UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q

☑    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 20202021
OR
☐    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from      to         
Commission file number: 0-50231
Federal National Mortgage Association
(Exact name of registrant as specified in its charter)
Fannie Mae
Federally chartered corporation52-0883107
1100 15th Street, NW


800232-6643
Washington,DC20005
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
(Address of principal executive offices, including zip code)(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act: 
Title of each classTrading Symbol(s)Name of each exchange on which registered
NoneN/AN/A
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes ☑     No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  Yes ☑     No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer☑Accelerated filer☐
Non-accelerated filer☐Smaller reporting company☐
Emerging growth company☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes☐ No ☑
As of March 31, 2020,April 15, 2021, there were 1,158,087,567 shares of common stock of the registrant outstanding.


TABLE OF CONTENTS
Page
PART I—Financial Information
1
Item 1.
6071
6172
6273
6374
Note 1—Summary of Significant Accounting Policies
6475
Note 2—Consolidations and Transfers of Financial Assets
7280
Note 3—Mortgage Loans
7382
Note 4—Allowance for Loan Losses
8289
Note 5—Investments in Securities
8491
Note 6—Financial Guarantees
8794
Note 7—Short-Term and Long-Term Debt
8895
Note 8—Derivative Instruments
8997
Note 9—Segment Reporting
92100
Note 10—Concentrations of Credit Risk
93102
Note 11—Netting Arrangements
97106
Note 12—Fair Value
98108
Note 13—Commitments and Contingencies
108118
Item 2.
1
1
2
Summary of Our Financial Performance
2
Liquidity Provided in the First Quarter of 2021
3
53
75
119
1918
2019
2221
23
23
Single-Family Mortgage Market
23
Single-Family Market Activity
24
Single-Family Business Metrics
24
Single-Family Business Financial Results
26
Single-Family Mortgage Credit Risk Management
27
4147
Multifamily Mortgage Market
47
Multifamily Business Metrics
48
Multifamily Business Financial Results
50
Multifamily Mortgage Credit Risk Management
50
4957
5362
5463
Institutional Counterparty Credit Risk Management
63
Market Risk Management, including Interest-Rate Risk Management
64
5666
5666
57
Item 3.
110
Item 4.
110
PART II—Other Information
112
Item 1.
112
Item 1A.
113
Item 2.
117
Item 3.
118
Item 4.
118
Item 5.
118
Item 6.
11867
Fannie Mae First Quarter 20202021 Form 10-Qi

Item 3.
120
Item 4.
120
PART II—Other Information
123
Item 1.
123
Item 1A.
124
Item 2.
126
Item 3.
128
Item 4.
128
Item 5.
128
Item 6.
128
Fannie Mae First Quarter 2021 Form 10-Qii
MD&A | Introduction

PART I—FINANCIAL INFORMATION
Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations
We have been under conservatorship, with the Federal Housing Finance Agency (“FHFA”) acting as conservator, since September 6, 2008. As conservator, FHFA succeeded to all rights, titles, powers and privileges of the company, and of any shareholder, officer or director of the company with respect to the company and its assets. The conservator has since provided for the exercise of certain authorities by our Board of Directors. Our directors do not have any fiduciary duties to any person or entity except to the conservator and, accordingly, are not obligated to consider the interests of the company, the holders of our equity or debt securities, or the holders of Fannie Mae MBS unless specifically directed to do so by the conservator.
We do not know when or how the conservatorship will terminate, what further changes to our business will be made during or following conservatorship, what form we will have and what ownership interest, if any, our current common and preferred stockholders will hold in us after the conservatorship is terminated or whether we will continue to exist following conservatorship. The U.S. Department of the Treasury (“Treasury”) released a plan in September 2019FHFA established 2021 performance objectives for housing finance reform (the “Treasury plan”)us that includes recommendations related to endingincluded preparing for our eventual exit from conservatorship. Congress and the Administration continue to consider options for reform of the housing finance system, including Fannie Mae.
We are not currently permitted to retain more than $25 billion in capital reserves or to pay dividends or other distributions to stockholders other than Treasury.stockholders. Our agreements with the U.S. Department of the Treasury (“Treasury”) include a commitment from Treasury to provide us with funds to maintain a positive net worth under specified conditions; however, the U.S. government does not guarantee our securities or other obligations. Our agreements with Treasury also include covenants that significantly restrict our business activities. For additional information on the conservatorship, the uncertainty of our future, our agreements with Treasury, and recent developments relating to housing finance reform, see “Business—Conservatorship, Treasury Agreements and Housing Finance Reform” and “Risk Factors” in our Form 10-K for the year ended December 31, 20192020 (“20192020 Form 10-K”) and “Risk Factors” in our 2019 Form 10-K and in this report.
.
You should read this Management’s Discussion and Analysis of FinancialCondition and Results of Operations (“MD&A”)&A in conjunction with our unaudited condensed consolidated financial statements and related notes in this report and the more detailed information in our 2019 2020 Form 10-K. You can find a “Glossary of Terms Used in This Report” in our 20192020 Form 10-K.
Forward-looking statements in this report are based on management’s current expectations and are subject to significant uncertainties and changes in circumstances, as we describe in “Forward-Looking Statements.” Future events and our future results may differ materially from those reflected in our forward-looking statements due to a variety of factors, including those discussed in “Risk Factors” and elsewhere in this report and in our 20192020 Form 10-K.
Introduction
Fannie Mae is a leading source of financing for mortgages in the United States. States, with $4.1 trillion in assets as of March 31, 2021. Organized as a government-sponsored entity, Fannie Mae is a shareholder-owned corporation. Our charter is an act of Congress, and we have a mission under that charter to provide liquidity and stability to the residential mortgage market and to promote access to mortgage credit. We were initially established in 1938.
Our revenues are primarily driven by guaranty fees we receive for managingassuming the credit risk on loans underlying the mortgage-backed securities we issue. Our mission is to provide a stable source of liquidity to support housing in the U.S. for low- and moderate-income borrowers and renters. We operate in the secondary mortgage market, primarily working with lenders, who originate loans to borrowers. We do not originate loans or lend money directly to borrowers in the primary mortgage market. Instead,borrowers. Rather, we primarily work with lenders who originate loans to borrowers. We securitize mortgagethose loans originated by lenders into Fannie Mae mortgage-backed securities that we guarantee (which we refer to as Fannie Mae MBS or our MBS); purchase mortgage.
Effectively managing credit risk is key to our business. In exchange for assuming credit risk on the loans we acquire, we receive guaranty fees. These fees take into account the credit risk characteristics of the loans we acquire and consist of two primary components:
•Loan-level pricing adjustments, which are upfront fees received when we acquire single-family loans.
•Base guaranty fees, which we receive monthly over the life of the loan.
Guaranty fees are set at the time we acquire loans and mortgage-related securities, primarily for securitizationdo not change over the life of the loan. How long a loan remains in our guaranty book is heavily dependent on interest rates. When interest rates decrease, a larger portion of our book of business turns over as more loans refinance. On the other hand, as interest rates increase, fewer loans refinance and saleour book turns over more slowly. Since guaranty fees are set at the time a later date; manage mortgage credit risk; and engageloan is originated, the impact of any change in other activities that support access to credit andguaranty fees on future revenues is dependent on the supplyrate at which newly originated loans replace the existing loans in our book of affordable housing.
Through our single-family and multifamily business segments, we provided $204.6 billion in liquidity to the mortgage market in the first quarter of 2020, which enabled the financing of approximately 854,000 home purchases, refinancings or rental units.
Fannie Mae Provided $204.6 Billion in Liquidity in the First Quarter of 2020
Unpaid Principal BalanceUnits
$68.8B256K
Single-Family Home Purchases
$121.7B439K
Single-Family Refinancings
$14.1B159K
Multifamily Rental Units
business.
Fannie Mae First Quarter 20202021 Form 10-Q1
MD&A | Executive Summary | Summary of Our Financial Performance
Executive Summary
Summary of Our Financial Performance
fnm-20200331_g1.jpgfnm-20210331_g1.jpg
The decrease in our net incomeQ1 2021 vs. Q1 2020
•Net revenues increased $1.4 billion in the first quarter of 2020,2021, compared with the first quarter of 2019, was2020, primarily due to an increase in net amortization income as a result of continued high prepayment volumes from loan refinancings in the first quarter of 2021 driven by the low interest-rate environment. High prepayments result in accelerated amortization of cost basis adjustments, including risk-based pricing adjustments and other upfront fees we received at the time of loan acquisition. We anticipate net revenues from prepayment activity will begin to slow in the second half of 2021, as we expect mortgage interest rates are likely to rise, resulting in fewer borrowers who can benefit from a refinancing. Lower levels of refinancing will likely slow the accelerated amortization of cost basis adjustments for loans in our book of business as loans remain outstanding for longer, and therefore will likely result in lower amortization income in any one period.
•Net income increased $4.5 billion in the first quarter of 2021 compared with the first quarter of 2020, primarily driven by a shift from credit-related incomeexpense in the first quarter of 2020 to credit-related income in the first quarter of 2021. Credit-related expense in the first quarter of 2020 was driven by the economic dislocation caused by the COVID-19 outbreak,pandemic. Credit-related income in the first quarter of 2021 was driven by a benefit for credit losses primarily due to higher actual and forecasted home prices, partially offset by anhigher actual and projected interest rates. Additional drivers of increased net income include the increase in net interestrevenues from higher net amortization income discussed above and a decrease inshift from fair value losses. See “Consolidated Resultslosses to gains in the first quarter of Operations” for more information on2021 primarily driven by our financial results.implementation of hedge accounting in January 2021.
•Net worth.worth Our net worth declinedincreased to $30.2 billion as of March 31, 2021 from $14.6$25.3 billion as of December 31, 20192020. The increase is attributable to $13.9$5.0 billion as of March 31, 2020. Although we had comprehensive income of $476 million for the first quarter of 2020, we had a charge of $1.1 billion to retained earnings due to our implementation of Accounting Standards Update 2016-13, Financial Instruments—Credit Losses, Measurement of Credit Losses on Financial Instruments and related amendments (the “CECL standard”) on January 1, 2020, resulting in a $663 million decline in our net worth during the period. See “Note 1, Summary of Significant Accounting Policies—New Accounting Guidance—The Current Expected Credit Loss Standard” for further details.2021.
Changes in our net worth can be significantly impacted by market conditions that affect our net interest income; fluctuations in the estimated fair value of our derivatives and otherLong-term financial instruments that we mark to market through our earnings; developments that affect our loss reserves, such as changes in interest rates, home prices or accounting standards, or events such as natural disasters or pandemics; and other factors, as we discuss in “Risk Factors” and “Consolidated Results of Operations” in our 2019 Form 10-K and in this report.
Financial performance. Our long-term financial performance will depend on many factors, including:
•the size of and our share of the U.S. mortgage market, which in turn will depend upon macroeconomic factors such as population growth, household formation and housing supply;
•borrower performance, the guaranty fees we charge, and changes in macroeconomic factors, including home prices and interest rates; and
•actions by FHFA, the Administration and Congress relating to our business and housing finance reform, including the capital requirements that will be applicable to us, our ongoing financial obligations to Treasury, potential restrictions on our activities and our business footprint, our competitive environment, and actions we are required to take to support borrowers or the mortgage market.
Quarterly fluctuations in acquisition volumes, market share, guaranty fees, or acquisition credit characteristics in any one period typically have limited impact on the size and stability of our conventional guaranty book of business and the associated revenue, profitability, and credit quality.
As described further in “COVID-19 Impact” and “Risk Factors,” the COVID-19 outbreak has significantly affected our financial performance and we expect that it will continue to do so. Given the unprecedented nature of the COVID-19 outbreak and the fast pace at which new developments relating to the outbreak are occurring, it is difficult to assess or predict the short-term or long-term effects of the outbreak on our financial performance.
Fannie Mae First Quarter 2020 Form 10-Q2
MD&A | Executive Summary
Net Worth, Treasury Funding and Senior Preferred Stock Dividends
Treasury has made a commitment under a senior preferred stock purchase agreement to provide funding to us under certain circumstances if we have a net worth deficit. Pursuant to the senior preferred stock purchase agreement, we issued shares of senior preferred stock to Treasury in 2008.
Under the terms of the senior preferred stock, we will not owe senior preferred stock dividends to Treasury until we have accumulated over $25 billion in net worth as of the end of a quarter. Accordingly, no dividends were payable to Treasury for the first quarter of 2020, and none are payable for the second quarter of 2020.
The charts below show information about our net worth, the remaining amount of Treasury’s funding commitment to us, senior preferred stock dividends we have paid Treasury and funds we have drawn from Treasury pursuant to its funding commitment.
fnm-20200331_g2.jpgfnm-20200331_g3.jpg
(1)Aggregate amount of dividends we have paid to Treasury on the senior preferred stock from 2008 through March 31, 2020. Under the terms of the senior preferred stock purchase agreement, dividend payments we make to Treasury do not offset our draws of funds from Treasury.
(2)Aggregate amount of funds we have drawn from Treasury pursuant to the senior preferred stock purchase agreement from 2008 through March 31, 2020.
The aggregate liquidation preference of the senior preferred stock increased from $131.2 billion as of December 31, 2019 to $135.4 billion as of March 31, 2020 due to the increase in our net worth during the fourth quarter of 2019. Because our net worth did not increase during the first quarter of 2020, the aggregate liquidation preference of the senior preferred stock will remain at $135.4 billion as of June 30, 2020.
If we were to draw additional funds from Treasury under the senior preferred stock purchase agreement with respect to a future period, the amount of remaining funding under the agreement would be reduced by the amount of our draw, and the aggregate liquidation preference of the senior preferred stock would increase by the amount of our draw. For a description of the terms of the senior preferred stock purchase agreement and the senior preferred stock, see “Business—Conservatorship, Treasury Agreements and Housing Finance Reform” in our 2019 Form 10-K.
Treasury owns our senior preferred stock and a warrant to purchase 79.9% of our common stock. Treasury has also made a commitment under the senior preferred stock purchase agreement to provide us with funds to maintain a positive net worth under specified conditions. However, the U.S. government does not guarantee our securities or other obligations.

Fannie Mae First Quarter 20202021 Form 10-Q32
MD&A | Executive Summary | Summary of Our Financial Performance
COVID-19 Impact
On March 11, 2020,•actions by FHFA, the World Health Organization characterized COVID-19, a new respiratory disease caused by a novel coronavirus, as a pandemic,Administration and on March 13, 2020, President Trump declared the COVID-19 outbreak in the United States a national emergency. The COVID-19 outbreak in the United States has expanded in recent weeks, and has resulted in stay-at-home orders, school closures and widespread business shutdowns across the country. The COVID-19 outbreak had a significant impact onCongress relating to our business and housing finance reform, including our capital requirements, our ongoing financial resultsobligations to Treasury, restrictions on our activities and our business footprint, our competitive environment, requirements to support borrowers or the mortgage market, and actions we take in light of these conditions.
We discuss recent measures to address the economic impact of COVID-19 in the American Rescue Plan Act of 2021 (the “American Rescue Plan”) that may impact us in “Legislation and Regulation” and recent economic conditions in “Key Market Economic Indicators” in this report.
Liquidity Provided in the First Quarter of 2021
Through our single-family and multifamily business segments, we provided $422 billion in liquidity to the mortgage market in the first quarter of 2020, and we expect that it will continue to do so. We provide a brief overview below of the economic impact of the outbreak, our response to the outbreak, and the outbreak's impact on our business and financial results, with references to where these items are discussed in more detail in this report. We also highlight below the many uncertainties relating to the impact of the COVID-19 outbreak.
Economic Impact
The COVID-19 outbreak has caused substantial financial market volatility in recent weeks and has significantly adversely affected both the U.S. and the global economy. The extensive shutdowns and other reductions in business activity across the country and globally have substantially increased unemployment levels. The federal government is taking many actions to reduce the negative economic impact of the COVID-19 outbreak. For example, the Federal Reserve has lowered the federal funds rate and is increasing its purchases of Treasury and mortgage-backed securities, purchasing corporate debt securities, and establishing and expanding liquidity facilities to support the flow of credit to consumers and businesses. In addition, the federal government has passed legislation increasing and expanding unemployment benefits, providing direct cash payments to eligible taxpayers, and allocating funds to assist businesses, states, and municipalities. However, the extent to which these actions will mitigate the short-term and long-term negative impacts of the COVID-19 outbreak on the U.S. economy and our business is unclear. The outbreak has already resulted in a contraction in U.S. gross domestic product (“GDP”) for the first quarter of 2020, and could result in a sustained drop in the level of U.S. economic activity.
We expect the COVID-19 outbreak to significantly negatively impact GDP, unemployment rates, and home price growth in 2020. See “Key Market Economic Indicators” for information on macroeconomic conditions during the first quarter of 2020 and our current forecasts regarding future macroeconomic conditions.
Fannie Mae Response
We are taking a number of actions to help borrowers, renters, lenders and servicers manage the negative impact of the COVID-19 outbreak,2021, including providing forbearance to single-family and multifamily borrowers with COVID-19-related financial hardships, suspending foreclosure-related activities, providing lenders and servicers temporary flexibilities for certain of our Selling Guide and Servicing Guide requirements, and providing liquidity to lenders by purchasing loans$211 billion through our whole loan conduit. See “Single-Family Business—Single-Family Mortgage Credit Risk Management” and “Multifamily Business—Multifamily Mortgage Credit Risk Management” for more information onconduit that primarily supports small- to medium-sized lenders, enabling the actions we are taking to help borrowers, renters, lenders and servicersfinancing of approximately 1.7 million home purchases, refinancings or rental units.
Fannie Mae Provided $422 Billion in response to the COVID-19 outbreak. Also see “Legislation and Regulation” for a discussion of the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), which contains a number of provisions aimed at providing relief for borrowers and renters experiencing financial hardship caused by the COVID-19 outbreak that apply to the loans we guarantee, and for a discussion of a change to our Single-Family Servicing Guide to provide stability and clarity to mortgage servicers regarding their obligations to advance missed borrower payments.
We have also taken steps to protect the safety and resiliency of our workforce. We have required nearly all of our workforce to work remotely since mid-March and continue to assess when it will be safe for employees to return to the office. To date, our business resiliency plans and technology systems have effectively supported this company-wide telework arrangement.
Impact on our Business and Financial Results
The economic dislocation caused by the COVID-19 outbreak was the primary driver of the decline in our net incomeLiquidity in the first quarterFirst Quarter of 2020, as compared with the first quarter of 2019. We significantly increased our allowance for loan losses to reflect the loan losses we currently expect as a result of the outbreak, which resulted in substantial credit-related expenses for the quarter. We expect the impact of the outbreak to continue to negatively affect our financial results and contribute to lower net income in 2020 than in 2019. We could have a net loss in one or more future periods or possibly could have a net worth deficit that requires a draw from Treasury under the senior preferred stock purchase agreement. See “Consolidated Results of Operations,” “Single-Family Business” and “Multifamily Business” for more information on our financial results for the first quarter of 2020.
The volatile market conditions in recent weeks have also adversely affected our ability to issue credit risk transfer securities, as described in “Single-Family Business—Single-Family Mortgage Credit Risk Management—Single-Family Credit Enhancement and Transfer of Mortgage Credit Risk” and “Multifamily Business—Multifamily Mortgage Credit Risk Management—Transfer of Multifamily Mortgage Credit Risk.”
Also see “Retained Mortgage Portfolio,” “Liquidity and Capital Management” and “Risk Management” for discussions of the impact of the COVID-19 outbreak on our business.
2021
Fannie Mae First Quarter 2020 Form 10-Q4
Unpaid Principal BalanceMD&A | Executive SummaryUnits
$99B
340K
Single-Family Home Purchases
$301B
1.1M
Single-Family Refinancings
$22B
217K
Multifamily Rental Units
Risks
We continued our commitment to green financing in the first quarter of 2021, issuing a total of $6.4 billion in multifamily green MBS, $37.4 million in single-family green MBS and Uncertainties
Our current forecasts$715.4 million in multifamily green resecuritizations. We also issued $3.1 billion in multifamily social MBS and expectations relating to$314.8 million in multifamily social resecuritizations in the impactfirst quarter of the COVID-19 outbreak are subject to many uncertainties2021. These social bonds represent our first issuance of social bonds and may change, perhaps substantially. It is difficult to assess or predict the impactwere issued in alignment with our Sustainable Bond Framework, which guides our issuances of this unprecedented event onsustainable debt bonds and sustainable MBS that support housing affordability and green financing. For information about our business, financial results or financial condition. Factors that will impact the extent to which the COVID-19 outbreak affectsgreen bonds and our business, financial resultsSustainable Bond Framework, see “Directors, Executive Officers and financial condition include: the duration, spread and severity of the outbreak; the actions taken to contain the virus or treat its impact, including government actions to mitigate the economic impact of the outbreak; the nature and extent of the forbearance and modification options we offer borrowers affected by the outbreak; accounting elections and estimates relating to the impact of the COVID-19 outbreak; borrower and renter behavior in response to the outbreak and its economic impact; how quickly and to what extent normal economic and operating conditions can resume, including whether any future outbreaks interrupt economic recovery; and how quickly and to what extent affected borrowers, renters and counterparties can recover from the negative economic impact of the outbreak. See “Risk Factors” for a discussion of the risks to our business, financial results and financial condition relating to the COVID-19 outbreak. See “Forward-Looking Statements” for a discussion of factors that could cause actual conditions, events or results to differ materially from those describedCorporate Governance—ESG Matters” in our forecasts, expectations and other forward-looking statements in this report.2020 Form 10-K.
Legislation and Regulation
The information in this section updates and supplements information regarding legislative, regulatory, conservatorship and regulatoryother developments affecting our business set forth in “Business—Conservatorship, Treasury Agreements and Housing Finance Reform” and “Business—Charter ActLegislation and Regulation” in our 20192020 Form 10-K. Also see “Risk Factors” in this report and in our 20192020 Form 10-K for discussions of risks relating to legislative and regulatory matters.
CARES ActAmerican Rescue Plan
OnIn March 27, 2020,2021, Congress enacted and the President signed the American Rescue Plan to address the economic dislocation and other burdens resulting from the COVID-19 pandemic. The act follows enactment of the Coronavirus Aid, Relief, and Economic Security Act referred to as(the “CARES Act”) in March 2020 and the CARESConsolidated Appropriations Act was enacted.of 2021 in December 2020. The CARES Act is an economic stimulus bill that provides relief for individuals and businesses negatively affected by the COVID-19 outbreak. The CARES Act includes a number of provisions that apply to the loans we guarantee, including provisions requiring that our servicers:
•provide forbearance (that is, a temporary suspension of the borrower’s monthly mortgage payments) for up to 360 days upon the request of any single-family borrower experiencing a financial hardship caused by the COVID-19 outbreak, regardless of the borrower’s delinquency status and with no additional documentation required other than the borrower’s attestation to a financial hardship caused by the COVID-19 outbreak;
•provide forbearance for up to 90 days upon the request of any multifamily borrower experiencing a documented financial hardship due to the COVID-19 outbreak that was current on its payments as of February 1, 2020; during the forbearance period, multifamily borrowers may not evict tenants for nonpayment, issue notices to vacate, or charge fees for late payment of rent; and
•suspend foreclosures and foreclosure-related evictions for single-family properties through May 17, 2020, other than for vacant or abandoned properties.
The CARES Act also instituted a temporary moratorium through July 25, 2020 on tenant evictions for nonpayment of rent that applies to any single-family or multifamily property that secures a mortgage loan we own or guarantee.
See “Single-Family Business—Single-Family Mortgage Credit Risk Management” and “Multifamily Business—Multifamily Mortgage Credit Risk Management” for more information on the actions we are taking to provide forbearance and suspend foreclosures and evictions pursuant to the CARES Act, FHFA directives, and other legal requirements.
The CARES Act also allows financial institutions to elect temporary relief relating to the accounting for troubled debt restructurings (“TDRs”). The CARES Act provides that a financial institution may elect to suspend the TDR requirements under U.S. generally accepted accounting principles (“GAAP”) for certain loss mitigation activities, including forbearance and loan modifications, related to the COVID-19 pandemic that occur between March 1, 2020 through the earlier of December 31, 2020 or 60 days after the date on which the COVID-19 outbreak national emergency terminates, as long as the loan was not more than 30 days delinquent as of December 31, 2019. As described in “Note 1, Summary of Significant Accounting Policies,” we have elected this option for temporary TDR relief for COVID-19-related loss mitigation activities.
In addition to the requirements applicable to us, the CARES Act alsoAmerican Rescue Plan contains many provisions designed to mitigate the negative economic impact of the COVID-19 outbreak. Some of these provisions may improve the ability of impacted borrowers to pay their mortgage loans and renters to pay their rent,pandemic, including direct cash payments to eligible taxpayers below specified income limits, expandedextended unemployment insurance benefits, and eligibility, andadditional relief designed to prevent layoffs and business closures at small businesses. It also includes emergency rental assistance, emergency housing vouchers and funds to assist struggling homeowners with mortgage payments, property taxes, property insurance, utilities and other housing-related costs. We expect the funding provided under the American Rescue Plan will improve the ability of some single-family and multifamily borrowers to make payments on their loans.
Proposed CFPB Rule Regarding Foreclosure
On April 5, 2021, the Consumer Financial Protection Bureau (the “CFPB”) issued a proposed rule that, if finalized, would generally prohibit servicers from initiating any new foreclosure on a mortgage loan secured by the borrower’s principal residence until after December 31, 2021. The CFPB is considering providing limited exceptions from this prohibition if the servicer has completed its loss mitigation review and determined the borrower is not eligible for any non-foreclosure
Fannie Mae First Quarter 20202021 Form 10-Q53
MD&A | Legislation and Regulation
State and Local Government Responsesoption or if the borrower has been unresponsive to COVID-19
To slow the spreadservicer outreach. The proposed effective date of the COVID-19 outbreak, many statesrule is August 31, 2021 and localities have issued stay-at-home orders requiring non-essential businessespublic comments are due May 10, 2021. Fannie Mae has already suspended foreclosures and certain foreclosure-related activities for single-family properties, other than for vacant or abandoned properties, through at least June 30, 2021. If the period before foreclosures can be initiated is extended, it may impact the timing of when we realize credit losses from foreclosures and foreclosure-related activities. It could also increase our expected credit loss reserves, which could adversely affect our credit-related expenses.
Federal Eviction Moratorium
In March 2021, the Centers for Disease Control and Prevention (the “CDC”) extended through June 30, 2021 its order prohibiting the eviction of any tenant, lessee or resident of a residential property for nonpayment of rent, if such person provides a specified declaration attesting that they meet the requirements to close. Acrossobtain the nation, states are following different practices in determining which mortgage-related businesses, title companies, courts, county recording offices, and other such operations are essential and should remain open, which is contributing to uncertainty and delays in some mortgage refinances and originations.
Many states and localities are continuing to issue executive orders and propose legislation requiring mortgage forbearance, foreclosure and eviction moratoriums, and rent flexibilities. These executive orders and proposals vary significantly in duration and scope. Some of these orders and proposals provide borrower or renter relief that goes beyond the scopeprotection of the CARES Act. In addition, dueorder. The requirements to growing concern that renters willobtain the protection of the order include a specified income cap and an inability to pay full rent. Challenges to the CDC’s eviction moratorium order have been brought in a number of jurisdictions, and the validity of the CDC’s order remains subject to further litigation. While the CDC order does not impose any obligations on Fannie Mae or its servicers to ensure compliance by borrowers, a borrower’s income may be able to meet their monthly rental payments as the COVID-19 emergency continues, some states and localities are considering rent freezes or rent forgiveness during the emergency’s duration. Actions takenimpacted by federal, state or local lawmakers to provide additional relief to borrowers and renters during the COVID-19 outbreak, depending on their scope and whether and to what extent they apply to our business, could negatively affect our business and financial results.
FHFA Instructions on Servicer Advance Requirement and Loan Removal Policy
In April 2020, FHFA instructed us to reduce our single-family servicers’ current obligations to advance missed borrower payments to MBS trusts. Currently, for the majority of our single-family guaranty book of business, when borrowerstenants who do not pay their rent while under the protection of the CDC order. As a result and as described in “Risk Factors” in our 2020 Form 10-K, these eviction moratoriums could adversely affect the ability of some of our borrowers to make payments on their loans.
New Refinance Option
On April 28, 2021, FHFA announced that it is directing Fannie Mae and Freddie Mac to implement a new refinance option targeting low-income borrowers with single-family mortgages backed by Fannie Mae and Freddie Mac. The initiative is intended to encourage eligible borrowers to take advantage of the current low interest-rate environment to refinance and lower both their interest rates and their monthly mortgage payments.
2020 Housing Goals Performance
We are subject to housing goals, which establish specified requirements for our Single-Family Servicing Guide generally requires servicersmortgage acquisitions relating to advanceaffordability or location. We believe we met all of our single-family and multifamily housing goals for 2020. Final performance results will be determined and published by FHFA sometime after the missed scheduled principalrelease later this year of 2020 data reported by primary mortgage market originators under the Home Mortgage Disclosure Act. For more information on our housing goals, see “Business—Legislation and interest paymentsRegulation—GSE Act and Other Legislative and Regulatory Matters—Housing Goals” in our 2020 Form 10-K.
The Qualified Mortgage Patch
In December 2020, the CFPB published a final rule that eliminates the qualified mortgage patch and replaces the 43% debt-to-income (“DTI”) ratio limit and certain other requirements for a standard qualified mortgage with a pricing and underwriting framework. The final qualified mortgage rule went into effect in March 2021, with lenders required to MBS trusts for paymentcomply beginning in July 2021. In April 2021, the CFPB published a final rule extending the mandatory compliance date to MBS holders untilOctober 2022 and thereby also extending the qualified mortgage patch. The CFPB has indicated that it will consider changes to the final rule during the extended implementation timeframe. Although the rule’s implementation is delayed, the terms of our senior preferred stock purchase agreement with Treasury require that after July 2021 most single-family loans are purchased fromwe purchase be qualified mortgages under the MBS trusts. Since we typicallyterms of the final rule that went into effect in March 2021. We do not purchase loans from MBS trusts while they areexpect the final qualified mortgage rule, as published, to impact our business significantly, but it may increase competition. See “Risk Factors—GSE and Conservatorship Risk” and “Risk Factors—Legal and Regulatory Risk” in forbearance, this servicer payment obligation could continueour 2020 Form 10-K for an extended period of time. To provide servicers with stability and clarity regarding their payment obligations and to align our servicer advance requirement with Freddie Mac, FHFA’s instructions require that, effective August 2020, we cease requiring servicers to advance missed scheduled principal and interest payments after four months of missed borrower paymentsmore information on a loan. After this time, we will make the missed scheduled principal and interest payments to the MBS trust for payment to MBS holders so long as the loan remainsrisks presented by regulatory changes in the MBS trust.
FHFA also issued an instruction in April 2020 requiring that loans subject to forbearance plans must remain in MBS trusts to the extent permitted by the trust documents. Our current policies already provide that we generally do not purchase loans in forbearance plans from MBS trusts, so this did not require a change to our current policies.
Stress Testing
The Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) requires certain financial companies to conduct annual stress tests to determine whether the companies have the capital necessary to absorb losses as a result of adverse economic conditions. In March 2020, FHFA amended its regulation relating to this requirement. Under the previous version of FHFA’s stress testing regulation, each year we were required to conduct a stress test using three different scenarios of financial conditions provided by FHFA: baseline, adverse and severely adverse. Consistent with actions taken by other U.S. financial services regulators, FHFA’s amended stress testing regulation eliminated the adverse scenario from the list of required scenarios.
Duty to Serve Plan Extension
In March 2020, in light of COVID-19, FHFA notified us that it has extended until September 1, 2020 the deadline for the submission of our draft duty to serve underserved markets plan for 2021-2023.industry.
Fannie Mae First Quarter 20202021 Form 10-Q64
MD&A | Key Market Economic Indicators

Key Market Economic Indicators
Below we discuss how varying macroeconomic conditions can significantly influence our financial results across different business and economic environments.
The COVID-19 pandemic has had a significant adverse effect on both the U.S. and global economies. Our forecasts and expectations are subject to many uncertainties, including the impact of the COVID-19 pandemic, and may change, perhaps substantially, from our current expectations.
Selected Benchmark Interest Rates
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(1)According to Bloomberg.
(2)Secured Overnight Financing Rate (“SOFR”) began April 2018.
(3)Refers to the U.S. weekly average fixed-rate mortgage rate according to Freddie Mac's Primary Mortgage Market Survey®. These rates are reported using the latest available data for a given period.
How interest rates can affect our financial results
•Net interest income. In a rising interest-rate environment, our mortgage loans tend to prepay more slowly, which typically results in lower net amortization income fromslowly. We amortize various cost basis adjustments onover the life of the mortgage loans and related debt.loan, including those relating to loan-level pricing adjustments we receive as upfront fees at the time we acquire single-family loans. As a result, any prepayment of a loan results in an accelerated realization of those upfront fees as income. Therefore, as loan prepayments slow, the accelerated realization of amortization income also slows. Conversely, in a declining interest-rate environment, our mortgage loans tend to prepay faster, typically resulting in the opposite trends of higher net amortization income from cost basis adjustments on mortgage loans and related debt.
•Fair value gains (losses). We have exposure to fair value gains and losses resulting from changes in interest rates, primarily through our risk managementmortgage commitment derivatives and mortgage commitmentrisk management derivatives, which we mark to market. Generally, we experience fair value losses when swap rates decrease and fairmarket through earnings. Fair value gains when swapand losses on our mortgage commitment derivatives fluctuate depending on how interest rates increase; however, becauseand prices move between the composition of our derivativetime the commitment is opened and settled. The net position variesand composition across the yield curve differentof our risk management derivatives changes over time. As a result, interest rate changes (increases or decreases) and yield curve changes (e.g., parallel,(parallel, steepening or flattening)flattening shifts) will generate differentvarying amounts of fair value gains and losses. We are preparing to implement hedge accounting to reduce the impact of interest-rate volatility on our financial results. For additional information on the expected impact of hedge accounting, see “Consolidated Results of Operations—Fair Value Losses, Net.”or losses in a given period.
•Credit-related income (expense). Increases in mortgage interest rates tend to lengthen the expected lives of our loans, which generally increases the expected impairment and provision for credit losses on such loans. Decreases in mortgage interest rates tend to shorten the expected lives of our loans, which reduces the impairment and provision for credit losses on such loans.
Fannie Mae First Quarter 20202021 Form 10-Q75
MD&A | Key Market Economic Indicators

•
In January 2021, we began applying fair value hedge accounting to reduce the impact of changes in interest rates, or the interest-rate effect, on our financial results. For additional information on how hedge accounting supports our interest-rate risk management strategy and our fair value hedge accounting policy, see “Consolidated Results of Operations—Hedge Accounting Impact,” “Risk Management—Market Risk Management, including Interest-Rate Risk Management—Earnings Exposure to Interest-Rate Risk” and “Note 1, Summary of Significant Accounting Policies.”
Single-Family Quarterly Home Price Growth Rate(1)
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(1)Calculated internally using property data on loans purchased by Fannie Mae, Freddie Mac and other third-party home sales data. Fannie Mae’s home price index is a weighted repeat transactions index, measuring average price changes in repeat sales on the same properties. Fannie Mae’s home price index excludes prices on properties sold in foreclosure. Fannie Mae’s home price estimates are based on preliminary data and are subject to change as additional data becomebecomes available.
How homeHome prices and how they can affect our financial results
•Actual and forecasted home prices impact our provision or benefit for credit losses.
•Changes in home prices affect the amount of equity that borrowers have in their homes. Borrowers with less equity typically have higher delinquency and default rates.
•As home prices increase, the severity of losses we incur on defaulted loans that we hold or guarantee decreases because the amount we can recover from the properties securing the loans increases. DecreasesDeclines in home prices increase the losses we incur on defaulted loans.
•Home prices also impact the growth and size of our guaranty book of business. As home prices rise, the principal balance of loans associated with purchase-money mortgages may increase, which affects the size of our book. Additionally, rising home prices can increase the amount of equity borrowers have in their home, which may lead to an increase in origination volumes for cash-out refinance loans with higher principal balances than the existing loan. Replacing existing loans with newly acquired cash-out refinances can affect the growth and size of our book.
•Home price growth in the first quarterof 2021 was unseasonably strong, driven by continued low interest rates and low levels of housing supply relative to the level of demand.
•We currently expect home pricesprice growth on a national basis will be flat in 2020. While we previously expected home price appreciation on2021 of 8.8%, which is a national basis to moderate slightly in 2020,significant increase compared with our prior forecast but lower than the 5.1%exceptionally strong home price growth rateof 10.6% in 2019, we revised our prior expectation downward due2020. However, a higher-than-expected supply of homes available for sale or weaker-than-expected demand could lead to the impact of the COVID-19 outbreak.slower growth in home prices. We also expect significant regional variation in the timing and rate of home price growth.
•Our forecasts and expectations relating to the impact of the COVID-19 outbreak are subject to many uncertainties and may change, perhaps substantially, from our current forecasts and expectations.expectations, including any continued impact from the COVID-19 pandemic. For example, home price growth could slow if GDP declines moregrowth is weaker than we currently expect, if unemployment, particularly among existing homeowners and potential new home buyers, is higher than we expect, or if the housing market is more sensitive to economic and labor market weaknesslabor-market weaknesses than we expect, home price growth could contract further with potential declines in annual nominal home prices for 2020.expect. For further discussion on housing activity, see “Single-Family Business—Single-Family Mortgage Market” and “Multifamily Business—Multifamily Mortgage Market.”
New Housing Starts(1)

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(1)According to U.S. Census Bureau and subject to revision.
Fannie Mae First Quarter 20202021 Form 10-Q86
MD&A | Key Market Economic Indicators

New Housing Starts(1)
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(1)According to U.S. Census Bureau and subject to revision. New housing starts for the first quarter of 2021 are based on Fannie Mae’s forecast.
How housing activity can affect our financial results
•Two key aspects of economic activity that can impact supply and demand for housing and thus mortgage lending are the raterates of household formation and new housing construction.
•Household formation is a key driver of demand for both single-family and multifamily housing. A newly formed household will either rent or purchase a home. Thus, changes in the pace of household formation can affect prices and credit performance as well as the degree of loss on defaulted loans.
•Growth of household formation stimulates homebuilding. Homebuilding has typically been a cyclical leader, of broader economic activity contributing to the growth of GDP and to employment. Residential construction activity has historically been a leading indicator, weakening prior to a slowdown in U.S. economic activity and accelerating prior to a recovery. However, the 2008-2009 recession was significantly impacted by real estate and real estate finance. Therefore, various policy responses were targeted to real estate and real estate finance, potentially altering the cyclical performance of the real estate sector. Duerecovery, which contributes to the adverse naturegrowth of the current economic situation,GDP and employment. However, the housing sector’s performance may vary from its historical precedent.precedent due to the many uncertainties surrounding future economic or housing policy as well as the continued impact of the COVID-19 pandemic on the economy and the housing market.
•In light of the uncertainties surrounding the effects of the COVID-19 outbreak and its impact on the economy, purchase demand is likelyWith regard to decline as people delay buying homes, which we expect will contribute tohousing construction, a decrease in home construction. We expect single-family housing starts to fall sharply in the second quarter, and we expect full-year 2020 single-family housing starts to decline as well.
•A decline in housing starts results in fewer new homes being available for purchase and potentially a lower volume of mortgage originations. Construction activity can also affect credit losses.losses through its impact on home prices. If the growth of demand exceeds the growth of supply, prices will appreciate and impact the risk profile of newly originated home purchase mortgages, depending on where in the housing cycle the market is. A reduced pace of construction is often leads toassociated with a broader economic slowdown and signalsmay signal expected increases in delinquency and losses on defaulted loans.
GDP, Unemployment Rate•Home sales fell in the first quarter of 2021, declining from the high pace seen at the end of 2020. We expect a continued lack of new and Personal Consumption
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(1)GDP growth (decline) and personal consumption growth (decline) areexisting homes available for sale will likely continue to constrain sales into the quarterly series calculated by the Bureau of Economic Analysis and subject to revision.second quarter.
(2)According•Strong pricing, given both the current strength in demand and low supply of existing and new homes available for sale, should support construction and we expect single-family housing starts in 2021 to exceed 2020 levels by 23.8%. We also expect housing activity to remain strong throughout 2021.
•Construction demand in the U.S. Bureaumultifamily sector strengthened at the beginning of Labor Statistics and subject2021, with multifamily starts posting a solid increase in the first quarter. We expect a modest pullback in the second quarter before multifamily starts remain mostly flat for the second half of 2021; we project multifamily starts to revision.edge up about 1.0% on an annual basis in 2021.
Fannie Mae First Quarter 20202021 Form 10-Q97
MD&A | Key Market Economic Indicators
GDP, Unemployment Rate and Personal Consumption
fnm-20210331_g5.jpg

(1)GDP growth (decline) and personal consumption growth (decline) are based on the quarterly series calculated by the Bureau of Economic Analysis and are subject to revision.
(2)According to the U.S. Bureau of Labor Statistics and subject to revision.
How GDP, the unemployment rate and personal consumption can affect our financial results
•Changes in GDP, the unemployment rate and personal consumption can affect several mortgage market factors, including the demand for both single-family and multifamily housing and the level of loan delinquencies.delinquencies, which in turn can lead to credit losses.
•Economic growth is a key factor for the performance of mortgage-related assets. In a growing economy, employment and income are rising, thus allowing existing borrowers to meet payment requirements, existing homeowners to consider purchasing and moving to another home, and renters to consider becoming homeowners. Homebuilding typically increases to meet the rise in demand. Mortgage delinquencies typically fall in an expanding economy, thereby decreasing credit losses.
•In a slowing economy, employment and income growth slow and housing activity slows as an early indicator of reduced economic activity. As theTypically, as an economic slowdown intensifies, households become more conservative and debt repayment takes precedence overreduce their spending. This reduction in consumption which then falls and accelerates the slowdown. If theAn economic slowdown of economic growth turnscan lead to recession, employment losses, occur impairing the ability of borrowers and renters to meet mortgage and rental payments, andthus causing loan delinquencies to rise. Home sales and mortgage originations also typically fall in a slowing economy.
•Due toThe economic recovery from the impact of the COVID-19 outbreak,pandemic began in the unemployment rate rose significantlysecond half of 2020 and continued its momentum in Marchthe first quarter of 2021 as additional government stimulus measures were passed with the American Rescue Plan, vaccination rates increased, and unemployment claims increased sharply in April. We expect this trendmany lockdown measures began to continuebe lifted. This led to strong consumer spending and GDP growth. The pace and strength of economic recovery remains uncertain and will depend on a number of factors, including consumers’ eagerness to return to previously restricted activities, recovery of economic activity outside the U.S., global supply chain disruptions, the path of the COVID-19 pandemic, and the potential for the near term. Additionally, we expect GDP to decline in 2020.higher inflation.
See “Risk Factors—Market and Industry Risk” in this report and in our 20192020 Form 10-K and “Risk Factors” in this report for further discussion of risks to our business and financial results associated with interest rates, home prices, housing activity and economic conditions.
Fannie Mae First Quarter 20202021 Form 10-Q108
MD&A | Consolidated Results of Operations
Consolidated Results of Operations
This section discusses our condensed consolidated results of operations and should be read together with our condensed consolidated financial statements and the accompanying notes.
Summary of Condensed Consolidated Results of OperationsSummary of Condensed Consolidated Results of OperationsSummary of Condensed Consolidated Results of Operations
For the Three Months Ended March 31,For the Three Months Ended March 31,
For the Three Months Ended March 31,
20202019Variance20212020Variance
(Dollars in millions)(Dollars in millions)
Net interest income(1)
Net interest income(1)
$5,347  $4,796  $551  
Net interest income(1)
$6,742 $5,347 $1,395 
Fee and other incomeFee and other income308  134  174  Fee and other income87 120 (33)
Net revenuesNet revenues5,655  4,930  725  Net revenues6,829 5,467 1,362 
Investment gains (losses), netInvestment gains (losses), net(158) 133  (291) Investment gains (losses), net45 (158)203 
Fair value losses, net(276) (831) 555  
Fair value gains (losses), net(1)
Fair value gains (losses), net(1)
784 (276)1,060 
Administrative expensesAdministrative expenses(749) (744) (5) Administrative expenses(748)(749)1 
Credit-related income (expenses):Credit-related income (expenses):Credit-related income (expenses):
Benefit (provision) for credit lossesBenefit (provision) for credit losses(2,583) 650  (3,233) Benefit (provision) for credit losses765 (2,583)3,348 
Foreclosed property expense(80) (140) 60  
Foreclosed property income (expense)Foreclosed property income (expense)5 (80)85 
Total credit-related income (expenses)Total credit-related income (expenses)(2,663) 510  (3,173) Total credit-related income (expenses)770 (2,663)3,433 
Temporary Payroll Tax Cut Continuation Act of 2011 (“TCCA”) fees(637) (593) (44) 
TCCA feesTCCA fees(731)(637)(94)
Credit enhancement expense(2)
Credit enhancement expense(2)
(331) (171) (160) 
Credit enhancement expense(2)
(284)(376)92 
Other expenses, net(3)
(263) (207) (56) 
Change in expected credit enhancement recoveries(3)
Change in expected credit enhancement recoveries(3)
(31)188 (219)
Other expenses, net(4)
Other expenses, net(4)
(319)(218)(101)
Income before federal income taxesIncome before federal income taxes578  3,027  (2,449) Income before federal income taxes6,315 578 5,737 
Provision for federal income taxesProvision for federal income taxes(117) (627) 510  Provision for federal income taxes(1,322)(117)(1,205)
Net incomeNet income$461  $2,400  $(1,939) Net income$4,993 $461 $4,532 
Total comprehensive incomeTotal comprehensive income$476  $2,361  $(1,885) Total comprehensive income$4,966 $476 $4,490 
(1)Prior period amounts have been adjustedIn January 2021, we began applying fair value hedge accounting. For qualifying hedging relationships, fair value changes attributable to reflectmovements in the current yeardesignated benchmark interest rates for hedged mortgage loans and funding debt and the fair value change of the designated portion of the paired interest-rate swaps are recognized in presentation related to our yield maintenance fees.“Net interest income.” In prior years, all fair value changes for interest-rate swaps were recognized in “Fair value gains (losses), net.” See “Hedge Accounting Impact” below and “Note 1, Summary of Significant Accounting Policies” for more information about our change in presentation.hedge accounting program.
(2)Previously included in Other expenses, net. Primarily consistsConsists of costs associated with our freestanding credit enhancements, which primarily include our Connecticut Avenue Securities® (“CAS”) and Credit Insurance Risk TransferTM (“CIRTTM”) and Connecticut Avenue Securities® (“CAS”) programs, as well as enterprise-paid mortgage insurance (“EPMI”), and certain lender risk-sharing programs.
(3)Consists of change in benefits recognized from our freestanding credit enhancements, including any realized amounts.
(4)Consists of debt extinguishment gains and losses, housing trust fund expenses, loan subservicing costs, servicer fees paid in connection with certain loss mitigation activities, and gains and losses from partnership investments.
Hedge Accounting Impact
Our earnings can experience volatility due to interest-rate changes and differing accounting treatments that apply to certain financial instruments on our balance sheet. Specifically, we have exposure to earnings volatility that is driven by changes in interest rates in two primary areas: our net portfolio and our consolidated MBS trusts. The exposure in the net portfolio is primarily driven by changes in the fair value of risk management derivatives, mortgage commitments, and certain assets, primarily securities, that are carried at fair value. The exposure related to our consolidated MBS trusts primarily relates to changes in our credit loss reserves driven by changes in interest rates.
To help address this volatility, we began applying fair value hedge accounting in January 2021 to reduce the current-period impact on our earnings related to changes in interest rates, particularly the London Inter-bank Offered Rate (“LIBOR”) and the Secured Overnight Financing Rate (“SOFR”). Hedge accounting aligns the timing of when we recognize fair value changes in hedged items attributable to these benchmark interest-rate movements with fair value changes in the hedging instrument.
Fannie Mae First Quarter 2021 Form 10-Q9
MD&A | Consolidated Results of Operations
Under our hedge accounting program, we establish fair value hedging relationships between risk management derivatives, specifically interest-rate swaps, and qualifying portfolios of mortgage loans or funding debt. For hedging relationships that are highly effective, we recognize changes in the fair value of the hedged mortgage loans or funding debt attributable to movements in the benchmark interest rate in net interest income. We then offset that impact with the changes in fair value of the designated interest-rate swap. This has the effect of deferring the recognition of gains and losses on the hedging instrument to future periods by recognizing the offsetting gain or loss on the hedged item as a cost basis adjustment on the underlying loans or funding debt at the end of the hedge term. The cost basis adjustment is then subsequently amortized back into earnings. Accordingly, for the first quarter of 2021 we deferred $1.2 billion in fair value losses as cost basis adjustments on our hedged loans and funding debt that will be amortized through “Net interest income” over the contractual life of the respective hedged items.
Although hedge accounting reduces the earnings volatility related to benchmark interest rate movements in any given period, it does not impact the amount of interest-rate-driven gains or losses we will ultimately recognize through earnings.
While we expect the earnings volatility related to benchmark interest rate movements to be meaningfully reduced as a result of our adoption of hedge accounting, earnings variability driven by other factors, such as spreads, remains. In addition, hedge accounting is not designed to address earnings volatility driven by changes in cost basis amortization recognized in net interest income, which can be influenced by interest rate changes.
See “Note 1, Summary of Significant Accounting Policies” and “Note 8, Derivative Instruments” for more information aboutadditional discussion of our change in presentation.
(3)Consists of the following: (a) debt extinguishment losses, net; (b) gains (losses) from partnership investments;fair value hedge accounting policy and (c) losses on certain guaranty contracts.related disclosures.
Net Interest Income
Our primary source of net interest income is guaranty fees we receive for managing the credit risk on loans underlying Fannie Mae MBS held by third parties.
Guaranty fees consist of two primary components:
•base guaranty fees that we receive over the life of the loan; and
•upfront fees that we receive at the time of loan acquisition primarily related to single-family loan-level pricing adjustments and other fees we receive from lenders, which are amortized into net interest income as cost basis adjustments over the contractual life of the loan. We refer to this as amortization income.
We recognize almost all of our guaranty fee revenue in net interest income because we consolidate the substantial majority of loans underlying our Fannie Mae MBS in consolidated trusts in our condensed consolidated balance sheets. Those guarantyGuaranty fees are the primary component offrom these loans overwhelmingly account for the difference between the interest income on loans in consolidated trusts and the interest expense on the debt of consolidated trusts.
The timing of when we recognize amortization income can vary based on a number of factors, the most significant of which is a change in mortgage interest rates. In a rising interest-rate environment, our mortgage loans tend to prepay more slowly, which typically results in lower net amortization income. Conversely, in a declining interest-rate environment, our mortgage loans tend to prepay faster, typically resulting in higher net amortization income.
We also recognize net interest income on the difference between interest income earned on the assets in our retained mortgage portfolio and our other investments portfolio (collectively, our “portfolios”) and the interest expense associated with the debt that funds those assets. See “Retained Mortgage Portfolio” and “Liquidity and Capital Management—Liquidity Management—Other Investments Portfolio” for more information about our portfolios.
As discussed above, beginning in January 2021, we recognize fair value changes attributable to movements in benchmark interest rates for hedged mortgage loans and funding debt and total fair value changes for designated interest-rate swaps, as well as the amortization of hedge-related basis adjustments on the associated mortgage loans or funding debt and any related interest accrual on the swap, as a component of net interest income. The income or expense associated with this activity is presented in the hedge accounting line item in the table below.
Fannie Mae First Quarter 20202021 Form 10-Q1110
MD&A | Consolidated Results of Operations
The table below displays the components of our net interest income from our guaranty book of business, which we discuss in “Guaranty Book of Business,” and from our portfolios. Prior period amounts have been adjustedportfolios, as well as from hedge accounting.
Components of Net Interest Income
For the Three Months Ended March 31,
20212020Variance
(Dollars in millions)
Net interest income from guaranty book of business:
Base guaranty fee income(1)
$3,197 $2,600 $597 
Base guaranty fee income related to TCCA(2)
731 637 94 
Net amortization income(3)
2,526 1,506 1,020 
Total net interest income from guaranty book of business6,454 4,743 1,711 
Net interest income from portfolios266 604 (338)
Income from hedge accounting(4)
22 — 22 
Total net interest income$6,742 $5,347 $1,395 
(1)Excludes revenues generated by the 10 basis point guaranty fee increase we implemented pursuant to reflect the current year change in presentation relatedTCCA which is remitted to our yield maintenance fees. See “Note 1, Summary of Significant Accounting Policies” for more information about our change in presentation.Treasury and not retained by us.
Components of Net Interest Income
For the Three Months Ended March 31,
 20202019Variance
(Dollars in millions)
Net interest income from guaranty book of business:
Base guaranty fee income, net of TCCA$2,600  $2,318  $282  
Base guaranty fee income related to TCCA(1)
637  593  44  
Net amortization income1,506  986  520  
Total net interest income from guaranty book of business4,743  3,897  846  
Net interest income from portfolios604  899  (295) 
Total net interest income$5,347  $4,796  $551  
(1)Revenues(2)Represents revenues generated by the 10 basis point guaranty fee increase we implemented pursuant to the TCCA, the incremental revenue from which is remitted to Treasury and not retained by us. See “Note 1, Summary of Significant Accounting Policies” for more information on guidance we received from FHFA regarding TCCA fee amounts that we are not required to accrue or remit to Treasury with respect to delinquent loans backing MBS trusts.
(3)Net amortization income refers to the amortization of premiums and discounts on mortgage loans and debt of consolidated trusts. These cost basis adjustments represent the difference between the initial fair value and the carrying value of these instruments as well upfront fees we receive at the time of loan acquisition. It does not include the amortization of cost basis adjustments resulting from hedge accounting, which is included in income from hedge accounting.
(4)For the first quarter of 2021, income from hedge accounting includes contractual interest accruals and fair value losses for designated interest-rate swaps of $1,124 million offset by $1,146 million of gains from hedged mortgage loans and funding debt, net of $13 million in hedge-related amortization expense.
Net interest income increased in the first quarter of 20202021 compared with the first quarter of 2019,2020, driven by higher net amortization income and higher base guaranty fee income, partially offset by lower income from portfolios.
•NetHigher net amortization income increased in the first quarter of 2020 compared with the first quarter of 2019 as a lowerincome. A continued low interest-rate environment in the first quarter of 20202021 led to increased prepayments on mortgageelevated prepayment volumes as loans refinanced, which accelerated the amortization of cost basis adjustments, including upfront fees we recognize over the contractual life of the loans, on mortgage loans of consolidated trusts and the related debt.
•Net interest income fromHigher base guaranty fees increased in the first quarter of 2020 compared with the first quarter of 2019 due to anfee income. An increase in the size of our guaranty book of business and loans with higherwas the primary driver of the increase in base guaranty fees comprising a larger part of our guaranty book of business.
•Net interestfee income from portfolios decreased in the first quarter of 2020 compared with2021.
•Lower income from portfolios. Lower yields in the first quarter of 2019 primarily due to sales of reperforming2021 on mortgage loans as well as liquidations, which have reduced the average balance ofand assets in our retained mortgageother investments portfolio, over time. This was partially offset by a decrease in interest expense on long-termour funding debt as thedue to a decrease in average borrowing costs, contributed to a decline in our retained mortgage portfolio reduced our funding needs overincome from portfolios in the past twelve months. For a discussionfirst quarter of 2021. We discuss the impact of the COVID-19 outbreak on our funding needs and funding activity seein “Liquidity and Capital Management—Liquidity Management—Debt Funding.”
Though mortgage rates modestly increased over the first quarter of 2021, we continued to be in a historically low interest-rate environment, contributing to continued mortgage refinance activity and high levels of amortization income. Because a large portion of our book of business has been and is expected to be originated in this historically low interest-rate environment, we anticipate that refinancing activity will begin to slow in the second half of 2021 as fewer borrowers can benefit from a refinancing as we expect interest rates will likely rise. Lower levels of refinancing in the future will likely slow the rate at which we amortize cost basis adjustments and therefore will likely result in lower amortization income in any one period as the average life of our outstanding book of business may extend as our book of business turns over more slowly. In addition, a slower turnover rate would limit the impact that changes in our guaranty fees have on our future revenues as any changes would take longer to meaningfully impact the average charged guaranty fee on our total book of business.
For loans negatively impacted by the COVID-19 pandemic, we continue to recognize interest income for up to six months of delinquency provided that the loans were either current at March 1, 2020 or originated after March 1, 2020, and collection of principal and interest is reasonably assured. For those loans where we have provided relief beyond six
Fannie Mae First Quarter 2021 Form 10-Q11
MD&A | Consolidated Results of Operations
months of delinquency, we continue to accrue interest income provided that the loan remains in a forbearance arrangement and collection of principal and interest continues to be reasonably assured. This resulted in a large portion of delinquent loans, including those in a forbearance arrangement, remaining on accrual status as of March 31, 2021. See “Note 3, Mortgage Loans” for more information about our nonaccrual accounting policy and “Single-Family Business—Single-Family Mortgage Credit Risk Management—Single-Family Problem Loan Management” and “Multifamily Business—Multifamily Mortgage Credit Risk Management—Multifamily Problem Loan Management and Foreclosure Prevention” for details about loans in forbearance, as well as on-balance sheet loans past due 90 days or more and continuing to accrue interest.
Analysis of Net Interest Income
The table below displays an analysis of our net interest income, average balances, and related yields earned on assets and incurred on liabilities. For most components of the average balances, we use a daily weighted average of unpaid principal balance net of unamortized cost basis adjustments. When daily average balance information is not available, such as for mortgage loans, we use monthly averages. For the first quarter of 2021, net interest income was impacted by the application of fair value hedge accounting beginning in January 2021.
Analysis of Net Interest Income and Yield(1)
For the Three Months Ended March 31,
20212020
Average BalanceInterest Income/ (Expense)Average Rates Earned/PaidAverage BalanceInterest Income/ (Expense)Average Rates Earned/Paid
(Dollars in millions)
Interest-earning assets:
Mortgage loans of Fannie Mae(2)
$109,537 $825 3.01 %$101,765 $1,016 3.99 %
Mortgage loans of consolidated trusts(2)
3,600,116 22,528 2.50 3,259,557 27,922 3.43 
Total mortgage loans(3)
3,709,653 23,353 2.52 3,361,322 28,938 3.44 
Mortgage-related securities7,403 42 2.27 10,875 99 3.64 
Non-mortgage-related securities(4)
164,404 117 0.28 64,806 248 1.51 
Federal funds sold and securities purchased under agreements to resell or similar arrangements60,103 8 0.05 29,335 107 1.44 
Advances to lenders10,965 42 1.53 6,416 34 2.10 
Total interest-earning assets$3,952,528 23,562 2.38 %$3,472,754 29,426 3.39 %
Interest-bearing liabilities:
Short-term funding debt$9,779 (3)0.12 %$31,842 (102)1.27 %
Long-term funding debt(2)
259,737 (760)1.17 135,415 (787)2.32 
Connecticut Avenue Securities® (“CAS”) debt
14,804 (153)4.13 20,536 (289)5.63 
Total debt of Fannie Mae284,320 (916)1.29 187,793 (1,178)2.51 
Debt securities of consolidated trusts held by third parties3,643,848 (15,904)1.75 3,281,716 (22,901)2.79 
Total interest-bearing liabilities$3,928,168 (16,820)1.71 %$3,469,509 (24,079)2.78 %
Net interest income/net interest yield$6,742 0.68 %$5,347 0.62 %
(1)Includes the effects of discounts, premiums and other cost basis adjustments. For the first quarter of 2021, includes cost basis adjustments related to hedge accounting.
(2)Includes income of $22 million from hedged funding debt, hedged mortgage loans and paired interest-rate swaps for the first quarter of 2021. Substantially all of this amount is related to the hedged funding debt and paired interest-rate swaps. There was no income or expense from hedge accounting for the first quarter of 2020.
(3)Average balance includes mortgage loans on nonaccrual status. For nonaccrual mortgage loans not subject to the COVID-19-related nonaccrual guidance, interest income is recognized when cash is received. Interest income from the amortization of loan fees, primarily consisting of upfront cash fees and yield maintenance fees, was $2.5 billion and $1.6 billion for the first quarter of 2021 and 2020, respectively.
Fannie Mae First Quarter 2021 Form 10-Q12
MD&A | Consolidated Results of Operations
(4)Consists of cash, cash equivalents and U.S. Treasury securities.
Analysis of Deferred Amortization Income
We initially recognize mortgage loans and debt of consolidated trusts in our condensed consolidated balance sheetsheets at fair value. The difference between the initial fair value and the carrying value of these instruments is recorded as a cost basis adjustments,adjustment, either as premiumsa premium or discounts,a discount, in our condensed consolidated balance sheets. We amortize these cost basis adjustments over the contractual lives of the loans or debt. On a net basis, for mortgage loans and debt of consolidated trusts, we are in a premium position with respect to debt of consolidated trusts, which represents deferred income we will recognize in our condensed consolidated statements of operations and comprehensive income as amortizationnet interest income in future periods.
Deferred Income Represented by Net Premium Position
on Debt of Consolidated Trusts
(Dollars in billions)
fnm-20200331_g8.jpgfnm-20210331_g6.jpg
Fannie Mae First Quarter 2020 Form 10-Q12
MD&A | Consolidated Results of Operations
Analysis of Net Interest Income
The table below displays an analysis of our net interest income, average balances, and related yields earned on assets and incurred on liabilities. For most components of the average balances, we use a daily weighted average of unpaid principal balance net of unamortized cost basis adjustments. When daily average balance information is not available, such as for mortgage loans, we use monthly averages. Prior-period amounts have been adjusted to reflect the current-year change in presentation related to our yield maintenance fees. See “Note 1, Summary of Significant Accounting Policies” for more information about our change in presentation.
Analysis of Net Interest Income and Yield(1)
For the Three Months Ended March 31,
20202019
Average
Balance		Interest
Income/
(Expense)		Average
Rates
Earned/Paid		Average
Balance		Interest
Income/
(Expense)		Average
Rates
Earned/Paid
(Dollars in millions)
Interest-earning assets:
Mortgage loans of Fannie Mae$101,765  $1,016  3.99 %$119,495  $1,323  4.43 %
Mortgage loans of consolidated trusts3,259,557  27,922  3.43  3,153,383  28,539  3.62  
Total mortgage loans(2)
3,361,322  28,938  3.44  3,272,878  29,862  3.65  
Mortgage-related securities10,875  99  3.64  9,044  102  4.51  
Non-mortgage-related securities(3)
64,806  248  1.51  60,833  378  2.49  
Federal funds sold and securities purchased under agreements to resell or similar arrangements29,335  107  1.44  41,533  263  2.53  
Advances to lenders6,416  34  2.10  3,703  32  3.46  
Total interest-earning assets$3,472,754  $29,426  3.39 %$3,387,991  $30,637  3.62 %
Interest-bearing liabilities:
Short-term funding debt$31,842  $(102) 1.27 %$20,712  $(125) 2.41 %
Long-term funding debt135,415  (787) 2.32  179,152  (1,114) 2.49  
Connecticut Avenue Securities® (“CAS”)
20,536  (289) 5.63  24,884  (382) 6.14  
Total debt of Fannie Mae187,793  (1,178) 2.51  224,748  (1,621) 2.89  
Debt securities of consolidated trusts held by third parties3,281,716  (22,901) 2.79  3,156,398  (24,220) 3.07  
Total interest-bearing liabilities$3,469,509  $(24,079) 2.78 %$3,381,146  $(25,841) 3.06 %
Net interest income/net interest yield$5,347  0.62 %$4,796  0.57 %
(1)Includes the effects of discounts, premiums and other cost basis adjustments.
(2)Average balance includes mortgage loans on nonaccrual status. Typically, interest income on nonaccrual mortgage loans is recognized when cash is received. Interest income from the amortization of loan fees, primarily consisting of upfront cash fees and yield maintenance fees, was $1.6 billion and $1.1 billion for the first quarter of 2020 and 2019, respectively.
(3)Consists of cash, cash equivalents and U.S Treasury securities.
Investment Gains (Losses), Net
Investment gains (losses), net primarily includes gains and losses recognized from the sale of available-for-sale (“AFS”) securities, the sale of loans, gains and losses recognized on the consolidation and deconsolidation of securities, net of other-than-temporary impairments recognized on our investments, and the lower of cost or fair value adjustments on single-family held-for-sale (“HFS”) loans. We recognized investment losses, net in the first quarter of 2020 as a result of the decrease in the fair value of HFS loans driven by price decreases during the quarter. We recognized investment gains, net in the first quarter of 2019 primarily as a result of gains on the sale of AFS securities.
Fannie Mae First Quarter 2020 Form 10-Q13
MD&A | Consolidated Results of Operations
Fair Value Losses,Gains (Losses), Net
The estimated fair value of our derivatives, trading securities and other financial instruments carried at fair value may fluctuate substantially from period to period because of changes in interest rates, the yield curve, mortgage and credit spreads and implied volatility, as well as activity related to these financial instruments. While the estimated fair value of our derivatives that mitigate certain risk exposures may fluctuate, some of the financial instruments that generate these exposures are not recorded at fair value
As discussed above in our condensed consolidated financial statements.
We are preparing to implement“Hedge Accounting Impact,” we began applying fair value hedge accounting in January 2021 to reduce the impact of interest-rateearnings volatility onin our financial results. Once implemented, for derivativesstatements driven by changes in designated hedges,interest rates. Accordingly, we now recognize the fair value gains and losses attributableand the contractual interest income and expense associated with risk management derivatives in qualifying hedging relationships in net interest income. Prior to changes in certain benchmark interest rates, such as the London Inter-bank Offered Rate (“LIBOR”) or the Secured Overnight Financing Rate (“SOFR”), may be reduced by offsetting gains and losses in theimplementation of our hedge accounting program, these fair value of designated hedged mortgage loans or debt. Therefore, we expect the volatility of our financial results associated with changes were included in interest rates will be reduced substantially while fair value gains and losses driven(losses), net. Derivatives not designated in hedging relationships are unaffected by other factors, such as credit spreads, will remain.this change.
The table below displays the components of our fair value gains and losses.
Fair Value Losses, Net
For the Three Months Ended March 31,
20202019
(Dollars in millions)
Risk management derivatives fair value losses attributable to:
Net contractual interest expense on interest-rate swaps$(106) $(266) 
Net change in fair value during the period(255) (122) 
Total risk management derivatives fair value losses, net(361) (388) 
Mortgage commitment derivatives fair value losses, net(993) (300) 
Credit enhancement derivatives fair value losses, net(11) (7) 
Total derivatives fair value losses, net(1,365) (695) 
Trading securities gains, net647  92  
CAS debt fair value gains (losses), net637  (22) 
Other, net(1)
(195) (206) 
Fair value losses, net$(276) $(831) 
Fair Value Gains (Losses), Net
For the Three Months Ended March 31,
20212020
(Dollars in millions)
Risk management derivatives fair value gains (losses) attributable to:
Net contractual interest income (expense) on interest-rate swaps$43 $(106)
Net change in fair value during the period(1,011)(255)
Impact on risk management derivatives fair value losses, net due to the reclassification of hedged amounts to net interest income(1)
1,124 — 
Risk management derivatives fair value gains (losses), net156 (361)
Mortgage commitment derivatives fair value gains (losses), net1,082 (993)
Credit enhancement derivatives fair value losses, net(90)(11)
Total derivatives fair value gains (losses), net1,148 (1,365)
Trading securities gains (losses), net(758)647 
CAS debt fair value gains (losses), net(1)637 
Other, net(2)
395 (195)
Fair value gains (losses), net$784 $(276)
(1)Consists of the reclassification of $1,178 million in fair value losses and $54 million of contractual interest income for designated interest-rate swaps as a result of fair value hedge accounting.
Fannie Mae First Quarter 2021 Form 10-Q13
MD&A | Consolidated Results of Operations
(2)Consists of fair value gains and losses on non-CAS debt and mortgage loans held at fair value.
Fair value losses, net decreasedgains in the first quarter of 2020 compared with 2021 were primarily driven by:
•the first quarterapplication of 2019,hedge accounting resulting in a reclassification of fair value losses on designated interest-rate swaps to “net interest income;”
•increases in the fair value of mortgage commitment derivatives due to gains on ourcommitments to sell mortgage-related securities as prices decreased during the commitment period as interest rates increased; and
•decreases in the fair value of long-term debt of consolidated trusts held at fair value, which are included in “Other, net,” due to increases in interest rates.
These gains were partially offset by losses on trading securities and CAS debt. Our fair value gains and losses in the first quarter of 2020 were impacted by market disruptions due to increases in U.S. Treasury yields during the COVID-19 outbreak thatperiod, which resulted in lower interest rates and widened spreads between debt and U.S. Treasury yields.losses on fixed-rate securities held in our other investments portfolio.
Fair value losses in the first quarter of 2020 were primarily driven by:
•decreases in the fair value of mortgage commitment derivatives due to losses on commitments to sell mortgage-related securities as prices increased during the commitment period as interest rates declined, which were partially offset by gains on commitments to buy mortgage-related securities;
•net interest expense on risk management derivatives combined with decreases in the fair value of pay-fixed risk management derivatives due to declines in medium- to longer-term swap rates, which were partially offset by increases in the fair value of receive-fixed risk management derivatives; and
•increases in the fair value of long-term debt of consolidated trusts held at fair value, which are included in “Other, net,” due to declines in interest rates.
These losses were partially offset by fair value gains in the first quarter of 2020 on trading securities and CAS debt, primarily driven by declines in U.S. Treasury yieldsinterest rates and widened spreads between CAS debt yields and U.S. Treasury yields,LIBOR, which resulted in gains on fixed-rate securities held in our other investments portfolio and our CAS debt held at fair value.
Fair value losses in the first quarter of 2019 were primarily driven by:
•net interest expense on our risk management derivatives combined with decreases in the fair value of our
pay-fixed risk management derivatives due to declines in longer-term swap rates during the quarter, which were
partially offset by increases in the fair value of our receive-fixed risk management derivatives;
Fannie Mae First Quarter 2020 Form 10-Q14
MD&A | Consolidated Results of Operations
•decreases in the fair value of our mortgage commitment derivatives due to losses on commitments to sell mortgage-related securities as a result of increases in the prices of securities as interest rates decreased during the
commitment periods; and
•losses driven by increases in the fair value of long-term debt of consolidated trusts held at fair value.
Credit-Related Income (Expense)
Our credit-related income or expense 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 types and volume of our loss mitigation activities, including forbearanceforbearances and loan modifications, the volume of foreclosures completed and the redesignation of loans from held for investment (“HFI”) to held for sale (“HFS”). While the redesignation of certain reperforming and nonperforming single-family loans has been a significant driver of credit-related income in recent periods, we expect to see a significantly reduced impact from this activity in 2020 as market disruptions due to the COVID-19 outbreak have decreased investor interest in reperforming and nonperforming loans.
Our credit-related income or expense and our loss reserves can also be impacted by updates to the models, assumptions and data used in determining our allowance for loan losses. The January 1,As described below, since the onset of the COVID-19 pandemic in early 2020, CECL standard implementation introduces additional volatility in our financial results as credit-related income or expense now includes expected lifetime losses onand our loans and thus are sensitive to fluctuations in the factors detailed above.
The primary driverloss reserves have been significantly affected by our estimates of credit-related expense for the first quarter of 2020 was an increase in our allowance for loan losses due to losses we expect to incur as a result of the COVID-19 outbreak, using an expected lifetime loss methodology. Estimating the impact of the COVID-19 outbreak on our expected credit loss reserves requiredpandemic, which require significant management judgment, including estimatesjudgment. Changes in our expectations regarding the length of the number of single-familytime borrowers who will receiveremain in forbearance, and any resulting loan modifications that will be provided onceeven more significantly, the loss mitigation outcomes of affected borrowers after the forbearance period ends. Under our CECL methodology, depending onends, remain uncertain and can affect the typeamount of loan modification granted, loss severity estimates vary. In determining our allowance for loan losses as of March 31, 2020,credit-related income or expense we estimated that 15% of our single-family borrowers and 20% of our multifamily borrowers would ultimately receive forbearance due to a COVID-19-related financial hardship. Given the short-term nature of the forbearance period for multifamily borrowers (up to 3 months), the impact of forbearance did not have a material impact on our multifamily allowance as of March 31, 2020.recognize. Although we believe ourthe estimates underlying our allowance determination are reasonable, we may observe future volatility in these estimates as we continue to observe actual loan performance data and update our models and assumptions surroundingrelating to this unprecedented event.
Fannie Mae First Quarter 20202021 Form 10-Q1514
MD&A | Consolidated Results of Operations
Benefit (Provision) for Credit Losses
The table below provides a quantitative analysis of the drivers for the first quarter of 2020 of our single-family and multifamily benefit or provision for credit losses and the increasechange in expected credit enhancement recoveries. The benefit from freestanding credit enhancements. Theor provision for credit losses includes our benefit or provision for loan losses, on our loan book of business as well as our provision foraccrued interest receivable losses and our guaranty loss reserves.reserves, and excludes credit losses on our available-for-sale (“AFS”) securities. It also excludes the transition impact of adopting the CECL standard,Accounting Standards Update (“ASU”) 2016-13, Financial Instruments—Credit Losses, Measurement of Credit Losses on Financial Instruments, (the “CECL standard”), which was recorded as an adjustment to beginning retained earnings.earnings as of January 1, 2020. Many of the drivers that contribute to our benefit or provision for credit losses overlap or are interdependent. The attribution shown below is based on internal allocation estimates.
Components of Benefit (Provision) for Credit Losses and Change in Expected Credit Enhancement Recoveries
For the Three Months Ended March 31,
20212020
(Dollars in millions)
Single-family benefit (provision) for credit losses:
Changes in loan activity(1)(2)
$(63)$3 
Redesignation of loans from HFI to HFS307 175 
Actual and forecasted home prices1,179 (921)
Actual and projected interest rates(892)1,257 
Changes in assumptions regarding COVID-19 forbearance and change in actual and expected loan delinquencies(1)(3)
127 (2,587)
Other(5)
4 (97)
Single-family benefit (provision) for credit losses662 (2,170)
Multifamily benefit (provision) for credit losses:
Changes in loan activity(2)
(119)(22)
Actual and projected interest rates(19)216 
Actual and projected economic data(4)
315 — 
Estimated impact of the COVID-19 pandemic54 (636)
Other(5)
(128)32 
Multifamily benefit (provision) for credit losses103 (410)
Total benefit (provision) for credit losses$765 $(2,580)
Change in expected credit enhancement recoveries:(6)
Single-family$(16)$58 
Multifamily(22)127 
Total change in expected credit enhancement recoveries$(38)$185 
Expected benefits from credit enhancements that are contractually attached(1)Prior-period amounts have been adjusted to conform to the loan, which largely consist of primary mortgage insurance, are included as a reduction of estimated credit losses in our allowance for loan losses. Expected benefits from freestanding credit enhancements are not considered in our allowance for loan losses and are recognized separately in “Fee and other income.” Freestanding credit enhancements relatecurrent-year presentation to our credit risk transfers, including but not limited to, Credit Insurance Risk TransferTM (“CIRTTM”) transactions, Connecticut Avenue Securities® (“CAS”) credit risk transfer programs, and multifamily Delegated Underwriting and Servicing (“DUS®”) lender risk-sharing. Benefits from these programs are modeled based on estimated losses and the contractual terms of the credit risk transfer arrangements.
Components of Provision for Credit Losses and Benefit from Freestanding Credit Enhancements
For the Three Months Ended March 31, 2020
(Dollars in millions)
Single-family provision for credit losses:
Changes in loan activity(1)
$(84)
Redesignation of loans from HFI to HFS175 
Actual and forecasted home prices(921)
Actual and projected interest rates1,257 
Adjustment to model results for estimated impact of the COVID-19 outbreak(2,500)
Other(97)
Single-family provision for credit losses(2,170)
Multifamily provision for credit losses:
Changes in loan activity(1)
(22)
Actual and projected interest rates216 
Estimated impact of the COVID-19 outbreak(636)
Other32 
Multifamily provision for credit losses(410)
Total provision for credit losses(2)
$(2,580)
Increase in expected benefit from freestanding credit enhancements:
Single-family$58 
Multifamily127 
Total increase in expected benefit from freestanding credit enhancements$185 
(1)Primarily consists ofinclude changes in the allowance due to loan delinquency,delinquency.
(2)Primarily consists of loan liquidations, new TDRs, amortization of concessions granted to borrowers and the impact of FHFA’s Advisory Bulletin 2012-02, “Framework for Adversely Classifying Loans, Other Real Estate Owned, and Other Assets and Listing Assets for Special Mention” (the “Advisory Bulletin”). For multifamily, itchanges in loan activity also includes changes in the allowance due to loan delinquencies and the impact of changes in debt service coverage ratios (“DSCRs”) based on updated property financial information.information, which is used to assess loan credit quality.
(2)The table does not include credit losses(3)Includes changes in the allowance due to assumptions regarding loss mitigation when loans exit forbearance, as well as adjustments to modeled results.
(4)For the three months ended March 31, 2020, the impact of $3 million on our AFS securities.actual and projected economic data is grouped with “Estimated impact of the COVID-19 pandemic” as these impacts were driven by the pandemic.
The primary factors that impacted our single-family(5)Includes provision for allowance for accrued interest receivable. For single-family, also includes changes in the reserve for guaranty losses that are not separately included in the other components. For multifamily, also includes the impact of credit lossesmodel enhancements implemented in the first quarter of 2020 were:
•Expected credit losses as a result of the COVID-19 outbreak, which was included as an adjustment to modeled results. Given the rapidly changing and deteriorating market conditions in recent weeks as a result of the unprecedented COVID-19 outbreak, we believe our model used to estimate single-family credit losses as of March 31, 2020 does not capture the entirety of losses we expect to incur relating to COVID-19. As such, management used its judgment to increase the loss projections developed by our credit loss model to reflect our current expectations relating to COVID-19’s impact. These judgments included adjusting our modeled results for (1) the expected impact of widespread forbearance programs, including the rate of borrower participation, and the volume and type of loan modifications as a result thereof, (2) the effect of TDR accounting relief from the CARES Act, and (3) lower expected2021.
Fannie Mae First Quarter 20202021 Form 10-Q1615
MD&A | Consolidated Results of Operations
prepayment volumes given the sharp rise(6)Includes changes in unemployment ratesexpected credit enhancement recoveries only for active loans. Recoveries received after foreclosure, which are included in “Change in expected credit enhancement recoveries” in “Summary of Condensed Consolidated Results of Operations,” are not included.
Single-Family Benefit (Provision) for Credit Losses
The primary factors that are expectedcontributed to stay elevated over the near term. In developing the model adjustment shownour single-family benefit for credit losses in the table above, management considered the current credit risk profilefirst quarter of our single-family loan book of business, as well as relevant historical credit loss experience during rare or stressful economic environments.2021 were:
•A decrease inBenefit from actual and expected home price growth. During the first quarter of 2021, home price growth was unseasonably strong. We also increased our expectations for home price growth. We revised our forecast to reflect near zero home price appreciationgrowth on a national basis for 2020 due to COVID-19 market disruptions. The actual and forecasted home price impact shown in the table above reflects our revised forecast. Lowerfull-year 2021. Higher home prices increasedecrease the likelihood that loans will default and increasereduce the amount of credit loss on loans that do default, which impacts our estimate of losses and ultimately increasesreduces our loss reserves and provision for credit losses.
•These factors were partially offset by lower actual and projected mortgage interest rates. As mortgage interest rates decline, we expect an increase in future prepayments on single-family loans, See “Key Market Economic Indicators” for additional information about how home prices affect our credit loss estimates, including modified loans. Higher expected prepayments shorten the expected livesa discussion of modified loans, which decreases the expected impairment relating to term and interest-rate concessions provided on these loans and results in a benefit for credit losses. The actual and forecasted interest rate impact shown in the table above reflects our modeled results. As noted above, we adjusted downward our modeled expectation of prepayment volumes due to the COVID-19 outbreak, which reduced this modeled benefit from interest rates.
Our multifamily provision for credit losseshome price appreciation in the first quarter of 2020 was primarily driven by:2021 and our home price forecast.
•Expected credit losses asBenefit from the redesignation of certain reperforming single-family loans from HFI to HFS. After a resulttemporary pause in sales of the COVID-19 outbreak. Similar to the single-family provisionnonperforming and reperforming loans, we resumed our plans for credit losses discussed above, we believe our model used to estimate multifamily credit losses as of March 31, 2020 does not capture the entirety of losses we expect to incur relating to COVID-19. As such, management used its judgment to increase the loss projections developed by our credit loss model to reflect our current expectations relating to COVID-19’s impact. Accordingly, our current multifamily provision for credit losses was primarily driven by higher expected unemployment rates, which we expect will increase the number of loans in forbearance and reduce property net operating income in the near term, thereby decreasing forecasted property values and increasing the probability of loan default. In developing these adjustments, management considered the current credit risk profile of our multifamily loan book of business, as well as relevant historical credit loss experience during rare or stressful economic environments.
The table below provides quantitative analysis of the drivers for the first quarter of 2019 of our single-family benefit for credit losses. The presentation of our components represents amounts recognized prior to our transition to the lifetime loss model prescribed by the CECL standard. Many of the drivers that contribute to our benefit for credit losses overlap or are interdependent. The attribution shown below is based on internal allocation estimates. The table does not include our multifamily benefit (provision) for credit losses as the amounts for 2019 were less than $50 million.
Components of Benefit for Credit Losses
For the Three Months Ended March 31,
2019
(Dollars in millions)
Single-family benefit for credit losses:
Changes in loan activity(1)
$24 
Redesignation of loans from HFI to HFS227 
Actual and forecasted home prices228 
Actual and projected interest rates165 
Other(2)
17 
Total single-family benefit for credit losses$661 
(1)Primarily consists of changes in the allowance due to loan delinquency, loan liquidations, new TDRs, amortization of concessions granted to borrowers and the impact of FHFA’s Advisory Bulletin.
(2)Primarily consists of the impact of model and assumption changes and changes in the reserve for guaranty losses that are not separately included in the other components.
The primary factors that contributed to our benefit for credit lossessales late in the first quarter of 2019 were:
•The redesignation of2021. As a result, we redesignated certain reperforming single-family loans from HFI to HFS, as we no longer intend to hold them for the foreseeable future or to maturity. Upon redesignation of these loans, we recorded the loans at the lower of cost or fair value with a write-off toagainst the allowance for loan losses. Amounts recorded in the allowance related to these loans exceeded the amounts chargedwritten off, which contributed to theresulting in a benefit for credit losses.
•Benefit from changes in assumptions regarding COVID-19 forbearance and change in actual and expected loan delinquencies. Management continues to apply its judgment and supplement model results as of March 31, 2021, due to continued uncertainty regarding the loss mitigation outcomes of borrowers in forbearance, and uncertainty regarding the future impact of the pandemic, including the efficacy of the COVID-19 vaccines on new strains of the virus and its effect on the economy. Although uncertainty remains, our expected credit losses as a result of the COVID-19 pandemic decreased in the first quarter of 2021, driven by the passage of the American Rescue Plan, which provides additional economic stimulus and helps support the continued economic recovery. In addition, decreased political uncertainty compared with the end of 2020 combined with the increased progression of the COVID-19 vaccines rollout lessened expectations of credit losses. Based on these factors in the first quarter of 2021, management used its judgment to reduce the non-modeled adjustment that was previously applied to the loss projections developed by our credit loss model.
The impact of these factors was partially offset by the impact of the following factor, which reduced our single-family benefit for credit losses recognized in the first quarter of 2021:
•Provision from higher actual and projected interest rates. Although we continue to be in a historically low interest-rate environment, actual and projected interest rates rose in the first quarter of 2021. As mortgage interest rates increase, we expect a decrease in future prepayments on single-family loans, including modified loans. Lower expected prepayments extend the expected lives of modified loans, which increases the expected impairment relating to term and interest-rate concessions provided on these loans, resulting in a provision for credit losses.
The primary factors that impacted our single-family provision for credit losses in the first quarter of 2020 were:
•Expected credit losses as a result of the COVID-19 pandemic. Given the rapidly changing and deteriorating market conditions in the first quarter of 2020 as a result of the unprecedented COVID-19 pandemic, we believed our model used to estimate single-family credit losses as of March 31, 2020 did not capture the entirety of losses we expected to incur relating to COVID-19. As a result, management used its judgment to increase the loss projections developed by our credit loss model to reflect our expectations at that time relating to COVID-19’s impact. These judgments included adjusting our modeled results for (1) the expected impact of widespread forbearance programs, including the rate of borrower participation, and the volume and type of loan modifications as a result thereof, (2) the effect of troubled debt restructuring (“TDR”) accounting relief from the CARES Act, and (3) lower expected prepayment volumes given the sharp rise in unemployment rates that were expected to stay elevated over the near term. In developing the model adjustment, management considered the credit risk profile of our single-family loan book of business at that time, as well as relevant historical credit loss experience during rare or stressful economic environments.
•A decrease in our expectations for home price growth. In the first quarter of 2020, we revised our forecast to reflect near zero home price appreciation on a national basis for 2020 due to COVID-19 market disruptions. Lower home prices increase the likelihood that loans will default and increase the amount of credit loss on
Fannie Mae First Quarter 20202021 Form 10-Q1716
MD&A | Consolidated Results of Operations
•An increase in actual and forecasted home prices. Higher home prices decrease the likelihood that loans will default and reduce the amount of credit loss on loans that do default, which impacts our estimate of losses and ultimately reducesincreases our loss reserves and provision for credit losses.
•LowerThese factors were partially offset by lower actual and projected mortgage interest rates.
TCCA Fees
Pursuant As mortgage interest rates declined, we expected an increase in future prepayments on single-family loans, including modified loans. As noted above, we adjusted downward our modeled expectation of prepayment volumes due to the TCCA,COVID-19 pandemic, which reduced this modeled benefit from interest rates.
Multifamily Benefit (Provision) for Credit Losses
The primary factors that impacted our multifamily benefit for credit losses in 2012, FHFA directed usthe first quarter of 2021 were:
•Benefit from actual and projected economic data. In the first quarter of 2021, property value forecasts increased due to continued demand for multifamily housing. In addition, improved job growth led to an increase in projected average property net operating income, which reduced the probability of loan defaults resulting in a benefit for credit losses for the quarter.
•Benefit from changes in expected credit losses as a result of the COVID-19 pandemic. Similar to our single-family guaranty feesprovision for credit losses described above, management continues to apply its judgment and supplement model results as of March 31, 2021, due to continued uncertainty regarding the future impact of the pandemic, including the efficacy of the COVID-19 vaccines on new strains of the virus and its effect on the economy. Although uncertainty remains, our expected credit losses as a result of the COVID-19 pandemic decreased in the first quarter of 2021 driven by 10 basis points and remit this increase to Treasury. This TCCA-related revenue is included in “Net interest income”positive economic growth and the expense is recognized as “TCCA fees”passage of the American Rescue Plan, which provided additional economic stimulus. Based on these factors in the first quarter of 2021, management used its judgment to reduce the non-modeled adjustment that was previously applied to the loss projections developed by our condensed consolidated financial statements. TCCA fees increasedcredit loss model.
Our multifamily provision for credit losses in the first quarter of 2020 comparedwas primarily driven by:
•Expected credit losses as a result of the COVID-19 pandemic. Consistent with the first quarter2020 single-family provision for credit losses discussed above, we believed our model used to estimate multifamily credit losses as of 2019 asMarch 31, 2020 did not capture the entirety of losses we expected to incur relating to the economic dislocation caused by the COVID-19 pandemic. As a result, management used its judgment to increase the loss projections developed by our credit loss model to reflect our expectations at that time relating to COVID-19’s impact. Accordingly, our multifamily provision for credit losses was primarily driven by higher expected unemployment rates, which we expected would increase the number of loans in forbearance and reduce property net operating income in the near term, thereby decreasing forecasted property values and increasing the probability of loan default. In developing these adjustments, management considered the credit risk profile of our multifamily loan book of business subject to the TCCA continued to grow. See “Business—Charter Act and Regulation—GSE Act and Other Legislation—Guaranty Fees and Pricing” in our 2019 Form 10-K for further discussion of the TCCA.
Credit Enhancement Expense
Credit enhancement expense primarily consists of costs associated with our CIRT and CAS programsat that time, as well as enterprise-paid mortgage insurance (“EPMI”). We exclude from this expense costs related to our CAS transactions accounted for as debt instruments andrelevant historical credit risk transfer programs accounted for as derivative instruments. Credit enhancement expense has been presented as a separate line item for all periods presented as the percentage of our book of business covered by freestanding credit enhancements has increased and become a more significant driver of our results of operations. In prior periods, credit enhancement expenses were recorded in “Other expenses, net.”
Credit enhancement expense increased in the first quarter of 2020 compared with the first quarter of 2019 primarily due to higher outstanding volumes of loans covered by credit risk transfer transactions. We discuss the transfer of mortgage credit risk in “Single-Family Business—Single-Family Mortgage Credit Risk Management—Single-Family Credit Enhancement and Transfer of Mortgage Credit Risk” and “Multifamily Business—Multifamily Mortgage Credit Risk Management—Transfer of Multifamily Mortgage Credit Risk.”loss experience during rare or stressful economic environments.
Fannie Mae First Quarter 20202021 Form 10-Q1817
MD&A | Consolidated Balance Sheet Analysis

Consolidated Balance Sheet Analysis
This section discusses our condensed consolidated balance sheets and should be read together with our condensed consolidated financial statements and the accompanying notes.
Summary of Condensed Consolidated Balance SheetsSummary of Condensed Consolidated Balance SheetsSummary of Condensed Consolidated Balance Sheets
As ofAs of
March 31, 2020December 31, 2019VarianceMarch 31, 2021December 31, 2020Variance
(Dollars in millions)(Dollars in millions)
Assets
Assets
Assets
Cash and cash equivalents and federal funds sold and securities purchased under agreements to resell or similar arrangementsCash and cash equivalents and federal funds sold and securities purchased under agreements to resell or similar arrangements$88,238  $34,762  $53,476  Cash and cash equivalents and federal funds sold and securities purchased under agreements to resell or similar arrangements$81,475 $66,537 $14,938 
Restricted cash48,245  40,223  8,022  
Restricted cash and cash equivalentsRestricted cash and cash equivalents87,803 77,286 10,517 
Investments in securitiesInvestments in securities55,230  50,527  4,703  Investments in securities112,758 138,239 (25,481)
Mortgage loans:Mortgage loans:Mortgage loans:
Of Fannie MaeOf Fannie Mae106,674  101,668  5,006  Of Fannie Mae111,097 117,911 (6,814)
Of consolidated trustsOf consolidated trusts3,269,345  3,241,510  27,835  Of consolidated trusts3,638,411 3,546,533 91,878 
Allowance for loan lossesAllowance for loan losses(13,209) (9,016) (4,193) Allowance for loan losses(9,628)(10,552)924 
Mortgage loans, net of allowance for loan lossesMortgage loans, net of allowance for loan losses3,362,810  3,334,162  28,648  Mortgage loans, net of allowance for loan losses3,739,880 3,653,892 85,988 
Deferred tax assets, netDeferred tax assets, net12,831  11,910  921  Deferred tax assets, net12,516 12,947 (431)
Other assetsOther assets34,002  31,735  2,267  Other assets35,671 36,848 (1,177)
Total assetsTotal assets$3,601,356  $3,503,319  $98,037  Total assets$4,070,103 $3,985,749 $84,354 
Liabilities and equityLiabilities and equityLiabilities and equity
Debt:Debt:Debt:
Of Fannie MaeOf Fannie Mae$228,458  $182,247  $46,211  Of Fannie Mae$273,442 $289,572 $(16,130)
Of consolidated trustsOf consolidated trusts3,334,098  3,285,139  48,959  Of consolidated trusts3,740,538 3,646,164 94,374 
Other liabilitiesOther liabilities24,855  21,325  3,530  Other liabilities25,898 24,754 1,144 
Total liabilitiesTotal liabilities3,587,411  3,488,711  98,700  Total liabilities4,039,878 3,960,490 79,388 
Fannie Mae stockholders’ equity:Fannie Mae stockholders’ equity:Fannie Mae stockholders’ equity:
Senior preferred stockSenior preferred stock120,836  120,836  —  Senior preferred stock120,836 120,836 — 
Other net deficitOther net deficit(106,891) (106,228) (663) Other net deficit(90,611)(95,577)4,966 
Total equityTotal equity13,945  14,608  (663) Total equity30,225 25,259 4,966 
Total liabilities and equityTotal liabilities and equity$3,601,356  $3,503,319  $98,037  Total liabilities and equity$4,070,103 $3,985,749 $84,354 
Cash and Cash Equivalents and Federal Funds Sold and Securities Purchased Underunder Agreements to Resell or Similar Arrangements, Restricted Cash and Cash Equivalents and Investments in Securities
The increase in cash and cash equivalents and federal funds sold and securities purchased under agreements to resell or similar arrangements from December 31, 20192020 to March 31, 20202021 was offset by a decrease in investments in securities, driven by a shift to investments in federal funds sold and securities purchased under agreements to resell and similar arrangements as of March 31, 2021 as compared with investments in U.S. Treasury securities at December 31, 2020. The overall net amount decreased primarily driven by proceeds from newa decrease in funding debt issuances to support refinancing activity andduring the period resulting in anticipation of future potential liquidity needs as a result ofnet cash outflows for the COVID-19 outbreak, as well as proceeds from loan payoffs. Seequarter, which we discuss in “Liquidity and Capital Management—Debt Funding—Debt Funding Activity" for a discussion of our funding needs related to the COVID-19 outbreak.Cash Flows.”
Mortgage Loans, Net of Allowance
The mortgage loans reported in our condensed consolidated balance sheets are classified as either HFS or HFI and include loans owned by Fannie Mae and loans held in consolidated trusts.
Mortgage loans, net of allowance for loan losses increased as of March 31, 20202021 compared with December 31, 2019,2020, primarily driven by:
•by an increase in mortgage loans due to acquisitions, primarily from continued high refinancing activity, outpacing liquidations and sales;
•partially offset by an increase in our allowance for loan losses due to losses we expect to incur as a result of the COVID-19 outbreak and the impact of our adoption of the CECL standard on January 1, 2020.sales.
For additional information on our mortgage loans, see “Note 3, Mortgage Loans,” and for additional information on changes in our allowance for loan losses, see “Note 4, Allowance for Loan Losses.”
Fannie Mae First Quarter 20202021 Form 10-Q1918
MD&A | Consolidated Balance Sheet Analysis

Debt
The increasedecrease in debt of Fannie Mae from December 31, 20192020 to March 31, 20202021 was primarily driven by new short- and long-term debt issuancesdue to support refinancing activity and in anticipation of future potential liquidity needs as a result of the COVID-19 outbreak.decreased funding needs. The increase in debt of consolidated trusts from December 31, 20192020 to March 31, 20202021 was primarily driven by sales of Fannie Mae MBS, which are accounted for as issuances of debt of consolidated trusts in our condensed consolidated balance sheets, since the MBS certificate ownership is transferred from us to a third party. See “Liquidity and Capital Management—Liquidity Management—Debt Funding” for a summary of the activity of thein debt of Fannie Mae and a comparison of the mix between our outstanding short-term and long-term debt. Also see “Note 7, Short-Term and Long-Term Debt” for additional information on our total outstanding debt.
Stockholders’ Equity
Our net equity decreasedincreased as of March 31, 20202021 compared with December 31, 2019 due to a charge2020 by the amount of $1.1 billion to retained earnings due to our implementationcomprehensive income recognized during the first quarter of the CECL standard on January 1, 2020. See “Note 1, Summary of Significant Accounting Policies—New Accounting Guidance—The Current Expected Credit Loss Standard” for further details.2021.
Under the liquidation preference provisions of the senior preferred stock described in “Business—Conservatorship, Treasury Agreements and Housing Finance Reform—Treasury Agreements” in our 2019 Form 10-K, theThe aggregate liquidation preference of the senior preferred stock increased from $131.2 billion as of December 31, 2019 to $135.4$146.8 billion as of March 31, 2020. Because2021 and will further increase to $151.7 billion as of June 30, 2021 due to the $5.0 billion increase in our net worth did not increase during the first quarter of 2020, the aggregate liquidation preference of the senior preferred stock will remain at $135.4 billion as of June 30, 2020.2021.
Retained Mortgage Portfolio
We use our retained mortgage portfolio primarily to provide liquidity to the mortgage market through our whole loan conduit and to support our loss mitigation activities, particularly in times of economic stress when other sources of liquidity to the mortgage market may decrease or withdraw. Previously, we also used our retained mortgage portfolio for investment purposes.
Our retained mortgage portfolio consists of mortgage loans and mortgage-related securities that we own, including Fannie Mae MBS and non-Fannie Mae mortgage-related securities. Assets held by consolidated MBS trusts that back mortgage-related securities owned by third parties are not included in our retained mortgage portfolio.
We use our retained mortgage portfolio primarily to provide liquidity to the mortgage market and support our loss mitigation activities. Previously, we also used our retained mortgage portfolio for investment purposes.
The chart below separates the instruments within our retained mortgage portfolio, measured by unpaid principal balance, into three categories based on each instrument’s use:
•Lender liquidity, which includes balances related to our whole loan conduit activity, supports our efforts to provide liquidity to the single-family and multifamily mortgage markets.
•Loss mitigation supports our loss mitigation efforts through the purchase of delinquent loans from our MBS trusts.
•Other represents assets that were previously purchased for investment purposes. More than halfThe majority of the balance of “Other” as of March 31, 20202021 consisted of Fannie Mae reverse mortgage securities and reverse mortgage loans. We expect the amount of assets in “Other” will continue to decline over time as they liquidate, mature or are sold.
Retained Mortgage Portfolio
(Dollars in billions)
fnm-20200331_g9.jpgfnm-20210331_g7.jpg
The modest decrease in our retained mortgage portfolio as of March 31, 20202021 compared with December 31, 20192020 was primarily due to sales of Fannie Mae securities and continued liquidations of loans. This decrease was partially offset by an increase in our acquisitions of loans through our whole loan conduit inpayoffs during the first quarter of 20202021 in our loss mitigation loans driven by higher mortgage refinance activity.
Fannie Mae First Quarter 20202021 Form 10-Q2019
MD&A | Retained Mortgage Portfolio
The table below displays the components of our retained mortgage portfolio, measured by unpaid principal balance. Based on the nature of the asset, these balances are included in either “Investments in securities” or “Mortgage loans of Fannie Mae” in our Summary of Condensed Consolidated Balance Sheets.
Retained Mortgage PortfolioRetained Mortgage PortfolioRetained Mortgage Portfolio
As ofAs of
March 31, 2020December 31, 2019March 31, 2021December 31, 2020
(Dollars in millions)(Dollars in millions)
Lender liquidity:Lender liquidity:Lender liquidity:
Agency securities(1)
Agency securities(1)
$32,316  $38,375  
Agency securities(1)
$34,849 $34,810 
Mortgage loansMortgage loans26,744  21,152  Mortgage loans45,194 45,895 
Total lender liquidityTotal lender liquidity59,060  59,527  Total lender liquidity80,043 80,705 
Loss mitigation mortgage loans(2)
Loss mitigation mortgage loans(2)
60,477  60,731  
Loss mitigation mortgage loans(2)
53,267 56,315 
Other:Other:Other:
Reverse mortgage loansReverse mortgage loans16,397  17,129  Reverse mortgage loans11,618 12,388 
Mortgage loans

Mortgage loans

6,474  6,546  Mortgage loans4,079 4,881 
Reverse mortgage securities(3)
Reverse mortgage securities(3)
7,233  7,575  
Reverse mortgage securities(3)
7,118 7,185 
Private-label and other securitiesPrivate-label and other securities974  1,250  Private-label and other securities450 473 
Fannie Mae-wrapped private-label securitiesFannie Mae-wrapped private-label securities555  581  Fannie Mae-wrapped private-label securities510 521 
Mortgage revenue bondsMortgage revenue bonds257  272  Mortgage revenue bonds162 182 
Total otherTotal other31,890  33,353  Total other23,937 25,630 
Total retained mortgage portfolioTotal retained mortgage portfolio$151,427  $153,611  Total retained mortgage portfolio$157,247 $162,650 
Retained mortgage portfolio by segment:

Retained mortgage portfolio by segment:

Retained mortgage portfolio by segment:
Single-family mortgage loans and mortgage-related securitiesSingle-family mortgage loans and mortgage-related securities$144,040  $145,179  Single-family mortgage loans and mortgage-related securities$150,397 $154,943 
Multifamily mortgage loans and mortgage-related securitiesMultifamily mortgage loans and mortgage-related securities$7,387  $8,432  Multifamily mortgage loans and mortgage-related securities$6,850 $7,707 
(1)Consists of Fannie Mae, Freddie Mac and Ginnie Mae mortgage-related securities, including Freddie Mac securities guaranteed by Fannie Mae. Excludes Fannie Mae and Ginnie Mae reverse mortgage securities and Fannie Mae-wrapped private-label securities.
(2)Includes single-family loans classified as TDRs that were on accrual status of $37.9$26.1 billion and $38.2$29.4 billion as of March 31, 20202021 and December 31, 2019,2020, respectively, and single-family loans on nonaccrual status of $19.6 billion as of March 31, 20202021 and December 31, 2019.2020. Includes multifamily loans classified as TDRs that were on accrual status of $40$24 million and $51$20 million as of March 31, 20202021 and December 31, 2019,2020, respectively, and multifamily loans on nonaccrual status of $95$533 million and $132$536 million as of March 31, 20202021 and December 31, 2019,2020, respectively.
(3)Consists of Fannie Mae and Ginnie Mae reverse mortgage securities.
The amount of mortgage assets that we may own is capped at $250 billion byand will decrease to $225 billion on December 31, 2022 under the terms of our senior preferred stock purchase agreement with Treasury, and FHFA has directed that we furtherTreasury. We are currently managing our business to a $225 billion cap our mortgage assets at $225 billion. The Treasury plan includes a recommendation that Treasury and FHFA amend our senior preferred stock purchase agreementpursuant to further reduce the cap on our investments in mortgage-related assets, and also to restrict our retained mortgage portfolio to solely supporting the business of securitizing MBS.instructions from FHFA. See “Business—Conservatorship, Treasury Agreements and Housing Finance Reform” in our 20192020 Form 10-K for additional information on our portfolio cap and the Treasury plan.cap.
Effective January 31, 2020, FHFA directed us toWe include 10% of the notional value of interest-only securities in calculating the size of the retained portfolio for the purpose of determining compliance with the senior preferred stock purchase agreement retained portfolio limits and associated FHFA guidance. As of March 31, 2020,2021, 10% of the notional value of our interest-only securities was $2.1$2.2 billion, which is not included in the table above.
WeUnder the terms of our MBS trust documents, we have the option or, in some instances, the obligation, to purchase mortgage loans that meet specific criteria from an MBS trust. In supportThe purchase price for these loans is the unpaid principal balance of our loss mitigation strategy, we purchased $3.0 billion of loans from our single-family MBS truststhe loan plus accrued interest. If a delinquent loan remains in the first quarter of 2020, the substantial majority of which were delinquent. In deciding whether and when to exercise our option to purchase a loan from a single-family MBS trust, the servicer is responsible for advancing the borrower’s missed scheduled principal and interest payments to the MBS holders for up to four months, after which time we considermust make these missed payments. In addition, we must reimburse servicers for advanced principal and interest payments. The cost of purchasing most delinquent loans from a variety of factors, including, but not limited to,single-family Fannie Mae MBS trust and holding them in our retained mortgage portfolio is currently less than the cost of funds, general market conditions, and relevant market yields. The weight we giveadvancing delinquent payments to these factors, among others, changes depending on market circumstances and other factors. See “MD&A—Retained Mortgage Portfolio—Purchases of Loans from Our MBS Trusts” in our 2019 Form 10-Ksecurity holders.
Except for more information relating to our purchases of loans from MBS trusts.
As a result of the COVID-19 outbreak, we have made a number of changes to our single-family and multifamily loss mitigation strategies. This includes providing single-family borrowers experiencing COVID-19-related financial hardship with forbearance for up to 12 months, as well as repayment plan and loan modification options once the forbearance period ends. Typically, we do not buy loans out of our MBS trusts while theythat are in forbearance or when they arethat have been granted certain other types of loss mitigation options such(such as a repayment plan or certain types of loan modifications. Given the significant uncertainty associated with thepayment deferral), we have historically purchased loans from single-family MBS trusts when they become four consecutive monthly payments delinquent. In September 2020, FHFA instructed both us and Freddie Mac
Fannie Mae First Quarter 20202021 Form 10-Q2120
MD&A | Retained Mortgage Portfolio
COVID-19 outbreak,to extend the timeframe for our single-family delinquent loan buyout policy to 24 consecutively missed monthly payments (that is, loans that are 24 months past due) effective January 1, 2021. We expect that in most cases we nevertheless will purchase delinquent loans from single-family MBS trusts prior to the 24-month deadline under one of the exceptions to the FHFA directive, which includes loans that are permanently modified, loans subject to a short-sale or deed-in-lieu of foreclosure, loans that are paid in full and loans referred to foreclosure.
In support of our loss mitigation strategies, we purchased $1.5 billion of loans from our single-family MBS trusts in the first quarter of 2021, the substantial majority of which were delinquent, compared with $3.0 billion of loans purchased from single-family MBS trusts in the first quarter of 2020. We expect the amount of loans we may buy out of trusts over the long termmay increase, particularly in 2022, compared with 2020 as a result of COVID-19-related loan delinquencies orand loss mitigation strategies, could substantiallywhich may increase the size of our retained mortgage portfolio. As describedHowever, the magnitude of any increase in “MD&A—Liquidity and Capital Management—Debt Funding Activity,” dependingour retained mortgage portfolio will depend on the extentvolume of loans we ultimately buy, the timing of those purchases, and the length of time those loans remain in our retained mortgage portfolio. These factors are highly uncertain and depend on a number of things, including the length of time loans remain in forbearance, the duration of foreclosure suspensions, and the nature and success of our funding needsloss mitigation activities, including payment deferrals and the amountrepayment plans, which do not require us to purchase loans out of trust. Because of our mortgage loans we purchase from MBS trusts, weasset limit, our business activities may be required to obtain FHFA’sconstrained. See “Single-Family Business—Single-Family Mortgage Credit Risk Management—Single-Family Problem Loan Management—Single-Family Loans in Forbearance” and Treasury’s prior written consent to increase“Multifamily Business—Multifamily Mortgage Credit Risk Management—Multifamily Problem Loan Management and Foreclosure Prevention” for information on our current debt limit and mortgage asset limit.loans in forbearance.
Guaranty Book of Business
Our “guaranty book of business” consists of:
•Fannie Mae MBS outstanding, excluding the portions of any structured securities we issue that are backed by Freddie Mac securities;
•mortgage loans of Fannie Mae held in our retained mortgage portfolio; and
•other credit enhancements that we provide on mortgage assets.
“Total Fannie Mae guarantees” consists of:
•our guaranty book of business; and
•the portions of any structured securities we issue that are backed by Freddie Mac securities.
We and Freddie Mac began issuingissue single-family uniform mortgage-backed securities, or “UMBS®.”, in June 2019. In this report, we use the term “Fannie Mae-issued UMBS” to refer to single-family Fannie Mae MBS that are directly backed by fixed-rate mortgage loans and generally eligible for trading in the to-be-announced (“TBA”) market. We use the term “Fannie Mae MBS” or “our MBS” to refer to any type of mortgage-backed security that we issue, including UMBS, SupersTM®, Real Estate Mortgage Investment Conduit securities (“REMICs”) and other types of single-family or multifamily mortgage-backed securities.
Some Fannie Mae MBS that we issue are backed in whole or in part by Freddie Mac securities. When we resecuritize Freddie Mac securities into Fannie Mae-issued structured securities, such as Supers and REMICs, our guaranty of principal and interest extends to the underlying Freddie Mac securities. However, Freddie Mac continues to guarantee the payment of principal and interest on the underlying Freddie Mac securities that we have resecuritized. We do not charge an incremental guaranty fee to include Freddie Mac securities in the structured securities that we issue. References to our single-family guaranty book of business in this report exclude Freddie Mac-acquired mortgage loans underlying Freddie Mac securities that we have resecuritized.
Fannie Mae First Quarter 2021 Form 10-Q21
MD&A | Guaranty Book of Business
The table below displays the composition of our guaranty book of business based on unpaid principal balance. Our single-family guaranty book of business accounted for 89% and 90% of our guaranty book of business as of March 31, 20202021 and December 31, 2019.2020, respectively.
Composition of Fannie Mae Guaranty Book of Business(1)

Composition of Fannie Mae Guaranty Book of BusinessComposition of Fannie Mae Guaranty Book of Business
As ofAs of
March 31, 2020December 31, 2019March 31, 2021December 31, 2020
Single-Family
Multifamily
Total
Single-Family
Multifamily
Total
Single-Family
Multifamily
Total
Single-Family
Multifamily
Total
(Dollars in millions)(Dollars in millions)
Conventional guaranty book of business(2)(1)
Conventional guaranty book of business(2)(1)
$3,038,517  $347,381  $3,385,898  $2,997,475  $341,522  $3,338,997  
Conventional guaranty book of business(2)(1)
$3,380,576 $399,596 $3,780,172 $3,305,030 $386,379 $3,691,409 
Government guaranty book of business(3)(2)
Government guaranty book of business(3)(2)
26,135  1,060  27,195  27,422  1,079  28,501  
Government guaranty book of business(3)(2)
19,659 2,180 21,839 20,777 2,268 23,045 
Guaranty book of businessGuaranty book of business3,064,652  348,441  3,413,093  3,024,897  342,601  3,367,498  Guaranty book of business3,400,235 401,776 3,802,011 3,325,807 388,647 3,714,454 
Freddie Mac securities guaranteed by Fannie Mae(4)(3)
Freddie Mac securities guaranteed by Fannie Mae(4)(3)
72,660  —  72,660  50,100  —  50,100  
Freddie Mac securities guaranteed by Fannie Mae(4)(3)
154,623 — 154,623 137,316 — 137,316 
Total Fannie Mae guaranteesTotal Fannie Mae guarantees$3,137,312  $348,441  $3,485,753  $3,074,997  $342,601  $3,417,598  Total Fannie Mae guarantees$3,554,858 $401,776 $3,956,634 $3,463,123 $388,647 $3,851,770 
(1)Includes other single-family Fannie Mae guaranty arrangements of $1.3 billion as of March 31, 2020 and December 31, 2019, and other multifamily Fannie Mae guaranty arrangements of $11.1 billion and $11.3 billion as of March 31, 2020 and December 31, 2019, respectively. The unpaid principal balance of resecuritized Fannie Mae MBS is included only once in the reported amount.
(2)Refers to mortgage loans and mortgage-related securities that are not guaranteed or insured, in whole or in part, by the U.S. government.
(3)(2)Refers to mortgage loans and mortgage-related securities guaranteed or insured, in whole or in part, by the U.S. government.
(4)(3)Consists of approximately (i) $55.3$126.0 billion and $110.7 billion in unpaid principal balance of Freddie Mac-issued UMBS backing Fannie Mae-issued Supers;Supers as of March 31, 2021 and December 31, 2020, respectively; and (ii) $17.3$28.7 billion and $26.6 billion in unpaid principal balance of Freddie Mac securities backing Fannie Mae-issued REMICs a portionas of which may be backed in whole or in part by Fannie Mae MBS. Therefore, our total exposure to Freddie Mac securities included in Fannie Mae REMIC collateral is likely lower.March 31, 2021 and December 31, 2020, respectively.
The Federal Housing Enterprises Financial Safety and Soundness Act of 1992, as amended, including by the Federal Housing Finance Regulatory Reform Act of 2008 (together, the “GSE Act”) requires us to set aside each year an amount equal to 4.2
Fannie Mae First Quarter 2020 Form 10-Q22
MD&A | Guaranty Book of Business

basis points of the unpaid principal balance of our new business purchases and to pay this amount to specified U.S. Department of Housing and Urban Development (“HUD”) and Treasury funds in support of affordable housing. In March 2020,2021, we paid $280$603 million to the funds based on our new business purchases in 2019.2020. For the first three monthsquarter of 2020,2021, we recognized an expense of $86$177 million related to this obligation based on our $204.9$422.2 billion in new business purchases during the period. We expect to pay this amount to the funds in 2021,2022, plus additional amounts to be accrued based on our new business purchases in the remaining nine months of 2020.2021. See “Business—Charter ActLegislation and Regulation—GSE Act and Other Legislation—Legislative and Regulatory Matters—Affordable Housing Allocations” in our 20192020 Form 10-K for more information regarding this obligation.
Fannie Mae First Quarter 2021 Form 10-Q22
MD&A | Business Segments
Business Segments
We have two reportable business segments: Single-Family and Multifamily. The Single-Family business operates in the secondary mortgage market relating to single-family mortgage loans, which are secured by properties containing four or fewer residential dwelling units. The Multifamily business operates in the secondary mortgage market relating primarily to multifamily mortgage loans, which are secured by properties containing five or more residential units.
The chart below displays the net revenues and net income for each of our business segments for the first quarter of 20192020 compared with the first quarter of 2020.2021. Net revenues consist of net interest income and fee and other income.
Business Segment Net Revenues and Net Income
(Dollars in billions)
fnm-20200331_g10.jpgfnm-20200331_g11.jpgfnm-20210331_g8.jpgfnm-20210331_g9.jpg
In the following sections, we describe each segment’s business metrics, financial results and credit performance. For an overview of how we are compensated for and manage the risk of credit losses through the life cycle of our loans and how we measure our credit risk, see "Business—Managing Mortgage Credit Risk” in our 2020 Form 10-K.
Single-Family Business
Working with our lender customers, ourOur Single-Family business provides liquidity to the mortgage market primarily by acquiring single-family loans from lenders and securitizing those loans into Fannie Mae MBS, which are either delivered to the lenders or sold to investors or dealers.
This section supplements and updates information regarding our Single-Family business segment in our 20192020 Form 10-K. See “MD&A—Single-Family Business” in our 20192020 Form 10-K for additional information regarding the primary business activities, customers and competition of our Single-Family business.
Single-Family Mortgage Market Share
Single-Family Mortgage Acquisition Market Share
Our share of the single-family mortgage acquisition market, including loans held on lenders’ books, may fluctuate from period to period. We currently estimate our single-family acquisition market shareHousing activity slowed modestly in the last three years remained withinfirst quarter of 2021 compared with the rangefourth quarter of 24%2020. Total home sales and single-family housing starts moderated due to 30%, supporting approximately onenear record-low inventory of available homes for sale, inclement weather in fourFebruary, and construction capacity constraints. However, we expect solid gains in total home sales and single-family mortgage loans. Our market share estimate is based on publicly available data regardinghousing starts for full-year 2021 compared with 2020. Mortgage rates increased in the amountfirst quarter of single-family first-lien mortgage loans originated and our competitors’ acquisitions.2021,
Fannie Mae First Quarter 20202021 Form 10-Q23

MD&A | Single-Family Business | Single-Family Mortgage Market
and we expect additional increases this year, which will likely lead to a decline in total refinance originations for 2021 compared with 2020.
Total existing home sales averaged 6.3 million units annualized in the first quarter of 2021, compared with 6.7 million units in the fourth quarter of 2020, according to data from the National Association of REALTORS®. According to the U.S. Census Bureau, new single-family home sales increased during the first quarter of 2021, averaging an annualized rate of 959,000 units, compared with 924,000 units in the fourth quarter of 2020.
The 30-year fixed mortgage rate averaged 3.08% in March 2021, compared with 2.68% in December 2020, according to Freddie Mac’s Primary Mortgage Market Survey®.
We forecast that total originations in the U.S. single-family mortgage market in 2021 will decrease from 2020 levels by approximately 12%, from an estimated $4.54 trillion in 2020 to $4.00 trillion in 2021, and that the amount of refinance originations in the U.S. single-family mortgage market will decrease from an estimated $2.89 trillion in 2020 to $2.11 trillion in 2021. Declining origination volume reduces the number of mortgages available for us to acquire, which affects our business volume. See “Key Market Economic Indicators” for additional discussion of how housing activity can affect our financial results and the uncertainties that may affect our forecasts and expectations.
Single-Family Market Activity
Single-Family Mortgage-Related Securities Issuances Market Share
Our single-family Fannie Mae MBS issuances were $403.7 billion for the first quarter of 2021, compared with $185.7 billion for the first quarter of 2020, compared with $88.4 billion for2020. This increase was driven by a high volume of refinance activity in the first quarter of 2019.2021 due to historically low mortgage rates. Based on the latest data available, the chart below displays our estimated market share of single-family mortgage-related securities issuances in the first quarter of 20202021 as compared with that of our primary competitors for the issuance of single-family mortgage-related securities.
Single-Family Mortgage-Related Securities Issuances Share
First Quarter 2020 Market Share2021
fnm-20200331_g12.jpgfnm-20210331_g10.jpg
We estimate our market share of single-family mortgage-related securities issuances was 38%41% in the fourth quarter of 2020 and 37% in the first quarter of 2020, compared with 37% in the fourth quarter of 2019 and 36% in the first quarter of 2019.
Single-Family Mortgage Market
We expect housing activity to slow significantly in the months ahead due to the COVID-19 outbreak despite a solid first quarter of 2020. We forecast a sharp decline in total home sales and housing starts in the second quarter of 2020 and, despite some modest recovery expected in the following quarters, declines for the full year of 2020. However, we expect the current low interest rate environment to support refinance activity throughout 2020.
Housing activity rose slightly in the first quarter of 2020 compared with the fourth quarter of 2019. Total existing home sales averaged 5.5 million units annualized in the first quarter of 2020, compared with 5.4 million units in the fourth quarter of 2019, according to data from the National Association of REALTORS®. According to the U.S. Census Bureau, new single-family home sales increased during the first quarter of 2020, averaging an annualized rate of 715,000 units, compared with 710,000 units in the fourth quarter of 2019.
The 30-year fixed mortgage rate averaged 3.51% in the first quarter of 2020, compared with 3.70% in the fourth quarter of 2019, according to Freddie Mac’s Primary Mortgage Market Survey®.
We forecast that total originations in the U.S. single-family mortgage market in 2020 will increase from 2019 levels by approximately 10%, from an estimated $2.30 trillion in 2019 to $2.52 trillion in 2020, and that the amount of originations in the U.S. single-family mortgage market that are refinances will increase from an estimated $1.01 trillion in 2019 to $1.41 trillion in 2020.
Presentation of Our Single-Family Guaranty Book of Business
For purposes of the information reported in this “Single-Family Business” section, we measure the single-family guaranty book of business using the unpaid principal balance of our mortgage loans underlying Fannie Mae MBS outstanding. By contrast, the single-family guaranty book of business presented in the “Composition of Fannie Mae Guaranty Book of Business” table in the “Guaranty Book of Business” section is based on the unpaid principal balance of the Fannie Mae MBS outstanding, rather than the unpaid principal balance of the underlying mortgage loans. These amounts differ primarily as a result of payments we receive on underlying loans that have not yet been remitted to the MBS holders or instances where we have advanced missed borrower payments on mortgage loans to make required distributions to related MBS holders. As measured for purposes of the information reported below, our single-family conventional guaranty book of business was $2,976.8$3,272.0 billion as of March 31, 20202021 and $2,951.9$3,200.9 billion as of December 31, 2019.2020.
Fannie Mae First Quarter 20202021 Form 10-Q24
MD&A | Single-Family Business | Single-Family Business Metrics
Single-Family Business Metrics
Net interest income for our Single-Family business is driven by the guaranty fees we charge and the size of our single-family conventional guaranty book of business. Our business volume and growth in our guaranty book of business is affected by the rate of growth in total U.S. residential mortgage debt outstanding, the size of the U.S. residential mortgage market and our share of mortgage acquisitions. The guaranty fees we charge are based on the characteristics of the loans we acquire. We may adjust our guaranty fees in light of market conditions and to achieve return targets, which are based on FHFA’s conservatorship capital framework.targets. As a result, the average charged guaranty fee on new acquisitions may fluctuate based on the credit quality and product mix of loans acquired, as well as market conditions and other factors.
We implemented an adverse market refinance fee effective December 1, 2020. The fee is intended to help us offset some of the higher projected expenses and risk due to COVID-19. For every $1 billion in eligible refinance loans we acquire, we will collect $5 million in adverse market refinance fees, which will be amortized into net interest income over the contractual life of the loans as a cost basis adjustment. See “Executive Summary—COVID-19 Impact” in our 2020 Form 10-K for additional information on the adverse market refinance fee.
The charts below display our average charged guaranty fees, net of TCCA fees, on our single-family conventional guaranty book of business and on new single-family conventional loan acquisitions, along with our average single-family conventional guaranty book of business and our single-family conventional loan acquisitions for the periods presented.
Select Single-Family Guaranty Fees, Acquisitions
and Book of Business Metrics
(Dollars in billions)
fnm-20200331_g13.jpgfnm-20200331_g14.jpgfnm-20210331_g11.jpgfnm-20210331_g12.jpg
Average charged guaranty fee on single-family conventional guaranty book of business, net of TCCA fees(1)
Average single-family conventional guaranty book of business(2)
Average charged guaranty fee on new single-family conventional acquisitions, net of TCCA fees(1)
Single-family conventional acquisitions
(1)    Excludes the impact of a 10 basis point guaranty fee increase implemented pursuant to the TCCA, the incremental revenue from which is remitted to Treasury and not retained by us.
(2)    Our single-family conventional guaranty book of business primarily consists of single-family conventional mortgage loans underlying Fannie Mae MBS outstanding. It also includes single-family conventional mortgage loans of Fannie Mae held in our retained mortgage portfolio, and other credit enhancements that we provide on single-family conventional mortgage assets. Our single-family conventional guaranty book of business does not include: (a) non-Fannie Mae single-family mortgage-related securities held in our retained mortgage portfolio for which we do not provide a guaranty; (b) mortgage loans guaranteed or insured, in whole or in part, by the U.S. government; or (c) Freddie Mac-acquired mortgage loans underlying Freddie Mac-issued UMBS that we have resecuritized.
Average charged guaranty fee represents, on an annualized basis, the sum of the Our average guaranty fee rate for our single-family conventional guaranty arrangements during the period plus the recognitionbook of any upfront cash payments relating to these guaranty arrangementsbusiness is based on an estimated average life at the time of acquisition. Management uses average charged guaranty fee on new acquisitions as a metric to assess the reasonableness of our compensation for the credit risk we manage on newly acquired loans.
Our average charged guaranty fee on newly acquired conventional single-family loans, net of TCCA fees, decreased from 50.4 basis points in the first quarter of 2019 to 49.4 basis points in the first quarter of 2020, primarily driven by the stronger credit profile of our newly acquired single-family loans.

quarter-end balances.
Fannie Mae First Quarter 20202021 Form 10-Q25
MD&A | Single-Family Business | Single-Family Business Metrics
Single-Family Business Financial ResultsAverage charged guaranty fee on newly acquired conventional single-family loans is a metric management uses to measure the price we earn as compensation for the credit risk we manage and to assess our return. Average charged guaranty fee represents, on an annualized basis, the sum of the base guaranty fees charged during the period for our new single-family conventional guaranty arrangements, which we will receive monthly over the life of the loan, plus the recognition of any upfront cash payments, including loan-level price adjustments and the recently implemented adverse market refinance fee, based on an estimated average life at the time of acquisition. We use loan-level price adjustments, including various upfront risk-based fees, to price for the credit risk we assume in providing our guaranty. FHFA must approve changes to the national loan-level price adjustments we charge and can direct us to make other changes to our single-family guaranty fee pricing.
For the Three Months Ended March 31,
20202019Variance
(Dollars in millions)
Net interest income(1)
$4,541  $4,039  $502  
Fee and other income152  106  46  
Net revenues4,693  4,145  548  
Investment gains (losses), net(152) 94  (246) 
Fair value losses, net(460) (887) 427  
Administrative expenses(629) (631) 2  
Credit-related income (expense)(2)
(2,250) 518  (2,768) 
TCCA fees(1)
(637) (593) (44) 
Credit enhancement expense(312) (167) (145) 
Other expenses, net(3)
(167) (170) 3  
Income before federal income taxes86  2,309  (2,223) 
Provision for federal income taxes(18) (484) 466  
Net income$68  $1,825  $(1,757) 
Our average charged guaranty fee on newly acquired conventional single-family loans, net of TCCA fee decreased in the first quarter of 2021 compared with the first quarter of 2020. The decrease in average charged guaranty fee on new acquisitions was primarily due to an increase in our estimated average life of loans acquired in the first quarter of 2021 compared with the first quarter of 2020. Due to an increase in actual and projected mortgage rates in the first quarter of 2021 and as a result of a large portion of our book of business being originated in this historically low interest-rate environment, we expect slower prepayments in the future as fewer borrowers can benefit from refinancing as rates rise. Lower expected prepayments increases the estimated lives of the loans we acquire, thereby decreasing the rate at which we recognize upfront cash payments as income in our calculation of average charged guaranty fee. The impact of the change in estimated life was partially offset by the increase in guaranty fee from the implementation of the adverse market refinance fee in December 2020.
Single-Family Business Financial Results(1)
For the Three Months Ended March 31,
20212020Variance
(Dollars in millions)
Net interest income(2)
$5,894 $4,541 $1,353 
Fee and other income62 94 (32)
Net revenues5,956 4,635 1,321 
Investment gains (losses), net64 (152)216 
Fair value gains (losses), net740 (460)1,200 
Administrative expenses(623)(629)6 
Credit-related income (expense)(3)
679 (2,250)2,929 
TCCA fees(2)
(731)(637)(94)
Credit enhancement expense(226)(316)90 
Change in expected credit enhancement recoveries(4)
(16)58 (74)
Other expenses, net(5)
(287)(163)(124)
Income before federal income taxes5,556 86 5,470 
Provision for federal income taxes(1,162)(18)(1,144)
Net income$4,394 $68 $4,326 
(1)See “Note 9, Segment Reporting” for information about our segment allocation methodology.
(2)Reflects the impact of a 10 basis point guaranty fee increase implemented pursuant to the TCCA, the incremental revenue from which is remitted to Treasury. The resulting revenue is included in net interest income and the expense is recognized as “TCCA fees.”
(2)(3)Consists of the benefit or provision for credit losses and foreclosed property income or expense. The presentation
(4)Consists of change in benefits recognized from our credit-related income for the three months ended March 31, 2019 represents amounts recognized priorsingle-family freestanding credit enhancements, which primarily relate to our transition to the lifetime loss model prescribed by the CECL standard.CAS and CIRT programs.
(3)(5)Consists primarily of debt extinguishment gains and losses, housing trust fund expenses, servicer fees paid in connection with certain loss mitigation activities, and loan subservicing costs.
Net Interest Income
Single-family net interest income increased in the first quarter of 20202021 compared with the first quarter of 2019, primarily due to2020, driven by higher net amortization income and higher base guaranty fee income, partially offset by a decline inlower income from portfolios.
The drivers of net interest income for the Single-Family segment for the first quarter of 2020 are consistent with the drivers of net interest income in our condensed consolidated statements of operations and comprehensive income, which we discuss in “Consolidated Results of Operations—Net Interest Income.”
Investment Gains (Losses), Net
Investment losses in the first quarter of 2020 were the result of decreases in the fair value of HFS loans. Investment gains in the first quarter of 2019 were the result of gains on sales of AFS securities. The drivers of investment gains (losses), net for the Single-Family segment are consistent with the drivers of investment gains (losses), net in our condensed consolidated statements of operations and comprehensive income, which we discuss in “Consolidated Results of Operations—Investment Gains (Losses), Net.”
Fair Value Losses, Net
Fair value losses, net in the first quarter of 2020 were primarily driven by decreases in the fair values of our mortgage commitments and risk management derivatives, partially offset by fair value gains on trading securities and CAS debt. Fair value losses, net in the first quarter of 2019 were primarily driven by net interest expense on our risk management derivatives, and decreases in the fair value of our pay-fixed risk management derivatives and our mortgage commitments. In addition, the increase in the fair value of our debt also resulted in fair value losses for the first quarter of 2019. The drivers of fair value losses, net for the Single-Family segment are consistent with the drivers of fair value losses, net in our condensed consolidated statements of operations and comprehensive income, which we discuss in “Consolidated Results of Operations—Fair Value Losses, Net.”
As we discuss in “Consolidated Results of Operations—Fair Value Losses, Net,” we expect that implementing a hedge accounting program will reduce the volatility of our financial results associated with changes in interest rates, while fair value gains and losses driven by other factors such as credit spreads will remain.
Fannie Mae First Quarter 20202021 Form 10-Q26
MD&A | Single-Family Business | Single-Family Business Financial Results
Fair Value Gains (Losses), Net
Fair value gains, net in the first quarter of 2021 were largely impacted by the implementation of our hedge accounting program resulting in a reclassification of fair value losses on designated interest-rate swaps to “net interest income.” Fair value gains, net were also driven by gains as a result of increases in the fair value of mortgage commitment derivatives, which were partially offset by losses on trading securities.
Fair value losses, net in the first quarter of 2020 were primarily driven by decreases in the fair value of our mortgage commitments and risk management derivatives, partially offset by fair value gains on trading securities and CAS debt.
The drivers of fair value gains (losses), net for the Single-Family segment are consistent with the drivers of fair value gains, net in our condensed consolidated statements of operations and comprehensive income, which we discuss in “Consolidated Results of Operations—Fair Value Gains (Losses), Net.”
For information on the implementation of our hedge accounting program and its impact on our financial statements, see “Consolidated Results of Operations—Hedge Accounting Impact” and “Consolidated Results of Operations—Fair Value Gains (Losses), Net.”
Credit-Related Income (Expense)
Credit-related income for the first quarter of 2021 was driven by a benefit for credit losses due primarily to higher actual and forecasted home prices, partially offset by higher actual and projected interest rates.
Credit-related expense for the first quarter of 2020 was primarily driven by an increase in our allowance for loan losses due to losses we expectexpected to incur as a result of the COVID-19 outbreakpandemic using an expected lifetime loss methodology consistent with our implementation of the CECL standard.
Credit-related income for the first quarter of 2019 was primarily driven by the redesignation of certain single-family loans from HFI to HFS; an increase in actual and forecasted home prices; and lower actual and projected mortgage interest rates.
See “Consolidated Results of Operations—Credit-Related Income (Expense)” in this report for more information on the primary factors that contributed to our single-family credit-related income (expense).
Single-Family Mortgage Credit Risk Management
This section updates our discussion of single-family mortgage credit risk management in our 20192020 Form 10-K. For an overview of key elements of our mortgage credit risk management, see “Business—Managing Mortgage Credit Risk” in our 2020 Form 10-K. For additional information on our acquisition and servicing policies, underwriting and servicing standards, quality control process, repurchase requests, and representation and warranty framework, see “MD&A—Single-Family Business—Single-Family Mortgage Credit Risk Management” in our 20192020 Form 10-K.
Single-Family Acquisition and Servicing Policies and Underwriting and Servicing Standards
COVID-19 Temporary Selling Policies
We are working closely with Freddie Mac, under the guidance and at the direction of FHFA, to offer temporary measures during the COVID-19 national emergency to help ensurethat provide lenders havewith the clarity and flexibility to continue to lendlending in a prudent and responsible manner. The temporary
Temporary policy flexibilities and updates to our Selling Guide requirements duringhave been designed to mitigate the operational impact of COVID-19 national emergency include:on loan underwriting and originations. These flexibilities have included:
•purchasing certain loans through February 28, 2021 that areoriginated in 2020 and were subject to a COVID-19-related payment forbearance at the time of sale, subject to payment of a loan-level price adjustment;
•offering flexibilities related to the lender’s process foradditional methods of obtaining verbal verificationverifications of employment;borrower employment for loans with application dates through April 30, 2021;
•allowing temporary flexibilities to our appraisal requirements;alternative property valuation methods; and
•providing flexibilitiesexpanding guidelines for the use of a power of attorney and remote online notarization.for loans with application dates through April 30, 2021.
We have also temporarily updated some of our Selling Guide requirementsTemporary policy updates to help ensure that the most up-to-date information is being considered to support the borrower’s ability to repay the loan, including:provide clarity and mitigate risk include:
•reducing our age-of-document requirements from four months to two months for mostassessment of more recent documentation of borrower employment (including self-employment), income, and asset documentation;assets;
•requiring lenders to confirm a self-employed borrower’s business is open and operating within 10 business daysevidence of the note date, or after closing but prior to deliveryreceipt of the loan; and
•in light of current market volatility, updating our policies for use offunds from stocks, stock options and mutual funds when used for down payment or closing costs, to require documentation of the borrower’s actual receipt of funds realized from the sale, or when these assets are used for reserves, allowing the lender to consider only 70% ofand reducing the value to 70% when considered for reserves;
•requiring additional due diligence regarding the payment status of the assets.a borrower’s existing mortgage loans;
•providing clarity for assessing self-employment income for qualifying purposes; and
Fannie Mae First Quarter 2021 Form 10-Q27
MD&A | Single-Family Business | Single-Family Mortgage Credit Risk Management
•requiring that loans be no more than six months old to be eligible for sale to us.
COVID-19 Temporary Servicing Policies
We are also workingcontinue to work with Freddie Mac under the direction ofas instructed by FHFA to implement temporary policies in response to the COVID-19 pandemic to enable our single-family loan servicers to better assist borrowers impacted by COVID-19. We issued initial requirements to servicers on temporary policies to assist borrowers impacted by COVID-19 in March 2020, and updated these requirements in April 2020have subsequently amended the requirements. We will continue monitoring the market to align with the CARES Act. determine whether further adjustments to or extensions of our temporary policies are appropriate.
These temporary policies include requiring that our single-family loan servicers:include:
•provideauthorizing servicers to offer up to 12 months of forbearance, upon the request of any single-family borrower experiencing a financial hardship due to the COVID-19 outbreak,pandemic, regardless of the borrower’s delinquency status and with no additional documentation required other than the borrower’s attestation tostatus; for loans already in a financial hardship caused by COVID-19. The borrower must be providedCOVID-19-related forbearance as of February 28, 2021, servicers may grant an initialextension of forbearance plan for a period up to 180 days, and that forbearance period may be extended for up to an additional 180 days atsix months, to a total of up to 18 months, provided that the request offorbearance does not result in the borrower. If the borrower’s COVID-19-related hardship has not been resolved during an incremental forbearance period, the servicer must extend the borrower’s forbearance period at the borrower’s request, not to exceed 12loan becoming greater than 18 months total;delinquent;
•suspendbeginning July 1, 2020, offering a payment deferral workout option to eligible borrowers who have resolved a COVID-19-related financial hardship but cannot afford to bring the loan current by reinstating the loan (that is, repaying all the missed payments at one time) or through a repayment plan (that is, repaying the missed payments over time). The payment deferral workout option allows the borrower to defer up to 18 months of past-due payments, without interest, to the end of the loan term (or when the loan is refinanced, the property is sold or the loan is otherwise paid off before the end of the loan term). All other terms of the loan remain unchanged;
•suspending foreclosures and certain foreclosure-related activities for single-family properties through at least May 17, 2020,June 30, 2021, other than for vacant or abandoned properties; and
•report the status of the mortgage loanreporting as current to the credit bureaus the obligation of a borrower who receives a forbearance plan or other form of relief as a result of the COVID-19 pandemic during the CARES Act covered period if the borrower was current before the accommodation and makes payments as agreed under the accommodation in accordance with the Fair Credit Reporting Act, as amended by the CARES Act, for borrowers who receive an accommodation, includingAct.
Certain states and localities have implemented COVID-19-related borrower and renter protections that are more extensive than our Servicing Guide requirements. States and localities may continue to consider such proposals in the future or extend the time period of existing protections. In addition, the CFPB issued a forbearance plan, loanproposed rule prohibiting most new single-family foreclosures on mortgage loans secured by the borrower’s principal residence until after December 31, 2021, as we discuss in “Legislation and Regulation.” Our servicers must comply with all applicable laws.
Fannie Mae First Quarter 20202021 Form 10-Q2728
MD&A | Single-Family Business
modification or other form of assistance or relief, as a result of the COVID-19 outbreak. Specifically, the CARES Act requires that if a lender agrees to provide a payment accommodation to a consumer affected by the COVID-19 outbreak during the covered period, the lender must report the borrower’s obligation to the credit bureaus as current if the borrower was current before the accommodation and makes payments as agreed under the accommodation (or is not required to make payments under the accommodation). If the borrower was delinquent before the accommodation, the lender must maintain the delinquency status while the accommodation is in effect, unless the borrower brings the account current during the accommodation.
A servicer is required to contact a borrower on a forbearance plan no later than 30 days before the end of the forbearance period to evaluate them for a workout option after the forbearance period. Those options include a reinstatement (where the borrower repays all of the missed payments at one time), a repayment plan (where the borrower repays the missed payments over time), a deferral of some missed payments to the end of the loan term, or a modification of the loan term so that the borrower may be brought current and either continues to make their original monthly contractual payment or makes reduced monthly contractual payments over a longer period of time.
In addition, some states and local governments are considering proposals that would assist borrowers and renters impacted by COVID-19 that are more extensive than the CARES Act or our Servicing Guide requirements. Servicers must comply with all applicable laws even where a provision of our Servicing Guide conflicts with applicable law.
Desktop Underwriter Update
As part of our comprehensive risk management approach, we periodically update our proprietary automated underwriting system, Desktop Underwriter® (“DU®”), to reflect changes to our underwriting and eligibility guidelines. As part of normal business operations, we regularly review DU to determine whether its risk analysis and eligibility assessment are appropriate based on the current market environment and loan performance information. As a result of our most recent review, in April 2020 we enhanced the DU eligibility assessment to help Fannie Mae and our customers better manage credit risk in the current market while providing sustainable options to borrowers. We expect this change will result in a modest reduction of loans with high-risk factors being eligible for acquisition through DU.
We will continue to closely monitor loan acquisitions and market conditions and, as appropriate, seek to make changes in our eligibility criteria so that the loans we acquire are consistent with our risk appetite.
For further information regarding Desktop Underwriter, please see “MD&A—Single-Family Business—Single-Family Mortgage Credit Risk Management—Single-Family Acquisition and Servicing Policies and Underwriting and Servicing Standards” in our 2019 Form 10-K.
Fannie Mae First Quarter 2020 Form 10-Q28
MD&A | Single-Family BusinessMortgage Credit Risk Management
Single-Family Portfolio Diversification and Monitoring
The table below displays our single-family conventional business volumes and our single-family conventional guaranty book of business, based on certain key risk characteristics that we use to evaluate the risk profile and credit quality of our single-family loans. We provide additional information on the credit characteristics of our single-family loans in quarterly financial supplements, which we furnish to the U.S. Securities and Exchange Commission (“SEC”(the “SEC”) with current reports on Form 8-K.8-K and make available on our website. Information in our quarterly financial supplements is not incorporated by reference into this report.
Key Risk Characteristics of Single-Family Conventional Business Volume and Guaranty Book of Business(1)
Key Risk Characteristics of Single-Family Conventional Business Volume and Guaranty Book of Business(1)
Key Risk Characteristics of Single-Family Conventional Business Volume and Guaranty Book of Business(1)
Percent of Single-Family Conventional Business
Volume at Acquisition(2)
Percent of Single-Family Conventional
Guaranty Book of Business(3)
As of
Percent of Single-Family Conventional Business
Volume at Acquisition(2)
Percent of Single-Family Conventional
Guaranty Book of Business(3)
As of
For the Three Months Ended March 31,For the Three Months Ended March 31,
Percent of Single-Family Conventional
Guaranty Book of Business(3)
As of
20202019March 31, 2020December 31, 201920212020March 31, 2021
Original loan-to-value (“LTV”) ratio:(4)
Original loan-to-value (“LTV”) ratio:(4)
Original loan-to-value (“LTV”) ratio:(4)
<= 60%<= 60%21  %  15  %  19  %  19  %  <= 60%34 %21 %24 %23 %
60.01% to 70%60.01% to 70%15  11  14  13  60.01% to 70%17 15 15 14 
70.01% to 80%70.01% to 80%36  35  37  37  70.01% to 80%30 36 35 35 
80.01% to 90%80.01% to 90%13  13  12  12  80.01% to 90%9 13 11 11 
90.01% to 95%90.01% to 95%12  16  11  12  90.01% to 95%8 12 10 11 
95.01% to 100%95.01% to 100%3  10  5  5  95.01% to 100%2 3 4 4 
Greater than 100%Greater than 100%*  *  2  2  Greater than 100%**1 2 
TotalTotal100  %  100  %  100  %  100  %  Total100 %100 %100 %100 %
Weighted averageWeighted average74  %  78  %  75  %  76  %  Weighted average68 %74 %73 %74 %
Average loan amountAverage loan amount$274,345  $238,932  $175,026  $173,804  Average loan amount$282,561 $274,345 $188,447 $185,047 
Estimated mark-to-market LTV ratio:(5)
Estimated mark-to-market LTV ratio:(5)
Estimated mark-to-market LTV ratio:(5)
<= 60%<= 60%53  %  54  %  <= 60%53 %52 %
60.01% to 70%60.01% to 70%17  17  60.01% to 70%18 17 
70.01% to 80%70.01% to 80%17  16  70.01% to 80%18 18 
80.01% to 90%80.01% to 90%8  8  80.01% to 90%8 9 
90.01% to 100%90.01% to 100%5  5  90.01% to 100%3 4 
Greater than 100%Greater than 100%*  *  Greater than 100%**
TotalTotal100  %  100  %  Total100 %100 %
Weighted averageWeighted average57  %  57  %  Weighted average57 %58 %
Product type:
Fixed-rate:(6)
Long-term87  %  90  %  85  %  85  %  
Intermediate-term12  8  13  13  
Total fixed-rate99  98  98  98  
Adjustable-rate1  2  2  2  
FICO credit score at origination:FICO credit score at origination:
< 620< 620— %*%1 %1 %
620 to < 660620 to < 6602 3 4 4 
660 to < 680660 to < 6802 3 4 4 
680 to < 700680 to < 7005 6 7 7 
700 to < 740700 to < 74017 22 19 20 
>= 740>= 74074 66 65 64 
TotalTotal100  %  100  %  100  %  100  %  Total100 %100 %100 %100 %
Number of property units:
1 unit98  %  98  %  97  %  97  %  
2 to 4 units2  2  3  3  
Weighted averageWeighted average761 753 751750 
Debt-to-income (“DTI”) ratio at origination:(6)
Debt-to-income (“DTI”) ratio at origination:(6)
<= 43%<= 43%80 %75 %77 %77 %
43.01% to 45%43.01% to 45%8 9 9 9 
Greater than 45%Greater than 45%12 16 14 14 
TotalTotal100  %  100  %  100  %  100  %  Total100 %100 %100 %100 %
Property type:
Single-family homes91  %  90  %  91  %  91  %  
Condo/Co-op9  10  9  9  
Total100  %  100  %  100  %  100  %  
Weighted averageWeighted average33 %35 %35 %35 %
Fannie Mae First Quarter 20202021 Form 10-Q29
MD&A | Single-Family Business | Single-Family Mortgage Credit Risk Management
Percent of Single-Family Conventional Business
Volume at Acquisition(2)
Percent of Single-Family Conventional
Guaranty Book of Business(3)
As of
Percent of Single-Family Conventional Business
Volume at Acquisition(2)
Percent of Single-Family Conventional
Guaranty Book of Business(3)
As of
For the Three Months Ended March 31,For the Three Months Ended March 31,
Percent of Single-Family Conventional
Guaranty Book of Business(3)
As of
20202019March 31, 2020December 31, 201920212020March 31, 2021
Product type:Product type:
Fixed-rate:(7)
Fixed-rate:(7)
Long-termLong-term84 %87 %84 %85 %
Intermediate-termIntermediate-term16 12 15 14 
Total fixed-rateTotal fixed-rate100 99 99 99 
Adjustable-rateAdjustable-rate*1 1 1 
TotalTotal100 %100 %100 %100 %
Number of property units:Number of property units:
1 unit1 unit98 %98 %97 %97 %
2-4 units2-4 units2 2 3 3 
TotalTotal100 %100 %100 %100 %
Property type:Property type:
Single-family homesSingle-family homes91 %91 %91 %91 %
Condo/Co-opCondo/Co-op9 9 9 9 
TotalTotal100 %100 %100 %100 %
Occupancy type:Occupancy type:Occupancy type:
Primary residencePrimary residence92  %  90  %  89  %  89  %  Primary residence91 %92 %90 %90 %
Second/vacation homeSecond/vacation home3  4  4  4  Second/vacation home3 3 4 4 
InvestorInvestor5  6  7  7  Investor6 5 6 6 
TotalTotal100  %  100  %  100  %  100  %  Total100 %100 %100 %100 %
FICO credit score at origination:
< 620*  %  *  %  1  %  1  %  
620 to < 6603  6  5  5  
660 to < 6803  5  4  5  
680 to < 7006  9  7  7  
700 to < 74022  24  21  21  
>= 74066  56  62  61  
Total100  %  100  %  100  %  100  %  
Weighted average753  742  747  746  
Debt-to-income (“DTI”) ratio at origination:(7)
<= 43%75  %  65  %  76  %  76  %  
43.01% to 45%9  10  9  9  
Greater than 45%16  25  15  15  
Total100  %  100  %  100  %  100  %  
Weighted average35  %  38  %  35  %  35  %  
Loan purpose:
Loan purpose:
Loan purpose:
PurchasePurchase36  %  66  %  44  %  45  %  Purchase25 %36 %36 %38 %
Cash-out refinanceCash-out refinance24  20  20  19 ��Cash-out refinance20 24 20 20 
Other refinanceOther refinance40  14  36  36  Other refinance55 40 44 42 
TotalTotal100  %  100  %  100  %  100  %  Total100 %100 %100 %100 %
Geographic concentration:(8)
Geographic concentration:(8)
Geographic concentration:(8)
MidwestMidwest13  %  13  %  15  %  15  %  Midwest12 %13 %14 %14 %
NortheastNortheast12  14  17  17  Northeast14 12 17 17 
SoutheastSoutheast21  24  22  22  Southeast21 21 22 22 
SouthwestSouthwest21  22  18  18  Southwest18 21 18 19 
WestWest33  27  28  28  West35 33 29 28 
TotalTotal100  %  100  %  100  %  100  %  Total100 %100 %100 %100 %
Origination year:Origination year:Origination year:
2014 and prior36  %  38  %  
20158  8  
2015 and prior2015 and prior27 %30 %
2016201613  14  20167 8 
2017201711  12  20176 7 
2018201810  11  20184 6 
2019201918  17  20199 11 
202020204  —  202038 38 
202120219 — 
TotalTotal100  %  100  %  Total100 %100 %
*    Represents less than 0.5% of single-family conventional business volume or guaranty book of business.
Fannie Mae First Quarter 20202021 Form 10-Q30
MD&A | Single-Family Business | Single-Family Mortgage Credit Risk Management
(1)Second-lien mortgage loans held by third parties are not reflected in the original LTV or the estimated mark-to-market LTV ratios in this table.
(2)Calculated based on the unpaid principal balance of single-family loans for each category at time of acquisition.
(3)Calculated based on the aggregate unpaid principal balance of single-family loans for each category divided by the aggregate unpaid principal balance of loans in our single-family conventional guaranty book of business as of the end of each period.
(4)The original LTV ratio generally is based on the original unpaid principal balance of the loan divided by the appraised property value reported to us at the time of acquisition of the loan. Excludes loans for which this information is not readily available.
(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. Excludes loans for which this information is not readily available.
(6)Excludes loans for which this information is not readily available.
(7)Long-term fixed-rate consists of mortgage loans with maturities greater than 15 years, while intermediate-term fixed-rate loans have maturities equal to or less than 15 years.
(7)Excludes loans for which this information is not readily available.(8)
(8)Midwest consists of IL, IN, IA, MI, MN, NE, ND, OH, SD and WI. Northeast consists of CT, DE, ME, MA, NH, NJ, NY, PA, PR, RI, VT and VI. Southeast consists of AL, DC, FL, GA, KY, MD, MS, NC, SC, TN, VA and WV. Southwest consists of AZ, AR, CO, KS, LA, MO, NM, OK, TX and UT. West consists of AK, CA, GU, HI, ID, MT, NV, OR, WA and WY.
Characteristics of our New Single-Family Loan Acquisitions
The share of our single-family loan acquisitions consisting of refinance loans rather than home purchase loans increased in the first quarter of 20202021 compared with the first quarter of 2019,2020, primarily due to a lower interest-rate environment, which encouraged refinance activity. Typically, refinance loans have lower LTV ratios than home purchase loans. This trend contributed to a decrease in the percentage of our single-family loan acquisitions with LTV ratios over 90%—, from 26% in the first quarter of 2019 to 15% in the first quarter of 2020.2020 to 10% in the first quarter of 2021. The historically low interest-rate environment, combined with the high level of refinancing activity, also led to an increase in the percentage of loans we acquired with a FICO credit score over 740, from 66% in the first quarter of 2020 to 74% in the first quarter of 2021.
Our share of acquisitions of loans with DTI ratios above 45% decreased in the first quarter of 20202021 compared with the first quarter of 2019.2020. This decrease was driven in part by changes in our eligibility guidelines implemented in 2019 to further limit risk layering, particularly with respect to loans with DTI ratios above 45%, as well as a higher volume of refinance loan acquisitions.acquisitions, which tend to have lower DTI ratios than home purchase loans.
For a discussion of factors that may impact the volume and credit characteristics of loans we acquire in the future, see “MD&A—Single-Family Business—Single-Family Mortgage Credit Risk Management—Single-Family Portfolio Diversification and Monitoring” in our 20192020 Form 10-K. In this section of our 20192020 Form 10-K, we also provide more information on the credit characteristics of loans in our single-family conventional guaranty book of business, including Home Affordable Refinance Program® (“HARP®”) and Refi PlusTM loans, jumbo-conforming and high-balance loans, reverse mortgages and mortgage products with rate resets.
In January 2021, the terms of our senior preferred stock purchase agreement were amended through a letter agreement FHFA entered into on our behalf with Treasury. The letter agreement includes restrictive covenants that impact our single-family business and is described in “Business—Conservatorship, Treasury Agreements and Housing Finance Reform” in our 2020 Form 10-K. We are not currently in compliance with the new covenants that restrict our acquisitions of purchase money single-family loans with higher-risk characteristics and our acquisitions of single-family loans backed by investment properties and second homes. We are taking steps to ensure we comply with these covenants and continue to work with FHFA and our lender customers on our implementation efforts.
Fannie Mae First Quarter 20202021 Form 10-Q31
MD&A | Single-Family Business | Single-Family Mortgage Credit Risk Management
Single-Family Credit Enhancement and Transfer of Mortgage Credit Risk
Single-Family Credit Enhancement
Our charter generally requires credit enhancement on any single-family conventional mortgage loan that we purchase or securitize if it has an LTV ratio over 80% at the time of purchase. We generally achieve this through primary mortgage insurance. We also enter into various other types of transactions in which we transfer mortgage credit risk to third parties.
Our approved monoline mortgage insurers’ financial ability and willingness to pay claims is an important determinant of our overall credit risk exposure. For a discussion of our exposure to and management of the institutional counterparty credit risk associated with the providers of these credit enhancements, see “MD&A—Risk Management—Institutional Counterparty Credit Risk Management” and “Note 13, Concentrations of Credit Risk” in our 2020 Form 10-K and “Note 10, Concentrations of Credit Risk” in this report. Also see “Risk Factors” in our 2020 Form 10-K.
Single-Family Loans without Credit Enhancement
The following table displays the primary characteristics of loans in our single-family conventional guaranty book of business currently without credit enhancement.
Single-Family Loans without Credit Enhancement
As of
March 31, 2021December 31, 2020
Unpaid Principal BalancePercentage of Single-Family Conventional Guaranty Book of BusinessUnpaid Principal BalancePercentage of Single-Family Conventional Guaranty Book of Business
(Dollars in billions)
Low LTV ratio or short-term(1)
$1,014 31 %$938 29 %
Pre-credit risk transfer program inception(2)
424 13 462 14 
Recently acquired(3)
1,119 34 934 29 
Other(4)
302 9 286 9 
Less: Loans in multiple categories(829)(25)(751)(23)
Total single-family loans currently without credit enhancement$2,030 62 %$1,869 58 %
(1)Represents loans with an LTV ratio less than or equal to 60% or loans with an original maturity of 20 years or less.
(2)Represents loans that were acquired before the inception of our credit risk transfer programs. Also includes Refi PlusTM loans.
(3)Represents loans that were recently acquired and have not been included in a reference pool.
(4)Includes adjustable-rate mortgage loans, loans with a combined LTV ratio greater than 97%, non-Refi Plus loans acquired after the inception of our credit risk transfer programs that became 30 or more days delinquent prior to inclusion in a credit risk transfer transaction, and loans that were delinquent as of March 31, 2021 or December 31, 2020.
We have not entered into new credit risk transfer transactions since the first quarter of 2020 as we discuss below in “Transfer of Mortgage Credit Risk.” As a result, the percentage of loans in our single-family conventional guaranty book of business without credit enhancement has increased in recent periods. The percentage of our loans without credit enhancement was 62% and 58% as of March 31, 2021 and December 31, 2020, respectively.
Fannie Mae First Quarter 2021 Form 10-Q32
MD&A | Single-Family Business | Single-Family Mortgage Credit Risk Management
Single-Family Loans with Credit Enhancement
The table below displays information about loans in our single-family conventional guaranty book of business covered by one or more forms of credit enhancement, including mortgage insurance or a credit risk transfer transaction. For a description of primary mortgage insurance and the other types of credit enhancements specified in the table, see “MD&A—Single-Family Business—Single-Family Mortgage Credit Risk Management—Single-Family Credit Enhancement and Transfer of Mortgage Credit Risk” in our 20192020 Form 10-K. For a discussion of our exposure to and management of the institutional counterparty credit risk associated with the providers of these credit enhancements, see “MD&A—Risk Management—Institutional Counterparty Credit Risk Management” and “Note 13, Concentrations of Credit Risk” in our 2019 Form 10-K and “Note 10, Concentrations of Credit Risk” in this report. Also see “Risk Factors” in our 2019 Form 10-K and in this report.
Single-Family Loans with Credit EnhancementSingle-Family Loans with Credit EnhancementSingle-Family Loans with Credit Enhancement
As ofAs of
March 31, 2020December 31, 2019March 31, 2021December 31, 2020
Unpaid Principal BalancePercentage of Single-Family Conventional Guaranty Book of BusinessUnpaid Principal BalancePercentage of Single-Family Conventional Guaranty Book of BusinessUnpaid Principal BalancePercentage of Single-Family Conventional Guaranty Book of BusinessUnpaid Principal BalancePercentage of Single-Family Conventional Guaranty Book of Business
(Dollars in billions)(Dollars in billions)
Primary mortgage insurance and otherPrimary mortgage insurance and other$658  22 %$653  22 %Primary mortgage insurance and other$677 21 %$681 21 %
Connecticut Avenue SecuritiesConnecticut Avenue Securities916  31  919  31  Connecticut Avenue Securities525 16 608 19 
Credit Insurance Risk TransferCredit Insurance Risk Transfer307  10  275  10  Credit Insurance Risk Transfer189 6 216 7 
Lender risk-sharingLender risk-sharing148  5  147  5  Lender risk-sharing108 3 131 4 
Less: Loans covered by multiple credit enhancementsLess: Loans covered by multiple credit enhancements(456) (15) (438) (15) Less: Loans covered by multiple credit enhancements(257)(8)(304)(9)
Total single-family loans with credit enhancementTotal single-family loans with credit enhancement$1,573  53 %$1,556  53 %Total single-family loans with credit enhancement$1,242 38 %$1,332 42 %
Transfer of Mortgage Credit Risk
In addition to primary mortgage insurance, our Single-Family business has developed other risk-sharing capabilities to transfer portions of our single-family mortgage credit risk to domestic and international investors and reinsurers in the private market. Our credit risk transfer transactions arehave been designed to transfer a portion of the losses we expect would be incurred in an economic downturn or a stressed credit environment. As described in “MD&A—Single-Family Business—Single-Family Mortgage Credit Risk Management—Single-Family Credit Enhancement and Transfer of Mortgage Credit Risk—Credit Risk Transfer Transactions” in our 20192020 Form 10-K, we have used primarily three primary single-family credit risk transfer programs: Connecticut Avenue Securities® (“CAS”), Credit Insurance Risk TransferTM (“CIRT”), and lender risk-sharing. In March 2020, FHFA directed us to wind down our single-familyAt FHFA’s direction, we have discontinued entering into new lender risk-sharing transactions byas of the end of this year.2020. We continually evaluate our credit risk transfer transactions, which, in addition to managing our credit risk, also affect our returns on capital under FHFA’s conservatorship capital requirements. capital.
We discuss FHFA’s proposed capital rule in “Business—Charter Act and Regulation—GSE Act and Other Legislation” in our 2019 Form 10-K.
Duringhave not entered into any new credit risk transfer transactions since the first quarter of 2020 pursuantas we continue to evaluate their costs and benefits, including a reduction in the capital relief these transactions provide under FHFA’s enterprise regulatory capital framework. As a result, the percentage of our book that is covered by these transactions has declined. The structure of and extent to which we engage in any additional credit risk transfer transactions we transferred a portionin the future will be affected by the enterprise regulatory capital framework, our risk appetite, the strength of the mortgage credit risk on single-family mortgages with an unpaid principal balance of $118 billion at the time of the transactions. As of March 31, 2020, approximately 46% of the loans in our single-family conventional guaranty book of business, measured by unpaid principal balance, were included in a reference pool for a credit risk transfer transaction.
In recent weeks, we have been significantly restricted in our ability to enter into credit risk transfer transactions due to detrimentalfuture market conditions, as a resultincluding the cost of these transactions, and the COVID-19 outbreak. We do not anticipate being able to enter into such transactions until market conditions improve.review of our overall business and capital plan. See “Risk Factors” in this reportour 2020 Form 10-K for additional information on the risks associated with the current limitationsconstraints on our ability to enter intonew credit risk transfer transactions.transactions and “Business—Legislation and Regulation—GSE Act and Other Legislative and Regulatory Matters” in our 2020 Form 10-K for more information on FHFA’s enterprise regulatory capital framework.
Fannie Mae First Quarter 20202021 Form 10-Q3233
MD&A | Single-Family Business | Single-Family Mortgage Credit Risk Management
The table below displays the mortgage credit risk transferred to third parties and retained by Fannie Mae pursuant to our single-family credit risk transfer transactions. The risk in force of these transactions, which refers to the maximum amount of losses that could be absorbed by credit risk transfer investors, was approximately $39 billion as of March 31, 2021.
Single-Family Credit Risk Transfer Transactions
Issuances from Inception to March 31, 2020
(Dollars in billions)

fnm-20200331_g15.jpg
Senior
Fannie Mae(1)
Initial Reference Pool(5)
$2,079
Mezzanine
Fannie Mae(1)
CIRT(2)(3)
CAS(2)
Lender Risk-Sharing(2)(4)
$2$12$41$4$2,156
First Loss
Fannie Mae(1)
CAS(2)(6)
Lender Risk-Sharing(2)(4)
$9$6$3
Outstanding as of March 31, 2021
(Dollars in billions)
fnm-20210331_g13.jpg
Senior
Fannie Mae(1)
$833
Outstanding Reference Pool(4)(6)
$882







Mezzanine
Fannie Mae(1)
$1

CIRT(2)(3)
$10

CAS(2)
$16

Lender Risk-Sharing(2)
$4

First Loss
Fannie Mae(1)
$9

CAS(2)(5)
$6

Lender Risk-Sharing(2)
$3

Outstanding as of March 31, 2020
(Dollars in billions)

fnm-20200331_g16.jpg
Senior
Fannie Mae(1)
Outstanding Reference Pool(5)(7)
$1,361
Mezzanine
Fannie Mae(1)
CIRT(2)(3)
CAS(2)
Lender Risk-Sharing(2)(4)
$1$10$25$4$1,418
First Loss
Fannie Mae(1)
CAS(2)(6)
Lender Risk-Sharing(2)(4)
$9$6$2
(1)Credit risk retained by Fannie Mae in CAS, CIRT and lender risk-sharing transactions. Tranche sizes vary across programs.
(2)Credit risk transferred to third parties. Tranche sizes vary across programs.
(3)Includes mortgage pool insurance transactions covering loans with an unpaid principal balance of approximately $7 billion at issuance and approximately $3$2.0 billion outstanding as of March 31, 2020.2021.
(4)For some lender risk-sharing transactions, does not reflect completed transfers of risk prior to settlement.
(5)For CIRT and some lender risk-sharing transactions, “Reference Pool” reflects a pool of covered loans.
(6)(5)For CAS transactions, “First Loss” represents all B tranche balances.
(7)(6)For CAS and some lender risk-sharing transactions, represents outstanding reference pools, not the outstanding unpaid principal balance of the underlying loans. The outstanding unpaid principal balance for all loans covered by credit risk transfer programs, including all loans on which risk has been transferred in lender risk-sharing transactions, was $1,371$822.0 billion as of March 31, 2020.2021.
Fannie Mae First Quarter 2020 Form 10-Q33
MD&A | Single-Family Business
The following table displays the approximate cash paid or transferred to investors for these credit risk transfer transactions.transactions outstanding. The cash represents the portion of the guaranty fee paid to investors as compensation for taking on a share of the credit risk.
Credit Risk Transfer TransactionsCredit Risk Transfer TransactionsCredit Risk Transfer Transactions
For the Three Months Ended March 31,For the Three Months Ended March 31,
2020201920212020
Cash paid or transferred for:Cash paid or transferred for:(Dollars in millions)Cash paid or transferred for:(Dollars in millions)
CAS transactions(1)
CAS transactions(1)
$261  $229  
CAS transactions(1)
$206 $261 
CIRT transactionsCIRT transactions102  85  CIRT transactions72 102 
Lender risk-sharing transactionsLender risk-sharing transactions81  48  Lender risk-sharing transactions74 81 
(1)Consists of cash paid for interest expense net of LIBOR on outstanding CAS debt and amounts paid for both CAS REMIC® and CAS credit-linkedCredit-linked notes (“CLN”) transactions. CAS REMICs are Connecticut Avenue Securities that are structured as notes issued by trusts that qualify as REMICs. CAS CLNs are similar to CAS REMICs with the exception that loans underlying the transactions were not tagged for use in a REMIC transaction at the time of acquisition.
Once we are able to resume credit risk transfer transactions, we will evaluate loans in our single-family guaranty book of business without credit enhancement to determine if it makes economic sense to include them in a future CAS or CIRT transaction. The following table displays the primary characteristics of the loans in our single-family conventional guaranty book of business currently without credit enhancement.
Single-Family Loans without Credit Enhancement
As of
March 31, 2020December 31, 2019
Unpaid Principal BalancePercentage of Single-Family Conventional Guaranty Book of BusinessUnpaid Principal BalancePercentage of Single-Family Conventional Guaranty Book of Business
(Dollars in billions)
Low LTV ratio or short-term(1)
$749  25 %$736  25 %
Pre-credit risk transfer program inception(2)
583  20  608  20  
Recently acquired(3)
335  11  287  10  
Other(4)
241  8  246  8  
Less: Loans in multiple categories(504) (17) (481) (16) 
Total single-family loans currently without credit
enhancement		$1,404  47 %$1,396  47 %
(1)Represents loans with an LTV ratio less than or equal to 60% or loans with an original maturity of 20 years or less.
(2)Represents loans that were acquired before the inception of our credit risk transfer programs. Also includes Refi Plus loans.
(3)Represents loans that were recently acquired and have not been included in a reference pool.
(4)Includes adjustable-rate mortgage loans, loans with a combined LTV ratio greater than 97%, non-Refi Plus loans acquired after the inception of our credit risk transfer programs that became 30 or more days delinquent prior to inclusion in a credit risk transfer transaction, and loans that were delinquent as of March 31, 2020 or December 31, 2019.
Fannie Mae First Quarter 20202021 Form 10-Q34
MD&A | Single-Family Business | Single-Family Mortgage Credit Risk Management
Single-Family Problem Loan Management
Our problem loan management strategies focus primarily on reducing defaults to avoid losses that would otherwise occur and pursuing foreclosure alternatives to mitigate the severity of the losses we incur. See “MD&A—Single-Family Business—Single-Family Mortgage Credit Risk Management—Single-Family Problem Loan Management” in our 20192020 Form 10-K for a discussion of delinquency statistics on our problem loans, efforts undertaken to manage our problem loans, metrics regarding our loan workout activities, real estate owned (“REO”) management and other single-family credit-related disclosures.information. The discussion below updates some of that information. We also provide ongoing credit performance information on loans underlying single-family Fannie Mae MBS and loans covered by single-family credit risk transfer transactions. For loans backing Fannie Mae MBS, see the “Forbearance and Delinquency Dashboard” available in the MBS section of our Data Dynamics® tool, which is available at www.fanniemae.com/datadynamics. For loans covered by credit risk transfer transactions, see the “Deal Performance Data” report available in the CAS and CIRT sections of the tool. Information on our website is not incorporated into this report. Information in Data Dynamics may differ from similar measures presented in our financial statements and other public disclosures for a variety of reasons, including as a result of variations in the loan population covered, timing differences in reporting and other factors.
Delinquency
The tabletables below displaysdisplay the delinquency status of loans and changes in the balancevolume of seriously delinquent loans in our single-family conventional guaranty book of business based on the number of loans. Single-family seriously delinquent loans are loans that are 90 days or more past due or in the foreclosure process.process, expressed as a percentage of our single-family conventional guaranty book of business based on loan count. Management monitors the single-family serious delinquency rate as an indicator of potential future credit losses and loss mitigation activities. Serious delinquency rates are reflective of our performance in assessing and managing credit risk associated with single-family loans in our guaranty book of business. Typically, higher serious delinquency rates result in a higher allowance for loan losses.
As described above in “Single-Family Acquisition and Servicing Policies and Underwriting and Servicing Standards—COVID-19 Temporary Servicing Policies,” pursuantFor purposes of our disclosures regarding delinquency status, we report loans receiving COVID-19-related payment forbearance as delinquent according to the contractual terms of the loan. Pursuant to the CARES Act, for purposes of reporting to the credit bureaus, servicers must report a borrower receiving a COVID-19-related payment accommodation during the covered period, such as a forbearance plan or loan modification, as current if his or her loanthe borrower was current prior to receiving the accommodation. For purposes of our Form 10-Qaccommodation and related public disclosures regarding the delinquency status ofborrower makes all required payments in accordance with the loans in our guaranty book of business, we will continue to report loans receiving COVID-19-related payment forbearance as delinquent according to the contractual terms of the loan.accommodation.
Delinquency Status and Activity of Single-Family Conventional Loans
As of
March 31, 2020December 31, 2019March 31, 2019
Delinquency status:
30 to 59 days delinquent1.31 %1.27 %1.32 %
60 to 89 days delinquent0.32  0.35  0.35  
Seriously delinquent (“SDQ”)0.66  0.66  0.74  
Percentage of SDQ loans that have been delinquent for more than 180 days51 %49 %50 %
Percentage of SDQ loans that have been delinquent for more than two years11  11  11  
For the Three Months Ended March 31,
20202019
Single-family SDQ loans (number of loans):
Beginning balance112,434  130,440  
Additions47,756  52,679  
Removals:
Modifications and other loan workouts(9,714) (12,527) 
Liquidations and sales(9,634) (11,830) 
Cured or less than 90 days delinquent(29,087) (32,746) 
Total removals(48,435) (57,103) 
Ending balance111,755  126,016  
Our single-family serious delinquency rate remained relatively flat as of March 31, 2020 compared with December 31, 2019 and March 31, 2019.
While our single-family delinquency rates have been low in recent periods, we expect current and future declines in economic activity and resulting higher unemployment rates due to the COVID-19 outbreak will likely lead to significantly higher rates of delinquencies.
Certain higher-risk loan categories, such as Alt-A loans, loans with mark-to-market LTV ratios greater than 100%, and our 2005 through 2008 loan vintages, continue to exhibit higher-than-average delinquency rates and/or account for a higher share of our credit losses. Single-family loans originated in 2005 through 2008 constituted 3% of our single-family book of business as of March 31, 2020, but constituted 32% of our seriously delinquent single-family loans as of March 31, 2020 and drove 26% of our single-family credit losses in the first quarter of 2020. In addition, loans in certain judicial foreclosure states such as
Delinquency Status and Activity of Single-Family Conventional Loans
As of
March 31, 2021December 31, 2020March 31, 2020
Delinquency status:
30 to 59 days delinquent0.71 %1.02 %1.31 %
60 to 89 days delinquent0.26 0.36 0.32 
Seriously delinquent (“SDQ”)2.58 2.87 0.66 
Percentage of SDQ loans that have been delinquent for more than 180 days74 67 51 
Percentage of SDQ loans that have been delinquent for more than two years4 3 11 
Fannie Mae First Quarter 20202021 Form 10-Q35
MD&A | Single-Family Business | Single-Family Mortgage Credit Risk Management
Florida, New Jersey
For the Three Months Ended March 31,
20212020
Single-family SDQ loans (number of loans):
Beginning balance495,806 112,434 
Additions84,685 47,756 
Removals:
Modifications and other loan workouts(80,967)(9,714)
Liquidations and sales(16,179)(9,634)
Cured or less than 90 days delinquent(35,316)(29,087)
Total removals(132,462)(48,435)
Ending balance448,029 111,755 
Our single-family serious delinquency rate decreased as of March 31, 2021 compared with December 31, 2020 due to the on-going economic recovery and New York with historically long foreclosure timelines have exhibited higher-than-average delinquency rates and/or account for a higher sharethe decline in the number of our credit losses.single-family loans in a COVID-19 forbearance plan. Our single-family serious delinquency rate increased as of March 31, 2021 compared with March 31, 2020 due to the economic dislocation caused by the COVID-19 pandemic, which increased borrower participation in forbearance plans. As of March 31, 2021, single-family loans in forbearance comprised 75% of our single-family seriously delinquent loans. The percentage of seriously delinquent loans that have been delinquent for more than 180 days increased as of March 31, 2021 compared with March 31, 2020 primarily due to loans that continue to remain in a COVID-19-related forbearance and have become more delinquent.
Our single-family serious delinquency rate excluding loans in forbearance was 0.66% as of March 31, 2021 and December 31, 2020. We monitor the single-family serious delinquency rate excluding loans that received a forbearance to better understand the impact that forbearance activity has had on the rate and to monitor loans that are seriously delinquent not as a result of COVID-19. We expect the COVID-19 pandemic to result in a continued higher single-family serious delinquency rate over the next several quarters compared with pre-pandemic levels.
Fannie Mae First Quarter 2021 Form 10-Q36
MD&A | Single-Family Business | Single-Family Mortgage Credit Risk Management
The table below displays the serious delinquency rates for, and the percentage of our total seriously delinquent single-family conventional loans represented by, the specified loan categories. Percentage of book amounts present the unpaid principal balance of loans for each category divided by the unpaid principal balance of our total single-family conventional guaranty book of business. We also include information for our loans in California because the state accounts for a large share of our single-family conventional guaranty book of business. The reported categories are not mutually exclusive.
Single-Family Conventional Seriously Delinquent Loan Concentration AnalysisSingle-Family Conventional Seriously Delinquent Loan Concentration AnalysisSingle-Family Conventional Seriously Delinquent Loan Concentration Analysis
As ofAs of
March 31, 2020December 31, 2019March 31, 2019March 31, 2021December 31, 2020March 31, 2020
Percentage of Book Outstanding
Percentage of Seriously Delinquent Loans(1)
Serious Delinquency RatePercentage of Book Outstanding
Percentage of Seriously Delinquent Loans(1)
Serious Delinquency RatePercentage of Book Outstanding
Percentage of Seriously Delinquent Loans(1)
Serious Delinquency RatePercentage of Book Outstanding
Percentage of Seriously Delinquent Loans(1)
Serious Delinquency RatePercentage of Book Outstanding
Percentage of Seriously Delinquent Loans(1)
Serious Delinquency RatePercentage of Book Outstanding
Percentage of Seriously Delinquent Loans(1)
Serious Delinquency Rate
States:States:States:
CaliforniaCalifornia19 %7 %0.33 %19 %6 %0.32 %19 %6 %0.34 %California19 %12 %2.31 %19 %12 %2.62 %19 %7 %0.33 %
FloridaFlorida6  8  0.83  6  8  0.84  6  9  1.03  Florida6 9 3.60 6 9 4.17 6 8 0.83 
IllinoisIllinois4  6  0.91  4  6  0.91  4  6  0.98  Illinois3 5 3.02 3 5 3.10 4 6 0.91 
New JerseyNew Jersey3  5  1.13  3  5  1.13  3  5  1.32  New Jersey4 5 4.04 3 5 4.57 3 5 1.13 
New YorkNew York5  8  1.19  5  8  1.18  5  8  1.38  New York5 7 4.34 5 7 4.79 5 8 1.19 
All other statesAll other states63  66  0.64  63  67  0.64  63  66  0.71  All other states63 62 2.34 64 62 2.59 63 66 0.64 
Product type:Product type:Product type:
Alt-A(2)
Alt-A(2)
1  9  2.95  2  9  2.95  2  11  3.31  
Alt-A(2)
1 5 8.85 1 5 9.32 1 9 2.95 
Vintages:Vintages:Vintages:
2004 and prior2004 and prior2  20  2.48  2  20  2.48  3  23  2.68  2004 and prior2 9 5.66 2 9 5.88 2 20 2.48 
2005-20082005-20083  32  4.11  4  33  4.11  4  38  4.50  2005-20082 15 9.65 2 15 9.98 3 32 4.11 
2009-202095  48  0.35  94  47  0.35  93  39  0.33  
2009-20212009-202196 76 2.13 96 76 2.39 95 48 0.35 
Estimated mark-to-market LTV ratio:Estimated mark-to-market LTV ratio:Estimated mark-to-market LTV ratio:
<= 60%<= 60%53  52  0.53  54  52  0.53  54  48  0.56  <= 60%53 59 2.36 52 56 2.52 53 52 0.53 
60.01% to 70%60.01% to 70%17  17  0.80  17  17  0.80  18  17  0.84  60.01% to 70%18 18 3.27 17 18 3.73 17 17 0.80 
70.01% to 80%70.01% to 80%17  14  0.74  16  14  0.75  16  14  0.87  70.01% to 80%18 13 2.67 18 14 3.05 17 14 0.74 
80.01% to 90%80.01% to 90%8  9  0.96  8  9  1.00  8  10  1.16  80.01% to 90%8 8 3.23 9 9 4.17 8 9 0.96 
90.01% to 100%90.01% to 100%5  4  0.85  5  4  0.86  4  5  1.21  90.01% to 100%3 1 1.49 4 2 1.85 5 4 0.85 
Greater than 100%Greater than 100%*  4  10.06  *  4  10.14  *  6  9.35  Greater than 100%*1 21.81 *1 22.43 *4 10.06 
Credit enhanced:(3)
Credit enhanced:(3)
Credit enhanced:(3)
Primary MI & other(4)
Primary MI & other(4)
22  26  0.95  22  26  0.96  21  26  1.07  
Primary MI & other(4)
21 27 4.06 21 27 4.36 22 26 0.95 
Credit risk transfer(5)
Credit risk transfer(5)
46  17  0.29  45  16  0.27  42  10  0.24  
Credit risk transfer(5)
25 36 3.65 30 37 3.69 46 17 0.29 
Non-credit enhancedNon-credit enhanced47  65  0.77  47  66  0.79  52  69  0.83  Non-credit enhanced62 51 2.06 58 51 2.36 47 65 0.77 
*Represents less than 0.5% of single-family conventional guaranty book of business.
(1)Calculated based on the number of single-family loans that were seriously delinquent for each category divided by the total number of single-family conventional loans that were seriously delinquent.
(2)For a description of our Alt-A loan classification criteria, see “MD&A—Glossary of Terms Used in This Report” in our 20192020 Form 10-K.
(3)The credit-enhanced categories are not mutually exclusive. A loan with primary mortgage insurance that is also covered by a credit risk transfer transaction will be included in both the “Primary MI & other” category and the “Credit risk transfer” category. As a result, the “Credit enhanced” and “Non-credit enhanced” categories do not sum to 100%. The total percentage of our single-family conventional guaranty book of business with some form of credit enhancement as of March 31, 20202021 was 53%38%.
(4)Refers to loans included in an agreement used to reduce credit risk by requiring primary mortgage insurance, collateral, letters of credit, corporate guarantees, or other agreements to provide an entity with some assurance that it will be compensated to some degree in the event of a financial loss. Excludes loans covered by credit risk transfer transactions unless such loans are also covered by primary mortgage insurance.
Fannie Mae First Quarter 2020 Form 10-Q(5)36
MD&A | Single-Family Business
(5)Refers to loans included in reference pools for credit risk transfer transactions, including loans in these transactions that are also covered by primary mortgage insurance. For CAS and some lender risk-sharing transactions, this represents outstanding unpaid principal balance of the underlying loans on the single-family mortgage credit book, not the outstanding reference pool, as of the specified date. Loans included in our credit risk transfer transactions have all been acquired since 2009.
Fannie Mae First Quarter 2021 Form 10-Q37
MD&A | Single-Family Business | Single-Family Mortgage Credit Risk Management
Single-Family Loans in Forbearance
As a part of our relief programs, we have authorized our servicers to permit payment forbearance to borrowers experiencing a COVID-19-related financial hardship for up to 12 months without regard to the delinquency status of the loan, and for borrowers already in forbearance as of February 28, 2021, for a total of up to 18 months, provided that the forbearance does not result in the loan becoming greater than 18 months delinquent. We estimate that, through March 31, 2021, approximately 8% of the single-family loans, based on loan count of our conventional guaranty book of business as of March 31, 2020, have been in a COVID-19-related forbearance at some point between then and March 31, 2021 (referred to as our “single-family cumulative forbearance take-up rate”). Based on our expectations regarding the economic recovery, which we discuss in “Key Market Economic Indicators,“ we believe that the substantial majority of borrowers who will ultimately request COVID-19-related relief have already done so.
As shown in the tables below, many of the loans that entered forbearance have since exited; therefore, the percentage of loans in our single-family conventional guaranty book of business in forbearance as of March 31, 2021 has declined to 2.5%. Some borrowers whose loans are in forbearance continue to make payments according to the original contractual terms of the loan notwithstanding the forbearance arrangement; we expect some of these borrowers will continue to do so and therefore remain current. The table below provides information on the delinquency and accrual status of our single-family loans in forbearance. We expect many of the loans in forbearance will resolve their delinquency through a payment deferral or other form of loan workout. As discussed below, servicers are required to contact borrowers prior to the end of forbearance to evaluate them for loan workout options that can support their successful transition out of forbearance.
We continue to accrue interest income on a majority of our single-family loans in forbearance because we have determined that collection of principal and interest on these loans is reasonably assured. For information on our nonaccrual policy for loans negatively impacted by the COVID-19 pandemic, see “Note 3, Mortgage Loans.”
Fannie Mae First Quarter 2021 Form 10-Q38
MD&A | Single-Family Business | Single-Family Mortgage Credit Risk Management
Delinquency and Accrual Status of Single-Family Loans in Forbearance
March 31, 2021
Number of Loans
Unpaid Principal Balance(1)
Percentage of Loans in Forbearance(2)
Percentage of Loans on Accrual Status(2)
(Dollars in millions)
Delinquency status:
Current44,195 $8,128 10 %100 %
30 to 59 days delinquent25,301 4,886 6 94 
60 to 89 days delinquent24,529 4,802 6 85 
Seriously delinquent:
90 to 180 days delinquent86,337 16,767 20 82 
180+ days delinquent249,230 53,471 58 70 
Total seriously delinquent335,567 70,238 78 73 
Total loans in forbearance(3)
429,592 $88,054 100 %77 
Percentage of single-family conventional guaranty book of business2.5 %2.7 %
December 31, 2020
Number of Loans
Unpaid
Principal Balance(1)
Percentage of Loans in Forbearance(2)
Percentage of Loans on Accrual Status(2)
Delinquency status:(Dollars in millions)
Current64,159 $12,110 12 %100 %
30 to 59 days delinquent40,653 7,672 8 97 
60 to 89 days delinquent35,107 6,658 7 85 
Seriously delinquent:
90 to 180 days delinquent126,611 24,961 24 85 
180+ days delinquent258,025 56,379 49 82 
Total seriously delinquent384,636 81,340 73 83 
Total loans in forbearance(3)
524,555 $107,780 100 %86 
Percentage of single-family conventional guaranty book of business3.0 %3.4 %
(1)Does not reflect a valuation allowance recorded on the unpaid principal balance of loans in forbearance of $1.5 billion and $1.8 billion as of March 31, 2021 and December 31, 2020, respectively.
(2)Based on loan count.
(3)Amortized cost of these loans was $90.3 billion and $110.4 billion as of March 31, 2021 and December 31, 2020, respectively.
As of March 31, 2021, the vast majority of our single-family conventional loans in forbearance was due to borrowers experiencing a COVID-19-related financial hardship. As a result of the economic dislocation caused by the pandemic, we expect the number of single-family loans in forbearance to remain elevated through 2021 compared with pre-pandemic levels.
Fannie Mae First Quarter 2021 Form 10-Q39
MD&A | Single-Family Business | Single-Family Mortgage Credit Risk Management
The table below provides information on the credit profile of our single-family loans in forbearance with select higher-risk characteristics. While the credit profile of our single-family loans in forbearance is weaker than the overall credit profile of our single-family conventional guaranty book of business, only 1% of our single-family loans in forbearance with a mark-to-market LTV ratio over 80% are not covered by mortgage insurance.
Select Higher-Risk Characteristics of Single-Family Loans in Forbearance
As of March 31, 2021As of December 31, 2020
Number of LoansPercentage of Unpaid Principal Balance in ForbearanceNumber of LoansPercentage of Unpaid Principal Balance in Forbearance
Loans in forbearance with certain higher-risk characteristics:(1)
Estimated mark-to-market LTV ratio > 80%41,355 12 %62,14415 %
Estimated mark-to-market LTV ratio > 80% without mortgage insurance4,946 1 6,8112 
DTI > 43%166,350 41 201,35441 
FICO credit score at origination < 680134,474 27 159,01726 
(1)The higher-risk categories are not mutually exclusive.
As a part of our loss mitigation efforts, servicers must attempt to contact the borrower no later than 30 days before the end of the forbearance period to evaluate them for a workout option after the forbearance period. Those options include:
•a reinstatement (where the borrower repays all of the missed payments at one time);
•a repayment plan (where the borrower repays the missed payments over time);
•a payment deferral (where the borrower defers the missed payments to the end of the loan term, or to when the loan is refinanced, the property is sold or the loan is otherwise paid off before the end of the loan term); or
•a modification of the loan terms so that the borrower may be brought current, which typically results in the borrower making reduced monthly contractual payments over a longer period of time.
Unlike a loan modification, repayment plans and payment deferrals do not require us to purchase the loan out of trust.
Fannie Mae First Quarter 2021 Form 10-Q40
MD&A | Single-Family Business | Single-Family Mortgage Credit Risk Management
The table below displays the status as of the current period-end of the single-family loans in our guaranty book of business that received a forbearance in 2020 or 2021. The vast majority of these forbearance arrangements were offered to borrowers who experienced a COVID-19-related financial hardship. Many of these borrowers have successfully resolved their forbearance arrangement, primarily through payment deferral or reinstatement. We expect the percentage of loans that receive a modification upon transitioning out of forbearance to increase throughout 2021. See “Loan Workout Metrics” for additional information about actions taken by us to help reinstate a loan to current status.
Status of Single-Family Forbearance Loans
As of March 31, 2021
Number of LoansPercentage of Loans with Forbearance by Category
Loans that received a forbearance, by status:
Active forbearance429,592 32 %
Payment deferral(1)
274,704 20 
Modification(2)
20,985 2 
Reinstated(3)
337,332 25 
Other(4)
42,335 3 
Total loans that received a forbearance in our single-family guaranty book of business1,104,948 82 
Loans that have received a forbearance, but paid off244,561 18 
Total loans that have received a forbearance(5)
1,349,509 100 %
(1)As of March 31, 2021, 96% of loans that received a forbearance and subsequently received a payment deferral were current.
(2)Includes loans that are in trial modifications. As of March 31, 2021, 89% of loans that received a forbearance and subsequently received a completed modification were current.
(3)Represents loans that are no longer in forbearance but are current according to the original terms of the loan. Also includes loans that remained current throughout the forbearance arrangement and continue to perform.
(4)Includes loans that were delinquent upon the expiration of the forbearance arrangement as well as loans that exited forbearance through a repayment plan.
(5)Includes 5,415 loans that were in forbearance as of January 1, 2020.
The table below displays the status as of December 31, 2020 for single-family loans in our guaranty book of business that received a forbearance in 2020.
Status of Single-Family Forbearance Loans
As of December 31, 2020
Number of LoansPercentage of Loans with Forbearance by Category
Loans that received a forbearance, by status:
Active forbearance524,555 40 %
Payment deferral(1)
220,414 17 
Modification(2)
13,277 1 
Reinstated(3)
337,086 26 
Other(4)
45,655 3 
Total loans that received a forbearance in our single-family guaranty book of business1,140,987 87 
Loans that have received a forbearance, but paid off167,388 13 
Total loans that have received a forbearance(5)
1,308,375 100 %
(1)As of December 31, 2020, 96% of loans that received a forbearance and subsequently received a payment deferral were current.
Fannie Mae First Quarter 2021 Form 10-Q41
MD&A | Single-Family Business | Single-Family Mortgage Credit Risk Management
(2)Includes loans that are in trial modifications. As of December 31, 2020, 83% of loans that received a forbearance and subsequently received a completed modification were current.
(3)Represents loans that are no longer in forbearance but are current according to the original terms of the loan. Also includes loans that remained current throughout the forbearance arrangement and continue to perform.
(4)Includes loans that were delinquent upon the expiration of the forbearance arrangement as well as loans that exited forbearance through a repayment plan.
(5)Includes 5,415 loans that were in forbearance as of January 1, 2020.
Accrued Interest Receivable, Net on Single-Family Loans in Forbearance
For loans negatively impacted by the COVID-19 pandemic, we continue to recognize interest income for up to six months of delinquency provided that the loan was either current at March 1, 2020 or originated after March 1, 2020 and collection of principal and interest is reasonably assured. For those loans where we have provided relief beyond six months of delinquency, we continue to accrue interest income provided that the loan remains in a forbearance arrangement and collection of principal and interest continues to be reasonably assured according to our nonaccrual policy. Our evaluation of whether the collection of principal and interest is reasonably assured considers the probability of default and the current value of the collateral. Once the forbearance period has ended, we will also consider the extent to which the borrower and the servicer have agreed to any of the loss mitigation options that are available. We then measure an allowance for expected credit losses on the unpaid accrued interest receivable balances such that the balance sheet reflects the net amount of interest we expect to collect. Accordingly, the application of our nonaccrual policy for loans negatively impacted by the COVID-19 pandemic has resulted in a large portion of delinquent loans, including those in forbearance, remaining on accrual status. See “Note 1, Summary of Significant Accounting Policies” in our 2020 Form 10-K and “Note 3, Mortgage Loans” in this report for additional information about our nonaccrual accounting policy. See also "Risk Factors—COVID-19 Pandemic Risk" in our 2020 Form 10-K for a discussion of credit risk and the COVID-19 pandemic.
Under our nonaccrual accounting policy for loans negatively impacted by the COVID-19 pandemic, our allowance for accrued interest receivable considers both the loan’s principal and accrued interest receivable balances as well as any proceeds that are expected from contractually attached mortgage insurance when assessing collectability. Our assessment of collectability requires significant management judgment; as a result, our allowance for accrued interest receivable is subject to the same review processes, as well as other established governance and controls, used for our allowance for loan losses. The table below displays an aging analysis of our accrued interest receivable, net of allowance on single-family loans that are in a forbearance plan.
Aging of Accrued Interest Receivable, Net of Allowance on Single-Family Loans in Forbearance
As of March 31, 2021As of December 31, 2020
(Dollars in millions)
Aging analysis of accrued interest receivable:
Current$22 $32 
30 to 59 days delinquent28 46 
60 to 89 days delinquent39 55 
Seriously delinquent:
90 to 180 days delinquent239 377 
180+ days delinquent1,518 1,427 
Total accrued interest receivable1,846 1,937 
Allowance for accrued interest receivable(179)(173)
Total accrued interest receivable, net$1,667 $1,764 
Principal and Interest Payments while Loans are in Forbearance
While a loan is in forbearance and remains in an MBS trust, investors in the MBS are entitled to continue to receive principal and interest payments on the MBS even though the borrower is not required to make principal and interest payments. For the majority of loans in our single-family guaranty book of business, our Single-Family Servicing Guide has, until recently, required servicers to advance missed scheduled principal and interest payments to the MBS trusts until the loans were purchased from the MBS trusts, including the portion of interest that represents guaranty fees owed to us. Because we typically do not purchase loans from MBS trusts while they are in forbearance, this servicer payment obligation could have continued for the entirety of the forbearance plan. Beginning August 2020, at FHFA’s instruction,
Fannie Mae First Quarter 2021 Form 10-Q42
MD&A | Single-Family Business | Single-Family Mortgage Credit Risk Management
we reduced our single-family servicers’ obligations to advance these missed borrower payments and only require servicers to advance missed scheduled principal and interest payments on a loan for the first four months of missed borrower payments. After four months, we make the missed scheduled principal and interest payments to the MBS trust for payment to MBS holders so long as the loan remains in the MBS trust. For the quarter ended March 31, 2021, we advanced $622 million in missed borrower principal and interest payments to MBS trusts for payment to MBS holders. Since FHFA’s instruction in August of 2020 through March 31, 2021, we have advanced $1.8 billion in missed borrower principal and interest payments. See “Retained Mortgage Portfolio” for a description of when we purchase loans from single-family MBS trusts.
Loan Workout Metrics
As a part of our credit risk management efforts, loan workouts represent actions taken by us to help reinstate a loan to current status and help homeowners stay in their home or to otherwise avoid foreclosure. Our loan workouts reflect:
•reflect various types of home retention solutions, including loan modifications, repayment plans, payment deferrals, and forbearances; and
•loan modifications. Our loan workouts also include foreclosure alternatives, includingsuch as short sales and deeds-in-lieu of foreclosure.
The chart below displays the unpaid principal balance of our completed single-family loan workouts by type, for the first quarter of 2019 compared with the first quarter of 2020, as well as the number of loan workouts, for each period.
fnm-20200331_g17.jpg
(1)Consiststhe first quarter of loan modifications and completed repayment plans and forbearances. Repayment plans reflect only those plans associated2020 compared with the first quarter of 2021. This table does not include loans in an active forbearance arrangement or that exited a forbearance arrangement but were 60 days or more delinquent. Forbearances reflect loans that were 90 days or more delinquent. Excludesnot seriously delinquent upon exit, trial modifications, loans to certain borrowers who have received bankruptcy relief that are classified as troubled debt restructurings, and repayment and forbearance plans that have been initiated but not completed.
fnm-20210331_g14.jpg
(1)There were approximately 16,700 loans and 18,100 loans in a trial modification period that was not complete as of March 31, 2020.2021 and 2020, respectively.
(2)ConsistsIncludes repayment plans and foreclosure alternatives. Repayment plans reflect only those plans associated with loans that were 60 days or more delinquent. For the first quarter of short sales and deeds-in-lieu2021, the table excludes completed forbearance arrangements. For the first quarter of foreclosure.2020, the table includes $17 million of completed forbearance arrangements that involve loans that were 90 days or more delinquent.
The declineincrease in home retention solutions in the first quarter of 20202021 compared with the first quarter of 20192020 was primarily driven by improvedcompleted COVID-19-related payment deferrals, which have been the primary loan performance. We expect theworkout solution for borrowers exiting COVID-19-related forbearance. The total amount of our home retention solutions to increase in future periods dueprincipal and interest deferred to the forbearance programsend of the loan term for single-family loans that received a payment deferral was $783 million for the first quarter of 2021.
Given the continuing impact of the pandemic, we are offering borrowers experiencing financial hardship dueexpect higher loan workout activity to the COVID-19 outbreak.continue in 2021.

Fannie Mae First Quarter 20202021 Form 10-Q3743
MD&A | Single-Family Business | Single-Family Mortgage Credit Risk Management
REO Management
If a loan defaults, we may acquire the homeproperty through foreclosure or a deed-in-lieu of foreclosure. The table below displays our foreclosureREO activity by region. Regional REO acquisition trends generally follow a pattern that is similar to, but lags, that of regional delinquency trends.
Single-Family REO PropertiesSingle-Family REO PropertiesSingle-Family REO Properties
For the Three Months Ended March 31, For the Three Months Ended March 31,
2020201920212020
Single-family REO properties (number of properties):Single-family REO properties (number of properties):Single-family REO properties (number of properties):
Beginning of period inventory of single-family REO properties(1)
Beginning of period inventory of single-family REO properties(1)
17,501  20,156  
Beginning of period inventory of single-family REO properties(1)
7,973 17,501 
Acquisitions by geographic area:(2)
Acquisitions by geographic area:(2)
Acquisitions by geographic area:(2)
MidwestMidwest944  1,261  Midwest250 944 
NortheastNortheast890  1,457  Northeast232 890 
SoutheastSoutheast1,148  1,746  Southeast292 1,148 
SouthwestSouthwest545  821  Southwest115 545 
WestWest248  510  West51 248 
Total REO acquisitions(1)
Total REO acquisitions(1)
3,775  5,795  
Total REO acquisitions(1)
940 3,775 
Dispositions of REODispositions of REO(4,987) (6,953) Dispositions of REO(1,995)(4,987)
End of period inventory of single-family REO properties(1)
End of period inventory of single-family REO properties(1)
16,289  18,998  
End of period inventory of single-family REO properties(1)
6,918 16,289 
Carrying value of single-family REO properties (dollars in millions)Carrying value of single-family REO properties (dollars in millions)$2,129  $2,404  Carrying value of single-family REO properties (dollars in millions)$995 $2,129 
Single-family foreclosure rate(3)
Single-family foreclosure rate(3)
0.09  %  0.14  %  
Single-family foreclosure rate(3)
0.02 %0.09 %
REO net sales price to unpaid principal balance(4)
REO net sales price to unpaid principal balance(4)
82  %  77  %  
REO net sales price to unpaid principal balance(4)
107 %82 %
Short sales net sales price to unpaid principal balance(5)
Short sales net sales price to unpaid principal balance(5)
79  %  75  %  
Short sales net sales price to unpaid principal balance(5)
82 %79 %
(1)Includes acquisitions through foreclosure and deeds-in-lieu of foreclosure. Also includes held-for-use properties, which are reported in our condensed consolidated balance sheets as a component of “Other assets.”
(2)See footnote 8 to the “Key Risk Characteristics of Single-Family Conventional Business Volume and Guaranty Book of Business” table for states included in each geographic region.
(3)Estimated based on the annualized total number of properties acquired through foreclosure or deeds-in-lieu of foreclosure as a percentage of the total number of loans in our single-family conventional guaranty book of business as of the end of each period.
(4)Calculated as the amount of sale proceeds received on disposition of REO properties during the respective periods, excluding those subject to repurchase requests made to our sellers or servicers, divided by the aggregate unpaid principal balance of the related loans at the time of foreclosure. Net sales price represents the contract sales price less selling costs for the property and other charges paid by the seller at closing.
(5)Calculated as the amount of sale proceeds received on properties sold in short sale transactions during the respective periods divided by the aggregate unpaid principal balance of the related loans. Net sales price includes borrower relocation incentive payments and subordinate lien(s) negotiated payoffs.
The decline in single-family REO properties in the first quarter of 20202021 compared with the first quarter of 20192020 was primarily due to the suspension of foreclosures that began in March 2020 as a reduction in REO acquisitions from serious delinquencies aged greater than 180 days, driven by improved loan performance andresult of the continued sale of nonperforming loans.
PursuantCOVID-19 pandemic. In response to the CARES Act, except in the case of vacant or abandoned properties,pandemic and with instruction from FHFA, we have prohibited our servicers are currently prohibited from completing foreclosures on our single-family loans through at least May 17, 2020. In addition, many states have enacted foreclosure moratoriums that extend either beyondJune 30, 2021, except in the CARES Act timeframecase of vacant or until further notice.abandoned properties.
Other Single-Family Credit Information
Single-Family Credit Loss Metrics and Loan Sale Performance
The single-family credit loss and loan sale performance measures below present information about gains or losses we realized on our single-family loans during the periods presented. The amount of credit loss we realizethese gains or losses in a given period is driven by foreclosures, pre-foreclosure sales, REO activity, mortgage loan redesignations, and other events that trigger write-offs net ofand recoveries. OurThe single-family credit loss metrics we present are not defined terms within GAAP and may not be calculated in the same manner as similarly titled measures reported by other companies. We believe our credit loss metrics may be usefulManagement uses these measures to stakeholders because they are presented as a percentage of our conventional guaranty book of business and represent our incurred credit losses.
We have revisedevaluate the presentationeffectiveness of our single-family credit loss metricsrisk management strategies in connectionconjunction with leading indicators such as serious delinquency and forbearance rates, which are potential indicators of future realized single-family credit losses. We believe these measures provide useful information about our implementation ofsingle-family credit performance and the CECL standard in January 2020, principally by separating the line item previously referred to as “Charge-offs, net of recoveries” into the following three line items: “Write-offs,” “Recoveries” and “Write-offs on the redesignation of mortgage loans from HFI to HFS.” Because sales of nonperforming and reperforming loans have been an important part offactors that impact our credit loss mitigationperformance.
Fannie Mae First Quarter 20202021 Form 10-Q3844
MD&A | Single-Family Business | Single-Family Mortgage Credit Risk Management
strategy in recent periods, we also provide information on our loan sale performance in the table below through the “Gains (losses) on sales and other valuation adjustments” line item, which shows our gains and/or losses realized on the sale of nonperforming and reperforming loans during the period as well as any lower-of-cost-or-market adjustments (“LOCOM”) related to loans held for sale.
As a result of the COVID-19 outbreak, there has been insufficient investor interest in sales of our nonperforming and reperforming loans in recent weeks. As a result, we do not anticipate entering into any new contracts for sales of nonperforming or reperforming loans until market conditions improve.

The table below displays the components of our single-family credit loss metrics and loan sale performance.
Single-Family Credit Loss Metrics and Loan Sale Performance
Single-Family Credit Gains (Loss) Metrics and Loan Sale PerformanceSingle-Family Credit Gains (Loss) Metrics and Loan Sale Performance
For the Three Months Ended March 31,For the Three Months Ended March 31,
2020201920212020
Amount
Ratio(1)
Amount
Ratio(1)
Amount
Ratio(1)
Amount
Ratio(1)
(Dollars in millions)(Dollars in millions)
Write-offsWrite-offs$(65) $(146) Write-offs$(19)$(65)
RecoveriesRecoveries14  60  Recoveries5 14 
Foreclosed property expense(78) (143) 
Credit losses and credit loss ratio(129) 1.7bps  (229) 3.2  bps  
Foreclosed property income (expense)Foreclosed property income (expense)17 (78)
Credit gains (losses) and related ratiosCredit gains (losses) and related ratios3 *bps(129)1.7bps
Write-offs on the redesignation of mortgage loans from HFI to HFS(2)Write-offs on the redesignation of mortgage loans from HFI to HFS(2)(9) (240) Write-offs on the redesignation of mortgage loans from HFI to HFS(2)(54)(9)
Gains (losses) on sales and other valuation adjustments(2)(3)
Gains (losses) on sales and other valuation adjustments(2)(3)
(167) 23  
Gains (losses) on sales and other valuation adjustments(2)(3)
31 (167)
Total credit losses, write-offs on redesignations, and gains (losses) on sales and other valuation adjustments, and related ratio$(305) 4.1bps  $(446) 6.1  bps  
Net credit gains (losses), write-offs on redesignations, and gains (losses) on sales and other valuation adjustments, and related ratiosNet credit gains (losses), write-offs on redesignations, and gains (losses) on sales and other valuation adjustments, and related ratios$(20)0.2 bps$(305)4.1bps
*    Represents credit gains ratio of less than 0.05 basis points.
(1)Basis points are calculated based on the amount of each line item annualized divided by the average single-family conventional guaranty book of business during the period.
(2)Consists of the temporary LOCOM adjustments on HFS loans andlower of cost or fair value adjustment at time of redesignation.
(3)Consists of gains (losses)or losses realized on the sales of nonperforming and reperforming mortgage loans during the period and temporary lower-of-cost-or-market adjustments on HFS loans, which are recognized in “Investment gains (losses), net” in our condensed consolidated financial statements.statements of operations and comprehensive income.
OurWe had modest single-family credit losses and credit loss ratio decreasedgains in the first quarter of 20202021 compared with single-family credit losses in the first quarter of 2020. Single-family credit gains in the first quarter of 2021 were primarily due to sales of existing foreclosed properties partially offset by reduced foreclosures driven by the COVID-19-related foreclosure moratorium.
Our single-family write-offs on redesignation increased in the first quarter of 2021 compared with the first quarter of 20192020 primarily due to reduced foreclosures and foreclosure alternatives and lower write-off severity rates duean increase in the volume of reperforming loans redesignated from HFI to continued home price appreciation.HFS in the first quarter of 2021.
Our single-family write-offs on redesignations, andWe had gains (losses) on sales and other valuation adjustments decreasedin the first quarter of 2021 primarily due to gains on lower-of-cost-or-market adjustments driven by price increases on our HFS loans compared with lower-of-cost-or-market losses in the first quarter of 2020 compared with the first quarter of 2019 due to fewer redesignations of mortgage loans from HFI to HFS, which resulted in lower write-off activity, partially offset by LOCOM adjustments driven by price declines on our HFS loans.loans as a result of the onset of the COVID-19 pandemic.
We do not expect a substantial increase in our single-family credit losses in the near term as a result of the COVID-19, outbreak, as we are currently offering up to 1218 months of forbearance to eligible single-family borrowers suffering financial hardship relating to the COVID-19 outbreakpandemic and because we have suspended foreclosures and certain foreclosure-related activities for single-family properties through at least May 17, 2020; however,June 30, 2021. Over the longer term, we expect the COVID-19 outbreak is likely topandemic will result in higher realized single-family credit losses over the longer term.as loans default. See “Risk Factors” in our 2020 Form 10-K for additional information.information on the potential credit risk impact of the COVID-19 pandemic and "Legislation and Regulation" in this report for information on the CFPB's proposal to generally prohibit servicers from initiating any new foreclosure on a mortgage loan secured by the borrower’s principal residence until after December 31, 2021.
For information on our credit-related income or expense, which includes changes in our allowance, see “Consolidated Results of Operations—Credit-Related Income (Expense)” and “Single-Family Business Financial Results.”
Fannie Mae First Quarter 20202021 Form 10-Q3945
MD&A | Single-Family Business | Single-Family Mortgage Credit Risk Management
Single-Family Loss Reserves
Our single-family loss reserves, which include our allowance for loan losses and the related accrued interest receivable, and our reserve for guaranty losses, provide for an estimate of credit losses in our single-family guaranty book of business. For periods beginning January 1, 2020, our measurement of loss reserves reflects a lifetime credit loss methodology pursuant to our adoption of the CECL standard and requires consideration of a broader range of reasonable and supportable forecast information to develop credit loss estimates. For the prior period, single-family loss reserves were measured using an incurred loss impairment methodology for loans that are collectively evaluated for impairment. For further details on our previous single-family loss reserves methodology, refer to “Note 1, Summary of Significant Accounting Policies” in our 2019 Form 10-K.
The table below summarizes the changes in our single-family loss reserves, excluding credit losses on our AFS securities. For a discussion of changes in our single-family benefit (provision)or provision for credit losses see “Consolidated Results of Operations—Credit-Related Income (Expense).”
Single-Family Loss ReservesSingle-Family Loss ReservesSingle-Family Loss Reserves
For the Three Months Ended March 31,For the Three Months Ended March 31,
2020201920212020
(Dollars in millions)(Dollars in millions)
Changes in loss reserves:Changes in loss reserves:Changes in loss reserves:
Beginning balanceBeginning balance$(8,779) $(14,007) Beginning balance$(9,573)$(8,779)
Transition impact from the adoption of the CECL standard(1,231) —  
Transition impact of the adoption of the CECL standardTransition impact of the adoption of the CECL standard— (1,231)
Benefit (provision) for credit lossesBenefit (provision) for credit losses(2,170) 661  Benefit (provision) for credit losses662 (2,170)
Write-offsWrite-offs74  386  Write-offs73 74 
RecoveriesRecoveries(14) (60) Recoveries(5)(14)
OtherOther28  1  Other57 28 
Ending balanceEnding balance$(12,092) $(13,019) Ending balance$(8,786)$(12,092)
Write-offs, net of recoveries as a percentage of the average single-family conventional guaranty book of business (in bps)0.8  4.5
Write-offs, net of recoveries annualized, as a percentage of the average single-family conventional guaranty book of business (in bps)Write-offs, net of recoveries annualized, as a percentage of the average single-family conventional guaranty book of business (in bps)0.8 0.8
As ofAs of
March 31, 2020December 31, 2019March 31, 2021December 31, 2020
Loss reserves as a percentage of single-family:Loss reserves as a percentage of single-family:Loss reserves as a percentage of single-family:
Conventional guaranty book of businessConventional guaranty book of business0.41 %0.30 %Conventional guaranty book of business0.27 %0.30 %
Nonaccrual loans at amortized costNonaccrual loans at amortized cost42.68  30.58  Nonaccrual loans at amortized cost24.75 34.63 
Fannie Mae First Quarter 2020 Form 10-Q40
MD&A | Single-Family Business
Troubled Debt Restructurings and Nonaccrual Loans
We continue to account for eligible COVID-19-related loss mitigation activities as permitted under the CARES Act and the Consolidated Appropriations Act of 2021, which provide relief from TDR accounting and disclosure requirements for our forbearance plans and loan modifications. See “Note 1, Summary of Significant Accounting Policies” in our 2020 Form 10-K for more information on the relief from TDR accounting and disclosure requirements.
The tablestable below displaydisplays the single-family loans classified as TDRs that were on accrual status and single-family loans on nonaccrual status. The tables includetable includes our amortized cost in HFI and HFS single-family mortgage loans, as well as interest income forgone and recognized for on-balance sheet TDRs on accrual status and nonaccrual loans. For more information on the impact of TDRs and nonaccrual loans, see “Note 3, Mortgage Loans.”
Pursuant to the CARES Act, we have elected to temporarily suspend the accounting for TDRs under GAAP for certain loss mitigation activities, including forbearance and loan modifications, related to the COVID-19 pandemic that occur between March 1, 2020 through the earlier of December 31, 2020 or 60 days after the date on which the COVID-19 outbreak national emergency terminates, as long as the loan was not more than 30 days delinquent as of December 31, 2019. Accordingly, we do not expect an increase in our TDRs in 2020. See “Note 1, Summary of Significant Accounting Policies” for additional information on our accounting for TDRs.
Single-Family TDRs on Accrual Status and Nonaccrual Loans
As of
March 31, 2021December 31, 2020
(Dollars in millions)
TDRs on accrual status$66,561 $69,503 
Nonaccrual loans35,498 27,643 
Total TDRs on accrual status and nonaccrual loans$102,059 $97,146 
Accruing on-balance sheet loans past due 90 days or more(1)
$58,426 $77,181 
Single-Family TDRs on Accrual Status and Nonaccrual Loans
As of
March 31, 2020December 31, 2019
(Dollars in millions)
TDRs on accrual status$80,952  $81,634  
Nonaccrual loans28,335  28,708  
Total TDRs on accrual status and nonaccrual loans$109,287  $110,342  
Accruing on-balance sheet loans past due 90 days or more(1)
$178  $191  
For the Three Months Ended March 31,
20202019
(Dollars in millions)
Interest related to on-balance sheet TDRs on accrual status and nonaccrual loans:
Interest income forgone(2)
$406  $521  
Interest income recognized(3)
1,068  1,272  
Fannie Mae First Quarter 2021 Form 10-Q46
MD&A | Single-Family Business | Single-Family Mortgage Credit Risk Management
For the Three Months Ended March 31,
20212020
(Dollars in millions)
Interest related to on-balance sheet TDRs on accrual status and nonaccrual loans:
Interest income forgone(2)
$480 $406 
Interest income recognized(3)
815 1,068 
(1)Includes loans that, as of the end of each period, are 90 days or more past due and continuing to accrue interest. TheAs of March 31, 2021 and December 31, 2020, the substantial majority of these amounts consist of loans insured or guaranteed by the U.S. government and loans for which we have recourse against the seller in the event ofhad a default.COVID-19-related forbearance.
(2)Represents the amount of interest income we did not recognize, but would have recognized during the period, for nonaccrual loans and TDRs on accrual status held as of the end of each period had the loans performed according to their original contractual terms.
(3)Primarily includes amounts accrued while the loans were performing, including the amortization of any deferred cost basis adjustments, and cash payments received on nonaccrual loans.loans held as of the end of each period.
As of March 31, 2021, there was an increase in loans on nonaccrual status and a corresponding decrease in loans accruing on-balance sheet that were past due 90 days or more compared with December 31, 2020. This was primarily attributed to loans that continue to remain in a COVID-19-related forbearance and have become more delinquent. As a result, a greater portion of these loans have entered nonaccrual status, as collection of principal and interest is no longer reasonably assured.
Under our nonaccrual policy for loans negatively impacted by the COVID-19 pandemic, we continue to recognize interest income for up to six months of delinquency provided that the loan was either current at March 1, 2020 or originated after March 1, 2020 and collection of principal and interest is reasonably assured. For those loans where we have provided relief beyond six months of delinquency, we continue to accrue interest income provided that the loan remains in a forbearance arrangement and collection of principal and interest continues to be reasonably assured according to our nonaccrual policy. This has resulted in a large portion of loans in forbearance remaining on accrual status. For additional information on our accounting policy for nonaccrual loans, see “Note 3, Mortgage Loans.”
We have established a valuation allowance of $219 million as of March 31, 2021 on the total single-family accrued interest receivable balance based on our assessment of collectability. For single-family loans negatively impacted by the pandemic that are six or more months delinquent as of March 31, 2021, we have recorded a total accrued interest receivable balance of $1.8 billion, for which we have established a valuation allowance of $185 million.
Multifamily Business
Our Multifamily business provides mortgage market liquidity primarily for properties with five or more residential units, which may be apartment communities, cooperative properties, seniors housing, dedicated student housing or manufactured housing communities.
This section supplements and updates information regarding our Multifamily business segment in our 20192020 Form 10-K. See “MD&A—Multifamily Business” in our 20192020 Form 10-K for additional information regarding the primary business activities, customers, competition and market share of our Multifamily business.
Multifamily Mortgage Market
National multifamilyMultifamily market fundamentals, which include factors such as vacancy rates and rents, remained relatively stable throughout most ofimproved during the first quarter of 2020, since the onset of the COVID-19 outbreak did not begin impacting most local economies until mid-2021, due to late- March 2020.a rebounding economy, increasing job growth, and continued demand for multifamily housing.
•Vacancy rates.Based on preliminary third-party data, the estimated national multifamily vacancy rate for institutional investment-type apartment properties wasas of March 31, 2021 remained unchanged at 6.0%, the same as of December 31, 2020, but higher than the estimated 5.8% as of March 31, 2020, compared with 5.5% as of December 31, 2019 and March 31, 2019.2020. The estimated national multifamily vacancy rate remains belowin line with its estimated average rate of about 6.0% over the last 10ten years. We believe that elevated levels of new supply delivered during the quarter, especially in higher cost metros and submarkets, kept the estimated national vacancy level from declining by increasing the number of units available despite the improvement in market fundamentals.
•Rents. Effective rents are estimated to have reversed recent trends and increased by 0.5% induring the first quarter of 2020,2021 compared to an estimated 0.3% inwith a decrease of 0.5% during the fourth quarter of 20192020 and an estimatedincrease of 0.5% induring the first quarter of 2019.2020.
Fannie Mae First Quarter 2020 Form 10-Q41
MD&A | Multifamily Business
Vacancy rates and rents are important to loan performance because multifamily loans are generally repaid from the cash flows generated by the underlying property. Several years of improvement in these fundamentals helped to
Fannie Mae First Quarter 2021 Form 10-Q47
MD&A | Multifamily Business | Multifamily Mortgage Market
increase property values in most metropolitan areas. According to the latest third-party estimate, approximately 494,000 newBased on current multifamily units are expected to be completed in 2020; however, we believe the amount of new multifamily units in 2020 likely will be lower than this estimate due to the ongoing supply chain disruptions, coupled with the current social distancing restrictions and stay-at-home orders in place across the country.
Although multifamily fundamentals remained positiveproperty sales data, transaction volumes in the first quarter of 2020,2021 trended lower than in previous years yet capitalization rates remained low. We believe this is due to property owners choosing to retain their multifamily properties, especially as demand trends are improving, as well as commercial real estate investors remaining interested in multifamily rather than other sectors that were hit hard by the pandemic, such as hospitality and retail, thus keeping overall property values relatively stable.
Multifamily construction underway remains elevated, with more than 500,000 units expected to be delivered in 2021, compared with the estimated 396,000 new multifamily units that were completed in 2020. We believe this additional supply is one reason for elevated concession rates.
While significant uncertainty remains, we currently expect the multifamily sector to be negatively impacted in 2020benefit from rising vacancy rates, as well as from declining or negativean improving economy and subsequent job growth over the coming months, leading to positive rent growth due to the economic dislocation resulting from the COVID-19 outbreak. While we expectand a slightly lower vacancy rates to rise, we believe the increase is likely to be modest as tenants will be less likely to move given the recent declines in employment rates, the stay-at-home orders currently in place across the country, and the eviction moratoriums in place in many localities.rate by year end.
Multifamily Business Metrics
Through the secondary mortgage market, we support rental housing for the workforce population, for senior citizens and students, and for families with the greatest economic need. Over 90% of the multifamily units we financed in the first quarter of 20202021 were affordable to families earning at or below 120% of the median income in their area, providing support for both workforce housing and affordable housing.
Multifamily New Business Volume
(Dollars in billions)
fnm-20200331_g18.jpgfnm-20210331_g15.jpg
(1)Reflects unpaid principal balance of multifamily Fannie Mae MBS issued, multifamily loans purchased, and credit enhancements provided on multifamily mortgage assets during the period.
FHFA’s 2020 conservatorship scorecard includes an objective to maintainFHFA established a 2021 multifamily volume cap of $70 billion in new business volume over the dollar volume of new multifamily business at or below $100 billion for the five-quarterfour-quarter period from OctoberJanuary 1, 20192021 through December 31, 2020. In addition,2021. FHFA directedalso announced the requirement that at least 37.5%50% of our 2021 multifamily business volume must be mission-driven, focused on certain affordable and underserved market segments, which consists of loans on properties affordable for residents who earn 80% of area median income or below, with special provisions for rural housing and for manufactured housing communities. Furthermore, FHFA’s 2021 multifamily volume cap requires that a minimum of 20% of our multifamily business during that time periodvolume in 2021 must be affordable to residents at 60% of area median income or below. Multifamily business that meets the minimum 20% requirement also counts as meeting the minimum 50% requirement.
The January 2021 amendment to the senior preferred stock purchase agreement contains certain restrictions on Fannie Mae’s business activities, including our multifamily business volume. We may not acquire more than $80 billion in multifamily mortgage assets in any 52-week period. FHFA will adjust the dollar amount of this limitation up or down at the end of each calendar year based on changes in the consumer price index. Additionally, at least 50% of our multifamily acquisitions in any calendar year must, at the time of acquisition, be classified as mission-driven, affordable housing, pursuant to FHFA’s guidelines for mission-driven loans. Ourconsistent with FHFA guidelines. We understand that the $70 billion multifamily new business volume was $18.1 billion forcap and related requirements established by FHFA in the fourth quarter of 20192020 remain in effect for calendar year 2021, and $14.1that the $80 billion forlimit established under the first quarter ofsenior preferred stock purchase agreement operates as an independent limit on our multifamily business volume. We continue to discuss certain interpretive questions about the new covenants with FHFA and to assess their operational and business impacts. For information on how conservatorship may affect our business activities, see “Risk Factors” in our 2020 leaving $67.8 billion of capacity remaining under our current multifamily volume cap for the remainder of 2020.Form 10-K.
Fannie Mae First Quarter 2021 Form 10-Q48
MD&A | Multifamily Business | Multifamily Business Metrics
Presentation of Our Multifamily Guaranty Book of Business
For purposes of the information reported in this “Multifamily Business” section, we measure our multifamily guaranty book of business using the unpaid principal balance of mortgage loans underlying Fannie Mae MBS. By contrast, the multifamily guaranty book of business presented in the “Composition of Fannie Mae Guaranty Book of Business” table in the “Guaranty Book of Business” section is based on the unpaid principal balance of Fannie Mae MBS outstanding, rather than the unpaid principal balance of the underlying mortgage loans. These amounts differ primarily as a result of payments we receive on underlying loans that have not yet been remitted to the MBS holders. As measured for purposes of the information reported below, the following chart displays our multifamily guaranty book of business.
Fannie Mae First Quarter 2020 Form 10-Q42
MD&A | Multifamily Business
Multifamily Guaranty Book of Business
(Dollars in billions)
fnm-20200331_g19.jpgfnm-20210331_g16.jpg
Unpaid principal balance of multifamily guaranty book of business(1)(1)
Average charged guaranty fee rate on multifamily guaranty book of business (in basis points), at end of period
(1)Our multifamily guaranty book of business primarily consists of multifamily mortgage loans underlying Fannie Mae MBS outstanding, multifamily mortgage loans of Fannie Mae held in our retained mortgage portfolio, and other credit enhancements that we provide on multifamily mortgage assets. It does not include non-Fannie Mae multifamily mortgage-related securities held in our retained mortgage portfolio for which we do not provide a guaranty.
Our average charged guaranty fee rate has trended downward from 2019 to 2020, driven by competitive market pressure on guaranty fees charged on newly acquired multifamily loans. Average charged guaranty fee represents our effective revenue rate relative to the size of our multifamily guaranty book of business. Management uses this metric to assess the reasonableness of our annualreturn we earn as compensation rate for the multifamily credit risk we manage.
Multifamily Business Financial Results(1)
For the Three Months Ended March 31,
20202019Variance
(Dollars in millions)
Net interest income$806  $757  $49  
Fee and other income156  28  128  
Net revenues962  785  177  
Fair value gains, net184  56  128  
Administrative expenses(120) (113) (7) 
Credit-related expense(2)
(413) (8) (405) 
Credit enhancement expense(19) (4) (15) 
Other income (expenses), net(3)
(102) 2  (104) 
Income before federal income taxes492  718  (226) 
Provision for federal income taxes(99) (143) 44  
Net income$393  $575  $(182) 
(1)See “Note 1, Summary Average charged guaranty fee increased in the first quarter of Significant Accounting Policies” for more information about2021 compared with the change in presentationfirst quarter of 2020 due to increased pricing on new multifamily business. While our yield maintenance fees. Prior period amounts have been adjusted to reflectmultifamily guaranty fee pricing is primarily based on the current year change in presentation.
(2)Consistsindividual credit risk characteristics of the benefit or provision for credit lossesloans we acquire, it is also influenced by market forces such as the availability of other sources of liquidity, our mission-related goals, the FHFA volume cap and foreclosed property income or expense. The presentationthe management of our credit-related expense for the three months ended March 31, 2019 represents amounts recognized prior to our transition to the lifetime loss model prescribed by the CECL standard.
(3)Consists of investment gains or losses, gains or losses from partnership investments, and other income or expenses.overall portfolio composition.
Fannie Mae First Quarter 20202021 Form 10-Q4349
MD&A | Multifamily Business | Multifamily Business Financial Results
Multifamily Business Financial Results(1)
For the Three Months Ended March 31,
20212020Variance
(Dollars in millions)
Net interest income$848 $806 $42 
Fee and other income25 26 (1)
Net revenues873 832 41 
Fair value gains, net44 184 (140)
Administrative expenses(125)(120)(5)
Credit-related income (expense)(2)
91 (413)504 
Credit enhancement expense(58)(60)2 
Change in expected credit enhancement recoveries(3)
(15)130 (145)
Other expense, net(4)
(51)(61)10 
Income before federal income taxes759 492 267 
Provision for federal income taxes(160)(99)(61)
Net income$599 $393 $206 
(1)See “Note 9, Segment Reporting” for information about our segment allocation methodology.
(2)Consists of the benefit or provision for credit losses and foreclosed property income or expense.
(3)Consists of change in benefits recognized from our freestanding credit enhancements that primarily relates to our Delegated Underwriting and Servicing (“DUS®”) lender risk-sharing.
(4)Consists of investment gains or losses, gains or losses from partnership investments, debt extinguishment gains or loss, and other income or expenses.
Net Interest Income
Multifamily netNet interest income is primarily driven by guaranty fee income. Guaranty fee income increased in the first quarter of 2020 as2021 compared with the first quarter of 2019 as a result of growth2020 due to higher guaranty fee income due to an increase in the size of our multifamily guaranty book of business partially offset by a decreaseand an increase in average charged guaranty fees, on the multifamily guaranty book.partially offset by lower yield maintenance fees.
Fee and OtherCredit-Related Income (Expense)
Fee and otherCredit-related income increased infor the first quarter of 2020 as compared with the first quarter of 2019, primarily as a result of an increase in our credit enhancement benefits from our multifamily DUS loss-sharing arrangements, which were driven by an increase in our estimated credit losses due to the COVID-19 outbreak. Prior to the adoption of the CECL standard in January 2020, the mitigating impact of our DUS loss-sharing arrangements2021 was a component of credit-related expense.
Fair Value Gains, Net
Depending on portfolio activity, our multifamily mortgage commitment derivatives may be in a net-buy or net-sell position during any given period. Fair value gains in the first quarter of 2020 and the first quarter of 2019 were primarily driven by gains on commitments to buy multifamily mortgage-related securities as a result of increases in prices as interest rates declined duringbenefit from actual and projected economic data and lower expected losses resulting from the commitment periods.
Credit-Related ExpenseCOVID-19 pandemic.
Credit-related expense for the first quarter of 2020 was primarily driven by an increase in our allowance for loan losses due to losses we expectexpected to incur as a result of the COVID-19 outbreak using an expected lifetime loss methodology consistent with our implementation of the CECL standard.pandemic.
See “Consolidated Results of Operations—Credit-Related Income (Expense)” in this report for more information on our multifamily provisionbenefit (provision) for credit losses.
Change in Expected Credit Enhancement Recoveries
Expected credit enhancement recoveries, which are impacted by changes in our allowance, decreased in the first quarter of 2021 compared with the first quarter of 2020 primarily due to lower expected losses.
Multifamily Mortgage Credit Risk Management
This section updates our discussion of multifamily mortgage credit risk management in our 20192020 Form 10-K in “MD&A—Multifamily Business—Multifamily Mortgage Credit Risk Management.” For an overview of key elements of our mortgage credit risk management, see "Business—Managing Mortgage Credit Risk" in our 2020 Form 10-K.
Multifamily Acquisition Policy and Underwriting Standards
Our standards for multifamily loans specify maximum original LTV ratio and minimum original debt service coverage ratio (“DSCR”) values that vary based on loan characteristics. Our experience has been that original LTV ratio and DSCR values have been reliable indicators of future credit performance. At underwriting, we evaluate the DSCR based on both actual and underwritten debt service payments. The original DSCR is calculated using the underwritten debt service payments for the loan, which assumes both principal and interest payments, rather than the actual debt service
Fannie Mae First Quarter 2021 Form 10-Q50
MD&A | Multifamily Business | Multifamily Mortgage Credit Risk Management
payments. Depending on the loan’s interest rate and structure, using the underwritten debt service payments may result in a more conservative estimate of the debt service payments (for example, loans with an interest-only period). This approach is used for all loans, including those with full and partial interest-only terms.
To address possible fluctuations in borrower income and expenses resulting from the COVID-19 outbreak,pandemic, we may instituteinstituted additional reserve requirements in 2020 for certain new multifamily loan acquisitions depending on the product type, as well as LTV ratiosratio and DSCRs.DSCR.
Key Risk Characteristics of Multifamily Guaranty Book of BusinessKey Risk Characteristics of Multifamily Guaranty Book of BusinessKey Risk Characteristics of Multifamily Guaranty Book of Business
As ofAs of
March 31, 2020December 31, 2019March 31, 2019March 31, 2021December 31, 2020March 31, 2020
Weighted average original LTV ratioWeighted average original LTV ratio66  %  66  %  66  %  Weighted average original LTV ratio66 %66 %66 %
Original LTV ratio greater than 80%Original LTV ratio greater than 80%1  1  1  Original LTV ratio greater than 80%1 1 1 
Original DSCR less than or equal to 1.10Original DSCR less than or equal to 1.1011  11  12  Original DSCR less than or equal to 1.1010 10 11 
Full interest-only loans27  27  25  
Partial interest-only loans(1)
51  51  49  
Full term interest-only loansFull term interest-only loans31 30 27 
Partial term interest-only loans(1)
Partial term interest-only loans(1)
52 51 51 
(1)Consists of mortgage loans that were underwritten with an interest-only term, regardless of whether the loan is currently in its interest-only period.
We provide additional information on the credit characteristics of our multifamily loans in quarterly financial supplements, which we furnish to the SEC with current reports on Form 8-K. Information in our quarterly financial supplements is not incorporated by reference into this report.
Fannie Mae First Quarter 2020 Form 10-Q44
MD&A | Multifamily Business
Transfer of Multifamily Mortgage Credit Risk
Lender risk-sharing is a cornerstone of our Multifamily business. We primarily transfer risk through our DUS program, which delegates to DUS lenders the ability to underwrite and service multifamily loans, in accordance with our standards and requirements. DUS lenders receive credit risk-related revenues for their respective portion of credit risk retained, and, in turn, are required to fulfill any loss sharingloss-sharing obligation. This aligns the interests of the lender and Fannie Mae throughout the life of the loan. We monitor the capital resources and loss sharing capacity of our DUS lenders on an ongoing basis.
Our DUS model typically results in our lenders sharing on a pro-rata or tiered basis approximately one-third of the credit risk on our multifamily loans. As of March 31, 2020 and December 31, 2019, 98%Lenders in the DUS program may also share in loan-level credit losses up to the first 5% of the unpaid principal balance inof the loan and then share with us any remaining losses up to a prescribed limit. Loans serviced by DUS lenders and their affiliates represented substantially all of our multifamily guaranty book of business had front-endas of March 31, 2021 and December 31, 2020. In certain situations, to effectively manage our counterparty risk, we do not allow the lender risk-sharing.to fully share in one-third of the credit risk, but have them share in a smaller portion.
While not a large portion of our multifamily guaranty book of business, our non-DUS lenders typically also have lender risk-sharing, where the lenders typically share or absorb losses based on a negotiated percentage of the loan or the pool balance.
To complement our front-end lender risk-sharing,lender-risk sharing program, we also engagehave engaged in back-end credit risk transfer transactions through our multifamilyMultifamily CIRT (“MCIRT”MCIRTTM”) and Multifamily Connecticut Avenue Securities™CAS (“MCAS”MCASTM”) transactions. Through these transactions, we transferhave transferred a portion of credit risk associated with Fannie Mae losses on a reference pool of multifamily mortgage loans.
While weOur back-end multifamily credit-risk sharing transactions were ableprimarily designed to enterfurther reduce the capital requirements associated with loans in the reference pool with the associated benefit of additional credit risk protection in the event of a stress environment. We have transferred multifamily credit risk through lender risk-sharing at the time of acquisition, but our multifamily back-end credit risk transfer activity has occurred later, typically up to a year or more after acquisition.
We have not entered into both an MCIRT and MCAS transaction inany new credit risk transfer transactions since the first quarter of 2020 due toas we evaluate their costs and benefits, including a reduction in the COVID-19 outbreak wecapital relief these transactions provide under FHFA’s enterprise regulatory capital framework. We may not be able to enter into additional transactions until market conditions improve. See “Risk Factors”engage in this report for additional information on the risks associated with the current limitations on our ability to enter into credit risk transfer transactions. We expecttransactions in the future, which could help us manage capital and manage within our risk appetite. The structure of and extent to continue entering into front-end lender risk-sharing arrangements, primarily throughwhich we engage in any additional credit risk transfer transactions will be affected by the enterprise regulatory capital framework, our DUS program.risk appetite, the strength of future market conditions, including the cost of these transactions, and the review of our overall business and capital plan.
Fannie Mae First Quarter 2021 Form 10-Q51
MD&A | Multifamily Business | Multifamily Mortgage Credit Risk Management
The table below displays the number of transactions and unpaid principal balance of multifamily mortgage loans covered by a back-end credit risk transfer transaction at the time of issuance. The table also includes the total unpaid principal balance of multifamily loans and the percentage of our multifamily guaranty book of business, based on unpaid principal balance, that are covered by a back-end credit risk transfer transaction. The table does not reflect front-end lender risk-sharing arrangements, as only a small portion of our multifamily guaranty book of business does not include these arrangements.
Multifamily Loans in Back-End Credit Risk Transfer Transactions
Year-to-date 2020Since Inception
Number of Back-End Credit Risk Transfer TransactionsUnpaid Principal Balance Covered at IssuanceNumber of Back-End Credit Risk Transfer TransactionsUnpaid Principal Balance Covered at issuance
(Dollars in millions)
MCIRT1  $8,720  8  $80,617  
MCAS1  12,212  2  29,293  
Total2  $20,932  10  $109,910  
As of
March 31, 2020December 31, 2019
Unpaid Principal BalancePercentage of Multifamily Guaranty Book of BusinessUnpaid Principal BalancePercentage of Multifamily Guaranty Book of Business
(Dollars in millions)
MCIRT$74,802  22 %$66,851  20 %
MCAS29,227  8  17,077  5  
Total unpaid principal balance of multifamily loans in back-end credit risk transfer transactions$104,029  30 %$83,928  25 %
For more information on our multifamily credit-risk sharing transactions and their impact on our conservatorship capital requirements, see “MD&A—Multifamily Business—Multifamily Mortgage Credit Risk Management” in our 2019 Form 10-K.
Multifamily Loans in Back-End Credit Risk Transfer Transactions
As of
March 31, 2021December 31, 2020
Unpaid Principal BalancePercentage of Multifamily Guaranty Book of BusinessUnpaid Principal BalancePercentage of Multifamily Guaranty Book of Business
(Dollars in millions)
MCIRT$71,302 18 %$72,166 19 %
MCAS28,711 7 28,968 7 
Total$100,013 25 %$101,134 26 %
Multifamily Portfolio Diversification and Monitoring
Diversification within our multifamily book of business by geographic concentration, term to maturity, interest rateinterest-rate structure, borrower concentration, loan size and credit enhancement coverage are important factors that influence credit performance and help reduce our credit risk.
As part of our ongoing credit risk management process, we and our lenders monitor the performance and risk characteristics of our multifamily loans and the underlying properties on an ongoing basis throughout the loan term at the asset and portfolio level. We require lenders to provide quarterly and annual financial updates for the loans for which we are contractually entitled to receive such information. We closely monitor loans with an estimated current DSCR below 1.0, as that is an indicator of
Fannie Mae First Quarter 2020 Form 10-Q45
MD&A | Multifamily Business
heightened default risk. The percentage of loans in our multifamily guaranty book of business, calculated based on unpaid principal balance, with a current DSCR less than 1.0 was approximately 2% as of March 31, 2020,2021 and December 31, 2019.2020. Our estimates of current DSCRs are based on the latest available income information for these properties and exclude co-op loans. Although we use the most recently available results from our multifamily borrowers, there is a lag in reporting, which typically can range from three to six months, but in some cases may be longer. Accordingly, the financial information we have received from borrowers may not reflect the most recent impacts of the COVID-19 pandemic.
In addition to the factors discussed above, we track the following credit risk characteristics to determine loan credit quality indicators, which are the internal risk categories we use and which are further discussed in “Note 3, Mortgage Loans:”Loans”:
•the physical condition of the property;
•delinquency status;
•the relevant local market and economic conditions that may signal changing risk or return profiles; and
•other risk factors.
For example, we closely monitor the rental payment trends and vacancy levels in local markets, as well as capitalization rates, to identify loans that merit closer attention or loss mitigation actions. We manage our exposure to refinancing risk for multifamily loans maturing in the next several years. We have a team that proactively manages upcoming loan maturities to minimize losses on maturing loans. This team assists lenders and borrowers with timely and appropriate refinancing of maturing loans with the goal of reducing defaults and foreclosures related to these loans. The primary asset management responsibilities for our multifamily loans are performed by our DUS and other multifamily lenders. We periodically evaluate these lenders’ performance for compliance with our asset management criteria.
Fannie Mae First Quarter 2021 Form 10-Q52
MD&A | Multifamily Business | Multifamily Mortgage Credit Risk Management
Multifamily Problem Loan Management and Foreclosure Prevention
In addition to the credit performance information on our multifamily loans provided below, we provide information about multifamily loans in a COVID-19-related forbearance that back MBS and whole loan REMICs in a “Multifamily MBS COVID-19 Forbearance and Eviction Moratorium
We have delegated toList” in the “Data Collections” section of our lenders the authority to execute a forbearance agreement with a multifamily borrower experiencing a documented financial hardship due to the COVID-19 outbreak for up to 3 monthly payments beginning with the first missed monthly payment occurring after February 1, 2020. Lenders may grant forbearances for any one or more monthly payments, but are only delegated to do so for up to 3 months. The borrowerDUS Disclose® tool, available at www.fanniemae.com/dusdisclose. Information on our website is required to bring the mortgage loan current within 12 months after the end of the forbearance period. The borrower is also required to suspend all tenant evictions for nonpayment of rent for any reason until the later of July 25, 2020 (120 days after the enactment of the CARES Act) or the months of actual payment forbearance, or as required by local law.not incorporated into this report.
Delinquency Statistics on our Problem Loans
The percentage of our multifamily loans categorizedclassified as substandard based on the characteristics mentioned above remained at historically low levelsin our guaranty book of business increased as of March 31, 2020 and2021 compared with December 31, 2019.2020, due to the continued impact of COVID-19. Substandard loans are loans that have a well-defined weakness that could impact thetheir timely full repayment. WhileWhile the vast majority of the substandard loans in our multifamily guaranty book of business are currently making timely payments or are in forbearance, we continue to monitor the performance of the full substandard loan population. For more information on our credit quality indicators, including our population of substandard loans, see “Note 3, Mortgage Loans.”
TheOur multifamily serious delinquency rate wasdecreased to 0.66% as of March 31, 2021 compared with 0.98% as of December 31, 2020, primarily driven by loans that received forbearance that are now in a forbearance repayment plan or have been modified or otherwise reinstated. This rate increased from 0.05% as of March 31, 2020 compared with 0.04% asdue to the economic dislocation caused by the COVID-19 pandemic, which increased borrower participation in forbearance plans since the start of December 31, 2019 and 0.07% as of March 31, 2019.the pandemic. Our multifamily seriously delinquentserious delinquency rate consists of multifamily loans that were 60 days or more past due based on unpaid principal balance, expressed as a percentage of our multifamily guaranty book of business.
We expect our population of substandard loans and our Our multifamily serious delinquency rate includes 0.32% and 0.50% of multifamily loans that were 180 days or more past due as of March 31, 2021 and December 31, 2020, respectively. Management monitors the multifamily serious delinquency rate as an indicator of potential future credit losses and loss mitigation activities. Serious delinquency rates are reflective of our performance in assessing and managing credit risk associated with multifamily loans in our guaranty book of business. Typically, higher serious delinquency rates result in a higher allowance for loan losses.
Our multifamily serious delinquency rate, excluding loans that received a forbearance, was 0.03% as of March 31, 2021 and December 31, 2020. We monitor this rate to increase duebetter understand the impact that forbearance activity has had on multifamily serious delinquency and the performance of loans that are seriously delinquent not as a result of COVID-19.
COVID-19 Forbearance and Multifamily Eviction Moratorium
In response to the COVID-19 outbreakpandemic and its impact, we have broadly offered forbearance to affected multifamily borrowers, as we describe in “MD&A—Multifamily Business—Multifamily Credit Risk Management—Multifamily Problem Loan Management and Foreclosure Prevention” in our 2020 Form 10-K.” Since 2020, we have delegated to our lenders the majority ofability to provide forbearance for up to six monthly payments for most loan types through June 30, 2021. For any forbearance request extending beyond six months, we do not delegate the decision and we will determine whether to extend relief based on the borrower’s circumstances. For delegated forbearances, borrowers are required to bring their loans on forbearance will be considered substandard and seriously delinquent.
REO Management
Thecurrent within a time period determined by multiplying the number of months of forbearance by four. For example, a three-month forbearance would translate into a twelve-month repayment period. In exchange for receiving forbearance, borrowers must agree to suspend tenant evictions for nonpayment of rent, provide monthly operating statements and remit any excess cash flow to our servicers on a monthly basis, to be held until the end of the forbearance period and then applied to missed mortgage payments.
In March 2021, the CDC extended its moratorium on evictions through June 30, 2021, as described in “Legislation and Regulation” in this report and in “Business—Legislation and Regulation—U.S. Government Response to COVID-19” in our 2020 Form 10-K.
Multifamily Loan Forbearance
We estimate that 1.6% of our multifamily foreclosed properties held for sale was 12 properties with a carrying valuebook of $84 millionbusiness as of March 31, 2020, compared with 12 properties withbased on unpaid principal balance, has been in a carrying valueCOVID-19-related forbearance at some point in time through March 31, 2021. As shown in the table below, some of $72 million as of December 31, 2019.these loans have exited forbearance into a repayment plan, have reinstated, have defaulted, or have since liquidated.
Fannie Mae First Quarter 20202021 Form 10-Q4653
MD&A | Multifamily Business | Multifamily Mortgage Credit Risk Management
The table below displays the status as of March 31, 2021 of the multifamily loans in our guaranty book of business that have received a forbearance since the start of the pandemic, as well as the serious delinquency rate of such loans. As of March 31, 2021, nearly all of our multifamily loans in forbearance were associated with a COVID-19-related financial hardship. Seniors housing loans, which constituted 4.3% of our multifamily guaranty book of business as of March 31, 2021, comprised approximately 40% of the total unpaid principal balance of multifamily loans that received a forbearance and remained in our multifamily guaranty book as of March 31, 2021. Of those multifamily senior housing loans that received a forbearance as of the end of the period, based on unpaid principal balance, 56% were in a repayment plan, 33% were reinstated, 8% have defaulted on their forbearance arrangement and the remaining 3% were in active forbearance.
Status and SDQ Rate of Multifamily Forbearance Loans Outstanding(1)
As of March 31, 2021
Number of LoansUnpaid Principal BalancePercentage of Unpaid Principal Balance in Book of BusinessPercentage of Unpaid Principal Balance with Forbearance by CategoryPercentage of Loans on Accrual StatusSerious Delinquency Rate
(Dollars in millions)
Loans that received a forbearance, by status:
Active forbearance(2)
64 $917 0.2 %18 %31 %99 %
Repayment plan188 2,736 0.7 53 80 48 
Reinstated(3)
65 1,168 0.3 23 52 — 
Defaulted(4)
40 325 0.1 6 — 96 
Total loans that received a forbearance357 5,146 1.3 100 %61 49 
Loans that have not received a forbearance29,127 393,947 98.7 — 100 0.03 
Total multifamily guaranty book of business29,484 $399,093 100 %1.3 %99 %0.66 %
As of December 31, 2020
Number of LoansUnpaid Principal BalancePercentage of Unpaid Principal Balance in Book of BusinessPercentage of Unpaid Principal Balance with Forbearance by CategoryPercentage of Loans on Accrual StatusSerious Delinquency Rate
(Dollars in millions)
Loans that received a forbearance, by status:
Active forbearance(2)
88$1,689 0.4 %32 %32 %100 %
Repayment plan1832,707 0.8 52 82 61 
Reinstated(3)
56491 0.1 10 100 — 
Defaulted(4)
33 325 0.1 6 — 100 
Total loans that received a forbearance360 5,212 1.4 100 %63 71 
Loans that have not received a forbearance28,285 379,335 98.6 — 100 0.03 
Total multifamily guaranty book of business28,645 $384,547 100 %1.4 %99 %0.98 %
(1)Excludes $275 million as of March 31, 2021 and $123 million as of December 31, 2020 in multifamily loans that received a forbearance, but liquidated prior to period end.
(2)Includes loans that are in the process of extending their forbearance.
Fannie Mae First Quarter 2021 Form 10-Q54
MD&A | Multifamily Business | Multifamily Mortgage Credit Risk Management

(3)Represents loans that are no longer in forbearance but are current according to the original terms of the loan or have been modified and are performing under the modification.
(4)Includes loans that are no longer in forbearance and are not on a repayment plan. Loans in this population may proceed to other loss mitigation activities, such as foreclosure or modification. As of March 31, 2021, the serious delinquency rate was less than 100% due to one loan having made a recent payment.
Under our nonaccrual accounting policy for loans negatively impacted by the COVID-19 pandemic, we continue to accrue interest income for up to six months provided that the loans were current as of March 1, 2020. Multifamily loans that are in a forbearance plan beyond six months past due are placed on nonaccrual status unless the loan is both well secured and in the process of collection. See Note 1, Summary of Significant Accounting Policies” in our 2020 Form 10-K and “Note 3, Mortgage Loans” in this report for additional information about our nonaccrual accounting policy.
For multifamily loans that received forbearance and were in our book of business as of March 31, 2021, we have recorded a total accrued interest receivable balance of $66 million, for which we have established a valuation allowance of $7 million.
REO Management
The number of multifamily foreclosed properties held for sale was 19 properties with a carrying value of $189 million as of March 31, 2021, compared with 14 properties with a carrying value of $114 million as of December 31, 2020. The increase was primarily driven by a seniors housing portfolio that defaulted on its forbearance arrangement.
We expect a continued increase in our multifamily foreclosed properties due to loans that received a COVID-19 forbearance but are unable to successfully cure their delinquency through a repayment plan or other modification.
Other Multifamily Credit Information
Multifamily Credit Loss Performance Metrics
The amount of multifamily credit loss or income we realize in a given period is driven by foreclosures, pre-foreclosure sales, REO activity and write-offs, net of recoveries. Our multifamily credit loss performance metrics are not defined terms within GAAP and may not be calculated in the same manner as similarly titled measures reported by other companies. We believe our multifamily credit losses and our multifamily credit losses, net of freestanding loss-sharing benefit, may be useful to stakeholders because they display our credit losses in the context of our multifamily guaranty book of business, including the benefit we receive from loss-sharing arrangements. Management views multifamily credit losses, net of freestanding loss-sharing benefit as a key metric related to our multifamily business model and our strategy to share multifamily credit risk.
The table below displays the components of our multifamily credit loss performance metrics, as well as our multifamily initial write-off severity rate. Our multifamily guaranty book
Multifamily Credit Loss Performance Metrics
For the Three Months Ended March 31,
20212020
(Dollars in millions)
Write-offs(1)
$(34)$(20)
Recoveries(2)
1 1 
Foreclosed property expense(12)(2)
Credit losses(45)(21)
Freestanding loss-sharing benefit(3)
15 3 
Credit losses, net of freestanding loss-sharing benefit$(30)$(18)
Credit loss ratio (in bps)(4)
4.6 2.5 
Credit loss ratio, net of freestanding loss-sharing benefit (in bps)(3)(4)
3.1 2.1 
Multifamily initial write-off severity rate(5)
13.8 %23.3 %
Multifamily loan write-off count9 3 
(1)Includes loan write-offs pursuant to the Advisory Bulletin. Write-offs associated with non-REO sales are net of business has experienced very low levelsloss sharing.
(2)Excludes a decrease of write-offs$13 million and an increase of $2 million in estimated recoveries for the past several years, which in some periods has resulted infirst quarter of 2021 and 2020, respectively, relating to amounts previously written off pursuant to the Advisory Bulletin. Under the CECL standard we adopted on January 1, 2020, estimated recoveries of amounts previously written off due to improved valuations are recorded as a component of “Benefit (provision) for credit income rather than losses, and drives variabilitylosses” in our write-off severity rate.condensed consolidated statements of operations and comprehensive income and are adjusted over
Multifamily Credit Loss Performance Metrics
For the Three Months Ended March 31,
20202019
(Dollars in millions)
Write-offs$(20) $—  
Recoveries1  —  
Foreclosed property income (expense)(2) 3  
Credit income (losses)(1)
(21) 3  
Freestanding loss-sharing benefit(2)
3  N/A  
Credit income (losses) net of freestanding loss-sharing benefit$(18) $3  
Credit (income) loss ratio(1)(3) (in bps)
2.5  (0.4) 
Credit (income) loss ratio, net of freestanding loss-sharing benefit(2)(3) (in bps)
2.1  N/A  
Multifamily initial write-off severity rate(4)
23.3  %—  %
Multifamily loan write-off count3  —  
(1)
Fannie Mae First Quarter 2021 Form 10-Q55
MD&A | Multifamily Business | Multifamily Mortgage Credit Risk Management
time as expectations change. The changes in expected loss-sharing benefit associated with these recoveries are included in “Freestanding loss-sharing benefit.”
Credit income is the(3)Represents expected benefits that we receive upon foreclosure as a result of net gains on the sale of foreclosed properties.
(2)Includes expected benefit ofcertain freestanding credit enhancements, primarily multifamily DUS lender-risk sharinglender risk-sharing transactions, whichas well as the expected loss-sharing benefit from write-offs pursuant to the Advisory Bulletin. These benefits are recorded in “Fee and other income”“Change in our condensed consolidated statements of operations. Prior to the adoption of the CECL standard, benefits from lender risk-sharing transactions were included in the benefit (provision) forexpected credit lossesenhancement recoveries” in our condensed consolidated statements of operations and comprehensive income.
(3)(4)Calculated based on the annualized amount of credit income (losses),“Credit losses” and credit“Credit losses, net of freestanding loss-sharing benefit,” divided by the average multifamily guaranty book of business during the period.
(4)(5)Rate is calculated as the initial write-off amount divided by the average defaulted unpaid principal balance. The rate includesexcludes write-offs pursuant to the provisions of the Advisory Bulletin and excludes any costs, gains or losses associated with REO after initial acquisition through final disposition. Write-offs are net of lender loss sharingloss-sharing agreements. Recoveries primarily include amounts accrued while the loans were performing and cash payments received on nonaccrual loans.
We do not expectAlthough we saw a significant increase in our multifamilysmall amount of credit losses in the next six months as a result of the COVID-19 outbreak duepandemic in the first quarter of 2021 and our expectation for losses related to the forbearancepandemic has improved, we are currently offering described above; however, the COVID-19 outbreak will likely result in higherexpect our realized multifamily credit losses will be higher over the longer term.long term as loans that have been materially impacted by COVID-19 are ultimately unable to reperform. See “Risk Factors” in our 2020 Form 10-K for additional information.information on the potential credit risk impact of the COVID-19 pandemic.
Multifamily Loss Reserves
Our multifamily loss reserves, which include our allowance for loan losses and the related accrued interest receivable, and our reserve for guaranty losses, provide for an estimate of credit losses in our multifamily guaranty book of business. For periods beginning January 1, 2020, our measurement of loss reserves reflects a lifetime credit loss methodology pursuant to our adoption of the CECL standard and requires consideration of a broader range of reasonable and supportable forecast information to develop credit loss estimates. For the prior period, multifamily loss reserves were measured using an incurred loss methodology. For further details on our previous multifamily loss reserves methodology, refer to “Note 1, Summary of Significant Accounting Policies” in our 2019 Form 10-K.
Fannie Mae First Quarter 2020 Form 10-Q47
MD&A | Multifamily Business

The table below summarizes the changes in our multifamily loss reserves, excluding credit losses on our AFS securities. For a discussion of changes in our multifamily benefit or provision for credit losses, see “Consolidated Results of Operations—Credit-Related Income (Expense).”
Multifamily Loss ReservesMultifamily Loss ReservesMultifamily Loss Reserves
For the Three Months Ended March 31,For the Three Months Ended March 31,
2020201920212020
(Dollars in millions)
Changes in loss reserves:Changes in loss reserves:Changes in loss reserves:
Beginning balanceBeginning balance$(268) $(245) Beginning balance$(1,225)$(268)
Transition impact from the adoption of the CECL standard(1)
(490) —  
Provision for credit losses(410) (11) 
Transition impact of the adoption of the CECL standard(1)
Transition impact of the adoption of the CECL standard(1)
— (490)
Benefit (provision) for credit lossesBenefit (provision) for credit losses103 (410)
Write-offsWrite-offs20  —  Write-offs34 20 
RecoveriesRecoveries(1) —  Recoveries(1)(1)
Ending balanceEnding balance$(1,149) $(256) Ending balance$(1,089)$(1,149)
Expected benefit of freestanding credit enhancements on multifamily loans not netted against loss reserves as of the end of the period(2)
Expected benefit of freestanding credit enhancements on multifamily loans not netted against loss reserves as of the end of the period(2)
$347  N/A
Expected benefit of freestanding credit enhancements on multifamily loans not netted against loss reserves as of the end of the period(2)
$336 $347 
As ofAs of
March 31, 2020December 31, 2019March 31, 2021December 31, 2020
Loss reserves as a percentage of multifamily guaranty book of businessLoss reserves as a percentage of multifamily guaranty book of business0.33 %0.08 %Loss reserves as a percentage of multifamily guaranty book of business0.27 %0.32 %
(1)Includes the transition impact of $221 million for the reclassification of freestanding credit enhancements, such as DUS lender risk-sharing, to “Other assets” from “Allowance for loan losses” on our condensed consolidated balance sheets.
(2)Prior to our adoption of the CECL standard, benefits for freestanding credit enhancements were netted against our multifamily loss reserves, which for March 31, 2019 was $100 million. As of January 1, 2020 these credit enhancements are recorded in “Other assets” in our condensed consolidated balance sheets.sheets on January 1, 2020.
Troubled Debt Restructurings and Nonaccrual Loans
We continue to account for eligible COVID-19-related loss mitigation activities as permitted under the CARES Act and the Consolidated Appropriations Act of 2021, which provide relief from TDR accounting and disclosure requirements for our forbearance plans and loan modifications. See “Note 1, Summary of Significant Accounting Policies” in our 2020 Form 10-K for more information on the relief from TDR accounting and disclosure requirements.
Fannie Mae First Quarter 2021 Form 10-Q56
MD&A | Multifamily Business | Multifamily Mortgage Credit Risk Management
The table below displays the multifamily loans classified as TDRs that were on accrual status and multifamily loans on nonaccrual status. The table includes our amortized cost in HFI multifamily mortgage loans, as well as interest income forgone and recognized for on-balance sheet TDRs on accrual status and nonaccrual loans. For more information on our accounting policies forTDRs and nonaccrual loans and TDRs, as well as accounting relief for certain eligible TDRs pursuant to the CARES Act, see “Note 1, Summary of Significant Accounting Policies.3, Mortgage Loans.”
Multifamily TDRs on Accrual Status and Nonaccrual LoansMultifamily TDRs on Accrual Status and Nonaccrual LoansMultifamily TDRs on Accrual Status and Nonaccrual Loans
As ofAs of
March 31, 2020December 31, 2019March 31, 2021December 31, 2020
(Dollars in millions)(Dollars in millions)
TDRs on accrual statusTDRs on accrual status$58  $66  TDRs on accrual status$32 $29 
Nonaccrual loans (1)
Nonaccrual loans (1)
95  439  
Nonaccrual loans (1)
2,153 2,073 
Total TDRs on accrual status and nonaccrual loansTotal TDRs on accrual status and nonaccrual loans$153  $505  Total TDRs on accrual status and nonaccrual loans$2,185 $2,102 
Accruing on-balance sheet loans past due 90 days or moreAccruing on-balance sheet loans past due 90 days or more$404 $610 
For the Three Months Ended March 31,
20202019
(Dollars in millions)
Interest related to on-balance sheet TDRs on accrual status and nonaccrual loans:
Interest income forgone(2)
$1  $7  
Interest income recognized(3)
1  —  
(1)As of January 1, 2020, we place a multifamily loan on nonaccrual status when the loan becomes two months or more past due according to its contractual terms unless the loan is well secured such that collectability of principal and accrued interest is reasonably assured. As a result, the population of loans classified as nonaccrual declined as a substantial amount of these loans were current and had been
Fannie Mae First Quarter 2020 Form 10-Q48
MD&A | Multifamily Business
For the Three Months Ended March 31,
20212020
(Dollars in millions)
Interest related to on-balance sheet TDRs on accrual status and nonaccrual loans:
Interest income forgone(1)
$14 $1 
Interest income recognized(2)
9 1 

(1)
previously individually impaired, but were not two months or more past due.
(2)Represents the amount of interest income we did not recognize, but would have recognized during the period for nonaccrual loans and TDRs on accrual status held as of the end of each period had the loans performed according to their original contractual terms.
(3)(2)Represents interest income recognized during the period, including the amortization of any deferred cost basis adjustments, for loans classified as either nonaccrual loans or TDRs on accrual status or nonaccrual loans held as of the end of each period. Primarily includes amounts accrued while the loans were performing. Cash received on nonaccrual loans in a forbearance plan are applied as a reduction of accrued interest receivable until the receivable has been reduced to zero, and then recognized as interest income.
For loans that were negatively impacted by the COVID-19 pandemic, we continue to accrue interest income for up to six months of delinquency provided that the loan was either current as of March 1, 2020 or originated after March, 1 2020 according to our nonaccrual policy. Multifamily loans in a forbearance plan beyond six months past due are placed on nonaccrual status unless the loan is both well secured and in the process of collection. The increase in nonaccrual loans and corresponding decrease in loans on accrual status 90 days or more past due in the first quarter of 2021 were primarily attributed to an increase in loans in forbearance that were beyond six months past due and were not well secured or in the process of collection. For additional information on our accounting policy for nonaccrual loans, see “Note 3, Mortgage Loans.”
Liquidity and Capital Management
Liquidity Management
This section supplements and updates information regarding liquidity management in our 20192020 Form 10-K. See “MD&A—Liquidity and Capital Management—Liquidity Management” in our 20192020 Form 10-K for additional information, including discussions of our primary sources and uses of funds, our liquidity and funding risk management practices and contingency planning, factors that influence our debt funding activity, factors that may impact our access to or the cost of our debt funding and factors that could adversely affect our liquidity and funding. Also see “Risk Factors—Liquidity and Funding Risk” in our 20192020 Form 10-K and “Risk Factors” in this report for a discussion of liquidity and funding risks, including potential impacts of the COVID-19 outbreak.pandemic.
Debt Funding
We are currently subject to a $300 billion debt limit under our senior preferred stock purchase agreement with Treasury, which will decrease to $270 billion as of December 31, 2022. The unpaid principal balance of our aggregate indebtedness was $275.1 billion as of March 31, 2021. Pursuant to the terms of the senior preferred stock purchase agreement, we are prohibited from issuing debt without the prior consent of Treasury if it would result in our aggregate indebtedness exceeding our outstanding debt limit. The calculation of our indebtedness for purposes of complying with our debt limit reflects the unpaid principal balance and excludes debt basis adjustments and debt of consolidated trusts. Due to our debt limit, our business activities may be constrained.
Fannie Mae First Quarter 2021 Form 10-Q57
MD&A | Liquidity and Capital Management

Outstanding Debt
Total outstanding debt of Fannie Mae includes short-term and long-term debt and excludes debt of consolidated trusts. Short-term debt of Fannie Mae consists of borrowings with an original contractual maturity of one year or less and, therefore, does not include the current portion of long-term debt. Long-term debt of Fannie Mae consists of borrowings with an original contractual maturity of greater than one year.
The following chart and table display information on our outstanding short-term and long-term debt based on original contractual maturity. The increaseprimary driver for the decrease in our short-term and long-term debt from December 31, 2020 to March 31, 2021 was decreased funding needs compared with the prior year, in which we had unusually high liquidity demands driven by the pandemic as well as historically high loan acquisition volumes through our whole loan conduit. As a result, we did not issue new debt to replace all of our debt that paid off during the first quarter of 2020 was primarily to support refinancing activity and in anticipation of future potential liquidity needs as a result of market dislocations caused by the COVID-19 outbreak as discussed below.2021.
Debt of Fannie Mae(1)
(Dollars in billions)
fnm-20200331_g20.jpgfnm-20210331_g17.jpg
(1)Outstanding debt balance consists of the unpaid principal balance, premiums and discounts, fair value adjustments, hedge-related basis adjustments and other cost basis adjustments. Reported amounts include net discount unamortized cost basis adjustments and fair value adjustments of $1.6 billion and $393 million as of March 31, 2021 and December 31, 2020, respectively.
Fannie Mae First Quarter 20202021 Form 10-Q4958
MD&A | Liquidity and Capital Management

Selected Debt InformationSelected Debt InformationSelected Debt Information
As ofAs of
March 31, 2020December 31, 2019March 31, 2021December 31, 2020
(Dollars in billions)(Dollars in billions)
Selected Weighted-Average Interest Rates(1)
Selected Weighted-Average Interest Rates(1)
Selected Weighted-Average Interest Rates(1)
Interest rate on short-term debtInterest rate on short-term debt0.71 %1.56 %Interest rate on short-term debt0.06 %0.18 %
Interest rate on long-term debt, including portion maturing within one yearInterest rate on long-term debt, including portion maturing within one year2.43 %2.86 %Interest rate on long-term debt, including portion maturing within one year1.34 1.34 
Interest rate on callable long-term debtInterest rate on callable long-term debt3.55 %3.39 %Interest rate on callable long-term debt1.38 1.40 
Selected Maturity DataSelected Maturity DataSelected Maturity Data
Weighted-average maturity of debt maturing within one year (in days)Weighted-average maturity of debt maturing within one year (in days)162  137  Weighted-average maturity of debt maturing within one year (in days)179 196 
Weighted-average maturity of debt maturing in more than one year (in months)Weighted-average maturity of debt maturing in more than one year (in months)54  66  Weighted-average maturity of debt maturing in more than one year (in months)53 52 
Other DataOther DataOther Data
Outstanding callable long-term debtOutstanding callable long-term debt$31.3  $38.5  Outstanding callable long-term debt$57.4 $57.5 
Connecticut Avenue Securities debt(2)
Connecticut Avenue Securities debt(2)
$19.5  $21.4  
Connecticut Avenue Securities debt(2)
14.5 15.0 
(1)Outstanding debt amounts and weighted-average interest rates reported in this chart and table includeExcludes the effects of discounts, premiums, other cost basis adjustments and fair value gains and losses associated with debt that we elected to carry at fair value. Reported amounts include unamortized cost basis adjustments and fair value adjustments of $647 million and $28 million as of March 31, 2020 and December 31, 2019, respectively.hedge-related basis adjustments.
(2)Represents CAS debt issued prior to November 2018. See “Single-Family Business—Single-Family Mortgage Credit Risk Management—Single-Family Credit Enhancement and Transfer of Mortgage Credit Risk—Credit Risk Transfer Transactions” in our 20192020 Form 10-K and in this report for information regarding our Connecticut Avenue Securities.
We intend to repay our short-term and long-term debt obligations as they become due primarily through proceeds from the issuance of additional debt securities and cash from business operations.
For information on the maturity profile of our outstanding long-term debt, see “Note 7, Short-Term and Long-Term Debt.”
Fannie Mae First Quarter 2021 Form 10-Q59
MD&A | Liquidity and Capital Management

Debt Funding Activity
The table below displays the activity in debt of Fannie Mae. This activity excludes the debt of consolidated trusts and intraday loans. Activity forin short-term debt of Fannie Mae relates to borrowings with an original contractual maturity of one year or less while activity forin long-term debt of Fannie Mae relates to borrowings with an original contractual maturity of greater than one year. The reported amounts of debt issued and paid off during each period represent the face amount of the debt at issuance and redemption.
The market dislocations relating todecrease in short-term and long-term debt issued and paid off during the COVID-19 outbreak have affected both our debt funding needs and debt funding activity. We significantly increased our debt issuances infirst quarter of 2021 compared with the first quarter of 2020 was primarily due to increased volume in the whole loan conduit driven by a significant increase in refinance activity during the quarter, to pay off callable debt and in anticipation of potential future liquidity needs. Adverse market conditions in March limited our ability to issue debt with a maturity greater than two years.decreased funding needs as discussed above. As a result, mostwe did not issue new debt to replace all of theour debt we issued in thethat paid off during first quarter of 2020 had terms2021.
Activity in Debt of Fannie Mae
For the Three Months Ended March 31,
20212020
(Dollars in millions)
Issued during the period:
Short-term:
Amount$5,142 $160,023 
Weighted-average interest rate(1)
*1.25 %
Long-term:(2)
Amount$2,815 $39,319 
Weighted-average interest rate0.59 %0.70 %
Total issued:
Amount$7,957 $199,342 
Weighted-average interest rate0.21 %1.14 %
Paid off during the period:(3)
Short-term:
Amount$14,459 $128,792 
Weighted-average interest rate0.10 %1.52 %
Long-term:(2)
Amount$8,450 $24,164 
Weighted-average interest rate1.04 %1.88 %
Total paid off:
Amount$22,909 $152,956 
Weighted-average interest rate0.45 %1.58 %
*    Represents a weighted-average interest rate of less than 0.005%.
(1)Includes income generated from three to twenty-four months. Market conditions improved in April, and we issued $3.5 billion in 5-year benchmark notes. Ifrepurchase agreements, which offset our short-term funding costs. Consequently, market conditions limit our ability to issue longer-term debt, it could requiremay result in weighted-average interest rates that we fund longer-term assets with short-term debt, which would increase the roll-over risk on our outstanding debt. See “Risk Factors” for additional information on the impact of the COVID-19 outbreak on our liquidity risk.
We expect our debt funding needs to increase in future periods, as significantly higher rates of loan delinquencies and an increase in forbearances and other loss mitigation activity driven by the COVID-19 outbreak require us to fund greater amounts of principal, interest, tax and insurance payments on delinquent loans and to purchase a larger volume of delinquent loans from MBS trusts. We also may continue to fund a high volume of whole loan conduit activity.
Pursuant to the terms of our senior preferred stock purchase agreement with Treasury, our aggregate indebtedness may not exceed $300 billion and our mortgage assets may not exceed $250 billion without Treasury’s prior written consent. FHFA has directed that we further cap our mortgage assetsare negative or at $225 billion, as described in “Business—Conservatorship, Treasury Agreements and Housing Finance Reform—Treasury Agreements” in our 2019 Form 10-K. As described above, we expect our debt funding needs to increase. Depending on the extent of these funding needs and the amount of mortgage loans we purchase from MBS trusts, we may be required to obtain FHFA’s and Treasury’s prior written consent to increase our current debt limit and mortgage asset limit.
Fannie Mae First Quarter 2020 Form 10-Qzero.50
MD&A | Liquidity and Capital Management

(2)
Activity in Debt of Fannie Mae
For the Three Months Ended March 31,
20202019
(Dollars in millions)
Issued during the period:
Short-term:
Amount  $160,023  $121,910  
Weighted-average interest rate1.25 %2.35 %
Long-term:(1)
Amount$39,319  $6,595  
Weighted-average interest rate0.70 %2.63 %
Total issued:
Amount$199,342  $128,505  
Weighted-average interest rate1.14 %2.36 %
Paid off during the period:(2)
Short-term:
Amount$128,792  $123,726  
Weighted-average interest rate1.52 %2.10 %
Long-term:(1)
Amount$24,164  $15,810  
Weighted-average interest rate1.88 %1.75 %
Total paid off:
Amount$152,956  $139,536  
Weighted-average interest rate1.58 %2.06 %
(1)Includes credit risk-sharing securities issued as CAS debt prior to November 2018. For information on our credit risk transfer transactions, see “Single-Family Business—Single-Family Mortgage Credit Risk Management—Single-Family Credit Enhancement and Transfer of Mortgage Credit Risk—Credit Risk Transfer Transactions” in our 20192020 Form 10-K and in this report.
(2)(3)Consists of all payments on debt, including regularly scheduled principal payments, payments at maturity, payments resulting from calls and payments for any other repurchases. Repurchases of debt and early retirements of zero-coupon debt are reported at original face value, which does not equal the amount of actual cash payment.
Fannie Mae First Quarter 20202021 Form 10-Q5160
MD&A | Liquidity and Capital Management

Other Investments Portfolio
The chart below displays information on the composition of our other investments portfolio. The balance of our other investments portfolio fluctuates as a result of changes in our cash flows, liquidity in the fixed-income markets, and our liquidity risk management framework and practices.
Our other investments portfolio increased significantlydecreased during the first quarter of 20202021 primarily due primarily to an increasea decrease in cashU.S. Treasury securities and cash equivalents drivenfederal funds sold and securities purchased under agreements to resell. In the first quarter of 2021, we began to invest funds held by consolidated trusts directly in eligible short-term third-party investments. As the funds underlying these investments are restricted per the trust agreements, these securities are not considered in our sources of liquidity and are excluded from our other investments portfolio. Prior to this change, funds held by consolidated trusts were invested in Fannie Mae short-term debt, as allowed by the trust agreements. We then invested those proceeds from increased debt issuances to support higher refinance activity in the whole loan conduit and potential futureunrestricted short-term investments, which were included in our other investments portfolio. This change did not materially alter our liquidity needs as described above, as well as proceeds from loan payoffs.position.
fnm-20200331_g21.jpgfnm-20210331_g18.jpg
Cash and cash equivalents(1)
Federal funds sold and securities purchased under agreements to resell or similar arrangements
U.S. Treasury securities
(1)    Cash equivalents are comprised of overnight repurchase agreements and U.S. Treasuries that have a maturity at the date of acquisition of three months or less.

Cash Flows
Three Months Ended March 31, 20202021. Cash, cash equivalents and restricted cash and cash equivalents decreased from $115.6 billion as of December 31, 2020 to $114.3 billion as of March 31, 2021. The decrease was primarily driven by cash outflows from (1) payments on outstanding debt of consolidated trusts, (2) purchases of loans held for investment, and (3) the redemption of funding debt, which outpaced issuances, primarily for the reasons described above.
Partially offsetting these cash outflows were cash inflows primarily from (1) the sale of Fannie Mae MBS to third parties and (2) proceeds from repayments and sales of loans.
Three Months Ended March 31, 2020. Cash, cash equivalents and restricted cash and cash equivalents increased from $61.4 billion as of December 31, 2019 to $128.7 billion as of March 31, 2020. The increase was primarily driven by cash inflows from (1) proceeds from repayments and sales of loans, (2) the sale of Fannie Mae MBS to third parties, and (3) the issuance of funding debt, which outpaced redemptions, primarily for the reasons described above.
Partially offsetting these cash inflows were cash outflows primarily from (1) purchases of loans held for investment and (2) payments on outstanding debt of consolidated trusts.
Three Months Ended March 31, 2019. Cash, cash equivalents and restricted cash increased from $49.4 billion as of December 31, 2018 to $52.2 billion as of March 31, 2019. The increase was primarily driven by cash inflows from (1) the net decreases in federal funds sold and securities purchased under agreements to resell or similar agreements and (2) the sale of Fannie Mae MBS to third parties.
Partially offsetting these cash inflows were cash outflows from, among other things, (1) the redemption of funding debt, which outpaced issuances, due to lower funding needs, and (2) the purchase of Fannie Mae MBS from third parties.
Credit Ratings
Our credit ratings from the major credit ratings organizations, as well as the credit ratings of the U.S. government, are primary factors that could affect our ability to access the capital markets and our cost of funds. In addition, our credit ratings are important when we seek to engage in certain long-term transactions, such as derivative transactions. Standard & Poor’s Global Ratings (“S&P”), Moody’s Investors Services (“Moody’s”) and Fitch Ratings Limited (“Fitch”) have all indicated that, if they were to lower the sovereign credit ratings on the U.S., they would likely lower their ratings on the debt of Fannie Mae and certain other government-related entities. In addition, actions by governmental entities impacting Treasury’s support for our business or our debt securities could adversely affect the credit ratings of our senior unsecured debt. See “Risk Factors—Liquidity and Funding Risk” in our 2019 Form 10-K for a discussion of the risks to our business relating to a decrease in our
Fannie Mae First Quarter 20202021 Form 10-Q5261
MD&A | Liquidity and Capital Management

Credit Ratings
As of March 31, 2021, our credit ratings which could include an increasehave not changed since we filed our 2020 Form 10-K. For information on our credit ratings, see “MD&A—Liquidity and Capital Management—Liquidity Management—Credit Ratings” in our borrowing costs, limits on our ability to issue debt, and additional collateral requirements under our derivatives contracts.
The table below displays the credit ratings issued by the three major credit rating agencies.
Fannie Mae Credit Ratings
March 31, 2020
S&PMoody'sFitch
Long-term senior debtAA+AaaAAA
Short-term senior debtA-1+P-1F1+
Preferred stockDCaC/RR6
OutlookStableStableStable
(for Long-Term Senior Debt)(for AAA rated Long-Term Issuer Default Ratings)
We have no covenants in our existing debt agreements that would be violated by a downgrade in our credit ratings. However, in connection with certain derivatives counterparties, we could be required to provide additional collateral to or terminate transactions with certain counterparties in the event that our senior unsecured debt ratings are downgraded.2020 Form 10-K.
Capital Management
Regulatory Capital Requirements
The deficit of our core capital over statutory minimum capital established in the GSE Act was $131.3$119.5 billion as of March 31, 20202021 and $128.8$124.3 billion as of December 31, 2019. For information on our current and proposed capital requirements, see2020. As we discuss in “Business—Charter ActLegislation and Regulation—GSE Act and Other Regulation”Legislative and Regulatory Matters—Capital” in our 2020 Form 10-K, FHFA has established a new enterprise regulatory capital framework, which went into effect in February 2021. The dates on which we must comply with the quantitative requirements of the new capital framework are staggered and largely dependent on whether we remain in conservatorship. We estimate that, had the new framework’s requirements been applicable to us as of March 31, 2021, we would have been required to hold approximately $190 billion in adjusted total capital, of which approximately $140 billion must be in the form of common equity tier 1 capital. Prescribed buffers drive approximately $75 billion of the total requirements. See “Note 12, Regulatory Capital Requirements” in our 20192020 Form 10-K.10-K for more information on our statutory capital measures under the GSE Act.
Capital Activity
Under the terms governing the senior preferred stock, effective with the third quarter 2019 dividend period, we will not owe dividends to Treasury until we have accumulated over $25 billion in net worth; and the aggregate liquidation preferenceprovisions of the senior preferred stock, we are permitted to retain increases at the end of each quarter by the increase, if any, in our net worth duringuntil our net worth exceeds the immediately prior fiscal quarter, untilamount of adjusted total capital necessary for us to meet the liquidation preference has increased by $22 billion pursuant to this provision. Accordingly, no dividends were payable to Treasury forcapital requirements and buffers under the first quarter ofenterprise regulatory capital framework discussed in “Business—Legislation and Regulation—GSE Act and Other Legislative and Regulatory Matters—Capital” in our 2020 and none are payable for the second quarter of 2020. Also, theForm 10-K. The aggregate liquidation preference of the senior preferred stock increased to $135.4$146.8 billion as of March 31, 2020. Because2021 and will further increase to $151.7 billion as of June 30, 2021 due to the $5.0 billion increase in our net worth did not increase during the first quarter of 2020, the aggregate liquidation preference of the senior preferred stock will remain at $135.4 billion as of June 30, 2020. As of March 31, 2020, our net worth was $13.9 billion.2021.
See “Business—Conservatorship, Treasury Agreements and Housing Finance Reform—Treasury Agreements” in our 20192020 Form 10-K for more information on the terms of our senior preferred stock and our senior preferred stock purchase agreement with Treasury. See “Risk Factors—GSE and Conservatorship Risk” in our 20192020 Form 10-K for a discussion of the risks associated with the limit on our capital reserves.
Treasury Funding Commitment
Treasury made a commitment under the senior preferred stock purchase agreement to provide funding to us under certain circumstances if we have a net worth deficit. As of March 31, 2021, the remaining amount of Treasury’s funding commitment to us was $113.9 billion. See “Note 11, Equity” in our 2020 Form 10-K for more information on the funding commitment provided by Treasury under the senior preferred stock purchase agreement.
Off-Balance Sheet Arrangements
Our off-balance sheet arrangements result primarily from the following:
•our guaranty of mortgage loan securitization and resecuritization transactions, and other guaranty commitments, over which we do not have control;
•liquidity support transactions; and
•partnership interests.
Since we began issuing UMBS in June 2019, someSome of the securities we issue are structured securities backed, in whole or in part, by Freddie Mac securities. When we issue a structured security, we provide a guaranty that we will supplement amounts received from the underlying mortgage-related security as required to permit timely payment of principal and interest on the certificates related to the resecuritization trust. Accordingly, when we issue structured securities backed in whole or in part by Freddie Mac securities, we extend our guaranty to the underlying Freddie Mac security included in the structured security. Our issuance of structured securities backed in whole or in part by Freddie Mac securities creates additional off-balance sheet exposure as we do not have control over the Freddie Mac mortgage loan securitizations. Because we do not have the power to direct matters (primarily the servicing of mortgage loans) that impact the credit risk to which we are exposed, which constitute control of these securitization trusts, we do not consolidate these trusts in our condensed consolidated balance sheet, giving rise to off-balance sheet exposure.
Fannie Mae First Quarter 20202021 Form 10-Q5362
MD&A | Off-Balance Sheet Arrangements

The total amount of our off-balance sheet exposure related to unconsolidated Fannie Mae MBS net of any beneficial interest that we retain, and other financial guarantees was $90.5$170.2 billion as of March 31, 2020.2021. Approximately $55.3$126.0 billion of this amount consisted of the unpaid principal balance of Freddie Mac-issued UMBS backing Fannie Mae-issued Supers. Additionally, off-balance sheet exposure includes approximately $17.3$28.7 billion of the unpaid principal balance of Freddie Mac securities backing Fannie Mae-issued REMICs; however, a portion of these Freddie Mac securities may be backed in whole or in part by Fannie Mae MBS. Therefore, our total exposure to Freddie Mac securities included in Fannie Mae REMIC collateral is likely lower.REMICs. We expect our off-balance sheet exposure to Freddie Mac securities to increase as we issue more structured securities backed by Freddie Mac securities in the future. The total amount of our off-balance sheet exposure related to unconsolidated Fannie Mae MBS net of any beneficial interest that we retain, and other financial guarantees was $68.6$153.6 billion as of December 31, 2019.2020. Approximately $37.8$110.7 billion of this amount consisted of the unpaid principal balance of Freddie Mac-issued UMBS backing Fannie Mae-issued Supers and $12.3$26.6 billion of this amount consisted of the unpaid principal balance of Freddie Mac securities backing Fannie Mae-issued REMICs. See “Note 6, Financial Guarantees” for more information regarding our maximum exposure to loss on unconsolidated Fannie Mae MBS and Freddie Mac securities.
We also have off-balance sheet exposure to losses from liquidity support transactions and partnership interests.
•Our total outstanding liquidity commitments to advance funds for securities backed by multifamily housing revenue bonds totaled $7.0$6.1 billion as of March 31, 20202021 and $7.2$6.4 billion as of December 31, 2019.2020. These commitments require us to advance funds to third parties that enable them to repurchase tendered bonds or securities that are unable to be remarketed. We hold cash and cash equivalents in our other investments portfolio in excess of these commitments to advance funds.
•We make investments in various limited partnerships and similar legal entities, which consist of low-income housing tax credit investments, community investments and other entities. When we do not have a controlling financial interest in those entities, our condensed consolidated balance sheets reflect only our investment rather than the full amount of the partnership’s assets and liabilities. See “Note 2, Consolidations and Transfers of Financial Assets— Unconsolidated VIEs” for information regarding our limited partnerships and similar legal entities.
Risk Management
Our business activities expose us to the following major categories of risk: credit risk (including mortgage credit risk and institutional counterparty credit risk), market risk (including interest-rate risk), liquidity and funding risk, and operational risk (including cyber/information security risk, third-party risk and model risk), as well as strategic risk, compliance risk and reputational risk. See “MD&A—Risk Management” in our 20192020 Form 10-K for a discussion of our management of these risks. This section supplements and updates that discussion but does not repeataddress all of the risk management categories described in our 20192020 Form 10-K.
Institutional Counterparty Credit Risk Management
This section supplements and updates our discussion of institutional counterparty credit risk management in our 2020 Form 10-K. See “MD&A—Risk Management—Institutional Counterparty Credit Risk Management” and “Risk Factors—Credit Risk” in our 20192020 Form 10-K for a discussion of our exposure to institutional counterparty credit risk and our strategy for managing this risk. As described in “Risk Factors” in this report,our 2020 Form 10-K, the COVID-19 outbreakpandemic has increased our counterparty credit risk. Also see “Note 10, Concentrations of Credit Risk” in this report for an update on our counterparty credit risk exposure.
Change in Non-Depository Seller and Servicer Liquidity Requirement as a Result of COVID-19 Forbearances
We have previously established minimum liquidity requirements for single-family non-depository servicers to maintain eligibility with Fannie Mae. With the increase in delinquent loans in forbearance plans as a result of the unprecedented circumstances of the COVID-19 pandemic and the CARES Act, we temporarily modified our minimum liquidity requirements for single-family non-depository servicers to maintain eligibility with Fannie Mae. Beginning with the second quarter of 2020, when calculating the minimum liquidity requirement for seriously delinquent mortgage loans for non-depository servicers, an adjustment is included for mortgage loans in a COVID-19-related forbearance plan that are 90 days or more delinquent and were current at the inception of the plan. The adjustment provides partial relief of the minimum liquidity requirements for the servicers of these impacted loans.
In June 2020, FHFA announced that it would re-propose the minimum financial eligibility requirements for Fannie Mae and Freddie Mac sellers and servicers due to market volatility driven by the COVID-19 pandemic.
Fannie Mae First Quarter 2021 Form 10-Q63
MD&A | Risk Management | Institutional Counterparty Credit Risk Management

Change in Private Mortgage Insurer Eligibility Requirements
Mortgage insurers must meet and maintain compliance with private mortgage insurer eligibility requirements (“PMIERs”) to be eligible to write mortgage insurance on loans acquired by Fannie Mae. The PMIERs are designed to ensure that mortgage insurers have sufficient liquid assets to pay all claims under a hypothetical future stress scenario. Under FHFA guidance, we and Freddie Mac published several revisions to the PMIERs in 2020, which initially became effective June 30, 2020. The revisions include (1) a temporary adjustment when calculating risk-based required assets for nonperforming mortgage loans that became newly delinquent after the onset of the COVID-19 crisis or that are subject to a forbearance plan granted in response to a financial hardship related to COVID-19, and (2) through June 30, 2021, a requirement for private mortgage insurers to secure prior approval from Fannie Mae to enable payment of dividends or certain new transfers of cash. The adjustment provides partial relief to mortgage insurers’ capital requirements under the PMIERs for the impacted loans.
Market Risk Management, Includingincluding Interest-Rate Risk Management
We are subject to market risk, which includes interest-rate risk and spread risk. Interest-rate risk is the risk that movements in benchmark interest rates could adversely affect the fair value of our assets or liabilities. Spread risk represents the change in an instrument’s fair value that relates to factors other than changes in the benchmark interest rate. The primary source of our interest-rate risk is the composition of our net portfolio. Our net portfolio consists of: our retained mortgage portfolio assets; other investments portfolio; outstanding debt of Fannie Mae used to fund the retained mortgage portfolio assets and other investments portfolio; and mortgage commitments and risk management derivatives. Risk management derivatives, along with our debt instruments, are used to manage interest-rate risk. For the impact of market risk on our GAAP earnings, see “Earnings Exposure to Interest-Rate Risk.”
This section supplements and updates information regarding market risk management in our 20192020 Form 10-K. See “MD&A—Risk Management—Market Risk Management, Includingincluding Interest-Rate Risk Management” and “Risk Factors” in our 20192020 Form 10-K for additional information, including our sources of interest-rate risk exposure, business risks posed by changes in interest rates, and our strategy for managing interest-rate risk. As described in “Risk Factors” in this report, the COVID-19 outbreak has increased our market risk.
Measurement of Interest-Rate Risk
The table below displays the pre-tax market value sensitivity of our net portfolio to changes in the level of interest rates and the slope of the yield curve as measured on the last day of each period presented. The table below also provides the daily average, minimum, maximum and standard deviation values for duration gap and for the most adverse market value impact on the net portfolio to changes in the level of interest rates and the slope of the yield curve for the three months ended March 31, 2021 and 2020. Our practice is to allow interest rates to go below zero in the downward shock models unless otherwise prevented through contractual floors.
For information on how we measure our interest-rate risk, see our 2020 and 2019.Form 10-K in “MD&A—Risk Management—Market Risk Management, including Interest-Rate Risk Management.”
Interest-Rate Sensitivity of Net Portfolio to Changes in Interest-Rate Level and Slope of Yield Curve
As of (1)(2)
March 31, 2021December 31, 2020
(Dollars in millions)
Rate level shock:
-100 basis points$(142)$(179)
-50 basis points(1)8 
+50 basis points(54)(111)
+100 basis points(81)(154)
Rate slope shock:
-25 basis points (flattening)(14)(9)
+25 basis points (steepening)11 4 

Fannie Mae First Quarter 20202021 Form 10-Q5464
MD&A | Risk Management | Market Risk Management, including Interest-Rate Risk Management

For the Three Months Ended March 31, (1)(3)
20212020
Duration GapRate Slope Shock 25 bpsRate Level Shock 50 bpsDuration GapRate Slope Shock 25 bpsRate Level Shock 50 bps
Market Value Sensitivity
Market Value Sensitivity

(In years)(Dollars in millions)(In years)(Dollars in millions)
Average0.02$(13)$(70)(0.02)$(20)$(32)
Minimum(0.04)(23)(140)(0.10)(33)(144)
Maximum0.10(5)(36)0.12(7)20 
Standard deviation0.025 23 0.046 31 
The significant volatility in the financial markets makes it more challenging to manage our interest-rate risk. The volatile market conditions in recent weeks have affected our ability to rely on our models for managing interest-rate risk. The rapid changes in market conditions occurring in the current environment also requires more active interest-rate risk management to maintain our desired interest rate-risk profile, which may result in additional hedging costs.(1)
For information on how we measure our interest-rate risk, see our 2019 Form 10-K in “MD&A—Risk Management—Market Risk Management, Including Interest-Rate Risk Management.”
Interest-Rate Sensitivity of Net Portfolio to Changes in Interest-Rate Level and Slope of Yield Curve
As of (1)(2)
March 31, 2020December 31, 2019
(Dollars in millions)
Rate level shock:
-100 basis points$(185) $57  
-50 basis points(54) 11  
+50 basis points32  51  
+100 basis points88  160  
Rate slope shock:
-25 basis points (flattening)(7) (20) 
+25 basis points (steepening)4  22  
For the Three Months Ended March 31,(1)(3)
20202019
Duration GapRate Slope Shock 25 bpsRate Level Shock 50 bpsDuration GapRate Slope Shock 25 bpsRate Level Shock 50 bps
Market Value Sensitivity
Market Value Sensitivity

(In years)(Dollars in millions)(In years)(Dollars in millions)
Average(0.02)$(20) $(32) (0.02)$(6) $(48) 
Minimum(0.10)(33) (144) (0.07)(11) (116) 
Maximum0.12(7) 20  0.02(1) (11) 
Standard deviation0.046  31  0.023  22  
(1)Computed based on changes in U.S. LIBOR interest-rates swap curve. Changes in the level of interest-rates assume a parallel shift in all maturities of the U.S. LIBOR interest-rate swap curve. Changes in the slope of the yield curve assume a constant 7-year rate, a shift of 16.7 basis points for the 1-year rate (and shorter tenors) and an opposite shift of 8.3 basis points for the 30-year rate. Rate shocks for remaining maturity points are interpolated.
(2)Measured on the last business day of each period presented.
(3)Computed based on daily values during the period presented.
The market value sensitivity of our net portfolio varies across a range of interest-rate shocks depending upon the duration and convexity profile of our net portfolio.
We use derivatives to help manage the residual interest-rate risk exposure between our assets and liabilities. Derivatives have enabled us to keep our economic interest-rate risk exposure, at consistently low levels in a wide range of interest-rate environments. The table below displays an example of how derivatives impacted the net market value exposure for a 50 basis point parallel interest-rate shock.
Derivative Impact on Interest-Rate Risk (50 Basis Points)Derivative Impact on Interest-Rate Risk (50 Basis Points)Derivative Impact on Interest-Rate Risk (50 Basis Points)
As of (1)
As of (1)
March 31, 2020December 31, 2019March 31, 2021December 31, 2020
(Dollars in millions)(Dollars in millions)
Before derivativesBefore derivatives$(177) $(197) Before derivatives$(899)$(613)
After derivativesAfter derivatives32  51  After derivatives(1)8 
Effect of derivativesEffect of derivatives209  248  Effect of derivatives898 621 
(1)Measured on the last business day of each period presented.
Earnings Exposure to Interest-Rate Risk
While we manage the interest-rate risk of our net portfolio with the objective of remaining neutral to movements in interest rates and volatility on an economic basis, our earnings can experience volatility due to interest-rate changes and differing accounting treatments that apply to certain financial instruments on our balance sheet. Specifically, we have exposure to earnings volatility that is driven by changes in interest rates in two primary areas: our net portfolio and our consolidated MBS trusts. The exposure in the net portfolio is primarily driven by changes in the fair value of risk management derivatives, mortgage commitments, and certain assets, primarily securities, that are carried at fair value. The exposure related to our consolidated MBS trusts primarily relates to changes in our credit loss reserves driven by changes in interest rates.
In January 2021, we began applying fair value hedge accounting to address some of the exposure to interest rates, particularly the earnings volatility related to changes in benchmark interest rates, including LIBOR and SOFR. Although we expect the earnings volatility related to changes in the benchmark interest rates to continue to be meaningfully reduced as a result of our adoption of hedge accounting, earnings variability driven by other factors, such as spreads or changes in cost basis amortization recognized in net interest income, remains. In addition, when the shape of the yield curve shifts significantly from period to period, hedge accounting may be less effective. In our current program, we establish new hedging relationships daily to provide flexibility in our overall risk management strategy.
See “Consolidated Results of Operations—Hedge Accounting Impact,” “Note 1, Summary of Significant Accounting Policies” and “Note 8, Derivative Instruments” for additional information on our fair value hedge accounting policy and related disclosures.
Fannie Mae First Quarter 20202021 Form 10-Q5565
MD&A | Critical Accounting Policies and Estimates

Critical Accounting Policies and Estimates
The preparation of financial statements in accordance with GAAP requires management to make a number of judgments, estimates and assumptions that affect the reported amount of assets, liabilities, income and expenses in our condensed consolidated financial statements. Understanding our accounting policies and the extent to which we use management judgment and estimates in applying these policies is integral to understanding our financial statements. We describe our most significant accounting policies in “Note 1, Summary of Significant Accounting Policies” in this report and in our 20192020 Form 10-K.
We evaluate our critical accounting estimates and judgments required by our policies on an ongoing basis and update them as necessary based on changing conditions. We have identified one of our accounting policies, allowance for loan losses, as critical because it involves significant judgments and assumptions about highly complex and inherently uncertain matters, and the use of reasonably different estimates and assumptions could have a material impact on our reported results of operations or financial condition.
Allowance for Loan Losses and Adoption of the CECL Standard
The CECL standard is effective for our fiscal year beginning January 1, 2020 and impacts the measurement of our allowance for loan losses. The CECL standard reflects lifetime expected credit losses on the loans in our book of business and requires consideration of a range of reasonable and supportable forecast information to develop that estimate. We have changed our accounting policies and implemented system, model and process changes to adopt the standard.
Our allowance for loan losses is a valuation account that is deducted from the amortized cost basis of HFI loans to present the net amount expected to be collected on the loans. The allowance for loan losses reflects an estimate of expected credit losses on single-family and multifamily HFI loans held by Fannie Mae and by consolidated Fannie Mae MBS trusts. Upon adoption, we usedWe use a discounted cash flow method to measure expected credit losses on our single-family mortgage loans and an undiscounted loss method to measure expected credit losses on our multifamily mortgage loans. The models useduse reasonable and supportable forecasts for key economic drivers, such as home prices (single-family), rental income (multifamily) and capitalization rates (multifamily). Our modeled loan performance is based on our historical experience of loans with similar risk characteristics adjusted to reflect current conditions and reasonable and supportable forecasts. Our historical loss experience and our credit loss estimates capture the possibility of remote events that could result in credit losses on loans that are considered low risk. Our credit loss models, including the forecast data used as key inputs, are subject to our model oversight and review processes as well as other established governance and controls.
Changes to our estimate of expected credit losses, including changes due to the passage of time, are recorded through the benefit (provision) for credit losses. When calculating our allowance for loan losses, we consider only our amortized cost in the loans at the balance sheet date. We record write-offs as a reduction to the allowance for loan losses when losses are confirmed through the receipt of assets in satisfaction of a loan, such as the underlying collateral upon foreclosure or cash upon completion of a short sale. Additionally, we record write-offs as a reduction to our allowance for loan losses when a loan is determined to be uncollectible and upon the redesignation of a seriously delinquentnonperforming or reperforming loan from HFI to HFS. We include expected recoveries of amounts previously written off and expected to be written off in determining our allowance for loan losses.
Our process for determining the impact of the adoption as well as the measurement of expected credit losses for the period under the new standardexpected credit loss model is complex and involves significant management judgment, including a reliance on historical loss information and current economic forecasts that may not be representative of credit losses we ultimately realize. For example, uncertainty regarding the expected impacts of the COVID-19 outbreakpandemic required significant management judgment in assessing our allowance for loan losses as of March 31, 2020.2021.
We provide more detailed information on our accounting for the allowance for loan losses and impact of adopting the CECL standard in “Note 1, Summary of Significant Accounting Policies.”Policies” in our 2020 Form 10-K. See “Note 4, Allowance for Loan Losses” in this report for additional information about our current-period benefit or provision for loan losses, including a discussion of the estimates used in measuring the impact of the COVID-19 pandemic on our allowance. See “Risk Factors” in our 20192020 Form 10-K and in this report for a discussion of the risks associated with the need for management to make judgments and estimates in applying our accounting policies and methods.
Impact of Future Adoption of New Accounting Guidance
We identify and discuss the expected impact on our condensed consolidated financial statements of recently issued accounting guidance, if any, in “Note 1, Summary of Significant Accounting Policies.” No applicable guidance was identified during the first quarter of 2021.
Fannie Mae First Quarter 20202021 Form 10-Q5666
MD&A | Forward-Looking Statements

Forward-Looking Statements
This report includes statements that constitute forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934 (the “Exchange Act”). In addition, we and our senior management may from time to time make forward-looking statements in our other filings with the SEC, our other publicly available written statements, and orally to analysts, investors, the news media and others. Forward-looking statements often include words such as “expect,” “anticipate,” “intend,” “plan,” “believe,” “seek,” “estimate,” “forecast,” “project,” “would,” “should,” “could,” “likely,” “may,” “will” or similar words. Examples of forward-looking statements in this report include, among others, statements relating to our expectations regarding the following matters:
•our future financial performance, financial condition and net worth, and the factors that will affect them;them, including our expectations regarding our future net revenues and amortization income;
•the impact of the COVID-19 outbreak on our business, financial results, financial condition,expectations regarding our business plans and strategies and on mortgage market and economic conditions, and the factors that will affect the outbreak’s impact;their impact, including plans to become well capitalized;
•our expectations for, and the impact of fluctuations in, our acquisition volumes, market share, guaranty fees, or acquisition credit characteristics; or the pace at which loans in our book of business turn over;
•our business plans relating to and strategiesthe effects of our credit risk transfer transactions, as well as the factors that will affect our engagement in future transactions;
•our expectations for economic and mortgage market conditions, the factors that will affect conditions, and the impact of such plansthose conditions on our business and strategies;financial results;
•our dividend paymentsexpectations regarding the impact of actions that we and federal, state and local governments are taking in response to Treasurythe COVID-19 pandemic and the liquidation preferencepandemic’s economic impact, and our expectations regarding the impact of those actions on our business, financial results, financial condition and business plans, and on mortgage market and economic conditions;
•our loss mitigation activity and its impact;
•the impact on our business of the CFPB’s final rule eliminating the qualified mortgage patch and the related requirement in our senior preferred stock;stock purchase agreement with Treasury;
•volatility in our future financial results and efforts we may make to address volatility, including our expectations relating to our implementation of a hedge accounting program and its impact on the volatility of our financial results;impact;
•the size and composition of our retained mortgage portfolio;
•the amount and timing of our purchases of loans from MBS trusts;
•the volume of whole loan conduit activity;
•the impact of legislation and regulation on our business or financial results;results and the timing of legislation and regulation;
•our payments to HUD and Treasury funds under the GSE Act;
•our plans relating to and the effects of our credit risk transfer transactions;
•factors that could affect or mitigate our credit risk exposure;
•mortgage market and economic conditions (including U.S. GDP, unemployment rates, home price growth, multifamily property valuation growth, housing activity, housing starts, home sales, rent growth, multifamily vacancy rates, and the future volume of and characteristics of mortgage originations) and the impact of mortgage market and economic conditions on our business and financial results;
•our future off-balance sheet exposure to Freddie MacMac-issued securities;
•the risks to our business;
•future delinquency rates, default rates, forbearances and other loss mitigation activity, substandard loan amountsforeclosures, and credit losses relating to the loans in our guaranty book of business and the factors that will affect them, including the impact of the COVID-19 outbreak;pandemic;
•our expectations relating to our TDRs;
•the performance of the loans in our book of business and the factors that will affect such performance;
•our loan acquisitions, the credit risk profile of such acquisitions, and the factors that will affect them;
•our future liquidity, liquidity requirements, the amount of our outstanding debt, funding needs and factors thatexpectations for how we will affect our ability to meet our debt obligations; and
•our response to legal and regulatory proceedings and their impact on our business or financial condition.
Forward-looking statements reflect our management’s current expectations, forecasts or predictions of future conditions, events or results based on various assumptions and management’s estimates of trends and economic factors in the markets in which we are active and that otherwise impact our business plans. Forward-looking statements are not guarantees of future performance. By their nature, forward-looking statements are subject to significant risks and uncertainties and changes in circumstances. Our actual results and financial condition may differ, possibly materially, from the anticipated results and financial condition indicated in these forward-looking statements.
Fannie Mae First Quarter 2021 Form 10-Q67
MD&A | Forward-Looking Statements

There are a number of factors that could cause actual conditions, events or results to differ materially from those described in our forward-looking statements, including, among others, the following:
•the uncertainty ofregarding our future, and our exit from conservatorship;conservatorship and our ability to raise or earn the capital needed to meet our capital requirements;
•uncertainty surrounding the duration spread and severity of the COVID-19 outbreak;pandemic; the actions taken to contain the virus or treat its impact, including government actions to mitigate the economic impact of the outbreak;pandemic and the widespread availability and public acceptance of COVID-19 vaccines; the extent to which consumers, workers and families feel safe resuming pre-pandemic activities; the nature, extent and extentsuccess of the forbearance, payment deferrals, modifications and modificationother loss mitigation options we offerprovide to borrowers affected by the outbreak;pandemic; accounting elections and estimates
Fannie Mae First Quarter 2020 Form 10-Q57
MD&A | Forward-Looking Statements

relating to the impact of the COVID-19 outbreak;pandemic; borrower and renter behavior in response to the outbreakpandemic and its economic impact; how quickly and to what extent normal economic and operating conditions can resume, including whether any future outbreaks or increases in the daily number of new COVID-19 cases interrupt economic recovery; and how quickly and to what extent affected borrowers, renters and counterparties can recover from the negative economic impact of the outbreak;pandemic;
•the market and regulatory changes we anticipate and our readiness for them, including changes relating to an eventual exit from conservatorship, the competitive landscape, and the need to attract private investment;
•the impact of the senior preferred stock purchase agreement and the enterprise regulatory capital framework, as well as future legislative and regulatory requirements or changes, governmental initiatives, or executive orders affecting us, such as the enactment of housing finance reform legislation, (including all or any portion of the Treasury plan), including changes that limit our business activities or our footprint;
•actions by FHFA, Treasury, HUD, the Consumer Financial Protection BureauCFPB or other regulators, Congress, the Executive Branch, or state or local governments that affect our business, including our new capital requirements that become applicable to usand recent changes or potential further changes in the ability-to-repay rule to replacethat eliminates the qualified mortgage patch for government-sponsored enterprise-eligibleGSE-eligible loans;
•changes in the structure and regulation of the financial services industry;
•the potential impact of a change in the corporate income tax rate, which would affect our capital requirements and net income in the quarter of enactment as a result of changes in the value of our deferred tax assets and our net income in subsequent quarters as a result of the change in our effective federal income tax rate;
•the timing and level of, as well as regional variation in, home price changes;
•changes infuture interest rates and credit spreads;
•developments that may be difficult to predict, including: market conditions that result in changes in our net amortization income from our guaranty book of business, fluctuations in the estimated fair value of our derivatives and other financial instruments that we mark to market through our earnings; and developments that affect our loss reserves, such as changes in interest rates, home prices or accounting standards, or events such as natural disasters or the emergence of widespread health emergencies or pandemics;
•uncertainties relating to the discontinuance of LIBOR, or other market changes that could impact the loans we own or guarantee or our MBS;
•credit availability;
•disruptions or instability in the housing and credit markets;
•the size and our share of the U.S. mortgage market and the factors that affect them, including population growth and household formation;
•growth, deterioration and the overall health and stability of the U.S. economy, including U.S. GDP, unemployment rates, personal income and other indicators thereof;
•changes in the fiscal and monetary policies of the Federal Reserve;
•our and our competitors’ future guaranty fee pricing and the impact of that pricing on our competitive environment and guaranty fee revenues;
•the volume of mortgage originations;
•the size, composition, quality and performance of our guaranty book of business and retained mortgage portfolio;
•the competitive environment in which we operate, including the impact of legislative, regulatory or other developments on levels of competition in our industry and other factors affecting our market share;
Fannie Mae First Quarter 2021 Form 10-Q68
MD&A | Forward-Looking Statements

•how long loans in our guaranty book of business remain outstanding;
•challenges we face in retaining and hiring qualified executives and other employees;
•the effectiveness of our business resiliency plans and systems;
•changes in the demand for Fannie Mae MBS, in general or from one or more major groups of investors;
•our conservatorship, including any changes to or termination (by receivership or otherwise) of the conservatorship and its effect on our business;
•the investment by Treasury, including the impact of recent changes or potential future changes to the terms of the senior preferred stock purchase agreement, or senior preferred stock, and its effect on our business, including restrictions imposed on us by the terms of the senior preferred stock purchase agreement, the senior preferred stock, and Treasury’s warrant, as well as the possibilityextent that these or other restrictions on our business and activities may beare applied to us through other mechanisms even if we cease to be subject to these agreements and instruments;
•adverse effects from activities we undertake to support the mortgage market and help borrowers, renters, lenders and servicers;
•actions we may be required to take by FHFA, in its role as our conservator or as our regulator, such as actions in response to the COVID-19 outbreak,pandemic, changes in the type of business we do, or actions relating to UMBS or our resecuritization of Freddie Mac-issued securities;
Fannie Mae First Quarter 2020 Form 10-Q58
MD&A | Forward-Looking Statements

•limitations on our business imposed by FHFA, in its role as our conservator or as our regulator;
•our future objectives and activities in support of those objectives, including actions we may take to reach additional underserved creditworthy borrowers;
•the possibility that future changes in leadership at FHFA or the Administration may result in changes in FHFA’s or Treasury’s willingness to pursue the administrative reform recommendations in the Treasury plan;our exit from conservatorship;
•our reliance on Common Securitization Solutions, LLC (“CSS”) and the common securitization platform for a majority of our single-family securitization activities, our reduced influence over CSS as a result of recent changes to the CSS limited liability company agreement and Board, and any additional changes FHFA may require in our relationship with or in our support of CSS;
•a decrease in our credit ratings;
•limitations on our ability to access the debt capital markets;
•continued limitationsconstraints on our ability to enterentry into new credit risk transfer transactions;
•significant changes in forbearance, modification and foreclosure activity;
•the volume and pace of future nonperforming and reperforming loan sales and their impact on our results and serious delinquency rates;
•changes in borrower behavior;
•actions we may take to mitigate losses, and the effectiveness of our loss mitigation strategies, management of our REO inventory and pursuit of contractual remedies;
•defaults by one or more institutional counterparties;
•resolution or settlement agreements we may enter into with our counterparties;
•our need to rely on third parties to fully achieve some of our corporate objectives;
•our reliance on mortgage servicers;
•changes in GAAP, guidance by the Financial Accounting Standards Board and changes to our accounting policies;
•changes in the fair value of our assets and liabilities;
•the stability and adequacy of the systems and infrastructure that impact our operations, including ours and those of CSS, our other counterparties and other third parties;
•the impact of increasing interdependence between the single-family mortgage securitization programs of Fannie Mae and Freddie Mac in connection with UMBS;
•operational control weaknesses;
•our reliance on models and future updates we make to our models, including the assumptions used by these models;
Fannie Mae First Quarter 2021 Form 10-Q69
MD&A | Forward-Looking Statements

•domestic and global political risks and uncertainties;
•natural disasters, environmental disasters, terrorist attacks, widespread health emergencies or pandemics, or other major disruptive events;
•severe weather events, fires, floods or other climate change events for which we may be uninsured or under-insured or that may affect our counterparties, and other risks resulting from climate change and efforts to address climate change;
•cyber attacks or other information security breaches or threats; and
•the other factors described in “Risk Factors” in this report and in our 20192020 Form 10-K.
Readers are cautioned not to unduly rely on the forward-looking statements we make and to place these forward-looking statements into proper context by carefully considering the factors discussed in “Risk Factors” in our 20192020 Form 10-K and in this report. These forward-looking statements are representative only as of the date they are made, and we undertake no obligation to update any forward-looking statement as a result of new information, future events or otherwise, except as required under the federal securities laws.
Fannie Mae First Quarter 20202021 Form 10-Q5970
 Financial Statements | Condensed Consolidated Balance Sheets

Item 1.  Financial Statements
FANNIE MAE
(In conservatorship)
Condensed Consolidated Balance Sheets — (Unaudited)
(Dollars in millions)
As ofAs of
March 31, 2020December 31, 2019March 31, 2021December 31, 2020
March 31, 2021December 31, 2020
ASSETSASSETSASSETS
Cash and cash equivalents Cash and cash equivalents  $80,463  $21,184  Cash and cash equivalents$26,538 $38,337 
Restricted cash (includes $41,331 and $33,294, respectively, related to consolidated trusts)48,245  40,223  
Federal funds sold and securities purchased under agreements to resell or similar arrangements  7,775  13,578  
Restricted cash and cash equivalents (includes $80,899 and $68,308, respectively, related to consolidated trusts)Restricted cash and cash equivalents (includes $80,899 and $68,308, respectively, related to consolidated trusts)87,803 77,286 
Federal funds sold and securities purchased under agreements to resell or similar arrangements (includes $40,837 and $0, respectively, related to consolidated trusts)Federal funds sold and securities purchased under agreements to resell or similar arrangements (includes $40,837 and $0, respectively, related to consolidated trusts)54,937 28,200 
Investments in securities: Investments in securities:  Investments in securities:
Trading, at fair value (includes $5,562 and $3,037, respectively, pledged as collateral)52,941  48,123  
Available-for-sale, at fair value (with an amortized cost of $2,147, net of allowance for credit losses of
$3 as of March 31, 2020)
2,289  2,404  
Trading, at fair value (includes $6,658 and $6,544, respectively, pledged as collateral)Trading, at fair value (includes $6,658 and $6,544, respectively, pledged as collateral)111,256 136,542 
Available-for-sale, at fair value (with an amortized cost of $1,440 and $1,606, net of allowance for credit losses of $3 as of March 31, 2021 and December 31, 2020)Available-for-sale, at fair value (with an amortized cost of $1,440 and $1,606, net of allowance for credit losses of $3 as of March 31, 2021 and December 31, 2020)1,502 1,697 
Total investments in securities Total investments in securities  55,230  50,527  Total investments in securities112,758 138,239 
Mortgage loans: Mortgage loans:  Mortgage loans:
Loans held for sale, at lower of cost or fair valueLoans held for sale, at lower of cost or fair value8,103  6,773  Loans held for sale, at lower of cost or fair value7,824 5,197 
Loans held for investment, at amortized cost: Loans held for investment, at amortized cost:  Loans held for investment, at amortized cost:
Of Fannie Mae Of Fannie Mae  98,585  94,911  Of Fannie Mae103,310 112,726 
Of consolidated trustsOf consolidated trusts3,269,331  3,241,494  Of consolidated trusts3,638,374 3,546,521 
Total loans held for investment (includes $7,701 and $7,825, respectively, at fair value)3,367,916  3,336,405  
Total loans held for investment (includes $6,048 and $6,490, respectively, at fair value) Total loans held for investment (includes $6,048 and $6,490, respectively, at fair value)3,741,684 3,659,247 
Allowance for loan losses Allowance for loan losses  (13,209) (9,016) Allowance for loan losses(9,628)(10,552)
Total loans held for investment, net of allowance Total loans held for investment, net of allowance  3,354,707  3,327,389  Total loans held for investment, net of allowance3,732,056 3,648,695 
Total mortgage loans Total mortgage loans  3,362,810  3,334,162  Total mortgage loans3,739,880 3,653,892 
Advances to lenders Advances to lenders  8,971  6,453  Advances to lenders10,572 10,449 
Deferred tax assets, net Deferred tax assets, net  12,831  11,910  Deferred tax assets, net12,516 12,947 
Accrued interest receivable, net (includes $8,417 and $8,172, respectively, related to consolidated trusts)8,808  8,604  
Accrued interest receivable, net (includes $9,732 and $9,635, respectively, related to consolidated trusts and net of allowance of $226 and $216 as of March 31, 2021 and December 31, 2020, respectively)Accrued interest receivable, net (includes $9,732 and $9,635, respectively, related to consolidated trusts and net of allowance of $226 and $216 as of March 31, 2021 and December 31, 2020, respectively)9,993 9,937 
Acquired property, net Acquired property, net  2,224  2,366  Acquired property, net1,183 1,261 
Other assets Other assets  13,999  14,312  Other assets13,923 15,201 
Total assets Total assets  $3,601,356  $3,503,319  Total assets$4,070,103 $3,985,749 
LIABILITIES AND EQUITYLIABILITIES AND EQUITYLIABILITIES AND EQUITY
Liabilities: Liabilities:  Liabilities:
Accrued interest payable (includes $9,386 and $9,361, respectively, related to consolidated trusts)$10,246  $10,228  
Accrued interest payable (includes $8,768 and $8,955, respectively, related to consolidated trusts)Accrued interest payable (includes $8,768 and $8,955, respectively, related to consolidated trusts)$9,585 $9,719 
Debt: Debt:  Debt:
Of Fannie Mae (includes $4,752 and $5,687, respectively, at fair value)228,458  182,247  
Of consolidated trusts (includes $22,855 and $21,880, respectively, at fair value)3,334,098  3,285,139  
Other liabilities (includes $355 and $376, respectively, related to consolidated trusts)14,609  11,097  
Of Fannie Mae (includes $3,336 and $3,728, respectively, at fair value)Of Fannie Mae (includes $3,336 and $3,728, respectively, at fair value)273,442 289,572 
Of consolidated trusts (includes $23,601 and $24,586, respectively, at fair value)Of consolidated trusts (includes $23,601 and $24,586, respectively, at fair value)3,740,538 3,646,164 
Other liabilities (includes $1,375 and $1,523, respectively, related to consolidated trusts)Other liabilities (includes $1,375 and $1,523, respectively, related to consolidated trusts)16,313 15,035 
Total liabilities Total liabilities  3,587,411  3,488,711  Total liabilities4,039,878 3,960,490 
Commitments and contingencies (Note 13)Commitments and contingencies (Note 13) —  —  Commitments and contingencies (Note 13)0 0 
Fannie Mae stockholders’ equity: Fannie Mae stockholders’ equity:  Fannie Mae stockholders’ equity:
Senior preferred stock (liquidation preference of $135,444 and $131,178, respectively)120,836  120,836  
Senior preferred stock (liquidation preference of $146,758 and $142,192, respectively)Senior preferred stock (liquidation preference of $146,758 and $142,192, respectively)120,836 120,836 
Preferred stock, 700,000,000 shares are authorized—555,374,922 shares issued and outstandingPreferred stock, 700,000,000 shares are authorized—555,374,922 shares issued and outstanding19,130  19,130  Preferred stock, 700,000,000 shares are authorized—555,374,922 shares issued and outstanding19,130 19,130 
Common stock, no par value, no maximum authorization—1,308,762,703 shares issued and
1,158,087,567 shares outstanding
Common stock, no par value, no maximum authorization—1,308,762,703 shares issued and
1,158,087,567 shares outstanding
687  687  Common stock, no par value, no maximum authorization—1,308,762,703 shares issued and 1,158,087,567 shares outstanding687 687 
Accumulated deficit Accumulated deficit  (119,454) (118,776) Accumulated deficit(103,117)(108,110)
Accumulated other comprehensive income Accumulated other comprehensive income  146  131  Accumulated other comprehensive income89 116 
Treasury stock, at cost, 150,675,136 sharesTreasury stock, at cost, 150,675,136 shares(7,400) (7,400) Treasury stock, at cost, 150,675,136 shares(7,400)(7,400)
Total stockholders’ equity (See Note 1: Senior Preferred Stock Purchase Agreement and Senior Preferred Stock for information on the related dividend obligation and liquidation preference)Total stockholders’ equity (See Note 1: Senior Preferred Stock Purchase Agreement and Senior Preferred Stock for information on the related dividend obligation and liquidation preference)13,945  14,608  Total stockholders’ equity (See Note 1: Senior Preferred Stock Purchase Agreement and Senior Preferred Stock for information on the related dividend obligation and liquidation preference)30,225 25,259 
Total liabilities and equity Total liabilities and equity  $3,601,356  $3,503,319  Total liabilities and equity$4,070,103 $3,985,749 
See Notes to Condensed Consolidated Financial Statements
Fannie Mae (In conservatorship) First Quarter 20202021 Form 10-Q6071

 Financial Statements | Condensed Consolidated Statements of Operations and Comprehensive Income

FANNIE MAE
(In conservatorship)
Condensed Consolidated Statements of Operations and Comprehensive Income — (Unaudited)
(Dollars and shares in millions, except per share amounts)
For the Three Months Ended March 31,For the Three Months Ended March 31,
2020201920212020
Interest income: Interest income:  Interest income:
Trading securities Trading securities  $316  $427  Trading securities$140 $316 
Available-for-sale securities Available-for-sale securities  31  53  Available-for-sale securities19 31 
Mortgage loans Mortgage loans  28,938  29,862  Mortgage loans23,353 28,938 
Federal funds sold and securities purchased under agreements to resell or similar arrangementsFederal funds sold and securities purchased under agreements to resell or similar arrangements107  263  Federal funds sold and securities purchased under agreements to resell or similar arrangements8 107 
Other Other  34  32  Other42 34 
Total interest income Total interest income  29,426  30,637  Total interest income23,562 29,426 
Interest expense: Interest expense:  Interest expense:
Short-term debtShort-term debt(102) (125) Short-term debt(3)(102)
Long-term debt Long-term debt  (23,977) (25,716) Long-term debt(16,817)(23,977)
Total interest expense Total interest expense  (24,079) (25,841) Total interest expense(16,820)(24,079)
Net interest income Net interest income  5,347  4,796  Net interest income6,742 5,347 
Benefit (provision) for credit lossesBenefit (provision) for credit losses (2,583) 650  Benefit (provision) for credit losses765 (2,583)
Net interest income after benefit (provision) for credit lossesNet interest income after benefit (provision) for credit losses 2,764  5,446  Net interest income after benefit (provision) for credit losses7,507 2,764 
Investment gains (losses), netInvestment gains (losses), net (158) 133  Investment gains (losses), net45 (158)
Fair value losses, net  (276) (831) 
Fair value gains (losses), netFair value gains (losses), net784 (276)
Fee and other income Fee and other income  308  134  Fee and other income87 120 
Non-interest loss  (126) (564) 
Non-interest income (loss)Non-interest income (loss)916 (314)
Administrative expenses: Administrative expenses:  Administrative expenses:
Salaries and employee benefits Salaries and employee benefits  (393) (386) Salaries and employee benefits(387)(393)
Professional services Professional services  (212) (225) Professional services(214)(212)
Other administrative expenses Other administrative expenses  (144) (133) Other administrative expenses(147)(144)
Total administrative expenses Total administrative expenses  (749) (744) Total administrative expenses(748)(749)
Foreclosed property expense  (80) (140) 
Foreclosed property income (expense)Foreclosed property income (expense)5 (80)
Temporary Payroll Tax Cut Continuation Act of 2011 (“TCCA”) feesTemporary Payroll Tax Cut Continuation Act of 2011 (“TCCA”) fees (637) (593) Temporary Payroll Tax Cut Continuation Act of 2011 (“TCCA”) fees(731)(637)
Credit enhancement expense Credit enhancement expense  (331) (171) Credit enhancement expense(284)(376)
Change in expected credit enhancement recoveriesChange in expected credit enhancement recoveries(31)188 
Other expenses, net Other expenses, net  (263) (207) Other expenses, net(319)(218)
Total expenses Total expenses  (2,060) (1,855) Total expenses(2,108)(1,872)
Income before federal income taxes Income before federal income taxes  578  3,027  Income before federal income taxes6,315 578 
Provision for federal income taxes Provision for federal income taxes  (117) (627) Provision for federal income taxes(1,322)(117)
Net income Net income  461  2,400  Net income4,993 461 
Other comprehensive income (loss):Other comprehensive income (loss): Other comprehensive income (loss):
Changes in unrealized gains (losses) on available-for-sale securities, net of reclassification adjustments and taxesChanges in unrealized gains (losses) on available-for-sale securities, net of reclassification adjustments and taxes18  (36) Changes in unrealized gains (losses) on available-for-sale securities, net of reclassification adjustments and taxes(23)18 
Other, net of taxes Other, net of taxes  (3) (3) Other, net of taxes(4)(3)
Total other comprehensive income (loss)Total other comprehensive income (loss) 15  (39) Total other comprehensive income (loss)(27)15 
Total comprehensive income Total comprehensive income  $476  $2,361  Total comprehensive income$4,966 $476 
Net income Net income  $461  $2,400  Net income$4,993 $461 
Dividends distributed or amounts attributable to senior preferred stockDividends distributed or amounts attributable to senior preferred stock(476) (2,361) Dividends distributed or amounts attributable to senior preferred stock(4,966)(476)
Net income (loss) attributable to common stockholdersNet income (loss) attributable to common stockholders $(15) $39  Net income (loss) attributable to common stockholders$27 $(15)
Earnings per share: Earnings per share:  Earnings per share:
Basic Basic  $0.00  $0.01  Basic$0.00 $0.00 
Diluted Diluted  0.00  0.01  Diluted0.00 0.00 
Weighted-average common shares outstanding: Weighted-average common shares outstanding:  Weighted-average common shares outstanding:
Basic Basic  5,867  5,762  Basic5,867 5,867 
Diluted Diluted  5,867  5,893  Diluted5,893 5,867 
See Notes to Condensed Consolidated Financial Statements
Fannie Mae (In conservatorship) First Quarter 20202021 Form 10-Q6172

 Financial Statements | Condensed Consolidated Statements of Cash Flows
FANNIE MAE
(In conservatorship)
Condensed Consolidated Statements of Cash Flows — (Unaudited)
(Dollars in millions)
For the Three Months Ended March 31,
20202019
Net cash provided by operating activities  $2,174  $1,816  
Cash flows provided by investing activities:  
Proceeds from maturities and paydowns of trading securities held for investment  13  15  
Proceeds from sales of trading securities held for investment  —  49  
Proceeds from maturities and paydowns of available-for-sale securities  96  113  
Proceeds from sales of available-for-sale securities  50  131  
Purchases of loans held for investment  (86,307) (33,631) 
Proceeds from repayments of loans acquired as held for investment of Fannie Mae  2,308  2,786  
Proceeds from sales of loans acquired as held for investment of Fannie Mae  —  26  
Proceeds from repayments and sales of loans acquired as held for investment of consolidated trusts169,656  88,419  
Advances to lenders  (45,248) (22,991) 
Proceeds from disposition of acquired property and preforeclosure sales  1,832  1,965  
Net change in federal funds sold and securities purchased under agreements to resell or similar arrangements5,803  10,688  
Other, net  (539) (124) 
Net cash provided by investing activities  47,664  47,446  
Cash flows used in financing activities:  
Proceeds from issuance of debt of Fannie Mae  254,559  173,122  
Payments to redeem debt of Fannie Mae  (207,818) (184,222) 
Proceeds from issuance of debt of consolidated trusts  135,918  64,821  
Payments to redeem debt of consolidated trusts  (164,726) (96,925) 
Payments of cash dividends on senior preferred stock to Treasury  —  (3,240) 
Other, net  (470) —  
Net cash provided by (used in) financing activities 17,463  (46,444) 
Net increase in cash, cash equivalents and restricted cash  67,301  2,818  
Cash, cash equivalents and restricted cash at beginning of period  61,407  49,423  
Cash, cash equivalents and restricted cash at end of period  $128,708  $52,241  
Cash paid during the period for:  
Interest  $28,867  $28,650  
Income taxes  —  —  






For the Three Months Ended March 31,
20212020
Net cash provided by operating activities$24,883 $2,174 
Cash flows provided by (used in) investing activities:
Proceeds from maturities and paydowns of trading securities held for investment13 13 
Proceeds from sales of trading securities held for investment97 0 
Proceeds from maturities and paydowns of available-for-sale securities69 96 
Proceeds from sales of available-for-sale securities115 50 
Purchases of loans held for investment(214,402)(86,307)
Proceeds from repayments of loans acquired as held for investment of Fannie Mae2,889 2,308 
Proceeds from repayments and sales of loans acquired as held for investment of consolidated trusts337,028 169,656 
Advances to lenders(114,805)(45,248)
Proceeds from disposition of acquired property and preforeclosure sales1,064 1,832 
Net change in federal funds sold and securities purchased under agreements to resell or similar arrangements(26,737)5,803 
Other, net228 (539)
Net cash provided by (used in) investing activities(14,441)47,664 
Cash flows provided by (used in) financing activities:
Proceeds from issuance of debt of Fannie Mae54,780 254,559 
Payments to redeem debt of Fannie Mae(69,735)(207,818)
Proceeds from issuance of debt of consolidated trusts339,056 135,918 
Payments to redeem debt of consolidated trusts(335,896)(164,726)
Other, net71 (470)
Net cash provided by (used in) financing activities(11,724)17,463 
Net increase (decrease) in cash, cash equivalents and restricted cash and cash equivalents(1,282)67,301 
Cash, cash equivalents and restricted cash and cash equivalents at beginning of period115,623 61,407 
Cash, cash equivalents and restricted cash and cash equivalents at end of period$114,341 $128,708 
Cash paid during the period for:
Interest$27,019 $28,867 
Income taxes0 0 








See Notes to Condensed Consolidated Financial Statements
Fannie Mae (In conservatorship) First Quarter 20202021 Form 10-Q6273

Financial Statements | Condensed Consolidated Statements of Changes in Equity (Deficit)
FANNIE MAE
(In conservatorship)
Condensed Consolidated Statements of Changes in
Equity (Deficit) — (Unaudited)
(Dollars and shares in millions)

Fannie Mae Stockholders’ Equity (Deficit)
Shares OutstandingSenior
Preferred Stock		Preferred
Stock		Common
Stock
Accumulated
Deficit		Accumulated
Other
Comprehensive
Income		Treasury
Stock		Total
Equity
Senior
Preferred		PreferredCommon
Balance as of December 31, 20191  556  1,158  $120,836  $19,130  $687  $(118,776) $131  $(7,400) $14,608  
Transition impact, net of tax, from the adoption of the current expected credit loss standard—  —  —  —  —  —  (1,139) —  —  (1,139) 
Balance as of January 1, 2020, adjusted1  556  1,158  120,836  19,130  687  (119,915) 131  (7,400) 13,469  
Senior preferred stock dividends paid—  —  —  —  —  —  —  —  —  —  
Comprehensive income:
Net income—  —  —  —  —  —  461  —  —  461  
Other comprehensive income, net of tax effect:
Changes in net unrealized gains on available-for-sale securities (net of taxes of $5)—  —  —  —  —  —  —  18  —  18  
Reclassification adjustment for gains included in net income (net of taxes of $—)—  —  —  —  —  —  —  —  —  —  
Other (net of taxes of $1)—  —  —  —  —  —  —  (3) —  (3) 
Total comprehensive income476  
Balance as of March 31, 20201  556  1,158  $120,836  $19,130  $687  $(119,454) $146  $(7,400) $13,945  
Fannie Mae Stockholders’ Equity
Shares OutstandingSenior
Preferred Stock		Preferred
Stock		Common
Stock
Accumulated
Deficit		Accumulated
Other
Comprehensive
Income		Treasury
Stock		Total
Equity
Senior
Preferred		PreferredCommon
Balance as of December 31, 20201 556 1,158 $120,836 $19,130 $687 $(108,110)$116 $(7,400)$25,259 
Comprehensive income:
Net income— — — — — — 4,993 — — 4,993 
Other comprehensive income, net of tax effect:
Changes in net unrealized gains on available- for-sale securities (net of taxes of $3)— — — — — — — (12)— (12)
Reclassification adjustment for gains included in net income (net of taxes of $3)— — — — — — — (11)— (11)
Other (net of taxes of $(1))— — — — — — — (4)— (4)
Total comprehensive income4,966 
Balance as of March 31, 20211 556 1,158 $120,836 $19,130 $687 $(103,117)$89 $(7,400)$30,225 

Fannie Mae Stockholders’ Equity (Deficit)
Shares OutstandingSenior
Preferred Stock		Preferred
Stock		Common
Stock
Accumulated
Deficit		Accumulated
Other
Comprehensive
Income		Treasury
Stock		Total
Equity
Senior
Preferred		PreferredCommon
Balance as of December 31, 20181  556  1,158  $120,836  $19,130  $687  $(127,335) $322  $(7,400) $6,240  
Senior preferred stock dividends paid—  —  —  —  —  —  (3,240) —  —  (3,240) 
Comprehensive income:
Net income—  —  —  —  —  —  2,400  —  —  2,400  
Other comprehensive income, net of tax effect:
Changes in net unrealized gains on available-for-sale securities (net of taxes of $2)—  —  —  —  —  —  —  8  —  8  
Reclassification adjustment for gains included in net income (net of taxes of $12)—  —  —  —  —  —  —  (44) —  (44) 
Other (net of taxes of $1)—  —  —  —  —  —  —  (3) —  (3) 
Total comprehensive income2,361  
Balance as of March 31, 20191  556  1,158  $120,836  $19,130  $687  $(128,175) $283  $(7,400) $5,361  






Fannie Mae Stockholders’ Equity
Shares OutstandingSenior
Preferred Stock		Preferred
Stock		Common
Stock
Accumulated
Deficit		Accumulated
Other
Comprehensive
Income		Treasury
Stock		Total
Equity
Senior
Preferred		PreferredCommon
Balance as of December 31, 20191 556 1,158 $120,836 $19,130 $687 $(118,776)$131 $(7,400)$14,608 
Transition impact, net of tax, from the adoption of
   the current expected credit loss standard		— — — — — — (1,139)— — (1,139)
Balance as of January 1, 2020, adjusted1 556 1,158 120,836 19,130 687 (119,915)131 (7,400)13,469 
Comprehensive income:
Net income— — — — — — 461 — — 461 
Other comprehensive income, net of tax effect:
Changes in net unrealized gains on available- for-sale securities (net of taxes of $5)— — — — — — — 18 — 18 
Reclassification adjustment for gains included in net income (net of taxes of $0)— — — — — — — 0 — 0 
Other (net of taxes of $1)— — — — — — — (3)— (3)
Total comprehensive income476 
Balance as of March 31, 20201 556 1,158 $120,836 $19,130 $687 $(119,454)$146 $(7,400)$13,945 






See Notes to Condensed Consolidated Financial Statements
Fannie Mae (In conservatorship) First Quarter 20202021 Form 10-Q6374

Notes to Condensed Consolidated Financial Statements | Summary of Significant Accounting Policies
FANNIE MAE
(In conservatorship)
Notes to Condensed Consolidated Financial Statements
(Unaudited)
1.  Summary of Significant Accounting Policies
Fannie Mae is a leading source of financing for mortgages in the United States. We are a stockholder-ownedshareholder-owned corporation organized as a government-sponsored entity (“GSE”) and existing under the Federal National Mortgage Association Charter Act (the “Charter Act” or our “charter”). We areOur charter is an act of Congress, and we have a government-sponsored enterprise (“GSE”),mission under that charter to provide liquidity and stability to the residential mortgage market and to promote access to mortgage credit. As a result, we are subject to government oversight and regulation. Our regulators include the Federal Housing Finance Agency (“FHFA”), the U.S. Department of Housing and Urban Development (“HUD”), the U.S. Securities and Exchange Commission (“SEC”), and the U.S. Department of the Treasury (“Treasury”). The U.S. government does not guarantee our securities or other obligations.
We have been under conservatorship, with FHFA acting as conservator, since September 6, 2008. See below and “Note 1, Summary of Significant Accounting Policies” in our annual report on Form 10-K for the year ended December 31, 20192020 (“20192020 Form 10-K”) for additional information on our conservatorship and the impact of U.S. government support of our business.
The unaudited interim condensed consolidated financial statements as of and for the three months ended March 31, 20202021 and related notes should be read in conjunction with our audited consolidated financial statements and related notes included in our 20192020 Form 10-K.
Basis of Presentation
The accompanying unaudited interim condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) for interim financial information and with the SEC’s instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and note disclosures required by GAAP for complete consolidated financial statements. In the opinion of management, all adjustments of a normal recurring nature considered necessary for a fair presentation have been included. The accompanying condensed consolidated financial statements include our accounts as well as the accounts of other entities in which we have a controlling financial interest. All intercompany accounts and transactions have been eliminated. To conform to our current period presentation, we have reclassified certain amounts reported in our prior period condensed consolidated financial statements. Results for the three months ended March 31, 20202021 may not necessarily be indicative of the results for the year ending December 31, 2020.2021.
Presentation of AdvancesRestricted Cash and Cash Equivalents
Restricted cash and cash equivalents includes funds held by consolidated MBS trusts that have not yet been remitted to Lenders
Advances to lenders representMBS certificateholders under the terms of our paymentsservicing guide and the related trust agreements. In the first quarter of cash in exchange for the receipt of mortgage loans from lenders in a transfer
that is accounted for as a secured lending arrangement. These transfers primarily occur when we provide early funding to
lenders for loans that they will subsequently either sell to us or securitize into a2021, Fannie Mae, MBSin its role as trustee, began to invest funds held by consolidated trusts directly in eligible short-term third-party investments, which may include investments in cash equivalents that they will deliver to us.
Early lender funding advancesare comprised of overnight repurchase agreements and U.S. Treasuries that have terms up to 60 daysa maturity at the date of acquisition of three months or less. The funds underlying these short-term investments are restricted per the trust agreements. Accordingly, any investment in cash equivalents should be classified as restricted and earn a short-term market rate of interest. Advances to lenders has beenis presented as a separate line item for all periods presented as increased mortgage refinance activity resulted“Restricted cash and cash equivalents” in a higherour condensed consolidated balance at period end. In prior periods, advancessheets to lenders were recorded in “Other assets.”
Presentationreflect the investment of Credit Enhancement Expense
Credit enhancement expense primarily consists of costs associated with our Connecticut Avenue Securities® (“CAS”) and Credit Insurance Risk TransferTM (“CIRTTM”) programs as well as enterprise-paid mortgage insurance (“EPMI”). We exclude from this expense costsfunds related to our CAS transactions accounted for as debt instruments and credit risk transfer programs accounted for as derivative instruments. Credit enhancement expense has been presented as a separate line item for all periods presented as the percentage of our book of business covered by freestanding credit enhancements has increased and become a more significant driver of our results of operations. In prior periods, credit enhancement expenses were recorded in “Other expenses, net.”
Presentation of Yield Maintenance Fees
Prior period multifamily yield maintenance fees have been reclassified to conform to the current period presentation. Multifamily yield maintenance fees, or prepayment premiums, are fees that a borrower pays when they prepay their loan. For multifamily loans held in consolidated trust, a portion of the yield maintenance fee is typically passed through to the holders of the trust certificate. As of January 1, 2020, we classify all yield maintenance fees as interest income. For consolidated loans, the portion of the fee passed through to the certificate holders of the trust is classified as interest expense. Previously, we classified multifamily yield maintenance fees as interest income when the fee was associated with a loan refinancing, otherwise the fee was classified as fee and other income. The portion of the fees passed through to the certificate holders of the trust were previously classified as interest expense when the fee was associated with a loan refinancing, otherwise the fee was classified as other expense. The changes in presentation have been applied retrospectively to all periods presented, which have been immaterial historically.
Fannie Mae (In conservatorship) First Quarter 2020 Form 10-Q64

Notes to Condensed Consolidated Financial Statements | Summary of Significant Accounting Policies
MBS trusts.
Use of Estimates
Preparing condensed consolidated financial statements in accordance with GAAP requires management to make estimates and assumptions that affect our reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the dates of our condensed consolidated financial statements, as well as our reported amounts of revenues and expenses during the reporting periods. Management has made significant estimates in a variety of areas including, but not limited to, the allowance for loan losses. For example, significant uncertainty regarding the expected impacts of the COVID-19 outbreakpandemic required substantial management judgment in assessing our allowance for loan losses as of March 31, 2020.2021. Actual results could differbe different from these estimates.
Fannie Mae (In conservatorship) First Quarter 2021 Form 10-Q75
Notes to Condensed Consolidated Financial Statements | Summary of Significant Accounting Policies
Conservatorship
On September 7, 2008, the Secretary of the Treasury and the Director of FHFA announced several actions taken by Treasury and FHFA regarding Fannie Mae, which included: (1) placing us in conservatorship, with FHFA acting as our conservator, and (2) the execution of a senior preferred stock purchase agreement by our conservator, on our behalf, and Treasury, pursuant to which we issued to Treasury both senior preferred stock and a warrant to purchase common stock.
Under the Federal Housing Enterprises Financial Safety and Soundness Act of 1992, as amended, including by the Federal Housing Finance Regulatory Reform Act of 2008 (together, the “GSE Act”), the conservator immediately succeeded to (1) all rights, titles, powers and privileges of Fannie Mae, and of any stockholder, officer or director of Fannie Mae with respect to Fannie Mae and its assets, and (2) title to the books, records and assets of any other legal custodian of Fannie Mae. The conservator subsequently issued an order that provided for our Board of Directors to exercise specified authorities. The conservator also provided instructions regarding matters for which conservator decision or notification is required. The conservator retains the authority to amend or withdraw its order and instructions at any time.
The conservator has the power to transfer or sell any asset or liability of Fannie Mae (subject to limitations and post-transfer notice provisions for transfers of qualified financial contracts) without any approval, assignment of rights or consent of any party. However, mortgage loans and mortgage-related assets that have been transferred to a Fannie Mae MBS trust must be held by the conservator for the beneficial owners of the Fannie Mae MBS and cannot be used to satisfy the general creditors of Fannie Mae. Neither the conservatorship nor the terms of our agreements with Treasury change our obligation to make required payments on our debt securities or perform under our mortgage guaranty obligations.
On September 5, 2019, Treasury released a plan to reform the housing finance system. The Treasury Housing Reform Plan (the “Treasury plan”) is far-reaching in scope and could have a significant impact on our structure, our role in the secondary mortgage market, our capitalization, our business and our competitive environment. The Treasury plan includes recommendations relating to ending our conservatorship, amending our senior preferred stock purchase agreement with Treasury, considering additional restrictions and requirements on our business, and many other matters. The Treasury plan recommends that Treasury’s commitment to provide funding under the senior preferred stock purchase agreement should be replaced with legislation that authorizes an explicit, paid-for guarantee backed by the full faith and credit of the Federal Government that is limited to the timely payment of principal and interest on qualifying MBS. The Treasury plan further recommends that, pending legislation, even after conservatorship Treasury should maintain its ongoing commitment to support our single-family and multifamily mortgage-backed securities through the senior preferred stock purchase agreement, as amended as contemplated by the plan.
The conservatorship has no specified termination date and there continues to be significant uncertainty regarding our future, including how long we will continue to exist in our current form, the extent of our role in the market, the level of government support of our business, how long we will be in conservatorship, what form we will have and what ownership interest, if any, our current common and preferred stockholders will hold in us after the conservatorship is terminated and whether we will continue to exist following conservatorship. Under the GSE Act, FHFA must place us into receivership if the Director of FHFA makes a written determination that our assets are less than our obligations or if we have not been paying our debts, in either case, for a period of 60 days. In addition, the Director of FHFA may place us into receivership at his discretion at any time for other reasons set forth in the GSE Act, including if we are critically undercapitalized or if we are undercapitalized and have no reasonable prospect of becoming adequately capitalized. Should we be placed into receivership, different assumptions would be required to determine the carrying value of our assets, which could lead to substantially different financial results. Treasury has made a commitment under the senior preferred stock purchase agreement to provide funding to us under certain circumstances if we have a net worth deficit. We are not aware of any plans of FHFA (1) to fundamentally change our business model, other than changes that might result from recommendations in the Treasury plan, if implemented, or (2) to reduce the aggregate amount available to or held by the company under our capital structure, which includes the senior preferred stock purchase agreement.
Senior Preferred Stock Purchase Agreement and Senior Preferred Stock
Under our senior preferred stock purchase agreement with Treasury, in September 2008 we issued Treasury 1000000 shares of senior preferred stock and a warrant to purchase shares of our common stock. The senior preferred stock purchase agreement and the dividend and liquidation provisions of the senior preferred stock were amended in January 2021 pursuant to a letter agreement between us, through FHFA in its capacity as conservator, and Treasury. These changes included the following:
•The dividend provisions of the senior preferred stock were amended to permit us to retain increases in our net worth until our net worth exceeds the amount of adjusted total capital necessary for us to meet the capital requirements and buffers under the enterprise regulatory capital framework discussed in “Note 12, Regulatory Capital Requirements” in our 2020 Form 10-K. After the “capital reserve end date,” which is defined as the last day of the second consecutive fiscal quarter during which we have maintained capital equal to, or in excess of, all of the capital requirements and buffers under the enterprise regulatory capital framework, the amount of quarterly dividends to Treasury will be equal to the lesser of any quarterly increase in our net worth and a 10% annual rate on the then-current liquidation preference of the senior preferred stock.
•At the end of each fiscal quarter, through and including the capital reserve end date, the liquidation preference of the senior preferred stock will be increased by an amount equal to the increase in our net worth, if any, during the immediately prior fiscal quarter.
Fannie Mae (In conservatorship) First Quarter 20202021 Form 10-Q6576

Notes to Condensed Consolidated Financial Statements | Summary of Significant Accounting Policies
Senior Preferred Stock Purchase Agreement•We may issue and Senior Preferred Stockretain up to $70 billion in proceeds from the sale ofcommon stock without Treasury’s prior consent, provided that (1) Treasury has already exercised its warrant in full, and (2) all currently pending significant litigation relating to the conservatorship and to an amendment to the senior preferred stock purchase agreement made in August 2012 has been resolved, which may require Treasury’s assent.
•FHFA may release us from conservatorship without Treasury’s consent after (1) all currently pending significant litigation relating to the conservatorship and to the August 2012 amendment to the senior preferred stock purchase agreement has been resolved, and (2) our common equity tier 1 capital, together with any other common stock that we may issue in a public offering, equals or exceeds 3% of our “adjusted total assets” under our enterprise regulatory capital framework.
•New restrictive covenants were added that will impact both our single-family and multifamily business activities.
The amendment has been accounted for as a modification of the existing arrangement. As a result, there is no change in the carrying value of the senior preferred stock.
Treasury has made a commitment under the senior preferred stock purchase agreement to provide funding to us under certain circumstances if we have a net worth deficit. Pursuant to the senior preferred stock purchase agreement, we have received a total of $119.8 billion from Treasury as of March 31, 2020,2021, and the amount of remaining funding available to us under the agreement wasis $113.9 billion. We have not received any funding from Treasury under this commitment since the first quarter of 2018.
Pursuant to the senior preferred stock purchase agreement, we issued shares of senior preferred stock in 2008. The current dividendDividend provisions of the senior preferred stock provide for quarterly dividends consisting of the amount, if any, by whichpermit us to retain increases in our net worth as of the end of the immediately preceding fiscal quarter exceeds a $25 billion capital reserve amount. We refer to this as a “net worth sweep” dividend. Because we had auntil our net worth exceeds the amount of $14.6 billion as of December 31, 2019, no dividends were payableadjusted total capital necessary for us to meet the first quarter ofcapital requirements and buffers under the enterprise regulatory capital framework established by FHFA in November 2020. And because we had a net worth of $13.9 billion as of March 31, 2020, no dividends are payable for the second quarter of 2020.
The liquidation preference of the senior preferred stock is subject to adjustment. The aggregate liquidation preference of the senior preferred stock increased from $131.2 billion as of December 31, 2019 to $135.4$146.8 billion as of March 31, 20202021 and will further increase to $151.7 billion as of June 30, 2021 due to the $5.0 billion increase in our net worth during the fourth quarter of 2019. Because our net worth did not increase during the first quarter of 2020, the aggregate liquidation preference of the senior preferred stock will remain at $135.4 billion as of June 30, 2020.2021.
See “Note 11, Equity” in our 20192020 Form 10-K for additional information about the senior preferred stock purchase agreement and the senior preferred stock.
RegulatoryStatutory Capital
We submit capital reports to FHFA, which monitors our capital levels. The deficit of core capital over statutory minimum capital was $131.3$119.5 billion as of March 31, 20202021 and $128.8$124.3 billion as of December 31, 2019.2020.
Related Parties
Because Treasury holds a warrant to purchase shares of Fannie Mae common stock equal to 79.9% of the total number of shares of Fannie Mae common stock, we and Treasury are deemed related parties. As of March 31, 2020,2021, Treasury held an investment in our senior preferred stock with an aggregate liquidation preference of $135.4$146.8 billion. See “Senior Preferred Stock Purchase Agreement and Senior Preferred Stock” above for additional information on transactions under this agreement and the modifications made in the January 2021 letter agreement.
FHFA’s control of both Fannie Mae and Freddie Mac has caused Fannie Mae, FHFA and Freddie Mac to be deemed related parties. Additionally, Fannie Mae and Freddie Mac jointly own Common Securitization Solutions, LLC (“CSS”), a limited liability company created to operate a common securitization platform; as such,a result, CSS is deemed a related party. As a part of our joint ownership, Fannie Mae, Freddie Mac and CSS are parties to a limited liability company agreement that sets forth the overall framework for the joint venture, including Fannie Mae’s and Freddie Mac’s rights and responsibilities as members of CSS. Fannie Mae, Freddie Mac and CSS are also parties to a customer services agreement that sets forth the terms under which CSS provides mortgage securitization services to us and Freddie Mac, including the operation of the common securitization platform as well as an administrative services agreement. CSS operates as a separate company from us and Freddie Mac, with all funding and limited administrative support services and other resources provided to it by us and Freddie Mac through our capital contributions.
In the ordinary course of business, Fannie Mae may purchase and sell securities issued by Treasury and Freddie Mac. These transactions occur on the same terms as those prevailing at the time for comparable transactions with unrelated parties. With our implementation of the Single Security Initiative in June 2019, someSome of the structured securities we issue are backed in whole or in part by Freddie Mac securities. Fannie Mae and Freddie Mac each have agreed to indemnify the other party for losses caused by: its failure to meet its payment or other specified obligations under the trust agreements pursuant to which the underlying resecuritized securities were issued; its failure to meet its obligations under the customer services agreement; its violations of laws; or with respect to material misstatements or omissions in offering documents, ongoing disclosures and related materials relating to the underlying resecuritized securities. Additionally, we make regular income tax payments to and receive tax refunds from the Internal Revenue Service (“IRS”), a bureau of Treasury.
Fannie Mae (In conservatorship) First Quarter 2021 Form 10-Q77
Notes to Condensed Consolidated Financial Statements | Summary of Significant Accounting Policies
Transactions with Treasury
Our administrative expenses were reduced by $4 million and $5 million for the three months ended March 31, 2021 and 2020, and 2019,respectively, due to reimbursements from Treasury and Freddie Mac for expenses incurred as program administrator for Treasury’s Home Affordable Modification Program and other initiatives under Treasury’s Making Home Affordable Program.
In December 2011, Congress enacted the Temporary Payroll Cut Continuation Act of 2011 (“TCCA”) which, among other provisions, required that we increase our single-family guaranty fees by at least 10 basis points and remit this increase to Treasury. Effective April 1, 2012, we increased the guaranty fee on all single-family residential mortgages delivered to us by 10 basis points. In 2012, FHFA and Treasury advised us to remit this fee increase to Treasury with respect to all loans acquired by us on or after April 1, 2012 and before January 1, 2022, and to continue to remit these amounts to Treasury on and after January 1, 2022 with respect to loans we acquired before this date until those loans are paid off or otherwise liquidated. The resulting fee revenue and expense are recorded in “Mortgage loans interest income”“Interest income: Mortgage loans” and “TCCA fees,” respectively, in our condensed consolidated statements of operations and comprehensive income.
In 2020, FHFA provided guidance that we are not required to accrue or remit TCCA fees to Treasury with respect to loans backing MBS trusts that have been delinquent for four months or longer. Once payments on such loans resume, we will resume accrual and remittance to Treasury of the associated TCCA fees on the loans.
We recognized $637$731 million and $593$637 million in TCCA fees during the three months ended March 31, 20202021 and 2019,2020, respectively, of which $637$727 million had not been remitted to Treasury as of March 31, 2020.
Fannie Mae (In conservatorship) First Quarter 2020 Form 10-Q66

Notes to Condensed Consolidated Financial Statements | Summary of Significant Accounting Policies
2021.
The GSE Act requires us to set aside certain funding obligations, a portion of which is attributable to Treasury’s Capital Magnet Fund. These funding obligations, recognized in “Other expenses, net” in our condensed consolidated statements of operations and comprehensive income, arewere measured as the product of 4.2 basis points and the unpaid principal balance of our total new business purchases for the respective period, and 35% of this amount is payable to Treasury’s Capital Magnet Fund. We recognized a total of $30$62 million and $15$30 million in “Other expenses, net” in connection with Treasury’s Capital Magnet Fund for the three months ended March 31, 20202021 and 2019,2020, respectively, of which $30$62 million hadhas not been remitted as of March 31, 2020.2021.
Transactions with FHFA
The GSE Act authorizes FHFA to establish an annual assessment for regulated entities, including Fannie Mae, which is payable on a semi-annual basis (April and October), for FHFA’s costs and expenses, as well as to maintain FHFA’s working capital. We recognized FHFA assessment fees, which are recorded in “Administrative expenses” in our condensed consolidated statements of operations and comprehensive income, of $32$37 million and $30$32 million for the three months ended March 31, 20202021 and 2019,2020, respectively.
Transactions with CSS and Freddie Mac
We contributed capital to CSS, the company we jointly own with Freddie Mac, of $29$27 million and $36$29 million for the three months ended March 31, 20202021 and 2019,2020, respectively.
In January 2020,
Derivatives
We recognize our derivatives as either assets or liabilities in our condensed consolidated balance sheets at FHFA’s direction we entered into an amended limited liability company agreement for CSS expanding the CSS Board of Managers from two members designated by each GSE to include (1) the CSS Chief Executive Officer; (2) a Board Chair not affiliated with either GSE or CSS (who was designated by FHFA in January 2020); and (3) up to three additional Board members not affiliated with either GSE or CSS who may be designated by FHFA while we and Freddie Mac both remain in conservatorship. As a result of the amendment, if FHFA were to designate three additional Board members, the four managers designated by us and Freddie Mac would constitute a minority of the CSS Board, and the Board could take actions without the approval of any of the managers we have designated on any matter during conservatorship andtheir fair value on a number of significant matters following either our or Freddie Mac’s exit from conservatorship.
Principles of Consolidation
Our condensed consolidated financial statements include our accounts as well as the accounts of the other entitiestrade date basis. Changes in which we have a controlling financial interest. All intercompany balances and transactions have been eliminated. The typical condition for a controlling financial interest is ownership of a majority of the voting interests of an entity. A controlling financial interest may also exist in entities through arrangements that do not involve voting interests, such as a variable interest entity (“VIE”).
Investments in Securities
Impairment of Available-for-Sale Debt Securities
An available-for-sale (“AFS”) debt security is impaired if the fair value of the investment is less than its amortized cost basis. Credit losses (benefits)and interest accruals on impaired AFS debt securities are recognized through an allowance for credit losses. Credit losses are evaluated on an individual security basis and are limited to the difference between thederivatives not in qualifying fair value of the debt security and its amortized cost basis. If we intend to sell a debt security or it is more likely than not that we will be required to sell the debt security before recovery, any allowance for credit losses on the debt security is reversed and the amortized cost basis of the debt security is written down to its fair value.
Mortgage Loans
Loans Held for Sale
When we acquire mortgage loans that we intend to sell or securitize via trusts that will not be consolidated, we classify the loanshedging relationships are recorded as held for sale (“HFS”). We report the carrying“fair value of HFS loans at the lower of cost or fair value. Any excess of an HFS loan’s cost over its fair value is recognized as a valuation allowance, with changes in the valuation allowance recognized as “Investment gains (losses), net” in our condensed consolidated statements of operations and comprehensive income. We recognize interest income on HFS loans on an accrual basis, unlessoffset the carrying amounts of certain derivatives that are in gain positions and loss positions as well as cash collateral receivables and payables associated with derivative positions pursuant to the terms of enforceable master netting arrangements. We offset these amounts only when we have the legal right to offset under the contract and we have met all the offsetting conditions. For our over-the-counter (“OTC”) derivative positions, our master netting arrangements allow us to net derivative assets and liabilities with the same counterparty. For our cleared derivative contracts, our master netting arrangements allow us to net our exposure by clearing organization and by clearing member.
After offsetting, we report derivatives in a gain position in “Other assets” and derivatives in a loss position in “Other liabilities” in our condensed consolidated balance sheets.
We evaluate financial instruments that we purchase or issue and other financial and non-financial contracts for embedded derivatives. To identify embedded derivatives that we must account for separately, we determine thatwhether: (1) the ultimate collectioneconomic characteristics of contractual principalthe embedded derivative are not clearly and closely related to the economic characteristics of the financial instrument or interest payments in fullother contract (i.e., the host contract); (2) the financial instrument or other contract itself is not reasonably assured. Purchased premiums, discounts and other cost basis adjustments on HFS loans are deferred upon loan acquisition,already measured at fair value with changes in fair value included in the cost basis of the loan,earnings; and not amortized. We determine any lower of cost or fair value adjustment on HFS loans at an individual loan level.
For nonperforming loans transferred from held for investment (“HFI”) to HFS, based upon(3) a change in our intent, we record the loans at the lower of cost or fair value on the date of transfer. When the fair value of the nonperforming loan is less than its amortized cost, we record a write-off against the allowance for loan losses in an amount equal to the difference between the amortized cost basis and the fair value of the loan. If the amount written off upon transfer exceeds the allowance related to theseparate
Fannie Mae (In conservatorship) First Quarter 20202021 Form 10-Q6778

Notes to Condensed Consolidated Financial Statements | Summary of Significant Accounting Policies
instrument with the same terms as the embedded derivative would meet the definition of a derivative. If the embedded derivative meets all three of these conditions, we elect to carry the hybrid contract in its entirety at fair value with changes in fair value recorded in earnings.
Fair value hedge accounting
In January 2021, to reduce earnings volatility related to changes in benchmark interest rates, we began applying fair value hedge accounting to certain pools of single-family mortgage loans and certain issuances of our funding debt by designating such instruments as the hedged item in hedging relationships with interest-rate swaps. In these relationships, we have designated the change in the benchmark interest rate, either the London Inter-bank Offered Rate (“LIBOR”) or Secured Overnight Financing Rate (“SOFR”), as the risk being hedged. We have elected to use the last-of-layer method to hedge certain pools of single-family mortgage loans. This election involves establishing fair value hedging relationships on the portion of each loan pool that is not expected to be affected by prepayments, defaults and other events that affect the timing and amount of cash flows. The term of each hedging relationship is generally one business day and we establish hedging relationships daily to align our hedge accounting with our risk management practices.
We apply hedge accounting to qualifying hedging relationships. A qualifying hedging relationship exists when changes in the fair value of a derivative hedging instrument are expected to be highly effective in offsetting changes in the fair value of the hedged item attributable to the risk being hedged during the term of the hedging relationship. We assess hedge effectiveness using statistical regression analysis. A hedging relationship is considered highly effective if the total change in fair value of the hedging instrument and the change in the fair value of the hedged item due to changes in the benchmark interest rate offset each other within a range of 80% to 125% and certain other statistical tests are met.
If a hedging relationship qualifies for hedge accounting, the change in the fair value of the interest-rate swaps and the change in the fair value of the hedged item for the risk being hedged are recorded through net interest income. A corresponding basis adjustment is recorded against the hedged item, either the pool of mortgage loans or the debt, for the changes in the fair value attributable to the risk being hedged. For hedging relationships that hedge pools of single-family mortgage loans, basis adjustments are allocated to individual single-family loans based on the relative unpaid principal balance of each loan at the termination of the hedging relationship. The cumulative basis adjustments on the hedged item are amortized into earnings using the effective interest method over the contractual life of the hedged item, with amortization beginning upon termination of the hedging relationship.
All changes in fair value of the designated portion of the derivative hedging instrument (i.e., interest-rate swap), including interest accruals, are recorded in the same line item in the condensed consolidated statements of operations and comprehensive income used to record the earnings effect of the hedged item. Therefore, changes in the fair value of the hedged mortgage loans and debt attributable to the risk being hedged are recognized in “Interest income” or “Interest expense,” along with the changes in the fair value of the respective derivative hedging instruments.
The recognition of basis adjustments on the hedged item and the subsequent amortization are noncash activities and are reported in “Net cash provided by operating activities” in our condensed consolidated statements of cash flows. Cash on derivative instruments paid or received while the derivative is designated in a hedging relationship is reported as “Net cash provided by operating activities” in the condensed consolidated statement of cash flows.
See “Note 3, Mortgage Loans,” “Note 7, Short-Term and Long-Term Debt” and “Note 8, Derivative Instruments” for additional information on our fair value hedge accounting policy and related disclosures.
Earnings per Share
Earnings per share (“EPS”) is presented for basic and diluted EPS. We compute basic EPS by dividing net income attributable to common stockholders by the weighted-average number of shares of common stock outstanding during the period. However, as a result of our conservatorship status and the terms of the senior preferred stock, no amounts would be available to distribute as dividends to common or preferred stockholders (other than to Treasury as the holder of the senior preferred stock). Net income (loss) attributable to common stockholders excludes amounts attributable to the senior preferred stock. Weighted average common shares include 4.7 billionshares for the periods ended March 31, 2021 and 2020 that would have been issued upon the full exercise of the warrant issued to Treasury from the date the warrant was issued through March 31, 2021 and 2020.
The calculation of diluted EPS includes all the components of basic earnings per share, plus the dilutive effect of common stock equivalents such as convertible securities and stock options. Weighted average shares outstanding is increased to include the number of additional common shares that would have been outstanding if the dilutive potential common shares had been issued. Our diluted EPS weighted-average shares outstanding includes 26 million shares issuable upon the conversion of convertible preferred stock as of March 31, 2021. For the three months ended March
Fannie Mae (In conservatorship) First Quarter 2021 Form 10-Q79
Notes to Condensed Consolidated Financial Statements | Summary of Significant Accounting Policies
transferred loan,31, 2020, convertible preferred stock is not included in the calculation because a net loss attributable to common shareholders was incurred and it would have an anti-dilutive effect.
2.  Consolidations and Transfers of Financial Assets
We have interests in various entities that are considered to be variable interest entities (“VIEs”). The primary types of entities are securitization and resecuritization trusts, limited partnerships and special purpose vehicles (“SPVs”). These interests include investments in securities issued by VIEs, such as Fannie Mae MBS created pursuant to our securitization transactions and our guaranty to the entity. We consolidate the substantial majority of our single-class securitization trusts because our role as guarantor and master servicer provides us with the power to direct matters (primarily the servicing of mortgage loans) that impact the credit risk to which we recordare exposed. In contrast, we do not consolidate single-class securitization trusts when other organizations have the excesspower to direct these activities unless we have the unilateral ability to dissolve the trust. We also do not consolidate our resecuritization trusts unless we have the unilateral ability to dissolve the trust. Historically, the vast majority of underlying assets of our resecuritization trusts were limited to Fannie Mae securities that were collateralized by mortgage loans held in provisionconsolidated trusts. However, with our issuance of uniform mortgage-backed securities (“UMBS®”), we include securities issued by Freddie Mac in some of our resecuritization trusts. The mortgage loans that serve as collateral for Freddie Mac-issued securities are not held in trusts that are consolidated by Fannie Mae.
Unconsolidated VIEs
We do not consolidate VIEs when we are not deemed to be the primary beneficiary. Our unconsolidated VIEs include securitization and resecuritization trusts, limited partnerships, and certain SPVs designed to transfer credit losses. Ifrisk. The following table displays the amounts written offcarrying amount and classification of our assets and liabilities that relate to our involvement with unconsolidated securitization and resecuritization trusts.
As of
March 31, 2021December 31, 2020
(Dollars in millions)
Assets and liabilities recorded in our condensed consolidated balance sheets related to unconsolidated mortgage-backed trusts:
Assets:
Trading securities:
Fannie Mae$1,243 $1,611 
Non-Fannie Mae3,598 3,608 
Total trading securities4,841 5,219 
Available-for-sale securities:
Fannie Mae1,036 1,168 
Non-Fannie Mae279 318 
Total available-for-sale securities1,315 1,486 
Other assets39 41 
Other liabilities(65)(67)
Net carrying amount$6,130 $6,679 
Our maximum exposure to loss generally represents the greater of our carrying value in the entity or the unpaid principal balance of the assets covered by our guaranty. Our involvement in unconsolidated resecuritization trusts may give rise to additional exposure to loss depending on the type of resecuritization trust. Fannie Mae non-commingled resecuritization trusts are less thanbacked entirely by Fannie Mae MBS. These non-commingled single-class and multi-class resecuritization trusts are not consolidated and do not give rise to any additional exposure to loss as we already consolidate the allowanceunderlying collateral.
Fannie Mae commingled resecuritization trusts are backed in whole or in part by Freddie Mac securities. The guaranty that we provide to these commingled resecuritization trusts may increase our exposure to loss to the extent that we are providing a guaranty for the timely payment and interest on the underlying Freddie Mac securities that we have not previously guaranteed. Our maximum exposure to loss for these unconsolidated trusts is measured by the amount of Freddie Mac securities that are held in these resecuritization trusts. Our maximum exposure to loss related to
Fannie Mae (In conservatorship) First Quarter 2021 Form 10-Q80
Notes to Condensed Consolidated Financial Statements | Consolidations and Transfers of Financial Assets

unconsolidated securitization and resecuritization trusts, which includes but is not limited to our exposure to these Freddie Mac securities, was approximately $164 billion and $146 billion as of March 31, 2021 and December 31, 2020, respectively. The total assets of our unconsolidated securitization and resecuritization trusts were approximately $230 billion and $180 billion as of March 31, 2021 and December 31, 2020, respectively.
The maximum exposure to loss for our unconsolidated limited partnerships and similar legal entities, which consist of low-income housing tax credit investments (“LIHTC”), community investments and other entities, was $169 million and the related net carrying value was $163 million as of March 31, 2021. As of December 31, 2020, the maximum exposure to loss was $126 million and the related net carrying value was $121 million. The total assets of these limited partnership investments were $2.5 billion as of March 31, 2021 and $2.6 billion as of December 31, 2020.
The maximum exposure to loss related to our involvement with unconsolidated SPVs that transfer credit risk represents the unpaid principal balance and accrued interest payable of obligations issued by the Connecticut Avenue Securities® (“CAS”) and Multifamily Connecticut Avenue Securities (“MCAS”) SPVs. The maximum exposure to loss related to these unconsolidated SPVs was $10.4 billion and $11.4 billion as of March 31, 2021 and December 31, 2020, respectively. The total assets related to these unconsolidated SPVs were $10.5 billion and $11.4 billion as of March 31, 2021 and December 31, 2020, respectively.
The unpaid principal balance of our multifamily loan portfolio was $388.6 billion as of March 31, 2021. As our lending relationship does not provide us with a controlling financial interest in the borrower entity, we do not consolidate these borrowers regardless of their status as either a VIE or a voting interest entity. We have excluded these entities from our VIE disclosures. However, the disclosures we have provided in “Note 3, Mortgage Loans,” “Note 4, Allowance for Loan Losses” and “Note 6, Financial Guarantees” with respect to this population are consistent with the FASB’s stated objectives for the disclosures related to unconsolidated VIEs.
Transfers of Financial Assets
We issue Fannie Mae MBS through portfolio securitization transactions by transferring pools of mortgage loans or mortgage-related securities to one or more trusts or special purpose entities. We are considered to be the transferor when we recognizetransfer assets from our own retained mortgage portfolio in a benefitportfolio securitization transaction. For the three months ended March 31, 2021 and 2020, the unpaid principal balance of portfolio securitizations was $216.7 billion and $89.0 billion, respectively. The substantial majority of these portfolio securitization transactions generally do not qualify for credit losses.sale treatment. Portfolio securitization trusts that do qualify for sale treatment primarily consist of loans that are guaranteed or insured, in whole or in part, by the U.S. government.
Nonperforming loans include both seriously delinquentWe retain interests from the transfer and reperformingsale of mortgage-related securities to unconsolidated single-class and multi-class portfolio securitization trusts. As of March 31, 2021, the unpaid principal balance of retained interests was $1.4 billion and its related fair value was $2.5 billion. As of December 31, 2020, the unpaid principal balance of retained interests was $1.7 billion and its related fair value was $2.9 billion. For the three months ended March 31, 2021 and 2020, the principal, interest and other fees received on retained interests was $143 million and $181 million, respectively.
Fannie Mae (In conservatorship) First Quarter 2021 Form 10-Q81
Notes to Condensed Consolidated Financial Statements | Mortgage Loans
3.  Mortgage Loans
We own single-family mortgage loans, which are secured by four or fewer residential dwelling units, and multifamily mortgage loans, that were previously delinquent butwhich are performing again because paymentssecured by five or more residential dwelling units. We classify these loans as either held for investment (“HFI”) or held for sale (“HFS”). We report the amortized cost of HFI loans for which we have not elected the fair value option at the unpaid principal balance, net of unamortized premiums and discounts, hedge-related basis adjustments, other cost basis adjustments, and accrued interest receivable, net. For purposes of our condensed consolidated balance sheets, we present accrued interest receivable, net separately from the amortized cost of our loans held for investment. We report the carrying value of HFS loans at the lower of cost or fair value and record valuation changes in “Investment gains (losses), net” in our condensed consolidated statements of operations and comprehensive income. See “Note 1, Summary of Significant Accounting Policies” and “Note 8, Derivative Instruments” for additional information on hedge-related basis adjustments and on implementation of our fair value hedge accounting program in January 2021.
For purposes of the single-family mortgage loan disclosures below, we display loans by class of financing receivable type. Financing receivable classes used for disclosure consist of: “20- and 30-year or more, amortizing fixed-rate,” “15-year or less, amortizing fixed-rate,” “Adjustable-rate,” and “Other.” The “Other” class primarily consists of reverse mortgage loans, interest-only loans, negative-amortizing loans and second liens.
The following table displays the carrying value of our mortgage loans and allowance for loan losses.
As of
March 31, 2021December 31, 2020
(Dollars in millions)
Single-family$3,286,381 $3,216,146 
Multifamily388,591 373,722 
Total unpaid principal balance of mortgage loans3,674,972 3,589,868 
Cost basis and fair value adjustments, net74,536 74,576 
Allowance for loan losses for HFI loans(9,628)(10,552)
Total mortgage loans(1)
$3,739,880 $3,653,892 
(1)Excludes $9.9 billion and $9.8 billion of accrued interest receivable, net of allowance as of March 31, 2021 and December 31, 2020, respectively.
The following tables display information about our redesignation of loans from HFI to HFS and the sales of mortgage loans during the period.
For the Three Months Ended March 31,
20212020
(Dollars in millions)
Single-family loans redesignated from HFI to HFS:
Amortized cost$3,112 $1,637 
Lower of cost or fair value adjustment at time of redesignation(1)
(54)(9)
Allowance reversed at time of redesignation361 184 
Single-family loans sold:
Unpaid principal balance$208 $0 
Realized gains, net2 0 
(1)Consists of the write-off against the allowance at the time of redesignation.
The amortized cost of single-family mortgage loans for which formal foreclosure proceedings were in process was $4.7 billion and $5.0 billion as of March 31, 2021 and December 31, 2020, respectively. As a result of our various loss mitigation and foreclosure prevention efforts, we expect that a portion of the loans in the process of formal foreclosure proceedings will not ultimately foreclose. In addition, in response to the COVID-19 pandemic, we have become current withprohibited our servicers from completing foreclosures on our single-family loans through at least June 30, 2021, except in the case of vacant or withoutabandoned properties.
Fannie Mae (In conservatorship) First Quarter 2021 Form 10-Q82
Notes to Condensed Consolidated Financial Statements | Mortgage Loans
Aging Analysis
The following tables display an aging analysis of the usetotal amortized cost of our HFI mortgage loans by portfolio segment and class, excluding loans for which we have elected the fair value option.
Pursuant to the CARES Act, for purposes of reporting to the credit bureaus, servicers must report a borrower receiving a COVID-19-related payment accommodation during the covered period, such as a forbearance plan or loan modification, plan. as current if the borrower was current prior to receiving the accommodation and the borrower makes all required payments in accordance with the accommodation. For purposes of our disclosures regarding delinquency status, we report loans receiving COVID-19-related payment forbearance as delinquent according to the contractual terms of the loan.
 As of March 31, 2021
30 - 59 Days
Delinquent
60 - 89 Days Delinquent
Seriously Delinquent(1)
Total DelinquentCurrentTotalLoans 90 Days or More Delinquent and Accruing InterestNonaccrual Loans with No Allowance
 (Dollars in millions)
Single-family:
20- and 30-year or more, amortizing fixed-rate$17,400 $7,024 $79,349 $103,773 $2,688,967 $2,792,740 $51,671 $6,461 
15-year or less, amortizing fixed-rate1,742 492 4,275 6,509 475,960 482,469 3,424 210 
Adjustable-rate180 63 993 1,236 26,549 27,785 735 116 
Other(2)
801 317 4,494 5,612 45,188 50,800 2,132 860 
Total single-family20,123 7,896 89,111 117,130 3,236,664 3,353,794 57,962 7,647 
Multifamily(3)
1,495 N/A2,531 4,026 387,841 391,867 404 183 
Total$21,618 $7,896 $91,642 $121,156 $3,624,505 $3,745,661 $58,366 $7,830 
 As of December 31, 2020
30 - 59 Days
Delinquent
60 - 89 Days Delinquent
Seriously Delinquent(1)
Total DelinquentCurrentTotalLoans 90 Days or More Delinquent and Accruing InterestNonaccrual Loans with No Allowance
 (Dollars in millions)
Single-family:
20- and 30-year or more, amortizing fixed-rate$24,928 $9,414 $88,276 $122,618 $2,619,585 $2,742,203 $68,526 $6,028 
15-year or less, amortizing fixed-rate1,987 601 5,028 7,616 449,443 457,059 4,292 240 
Adjustable-rate268 97 1,143 1,508 29,933 31,441 907 114 
Other(2)
1,150 458 5,037 6,645 47,937 54,582 2,861 771 
Total single-family28,333 10,570 99,484 138,387 3,146,898 3,285,285 76,586 7,153 
Multifamily(3)
1,140 N/A3,688 4,828 372,598 377,426 610 302 
Total$29,473 $10,570 $103,172 $143,215 $3,519,496 $3,662,711 $77,196 $7,455 
(1)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.
In
Fannie Mae (In conservatorship) First Quarter 2021 Form 10-Q83
Notes to Condensed Consolidated Financial Statements | Mortgage Loans
(2)Reverse mortgage loans included in “Other” are not aged due to their nature and are included in the event thatcurrent column.
(3)Multifamily loans 60-89 days delinquent are included in the seriously delinquent column.
Credit Quality Indicators
The following tables display the total amortized cost of our single-family HFI loans by class, year of origination and credit quality indicator, excluding loans for which we reclassifyhave elected the fair value option. The estimated mark-to-market loan-to-value (“LTV”) ratio is a performing loan from HFI to HFS, based upon a change inprimary factor we consider when estimating our intent, the allowance for loan losses previously recordedfor single-family loans. As LTV ratios increase, the borrower's equity in the home decreases, which may negatively affect the borrower's ability to refinance or to sell the property for an amount at or above the outstanding balance of the loan.
 
As of March 31, 2021, by Year of Origination(1)
20212020201920182017PriorTotal
 (Dollars in millions)
Estimated mark-to-market LTV ratio:(2)
20- and 30-year or more, amortizing fixed-rate:
Less than or equal to 80%$187,046 $848,710 $216,806 $124,252 $158,591 $885,994 $2,421,399 
Greater than 80% and less than or equal to 90%23,830 180,295 51,499 10,692 2,706 5,552 274,574 
Greater than 90% and less than or equal to 100%25,159 66,092 1,710 578 157 1,556 95,252 
Greater than 100%0 25 6 24 58 1,402 1,515 
Total 20- and 30-year or more, amortizing fixed-rate236,035 1,095,122 270,021 135,546 161,512 894,504 2,792,740 
15-year or less, amortizing fixed-rate:
Less than or equal to 80%48,003 187,390 35,975 13,779 28,112 161,802 475,061 
Greater than 80% and less than or equal to 90%1,137 4,953 292 19 9 19 6,429 
Greater than 90% and less than or equal to 100%356 587 4 2 3 9 961 
Greater than 100%0 0 0 2 3 13 18 
Total 15-year or less, amortizing fixed-rate49,496 192,930 36,271 13,802 28,127 161,843 482,469 
Adjustable-rate:
Less than or equal to 80%111 2,757 1,608 2,006 3,982 16,940 27,404 
Greater than 80% and less than or equal to 90%11 189 79 35 15 13 342 
Greater than 90% and less than or equal to 100%6 29 2 0 0 1 38 
Greater than 100%0 0 0 0 0 1 1 
Total adjustable-rate128 2,975 1,689 2,041 3,997 16,955 27,785 
Other:
Less than or equal to 80%0 0 39 318 779 34,761 35,897 
Greater than 80% and less than or equal to 90%0 0 1 15 31 1,000 1,047 
Greater than 90% and less than or equal to 100%0 0 2 5 11 456 474 
Greater than 100%0 0 0 3 5 485 493 
Total other0 0 42 341 826 36,702 37,911 
Total$285,659 $1,291,027 $308,023 $151,730 $194,462 $1,110,004 $3,340,905 
Total for all classes by LTV ratio:(2)
Less than or equal to 80%$235,160 $1,038,857 $254,428 $140,355 $191,464 $1,099,497 $2,959,761 
Greater than 80% and less than or equal to 90%24,978 185,437 51,871 10,761 2,761 6,584 282,392 
Greater than 90% and less than or equal to 100%25,521 66,708 1,718 585 171 2,022 96,725 
Greater than 100%0 25 6 29 66 1,901 2,027 
Total$285,659 $1,291,027 $308,023 $151,730 $194,462 $1,110,004 $3,340,905 
Fannie Mae (In conservatorship) First Quarter 2021 Form 10-Q84
Notes to Condensed Consolidated Financial Statements | Mortgage Loans
As of December 31, 2020, by Year of Origination(1)
20202019201820172016PriorTotal
(Dollars in millions)
Estimated mark-to-market LTV ratio:(2)
20- and 30-year or more, amortizing fixed-rate:
Less than or equal to 80%$794,156 $233,994 $135,849 $183,315 $221,172 $775,636 $2,344,122 
Greater than 80% and less than or equal to 90%157,500 85,227 23,440 5,270 1,592 5,958 278,987 
Greater than 90% and less than or equal to 100%109,743 4,186 820 250 124 1,994 117,117 
Greater than 100%28 7 28 77 81 1,756 1,977 
Total 20- and 30-year or more, amortizing fixed-rate1,061,427 323,414 160,137 188,912 222,969 785,344 2,742,203 
15-year or less, amortizing fixed-rate:
Less than or equal to 80%181,418 41,374 15,768 31,497 46,088 132,596 448,741 
Greater than 80% and less than or equal to 90%6,105 811 35 14 8 20 6,993 
Greater than 90% and less than or equal to 100%1,274 9 3 4 3 10 1,303 
Greater than 100%0 0 3 3 3 13 22 
Total 15-year or less, amortizing fixed-rate188,797 42,194 15,809 31,518 46,102 132,639 457,059 
Adjustable-rate:
Less than or equal to 80%2,935 1,839 2,412 4,765 2,678 16,248 30,877 
Greater than 80% and less than or equal to 90%234 152 79 19 5 12 501 
Greater than 90% and less than or equal to 100%56 3 1 0 0 2 62 
Greater than 100%0 0 0 0 0 1 1 
Total adjustable-rate3,225 1,994 2,492 4,784 2,683 16,263 31,441 
Other:
Less than or equal to 80%0 41 328 811 1,028 36,216 38,424 
Greater than 80% and less than or equal to 90%0 2 20 43 30 1,298 1,393 
Greater than 90% and less than or equal to 100%0 2 8 16 10 602 638 
Greater than 100%0 0 4 8 9 631 652 
Total other0 45 360 878 1,077 38,747 41,107 
Total$1,253,449 $367,647 $178,798 $226,092 $272,831 $972,993 $3,271,810 
Total for all classes by LTV ratio:(2)
Less than or equal to 80%$978,509 $277,248 $154,357 $220,388 $270,966 $960,696 $2,862,164 
Greater than 80% and less than or equal to 90%163,839 86,192 23,574 5,346 1,635 7,288 287,874 
Greater than 90% and less than or equal to 100%111,073 4,200 832 270 137 2,608 119,120 
Greater than 100%28 7 35 88 93 2,401 2,652 
Total$1,253,449 $367,647 $178,798 $226,092 $272,831 $972,993 $3,271,810 
(1)Excludes $12.9 billion and $13.5 billion as of March 31, 2021 and December 31, 2020, respectively, of mortgage loans guaranteed or insured, in whole or in part, by the U.S. government or one of its agencies, which represents primarily reverse mortgages for which we do not calculate an estimated mark-to-market LTV ratio.
(2)The aggregate estimated mark-to-market LTV ratio is based on the unpaid principal balance of the loan divided by the estimated current value of the property as of the end of each reported period, which we calculate using an internal valuation model that estimates periodic changes in home value.
Fannie Mae (In conservatorship) First Quarter 2021 Form 10-Q85
Notes to Condensed Consolidated Financial Statements | Mortgage Loans
The following tables display the total amortized cost in our multifamily HFI mortgageloans by year of origination and credit-risk rating, excluding loans for which we have elected the fair value option. Property rental income and property valuations are key inputs to our internally assigned credit risk ratings.
As of March 31, 2021, by Year of Origination
20212020201920182017PriorTotal
(Dollars in millions)
Internally assigned credit risk rating:
Non-classified(1)
$11,295 $81,647 $67,630 $61,280 $49,903 $108,429 $380,184 
Classified(2)
0 204 1,185 1,673 2,882 5,739 11,683 
Total$11,295 $81,851 $68,815 $62,953 $52,785 $114,168 $391,867 
As of December 31, 2020, by Year of Origination
20202019201820172016PriorTotal
(Dollars in millions)
Internally assigned credit risk rating:
Non-classified(1)
$71,977 $68,296 $62,087 $50,907 $43,174 $70,933 $367,374 
Classified(2)
37 1,041 1,529 2,616 1,579 3,250 10,052 
Total$72,014 $69,337 $63,616 $53,523 $44,753 $74,183 $377,426 
(1)A loan categorized as “Non-classified” is reversed through earningscurrent or adequately protected by the current financial strength and debt service capability of the borrower.
(2)Represents loans classified as “Substandard” or “Doubtful.” Loans classified as “Substandard” have a well-defined weakness that jeopardizes the timely full repayment. “Doubtful” refers to a loan with a weakness that makes collection or liquidation in full highly questionable and improbable based on existing conditions and values. As of March 31, 2021 and December 31, 2020, we had loans with an amortized cost of $4 million and less than $1 million, respectively, classified as doubtful.
Troubled Debt Restructurings
A modification to the contractual terms of a loan that results in granting a concession to a borrower experiencing financial difficulties is considered a troubled debt restructuring (“TDR”). In addition to formal loan modifications, we also engage in other loss mitigation activities with troubled borrowers, which include repayment plans and forbearance arrangements, both of which represent informal agreements with the borrower that do not result in the legal modification of the loan’s contractual terms. We account for these informal restructurings as a TDR if we defer more than three missed payments. We also classify loans to certain borrowers who have received bankruptcy relief as TDRs. However, our current TDR accounting described herein is temporarily impacted by our election to account for certain eligible loss mitigation activities under the COVID-19 Relief granted pursuant to the CARES Act and the Consolidated Appropriations Act of 2021. See “Note 1, Summary of Significant Accounting Policies” in our 2020 Form 10-K for more information on the relief from TDR accounting and disclosure requirements.
The substantial majority of the loan modifications accounted for as a TDR result in term extensions, interest rate reductions or a combination of both. During the three months ended March 31, 2021 and 2020, the average term extension of a single-family modified loan was 138 months and 168 months, respectively, and the average interest rate reduction was 0.52 and 0.32 percentage points, respectively.
Fannie Mae (In conservatorship) First Quarter 2021 Form 10-Q86
Notes to Condensed Consolidated Financial Statements | Mortgage Loans
The following table displays the number of loans and amortized cost of loans classified as a TDR during the period.
For the Three Months Ended March 31,
20212020
Number of LoansAmortized CostNumber of LoansAmortized Cost
(Dollars in millions)
Single-family:
20- and 30-year or more, amortizing fixed-rate2,989 $471 10,856 $1,909 
15-year or less, amortizing fixed-rate369 28 1,073 98 
Adjustable-rate41 6 144 24 
Other154 18 537 68 
Total single-family3,553 523 12,610 2,099 
Multifamily0 0 0 0 
Total TDRs3,553 $523 12,610 $2,099 
For loans that defaulted in the period presented and that were classified as a TDR in the twelve months prior to the default, the following table displays the number of loans and the amortized cost of these loans at the time of reclassification. The mortgage loan is reclassified into HFS at its amortized cost basis and a valuation allowance is established to the extent that the amortized cost basis of the loan exceeds its fair value. The initial recognition of the valuation allowance and any subsequent changes are recorded as a gain or loss in “Investment gains (losses), net.”
Loans Held for Investment
When we acquire mortgage loans that we have the ability and the intent to hold for the foreseeable future or until maturity, we classify the loans as HFI. When we consolidate a securitization trust, we recognize the loans underlying the trust in our condensed consolidated balance sheets. The trusts do not have the ability to sell mortgage loans and the use of such loans is limited exclusively to the settlement of obligations of the trusts. Therefore, mortgage loans acquired when we have the intent to securitize via consolidated trusts are generally classified as HFI in our condensed consolidated balance sheets both prior to and subsequent to their securitization.
We report the carrying value of HFI loans at the unpaid principal balance, net of unamortized premiums and discounts, other cost basis adjustments, and allowance for loan losses. We define the amortized cost of HFI loans as unpaid principal balance and accrued interest receivable, net of unamortized premiums, discounts, and other cost basis adjustments.payment default. For purposes of our condensed consolidated balance sheets,this disclosure, we present accrued interest receivable separately fromdefine loans that had a payment default as: single-family and multifamily loans with completed TDRs that liquidated during the amortized costperiod, either through foreclosure, deed-in-lieu of ourforeclosure, or a short sale; single-family loans held for investment. We recognize interest income on HFIwith completed modifications that are two or more months delinquent during the period; or multifamily loans on an accrual basis usingwith completed modifications that are one or more months delinquent during the effective yield method over the contractual life of the loan, including the amortization of any deferred cost basis adjustments, such as the premium or discount at acquisition, unless we determine that the ultimate collection of contractual principal or interest payments in full is not reasonably assured.period.
For the Three Months Ended March 31,
20212020
Number of LoansAmortized CostNumber of LoansAmortized Cost
(Dollars in millions)
Single-family:
20- and 30-year or more, amortizing fixed-rate7,172 $1,327 3,175 $521 
15-year or less, amortizing fixed-rate152 11 50 3 
Adjustable-rate11 2 7 1 
Other633 112 327 51 
Total single-family7,968 1,452 3,559 576 
Multifamily0 0 2 2 
Total TDRs that subsequently defaulted7,968 $1,452 3,561 $578 
Nonaccrual LoansUnconsolidated VIEs
We discontinue accruing interest on loansdo not consolidate VIEs when we believe collectability of principal or interest isare not reasonably assured, which for a single-family loan we have determined, based on our historical experience,deemed to be when the loan becomes two monthsprimary beneficiary. Our unconsolidated VIEs include securitization and resecuritization trusts, limited partnerships, and certain SPVs designed to transfer credit risk. The following table displays the carrying amount and classification of our assets and liabilities that relate to our involvement with unconsolidated securitization and resecuritization trusts.
As of
March 31, 2021December 31, 2020
(Dollars in millions)
Assets and liabilities recorded in our condensed consolidated balance sheets related to unconsolidated mortgage-backed trusts:
Assets:
Trading securities:
Fannie Mae$1,243 $1,611 
Non-Fannie Mae3,598 3,608 
Total trading securities4,841 5,219 
Available-for-sale securities:
Fannie Mae1,036 1,168 
Non-Fannie Mae279 318 
Total available-for-sale securities1,315 1,486 
Other assets39 41 
Other liabilities(65)(67)
Net carrying amount$6,130 $6,679 
Our maximum exposure to loss generally represents the greater of our carrying value in the entity or more past due accordingthe unpaid principal balance of the assets covered by our guaranty. Our involvement in unconsolidated resecuritization trusts may give rise to its contractual terms. Interest previously accrued but not collected on loans is reversed through interest income at the date a loan is placed on nonaccrual status. For single-family loans on nonaccrual status, we recognize income when cash payments are received. We return a non-modified single-family loanadditional exposure to accrual status at the point that the borrower brings the loan current. We return a modified single-family loan to accrual status at the point that the borrower successfully makes all required payments during the trial period (generally three to four months) and the modification is made permanent. As of January 1, 2020, we place a multifamily loan on nonaccrual status when the loan becomes two months or more past due according to its contractual terms unless the loan is well secured such that collectability of principal and accrued interest is reasonably assured. For multifamily loans on nonaccrual status, we apply any payment received on a cost recovery basis to reduce principalloss depending on the mortgage loan. We return a multifamily loan to accrual status when the borrower cures the delinquencytype of the loan. Transactions related to the multifamily nonaccrual policy have been immaterial historically.
Allowance for Loan Losses
Our allowance for loan losses is a valuation account that is deducted from the amortized cost basis of HFI loans to present the net amount expected to be collected on the loans. The allowance for loan losses reflects an estimate of expected credit losses on single-family and multifamily HFI loans heldresecuritization trust. Fannie Mae non-commingled resecuritization trusts are backed entirely by Fannie Mae MBS. These non-commingled single-class and bymulti-class resecuritization trusts are not consolidated and do not give rise to any additional exposure to loss as we already consolidate the underlying collateral.
Fannie Mae MBS trusts. Estimatescommingled resecuritization trusts are backed in whole or in part by Freddie Mac securities. The guaranty that we provide to these commingled resecuritization trusts may increase our exposure to loss to the extent that we are providing a guaranty for the timely payment and interest on the underlying Freddie Mac securities that we have not previously guaranteed. Our maximum exposure to loss for these unconsolidated trusts is measured by the amount of credit losses are based on expected cash flows derived from internal models that estimate loan performance under simulated ranges of economic environments. Our modeled loan performance is based on our historical experience of loans with similar risk characteristics adjusted to reflect current conditions and reasonable and supportable forecasts. Our historical loss experience and our credit loss estimates capture the possibility of remote events that could result in credit losses on loansFreddie Mac securities that are considered low risk. The allowance for loans losses does not consider benefits from freestanding credit enhancements, such as our CAS and CIRT programs and multifamily Delegated Underwriting and Servicing (“DUS®”) lender risk-sharing arrangements, which are recordedheld in “Other assets” in our condensed consolidated balance sheets. We have elected notthese resecuritization trusts. Our maximum exposure to measure an allowance for credit losses on accrued interest receivable balances as we have a nonaccrual policyloss related to ensure the timely reversal of unpaid accrued interest. See “Note 4, Allowance for Loan Losses” for additional information about our current period provision for loan losses, including a discussion of the estimates used in measuring the impact of the COVID-19 outbreak on our allowance.
Changes to our estimate of expected credit losses, including changes due to the passage of time, are recorded through the benefit (provision) for credit losses. When calculating our allowance for loan losses, we consider only our amortized cost in the loans at the balance sheet date. We record write-offs as a reduction to the allowance for loan losses when losses are
Fannie Mae (In conservatorship) First Quarter 20202021 Form 10-Q6880

Notes to Condensed Consolidated Financial Statements | Summary of Significant Accounting Policies
confirmed through the receipt of assets in satisfaction of a loan, such as the underlying collateral upon foreclosure or cash upon completion of a short sale. Additionally, we record write-offs as a reduction to our allowance for loan losses when a loan is determined to be uncollectible and upon the transfer of a nonperforming loan from HFI to HFS. We include expected recoveries of amounts previously written off and expected to be written off in determining our allowance for loan losses.
Single-Family Loans
We estimate the amount expected to be collected on our single-family loans using a discounted cash flow approach. Our allowance for loan losses is calculated as the difference between the amortized cost basis of the loan and the present value of expected cash flows on the loan. Expected cash flows include payments from the borrower, net of servicing fees, contractually attached credit enhancements and proceeds from the sale of the underlying collateral, net of selling costs.
When foreclosure of a single-family loan is probable, the allowance for loan losses is calculated as the difference between the amortized cost basis of the loan and the fair value of the collateral as of the reporting date, adjusted for the estimated costs to sell the property and the amount of expected recoveries from contractually attached credit enhancements or other proceeds we expect to receive.
Expected cash flows are developed using internal models that capture market and loan characteristic inputs. Market inputs include information such as actual and forecasted home prices, interest rates, volatility, and spreads, while loan characteristic inputs include information such as mark-to-market loan-to-value (“LTV”) ratios, delinquency status, geography, and borrower FICO credit scores. The model assigns a probability to borrower events including contractual payment, loan payoff and default under various economic environments based on historical data, current conditions, and reasonable and supportable forecasts.
The two primary drivers of our forecasted economic environments are interest rates and home prices. Our model projects the range of possible interest rate scenarios over the life of the loan based on actual interest rates and observed option pricing volatility in the capital markets. We develop regional forecasts based on Metropolitan Statistical Area data for single-family home prices using a multi-path simulation that captures home price projections over a five-year period, the period for which we can develop reasonable and supportable forecasts. After the five-year period, the home price forecast immediately reverts to a historical long-term growth rate.
Expected cash flows on the loan are discounted at the effective interest rate on the loan, adjusted for expected prepayments. For single-family loans that have not been modified in a troubled debt restructuring (“TDR”), the discount rate is updated each reporting period to reflect changes in expected prepayments. Expected cash flows do not include expected extensions of the contractual term unless such extension is the result of a reasonably expected TDR.
We consider the effects of actual and reasonably expected TDRs in our estimate of credit losses. These effects include any economic concession provided or expected to be provided to a borrower experiencing financial difficulty. We consider our current servicing practices and our historical experience to estimate reasonably expected TDRs. When a loan is contractually modified in a TDR, to capture the concession, the discount rate on the loan is locked to the rate in effect just prior to the modification and is no longer updated for changes in expected prepayments.
Multifamily Loans
Our allowance for loan losses on multifamily loans is calculated based on estimated probabilities of default and loss severities to derive expected loss ratios, which are then applied to the amortized cost basis of the loans. Our probabilities of default and severity are estimated using internal models based on historical loss experience of loans with similar risk characteristics that affect credit performance, such as debt service coverage ratio (“DSCR”), mark-to-market LTV ratio, collateral type, age, loan size, geography, prepayment penalty term, and note type. Our models simulate a range of possible future economic scenarios, which are used to estimate probabilities of default and loss severities. Key inputs to our models include rental income, which drives expected DSCRs for our loans, and capitalization rates, which project future property values. Our reasonable and supportable forecasts for multifamily rental income and capitalization rates, which are projected based on Metropolitan Statistical Area data, extend through the contractual maturity of the loans. For TDRs, we use a discounted cash flow approach to estimate expected credit losses.
When foreclosure of a multifamily loan is probable, the allowance for loan losses is calculated as the difference between the amortized cost basis of the loan and the fair value of the collateral as of the reporting date, adjusted for the estimated costs to sell the property and the amount of expected recoveries from contractually attached credit enhancements or other proceeds we expect to receive.
Fannie Mae (In conservatorship) First Quarter 2020 Form 10-Q69

Notes to Condensed Consolidated Financial Statements | Summary of Significant Accounting Policies
Earnings per Share
Earnings per share (“EPS”) is presented for basic and diluted EPS. We compute basic EPS by dividing net income attributable to common stockholders by the weighted-average number of shares of common stock outstanding during the period. However, as a result of our conservatorship status and the terms of the senior preferred stock, no amounts would be available to distribute as dividends to common or preferred stockholders (other than to Treasury as the holder of the senior preferred stock). Net income (loss) attributable to common stockholders excludes amounts attributable to the senior preferred stock. Weighted average common shares include 4.7 billion and 4.6 billion shares for the periods ended March 31, 2020 and 2019, respectively, that would be issued upon the full exercise of the warrant issued to Treasury from the date the warrant was issued through March 31, 2020 and 2019, respectively.
The calculation of diluted EPS includes all the components of basic earnings per share, plus the dilutive effect of common stock equivalents such as convertible securities and stock options. Weighted average shares outstanding is increased to include the number of additional common shares that would have been outstanding if the dilutive potential common shares had been issued. For the three months ended March 31, 2020, convertible preferred stock is not included in the calculation because a net loss attributable to common shareholders was incurred and it would have an anti-dilutive effect. For the three months ended March 31, 2019, our diluted EPS weighted average shares outstanding includes shares of common stock that would be issuable upon the conversion of 131 million shares of convertible preferred stock.
New Accounting Guidance
The CARES Act and Interagency Regulatory Guidance
Section 4013 of the Coronavirus Aid, Relief, and Economic Security Act, referred to as the CARES Act, which was enacted in March 2020, provides temporary relief from the accounting and reporting requirements for TDRs regarding certain loan modifications related to COVID-19. The CARES Act provides that a financial institution may elect to suspend the TDR requirements under GAAP for loan modifications related to the COVID-19 pandemic that occur between March 1, 2020 through the earlier of December 31, 2020 or 60 days after the date on which the COVID-19 outbreak national emergency terminates (the “Applicable Period”), as long as the loan was not more than 30 days delinquent as of December 31, 2019. Loan modifications are defined in this section of the CARES Act to include forbearance arrangements, repayment plans, interest rate modifications, and any similar arrangement that defer or delay the payment of principal or interest.
We have elected to account for eligible loan modifications under Section 4013 of the CARES Act. Therefore, the initial relief (i.e., the forbearance arrangement) and the subsequent agreements (i.e., repayment plans and loan modifications) that are necessary to allow the borrower to repay the past due amounts (collectively, the “COVID-19 Relief”), will not be subject to the specialized accounting or disclosures that are required for TDRs if the initial relief related to COVID-19 is granted during the Applicable Period and the borrower was no more than 30 days past due as of December 31, 2019.
In addition to the CARES Act, the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, National Credit Union Administration, Office of the Comptroller of the Currency, Consumer Financial Protection Bureau and the State Banking Regulators (collectively, the “Banking Agencies”) issued an Interagency Statement on Loan Modifications and Reporting for Financial Institutions Working with Customers Affected by the Coronavirus (the “Interagency Statement”) in April 2020. The Interagency Statement primarily provides incremental guidance related to the nonaccrual of interest income. It indicates that financial institutions may continue to accrue interest income on loans that are granted short-term (e.g., six months) payment delays, such as forbearance, if the delay is in response to COVID-19 and the borrower was less than 30 days past due at the time the delay was granted. We are still evaluating this option provided under the Interagency Statement for loans that have received short-term payment deferrals related to the COVID-19 pandemic. Our election on this matter will be finalized during the second quarter of 2020 as this guidance did not affect our first quarter financial statements.
The Current Expected Credit Loss Standard
The Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) 2016-13, Financial Instruments—Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments in June 2016, which was later amended by ASU 2019-04, ASU 2019-05 and ASU 2019-11. These ASUs (the “CECL standard”) replaced the existing incurred loss impairment methodology for loans that are collectively evaluated for impairment with a methodology that reflects lifetime expected credit losses and requires consideration of a broader range of reasonable and supportable forecast information to develop a lifetime credit loss estimate. The CECL standard also requires credit losses related to AFS debt securities to be recorded through an allowance for credit losses. Our adoption of this standard on January 1, 2020 did not have a material impact on our portfolio of AFS debt securities.
The CECL standard became effective for our fiscal year beginning January 1, 2020. We have changed our accounting policies as described above and implemented system, model and process changes to adopt the standard. Upon adoption, we used a discounted cash flow method to measure expected credit losses on our single-family mortgage loans and an undiscounted loss method to measure expected credit losses on our multifamily mortgage loans. The models used to estimate credit losses incorporated our historical credit loss experience, adjusted for current economic forecasts and the current credit profile of our
Fannie Mae (In conservatorship) First Quarter 2020 Form 10-Q70

Notes to Condensed Consolidated Financial Statements | Summary of Significant Accounting Policies
loan book of business. The models used reasonable and supportable forecasts for key economic drivers, such as home prices (single-family), rental income (multifamily) and capitalization rates (multifamily).
The adoption of the CECL standard on January 1, 2020 reduced our retained earnings by $1.1 billion on an after-tax basis. The adoption of this guidance increased our overall credit loss reserves primarily as the result of an increase in our single-family loan loss reserves that were previously evaluated on a collective basis for impairment. This increase was partially offset by a decrease in estimated credit losses on loans that were previously considered individually impaired (our TDRs).
The increase in our single-family loan loss reserves that were previously evaluated on a collective basis was primarily driven by the migration from an incurred-loss approach, which allowed us to consider only default events and economic conditions that already existed as of each financial reporting date, to an estimate that incorporates both expected default events over the expected life of each mortgage loan and a forecast of home prices in different economic environments over a reasonable and supportable period. The increase in loss reserves for this portion of our book was low relative to its size due to the credit quality of these loans and because as of the date of adoption our current model forecasted home price growth.
The allowance for loan losses on the TDR book was already measured using an expected lifetime credit loss estimate. The credit losses on this portion of our single-family book decreased upon the adoption of the CECL standard because the new guidance required us to exclude from our estimate of credit losses all pre-foreclosure and post-foreclosure costs that are expected to be advanced after the balance sheet date. Prior to the adoption of the CECL standard, we incorporated these costs in our estimate of credit losses for this book.
Impacts on Key Balance Sheet Line Items upon Implementation of the CECL Standard
The following table discloses the impact of adopting the CECL standard on key balance sheet line items.
Balance as of December 31, 2019Transition Impact from Adoption of the CECL StandardBalance as of January 1, 2020
(Dollars in millions)
Mortgage loans held for sale$6,773  $50  $6,823  
Allowance for loan losses(9,016) (1,722) (10,738) 
Other assets(1)
14,312  230  14,542  
Deferred tax assets, net11,910  303  12,213  
Accumulated deficit (beginning retained earnings)(118,776) (1,139) (119,915) 
(1)Transition adjustment primarily represents the reclassification and recognition of freestanding credit enhancements not contractually attached to the loan.
For a discussion of the current period measurement of our allowance for loan losses under the CECL standard, including the expected impact of the COVID-19 outbreak, see “Note 4, Allowance for Loan Losses.”
Reference Rate Reform
In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting (“ASU 2020-04”), which provides optional temporary relief to ease the potential burden of transitioning away from LIBOR and other discontinued interest rates. Specifically, ASU 2020-04 provides optional practical expedients and exceptions under GAAP related to contract modifications and hedging relationships that reference LIBOR or another reference rate expected to be discontinued. Qualifying for the accounting relief provided by ASU 2020-04 is subject to meeting certain criteria and is generally only available to contract modifications made and hedging relationships entered into or evaluated prospectively from March 12, 2020 through December 31, 2022.
We did not enter into any contract modifications between March 12, 2020 and March 31, 2020 that would be eligible for the accounting relief provided by ASU 2020-04. We also had no hedge accounting relationships during that period. We will continue to evaluate ASU 2020-04 to determine the timing and extent to which we will apply the provided accounting relief.
Fannie Mae (In conservatorship) First Quarter 2020 Form 10-Q71

Notes to Condensed Consolidated Financial Statements | Consolidations and Transfers of Financial Assets

2.  Consolidationsunconsolidated securitization and resecuritization trusts, which includes but is not limited to our exposure to these Freddie Mac securities, was approximately $164 billion and $146 billion as of March 31, 2021 and December 31, 2020, respectively. The total assets of our unconsolidated securitization and resecuritization trusts were approximately $230 billion and $180 billion as of March 31, 2021 and December 31, 2020, respectively.
The maximum exposure to loss for our unconsolidated limited partnerships and similar legal entities, which consist of low-income housing tax credit investments (“LIHTC”), community investments and other entities, was $169 million and the related net carrying value was $163 million as of March 31, 2021. As of December 31, 2020, the maximum exposure to loss was $126 million and the related net carrying value was $121 million. The total assets of these limited partnership investments were $2.5 billion as of March 31, 2021 and $2.6 billion as of December 31, 2020.
The maximum exposure to loss related to our involvement with unconsolidated SPVs that transfer credit risk represents the unpaid principal balance and accrued interest payable of obligations issued by the Connecticut Avenue Securities® (“CAS”) and Multifamily Connecticut Avenue Securities (“MCAS”) SPVs. The maximum exposure to loss related to these unconsolidated SPVs was $10.4 billion and $11.4 billion as of March 31, 2021 and December 31, 2020, respectively. The total assets related to these unconsolidated SPVs were $10.5 billion and $11.4 billion as of March 31, 2021 and December 31, 2020, respectively.
The unpaid principal balance of our multifamily loan portfolio was $388.6 billion as of March 31, 2021. As our lending relationship does not provide us with a controlling financial interest in the borrower entity, we do not consolidate these borrowers regardless of their status as either a VIE or a voting interest entity. We have excluded these entities from our VIE disclosures. However, the disclosures we have provided in “Note 3, Mortgage Loans,” “Note 4, Allowance for Loan Losses” and “Note 6, Financial Guarantees” with respect to this population are consistent with the FASB’s stated objectives for the disclosures related to unconsolidated VIEs.
Transfers of Financial Assets
We have interests in various entities thatissue Fannie Mae MBS through portfolio securitization transactions by transferring pools of mortgage loans or mortgage-related securities to one or more trusts or special purpose entities. We are considered to be variable interest entities (“VIEs”).the transferor when we transfer assets from our own retained mortgage portfolio in a portfolio securitization transaction. For the three months ended March 31, 2021 and 2020, the unpaid principal balance of portfolio securitizations was $216.7 billion and $89.0 billion, respectively. The primary types of entities are securitization and resecuritization trusts, limited partnerships and special purpose vehicles (“SPVs”). These interests include investments in securities issued by VIEs, such as Fannie Mae MBS created pursuant to our securitization transactions and our guaranty to the entity. We consolidate the substantial majority of our single-classthese portfolio securitization transactions generally do not qualify for sale treatment. Portfolio securitization trusts becausethat do qualify for sale treatment primarily consist of loans that are guaranteed or insured, in whole or in part, by the U.S. government.
We retain interests from the transfer and sale of mortgage-related securities to unconsolidated single-class and multi-class portfolio securitization trusts. As of March 31, 2021, the unpaid principal balance of retained interests was $1.4 billion and its related fair value was $2.5 billion. As of December 31, 2020, the unpaid principal balance of retained interests was $1.7 billion and its related fair value was $2.9 billion. For the three months ended March 31, 2021 and 2020, the principal, interest and other fees received on retained interests was $143 million and $181 million, respectively.
Fannie Mae (In conservatorship) First Quarter 2021 Form 10-Q81
Notes to Condensed Consolidated Financial Statements | Mortgage Loans
3.  Mortgage Loans
We own single-family mortgage loans, which are secured by four or fewer residential dwelling units, and multifamily mortgage loans, which are secured by five or more residential dwelling units. We classify these loans as either held for investment (“HFI”) or held for sale (“HFS”). We report the amortized cost of HFI loans for which we have not elected the fair value option at the unpaid principal balance, net of unamortized premiums and discounts, hedge-related basis adjustments, other cost basis adjustments, and accrued interest receivable, net. For purposes of our rolecondensed consolidated balance sheets, we present accrued interest receivable, net separately from the amortized cost of our loans held for investment. We report the carrying value of HFS loans at the lower of cost or fair value and record valuation changes in “Investment gains (losses), net” in our condensed consolidated statements of operations and comprehensive income. See “Note 1, Summary of Significant Accounting Policies” and “Note 8, Derivative Instruments” for additional information on hedge-related basis adjustments and on implementation of our fair value hedge accounting program in January 2021.
For purposes of the single-family mortgage loan disclosures below, we display loans by class of financing receivable type. Financing receivable classes used for disclosure consist of: “20- and 30-year or more, amortizing fixed-rate,” “15-year or less, amortizing fixed-rate,” “Adjustable-rate,” and “Other.” The “Other” class primarily consists of reverse mortgage loans, interest-only loans, negative-amortizing loans and second liens.
The following table displays the carrying value of our mortgage loans and allowance for loan losses.
As of
March 31, 2021December 31, 2020
(Dollars in millions)
Single-family$3,286,381 $3,216,146 
Multifamily388,591 373,722 
Total unpaid principal balance of mortgage loans3,674,972 3,589,868 
Cost basis and fair value adjustments, net74,536 74,576 
Allowance for loan losses for HFI loans(9,628)(10,552)
Total mortgage loans(1)
$3,739,880 $3,653,892 
(1)Excludes $9.9 billion and $9.8 billion of accrued interest receivable, net of allowance as guarantorof March 31, 2021 and master servicer provides usDecember 31, 2020, respectively.
The following tables display information about our redesignation of loans from HFI to HFS and the sales of mortgage loans during the period.
For the Three Months Ended March 31,
20212020
(Dollars in millions)
Single-family loans redesignated from HFI to HFS:
Amortized cost$3,112 $1,637 
Lower of cost or fair value adjustment at time of redesignation(1)
(54)(9)
Allowance reversed at time of redesignation361 184 
Single-family loans sold:
Unpaid principal balance$208 $0 
Realized gains, net2 0 
(1)Consists of the write-off against the allowance at the time of redesignation.
The amortized cost of single-family mortgage loans for which formal foreclosure proceedings were in process was $4.7 billion and $5.0 billion as of March 31, 2021 and December 31, 2020, respectively. As a result of our various loss mitigation and foreclosure prevention efforts, we expect that a portion of the loans in the process of formal foreclosure proceedings will not ultimately foreclose. In addition, in response to the COVID-19 pandemic, we have prohibited our servicers from completing foreclosures on our single-family loans through at least June 30, 2021, except in the case of vacant or abandoned properties.
Fannie Mae (In conservatorship) First Quarter 2021 Form 10-Q82
Notes to Condensed Consolidated Financial Statements | Mortgage Loans
Aging Analysis
The following tables display an aging analysis of the total amortized cost of our HFI mortgage loans by portfolio segment and class, excluding loans for which we have elected the fair value option.
Pursuant to the CARES Act, for purposes of reporting to the credit bureaus, servicers must report a borrower receiving a COVID-19-related payment accommodation during the covered period, such as a forbearance plan or loan modification, as current if the borrower was current prior to receiving the accommodation and the borrower makes all required payments in accordance with the poweraccommodation. For purposes of our disclosures regarding delinquency status, we report loans receiving COVID-19-related payment forbearance as delinquent according to direct matters (primarily the servicingcontractual terms of the loan.
 As of March 31, 2021
30 - 59 Days
Delinquent
60 - 89 Days Delinquent
Seriously Delinquent(1)
Total DelinquentCurrentTotalLoans 90 Days or More Delinquent and Accruing InterestNonaccrual Loans with No Allowance
 (Dollars in millions)
Single-family:
20- and 30-year or more, amortizing fixed-rate$17,400 $7,024 $79,349 $103,773 $2,688,967 $2,792,740 $51,671 $6,461 
15-year or less, amortizing fixed-rate1,742 492 4,275 6,509 475,960 482,469 3,424 210 
Adjustable-rate180 63 993 1,236 26,549 27,785 735 116 
Other(2)
801 317 4,494 5,612 45,188 50,800 2,132 860 
Total single-family20,123 7,896 89,111 117,130 3,236,664 3,353,794 57,962 7,647 
Multifamily(3)
1,495 N/A2,531 4,026 387,841 391,867 404 183 
Total$21,618 $7,896 $91,642 $121,156 $3,624,505 $3,745,661 $58,366 $7,830 
 As of December 31, 2020
30 - 59 Days
Delinquent
60 - 89 Days Delinquent
Seriously Delinquent(1)
Total DelinquentCurrentTotalLoans 90 Days or More Delinquent and Accruing InterestNonaccrual Loans with No Allowance
 (Dollars in millions)
Single-family:
20- and 30-year or more, amortizing fixed-rate$24,928 $9,414 $88,276 $122,618 $2,619,585 $2,742,203 $68,526 $6,028 
15-year or less, amortizing fixed-rate1,987 601 5,028 7,616 449,443 457,059 4,292 240 
Adjustable-rate268 97 1,143 1,508 29,933 31,441 907 114 
Other(2)
1,150 458 5,037 6,645 47,937 54,582 2,861 771 
Total single-family28,333 10,570 99,484 138,387 3,146,898 3,285,285 76,586 7,153 
Multifamily(3)
1,140 N/A3,688 4,828 372,598 377,426 610 302 
Total$29,473 $10,570 $103,172 $143,215 $3,519,496 $3,662,711 $77,196 $7,455 
(1)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.
Fannie Mae (In conservatorship) First Quarter 2021 Form 10-Q83
Notes to Condensed Consolidated Financial Statements | Mortgage Loans
(2)Reverse mortgage loans included in “Other” are not aged due to their nature and are included in the current column.
(3)Multifamily loans 60-89 days delinquent are included in the seriously delinquent column.
Credit Quality Indicators
The following tables display the total amortized cost of our single-family HFI loans by class, year of origination and credit quality indicator, excluding loans for which we have elected the fair value option. The estimated mark-to-market loan-to-value (“LTV”) ratio is a primary factor we consider when estimating our allowance for loan losses for single-family loans. As LTV ratios increase, the borrower's equity in the home decreases, which may negatively affect the borrower's ability to refinance or to sell the property for an amount at or above the outstanding balance of the loan.
 
As of March 31, 2021, by Year of Origination(1)
20212020201920182017PriorTotal
 (Dollars in millions)
Estimated mark-to-market LTV ratio:(2)
20- and 30-year or more, amortizing fixed-rate:
Less than or equal to 80%$187,046 $848,710 $216,806 $124,252 $158,591 $885,994 $2,421,399 
Greater than 80% and less than or equal to 90%23,830 180,295 51,499 10,692 2,706 5,552 274,574 
Greater than 90% and less than or equal to 100%25,159 66,092 1,710 578 157 1,556 95,252 
Greater than 100%0 25 6 24 58 1,402 1,515 
Total 20- and 30-year or more, amortizing fixed-rate236,035 1,095,122 270,021 135,546 161,512 894,504 2,792,740 
15-year or less, amortizing fixed-rate:
Less than or equal to 80%48,003 187,390 35,975 13,779 28,112 161,802 475,061 
Greater than 80% and less than or equal to 90%1,137 4,953 292 19 9 19 6,429 
Greater than 90% and less than or equal to 100%356 587 4 2 3 9 961 
Greater than 100%0 0 0 2 3 13 18 
Total 15-year or less, amortizing fixed-rate49,496 192,930 36,271 13,802 28,127 161,843 482,469 
Adjustable-rate:
Less than or equal to 80%111 2,757 1,608 2,006 3,982 16,940 27,404 
Greater than 80% and less than or equal to 90%11 189 79 35 15 13 342 
Greater than 90% and less than or equal to 100%6 29 2 0 0 1 38 
Greater than 100%0 0 0 0 0 1 1 
Total adjustable-rate128 2,975 1,689 2,041 3,997 16,955 27,785 
Other:
Less than or equal to 80%0 0 39 318 779 34,761 35,897 
Greater than 80% and less than or equal to 90%0 0 1 15 31 1,000 1,047 
Greater than 90% and less than or equal to 100%0 0 2 5 11 456 474 
Greater than 100%0 0 0 3 5 485 493 
Total other0 0 42 341 826 36,702 37,911 
Total$285,659 $1,291,027 $308,023 $151,730 $194,462 $1,110,004 $3,340,905 
Total for all classes by LTV ratio:(2)
Less than or equal to 80%$235,160 $1,038,857 $254,428 $140,355 $191,464 $1,099,497 $2,959,761 
Greater than 80% and less than or equal to 90%24,978 185,437 51,871 10,761 2,761 6,584 282,392 
Greater than 90% and less than or equal to 100%25,521 66,708 1,718 585 171 2,022 96,725 
Greater than 100%0 25 6 29 66 1,901 2,027 
Total$285,659 $1,291,027 $308,023 $151,730 $194,462 $1,110,004 $3,340,905 
Fannie Mae (In conservatorship) First Quarter 2021 Form 10-Q84
Notes to Condensed Consolidated Financial Statements | Mortgage Loans
As of December 31, 2020, by Year of Origination(1)
20202019201820172016PriorTotal
(Dollars in millions)
Estimated mark-to-market LTV ratio:(2)
20- and 30-year or more, amortizing fixed-rate:
Less than or equal to 80%$794,156 $233,994 $135,849 $183,315 $221,172 $775,636 $2,344,122 
Greater than 80% and less than or equal to 90%157,500 85,227 23,440 5,270 1,592 5,958 278,987 
Greater than 90% and less than or equal to 100%109,743 4,186 820 250 124 1,994 117,117 
Greater than 100%28 7 28 77 81 1,756 1,977 
Total 20- and 30-year or more, amortizing fixed-rate1,061,427 323,414 160,137 188,912 222,969 785,344 2,742,203 
15-year or less, amortizing fixed-rate:
Less than or equal to 80%181,418 41,374 15,768 31,497 46,088 132,596 448,741 
Greater than 80% and less than or equal to 90%6,105 811 35 14 8 20 6,993 
Greater than 90% and less than or equal to 100%1,274 9 3 4 3 10 1,303 
Greater than 100%0 0 3 3 3 13 22 
Total 15-year or less, amortizing fixed-rate188,797 42,194 15,809 31,518 46,102 132,639 457,059 
Adjustable-rate:
Less than or equal to 80%2,935 1,839 2,412 4,765 2,678 16,248 30,877 
Greater than 80% and less than or equal to 90%234 152 79 19 5 12 501 
Greater than 90% and less than or equal to 100%56 3 1 0 0 2 62 
Greater than 100%0 0 0 0 0 1 1 
Total adjustable-rate3,225 1,994 2,492 4,784 2,683 16,263 31,441 
Other:
Less than or equal to 80%0 41 328 811 1,028 36,216 38,424 
Greater than 80% and less than or equal to 90%0 2 20 43 30 1,298 1,393 
Greater than 90% and less than or equal to 100%0 2 8 16 10 602 638 
Greater than 100%0 0 4 8 9 631 652 
Total other0 45 360 878 1,077 38,747 41,107 
Total$1,253,449 $367,647 $178,798 $226,092 $272,831 $972,993 $3,271,810 
Total for all classes by LTV ratio:(2)
Less than or equal to 80%$978,509 $277,248 $154,357 $220,388 $270,966 $960,696 $2,862,164 
Greater than 80% and less than or equal to 90%163,839 86,192 23,574 5,346 1,635 7,288 287,874 
Greater than 90% and less than or equal to 100%111,073 4,200 832 270 137 2,608 119,120 
Greater than 100%28 7 35 88 93 2,401 2,652 
Total$1,253,449 $367,647 $178,798 $226,092 $272,831 $972,993 $3,271,810 
(1)Excludes $12.9 billion and $13.5 billion as of March 31, 2021 and December 31, 2020, respectively, of mortgage loans) that impactloans guaranteed or insured, in whole or in part, by the credit risk toU.S. government or one of its agencies, which we are exposed. In contrast,represents primarily reverse mortgages for which we do not consolidate single-class securitization trusts when other organizations havecalculate an estimated mark-to-market LTV ratio.
(2)The aggregate estimated mark-to-market LTV ratio is based on the power to direct these activities unlessunpaid principal balance of the loan divided by the estimated current value of the property as of the end of each reported period, which we calculate using an internal valuation model that estimates periodic changes in home value.
Fannie Mae (In conservatorship) First Quarter 2021 Form 10-Q85
Notes to Condensed Consolidated Financial Statements | Mortgage Loans
The following tables display the total amortized cost in our multifamily HFI loans by year of origination and credit-risk rating, excluding loans for which we have elected the unilateral abilityfair value option. Property rental income and property valuations are key inputs to dissolveour internally assigned credit risk ratings.
As of March 31, 2021, by Year of Origination
20212020201920182017PriorTotal
(Dollars in millions)
Internally assigned credit risk rating:
Non-classified(1)
$11,295 $81,647 $67,630 $61,280 $49,903 $108,429 $380,184 
Classified(2)
0 204 1,185 1,673 2,882 5,739 11,683 
Total$11,295 $81,851 $68,815 $62,953 $52,785 $114,168 $391,867 
As of December 31, 2020, by Year of Origination
20202019201820172016PriorTotal
(Dollars in millions)
Internally assigned credit risk rating:
Non-classified(1)
$71,977 $68,296 $62,087 $50,907 $43,174 $70,933 $367,374 
Classified(2)
37 1,041 1,529 2,616 1,579 3,250 10,052 
Total$72,014 $69,337 $63,616 $53,523 $44,753 $74,183 $377,426 
(1)A loan categorized as “Non-classified” is current or adequately protected by the trust.current financial strength and debt service capability of the borrower.
(2)Represents loans classified as “Substandard” or “Doubtful.” Loans classified as “Substandard” have a well-defined weakness that jeopardizes the timely full repayment. “Doubtful” refers to a loan with a weakness that makes collection or liquidation in full highly questionable and improbable based on existing conditions and values. As of March 31, 2021 and December 31, 2020, we had loans with an amortized cost of $4 million and less than $1 million, respectively, classified as doubtful.
Troubled Debt Restructurings
A modification to the contractual terms of a loan that results in granting a concession to a borrower experiencing financial difficulties is considered a troubled debt restructuring (“TDR”). In addition to formal loan modifications, we also engage in other loss mitigation activities with troubled borrowers, which include repayment plans and forbearance arrangements, both of which represent informal agreements with the borrower that do not result in the legal modification of the loan’s contractual terms. We account for these informal restructurings as a TDR if we defer more than three missed payments. We also do not consolidateclassify loans to certain borrowers who have received bankruptcy relief as TDRs. However, our resecuritization trusts unless we havecurrent TDR accounting described herein is temporarily impacted by our election to account for certain eligible loss mitigation activities under the unilateral abilityCOVID-19 Relief granted pursuant to dissolve the trust. Historically,CARES Act and the vastConsolidated Appropriations Act of 2021. See “Note 1, Summary of Significant Accounting Policies” in our 2020 Form 10-K for more information on the relief from TDR accounting and disclosure requirements.
The substantial majority of underlying assetsthe loan modifications accounted for as a TDR result in term extensions, interest rate reductions or a combination of our resecuritization trusts were limited to Fannie Mae securitiesboth. During the three months ended March 31, 2021 and 2020, the average term extension of a single-family modified loan was 138 months and 168 months, respectively, and the average interest rate reduction was 0.52 and 0.32 percentage points, respectively.
Fannie Mae (In conservatorship) First Quarter 2021 Form 10-Q86
Notes to Condensed Consolidated Financial Statements | Mortgage Loans
The following table displays the number of loans and amortized cost of loans classified as a TDR during the period.
For the Three Months Ended March 31,
20212020
Number of LoansAmortized CostNumber of LoansAmortized Cost
(Dollars in millions)
Single-family:
20- and 30-year or more, amortizing fixed-rate2,989 $471 10,856 $1,909 
15-year or less, amortizing fixed-rate369 28 1,073 98 
Adjustable-rate41 6 144 24 
Other154 18 537 68 
Total single-family3,553 523 12,610 2,099 
Multifamily0 0 0 0 
Total TDRs3,553 $523 12,610 $2,099 
For loans that defaulted in the period presented and that were collateralized by mortgageclassified as a TDR in the twelve months prior to the default, the following table displays the number of loans held in consolidated trusts. However, with our issuanceand the amortized cost of UMBS beginning in June 2019,these loans at the time of payment default. For purposes of this disclosure, we include securities issued by Freddie Mac in some of our resecuritization trusts. The mortgagedefine loans that serve as collateral for Freddie Mac-issued securities are not held in trustshad a payment default as: single-family and multifamily loans with completed TDRs that liquidated during the period, either through foreclosure, deed-in-lieu of foreclosure, or a short sale; single-family loans with completed modifications that are consolidated by Fannie Mae.two or more months delinquent during the period; or multifamily loans with completed modifications that are one or more months delinquent during the period.
For the Three Months Ended March 31,
20212020
Number of LoansAmortized CostNumber of LoansAmortized Cost
(Dollars in millions)
Single-family:
20- and 30-year or more, amortizing fixed-rate7,172 $1,327 3,175 $521 
15-year or less, amortizing fixed-rate152 11 50 3 
Adjustable-rate11 2 7 1 
Other633 112 327 51 
Total single-family7,968 1,452 3,559 576 
Multifamily0 0 2 2 
Total TDRs that subsequently defaulted7,968 $1,452 3,561 $578 
Unconsolidated VIEs
We do not consolidate VIEs when we are not deemed to be the primary beneficiary. Our unconsolidated VIEs include securitization and resecuritization trusts, limited partnerships, and certain SPVs designed to transfer credit risk. The following table displays the carrying amount and classification of our assets and liabilities that relate to our involvement with unconsolidated securitization and resecuritization trusts.
As of
As ofMarch 31, 2021December 31, 2020
March 31, 2020December 31, 2019(Dollars in millions)
Assets and liabilities recorded in our condensed consolidated balance sheets related to unconsolidated mortgage-backed trusts:

Assets and liabilities recorded in our condensed consolidated balance sheets related to unconsolidated mortgage-backed trusts:

(Dollars in millions)Assets and liabilities recorded in our condensed consolidated balance sheets related to unconsolidated mortgage-backed trusts:
Assets:Assets:Assets:
Trading securities:Trading securities:Trading securities:
Fannie MaeFannie Mae$2,666  $2,543  Fannie Mae$1,243 $1,611 
Non-Fannie MaeNon-Fannie Mae4,610  5,100  Non-Fannie Mae3,598 3,608 
Total trading securitiesTotal trading securities7,276  7,643  Total trading securities4,841 5,219 
Available-for-sale securities:Available-for-sale securities:Available-for-sale securities:
Fannie MaeFannie Mae1,505  1,524  Fannie Mae1,036 1,168 
Non-Fannie MaeNon-Fannie Mae493  574  Non-Fannie Mae279 318 
Total available-for-sale securitiesTotal available-for-sale securities1,998  2,098  Total available-for-sale securities1,315 1,486 
Other assetsOther assets45  56  Other assets39 41 
Other liabilitiesOther liabilities(71) (78) Other liabilities(65)(67)
Net carrying amountNet carrying amount$9,248  $9,719  Net carrying amount$6,130 $6,679 
Our maximum exposure to loss generally represents the greater of our carrying value in the entity or the unpaid principal balance of the assets covered by our guaranty. Our involvement in unconsolidated resecuritization trusts may give rise to additional exposure to loss depending on the type of resecuritization trust. Fannie Mae non-commingled resecuritization trusts are backed entirely by Fannie Mae MBS. These non-commingled single-class and multi-class resecuritization trusts are not consolidated and do not give rise to any additional exposure to loss as we already consolidate the underlying collateral.
Fannie Mae commingled resecuritization trusts are backed in whole or in part by Freddie Mac securities. The guaranty that we provide to these commingled resecuritization trusts may increase our exposure to loss to the extent that we are providing a guaranty for the timely payment and interest on the underlying Freddie Mac securities that we have not previously guaranteed. Our maximum exposure to loss for these unconsolidated trusts is measured by the amount of Freddie Mac securities that are held in these resecuritization trusts. However, a portion of these Freddie Mac securities may be backed in whole or in part by Fannie Mae MBS. To the extent that these Freddie Mac securities are backed by Fannie Mae MBS, our guarantee to the resecuritization trust does not subject us to any additional exposure to credit risk. Thus, our actual exposure to credit risk from Freddie Mac securities held in our resecuritization trusts is likely lower than the disclosed maximum exposure to loss. Our maximum exposure to loss related to
Fannie Mae (In conservatorship) First Quarter 2021 Form 10-Q80
Notes to Condensed Consolidated Financial Statements | Consolidations and Transfers of Financial Assets

unconsolidated securitization and resecuritization trusts, which includes but is not limited to our exposure to these Freddie Mac securities, was approximately $84$164 billion and $62$146 billion as of March 31, 20202021 and December 31, 2019,2020, respectively. The total assets of our unconsolidated securitization and resecuritization trusts were approximately $170$230 billion and $130$180 billion as of March 31, 20202021 and December 31, 2019,2020, respectively.
The maximum exposure to loss for our unconsolidated limited partnerships and similar legal entities, which consist of low-income housing tax credit investments (“LIHTC”), community investments and other entities, was $93$169 million and the related
Fannie Mae (In conservatorship) First Quarter 2020 Form 10-Q72

Notes to Condensed Consolidated Financial Statements | Consolidations and Transfers of Financial Assets

net carrying value was $75$163 million as of March 31, 2020.2021. As of December 31, 2019,2020, the maximum exposure to loss was $98$126 million and the related net carrying value was $79$121 million. The total assets of these limited partnership investments were $1.7$2.5 billion as of March 31, 20202021 and $2.0$2.6 billion as of December 31, 2019.2020.
The maximum exposure to loss related to our involvement with unconsolidated SPVs that transfer credit risk represents the unpaid principal balance and accrued interest payable of obligations issued by the Connecticut Avenue Securities® (“CAS”) and Multifamily Connecticut Avenue Securities (“MCAS”) SPVs. The maximum exposure to loss related to these unconsolidated SPVs was $12.3$10.4 billion and $9.5$11.4 billion as of March 31, 20202021 and December 31, 2019,2020, respectively. The total assets related to these unconsolidated SPVs were $12.4$10.5 billion and $9.5$11.4 billion as of March 31, 20202021 and December 31, 2019,2020, respectively.
The unpaid principal balance of our multifamily loan portfolio was $334.4$388.6 billion as of March 31, 2020.2021. As our lending relationship does not provide us with a controlling financial interest in the borrower entity, we do not consolidate these borrowers regardless of their status as either a VIE or a voting interest entity. We have excluded these entities from our VIE disclosures. However, the disclosures we have provided in “Note 3, Mortgage Loans,” “Note 4, Allowance for Loan Losses” and “Note 6, Financial Guarantees” with respect to this population are consistent with the FASB’s stated objectives for the disclosures related to unconsolidated VIEs.
Transfers of Financial Assets
We issue Fannie Mae MBS through portfolio securitization transactions by transferring pools of mortgage loans or mortgage-related securities to one or more trusts or special purpose entities. We are considered to be the transferor when we transfer assets from our own retained mortgage portfolio in a portfolio securitization transaction. For the three months ended March 31, 20202021 and 2019,2020, the unpaid principal balance of portfolio securitizations was $89.0$216.7 billion and $41.4$89.0 billion, respectively. The substantial majority of these portfolio securitization transactions generally do not qualify for sale treatment. Portfolio securitization trusts that do qualify for sale treatment primarily consist of loans that are guaranteed or insured, in whole or in part, by the U.S. government.
We retain interests from the transfer and sale of mortgage-related securities to unconsolidated single-class and multi-class portfolio securitization trusts. As of March 31, 2021, the unpaid principal balance of retained interests was $1.4 billion and its related fair value was $2.5 billion. As of December 31, 2020, the unpaid principal balance of retained interests was $2.9$1.7 billion and its related fair value was $4.1 billion. As of December 31, 2019, the unpaid principal balance of retained interests was $2.9 billion and its related fair value was $4.0 billion. For the three months ended March 31, 20202021 and 2019,2020, the principal, interest and other fees received on retained interests was $181$143 million and $116$181 million, respectively.
Fannie Mae (In conservatorship) First Quarter 2021 Form 10-Q81
Notes to Condensed Consolidated Financial Statements | Mortgage Loans
3.  Mortgage Loans
We own single-family mortgage loans, which are secured by four or fewer residential dwelling units, and multifamily mortgage loans, which are secured by five or more residential dwelling units. We classify these loans as either HFIheld for investment (“HFI”) or HFS.held for sale (“HFS”). We report the amortized cost of HFI loans for which we have not elected the fair value option at the unpaid principal balance, net of unamortized premiums and discounts, hedge-related basis adjustments, other cost basis adjustments, and accrued interest receivable. receivable, net. For purposes of our condensed consolidated balance sheet,sheets, we present accrued interest receivable, net separately from the amortized cost of our loans held for investment. We report the carrying value of HFS loans at the lower of cost or fair value and record valuation changes in “Investment gains (losses), net” in our condensed consolidated statements of operations and comprehensive income. See “Note 1, Summary of Significant Accounting Policies” and “Note 8, Derivative Instruments” for additional information on hedge-related basis adjustments and on implementation of our fair value hedge accounting program in January 2021.
For purposes of the single-family mortgage loan disclosures below, we display loans by class of financing receivable type. In the current period, we revised the financingFinancing receivable classes used for disclosure to consist of: “20- and 30-year or more, amortizing fixed-rate,” “15-year or less, amortizing fixed-rate,” “Adjustable-rate,” and “Other.” The “Other” class primarily consists of reverse mortgage loans, interest-only loans, negative-amortizing loans and second liens. We believe the revised classifications are more aligned with how we assess and manage the credit risk of our loans. We have revised the presentation of certain loan disclosures for prior periods to conform with the revised current period classes of financing receivables.
The following table displays the carrying value of our mortgage loans and our allowance for loan losses.
As of
March 31, 2020December 31, 2019
(Dollars in millions)
Single-family$2,996,281  $2,972,361  
Multifamily334,397  327,593  
Total unpaid principal balance of mortgage loans3,330,678  3,299,954  
Cost basis and fair value adjustments, net45,341  43,224  
Allowance for loan losses(13,209) (9,016) 
Total mortgage loans$3,362,810  $3,334,162  
Fannie Mae (In conservatorship) First Quarter 2020 Form 10-Q73
As of
March 31, 2021December 31, 2020
(Dollars in millions)
Single-family$3,286,381 $3,216,146 
Multifamily388,591 373,722 
Total unpaid principal balance of mortgage loans3,674,972 3,589,868 
Cost basis and fair value adjustments, net74,536 74,576 
Allowance for loan losses for HFI loans(9,628)(10,552)
Total mortgage loans(1)
$3,739,880 $3,653,892 

(1)
Notes to Condensed Consolidated Financial Statements | Mortgage LoansExcludes $9.9 billion and $9.8 billion of accrued interest receivable, net of allowance as of March 31, 2021 and December 31, 2020, respectively.
The following tables display information about our redesignation of loans from HFI to HFS and the sales of mortgage loans during the period along with our redesignations of loans at the time of redesignation.period.
For the Three Months Ended March 31,For the Three Months Ended March 31,
2020201920212020
(Dollars in millions)(Dollars in millions)
Single family loans redesignated from HFI to HFS:
Single-family loans redesignated from HFI to HFS:Single-family loans redesignated from HFI to HFS:
Amortized costAmortized cost$1,637  $2,945  Amortized cost$3,112 $1,637 
Lower of cost or fair value adjustment at time of redesignation(1)
Lower of cost or fair value adjustment at time of redesignation(1)
(9) (240) 
Lower of cost or fair value adjustment at time of redesignation(1)
(54)(9)
Allowance reversed at time of redesignationAllowance reversed at time of redesignation184  467  Allowance reversed at time of redesignation361 184 
Single-family loans sold: Single-family loans sold:  Single-family loans sold:
Unpaid principal balanceUnpaid principal balance$—  $58  Unpaid principal balance$208 $0 
Realized gains (losses)—  36  
Realized gains, netRealized gains, net2 0 
(1)Consists of the write-off against the allowance at the time of redesignation.
The amortized cost of single-family mortgage loans for which formal foreclosure proceedings were in process was $7.9$4.7 billion and $7.6$5.0 billion as of March 31, 20202021 and December 31, 2019,2020, respectively. As a result of our various loss mitigation and foreclosure prevention efforts, we expect that a portion of the loans in the process of formal foreclosure proceedings will not ultimately foreclose. In addition, in response to the COVID-19 pandemic, we have prohibited our servicers from completing foreclosures on our single-family loans through at least June 30, 2021, except in the case of vacant or abandoned properties.
Fannie Mae (In conservatorship) First Quarter 2021 Form 10-Q82
Notes to Condensed Consolidated Financial Statements | Mortgage Loans
Aging Analysis
The following tables display an aging analysis of the total amortized cost of our HFI mortgage loans by portfolio segment and class, excluding loans for which we have elected the fair value option.
 As of March 31, 2020
30 - 59 Days
Delinquent		60 - 89 Days Delinquent
Seriously Delinquent(1)
Total DelinquentCurrentTotalLoans 90 Days or More Delinquent and Accruing Interest Nonaccrual Loans with No Allowance
 (Dollars in millions)
Single-family:
20- and 30-year or more, amortizing fixed-rate$29,663  $6,665  $13,323  $49,651  $2,497,239  $2,546,890  $23  $6,653  
15-year or less, amortizing fixed-rate1,803  280  450  2,533  373,012  375,545  —  542  
Adjustable-rate383  76  165  624  41,864  42,488  —  150  
Other(2)
2,302  756  1,847  4,905  61,288  66,193  132  710  
Total single-family34,151  7,777  15,785  57,713  2,973,403  3,031,116  155  8,055  
Multifamily(3)
37  N/A  158  195  337,499  337,694  —  33  
Total$34,188  $7,777  $15,943  $57,908  $3,310,902  $3,368,810  $155  $8,088  
Pursuant to the CARES Act, for purposes of reporting to the credit bureaus, servicers must report a borrower receiving a COVID-19-related payment accommodation during the covered period, such as a forbearance plan or loan modification, as current if the borrower was current prior to receiving the accommodation and the borrower makes all required payments in accordance with the accommodation. For purposes of our disclosures regarding delinquency status, we report loans receiving COVID-19-related payment forbearance as delinquent according to the contractual terms of the loan.
 As of March 31, 2021
30 - 59 Days
Delinquent
60 - 89 Days Delinquent
Seriously Delinquent(1)
Total DelinquentCurrentTotalLoans 90 Days or More Delinquent and Accruing InterestNonaccrual Loans with No Allowance
 (Dollars in millions)
Single-family:
20- and 30-year or more, amortizing fixed-rate$17,400 $7,024 $79,349 $103,773 $2,688,967 $2,792,740 $51,671 $6,461 
15-year or less, amortizing fixed-rate1,742 492 4,275 6,509 475,960 482,469 3,424 210 
Adjustable-rate180 63 993 1,236 26,549 27,785 735 116 
Other(2)
801 317 4,494 5,612 45,188 50,800 2,132 860 
Total single-family20,123 7,896 89,111 117,130 3,236,664 3,353,794 57,962 7,647 
Multifamily(3)
1,495 N/A2,531 4,026 387,841 391,867 404 183 
Total$21,618 $7,896 $91,642 $121,156 $3,624,505 $3,745,661 $58,366 $7,830 
Fannie Mae (In conservatorship) First Quarter 2020 Form 10-Q74
 As of December 31, 2020
30 - 59 Days
Delinquent
60 - 89 Days Delinquent
Seriously Delinquent(1)
Total DelinquentCurrentTotalLoans 90 Days or More Delinquent and Accruing InterestNonaccrual Loans with No Allowance
 (Dollars in millions)
Single-family:
20- and 30-year or more, amortizing fixed-rate$24,928 $9,414 $88,276 $122,618 $2,619,585 $2,742,203 $68,526 $6,028 
15-year or less, amortizing fixed-rate1,987 601 5,028 7,616 449,443 457,059 4,292 240 
Adjustable-rate268 97 1,143 1,508 29,933 31,441 907 114 
Other(2)
1,150 458 5,037 6,645 47,937 54,582 2,861 771 
Total single-family28,333 10,570 99,484 138,387 3,146,898 3,285,285 76,586 7,153 
Multifamily(3)
1,140 N/A3,688 4,828 372,598 377,426 610 302 
Total$29,473 $10,570 $103,172 $143,215 $3,519,496 $3,662,711 $77,196 $7,455 

(1)
Notes to Condensed Consolidated Financial Statements | Mortgage Loans
 As of December 31, 2019
30 - 59 Days
Delinquent		60 - 89 Days Delinquent
Seriously Delinquent(1)
Total DelinquentCurrentTotalLoans 90 Days or More Delinquent and Accruing Interest
 (Dollars in millions)
Single-family:
20- and 30-year or more, amortizing fixed-rate$26,882  $7,126  $13,082  $47,090  $2,470,457  $2,517,547  $28  
15-year or less, amortizing fixed-rate1,616  286  445  2,347  371,740  374,087  —  
Adjustable-rate412  85  167  664  44,244  44,908  —  
Other(2)
2,323  829  1,891  5,043  64,726  69,769  136  
Total single-family31,233  8,326  15,585  55,144  2,951,167  3,006,311  164  
Multifamily(3)
7  N/A  115  122  330,496  330,618  —  
Total$31,240  $8,326  $15,700  $55,266  $3,281,663  $3,336,929  $164  
(1)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.
(2)Reverse mortgage loans included in "Other" are not aged due to their nature and are included in the current column.
(3)Multifamily loans 60-89 days delinquent are included in the seriously delinquent column.
Fannie Mae (In conservatorship) First Quarter 20202021 Form 10-Q7583

Notes to Condensed Consolidated Financial Statements | Mortgage Loans
(2)Reverse mortgage loans included in “Other” are not aged due to their nature and are included in the current column.
(3)Multifamily loans 60-89 days delinquent are included in the seriously delinquent column.
Credit Quality Indicators
The following table displaystables display the total amortized cost of our single-family HFI loans by class, year of origination and credit quality indicator, excluding loans for which we have elected the fair value option. The estimated mark-to-market LTVloan-to-value (“LTV”) ratio is a primary factor we consider when estimating our allowance for loan losses for single-family loans. As LTV ratios increase, the borrower's equity in the home decreases, which may negatively affect the borrower's ability to refinance or to sell the property for an amount at or above the outstanding balance of the loan.
As of March 31, 2020, by Year of Origination(1)
As of March 31, 2021, by Year of Origination(1)
20202019201820172016PriorTotal20212020201920182017PriorTotal
(Dollars in millions) (Dollars in millions)
Estimated mark-to-market LTV ratio:(2)
Estimated mark-to-market LTV ratio:(2)
Estimated mark-to-market LTV ratio:(2)
20- and 30-year or more, amortizing fixed-rate:20- and 30-year or more, amortizing fixed-rate:20- and 30-year or more, amortizing fixed-rate:
Less than or equal to 80%Less than or equal to 80%$76,429  $307,581  $177,622  $252,599  $312,333  $1,034,737  $2,161,301  Less than or equal to 80%$187,046 $848,710 $216,806 $124,252 $158,591 $885,994 $2,421,399 
Greater than 80% and less than or equal to 90%Greater than 80% and less than or equal to 90%16,159  93,510  72,787  40,029  10,145  14,220  246,850  Greater than 80% and less than or equal to 90%23,830 180,295 51,499 10,692 2,706 5,552 274,574 
Greater than 90% and less than or equal to 100%Greater than 90% and less than or equal to 100%17,666  92,907  16,344  2,080  503  4,715  134,215  Greater than 90% and less than or equal to 100%25,159 66,092 1,710 578 157 1,556 95,252 
Greater than 100%Greater than 100%—  443  143  167  170  3,601  4,524  Greater than 100%0 25 6 24 58 1,402 1,515 
Total 20 and 30-year or more, amortizing fixed-rate110,254  494,441  266,896  294,875  323,151  1,057,273  2,546,890  
Total 20- and 30-year or more, amortizing fixed-rateTotal 20- and 30-year or more, amortizing fixed-rate236,035 1,095,122 270,021 135,546 161,512 894,504 2,792,740 
15-year or less, amortizing fixed-rate:15-year or less, amortizing fixed-rate:15-year or less, amortizing fixed-rate:
Less than or equal to 80%Less than or equal to 80%15,233  56,811  23,322  42,251  58,651  172,743  369,011  Less than or equal to 80%48,003 187,390 35,975 13,779 28,112 161,802 475,061 
Greater than 80% and less than or equal to 90%Greater than 80% and less than or equal to 90%795  3,502  668  97  23  46  5,131  Greater than 80% and less than or equal to 90%1,137 4,953 292 19 9 19 6,429 
Greater than 90% and less than or equal to 100%Greater than 90% and less than or equal to 100%322  967  22  10  8  23  1,352  Greater than 90% and less than or equal to 100%356 587 4 2 3 9 961 
Greater than 100%Greater than 100%—  2  7  9  7  26  51  Greater than 100%0 0 0 2 3 13 18 
Total 15-year or less, amortizing fixed-rateTotal 15-year or less, amortizing fixed-rate16,350  61,282  24,019  42,367  58,689  172,838  375,545  Total 15-year or less, amortizing fixed-rate49,496 192,930 36,271 13,802 28,127 161,843 482,469 
Adjustable-rate:Adjustable-rate:Adjustable-rate:
Less than or equal to 80%Less than or equal to 80%433  2,551  3,917  7,631  4,116  22,449  41,097  Less than or equal to 80%111 2,757 1,608 2,006 3,982 16,940 27,404 
Greater than 80% and less than or equal to 90%Greater than 80% and less than or equal to 90%38  360  501  208  21  54  1,182  Greater than 80% and less than or equal to 90%11 189 79 35 15 13 342 
Greater than 90% and less than or equal to 100%Greater than 90% and less than or equal to 100%17  125  49  7  1  8  207  Greater than 90% and less than or equal to 100%6 29 2 0 0 1 38 
Greater than 100%Greater than 100%—  —  —  —  —  2  2  Greater than 100%0 0 0 0 0 1 1 
Total adjustable-rateTotal adjustable-rate488  3,036  4,467  7,846  4,138  22,513  42,488  Total adjustable-rate128 2,975 1,689 2,041 3,997 16,955 27,785 
Other:Other:Other:
Less than or equal to 80%Less than or equal to 80%—  42  348  871  1,134  42,367  44,762  Less than or equal to 80%0 0 39 318 779 34,761 35,897 
Greater than 80% and less than or equal to 90%Greater than 80% and less than or equal to 90%—  4  33  73  60  2,470  2,640  Greater than 80% and less than or equal to 90%0 0 1 15 31 1,000 1,047 
Greater than 90% and less than or equal to 100%Greater than 90% and less than or equal to 100%—  1  17  37  26  1,193  1,274  Greater than 90% and less than or equal to 100%0 0 2 5 11 456 474 
Greater than 100%Greater than 100%—  2  11  18  19  1,198  1,248  Greater than 100%0 0 0 3 5 485 493 
Total otherTotal other—  49  409  999  1,239  47,228  49,924  Total other0 0 42 341 826 36,702 37,911 
TotalTotal$127,092  $558,808  $295,791  $346,087  $387,217  $1,299,852  $3,014,847  Total$285,659 $1,291,027 $308,023 $151,730 $194,462 $1,110,004 $3,340,905 
Total for all classes by LTV ratio(2)
Total for all classes by LTV ratio:(2)
Total for all classes by LTV ratio:(2)
Less than or equal to 80%Less than or equal to 80%$92,095  $366,985  $205,209  $303,352  $376,234  $1,272,296  $2,616,171  Less than or equal to 80%$235,160 $1,038,857 $254,428 $140,355 $191,464 $1,099,497 $2,959,761 
Greater than 80% and less than or equal to 90%Greater than 80% and less than or equal to 90%16,992  97,376  73,989  40,407  10,249  16,790  255,803  Greater than 80% and less than or equal to 90%24,978 185,437 51,871 10,761 2,761 6,584 282,392 
Greater than 90% and less than or equal to 100%Greater than 90% and less than or equal to 100%18,005  94,000  16,432  2,134  538  5,939  137,048  Greater than 90% and less than or equal to 100%25,521 66,708 1,718 585 171 2,022 96,725 
Greater than 100%Greater than 100%—  447  161  194  196  4,827  5,825  Greater than 100%0 25 6 29 66 1,901 2,027 
TotalTotal$127,092  $558,808  $295,791  $346,087  $387,217  $1,299,852  $3,014,847  Total$285,659 $1,291,027 $308,023 $151,730 $194,462 $1,110,004 $3,340,905 
Fannie Mae (In conservatorship) First Quarter 20202021 Form 10-Q7684

Notes to Condensed Consolidated Financial Statements | Mortgage Loans

As of December 31, 2020, by Year of Origination(1)
20202019201820172016PriorTotal
(Dollars in millions)
Estimated mark-to-market LTV ratio:(2)
20- and 30-year or more, amortizing fixed-rate:
Less than or equal to 80%$794,156 $233,994 $135,849 $183,315 $221,172 $775,636 $2,344,122 
Greater than 80% and less than or equal to 90%157,500 85,227 23,440 5,270 1,592 5,958 278,987 
Greater than 90% and less than or equal to 100%109,743 4,186 820 250 124 1,994 117,117 
Greater than 100%28 7 28 77 81 1,756 1,977 
Total 20- and 30-year or more, amortizing fixed-rate1,061,427 323,414 160,137 188,912 222,969 785,344 2,742,203 
15-year or less, amortizing fixed-rate:
Less than or equal to 80%181,418 41,374 15,768 31,497 46,088 132,596 448,741 
Greater than 80% and less than or equal to 90%6,105 811 35 14 8 20 6,993 
Greater than 90% and less than or equal to 100%1,274 9 3 4 3 10 1,303 
Greater than 100%0 0 3 3 3 13 22 
Total 15-year or less, amortizing fixed-rate188,797 42,194 15,809 31,518 46,102 132,639 457,059 
Adjustable-rate:
Less than or equal to 80%2,935 1,839 2,412 4,765 2,678 16,248 30,877 
Greater than 80% and less than or equal to 90%234 152 79 19 5 12 501 
Greater than 90% and less than or equal to 100%56 3 1 0 0 2 62 
Greater than 100%0 0 0 0 0 1 1 
Total adjustable-rate3,225 1,994 2,492 4,784 2,683 16,263 31,441 
Other:
Less than or equal to 80%0 41 328 811 1,028 36,216 38,424 
Greater than 80% and less than or equal to 90%0 2 20 43 30 1,298 1,393 
Greater than 90% and less than or equal to 100%0 2 8 16 10 602 638 
Greater than 100%0 0 4 8 9 631 652 
Total other0 45 360 878 1,077 38,747 41,107 
Total$1,253,449 $367,647 $178,798 $226,092 $272,831 $972,993 $3,271,810 
Total for all classes by LTV ratio:(2)
Less than or equal to 80%$978,509 $277,248 $154,357 $220,388 $270,966 $960,696 $2,862,164 
Greater than 80% and less than or equal to 90%163,839 86,192 23,574 5,346 1,635 7,288 287,874 
Greater than 90% and less than or equal to 100%111,073 4,200 832 270 137 2,608 119,120 
Greater than 100%28 7 35 88 93 2,401 2,652 
Total$1,253,449 $367,647 $178,798 $226,092 $272,831 $972,993 $3,271,810 
As of December 31, 2019(1)
20- and 30-Year or More, Amortizing Fixed-Rate15-Year or less, Amortizing Fixed-RateAdjustable-RateOtherTotal
(Dollars in millions)
Estimated mark-to-market LTV ratio:(2)
Less than or equal to 80%$2,145,018  $368,181  $43,415  $47,005  $2,603,619  
Greater than 80% and less than or equal to 90%237,623  4,556  1,275  2,872  246,326  
Greater than 90% and less than or equal to 100%130,152  1,284  215  1,398  133,049  
Greater than 100%4,754  66  3  1,365  6,188  
Total$2,517,547  $374,087  $44,908  $52,640  $2,989,182  
(1)Excludes $16.3$12.9 billion and $17.1$13.5 billion as of March 31, 20202021 and December 31, 2019,2020, respectively, of mortgage loans guaranteed or insured, in whole or in part, by the U.S. government or one of its agencies. The class isagencies, which represents primarily reverse mortgages for which we do not calculate an estimated mark-to-market LTV ratio.
(2)The aggregate estimated mark-to-market LTV ratio is based on the unpaid principal balance of the loan divided by the estimated current value of the property as of the end of each reported period, which we calculate using an internal valuation model that estimates periodic changes in home value.
Fannie Mae (In conservatorship) First Quarter 2021 Form 10-Q85
Notes to Condensed Consolidated Financial Statements | Mortgage Loans
The following table displaystables display the total amortized cost ofin our multifamily HFI loans by year of origination and credit-risk rating, excluding loans for which we have elected the fair value option. Property rental income and property valuations are key inputs to our internally assigned credit risk ratings.
As of March 31, 2020, by Year of OriginationAs of March 31, 2021, by Year of Origination
20202019201820172016PriorTotal20212020201920182017PriorTotal
(Dollars in millions)(Dollars in millions)
Internally assigned credit risk rating:Internally assigned credit risk rating:Internally assigned credit risk rating:
Non-classified(1)
Non-classified(1)
$9,858  $69,507  $63,830  $53,715  $46,030 ��$87,262  $330,202  
Non-classified(1)
$11,295 $81,647 $67,630 $61,280 $49,903 $108,429 $380,184 
Classified(2)
Classified(2)
—  347  910  1,655  1,458  3,122  7,492  
Classified(2)
0 204 1,185 1,673 2,882 5,739 11,683 
TotalTotal$9,858  $69,854  $64,740  $55,370  $47,488  $90,384  $337,694  Total$11,295 $81,851 $68,815 $62,953 $52,785 $114,168 $391,867 
As of December 31, 2019
(Dollars in millions)
Internally assigned credit risk rating:
Non-classified(1)
$323,773 
Classified(2)
6,845 
Total$330,618 
As of December 31, 2020, by Year of Origination
20202019201820172016PriorTotal
(Dollars in millions)
Internally assigned credit risk rating:
Non-classified(1)
$71,977 $68,296 $62,087 $50,907 $43,174 $70,933 $367,374 
Classified(2)
37 1,041 1,529 2,616 1,579 3,250 10,052 
Total$72,014 $69,337 $63,616 $53,523 $44,753 $74,183 $377,426 
(1)A loan categorized as “Non-classified” is current or adequately protected by the current financial strength and debt service capability of the borrower.
(2)Represents loans classified as “Substandard” or “Doubtful.” Loans classified as “Substandard” have a well-defined weakness that jeopardizes the timely full repayment. “Doubtful” refers to a loan with a weakness that makes collection or liquidation in full highly questionable and improbable based on existing conditions and values. As of March 31, 20202021 and December 31, 2019,2020, we had loans with an amortized cost of $39$4 million and $5less than $1 million, respectively, classified as doubtful.
Troubled Debt Restructurings
A modification to the contractual terms of a loan that results in granting a concession to a borrower experiencing financial difficulties is considered a TDR.troubled debt restructuring (“TDR”). In addition to formal loan modifications, we also engage in other loss mitigation activities with troubled borrowers, which include repayment plans and forbearance arrangements, both of which represent informal agreements with the borrower that do not result in the legal modification of the loan’s contractual terms. We account for these
informal restructurings as a TDR if we defer more than three missed payments. We also classify loans to certain borrowers who have received bankruptcy relief as TDRs. OurHowever, our current TDR accounting described herein will beis temporarily impacted by our election to account for certain eligible loan modificationsloss mitigation activities under the COVID-19 Relief granted pursuant to the CARES Act.Act and the Consolidated Appropriations Act of 2021. See “Note 1, Summary of Significant Accounting Policies” in our 2020 Form 10-K for more information on the impactrelief from TDR accounting and disclosure requirements.
The substantial majority of the CARES Act.loan modifications accounted for as a TDR result in term extensions, interest rate reductions or a combination of both. During the three months ended March 31, 2021 and 2020, the average term extension of a single-family modified loan was 138 months and 168 months, respectively, and the average interest rate reduction was 0.52 and 0.32 percentage points, respectively.
Fannie Mae (In conservatorship) First Quarter 20202021 Form 10-Q7786

Notes to Condensed Consolidated Financial Statements | Mortgage Loans
The substantial majority of the loan modifications we complete result in term extensions, interest rate reductions or a combination of both. During the three months ended March 31, 2020 and 2019, the average term extension of a single-family modified loan was 168 months and 157 months, respectively, and the average interest rate reduction was 0.32 and 0.10 percentage points, respectively.
The following table displays the number of loans and amortized cost inof loans classified as a TDR.TDR during the period.
For the Three Months Ended March 31,For the Three Months Ended March 31,
2020201920212020
Number of LoansAmortized CostNumber of LoansAmortized CostNumber of LoansAmortized CostNumber of LoansAmortized Cost
(Dollars in millions)(Dollars in millions)
Single-family:Single-family:Single-family:
20- and 30-year or more, amortizing fixed-rate20- and 30-year or more, amortizing fixed-rate10,856  $1,909  11,445  $1,826  20- and 30-year or more, amortizing fixed-rate2,989 $471 10,856 $1,909 
15-year or less, amortizing fixed-rate15-year or less, amortizing fixed-rate1,073  98  1,295  114  15-year or less, amortizing fixed-rate369 28 1,073 98 
Adjustable-rateAdjustable-rate144  24  217  32  Adjustable-rate41 6 144 24 
OtherOther537  68  936  127  Other154 18 537 68 
Total single-familyTotal single-family12,610  2,099  13,893  2,099  Total single-family3,553 523 12,610 2,099 
MultifamilyMultifamily—  —  3  13  Multifamily0 0 0 0 
Total TDRsTotal TDRs12,610  $2,099  13,896  $2,112  Total TDRs3,553 $523 12,610 $2,099 
For loans that defaulted in the period presented and that were classified as a TDR in the twelve months prior to the default, the following table displays the number of loans and the amortized cost of these loans at the time of payment default. For purposes of this disclosure, we define loans that had a payment default as: single-family and multifamily loans with completed TDRs that liquidated during the period, either through foreclosure, deed-in-lieu of foreclosure, or a short sale; single-family loans with completed modifications that are two or more months delinquent during the period; or multifamily loans with completed modifications that are one or more months delinquent during the period.
For the Three Months Ended March 31,For the Three Months Ended March 31,
2020201920212020
Number of LoansAmortized CostNumber of LoansAmortized CostNumber of LoansAmortized CostNumber of LoansAmortized Cost
(Dollars in millions)(Dollars in millions)
Single-family:Single-family:Single-family:
20- and 30-year or more, amortizing fixed-rate20- and 30-year or more, amortizing fixed-rate3,175  $521  4,376  $664  20- and 30-year or more, amortizing fixed-rate7,172 $1,327 3,175 $521 
15-year or less, amortizing fixed-rate15-year or less, amortizing fixed-rate50  3  132  8  15-year or less, amortizing fixed-rate152 11 50 3 
Adjustable-rateAdjustable-rate7  1  8  1  Adjustable-rate11 2 7 1 
OtherOther327  51  643  104  Other633 112 327 51 
Total single-familyTotal single-family3,559  576  5,159  777  Total single-family7,968 1,452 3,559 576 
MultifamilyMultifamily2  2  —  —  Multifamily0 0 2 2 
Total TDRs that subsequently defaultedTotal TDRs that subsequently defaulted3,561  $578  5,159  $777  Total TDRs that subsequently defaulted7,968 $1,452 3,561 $578 
Nonaccrual Loans
For loans not subject to the COVID-19-related nonaccrual policy, we discontinue accruing interest when we believe collectability of principal and interest is not reasonably assured, which for a single-family loan we have determined, based on our historical experience, to be when the loan becomes two months or more past due according to its contractual terms. Interest previously accrued but not collected on such loans is reversed through interest income at the date the loan is placed on nonaccrual status. For single-family loans on nonaccrual status, we recognize income when cash payments are received. We return a non-modified single-family loan to accrual status at the point when the borrower brings the loan current. We return a modified single-family loan to accrual status at the point when the borrower has successfully made all required payments during the trial period (generally three to four months) and the modification is made permanent. We place a multifamily loan on nonaccrual status when the loan becomes two months or more past due according to its contractual terms unless the loan is well secured such that collectability of principal and accrued interest is reasonably assured. For multifamily loans on nonaccrual status, we apply any payment received on a cost recovery basis to reduce principal on the mortgage loan. We return a multifamily loan to accrual status when the borrower cures the delinquency of the loan. Single-family and multifamily loans are reported past due if a full payment of principal and interest is not received within one month of its due date.
Fannie Mae (In conservatorship) First Quarter 20202021 Form 10-Q7887

Notes to Condensed Consolidated Financial Statements | Mortgage Loans
Nonaccrual Loans
The table below displays the amortized cost of and interest income on our HFI single-family and multifamily loans on nonaccrual status by class, excluding loans for which we have elected the fair value option. For the three months ended March 31, 2020, the total amount of foregone interest income for single-family nonaccrual loans was $182 million, of which $87 million was accrued interest receivable written off through the reversal of interest income for nonaccrual loans held at period end. For the three months ended March 31, 2020, the total amount of foregone interest income for multifamily nonaccrual loans held as of period end was $1 million.
As ofFor the Three Months Ended March 31, 2020
March 31, 2020December 31, 2019
Amortized Cost
Total Interest Income Recognized (1)
(Dollars in millions)
Single-family:
20- and 30-year or more, amortizing fixed-rate$23,212  $23,427  $101  
15-year or less, amortized fixed-rate856  858  2  
Adjustable-rate279  288  1  
Other2,827  2,973  13  
Total single-family27,174  27,546  117  
Multifamily91  435  —  
Total$27,265  $27,981  $117  
(1)Represents the amount of cash payments received for nonaccrual loans held as of period end.
Fannie Mae (In conservatorship) First Quarter 2020 Form 10-Q79

Notes to Condensed Consolidated Financial Statements | Mortgage Loans
Individually Impaired Loans
Prior to the adoption of the CECL standard, we recorded a specific loss reserve for individually impaired loans and a collective loss reserve for all other loans. Individually impaired loans include TDRs, acquired credit-impaired loans and multifamily loans that we have assessed as probable that we will not collect all contractual amounts due, regardless of whether we are currently accruing interest, excluding loans classified as HFS and loans for which we have elected the fair value option. The following tables display the unpaid principal balance, total amortized cost, related allowance as of December 31, 2019 and average amortized cost, total interest income recognized, and interest income recognized on a cash basis for individually impaired loans for the three months ended March 31, 2019.
As of December 31, 2019
Unpaid Principal BalanceTotal Amortized CostRelated Allowance for Loan Losses
(Dollars in millions)
Individually impaired loans:
With related allowance recorded:
Single-family:
20- and 30-year or more, amortizing fixed-rate$63,091  $61,033  $(5,851) 
15-year or less, amortizing fixed-rate954  960  (24) 
Adjustable-rate156  157  (9) 
Other15,181  14,078  (2,291) 
Total single-family79,382  76,228  (8,175) 
Multifamily314  315  (45) 
Total individually impaired loans with related allowance recorded79,696  76,543  (8,220) 
With no related allowance recorded:(1)
Single-family:
20- and 30-year or more, amortizing fixed-rate18,372  17,578  —  
15-year or less, amortizing fixed-rate410  407  —  
Adjustable-rate265  265  —  
Other3,014  2,718  —  
Total single-family22,061  20,968  —  
Multifamily363  365  —  
Total individually impaired loans with no related allowance recorded22,424  21,333  —  
Total individually impaired loans(2)
$102,120  $97,876  $(8,220) 
(1) The discounted cash flows or collateral value equals or exceeds the carrying value of the loan and, as such, no valuation allowance is required.
(2) Includes single-family loans restructured in a TDR with an amortized cost of $96.9 billion as of December 31, 2019. Includes multifamily loans restructured in a TDR with an amortized cost of $102 million as of December 31, 2019.
Fannie Mae (In conservatorship) First Quarter 2020 Form 10-Q80

Notes to Condensed Consolidated Financial Statements | Mortgage Loans

For the Three Months Ended March 31, 2019
Average Amortized CostTotal Interest Income RecognizedInterest Income Recognized on a Cash Basis
(Dollars in millions)
Individually impaired loans:
With related allowance recorded:
Single-family:
20- and 30-year or more, amortizing fixed-rate$76,400  $804  $79  
15-year or less, amortizing fixed-rate1,323  12  1  
Adjustable-rate120  1  —  
Other19,898  204  15  
Total single-family97,741  1,021  95  
Multifamily247  2  —  
Total individually impaired loans with related allowance recorded97,988  1,023  95  
With no related allowance recorded:(1)
Single-family:
20- and 30-year or more, amortizing fixed-rate14,474  212  26  
15-year or less, amortizing fixed-rate318  4  1  
Adjustable-rate400  4  1  
Other3,000  48  3  
Total single-family18,192  268  31  
Multifamily353  2  —  
Total individually impaired loans with no related allowance recorded18,545  270  31  
Total individually impaired loans$116,533  $1,293  $126  
(1) The discountedFor loans negatively impacted by the COVID-19 pandemic, we continue to recognize interest income at the current contractual yield for up to six months of delinquency provided that the loan was either current at March 1, 2020 or originated after March 1, 2020, and collection of principal and interest is reasonably assured. For single-family loans where we have provided relief beyond six months of delinquency, we continue to accrue interest income provided that the loan remains in a forbearance arrangement and collection of principal and interest continues to be reasonably assured. Multifamily loans that are in a forbearance arrangement are placed on nonaccrual status when the borrower is six months past due unless the loan is both well secured and in the process of collection. Loans that have been placed in a repayment plan or that have been brought current through a modification or a payment deferral are returned to accrual status once the borrower has made six consecutive contractual payments under the terms of the repayment plan or the modified loan. For loans in a forbearance arrangement that are placed on nonaccrual status, cash flows or collateral value equals or exceedspayments for interest are applied as a reduction of accrued interest receivable until the carrying value ofreceivable has been reduced to zero, and then recognized as interest income. If a loan is modified, any capitalized interest that has not been previously recognized as interest income is recorded as a discount to the loan and amortized over the life of the loan. See “Note 1, Summary of Significant Accounting Policies” in our 2020 Form 10-K for more information on our nonaccrual policy, including a discussion of regulatory guidance on interest income issued in response to COVID-19, and additional information on our policies for determining if the collection of principal and interest is reasonably assured, as such, nowell as our policy for establishing a valuation allowance is required.for expected credit losses on the accrued interest receivable balance for loans negatively impacted by COVID-19.
The table below displays the forgone interest and the accrued interest receivable written off through the reversal of interest income for nonaccrual loans.
For the Three Months Ended March 31,
20212020
(Dollars in millions)
Single-family:
Interest income forgone(1)
$307 $182 
Accrued interest receivable written off through the reversal of interest income108 87 
Multifamily:
Interest income forgone(1)
$14 $1 
Accrued interest receivable written off through the reversal of interest income0 0 
(1)For loans on nonaccrual status held as of period end, represents the amount of interest income we did not recognize but would have recognized if the loans had performed in accordance with their original contractual terms.
The table below includes the amortized cost of and interest income recognized on our HFI single-family and multifamily loans on nonaccrual status by class, excluding loans for which we have elected the fair value option.
As ofFor the Three Months Ended March 31,
March 31, 2021December 31, 202020212020
Amortized Cost
Total Interest Income Recognized(1)
(Dollars in millions)
Single-family:
20- and 30-year or more, amortizing fixed-rate$30,173 $22,907 $64 $101 
15-year or less, amortizing fixed-rate945 853 2 2 
Adjustable-rate284 270 1 1 
Other2,583 2,475 4 13 
Total single-family33,985 26,505 71 117 
Multifamily2,153 2,069 8 0 
Total nonaccrual loans$36,138 $28,574 $79 $117 
(1)Single-family interest income recognized includes amounts accrued while the loans were performing, including the amortization of any deferred cost basis adjustments, as well as payments received on nonaccrual loans for nonaccrual loans held as of period end. Multifamily interest income recognized includes amounts accrued while the loans were performing and the amortization of any deferred cost basis adjustments for nonaccrual loans held as of period end.
Fannie Mae (In conservatorship) First Quarter 20202021 Form 10-Q8188

Notes to Condensed Consolidated Financial Statements | Allowance for Loan Losses
4.  Allowance for Loan Losses
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. See “Note 1, Summary of Significant Accounting Policies” for additional information and accounting policy changes resulting from our adoption of the CECL standard.
The following table displays changes in our allowance for single-family loans, multifamily loans and total allowance for loan losses, including the transition impact of adopting Accounting Standards Update (“ASU”) 2016-13, “Financial Instruments—Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments,” which was later amended by ASU 2019-04, ASU 2019-05 and ASU 2019-1 (collectively, the “CECL standard”), on January 1, 2020. See “Note 1, Summary of Significant Accounting Policies” in our 2020 Form 10-K for additional information on changes to our allowance for loan losses resulting from our adoption of the CECL standard.
For the Three Months Ended March 31, 2020
Balance December 31, 2019Transition Impact from the Adoption of the CECL StandardBalance January 1, 2020Provision for Loan LossesWrite-offsRecoveriesOtherBalance March 31, 2020
(Dollars in millions)
Single-family$(8,759) $(1,229) $(9,988) $(2,177) $70  $(3) $28  $(12,070) 
Multifamily(257) (493) (750) (407) 19  (1) —  (1,139) 
Total allowance for loan losses$(9,016) $(1,722) $(10,738) $(2,584) $89  $(4) $28  $(13,209) 
The benefit or provision for loan losses excludes provision for accrued interest receivable losses, guaranty loss reserves and credit losses on available-for-sale (“AFS”) debt securities. Cumulatively, these expenses are recognized as “Benefit (provision) for credit losses” in our condensed consolidated statements of operations and comprehensive income.
For the Three Months Ended March 31,
20212020
(Dollars in millions)
Single-family allowance for loan losses:
Beginning balance$(9,344)$(8,759)
Transition impact of the adoption of the CECL standard— (1,229)
Benefit (provision) for loan losses671 (2,177)
Write-offs71 70 
Recoveries(2)(3)
Other57 28 
Ending Balance$(8,547)$(12,070)
Multifamily allowance for loan losses:
Beginning balance$(1,208)$(257)
Transition impact of the adoption of the CECL standard— (493)
Benefit (provision) for loan losses95 (407)
Write-offs33 19 
Recoveries(1)(1)
Ending Balance$(1,081)$(1,139)
Total allowance for loan losses:
Beginning balance$(10,552)$(9,016)
Transition impact of the adoption of the CECL standard— (1,722)
Benefit (provision) for loan losses766 (2,584)
Write-offs104 89 
Recoveries(3)(4)
Other57 28 
Ending Balance$(9,628)$(13,209)
Our benefit or provision 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 types and volume of our loss mitigation activities, including forbearance and loan modifications, the volume of foreclosures completed, and the redesignation of loans from HFI to HFS. Estimating the impact of the COVID-19 outbreak on our expected loan loss reserves required significant management judgment, including estimates of the number of single-family borrowers who will receive forbearance and any resulting loan modifications that will be provided once the forbearance period ends. Under our CECL methodology, depending on the type of loan modification granted, loss severity estimates vary. Our benefit or provision can also be impacted by updates to the models, assumptions, and data used in determining our allowance for loan losses.As described below, our benefit or provision for loan losses and our loss reserves have been significantly affected by our estimates of the impact of the COVID-19
Fannie Mae (In conservatorship) First Quarter 2021 Form 10-Q89
Notes to Condensed Consolidated Financial Statements | Allowance for Loan Losses
pandemic, which require significant management judgment. Changes in our estimates of borrowers that will ultimately receive forbearance and even more significantly, the loss mitigation outcomes of affected borrowers after the forbearance period ends, remain uncertain and can affect the amount of benefit or provision for loan losses we recognize.
The primary factors that contributed to our single-family benefit for loan losses in the first quarter of 2021 were:
•Benefit from actual and expected home price growth. During the first quarter of 2021, home price growth was unseasonably strong. We also increased our expectations for home price growth on a national basis for full year 2021. Higher home prices decrease the likelihood that loans will default and reduce the amount of credit loss on loans that do default, which impacts our estimate of losses and ultimately reduces our loss reserves and provision for loan losses.
•Benefit from the redesignation of certain reperforming single-family loans from HFI to HFS. After a temporary pause in sales of nonperforming and reperforming loans, we resumed our plans for sales late in the first quarter of 2021. As a result, we redesignated certain reperforming single-family loans from HFI to HFS, as we no longer intend to hold them for the foreseeable future or to maturity. Upon redesignation of these loans, we recorded the loans at the lower of cost or fair value with a write-off against the allowance for loan losses. Amounts recorded in the allowance related to these loans exceeded the amounts written off, resulting in a benefit for loan losses.
•Benefit from changes in assumptions regarding COVID-19 forbearance and change in actual and expected loan delinquencies. Management continues to apply its judgment and supplement model results as of March 31, 2021, due to continued uncertainty regarding the loss mitigation outcomes of borrowers in forbearance, and uncertainty regarding the future impact of the pandemic, including the efficacy of the COVID-19 vaccines on new strains of the virus and its effect on the economy. Although uncertainty remains, our expected loan losses as a result of the COVID-19 pandemic decreased in the first quarter of 2021, driven by the passage of the American Rescue Plan, which provides additional economic stimulus and helps support the continued economic recovery. In addition, decreased political uncertainty compared with the end of 2020 combined with the increased progression of the COVID-19 vaccines rollout lessened expectations of loan losses. Based on these factors in the first quarter of 2021, management used its judgment to reduce the non-modeled adjustment that was previously applied to the loss projections developed by our credit loss model.
The impact of these factors was partially offset by the impact of the following factor which reduced our single-family benefit for loan losses recognized in the first quarter of 2021.
•Provision from higher actual and projected interest rates. Although we continue to be in a historically low interest-rate environment, actual and projected interest rates rose in the first quarter of 2021. As mortgage interest rates increase, we expect a decrease in future prepayments on single-family loans, including modified loans. Lower expected prepayments extend the expected lives of modified loans, which increases the expected impairment relating to term and interest-rate concessions provided on these loans resulting in a provision for loan losses.
The primary factors that impacted our single-family provision for loan losses in the first quarter of 2020 were:
•Expected loan losses as a result of the COVID-19 outbreak.pandemic. Given the rapidly changing and deteriorating market conditions in recent weeksthe first quarter of 2020 as a result of the unprecedented COVID-19 outbreak,pandemic, we believebelieved our model used to estimate single-family credit losses as of March 31, 2020 doesdid not capture the entirety of losses we expectexpected to incur relating to COVID-19. As such,a result, management used its judgment to increase the loss projections developed by our credit loss model to reflect our current expectations at that time relating to COVID-19’s impact. These judgments included adjusting our modeled results for (1) the expected impact of widespread forbearance programs, including the rate of borrower participation, and the volume and type of loan modifications as a result thereof, (2) the effect of TDR accounting relief from the CARES Act, and (3) lower expected prepayment volumes given the sharp rise in unemployment rates that arewere expected to stay elevated over the near term. In developing this model adjustment, management considered the current credit risk profile of our single-family loan book of business at that time, as well as relevant historical credit loss experience during rare or stressful economic environments.
•A decrease in our expectations for home price growth. WeIn the first quarter of 2020, we revised our forecast to reflect near zero home price appreciation on a national basis for 2020 due to COVID-19 market disruptions. Lower home prices increase the likelihood that loans will default and increase the amount of credit loss on loans that do default, which impacts our estimate of losses and ultimately increases our loss reserves and provision for credit losses.
•These factors were partially offset by lower actual and projected mortgage interest rates. As mortgage interest rates decline, we expect an increase in future prepayments on single-family loans, including modified loans. Higher expected prepayments shorten the expected lives of modified loans, which decreases the expected impairment relating to term and interest-rate concessions provided on these loans and results in a benefit for credit losses. As noted above, we adjusted downward our modeled expectation of prepayment volumes due to the COVID-19 outbreak, which reduced the modeled benefit from interest rates.
Fannie Mae (In conservatorship) First Quarter 20202021 Form 10-Q8290

Notes to Condensed Consolidated Financial Statements | Allowance for Loan Losses
•These factors were partially offset by lower actual and projected mortgage interest rates. As mortgage interest rates declined, we expected an increase in future prepayments on single-family loans, including modified loans. As noted above, we adjusted downward our modeled expectation of prepayment volumes due to the COVID-19 pandemic, which reduced this modeled benefit from interest rates.
The primary factorfactors that contributed to a decrease in single-family write-offsimpacted our multifamily benefit for loan losses in the first quarter of 2020 compared to2021 were:
•Benefit from actual and projected economic data. In the first quarter of 2019 was2021, property value forecasts increased due to continued demand for multifamily housing. In addition, improved job growth led to an increase in projected average property net operating income, which reduced the probability of loan default, resulting in a reductionbenefit for loan losses for the quarter.
•Benefit from changes in expected loan losses as a result of the COVID-19 pandemic. Similar to our single-family provision for loan losses described above, management continues to apply its judgment and supplement model results as of March 31, 2021, due to continued uncertainty regarding the future impact of the pandemic, including the efficacy of the COVID-19 vaccines on new strains of the virus and its effect on the economy. Although uncertainty remains, our expected loan losses as a result of the COVID-19 pandemic decreased in the numberfirst quarter of reperforming loans redesignated from HFI2021 driven by positive economic growth and the passage of the American Rescue Plan, which provided additional economic stimulus. Based on these factors in the first quarter of 2021, management used its judgment to HFS, resulting in lower write-offs.reduce the non-modeled adjustment that was previously applied to the loss projections developed by our credit loss model.
Our multifamily provision for loan losses in the first quarter of 2020 was primarily driven by higher expected loan losses as a result of the economic dislocation caused by the COVID-19 outbreak. Similar topandemic. Consistent with the 2020 single-family provision for loan losses discussed above, we believebelieved our model used to estimate multifamily creditloan losses as of March 31, 2020 doesdid not capture the entirety of losses we expectexpected to incur relating to COVID-19. As such,a result, management used its judgment to increase the loss projections developed by our credit loss model to reflect our current expectations at that time relating to COVID-19’s impact. Accordingly, our current multifamily provision for loan losses was primarily driven by higher expected unemployment rates, which we expect willexpected would increase the number of loans in forbearance and reduce property net operating income in the near term, thereby decreasing forecasted property values and increasing the probability of loan default. In developing these adjustments, management considered the current credit risk profile of our multifamily loan book of business at that time, as well as relevant historical credit loss experience during rare or stressful economic environments.
For the three months ended March 31, 2020, we recorded a benefit of $58 million related to changes in the expected benefit of freestanding credit enhancements on our single-family loans. Additionally, we recorded a benefit of $127 million related to freestanding credit enhancements on our multifamily loans. Freestanding credit enhancements primarily consist of transactions under our CAS program, our CIRT program, and certain lender risk-sharing programs, including our multifamily DUS program. The impact from these credit enhancements is recorded in “Fee and other income” in our condensed consolidated statements of operations and comprehensive income.
The following tables display prior period changes in single-family and multifamily allowance for loan losses and the prior period amortized cost in our HFI loans by impairment or allowance methodology and portfolio segment prior to the adoption of the CECL standard. For a description of our previous allowance and impairment methodology refer to “Note 1, Summary of Significant Accounting Policies” in our 2019 Form 10-K.
For the Three Months Ended March 31, 2019
Balance December 31, 2018Benefit (Provision) for Loan LossesWrite-offsRecoveriesOtherBalance March 31, 2019
(Dollars in millions)
Single-family$(13,969) $647  $381  $(45) $1  $(12,985) 
Multifamily(234) (13) —  —  —  (247) 
Total allowance for loan losses$(14,203) $634  $381  $(45) $1  $(13,232) 
As of December 31, 2019
Single-FamilyMultifamilyTotal
(Dollars in millions)
Allowance for loan losses by segment:
Individually impaired loans$(8,175) $(45) $(8,220) 
Collectively reserved loans(584) (212) (796) 
Total allowance for loan losses$(8,759) $(257) $(9,016) 
Amortized cost in loans by segment:
Individually impaired loans$97,196  $680  $97,876  
Collectively reserved loans2,909,115  329,938  3,239,053  
Total amortized cost in loans$3,006,311  $330,618  $3,336,929  
Fannie Mae (In conservatorship) First Quarter 2020 Form 10-Q83

Notes to Condensed Consolidated Financial Statements | Investments in Securities







5.  Investments in Securities
Trading Securities
Trading securities are recorded at fair value with subsequent changes in fair value recorded as “Fair value losses,gains (losses), net” in our condensed consolidated statements of operations and comprehensive income. The following table displays our investments in trading securities.
As ofAs of
March 31, 2020December 31, 2019March 31, 2021December 31, 2020
(Dollars in millions)(Dollars in millions)
Mortgage-related securities:Mortgage-related securities:Mortgage-related securities:
Fannie MaeFannie Mae$3,530  $3,424  Fannie Mae$1,985 $2,404 
Other agency(1)
Other agency(1)
4,167  4,490  
Other agency(1)
3,440 3,451 
Private-label and other mortgage securitiesPrivate-label and other mortgage securities444  629  Private-label and other mortgage securities157 158 
Total mortgage-related securities (includes $863 million and $896 million, respectively, related to consolidated trusts)8,141  8,543  
Total mortgage-related securities (includes $741 million and $793 million, respectively, related to consolidated trusts)Total mortgage-related securities (includes $741 million and $793 million, respectively, related to consolidated trusts)5,582 6,013 
Non-mortgage-related securities:Non-mortgage-related securities:Non-mortgage-related securities:
U.S. Treasury securitiesU.S. Treasury securities44,727  39,501  U.S. Treasury securities105,601 130,456 
Other securitiesOther securities73  79  Other securities73 73 
Total non-mortgage-related securitiesTotal non-mortgage-related securities44,800  39,580  Total non-mortgage-related securities105,674 130,529 
Total trading securitiesTotal trading securities$52,941  $48,123  Total trading securities$111,256 $136,542 
(1)Consists of Freddie Mac and Ginnie Mae mortgage-related securities.
Fannie Mae (In conservatorship) First Quarter 2021 Form 10-Q91
Notes to Condensed Consolidated Financial Statements | Investments in Securities

The following table displays information about our net trading gains.gains (losses).
For the Three Months Ended March 31,
20202019
(Dollars in millions)
Net trading gains$647  $92  
Net trading gains recognized in the period related to securities still held at period end591  89  
For the Three Months Ended March 31,
20212020
(Dollars in millions)
Net trading gains (losses)$(758)$647 
Net trading gains (losses) recognized in the period related to securities still held at period end(759)591 
Available-for-Sale Securities
We record AFS securities at fair value with unrealized gains and losses, recorded net of tax, as a component of “Other comprehensive income (loss)” and we recognize realized gains and losses from the sale of AFS securities in “Investment gains (losses), net” in our condensed consolidated statements of operations and comprehensive income. We define the amortized cost basis of our AFS securities as unpaid principal balance, net of unamortized premiums and discounts, and other cost basis adjustments.
Pursuant to the CECL standard, we We record an allowance for credit losses for AFS securities that reflects the impairment for credit losses, which are limited byto the amount that fair value is less than the amortized cost. Credit-related losses are written off when deemed uncollectible. Recoveries of credit losses are recorded as a reversal of the allowance for credit losses and benefit for credit losses only prior to the write-down or write-off of a security’s amortized cost basis. Impairment due to non-credit losses are recorded as unrealized losses within other comprehensive income.
Fannie Mae (In conservatorship) First Quarter 2020 Form 10-Q84

Notes to Condensed Consolidated Financial Statements | Investments in Securities







The following tables display the amortized cost, allowance for credit losses, gross unrealized gains and losses in accumulated other comprehensive income (loss) (“AOCI”), and fair value by major security type for AFS securities.
As of March 31, 2020As of March 31, 2021
Total Amortized Cost(1)
Allowance for Credit LossesGross Unrealized Gains in AOCIGross Unrealized Losses in AOCI
Total Fair Value(1)
Total Amortized Cost(1)
Allowance for Credit LossesGross Unrealized Gains in AOCIGross Unrealized Losses in AOCI
Total Fair Value(1)
(Dollars in millions)(Dollars in millions)
Fannie MaeFannie Mae$1,393  $—  $123  $(11) $1,505  Fannie Mae$988 $0 $59 $(11)$1,036 
Other agency(2)
Other agency(2)
171  —  19  —  190  
Other agency(2)
32 0 2 0 34 
Alt-A and subprime private-label securitiesAlt-A and subprime private-label securities4  —  3  —  7  Alt-A and subprime private-label securities3 0 2 0 5 
Mortgage revenue bondsMortgage revenue bonds291  (3) 9  (1) 296  Mortgage revenue bonds187 (3)7 0 191 
Other mortgage-related securitiesOther mortgage-related securities288  —  3  —  291  Other mortgage-related securities230 0 6 0 236 
TotalTotal$2,147  $(3) $157  $(12) $2,289  Total$1,440 $(3)$76 $(11)$1,502 
As of December 31, 2019As of December 31, 2020
Total Amortized Cost(1)(3)
Gross Unrealized GainsGross Unrealized Losses
Total Fair Value(1)
Total Amortized Cost(1)
Allowance for Credit LossesGross Unrealized Gains in AOCIGross Unrealized Losses in AOCI
Total Fair Value(1)
(Dollars in millions)(Dollars in millions)
Fannie MaeFannie Mae$1,445  $85  $(10) $1,520  Fannie Mae$1,094 $0 $86 $(12)$1,168 
Other agency(2)
Other agency(2)
183  15  —  198  
Other agency(2)
59 0 6 0 65 
Alt-A and subprime private-label securitiesAlt-A and subprime private-label securities34  23  —  57  Alt-A and subprime private-label securities4 0 2 0 6 
Mortgage revenue bondsMortgage revenue bonds309  9  (3) 315  Mortgage revenue bonds211 (3)8 0 216 
Other mortgage-related securitiesOther mortgage-related securities310  5  (1) 314  Other mortgage-related securities238 0 4 0 242 
TotalTotal$2,281  $137  $(14) $2,404  Total$1,606 $(3)$106 $(12)$1,697 
(1)We exclude from amortized cost and fair value accrued interest of $8$5 million and $10$6 million as of March 31, 20202021 and December 31, 20192020, respectively, which we record in “Other assets” in our condensed consolidated balance sheets.
(2)Other agency securities consist of securities issued by Freddie Mac and Ginnie Mae.
(3)Prior to our adoption of the CECL standard, total amortized cost represented the unpaid principal balance, unamortized premiums, discounts and other cost basis adjustments, as well as temporary impairments recognized in “Investment gains, net” in our consolidated statements of operations and comprehensive income.
Fannie Mae and Other Agency Securities
Our Fannie Mae and other agency AFS securities consist of securities issued by us, Freddie Mac, or Ginnie Mae. The principal and interest on these securities are guaranteed by the issuing agency. We believe that the guaranty provided by the issuing agency, the support provided to the agencies by the U.S. government, the importance of the agencies to the liquidity and stability in the secondary mortgage market, and the long history of zero credit losses on agency
Fannie Mae (In conservatorship) First Quarter 2021 Form 10-Q92
Notes to Condensed Consolidated Financial Statements | Investments in Securities

mortgage-related securities are all indicators that there are not currently no credit losses on these securities, even if the security is in an unrealized loss position. In addition, we generally hold these securities that are in an unrealized loss position to recovery. As a result, unless we intend to sell the security, we do not recognize an allowance for credit losses on agency mortgage-related securities.
Non-Agency Mortgage-Related Securities
As of March 31, 2020,2021, substantially all of our non-agency mortgage-related securities were in an unrealized gain position. As a result, we have not recognized an allowance for credit losses on these securities.
Fannie Mae (In conservatorship) First Quarter 2020 Form 10-Q85

Notes to Condensed Consolidated Financial Statements | Investments in Securities







The following tables display additional information regarding gross unrealized losses and fair value by major security type for AFS securities in an unrealized loss position, excluding allowance for credit losses.
As of
As of March 31, 2020March 31, 2021December 31, 2020
Less Than 12 Consecutive Months12 Consecutive Months or LongerLess Than 12 Consecutive Months12 Consecutive Months or LongerLess Than 12 Consecutive Months12 Consecutive Months or Longer
Gross Unrealized Losses in AOCIFair ValueGross Unrealized Losses in AOCIFair ValueGross Unrealized Losses in AOCIFair ValueGross Unrealized Losses in AOCIFair ValueGross Unrealized Losses in AOCIFair ValueGross Unrealized Losses in AOCIFair Value
(Dollars in millions)(Dollars in millions)
Fannie MaeFannie Mae$(1) $66  $(10) $105  Fannie Mae$0 $0 $(11)$131 $(1)$40 $(11)$94 
Mortgage revenue bonds(1) 22  —  —  
TotalTotal$(2) $88  $(10) $105  Total$0 $0 $(11)$131 $(1)$40 $(11)$94 
As of December 31, 2019
Less Than 12 Consecutive Months12 Consecutive Months or Longer
Gross Unrealized LossesFair ValueGross Unrealized LossesFair Value
(Dollars in millions)
Fannie Mae$—  $—  $(10) $337  
Mortgage revenue bonds—  —  (3) 3  
Other mortgage-related securities(1) 130  —  —  
Total$(1) $130  $(13) $340  
The following table displays the gross realized gains and proceeds on sales of AFS securities.
For the Three Months Ended March 31,For the Three Months Ended March 31,
For the Three Months Ended March 31,
2020201920212020
(Dollars in millions)(Dollars in millions)
Gross realized gains Gross realized gains$21  $61   Gross realized gains$13 $21 
Total proceeds (excludes initial sale of securities from new portfolio securitizations) Total proceeds (excludes initial sale of securities from new portfolio securitizations)50  131   Total proceeds (excludes initial sale of securities from new portfolio securitizations)115 50 
The following tables display net unrealized gains on AFS securities and other amounts accumulated within our accumulated other comprehensive income, net of tax.
As of
March 31, 2020
(Dollars in millions)
Net unrealized gains on AFS securities for which we have not recorded an allowance for credit losses$115 
Other31 
Accumulated other comprehensive income$146 
As of
March 31, 2021December 31, 2020
(Dollars in millions)
 Net unrealized gains on AFS securities for which we have not recorded an allowance for credit losses$51 $74 
Other38 42 
Accumulated other comprehensive income$89 $116 
As of
December 31, 2019
(Dollars in millions)
Net unrealized gains on AFS securities for which we have not recorded OTTI$97 
Other34 
Accumulated other comprehensive income$131 
Prior to our adoption of the CECL standard on January 1, 2020, we evaluated AFS securities for other-than-temporary impairment. The balance of the unrealized credit-loss component of AFS securities held by us and recognized in our consolidated statements of operations and comprehensive income was $36 million as of December 31, 2019.
Fannie Mae (In conservatorship) First Quarter 20202021 Form 10-Q8693

Notes to Condensed Consolidated Financial Statements | Investments in Securities







Maturity Information
The following table displays the amortized cost and fair value of our AFS securities by major security type and remaining contractual maturity, assuming no principal prepayments. The contractual maturity of mortgage-backed securities is not a reliable indicator of their expected life because borrowers generally have the right to prepay their obligations at any time.
As of March 31, 2020 As of March 31, 2021
Total Carrying Amount (1)
Total
Fair
Value		One Year or LessAfter One Year Through Five YearsAfter Five Years Through Ten YearsAfter Ten Years
Total Carrying Amount(1)
Total
Fair
Value		One Year or LessAfter One Year Through Five YearsAfter Five Years Through Ten YearsAfter Ten Years
Net Carrying Amount (1)
Fair Value
Net Carrying Amount (1)
Fair Value
Net Carrying Amount (1)
Fair Value
Net Carrying Amount (1)
Fair Value
Total Carrying Amount(1)
Total
Fair
Value
Net Carrying Amount(1)
Fair Value
Net Carrying Amount(1)
Fair Value
Net Carrying Amount(1)
Fair Value
(Dollars in millions) (Dollars in millions)
Fannie MaeFannie Mae$1,393  $1,505  $—  $—  $14  $14  $96  $109  $1,283  $1,382  Fannie Mae$988 $1,036 $0 $0 $4 $4 $98 $109 $886 $923 
Other agencyOther agency171  190  —  —  16  17  23  25  132  148  Other agency32 34 0 0 0 0 1 1 31 33 
Alt-A and subprime private-label securitiesAlt-A and subprime private-label securities4  7  —  —  —  —  2  3  2  4  Alt-A and subprime private-label securities3 5 0 0 0 0 2 2 1 3 
Mortgage revenue bondsMortgage revenue bonds288  296  2  2  30  32  27  28  229  234  Mortgage revenue bonds184 191 1 1 26 27 18 19 139 144 
Other mortgage-related securitiesOther mortgage-related securities288  291  —  —  —  —  23  24  265  267  Other mortgage-related securities230 236 0 0 0 0 18 20 212 216 
TotalTotal$2,144  $2,289  $2  $2  $60  $63  $171  $189  $1,911  $2,035  Total$1,437 $1,502 $1 $1 $30 $31 $137 $151 $1,269 $1,319 
(1)Net carrying amount consists of book value, net of allowance for credit losses on AFS debt securities.
6.  Financial Guarantees
We recognize a guaranty obligation for our obligation to stand ready to perform on our guarantees to unconsolidated trusts and other guaranty arrangements. These off-balance sheet guarantees expose us to credit losses primarily relating to the unpaid principal balance of our unconsolidated Fannie Mae MBS and other financial guarantees. The maximum remaining contractual term of our guarantees is 3332 years; however, the actual term of each guaranty may be significantly less than the contractual term based on the prepayment characteristics of the related mortgage loans. With our adoption of the CECL standard on January 1, 2020, weWe measure our guaranty reserve for estimated credit losses for off-balance sheet exposures over the contractual period for which they are exposed to the credit risk, unless that obligation is unconditionally cancellable by the issuer.
As the guarantor of structured securities backed in whole or in part by Freddie Mac-issued securities, we extend our guaranty to the underlying Freddie Mac securities in our resecuritization trusts. However, Freddie Mac continues to guarantee the payment of principal and interest on the underlying Freddie Mac securities that we have resecuritized. We do not charge an incremental guaranty fee to include Freddie Mac securities in the structured securities that we issue. When we began issuing UMBS in June 2019, we entered into an indemnification agreement under which Freddie Mac agreed to indemnify us for losses caused by its failure to meet its payment or other specified obligations under the trust agreements pursuant to which the underlying resecuritized securities were issued. As a result, and due to the funding commitment available to Freddie Mac through its senior preferred stock purchase agreement with Treasury, we have concluded that the associated credit risk is negligible. As such,Accordingly, we exclude from the following table Freddie Mac securities backing unconsolidated Fannie Mae-issued structured securities of approximately $72.7$154.6 billion and $50.1$137.3 billion as of March 31, 20202021 and December 31, 2019,2020, respectively.
Fannie Mae (In conservatorship) First Quarter 2021 Form 10-Q94
Notes to Condensed Consolidated Financial Statements | Financial Guarantees

The following table displays our off-balance sheet maximum exposure, guaranty obligation recognized in our condensed consolidated balance sheets and the potential maximum recovery from third parties through available credit enhancements and recourse related to our financial guarantees.
As ofAs of
March 31, 2020December 31, 2019March 31, 2021December 31, 2020
Maximum ExposureGuaranty Obligation
Maximum Recovery(1)
Maximum ExposureGuaranty Obligation
Maximum Recovery(1)
Maximum ExposureGuaranty Obligation
Maximum Recovery(1)
Maximum ExposureGuaranty Obligation
Maximum Recovery(1)
(Dollars in millions)(Dollars in millions)
Unconsolidated Fannie Mae MBSUnconsolidated Fannie Mae MBS$5,487  $18  $5,244  $5,801  $26  $5,545  Unconsolidated Fannie Mae MBS$4,232 $17 $4,047 $4,424 $18 $4,226 
Other guaranty arrangements(2)
Other guaranty arrangements(2)
12,399  123  2,495  12,670  128  2,553  
Other guaranty arrangements(2)
11,392 103 2,295 11,828 109 2,438 
TotalTotal$17,886  $141  $7,739  $18,471  $154  $8,098  Total$15,624 $120 $6,342 $16,252 $127 $6,664 
(1)Recoverability of such credit enhancements and recourse is subject to, among other factors, the ability of our mortgage insurers’insurers and the U.S. government, as a financial guarantors’ abilityguarantor, to meet their obligations to us. For information on our mortgage insurers, see “Note 10, Concentrations of Credit Risk.”
(2)Primarily consists of credit enhancements and long-term standby commitments.
Fannie Mae (In conservatorship) First Quarter 2020 Form 10-Q87

Notes to Condensed Consolidated Financial Statements | Short-Term and Long-Term Debt

7.  Short-Term and Long-Term Debt
In January 2021, we began applying fair value hedge accounting to certain debt issuances. The objective of our fair value hedges is to reduce GAAP earnings volatility related to changes in benchmark interest rates. See “Note 1, Summary of Significant Accounting Policies” and “Note 8, Derivative Instruments” for additional information on our fair value hedge accounting policy and related disclosures.
Short-Term Debt
The following table displays our outstanding short-term debt (debt with an original contractual maturity of one year or less) and weighted-average interest rates of this debt.
As of
 March 31, 2020December 31, 2019
Outstanding
Weighted- Average Interest Rate(1)
Outstanding
Weighted- Average Interest Rate(1)
(Dollars in millions)
Federal funds purchased and securities sold under agreements to repurchase(2)
$—  — %$478  1.67 %
Short-term debt of Fannie Mae58,337  0.71  26,662  1.56  
As of
 March 31, 2021December 31, 2020
Outstanding
Weighted- Average Interest Rate(1)
Outstanding
Weighted- Average Interest Rate(1)
(Dollars in millions)
Short-term debt of Fannie Mae$2,857 0.06 %$12,173 0.18 %
(1)Includes the effects of discounts, premiums and other cost basis adjustments.
(2)Represents agreements to repurchase securities for a specified price, with repayment generally occurring on the following day, reported as “Other liabilities” in our condensed consolidated balance sheets.
Intraday Line of Credit
We use a secured intraday funding line of credit provided by a large financial institution. We post collateral which, in some circumstances, the secured party has the right to repledge to third parties. As this line of credit is an uncommitted intraday loan facility, we may be unable to draw on it if and when needed. The line of credit under this facility was up to $15.0 billion as of March 31, 2020 and December 31, 2019.
Fannie Mae (In conservatorship) First Quarter 2021 Form 10-Q95
Notes to Condensed Consolidated Financial Statements | Short-Term and Long-Term Debt

Long-Term Debt
Long-term debt represents debt with an original contractual maturity of greater than one year. The following table displays our outstanding long-term debt.
As ofAs of
March 31, 2020December 31, 2019March 31, 2021December 31, 2020
MaturitiesOutstanding
Weighted- Average Interest Rate(1)
MaturitiesOutstanding
Weighted- Average Interest Rate(1)
Maturities
Outstanding(1)
Weighted- Average Interest Rate(2)
MaturitiesOutstanding
Weighted- Average Interest Rate(2)
(Dollars in millions)(Dollars in millions)
Senior fixed:Senior fixed:Senior fixed:
Benchmark notes and bondsBenchmark notes and bonds2020 - 2030$83,115  2.70 %2020 - 2030$86,114  2.66 %Benchmark notes and bonds2021 - 2030$102,683 2.09 %2021 - 2030$106,691 2.03 %
Medium-term notes(2)(3)
Medium-term notes(2)(3)
2020 - 202622,919  1.59  2020 - 202632,590  1.57  
Medium-term notes(2)(3)
2021 - 203147,693 0.61 2021 - 203048,524 0.63 
Other(3)(4)
Other(3)(4)
2020 - 20384,080  5.47  2020 - 20385,254  5.01  
Other(3)(4)
2021 - 20387,195 3.77 2021 - 20386,701 3.90 
Total senior fixedTotal senior fixed110,114  2.57  123,958  2.47  Total senior fixed157,571 1.72 161,916 1.69 
Senior floating:Senior floating:Senior floating:
Medium-term notes(2)(3)
Medium-term notes(2)(3)
2020 - 202240,078  0.54  2020 - 20219,774  1.66  
Medium-term notes(2)(3)
2021 - 202298,095 0.28 2021 - 2022100,089 0.35 
Connecticut Avenue Securities(4)(5)
Connecticut Avenue Securities(4)(5)
2023 - 203119,470  5.42  2023 - 203121,424  5.61  
Connecticut Avenue Securities(4)(5)
2023 - 203114,537 4.13 2023 - 203114,978 4.16 
Other(5)(6)
Other(5)(6)
2020 - 2037432  7.37  2020 - 2037398  6.27  
Other(5)(6)
2037382 7.69 2037416 7.75 
Total senior floatingTotal senior floating59,980  2.17  31,596  4.40  Total senior floating113,014 0.79 115,483 0.86 
Secured borrowings(6)
2021 - 202227  2.60  2021 - 202231  2.31  
Total long-term debt of Fannie Mae(7)
Total long-term debt of Fannie Mae(7)
170,121  2.43  155,585  2.86  
Total long-term debt of Fannie Mae(7)
270,585 1.34 277,399 1.34 
Debt of consolidated trustsDebt of consolidated trusts2020 - 20593,334,098  2.78  2020 - 20593,285,139  2.78  Debt of consolidated trusts2021 - 20603,740,538 1.72 2021 - 20603,646,164 1.88 
Total long-term debtTotal long-term debt$3,504,219  2.76 %$3,440,724  2.78 % Total long-term debt$4,011,123 1.70 %$3,923,563 1.85 %
(1)IncludesOutstanding debt balance consists of the effects ofunpaid principal balance, premiums and discounts, premiumsfair value adjustments, hedge-related basis adjustments, and other cost basis adjustments.
(2)Excludes the effects of fair value adjustments and hedge-related basis adjustments.
(3)Includes long-term debt with an original contractual maturity of greater than 1 year and up to 10 years, excluding zero-coupon debt.
(3)(4)Includes other long-term debt with an original contractual maturity of greater than 10 years and foreign exchange bonds.
Fannie Mae (In conservatorship) First Quarter 2020 Form 10-Q(5)88

Notes to Condensed Consolidated Financial Statements | Short-Term and Long-Term Debt

(4)Credit risk-sharing securities that transfer a portion of the credit risk on specified pools of single-family mortgage loans to the investors in these securities, a portion of which is reported at fair value. Represents CAS issued prior to November 2018. See “Note 2, Consolidations and Transfers of Financial Assets” in our 20192020 Form 10-K for more information about our CAS structures issued beginning November 2018.
(5)(6)Consists of structured debt instruments that are reported at fair value.
(6)Represents our remaining liability resulting from the transfer of financial assets from our condensed consolidated balance sheets that did not qualify as a sale under the accounting guidance for the transfer of financial instruments.(7)
(7)Includes unamortized discounts and premiums, fair value adjustments, hedge-related cost basis adjustments, and other cost basis adjustments in a net discount position of $1.6 billion and fair value adjustments of $586 million and $2$392 million as of March 31, 20202021 and December 31, 2019,2020, respectively.

Fannie Mae (In conservatorship) First Quarter 2021 Form 10-Q96
Notes to Condensed Consolidated Financial Statements | Derivative Instruments
8.  Derivative Instruments
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 8, Derivative Instruments” in our 20192020 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. Fair value amounts, which are (1) netted to the extent a legal right of offset exists and is enforceable by law at the counterparty level and (2) inclusive of the right or obligation associated with the cash collateral posted or received, are recorded in “Other assets” or “Other liabilities” in our condensed consolidated balance sheets. See “Note 12, Fair Value” for additional information on derivatives recorded at fair value. We present cash flows from derivatives as operating activities in our condensed consolidated statements of cash flows.
Fair Value Hedge Accounting
As discussed in “Note 1, Summary of Significant Accounting Policies,” we implemented a fair value hedge accounting program in January 2021. Pursuant to this 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.
Fannie Mae (In conservatorship) First Quarter 20202021 Form 10-Q8997

Notes to Condensed Consolidated Financial Statements | Derivative Instruments

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.instruments, including derivative instruments designated as hedges.
As of March 31, 2020As of December 31, 2019As of March 31, 2021As of December 31, 2020
Asset DerivativesLiability DerivativesAsset DerivativesLiability DerivativesAsset DerivativesLiability DerivativesAsset DerivativesLiability Derivatives
Notional AmountEstimated Fair ValueNotional AmountEstimated Fair ValueNotional AmountEstimated Fair ValueNotional AmountEstimated Fair ValueNotional AmountEstimated Fair ValueNotional AmountEstimated Fair ValueNotional AmountEstimated Fair ValueNotional AmountEstimated Fair Value
(Dollars in millions)(Dollars in millions)
Risk management derivatives:
Risk management derivatives designated as fair value hedges:Risk management derivatives designated as fair value hedges:
Swaps:Swaps:
Pay-fixedPay-fixed$2,804 $0 $75 $(7)$0 $0 $0 $0 
Receive-fixedReceive-fixed39,754 2 0 0 0 0 0 0 
Accrued interest receivableAccrued interest receivable— 1 — 0 — 0 — 0 
Total risk management derivatives designated as hedgesTotal risk management derivatives designated as hedges42,558 3 75 (7)0 0 0 0 
Risk management derivatives not designated as fair value hedges:Risk management derivatives not designated as fair value hedges:
Swaps:Swaps:Swaps:
Pay-fixedPay-fixed$50,946  $—  $29,603  $(1,930) $41,052  $—  $29,178  $(970) Pay-fixed68,674 0 9,636 (482)88,361 0 11,461 (595)
Receive-fixedReceive-fixed94,704  1,151  9,854  (2) 73,579  816  26,382  (62) Receive-fixed45,635 167 46,039 (1,035)92,315 233 33,919 (123)
BasisBasis273  205  —  —  273  149  —  —  Basis250 146 0 0 250 192 0 0 
Foreign currencyForeign currency215  29  217  (93) 229  39  232  (65) Foreign currency238 43 241 (52)237 57 239 (58)
Swaptions:Swaptions:Swaptions:
Pay-fixedPay-fixed4,600  7  5,875  (328) 4,600  18  6,375  (219) Pay-fixed5,690 124 375 (16)5,530 37 2,025 (118)
Receive-fixedReceive-fixed6,625  619  350  (130) 2,875  106  4,600  (232) Receive-fixed1,455 96 1,110 (42)3,355 346 700 (16)
Futures(1)
Futures(1)
53,742  —  —  —  20,507  —  —  —  
Futures(1)
1,602 0 0 0 64,398 0 0 0 
Total gross risk management derivativesTotal gross risk management derivatives211,105  2,011  45,899  (2,483) 143,115  1,128  66,767  (1,548) Total gross risk management derivatives123,544 576 57,401 (1,627)254,446 865 48,344 (910)
Accrued interest receivable (payable)Accrued interest receivable (payable)—  195  —  (310) —  226  —  (250) Accrued interest receivable (payable)— 91 — (86)— 97 — (105)
Total risk management derivatives not designated as hedgesTotal risk management derivatives not designated as hedges123,544 667 57,401 (1,713)254,446 962 48,344 (1,015)
Netting adjustment(2)
Netting adjustment(2)
—  (2,137) —  2,607  —  (1,288) —  1,694  
Netting adjustment(2)
— (655)— 1,632 — (905)— 995 
Total net risk management derivatives$211,105  $69  $45,899  $(186) $143,115  $66  $66,767  $(104) 
Total risk management derivatives portfolioTotal risk management derivatives portfolio166,102 15 57,476 (88)254,446 57 48,344 (20)
Mortgage commitment derivatives:Mortgage commitment derivatives:Mortgage commitment derivatives:
Mortgage commitments to purchase whole loansMortgage commitments to purchase whole loans$31,152  $413  $10,452  $(56) $7,115  $15  $1,787  $(1) Mortgage commitments to purchase whole loans9,456 5 22,709 (237)35,292 145 51 0 
Forward contracts to purchase mortgage-related securitiesForward contracts to purchase mortgage-related securities103,770  2,153  10,936  (36) 55,531  137  9,560  (28) Forward contracts to purchase mortgage-related securities26,155 57 145,335 (1,689)144,215 844 607 0 
Forward contracts to sell mortgage-related securitiesForward contracts to sell mortgage-related securities20,070  99  177,213  (3,502) 9,282  13  109,066  (277) Forward contracts to sell mortgage-related securities220,063 2,534 31,765 (46)199 0 227,828 (1,426)
Total mortgage commitment derivativesTotal mortgage commitment derivatives154,992  2,665  198,601  (3,594) 71,928  165  120,413  (306) Total mortgage commitment derivatives255,674 2,596 199,809 (1,972)179,706 989 228,486 (1,426)
Credit enhancement derivativesCredit enhancement derivatives26,897  37  12,312  (29) 28,432  40  9,486  (25) Credit enhancement derivatives14,079 61 10,410 (46)16,829 179 11,368 (49)
Derivatives at fair valueDerivatives at fair value$392,994  $2,771  $256,812  $(3,809) $243,475  $271  $196,666  $(435) Derivatives at fair value$435,855 $2,672 $267,695 $(2,106)$450,981 $1,225 $288,198 $(1,495)
(1)Futures 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 $1.4$1.0 billion and $1.0 billion$658 million as of March 31, 20202021 and December 31, 2019,2020, respectively. Cash collateral received was $896$35 million and $635$568 million as of March 31, 20202021 and December 31, 2019,2020, respectively.
Fannie Mae (In conservatorship) First Quarter 20202021 Form 10-Q9098

Notes to Condensed Consolidated Financial Statements | Derivative Instruments

We record all derivative gains and losses, including accrued interest, on derivatives while they are not in a qualifying designated hedging relationship in “Fair value losses,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,For the Three Months Ended March 31,
2020201920212020
(Dollars in millions)(Dollars in millions)
Risk management derivatives:Risk management derivatives:Risk management derivatives:
Swaps:Swaps:Swaps:
Pay-fixedPay-fixed$(4,029) $(1,335) Pay-fixed$2,207 $(4,029)
Receive-fixedReceive-fixed3,343  1,281  Receive-fixed(1,855)3,343 
BasisBasis56  24  Basis(46)56 
Foreign currencyForeign currency(38) 19  Foreign currency(8)(38)
Swaptions:Swaptions:Swaptions:
Pay-fixedPay-fixed(148) (177) Pay-fixed107 (148)
Receive-fixedReceive-fixed632  7  Receive-fixed(239)632 
FuturesFutures(71) 59  Futures1 (71)
Net contractual interest expense on interest-rate swapsNet contractual interest expense on interest-rate swaps(106) (266) Net contractual interest expense on interest-rate swaps(11)(106)
Total risk management derivatives fair value losses, net(361) (388) 
Mortgage commitment derivatives fair value losses, net(993) (300) 
Total risk management derivatives fair value gains (losses), netTotal risk management derivatives fair value gains (losses), net156 (361)
Mortgage commitment derivatives fair value gains (losses), netMortgage commitment derivatives fair value gains (losses), net1,082 (993)
Credit enhancement derivatives fair value losses, netCredit enhancement derivatives fair value losses, net(11) (7) Credit enhancement derivatives fair value losses, net(90)(11)
Total derivatives fair value losses, net$(1,365) $(695) 
Total derivatives fair value gains (losses), netTotal derivatives fair value gains (losses), net$1,148 $(1,365)
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, 2021
Interest Income: Mortgage LoansInterest Expense: Long-Term Debt
(Dollars in millions)
Total amounts presented in our condensed consolidated statements of operations and comprehensive income$23,353 $(16,817)
Gains (losses) from fair value hedging relationships:
Mortgage loans HFI and related interest-rate contracts:
Hedged items(36)— 
Derivatives designated as hedging instruments36 — 
Debt of Fannie Mae and related interest-rate contracts:
Hedged items— 1,195 
Discontinued hedge-related basis adjustment amortization— (13)
Derivatives designated as hedging instruments— (1,214)
Interest accruals on derivative hedging instruments— 54 
Total effect of fair value hedges$0 $22 

Fannie Mae (In conservatorship) First Quarter 2021 Form 10-Q99
Notes to Condensed Consolidated Financial Statements | Derivative Instruments
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 last-of-layer method. The hedged item carrying amounts and total basis adjustments include both open and discontinued hedges. The amortized cost and designated UPB consists of open hedges only.
As of March 31, 2021
Carrying Amount Assets (Liabilities)Cumulative Amount of Fair Value Hedging Basis Adjustments Included in the Carrying AmountClosed Portfolio of Mortgage Loans Under Last-of-Layer Method
Total Basis Adjustments(1)
Remaining Adjustments - Discontinued HedgeTotal Amortized CostDesignated UPB
(Dollars in millions)
Mortgage loans HFI$83,521 $(36)$(36)$55,819 $2,879 
Debt of Fannie Mae(55,345)1,182 1,182 — — 
(1)    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 11, Netting Arrangements” for information on our rights to offset assets and liabilities as of March 31, 20202021 and December 31, 2019.2020.
Fannie Mae (In conservatorship) First Quarter 2020 Form 10-Q91

Notes to Condensed Consolidated Financial Statements | Segment Reporting

9.  Segment Reporting
We have two reportable business segments:segments, which are based on the type of business activities each perform: Single-Family and Multifamily. Results of our two business segments are intended to reflect each segment as if it were a stand-alone business. The sum of the results for our two business segments equals our condensed consolidated results of operations. For additional information related to our business segments, including basis of organization and other segment activities, see “Note 10, Segment Reporting” in our 2020 Form 10-K.
Segment Allocations and Results
The majority of our revenues and expenses are directly associated with each respective business segment and are included in determining its operating results. Those revenues and expenses that are not directly attributable to a particular business segment are allocated based on the size of each segment’s guaranty book of business. The substantial majority of the gains and losses associated with our risk management derivatives, including the impact of hedge accounting, are allocated to our Single-Family business segment.
Fannie Mae (In conservatorship) First Quarter 2021 Form 10-Q100
Notes to Condensed Consolidated Financial Statements | Segment Reporting

The following table displays our segment results.
For the Three Months Ended March 31,For the Three Months Ended March 31,
2020201920212020
Single-FamilyMultifamilyTotalSingle-FamilyMultifamilyTotalSingle-FamilyMultifamilyTotalSingle-FamilyMultifamilyTotal
(Dollars in millions)(Dollars in millions)
Net interest income(1)
Net interest income(1)
$4,541  $806  $5,347  $4,039  $757  $4,796  
Net interest income(1)
$5,894 $848 $6,742 $4,541 $806 $5,347 
Fee and other income(2)
Fee and other income(2)
152  156  308  106  28  134  
Fee and other income(2)
62 25 87 94 26 120 
Net revenuesNet revenues4,693  962  5,655  4,145  785  4,930  Net revenues5,956 873 6,829 4,635 832 5,467 
Investment gains (losses), net(3)
Investment gains (losses), net(3)
(152) (6) (158) 94  39  133  
Investment gains (losses), net(3)
64 (19)45 (152)(6)(158)
Fair value gains (losses), net(4)
Fair value gains (losses), net(4)
(460) 184  (276) (887) 56  (831) 
Fair value gains (losses), net(4)
740 44 784 (460)184 (276)
Administrative expensesAdministrative expenses(629) (120) (749) (631) (113) (744) Administrative expenses(623)(125)(748)(629)(120)(749)
Credit-related income (expense)(5)
Credit-related income (expense):(5)
Credit-related income (expense):(5)
Benefit (provision) for credit lossesBenefit (provision) for credit losses(2,172) (411) (2,583) 661  (11) 650  Benefit (provision) for credit losses662 103 765 (2,172)(411)(2,583)
Foreclosed property income (expense)Foreclosed property income (expense)(78) (2) (80) (143) 3  (140) Foreclosed property income (expense)17 (12)5 (78)(2)(80)
Total credit-related income (expense)Total credit-related income (expense)(2,250) (413) (2,663) 518  (8) 510  Total credit-related income (expense)679 91 770 (2,250)(413)(2,663)
TCCA fees(6)
TCCA fees(6)
(637) —  (637) (593) —  (593) 
TCCA fees(6)
(731)0 (731)(637)0 (637)
Credit enhancement expense(7)
Credit enhancement expense(7)
(312) (19) (331) (167) (4) (171) 
Credit enhancement expense(7)
(226)(58)(284)(316)(60)(376)
Change in expected credit enhancement recoveries(8)
Change in expected credit enhancement recoveries(8)
(16)(15)(31)58 130 188 
Other expenses, netOther expenses, net(167) (96) (263) (170) (37) (207) Other expenses, net(287)(32)(319)(163)(55)(218)
Income before federal income taxesIncome before federal income taxes86  492  578  2,309  718  3,027  Income before federal income taxes5,556 759 6,315 86 492 578 
Provision for federal income taxesProvision for federal income taxes(18) (99) (117) (484) (143) (627) Provision for federal income taxes(1,162)(160)(1,322)(18)(99)(117)
Net incomeNet income$68  $393  $461  $1,825  $575  $2,400  Net income$4,394 $599 $4,993 $68 $393 $461 
(1)Net interest income primarily consists of guaranty fees received as compensation for assuming and managing the credit risk on loans underlying Fannie Mae MBS held by third parties for the respective business segment, and the difference between the interest income earned on the respective business segment’s mortgage assets in our retained mortgage portfolio and the interest expense associated with the debt funding those assets. Revenues from single-family guaranty fees include revenues generated by the 10 basis point increase in guaranty fees pursuant to the TCCA, the incremental revenue from which is remitted to Treasury and not retained by us. Also includes yield maintenance fees we recognized on the prepayment of multifamily loans.
(2)Single-FamilySingle-family fee and other income primarily consists of compensation for engaging in structured transactions and providing other lender services. Multifamily fee and other income consists of the benefit or costs associated with freestanding credit enhancements and fees associated with Multifamily business activities.
(3)InvestmentSingle-family investment gains and losses primarily consist of gains and losses on the sale of mortgage assets for the respective business segment.assets. Multifamily investment gains and losses primarily consists of gains and losses on resecuritization activity.
(4)Single-FamilySingle-family fair value gains and losses primarily consist of fair value gains and losses on risk management and mortgage commitment derivatives, trading securities, fair value option debt, and other financial instruments associated with our single-family guaranty book of business. Multifamily fair value gains and losses primarily consist of fair value gains and losses on MBS commitment derivatives, trading securities and other financial instruments associated with our multifamily guaranty book of business.
(5)Credit-related income or expense is based on the guaranty book of business of the respective business segment and consists of the applicable segment’s benefit or provision for credit losses and foreclosed property income or expense on loans underlying the segment’s guaranty book of business. The presentation of our credit-related income or expense for the three months ended March 31, 2019 represents amounts recognized prior to our transition to the lifetime loss model prescribed by the CECL standard.
(6)Consists of the portion of our single-family guaranty fees that is remitted to Treasury pursuant to the TCCA.
(7)Single-family credit enhancement expense primarily consists of costs associated with our freestanding credit enhancements, which include primarily costs associated with our Credit Insurance Risk TransferTM (“CIRT CASTM”), Connecticut Avenue Securities® (“CAS”) and EPMIenterprise-paid mortgage insurance (“EPMI”) programs. Multifamily credit enhancement expense primarily consists of costs associated with our Multifamily CIRTTM (“MCIRTTM”) and MCASMultifamily Connecticut Avenue SecuritiesTM (“MCAS”) programs as well as amortization expense for certain lender risk-sharing programs. Excludes CAS transactions accounted for as debt instruments and credit risk transfer programs accounted for as derivative instruments.
(8)Consists of change in benefits recognized from our freestanding credit enhancements, primarily from our CAS and CIRT programs as well as certain lender risk-sharing arrangements, including our multifamily DUS program. See “Note 1, Summary of Significant Accounting Policies” in our 2020 Form 10-K for more information on our change in presentation.
Fannie Mae (In conservatorship) First Quarter 20202021 Form 10-Q92101

Notes to Condensed Consolidated Financial Statements | Concentrations of Credit Risk

10.  Concentrations of Credit Risk
Risk Characteristics of our Guaranty Book of Business
One of the measures by which we gauge our performancecredit risk is the delinquency status of the mortgage loans in our guaranty book of business.
For single-family and multifamily loans, we use this information, in conjunction with housing market and other economic conditions,data, to structure our pricing and our eligibility and underwriting criteria to reflect the current risk of loans with higher-risk characteristics, and in some cases we decide to significantly reduce our participation in riskier loan product categories. Management also uses this data together with other credit risk measures to identify key trends that guide the development of our loss mitigation strategies.
We report the delinquency status of our single-family and multifamily guaranty book of business below. We report loans receiving COVID-19-related payment forbearance as delinquent according to the contractual terms of the loans.
Single-Family Credit Risk Characteristics
For single-family loans, management monitors the serious delinquency rate, which is the percentage of single-family loans, based on the number of loans that are 90 days or more past due or in the foreclosure process, and loans that have higher risk characteristics, such as high mark-to-market LTV ratios.
The following tables display the delinquency status and serious delinquency rates for specified loan categories of our single-family conventional guaranty book of business.
As ofAs of
March 31, 2020December 31, 2019March 31, 2021December 31, 2020
30 Days Delinquent60 Days Delinquent
Seriously Delinquent(1)
30 Days Delinquent60 Days Delinquent
Seriously Delinquent(1)
30 Days Delinquent60 Days Delinquent
Seriously Delinquent(1)
30 Days Delinquent60 Days Delinquent
Seriously Delinquent(1)
Percentage of single-family conventional guaranty book of business based on UPBPercentage of single-family conventional guaranty book of business based on UPB1.16 %0.27 %0.59 %1.07 %0.29 %0.59 %Percentage of single-family conventional guaranty book of business based on UPB0.62 %0.24 %2.72 %0.88 %0.33 %3.10 %
Percentage of single-family conventional loans based on loan countPercentage of single-family conventional loans based on loan count1.31  0.32  0.66  1.27  0.35  0.66  Percentage of single-family conventional loans based on loan count0.71 0.26 2.58 1.02 0.36 2.87 
As ofAs of
March 31, 2020December 31, 2019March 31, 2021December 31, 2020
Percentage of
Single-Family
Conventional
Guaranty Book of Business
Based on UPB
Seriously Delinquent Rate(1)
Percentage of
Single-Family
Conventional
Guaranty Book of Business
Based on UPB
Seriously Delinquent Rate(1)
Percentage of
Single-Family
Conventional
Guaranty Book of Business
Based on UPB
Serious Delinquency Rate(1)
Percentage of
Single-Family
Conventional
Guaranty Book of Business
Based on UPB
Serious Delinquency Rate(1)
Estimated mark-to-market LTV ratio:Estimated mark-to-market LTV ratio:Estimated mark-to-market LTV ratio:
Greater than 100%Greater than 100%*  10.06 %*  10.14 %Greater than 100%*21.81 %*22.43 %
Geographical distribution:Geographical distribution:Geographical distribution:
CaliforniaCalifornia19  0.33  19  0.32  California19 %2.31 19 %2.62 
FloridaFlorida6  0.83  6  0.84  Florida6 3.60 6 4.17 
IllinoisIllinois4  0.91  4  0.91  Illinois3 3.02 3 3.10 
New JerseyNew Jersey3  1.13  3  1.13  New Jersey4 4.04 3 4.57 
New YorkNew York5  1.19  5  1.18  New York5 4.34 5 4.79 
All other statesAll other states63  0.64  63  0.64  All other states63 2.34 64 2.59 
Product distribution:Product distribution:Product distribution:
Alt-AAlt-A1  2.95  2  2.95  Alt-A1 8.85 1 9.32 
Vintages:Vintages:Vintages:
2004 and prior2004 and prior2  2.48  2  2.48  2004 and prior2 5.66 2 5.88 
2005-20082005-20083  4.11  4  4.11  2005-20082 9.65 2 9.98 
2009-202095  0.35  94  0.35  
2009-20212009-202196 2.13 96 2.39 
*    Represents less than 0.5% of single-family conventional guaranty book of business.
(1)Consists of single-family conventional loans that were 90 days or more past due or in the foreclosure process as of March 31, 2020 or December 31, 2019.
Fannie Mae (In conservatorship) First Quarter 20202021 Form 10-Q93102

Notes to Condensed Consolidated Financial Statements | Concentrations of Credit Risk

(1)Based on loan count, consists of single-family conventional loans that were 90 days or more past due or in the foreclosure process as of March 31, 2021 or December 31, 2020.
Multifamily Credit Risk Characteristics
For multifamily loans, management monitors the serious delinquency rate, which is the percentage of multifamily loans, based on unpaid principal balance, that are 60 days or more past due, and other loans that havewith other higher risk characteristics to assessdetermine the overall credit quality of our multifamily book of business. Higher risk characteristics include, but are not limited to, current DSCR below 1.0 and original LTV ratios greater than 80%. We stratify multifamily loans into different internal risk categories based on the credit risk inherent in each individual loan.
The following tables display the delinquency status and serious delinquency rates for specified loan categories of our multifamily guaranty book of business.
As of
March 31, 2020(1)
December 31, 2019(1)
30 Days Delinquent
Seriously Delinquent(2)
30 Days Delinquent
Seriously Delinquent(2)
Percentage of multifamily guaranty book of business0.03 %0.05 %0.02 %0.04 %
As of
March 31, 2021(1)
December 31, 2020(1)
30 Days Delinquent
Seriously Delinquent(2)
30 Days Delinquent
Seriously Delinquent(2)
Percentage of multifamily guaranty book of business0.37 %0.66 %0.29 %0.98 %
As ofAs of
March 31, 2020December 31, 2019March 31, 2021December 31, 2020
Percentage of Multifamily Guaranty Book of Business(1)
Percentage Seriously Delinquent(2)(3)
Percentage of Multifamily Guaranty Book of Business(1)
Percentage Seriously Delinquent(2)(3)
Percentage of Multifamily Guaranty Book of Business(1)
Serious Delinquency Rate(2)(3)
Percentage of Multifamily Guaranty Book of Business(1)
Serious Delinquency Rate(2)(3)
Original LTV ratio:Original LTV ratio:Original LTV ratio:
Greater than 80%Greater than 80%1 %— %1 %— %Greater than 80%1 %0.86 %1 %1.04 %
Less than or equal to 80%Less than or equal to 80%99  0.05  99  0.04  Less than or equal to 80%99 0.66 99 0.98 
Current DSCR below 1.0(4)
Current DSCR below 1.0(4)
2  0.68  2  0.48  
Current DSCR below 1.0(4)
2 18.51 2 21.19 
(1)Calculated based on the aggregate unpaid principal balance of multifamily loans for each category divided by the aggregate unpaid principal balance of loans in our multifamily guaranty book of business.
(2)Consists of multifamily loans that were 60 days or more past due as of the dates indicated.
(3)Calculated based on the unpaid principal balance of multifamily loans that were seriously delinquent divided by the aggregate unpaid principal balance of multifamily loans for each category included in our multifamily guaranty book of business.
(4)Our estimates of current DSCRs are based on the latest available income information for these properties. Although we use the most recently available results of our multifamily borrowers, there is a lag in reporting, which typically can range from 3 to 6 months but in some cases may be longer. As a result, the financial information we have received from borrowers to date may not reflect the most recent impacts of COVID-19. For certain properties, we do not receive updated financial information.
Other Concentrations
Mortgage Insurers. Mortgage insurance “risk in force” refers to our maximum potential loss recovery under the applicable mortgage insurance policies in force and is generally based on the loan-level insurance coverage percentage and, if applicable, any aggregate pool loss limit, as specified in the policy.
The following table displays our total mortgage insurance risk in force by primary and pool insurance, as well as the total risk-in-force mortgage insurance coverage as a percentage of the single-family conventional guaranty book of business.
As ofAs of
March 31, 2020December 31, 2019March 31, 2021December 31, 2020
Risk in ForcePercentage of Single-Family Guaranty Book of BusinessRisk in ForcePercentage of Single-Family Guaranty Book of BusinessRisk in ForcePercentage of Single-Family Conventional Guaranty Book of BusinessRisk in ForcePercentage of Single-Family Conventional Guaranty Book of Business
(Dollars in millions)(Dollars in millions)
Mortgage insurance risk in force:Mortgage insurance risk in force:Mortgage insurance risk in force:
Primary mortgage insurancePrimary mortgage insurance$164,218  $162,855  Primary mortgage insurance$169,582 $170,890 
Pool mortgage insurancePool mortgage insurance306  339  Pool mortgage insurance285 291 
Total mortgage insurance risk in forceTotal mortgage insurance risk in force$164,524  6%$163,194  6%Total mortgage insurance risk in force$169,867 5%$171,181 5%
Fannie Mae (In conservatorship) First Quarter 2021 Form 10-Q103
Notes to Condensed Consolidated Financial Statements | Concentrations of Credit Risk
Mortgage insurance does not protect us from all losses on covered loans. For example, mortgage insurance does not cover us from default risk for propertiesproperty damage that suffered damages that wereis not covered by the hazard insurance we require.require, and such damage may result in a reduction to, or a denial of, mortgage insurance benefits. Specifically, a property damaged by a flood that was outside a Federal Emergency Management Agency (“FEMA”)-identified Special Flood Hazard Area, where we require coverage, or a property damaged by an earthquake are the most likely scenarios where property damage may result in a defaultloss event not covered by hazard insurance.
Fannie Mae (In conservatorship) First Quarter 2020 Form 10-Q94

Notes to Condensed Consolidated Financial Statements | Concentrations of Credit Risk

The table below displays our mortgage insurer counterparties that provided approximately 10% or more of the risk-in-force mortgage insurance coverage on mortgage loans in our single-family conventional guaranty book of business.
Percentage of Risk-in-Force
Coverage by Mortgage Insurer
Percentage of Risk-in-Force Coverage
by Mortgage Insurer		As of
As ofMarch 31, 2021December 31, 2020
March 31, 2020December 31, 2019
Counterparty:(1)
Counterparty:(1)
Counterparty:(1)
Arch Capital Group Ltd.Arch Capital Group Ltd.23 %23 %Arch Capital Group Ltd.20 %21 %
Mortgage Guaranty Insurance Corp.Mortgage Guaranty Insurance Corp.18 18 
Radian Guaranty, Inc.Radian Guaranty, Inc.20  20  Radian Guaranty, Inc.18 19 
Mortgage Guaranty Insurance Corp.18  18  
Genworth Mortgage Insurance Corp.(2)
16  15  
Genworth Mortgage Insurance Corp.Genworth Mortgage Insurance Corp.17 16 
Essent Guaranty, Inc.Essent Guaranty, Inc.13  14  Essent Guaranty, Inc.16 16 
OthersOthers10  10  Others11 10 
TotalTotal100 %100 %Total100 %100 %
(1)Insurance coverage amounts provided for each counterparty may include coverage provided by affiliates and subsidiaries of the counterparty.
(2)Genworth Financial, Inc., the ultimate parent company of Genworth Mortgage Insurance Corp., is in the process of being acquired by China Oceanwide Holdings Group Co., Ltd. Upon acquisition, Genworth Mortgage Insurance Corp. will continue to be subject to our ongoing review of financial and operational eligibility requirements.
ThreeNaN of our mortgage insurer counterparties that are currently not approved to write new business are in run-off: business—PMI Mortgage Insurance Co. (“PMI”), Triad Guaranty Insurance Corporation (“Triad”) and Republic Mortgage Insurance Company (”(“RMIC”).—are currently in run-off. A mortgage insurer that is in run-off continues to collect renewal premiums and process claims on its existing insurance business, but no longer writes new insurance, which increases the risk that the mortgage insurer will fail to pay claims fully. Entering run-off may close off a sourcelimit sources of profits and liquidity that may have otherwise assisted afor the mortgage insurer in paying claims under insurance policies, and could also cause the quality and speed of its claims processing to deteriorate. These three3 mortgage insurers provided a combined $3.1$2.2 billion, or 2%1%, of ourthe risk-in-force mortgage insurance coverage of our single-family conventional guaranty book of business as of March 31, 2020.2021.
PMI and Triad have been paying only a portion of policyholder claims and deferring the remaining portion. PMI is currently paying 76.5%77.5% of claims under its mortgage insurance policies in cash and is deferring the remaining 23.5%22.5%, and Triad is currently paying 75% of claims in cash and deferring the remaining 25%. It is uncertain whether PMI or Triad will be permitted in the future to pay any remainingtheir deferred policyholder claims and/or increase or decrease the amount of cash they pay on claims. RMIC is no longer deferring payments on policyholder claims, and has paid us its previously outstanding deferred payment obligations as well as interest on those obligations; however, RMICbut remains in run-off.
We have counterparty credit risk relating to the potential insolvency of, or non-performance by, monoline mortgage insurers that insure single-family loans we purchase or guarantee. There is risk that these counterparties may fail to fulfill their obligations to pay our claims under insurance policies. On at least a quarterly basis, we assess our mortgage insurer counterparties’ respective abilities to fulfill their obligations to us. Our assessment includes financial reviews and analyses of the insurers’ portfolios and capital adequacy. If we determine that it is probable that we will not collect all of our claims from one or more of our mortgage insurer counterparties, it could increase our loss reserves, which could adversely affect our results of operations, liquidity, financial condition and net worth.
When we estimate the credit losses that are inherent in our mortgage loans and under the terms of our guaranty obligations, we also consider the recoveries that we will receive on primary mortgage insurance, as mortgage insurance recoveries would reduce the severity of the loss associated with defaulted loans. We evaluate the financial condition of our mortgage insurer counterparties and adjust the contractually due recovery amounts to ensure that expected credit losses as of the balance sheet date are included in our loss reserve estimate. As a result, if our assessment of one or more of our mortgage insurer counterparties’ ability to fulfill their respective obligations to us worsens, it could increase our loss reserves. As of March 31, 20202021 and December 31, 2019,2020, our estimated benefit from mortgage insurance, which is based on estimated credit losses as of period end, reduced our loss reserves by $1.2 billion and $1.4 billion, and $410 million, respectively.
Fannie Mae (In conservatorship) First Quarter 2021 Form 10-Q104
Notes to Condensed Consolidated Financial Statements | Concentrations of Credit Risk
As of March 31, 20202021 and December 31, 2019,2020, we had outstanding receivables of $607$542 million and $654$560 million, respectively, recorded in “Other assets” in our condensed consolidated balance sheets related to amounts claimed on insured, defaulted loans excluding government-insured loans. As of March 31, 20202021 and December 31, 2019,2020, we assessed these outstanding receivables for collectability, and established a valuation allowance of $502$480 million and $541$497 million, respectively, which reduced our claim receivable to the amount considered probable of collection.
Fannie Mae (In conservatorship) First Quarter 2020 Form 10-Q95

Notes to Condensed Consolidated Financial Statements | Concentrations of Credit Risk

Mortgage Servicers and Sellers. Mortgage servicers collect mortgage and escrow payments from borrowers, pay taxes and insurance costs from escrow accounts, monitor and report delinquencies, and perform other required activities, including loss mitigation, on our behalf. Our mortgage servicers and sellers may also be obligated to repurchase loans or foreclosed properties, reimburse us for losses or provide other remedies under certain circumstances, such as if it is determined that the mortgage loan did not meet our underwriting or eligibility requirements, if certain loan representations and warranties are violated or if mortgage insurers rescind coverage. Our representation and warranty framework does not require repurchase for loans that have breaches of certain selling representations and warranties if they have met specified criteria for relief.
Our business with mortgage servicers is concentrated. The table below displays the percentage of our single-family guaranty book of business serviced by our top five depository single-family mortgage servicers and top five non-depository single-family mortgage servicers (i.e., servicers that are not insured depository institutions), and identifies one depository servicer that serviced more than 10% of our single-family guaranty book of business based on unpaid principal balance.
Percentage of Single-Family
Guaranty Book of Business
Percentage of Single-Family
Guaranty Book of Business
As ofAs of
March 31, 2020December 31, 2019March 31, 2021December 31, 2020
Wells Fargo Bank, N.A. (together with its affiliates)Wells Fargo Bank, N.A. (together with its affiliates)17 %17 %Wells Fargo Bank, N.A. (together with its affiliates)12 %13 %
Remaining top five depository servicersRemaining top five depository servicers14  15  Remaining top five depository servicers10 11 
Top five non-depository servicersTop five non-depository servicers28  27  Top five non-depository servicers23 24 
TotalTotal59 %59 %Total45 %48 %
Compared with depository financial institutions, our non-depository servicers pose additional risks because they may not have the same financial strength or operational capacity, or be subject to the same level of regulatory oversight as our largest mortgage servicer counterparties, which are mostly depository financial institutions.
The table below displays the percentage of our multifamily guaranty book of business serviced by our top five multifamily mortgage servicers, and identifies two servicers that serviced 10% or more of our multifamily guaranty book of business based on unpaid principal balance.
Percentage of Multifamily
Guaranty Book of Business
Percentage of Multifamily
Guaranty Book of Business
As ofAs of
March 31, 2020December 31, 2019March 31, 2021December 31, 2020
Walker & Dunlop, Inc.Walker & Dunlop, Inc.13 %12 %
Wells Fargo Bank, N.A. (together with its affiliates)Wells Fargo Bank, N.A. (together with its affiliates)13 %13 %Wells Fargo Bank, N.A. (together with its affiliates)11 12 
Walker & Dunlop, Inc.12  12  
Remaining top five servicersRemaining top five servicers23  23  Remaining top five servicers24 24 
TotalTotal48 %48 %Total48 %48 %
If a significant mortgage servicer or seller counterparty, or a number of mortgage servicers or sellers, fails to meet their obligations to us, it could adversely affect our results of operations and financial condition. We mitigate these risks in several ways, including:
•establishing minimum standards and financial requirements for our servicers;
•monitoring financial and portfolio performance as compared with peers and internal benchmarks; and
•for our largest mortgage servicers, conducting periodic on-site and financial reviews to confirm compliance with servicing guidelines and servicing performance expectations.
We may take one or more of the following actions to mitigate our credit exposure to mortgage servicers that present a higher risk:
•require a guaranty of obligations by higher-rated entities;
•transfer exposure to third parties;
Fannie Mae (In conservatorship) First Quarter 2021 Form 10-Q105
Notes to Condensed Consolidated Financial Statements | Concentrations of Credit Risk
•require collateral;
•establish more stringent financial requirements;
•work with underperforming major servicers to improve operational processes; and
•suspend or terminate the selling and servicing relationship if deemed necessary.
DerivativeDerivatives Counterparties. For information on credit risk associated with our derivative transactions and repurchase agreements see “Note 8, Derivative Instruments” and “Note 11, Netting Arrangements.”
Fannie Mae (In conservatorship) First Quarter 2020 Form 10-Q96

Notes to Condensed Consolidated Financial Statements | Netting Arrangements

11.  Netting Arrangements
We use master netting arrangements, which allow us to offset certain financial instruments and collateral with the same counterparty, to minimize counterparty credit exposure. The tables below display information related to derivatives, securities purchased under agreements to resell or similar arrangements, and securities sold under agreements to repurchase or similar arrangements, which are subject to an enforceable master netting arrangement or similar agreement that are either offset or not offset in our condensed consolidated balance sheets.
As of March 31, 2020
Gross Amount Offset(1)
Net Amount Presented in our Condensed Consolidated Balance SheetsAmounts Not Offset in our Condensed Consolidated Balance Sheets
Gross Amount
Financial Instruments(2)
Collateral(3)
Net Amount
(Dollars in millions)
Assets:
OTC risk management derivatives$2,206  $(2,202) $4  $—  $—  $4  
Cleared risk management derivatives—  65  65  —  —  65  
Mortgage commitment derivatives2,665  —  2,665  (1,228) (499) 938  
Total derivative assets4,871  (2,137) 2,734  
(4)
(1,228) (499) 1,007  
Securities purchased under agreements to resell or similar arrangements(5)
20,175  —  20,175  —  (20,175) —  
Total assets$25,046  $(2,137) $22,909  $(1,228) $(20,674) $1,007  
Liabilities:
OTC risk management derivatives$(2,793) $2,643  $(150) $—  $—  $(150) 
Cleared risk management derivatives—  (36) (36) —  36  —  
Mortgage commitment derivatives(3,594) —  (3,594) 1,228  2,349  (17) 
Total derivative liabilities(6,387) 2,607  (3,780) 
(4)
1,228  2,385  (167) 
Total liabilities$(6,387) $2,607  $(3,780) $1,228  $2,385  $(167) 
As of December 31, 2019As of March 31, 2021
Gross Amount Offset(1)
Net Amount Presented in our Condensed Consolidated Balance SheetsAmounts Not Offset in our Condensed Consolidated Balance Sheets
Gross Amount Offset(1)
Net Amount Presented in our Condensed Consolidated Balance SheetsAmounts Not Offset in our Condensed Consolidated Balance Sheets
Gross Amount
Financial Instruments(2)
Collateral(3)
Net AmountGross Amount
Financial Instruments(2)
Collateral(3)
Net Amount
(Dollars in millions)(Dollars in millions)
Assets:Assets:Assets:
OTC risk management derivativesOTC risk management derivatives$1,354  $(1,334) $20  $—  $—  $20  OTC risk management derivatives$670 $(661)$9 $0 $0 $9 
Cleared risk management derivativesCleared risk management derivatives—  46  46  —  —  46  Cleared risk management derivatives0 6 6 0 0 6 
Mortgage commitment derivativesMortgage commitment derivatives165  —  165  (101) (1) 63  Mortgage commitment derivatives2,596 0 2,596 (801)(85)1,710 
Total derivative assetsTotal derivative assets1,519  (1,288) 231  
(4)
(101) (1) 129  Total derivative assets3,266 (655)2,611 (4)(801)(85)1,725 
Securities purchased under agreements to resell or similar arrangements(5)
Securities purchased under agreements to resell or similar arrangements(5)
24,928  —  24,928  —  (24,928) —  
Securities purchased under agreements to resell or similar arrangements(5)
66,437 0 66,437 0 (66,437)0 
Total assetsTotal assets$26,447  $(1,288) $25,159  $(101) $(24,929) $129  Total assets$69,703 $(655)$69,048 $(801)$(66,522)$1,725 
Liabilities:Liabilities:Liabilities:
OTC risk management derivativesOTC risk management derivatives$(1,798) $1,695  $(103) $—  $—  $(103) OTC risk management derivatives$(1,720)$1,646 $(74)$0 $0 $(74)
Cleared risk management derivativesCleared risk management derivatives—  (1) (1) —  1  —  Cleared risk management derivatives0 (14)(14)0 14 0 
Mortgage commitment derivativesMortgage commitment derivatives(306) —  (306) 101  181  (24) Mortgage commitment derivatives(1,972)0 (1,972)801 159 (1,012)
Total derivative liabilitiesTotal derivative liabilities(2,104) 1,694  (410) 
(4)
101  182  (127) Total derivative liabilities(3,692)1,632 (2,060)(4)801 173 (1,086)
Securities sold under agreements to repurchase or similar arrangements(478) —  (478) —  475  (3) 
Total liabilitiesTotal liabilities$(2,582) $1,694  $(888) $101  $657  $(130) Total liabilities$(3,692)$1,632 $(2,060)$801 $173 $(1,086)
Fannie Mae (In conservatorship) First Quarter 20202021 Form 10-Q97106

Notes to Condensed Consolidated Financial Statements | Netting Arrangements


As of December 31, 2020
Gross Amount Offset(1)
Net Amount Presented in our Condensed Consolidated Balance SheetsAmounts Not Offset in our Condensed Consolidated Balance Sheets
Gross Amount
Financial Instruments(2)
Collateral(3)
Net Amount
(Dollars in millions)
Assets:
OTC risk management derivatives$962 $(952)$10 $0 $0 $10 
Cleared risk management derivatives0 47 47 0 0 47 
Mortgage commitment derivatives989 0 989 (406)(53)530 
Total derivative assets1,951 (905)1,046 (4)(406)(53)587 
Securities purchased under agreements to resell or similar arrangements(5)
46,644 0 46,644 0 (46,644)0 
Total assets$48,595 $(905)$47,690 $(406)$(46,697)$587 
Liabilities:
OTC risk management derivatives$(1,015)$999 $(16)$0 $0 $(16)
Cleared risk management derivatives0 (4)(4)0 2 (2)
Mortgage commitment derivatives(1,426)0 (1,426)406 1,017 (3)
Total derivative liabilities(2,441)995 (1,446)(4)406 1,019 (21)
Total liabilities$(2,441)$995 $(1,446)$406 $1,019 $(21)
(1)Represents the effect of the 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 and accrued interest.
(2)Mortgage commitment derivative amounts reflect where we have recognized both an asset and a liability with the same counterparty under an enforceable master netting arrangement but we have not elected to offset the related amounts in our condensed consolidated balance sheets.
(3)Represents collateral received that has not been recognized and not offset in our condensed consolidated balance sheets as well as collateral posted which has been recognized but not offset in our condensed consolidated balance sheets. Does not include collateral held or posted in excess of our exposure. The fair value of non-cash collateral we pledged which the counterparty was permitted to sell or repledge was $4.2 billion and $2.3$4.7 billion as of March 31, 20202021 and December 31, 2019, respectively.2020. The fair value of non-cash collateral received was $20.1$66.5 billion and $24.7$46.6 billion, of which $20.1$65.4 billion and $23.8$46.6 billion could be sold or repledged as of March 31, 20202021 and December 31, 2019,2020, respectively. NaN of the underlying collateral was sold or repledged as of March 31, 20202021 or December 31, 2019.2020.
(4)Excludes derivative assets of $37$61 million and $40$179 million as of March 31, 20202021 and December 31, 2019,2020, respectively, and derivative liabilities of $29$46 million and $25$49 million recognized in our condensed consolidated balance sheets as of March 31, 20202021 and December 31, 2019,2020, respectively, that are not subject to enforceable master netting arrangements.
(5)Includes $12.4$6.1 billion and $11.4$18.4 billion in securities purchased under agreements to resell classified as “Cash and cash equivalents” in our condensed consolidated balance sheets as of March 31, 20202021 and December 31, 2019,2020, respectively. Includes $5.4 billion in securities purchased under agreements to resell classified as “Restricted cash and cash equivalents” in our condensed consolidated balance sheets as of March 31, 2021. There were no securities purchased under agreements to resell classified as “Restricted cash and cash equivalents” as of December 31, 2020.
Derivative instruments are recorded at fair value and securities purchased under agreements to resell or similar arrangements are recorded at amortized cost in our condensed consolidated balance sheets. For how we determine our rights to offset the assets and liabilities presented above with the same counterparty, including collateral posted or received, see “Note 14, Netting Arrangements” in our 20192020 Form 10-K.
Fannie Mae (In conservatorship) First Quarter 2021 Form 10-Q107
Notes to Condensed Consolidated Financial Statements | Fair Value
12.  Fair Value
We use fair value measurements for the initial recording of certain assets and liabilities and periodic remeasurement of certain assets and liabilities on a recurring or nonrecurring basis.
Fair Value Measurement
Fair value measurement guidance defines fair value, establishes a framework for measuring fair value, and sets forth disclosures around fair value measurements. This guidance applies whenever other accounting guidance requires or permits assets or liabilities to be measured at fair value. The guidance establishes a three-level fair value hierarchy that prioritizes the inputs into the valuation techniques used to measure fair value. The hierarchy gives the highest priority, Level 1, to measurements based on unadjusted quoted prices in active markets for identical assets or liabilities. The next highest priority, Level 2, is given to measurements of assets and liabilities based on limited observable inputs or observable inputs for similar assets and liabilities. The lowest priority, Level 3, is given to measurements based on unobservable inputs.
Fannie Mae (In conservatorship) First Quarter 20202021 Form 10-Q98108

Notes to Condensed Consolidated Financial Statements | Fair Value
Recurring Changes in Fair Value
The following tables display our assets and liabilities measured in our condensed consolidated balance sheets at fair value on a recurring basis subsequent to initial recognition, including instruments for which we have elected the fair value option.
Fair Value Measurements as of March 31, 2020Fair Value Measurements as of March 31, 2021
Quoted Prices in Active Markets for Identical Assets (Level 1)Significant Other Observable Inputs
(Level 2)		Significant Unobservable Inputs
(Level 3)
Netting Adjustment(1)
Estimated Fair ValueQuoted Prices in Active Markets for Identical Assets (Level 1)
Significant Other Observable Inputs
(Level 2)
Significant Unobservable Inputs
(Level 3)
Netting Adjustment(1)
Estimated Fair Value
(Dollars in millions)(Dollars in millions)
Recurring fair value measurements:Recurring fair value measurements:Recurring fair value measurements:
Assets:Assets:Assets:
Cash equivalents(2)
Cash equivalents(2)
$4,050 $— $— $— $4,050 
Trading securities:Trading securities:Trading securities:
Mortgage-related securities:Mortgage-related securities:Mortgage-related securities:
Fannie MaeFannie Mae$—  $3,462  $68  $—  $3,530  Fannie Mae0 1,876 109 — 1,985 
Other agencyOther agency—  4,167  —  —  4,167  Other agency0 3,440 0 — 3,440 
Private-label and other mortgage securitiesPrivate-label and other mortgage securities—  350  94  —  444  Private-label and other mortgage securities0 157 0 — 157 
Non-mortgage-related securities:Non-mortgage-related securities:Non-mortgage-related securities:
U.S. Treasury securitiesU.S. Treasury securities44,727  —  —  —  44,727  U.S. Treasury securities105,601 0 0 — 105,601 
Other securitiesOther securities—  73  —  —  73  Other securities0 73 0 — 73 
Total trading securitiesTotal trading securities44,727  8,052  162  —  52,941  Total trading securities105,601 5,546 109 — 111,256 
Available-for-sale securities:Available-for-sale securities:Available-for-sale securities:
Mortgage-related securities:Mortgage-related securities:Mortgage-related securities:
Fannie MaeFannie Mae—  1,317  188  —  1,505  Fannie Mae0 847 189 — 1,036 
Other agencyOther agency—  190  —  —  190  Other agency0 34 0 — 34 
Alt-A and subprime private-label securitiesAlt-A and subprime private-label securities—  7  —  —  7  Alt-A and subprime private-label securities0 4 1 — 5 
Mortgage revenue bondsMortgage revenue bonds—  —  296  —  296  Mortgage revenue bonds0 0 191 — 191 
OtherOther—  7  284  —  291  Other0 6 230 — 236 
Total available-for-sale securitiesTotal available-for-sale securities—  1,521  768  —  2,289  Total available-for-sale securities0 891 611 — 1,502 
Mortgage loansMortgage loans—  7,063  638  —  7,701  Mortgage loans0 5,228 820 — 6,048 
Other assets:Other assets:Other assets:
Risk management derivatives:Risk management derivatives:Risk management derivatives:
SwapsSwaps—  1,370  210  —  1,580  Swaps0 299 151 — 450 
SwaptionsSwaptions—  626  —  —  626  Swaptions0 220 0 — 220 
Netting adjustmentNetting adjustment—  —  —  (2,137) (2,137) Netting adjustment— — — (655)(655)
Mortgage commitment derivativesMortgage commitment derivatives—  2,665  —  —  2,665  Mortgage commitment derivatives0 2,596 0 — 2,596 
Credit enhancement derivativesCredit enhancement derivatives—  —  37  —  37  Credit enhancement derivatives0 0 61 — 61 
Total other assetsTotal other assets—  4,661  247  (2,137) 2,771  Total other assets0 3,115 212 (655)2,672 
Total assets at fair valueTotal assets at fair value$44,727  $21,297  $1,815  $(2,137) $65,702  Total assets at fair value$109,651 $14,780 $1,752 $(655)$125,528 
Liabilities:Liabilities:Liabilities:
Long-term debt:Long-term debt:Long-term debt:
Of Fannie Mae:Of Fannie Mae:Of Fannie Mae:
Senior floatingSenior floating$—  $4,320  $432  $—  $4,752  Senior floating$0 $2,954 $382 $— $3,336 
Total of Fannie MaeTotal of Fannie Mae—  4,320  432  —  4,752  Total of Fannie Mae0 2,954 382 — 3,336 
Of consolidated trustsOf consolidated trusts—  22,772  83  —  22,855  Of consolidated trusts0 23,543 58 — 23,601 
Total long-term debtTotal long-term debt—  27,092  515  —  27,607  Total long-term debt0 26,497 440 — 26,937 
Other liabilities:Other liabilities:Other liabilities:
Risk management derivatives:Risk management derivatives:Risk management derivatives:
SwapsSwaps—  2,334  1  —  2,335  Swaps0 1,662 0 — 1,662 
SwaptionsSwaptions—  458  —  —  458  Swaptions0 58 0 — 58 
Netting adjustmentNetting adjustment—  —  —  (2,607) (2,607) Netting adjustment— — — (1,632)(1,632)
Mortgage commitment derivativesMortgage commitment derivatives—  3,594  —  —  3,594  Mortgage commitment derivatives0 1,972 0 — 1,972 
Credit enhancement derivativesCredit enhancement derivatives—  —  29  —  29  Credit enhancement derivatives0 0 46 — 46 
Total other liabilitiesTotal other liabilities—  6,386  30  (2,607) 3,809  Total other liabilities0 3,692 46 (1,632)2,106 
Total liabilities at fair valueTotal liabilities at fair value$—  $33,478  $545  $(2,607) $31,416  Total liabilities at fair value$0 $30,189 $486 $(1,632)$29,043 
Fannie Mae (In conservatorship) First Quarter 20202021 Form 10-Q99109

Notes to Condensed Consolidated Financial Statements | Fair Value
Fair Value Measurements as of December 31, 2019Fair Value Measurements as of December 31, 2020
Quoted Prices in Active Markets for Identical Assets (Level 1)Significant Other Observable Inputs
(Level 2)		Significant Unobservable Inputs
(Level 3)
Netting Adjustment(1)
Estimated Fair ValueQuoted Prices in Active Markets for Identical Assets (Level 1)
Significant Other Observable Inputs
(Level 2)
Significant Unobservable Inputs
(Level 3)
Netting Adjustment(1)
Estimated Fair Value
(Dollars in millions)(Dollars in millions)
Recurring fair value measurements:Recurring fair value measurements:Recurring fair value measurements:
Assets:Assets:Assets:
Cash equivalents(2)
Cash equivalents(2)
$1,120 $— $— $— $1,120 
Trading securities:Trading securities:Trading securities:
Mortgage-related securities:Mortgage-related securities:Mortgage-related securities:
Fannie MaeFannie Mae$—  $3,379  $45  $—  $3,424  Fannie Mae0 2,310 94 — 2,404 
Other agencyOther agency—  4,489  1  —  4,490  Other agency0 3,450 1 — 3,451 
Private-label and other mortgage securitiesPrivate-label and other mortgage securities—  629  —  —  629  Private-label and other mortgage securities0 158 0 — 158 
Non-mortgage-related securities:Non-mortgage-related securities:Non-mortgage-related securities:
U.S. Treasury securitiesU.S. Treasury securities39,501  —  —  —  39,501  U.S. Treasury securities130,456 0 0 — 130,456 
Other securitiesOther securities—  79  —  —  79  Other securities0 73 0 — 73 
Total trading securitiesTotal trading securities39,501  8,576  46  —  48,123  Total trading securities130,456 5,991 95 — 136,542 
Available-for-sale securities:Available-for-sale securities:Available-for-sale securities:
Mortgage-related securities:Mortgage-related securities:Mortgage-related securities:
Fannie MaeFannie Mae—  1,349  171  —  1,520  Fannie Mae0 973 195 — 1,168 
Other agencyOther agency—  198  —  —  198  Other agency0 65 0 — 65 
Alt-A and subprime private-label securitiesAlt-A and subprime private-label securities—  57  —  —  57  Alt-A and subprime private-label securities0 4 2 — 6 
Mortgage revenue bondsMortgage revenue bonds—  —  315  —  315  Mortgage revenue bonds0 0 216 — 216 
OtherOther—  8  306  —  314  Other0 7 235 — 242 
Total available-for-sale securitiesTotal available-for-sale securities—  1,612  792  —  2,404  Total available-for-sale securities0 1,049 648 — 1,697 
Mortgage loansMortgage loans—  7,137  688  —  7,825  Mortgage loans0 5,629 861 — 6,490 
Other assets:Other assets:Other assets:
Risk management derivatives:Risk management derivatives:Risk management derivatives:
SwapsSwaps—  1,071  159  —  1,230  Swaps0 376 203 — 579 
SwaptionsSwaptions—  124  —  —  124  Swaptions0 383 0 — 383 
Netting adjustmentNetting adjustment—  —  —  (1,288) (1,288) Netting adjustment— — — (905)(905)
Mortgage commitment derivativesMortgage commitment derivatives—  165  —  —  165  Mortgage commitment derivatives0 989 0 — 989 
Credit enhancement derivativesCredit enhancement derivatives—  —  40  —  40  Credit enhancement derivatives0 0 179 — 179 
Total other assetsTotal other assets—  1,360  199  (1,288) 271  Total other assets0 1,748 382 (905)1,225 
Total assets at fair valueTotal assets at fair value$39,501  $18,685  $1,725  $(1,288) $58,623  Total assets at fair value$131,576 $14,417 $1,986 $(905)$147,074 
Liabilities:Liabilities:Liabilities:
Long-term debt:Long-term debt:Long-term debt:
Of Fannie Mae:Of Fannie Mae:Of Fannie Mae:
Senior floatingSenior floating$—  $5,289  $398  $—  $5,687  Senior floating$0 $3,312 $416 $— $3,728 
Total of Fannie MaeTotal of Fannie Mae—  5,289  398  —  5,687  Total of Fannie Mae0 3,312 416 — 3,728 
Of consolidated trustsOf consolidated trusts—  21,805  75  —  21,880  Of consolidated trusts0 24,503 83 — 24,586 
Total long-term debtTotal long-term debt—  27,094  473  —  27,567  Total long-term debt0 27,815 499 — 28,314 
Other liabilities:Other liabilities:Other liabilities:
Risk management derivatives:Risk management derivatives:Risk management derivatives:
SwapsSwaps—  1,346  1  —  1,347  Swaps0 881 0 — 881 
SwaptionsSwaptions—  440  11  —  451  Swaptions0 134 0 — 134 
Netting adjustmentNetting adjustment—  —  —  (1,694) (1,694) Netting adjustment— — — (995)(995)
Mortgage commitment derivativesMortgage commitment derivatives—  306  —  —  306  Mortgage commitment derivatives0 1,426 0 — 1,426 
Credit enhancement derivativesCredit enhancement derivatives—  —  25  —  25  Credit enhancement derivatives0 0 49 — 49 
Total other liabilitiesTotal other liabilities—  2,092  37  (1,694) 435  Total other liabilities0 2,441 49 (995)1,495 
Total liabilities at fair valueTotal liabilities at fair value$—  $29,186  $510  $(1,694) $28,002  Total liabilities at fair value$0 $30,256 $548 $(995)$29,809 
(1)Derivative contracts are reported on a gross basis by level. 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.
(2)Cash equivalents are comprised of U.S. Treasuries that have a maturity at the date of acquisition of three months or less.

Fannie Mae (In conservatorship) First Quarter 20202021 Form 10-Q100110

Notes to Condensed Consolidated Financial Statements | Fair Value
The following tables display a reconciliation of all assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3). The tables also display gains and losses due to changes in fair value, including realized and unrealized gains and losses, recognized in our condensed consolidated statements of operations and comprehensive income for Level 3 assets and liabilities.
Fair Value Measurements Using Significant Unobservable Inputs (Level 3)Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
For the Three Months Ended March 31, 2020For the Three Months Ended March 31, 2021
Total Gains (Losses)
(Realized/Unrealized)
Net Unrealized Gains (Losses) Included in Net Income Related to Assets and Liabilities Still Held as of March 31,
2020(4)(5)
Net Unrealized Gains (Losses) Included in OCI Related to Assets and Liabilities Still Held as of March 31,
2020(1)
Total Gains (Losses)
(Realized/Unrealized)
Net Unrealized Gains (Losses) Included in Net Income Related to Assets and Liabilities Still Held as of March 31, 2021(4)(5)
Net Unrealized Gains (Losses) Included in OCI Related to Assets and Liabilities Still Held as of March 31, 2021(1)
Balance, December 31, 2019Included in Net Income
Included in Total OCI Gain/(Loss)(1)
Purchases(2)
Sales(2)
Issues(3)
Settlements(3)
Transfers out of Level 3
Transfers into
Level 3
Balance, March 31, 2020Balance, December 31, 2020Included in Net Income
Included in Total OCI Gain/(Loss)(1)
Purchases(2)
Sales(2)
Issues(3)
Settlements(3)
Transfers out of Level 3
Transfers into
Level 3
Balance, March 31, 2021
Net Unrealized Gains (Losses) Included in OCI Related to Assets and Liabilities Still Held as of March 31, 2021(1)
(Dollars in millions)(Dollars in millions)
Trading securities:Trading securities:Trading securities:
Mortgage-related:Mortgage-related:Mortgage-related:
Fannie MaeFannie Mae$45  $(9) $—  $—  $—  $—  $—  $(11) $43  $68  $(10) $—  Fannie Mae$94 $(1)$0 $0 $0 $0 $0 $(7)$23 $109 $2 $0 
Other agencyOther agency1  —  —  —  —  —  —  (1) —  —  —  —  Other agency1 0 0 0 0 0 0 (1)0 0 0 0 
Private-label and other mortgage securitiesPrivate-label and other mortgage securities—  —  —  —  —  —  —  —  94  94  —  —  Private-label and other mortgage securities0 0 0 0 0 0 0 0 0 0 0 0 
Total trading securitiesTotal trading securities$46  $(9) 
(5)(6)
$—  $—  $—  $—  $—  $(12) $137  $162  $(10) $—  Total trading securities$95 $(1)(5)(6)$0 $0 $0 $0 $0 $(8)$23 $109 $2 $0 
Available-for-sale securities:Available-for-sale securities:Available-for-sale securities:
Mortgage-related:Mortgage-related:Mortgage-related:
Fannie MaeFannie Mae$171  $—  $4  $—  $—  $—  $(1) $—  $14  $188  $—  $3  Fannie Mae$195 $0 $(3)$0 $0 $0 $(3)$0 $0 $189 $0 $(2)
Alt-A and subprime private-label securitiesAlt-A and subprime private-label securities2 0 (1)0 0 0 0 0 0 1 0 0 
Mortgage revenue bondsMortgage revenue bonds315  (3) 2  74  (74) —  (18) —  —  296  —  4  Mortgage revenue bonds216 0 (1)0 0 0 (24)0 0 191 0 0 
OtherOther306  (11) (1) 268  (268) —  (10) —  —  284  —  (1) Other235 3 3 0 0 0 (11)0 0 230 0 2 
Total available-for-sale securitiesTotal available-for-sale securities$792  $(14) 
(6)(7)
$5  $342  $(342) $—  $(29) $—  $14  $768  $—  $6  Total available-for-sale securities$648 $3 (6)(7)$(2)$0 $0 $0 $(38)$0 $0 $611 $0 $0 
Mortgage loansMortgage loans$688  $(24) 
(5)(6)
$—  $—  $—  $—  $(29) $(23) $26  $638  $(26) $—  Mortgage loans$861 $8 (5)(6)$0 $0 $0 $0 $(47)$(23)$21 $820 $9 $0 
Net derivativesNet derivatives162  41  
(5)
—  —  —  —  (4) 18  —  217  44  —  Net derivatives333 (132)(5)0 0 0 0 (35)0 0 166 (167)0 
Long-term debt:Long-term debt:Long-term debt:
Of Fannie Mae:Of Fannie Mae:Of Fannie Mae:
Senior floatingSenior floating(398) (34) 
(5)
—  —  —  —  —  —  —  (432) (34) —  Senior floating$(416)$34 (5)$0 $0 $0 $0 $0 $0 $0 $(382)$34 $0 
Of consolidated trustsOf consolidated trusts(75) 4  
(5)(6)
—  —  —  —  3  —  (15) (83) 4  —  Of consolidated trusts(83)1 (5)(6)0 0 0 0 4 20 0 (58)0 0 
Total long-term debtTotal long-term debt$(473) $(30) $—  $—  $—  $—  $3  $—  $(15) $(515) $(30) $—  Total long-term debt$(499)$35 $0 $0 $0 $0 $4 $20 $0 $(440)$34 $0 


Fannie Mae (In conservatorship) First Quarter 20202021 Form 10-Q101111

Notes to Condensed Consolidated Financial Statements | Fair Value
Fair Value Measurements Using Significant Unobservable Inputs (Level 3)Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
For the Three Months Ended March 31, 2019For the Three Months Ended March 31, 2020
Total Gains (Losses)
(Realized/Unrealized)
Net Unrealized Gains (Losses) Included in Net Income Related to Assets and Liabilities Still Held as of March 31,
2019(4)(5)
Net Unrealized Gains (Losses) Included in OCI Related to Assets and Liabilities Still Held as of March 31,
2019(1)
Total Gains (Losses)
(Realized/Unrealized)
Net Unrealized Gains (Losses) Included in Net Income Related to Assets and Liabilities Still Held as of March 31, 2020(4)(5)
Net Unrealized Gains (Losses) Included in OCI Related to Assets and Liabilities Still Held as of March 31, 2020(1)
Balance, December 31, 2018Included in Net Income
Included in Total OCI Gain/(Loss)(1)
Purchases(2)
Sales(2)
Issues(3)
Settlements(3)
Transfers out of Level 3
Transfers into
Level 3
Balance, March 31, 2019Balance, December 31, 2019Included in Net Income
Included in Total OCI Gain/(Loss)(1)
Purchases(2)
Sales(2)
Issues(3)
Settlements(3)
Transfers out of Level 3Transfers into
Level 3
Net Unrealized Gains (Losses) Included in OCI Related to Assets and Liabilities Still Held as of March 31, 2020(1)
(Dollars in millions)(Dollars in millions)
Trading securities:Trading securities:Trading securities:
Mortgage-related:Mortgage-related:Mortgage-related:
Fannie MaeFannie Mae$32  $2  $—  $—  $—  $—  $—  $—  $33  $67  $2  $—  Fannie Mae$45 $(9)$0 $0 $0 $0 $0 $(11)$43 $68 $(10)$0 
Other agencyOther agency1 0 0 0 0 0 0 (1)0 0 0 0 
Private-label and other mortgage securitiesPrivate-label and other mortgage securities1  —  —  —  —  —  (1) —  —  —  —  —  Private-label and other mortgage securities0 0 0 0 0 0 0 0 94 94 0 0 
Total trading securitiesTotal trading securities$33  $2  
(5)(6)
$—  $—  $—  $—  $(1) $—  $33  $67  $2  $—  Total trading securities$46 $(9)(5)(6)$0 $0 $0 $0 $0 $(12)$137 $162 $(10)$0 
Available-for-sale securities:Available-for-sale securities:Available-for-sale securities:
Mortgage-related:Mortgage-related:Mortgage-related:
Fannie MaeFannie Mae$152  $—  $4  $—  $—  $—  $—  $(41) $84  $199  $—  $2  Fannie Mae$171 $0 $4 $0 $0 $0 $(1)$0 $14 $188 $0 $3 
Alt-A and subprime private-label securities

24  —  —  —  —  —  (1) —  —  23  —  —  
Mortgage revenue bondsMortgage revenue bonds434  —  —  —  —  —  (9) —  —  425  —  —  Mortgage revenue bonds315 (3)2 74 (74)0 (18)0 0 296 0 4 
OtherOther342  7  (5) —  —  —  (8) —  1  337  —  (4) Other306 (11)(1)268 (268)0 (10)0 0 284 0 (1)
Total available-for-sale securitiesTotal available-for-sale securities$952  $7  
(6)(7)
$(1) $—  $—  $—  $(18) $(41) $85  $984  $—  $(2) Total available-for-sale securities$792 $(14)(6)(7)$5 $342 $(342)$0 $(29)$0 $14 $768 $0 $6 
Mortgage loansMortgage loans$937  $14  
(5)(6)
$—  $—  $—  $—  $(34) $(28) $45  $934  $11  $—  Mortgage loans$688 $(24)(5)(6)$0 $0 $0 $0 $(29)$(23)$26 $638 $(26)$0 
Net derivativesNet derivatives194  98  
(5)
—  —  —  —  (89) —  —  203  44  —  Net derivatives162 41 (5)0 0 0 0 (4)18 0 217 44 0 
Long-term debt:Long-term debt:Long-term debt:
Of Fannie Mae:Of Fannie Mae:Of Fannie Mae:
Senior floatingSenior floating(351) (25) 
(5)
—  —  —  —  —  —  —  (376) (25) —  Senior floating$(398)$(34)(5)$0 $0 $0 $0 $0 $0 $0 $(432)$(34)$0 
Of consolidated trustsOf consolidated trusts(201) (3) 
(5)(6)
—  —  —  —  5  49  (74) (224) (1) —  Of consolidated trusts(75)4 (5)(6)0 0 0 0 3 0 (15)(83)4 0 
Total long-term debtTotal long-term debt$(552) $(28) $—  $—  $—  $—  $5  $49  $(74) $(600) $(26) $—  Total long-term debt$(473)$(30)$0 $0 $0 $0 $3 $0 $(15)$(515)$(30)$0 
(1)Gains (losses) included in other comprehensive lossincome (loss) are included in “Changes in unrealized gains (losses) on available-for-sale securities, net of reclassification adjustments and taxes” in our condensed consolidated statements of operations and comprehensive income.
(2)Purchases and sales include activity related to the consolidation and deconsolidation of assets of securitization trusts.
(3)Issues and settlements include activity related to the consolidation and deconsolidation of liabilities of securitization trusts.
(4)Amount represents temporary changes in fair value. Amortization, accretion and the impairment of credit losses are not considered unrealized and are not included in this amount.
(5)Gains (losses) are included in “Fair value losses,gains (losses), net” in our condensed consolidated statements of operations and comprehensive income.
(6)Gains (losses) are included in “Net interest income” in our condensed consolidated statements of operations and comprehensive income.
(7)Gains (losses) are included in “Investment gains (losses), net” in our condensed consolidated statements of operations and comprehensive income.
Fannie Mae (In conservatorship) First Quarter 20202021 Form 10-Q102112

Notes to Condensed Consolidated Financial Statements | Fair Value
The following tables display valuation techniques and the range and the weighted average of significant unobservable inputs for our Level 3 assets and liabilities measured at fair value on a recurring basis, excluding instruments for which we have elected the fair value option. Changes in these unobservable inputs can result in significantly higher or lower fair value measurements of these assets and liabilities as of the reporting date.
Fair Value Measurements as of March 31, 2020Fair Value Measurements as of March 31, 2021
Fair ValueSignificant Valuation Techniques
Significant Unobservable
Inputs(1)
Range(1)
Weighted - Average(1)(2)
Fair ValueSignificant Valuation Techniques
Significant Unobservable
Inputs(1)
Range(1)
Weighted - Average(1)(2)
(Dollars in millions)(Dollars in millions)
Recurring fair value measurements:Recurring fair value measurements:Recurring fair value measurements:
Trading securities:Trading securities:Trading securities:
Mortgage-related securities:Mortgage-related securities:Mortgage-related securities:
Agency(3)
Agency(3)
$68  Various
Agency(3)
$109 Various
Private-label securities and other mortgage securities94  Various
Total trading securities$162  
Available-for-sale securities:Available-for-sale securities:Available-for-sale securities:
Mortgage-related securities:Mortgage-related securities:Mortgage-related securities:
Agency(3)
Agency(3)
$113  Consensus
Agency(3)
93 Consensus
75  Various96 Various
Total agencyTotal agency188  Total agency189 
Alt-A and subprime private-label securitiesAlt-A and subprime private-label securities1 Various
Mortgage revenue bondsMortgage revenue bonds211  Single VendorSpreads (bps)32.5  -376.0  97.5Mortgage revenue bonds119 Single VendorSpreads (bps)32.5 -188.578.4
85  Various72 Various
Total mortgage revenue bondsTotal mortgage revenue bonds296  Total mortgage revenue bonds191 
OtherOther248  Discounted Cash FlowSpreads (bps)620.0620.0Other202 Discounted Cash FlowSpreads (bps)405.0 -406.0405.5
36  Various28 Various
Total otherTotal other284  Total other230 
Total available-for-sale securitiesTotal available-for-sale securities$768  Total available-for-sale securities$611 
Net derivativesNet derivatives$209  Dealer Mark  Net derivatives$151 Dealer Mark
8  Various  15 Discounted Cash Flow
Total net derivativesTotal net derivatives$217  Total net derivatives$166 
Fannie Mae (In conservatorship) First Quarter 20202021 Form 10-Q103113

Notes to Condensed Consolidated Financial Statements | Fair Value
Fair Value Measurements as of December 31, 2019Fair Value Measurements as of December 31, 2020
Fair ValueSignificant Valuation Techniques
Significant Unobservable
Inputs(1)
Range(1)
Weighted - Average(1)(2)
Fair ValueSignificant Valuation Techniques
Significant Unobservable
Inputs(1)
Range(1)
Weighted - Average(1)(2)
(Dollars in millions)(Dollars in millions)
Recurring fair value measurements:Recurring fair value measurements:Recurring fair value measurements:
Trading securities:Trading securities:Trading securities:
Mortgage-related securities:Mortgage-related securities:Mortgage-related securities:
Agency(3)
Agency(3)
$46  Various
Agency(3)
$95 Various
Available-for-sale securities:Available-for-sale securities:Available-for-sale securities:
Mortgage-related securities:Mortgage-related securities:Mortgage-related securities:
Agency(3)
Agency(3)
$107  Consensus
Agency(3)
97 Consensus
64  Various98 Various
Total agencyTotal agency171  Total agency195 
Alt-A and subprime private-label securitiesAlt-A and subprime private-label securities2 Various
Mortgage revenue bondsMortgage revenue bonds222  Single VendorSpreads(bps)23.0  -205.1  76.1Mortgage revenue bonds144 Single VendorSpreads (bps)32.0 -315.393.4
93  Various72 Various
Total mortgage revenue bondsTotal mortgage revenue bonds315  Total mortgage revenue bonds216 
OtherOther267  Discounted Cash FlowSpreads(bps)300.0300.0Other206 Discounted Cash FlowSpreads (bps)425.0 -443.0434.2
39  Various29 Various
Total otherTotal other306  Total other235 
Total available-for-sale securitiesTotal available-for-sale securities$792  Total available-for-sale securities$648 
Net derivativesNet derivatives$147  Dealer MarkNet derivatives$203 Dealer Mark
15  Various130 Discounted Cash Flow
Total net derivativesTotal net derivatives$162  Total net derivatives$333 
(1)Valuation techniques for which no unobservable inputs are disclosed generally reflect the use of third-party pricing services or dealers, and the range of unobservable inputs applied by these sources is not readily available or cannot be reasonably estimated. Where we have disclosed unobservable inputs for consensus and single vendor techniques, those inputs are based on our validations performed at the security level using discounted cash flows.
(2)Unobservable inputs were weighted by the relative fair value of the instruments.
(3)Includes Fannie Mae and Freddie Mac securities.
Fannie Mae (In conservatorship) First Quarter 20202021 Form 10-Q104114

Notes to Condensed Consolidated Financial Statements | Fair Value
In our condensed consolidated balance sheets, certain assets and liabilities are measured at fair value on a nonrecurring basis; that is, the instruments are not measured at fair value on an ongoing basis but are subject to fair value adjustments in certain circumstances (for example, when we evaluate loans for impairment). We had 0 Level 1 assets or liabilities held as of March 31, 20202021 or December 31, 20192020 that were measured at fair value on a nonrecurring basis. We held $4$672 million and $274$25 million in Level 2 assets as of March 31, 20202021 and December 31, 2019,2020, respectively, comprised of mortgage loans held for sale and mortgage loans held for investment that were impaired. We had 0 Level 2 liabilities that were measured at fair value on a nonrecurring basis as of March 31, 20202021 or December 31, 2019.2020.
The following table displays valuation techniques for our Level 3 assets measured at fair value on a nonrecurring basis. The significant unobservable inputs related to these techniques primarily relate to collateral dependent valuations. The related ranges and weighted averages are not meaningful when aggregated as they vary significantly from property to property.
Fair Value Measurements
as of
Valuation TechniquesMarch 31, 2020December 31, 2019
(Dollars in millions)

Nonrecurring fair value measurements:
Mortgage loans held for sale, at lower of cost or fair valueConsensus$1,767  $471  
Single Vendor1,886  605  
Total mortgage loans held for sale, at lower of cost or fair value3,653  1,076  
 Single-family mortgage loans held for investment, at amortized costInternal Model1,491  555  
 Multifamily mortgage loans held for investment, at amortized costAsset Manager Estimate—  24  
Various52  16  
Total multifamily mortgage loans held for investment, at amortized cost52  40  
Acquired property, net:(1)
Single-familyAccepted Offers106  101  
Appraisals356  362  
Walk Forwards189  240  
Internal Model113  164  
Various52  51  
Total single-family816  918  
MultifamilyVarious7  9  
Total nonrecurring assets at fair value$6,019  $2,598  
(1)The most commonly used techniques in our valuation of acquired property are a proprietary home price model and third-party valuations (both current and walk forward). Based on the number of properties measured as of March 31, 2020, these methodologies comprised approximately 81% of our valuations, while accepted offers comprised approximately 14% of our valuations. Based on the number of properties measured as of December 31, 2019, these methodologies comprised approximately 85% of our valuations, while accepted offers comprised approximately 12% of our valuations.
Fair Value Measurements
as of
Valuation TechniquesMarch 31, 2021December 31, 2020
(Dollars in millions)
Nonrecurring fair value measurements:
Mortgage loans held for sale, at lower of cost or fair valueConsensus$212 $754 
Single Vendor394 333 
Total mortgage loans held for sale, at lower of cost or fair value606 1,087 
 Single-family mortgage loans held for investment, at amortized costInternal Model614 979 
 Multifamily mortgage loans held for investment, at amortized costAppraisals166 225 
Internal Model122 125 
Various75 40 
Total multifamily mortgage loans held for investment, at amortized cost363 390 
Acquired property, net:
Single-familyAccepted Offers16 35 
Appraisals63 89 
Internal Model26 41 
Walk Forwards56 85 
Various10 11 
Total single-family171 261 
MultifamilyVarious5 25 
Total nonrecurring assets at fair value$1,759 $2,742 
We use valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs. See “Note 15, Fair Value” in our 20192020 Form 10-K for information on the valuation control processes and the valuation techniques we use for fair value measurement and disclosure as well as our basis for classifying these measurements as Level 1, Level 2 or Level 3 of the valuation hierarchy in more specific situations. We made no material changes to the valuation control processes or the valuation techniques for the three months ended March 31, 2020.2021.
Fannie Mae (In conservatorship) First Quarter 20202021 Form 10-Q105115

Notes to Condensed Consolidated Financial Statements | Fair Value
Fair Value of Financial Instruments
The following table displays the carrying value and estimated fair value of our financial instruments. The fair value of financial instruments we disclose includes commitments to purchase multifamily and single-family mortgage loans that we do not record in our condensed consolidated balance sheets. The fair values of these commitments are included as “Mortgage loans held for investment, net of allowance for loan losses.” The disclosure excludes all non-financial instruments; therefore, the fair value of our financial assets and liabilities does not represent the underlying fair value of our total consolidated assets and liabilities.
As of March 31, 2020As of March 31, 2021
Carrying ValueQuoted Prices in Active Markets for Identical Assets (Level 1)Significant Other Observable Inputs (Level 2)Significant Unobservable Inputs
(Level 3)		Netting AdjustmentEstimated Fair ValueCarrying ValueQuoted Prices in Active Markets for Identical Assets (Level 1)Significant Other Observable Inputs (Level 2)Significant Unobservable Inputs
(Level 3)		Netting AdjustmentEstimated Fair Value
(Dollars in millions)(Dollars in millions)
Financial assets:Financial assets:Financial assets:
Cash and cash equivalents and restricted cash$128,708  $116,308  $12,400  $—  $—  $128,708  
Cash and cash equivalents, including restricted cash and cash equivalentsCash and cash equivalents, including restricted cash and cash equivalents$114,341 $102,841 $11,500 $0 $— $114,341 
Federal funds sold and securities purchased under agreements to resell or similar arrangementsFederal funds sold and securities purchased under agreements to resell or similar arrangements7,775  —  7,775  —  —  7,775  Federal funds sold and securities purchased under agreements to resell or similar arrangements54,937 0 54,937 0 — 54,937 
Trading securitiesTrading securities52,941  44,727  8,052  162  —  52,941  Trading securities111,256 105,601 5,546 109 — 111,256 
Available-for-sale securitiesAvailable-for-sale securities2,289  —  1,521  768  —  2,289  Available-for-sale securities1,502 0 891 611 — 1,502 
Mortgage loans held for saleMortgage loans held for sale8,103  —  86  8,402  —  8,488  Mortgage loans held for sale7,824 0 3,511 5,122 — 8,633 
Mortgage loans held for investment, net of allowance for loan lossesMortgage loans held for investment, net of allowance for loan losses3,354,707  —  3,395,898  118,612  —  3,514,510  Mortgage loans held for investment, net of allowance for loan losses3,732,056 0 3,549,337 245,916 — 3,795,253 
Advances to lendersAdvances to lenders8,971  —  8,969  2  —  8,971  Advances to lenders10,572 0 10,571 1 — 10,572 
Derivative assets at fair valueDerivative assets at fair value2,771  —  4,661  247  (2,137) 2,771  Derivative assets at fair value2,672 0 3,115 212 (655)2,672 
Guaranty assets and buy-upsGuaranty assets and buy-ups127  —  —  271  —  271  Guaranty assets and buy-ups109 0 0 242 — 242 
Total financial assetsTotal financial assets$3,566,392  $161,035  $3,439,362  $128,464  $(2,137) $3,726,724  Total financial assets$4,035,269 $208,442 $3,639,408 $252,213 $(655)$4,099,408 
Financial liabilities:Financial liabilities:Financial liabilities:
Short-term debt:Short-term debt:Short-term debt:
Of Fannie MaeOf Fannie Mae$58,337  $—  $58,388  $—  $—  $58,388  Of Fannie Mae$2,857 $0 $2,857 $0 $— $2,857 
Long-term debt:Long-term debt:Long-term debt:
Of Fannie MaeOf Fannie Mae170,121  —  176,634  2,215  —  178,849  Of Fannie Mae270,585 0 279,208 828 — 280,036 
Of consolidated trustsOf consolidated trusts3,334,098  —  3,440,638  31,767  —  3,472,405  Of consolidated trusts3,740,538 0 3,777,011 30,990 — 3,808,001 
Derivative liabilities at fair valueDerivative liabilities at fair value3,809  —  6,386  30  (2,607) 3,809  Derivative liabilities at fair value2,106 0 3,692 46 (1,632)2,106 
Guaranty obligationsGuaranty obligations141  —  —  99  —  99  Guaranty obligations120 0 0 75 — 75 
Total financial liabilitiesTotal financial liabilities$3,566,506  $—  $3,682,046  $34,111  $(2,607) $3,713,550  Total financial liabilities$4,016,206 $0 $4,062,768 $31,939 $(1,632)$4,093,075 
Fannie Mae (In conservatorship) First Quarter 20202021 Form 10-Q106116

Notes to Condensed Consolidated Financial Statements | Fair Value
As of December 31, 2019As of December 31, 2020
Carrying ValueQuoted Prices in Active Markets for Identical Assets (Level 1)Significant Other Observable Inputs (Level 2)Significant Unobservable Inputs
(Level 3)		Netting AdjustmentEstimated Fair ValueCarrying ValueQuoted Prices in Active Markets for Identical Assets (Level 1)Significant Other Observable Inputs (Level 2)Significant Unobservable Inputs
(Level 3)		Netting AdjustmentEstimated Fair Value
(Dollars in millions)(Dollars in millions)
Financial assets:Financial assets:Financial assets:
Cash and cash equivalents and restricted cashCash and cash equivalents and restricted cash$61,407  $50,057  $11,350  $—  $—  $61,407  Cash and cash equivalents and restricted cash$115,623 $97,179 $18,444 $0 $— $115,623 
Federal funds sold and securities purchased under agreements to resell or similar arrangementsFederal funds sold and securities purchased under agreements to resell or similar arrangements13,578  —  13,578  —  —  13,578  Federal funds sold and securities purchased under agreements to resell or similar arrangements28,200 0 28,200 0 — 28,200 
Trading securitiesTrading securities48,123  39,501  8,576  46  —  48,123  Trading securities136,542 130,456 5,991 95 — 136,542 
Available-for-sale securitiesAvailable-for-sale securities2,404  —  1,612  792  —  2,404  Available-for-sale securities1,697 0 1,049 648 — 1,697 
Mortgage loans held for saleMortgage loans held for sale6,773  —  229  7,054  —  7,283  Mortgage loans held for sale5,197 0 116 5,502 — 5,618 
Mortgage loans held for investment, net of allowance for loan lossesMortgage loans held for investment, net of allowance for loan losses3,327,389  —  3,270,535  127,650  —  3,398,185  Mortgage loans held for investment, net of allowance for loan losses3,648,695 0 3,512,672 255,556 — 3,768,228 
Advances to lendersAdvances to lenders6,453  —  6,451  2  —  6,453  Advances to lenders10,449 0 10,448 1 — 10,449 
Derivative assets at fair valueDerivative assets at fair value271  —  1,360  199  (1,288) 271  Derivative assets at fair value1,225 0 1,748 382 (905)1,225 
Guaranty assets and buy-upsGuaranty assets and buy-ups142  —  —  305  —  305  Guaranty assets and buy-ups115 0 0 258 — 258 
Total financial assetsTotal financial assets$3,466,540  $89,558  $3,313,691  $136,048  $(1,288) $3,538,009  Total financial assets$3,947,743 $227,635 $3,578,668 $262,442 $(905)$4,067,840 
Financial liabilities:Financial liabilities:Financial liabilities:
Federal funds purchased and securities sold under agreements to repurchase$478  $—  $478  $—  $—  $478  
Short-term debt:Short-term debt:Short-term debt:
Of Fannie MaeOf Fannie Mae26,662  —  26,667  —  —  26,667  Of Fannie Mae$12,173 $0 $12,177 $0 $— $12,177 
Long-term debt:Long-term debt:Long-term debt:
Of Fannie MaeOf Fannie Mae155,585  —  164,144  401  —  164,545  Of Fannie Mae277,399 0 288,414 878 — 289,292 
Of consolidated trustsOf consolidated trusts3,285,139  —  3,312,763  31,827  —  3,344,590  Of consolidated trusts3,646,164 0 3,756,673 31,584 — 3,788,257 
Derivative liabilities at fair valueDerivative liabilities at fair value435  —  2,092  37  (1,694) 435  Derivative liabilities at fair value1,495 0 2,441 49 (995)1,495 
Guaranty obligationsGuaranty obligations154  —  —  97  —  97  Guaranty obligations127 0 0 82 — 82 
Total financial liabilitiesTotal financial liabilities$3,468,453  $—  $3,506,144  $32,362  $(1,694) $3,536,812  Total financial liabilities$3,937,358 $0 $4,059,705 $32,593 $(995)$4,091,303 
For a detailed description and classification of our financial instruments, see “Note 15, Fair Value” in our 20192020 Form 10-K.
Fair Value Option
We elected the fair value option for loans and debt that contain embedded derivatives that would otherwise require bifurcation. Additionally, we elected the fair value option for our credit risk-sharing securities accounted for as debt of Fannie Mae issued under our CAS series prior to January 1, 2016. Under the fair value option, we elected to carry these instruments at fair value instead of bifurcating the embedded derivative from such instruments.
Interest income for the mortgage loans is recorded in “Interest income—Mortgage loans” and interest expense for the debt instruments is recorded in “Interest expense—Long-term debt” in our condensed consolidated statements of operations and comprehensive income.
Fannie Mae (In conservatorship) First Quarter 20202021 Form 10-Q107117

Notes to Condensed Consolidated Financial Statements | Fair Value
The following table displays the fair value and unpaid principal balance of the financial instruments for which we have made fair value elections.
As ofAs of
March 31, 2020December 31, 2019March 31, 2021December 31, 2020
Loans(1)
Long-Term Debt of Fannie MaeLong-Term Debt of Consolidated Trusts
Loans(1)
Long-Term Debt of Fannie MaeLong-Term Debt of Consolidated Trusts
Loans(1)
Long-Term Debt of Fannie MaeLong-Term Debt of Consolidated Trusts
Loans(1)
Long-Term Debt of Fannie MaeLong-Term Debt of Consolidated Trusts
(Dollars in millions)(Dollars in millions)
Fair valueFair value$7,701  $4,752  $22,855  $7,825  $5,687  $21,880  Fair value$6,048 $3,336 $23,601 $6,490 $3,728 $24,586 
Unpaid principal balanceUnpaid principal balance7,261  4,860  20,219  7,514  5,200  19,653  Unpaid principal balance5,618 3,158 20,828 6,046 3,518 21,408 
(1)Includes nonaccrual loans with a fair value of $121$144 million and $129$139 million as of March 31, 20202021 and December 31, 2019,2020, respectively. The difference between unpaid principal balance and the fair value of these nonaccrual loans as of March 31, 20202021 and December 31, 20192020 was $20$9 million and $11$8 million, respectively. Includes loans that are 90 days or more past due with a fair value of $73$228 million and $80$257 million as of March 31, 20202021 and December 31, 2019,2020, respectively. The difference between unpaid principal balance and the fair value of these 90 or more days past due loans as of March 31, 20202021 and December 31, 20192020 was $16$10 million and $10$14 million, respectively.
Changes in Fair Value under the Fair Value Option Election
We recorded gains of $151$25 million and $113$151 million for the three months ended March 31, 20202021 and March 31, 2019,2020, respectively, from changes in the fair value of loans recorded at fair value in “Fair value losses,gains (losses), net” in our condensed consolidated statements of operations and comprehensive income.
We recorded gains of $262$373 million and losses of $330$262 million for the three months ended March 31, 20202021 and March 31, 2019,2020, respectively, from changes in the fair value of long-term debt recorded at fair value in “Fair value losses,gains (losses), net” in our condensed consolidated statements of operations and comprehensive income.
13.  Commitments and Contingencies
We are party to various types of legal actions and proceedings, including actions brought on behalf of various classes of claimants. We also are subject to regulatory examinations, inquiries and investigations, and other information gathering requests. In some of the matters, indeterminate amounts are sought. Modern pleading practice in the U.S. permits considerable variation in the assertion of monetary damages or other relief. Jurisdictions may permit claimants not to specify the monetary damages sought or may permit claimants to state only that the amount sought is sufficient to invoke the jurisdiction of the trial court. This variability in pleadings, together with our and our counsel’s actual experience in litigating or settling claims, leads us to conclude that the monetary relief that may be sought by plaintiffs bears little relevance to the merits or disposition value of claims.
We have substantial and valid defenses to the claims in the proceedings described below and intend to defend these matters vigorously. However, legal actions and proceedings of all types are subject to many uncertain factors that generally cannot be predicted with assurance. Accordingly, the outcome of any given matter and the amount or range of potential loss at particular points in time is frequently difficult to ascertain. Uncertainties can include how fact finders will evaluate documentary evidence and the credibility and effectiveness of witness testimony, and how courts will apply the law. Disposition valuations are also subject to the uncertainty of how opposing parties and their counsel may view the evidence and applicable law.
On a quarterly basis, we review relevant information about all pending legal actions and proceedings for the purpose of evaluating and revising our contingencies, accruals and disclosures. We establish an accrual only for matters when a loss is probable and we can reasonably estimate the amount of such loss. We are often unable to estimate the possible losses or ranges of losses, particularly for proceedings that are in their early stages of development, where plaintiffs seek indeterminate or unspecified damages, where there may be novel or unsettled legal questions relevant to the proceedings, or where settlement negotiations have not occurred or progressed. Given the uncertainties involved in any action or proceeding, regardless of whether we have established an accrual, the ultimate resolution of certain of these matters may be material to our operating results for a particular period, depending on, among other factors, the size of the loss or liability imposed and the level of our net income or loss for that period.
In addition to the matters specifically described below, we are involved in a number of legal and regulatory proceedings that arise in the ordinary course of business that we do not expect will have a material impact on our business or financial condition. We have also advanced fees and expenses of certain current and former officers and directors in connection with various legal proceedings pursuant to our bylaws and indemnification agreements.
Fannie Mae (In conservatorship) First Quarter 20202021 Form 10-Q108118

Notes to Condensed Consolidated Financial Statements | Commitments and Contingencies

Senior Preferred Stock Purchase Agreements Litigation
A consolidated putative class action (“In re Fannie Mae/Freddie Mac Senior Preferred Stock Purchase Agreement Class Action Litigations”) and two non-class action lawsuits, Arrowood Indemnity Company v. Fannie Mae and Fairholme Funds v. FHFA, filed by Fannie Mae and Freddie Mac shareholders against us, FHFA as our conservator, and Freddie Mac are pending in the U.S. District Court for the District of Columbia. The lawsuits challenge the August 2012 amendment to each company’s senior preferred stock purchase agreement with Treasury.
Plaintiffs filed amended complaints in all three lawsuits on November 1, 2017 alleging that the net worth sweep dividend provisions of the senior preferred stock that were implemented pursuant to the August 2012 amendments nullified certain of the shareholders’ rights, particularly the right to receive dividends. Plaintiffs seek unspecified damages, equitable and injunctive relief, and costs and expenses, including attorneys’ fees. Plaintiffs in the class action seek to represent several classes of preferred and/or common shareholders of Fannie Mae and/or Freddie Mac who held stock as of the public announcement of the August 2012 amendments. On September 28, 2018, the court dismissed all of the plaintiffs’ claims except for their claims for breach of an implied covenant of good faith and fair dealing.
On May 21, 2018, a plaintiff in a non-class action case, Angel v. Federal Home Loan Mortgage Corporation, filed a complaint for declaratory relief and compensatory damages against Fannie Mae (including certain members of its Board of Directors), Freddie Mac (including certain members of its Board of Directors) and FHFA, as conservator, in the U.S. District Court for the District of Columbia. Plaintiff in that case asserts claims for breach of contract, breach of implied covenants of good faith and fair dealing, and aiding and abetting the federal government in avoiding an alleged implicit guarantee of dividend payments. On March 6, 2019, the court granted defendants’ motion to dismiss and on March 18, 2019, plaintiff moved to alter or amend the judgment and to file an amended complaint. On May 24, 2019, the court denied this motion. On April 24, 2020, the U.S. Court of Appeals for the District of Columbia Circuit affirmed the lower court’s judgment.
Given the stage of these lawsuits, the substantial and novel legal questions that remain, and our substantial defenses, we are currently unable to estimate the reasonably possible loss or range of loss arising from this litigation.
Fannie Mae (In conservatorship) First Quarter 20202021 Form 10-Q109119

Quantitative and Qualitative Disclosures about Market Risk

Item 3.  Quantitative and Qualitative Disclosures about Market Risk
Information about market risk is set forth in “MD&A—Risk Management—Market Risk Management, Includingincluding Interest-Rate Risk Management.”
Item 4.  Controls and Procedures
Overview
We are required under applicable laws and regulations to maintain controls and procedures, which include disclosure controls and procedures as well as internal control over financial reporting, as further described below.
Evaluation of Disclosure Controls and Procedures
Disclosure Controls and Procedures
Disclosure controls and procedures refer to controls and other procedures designed to provide reasonable assurance that information required to be disclosed in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC. Disclosure controls and procedures include, without limitation, controls and procedures designed to provide reasonable assurance that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding our required disclosure. In designing and evaluating our disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management was required to apply its judgment in evaluating and implementing possible controls and procedures.
EvaluationSenior Preferred Stock Purchase Agreements Litigation
A consolidated putative class action (“In re Fannie Mae/Freddie Mac Senior Preferred Stock Purchase Agreement Class Action Litigations”) and two non-class action lawsuits, Arrowood Indemnity Company v. Fannie Mae and Fairholme Funds v. FHFA, filed by Fannie Mae and Freddie Mac shareholders against us, FHFA as our conservator, and Freddie Mac are pending in the U.S. District Court for the District of Disclosure Controls and ProceduresColumbia. The lawsuits challenge the August 2012 amendment to each company’s senior preferred stock purchase agreement with Treasury.
As required by Rule 13a-15 underPlaintiffs filed amended complaints in all three lawsuits on November 1, 2017 alleging that the Exchange Act, management has evaluated, with the participation of our Chief Executive Officer and Chief Financial Officer, the effectiveness of our disclosure controls and procedures as in effect as of March 31, 2020, the endnet worth sweep dividend provisions of the period covered by this report. As a resultsenior preferred stock that were implemented pursuant to the August 2012 amendments nullified certain of management’s evaluation, our Chief Executive Officerthe shareholders’ rights, particularly the right to receive dividends. Plaintiffs seek unspecified damages, equitable and Chief Financial Officer concluded that our disclosure controlsinjunctive relief, and procedures were not effective at a reasonable assurance level ascosts and expenses, including attorneys’ fees. Plaintiffs in the class action seek to represent several classes of March 31, 2020 preferred and/or common shareholders of Fannie Mae and/or Freddie Mac who held stock as of the date of filing this report.
Our disclosure controls and procedures were not effective as of March 31, 2020 or aspublic announcement of the date of filing this report because they did not adequately ensureAugust 2012 amendments. On September 28, 2018, the accumulation and communication to management of information known to FHFA that is needed to meet our disclosure obligations under the federal securities laws. As a result, we were not able to rely upon the disclosure controls and procedures that were in place as of March 31, 2020 or ascourt dismissed all of the dateplaintiffs’ claims except for their claims for breach of this filing,an implied covenant of good faith and we continue to have a material weakness infair dealing.
Given the stage of these lawsuits, the substantial and novel legal questions that remain, and our internal control over financial reporting. This material weakness is described in more detail below under “Description of Material Weakness.” Based on discussions with FHFA and the structural nature of this material weakness, we do not expect to remediate this material weakness whilesubstantial defenses, we are under conservatorship.
Descriptioncurrently unable to estimate the reasonably possible loss or range of Material Weakness
The Public Company Accounting Oversight Board’s Auditing Standard 2201 defines a material weakness as a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company’s annual or interim financial statements will not be prevented or detected on a timely basis.
Management has determined that we continued to have the following material weakness as of March 31, 2020 and as of the date of filingloss arising from this report:
•Disclosure Controls and Procedures. We have been under the conservatorship of FHFA since September 6, 2008. Under the GSE Act, FHFA is an independent agency that currently functions as both our conservator and our regulator with respect to our safety, soundness and mission. Because of the nature of the conservatorship under the GSE Act, which places us under the “control” of FHFA (as that term is defined by securities laws), some of the information that we may need to meet our disclosure obligations may be solely within the knowledge of FHFA. As our conservator, FHFA has the power to take actions without our knowledge that could be material to our shareholders and other stakeholders, and could significantly affect our financial performance or our continued existence as an ongoing business. Although we and FHFA attempted to design and implement disclosure policies and procedures that would account for the conservatorship and accomplish the same objectives as a disclosure controls and procedures policy of a typical reporting company, there are inherent structural limitations on our ability to design, implement, test or operate effective disclosure controls and procedures. As both our regulator and our conservator under the GSElitigation.
Fannie Mae (In conservatorship) First Quarter 20202021 Form 10-Q110119
ControlsQuantitative and ProceduresQualitative Disclosures about Market Risk

Act, FHFAItem 3.  Quantitative and Qualitative Disclosures about Market Risk
Information about market risk is limitedset forth in its ability“MD&A—Risk Management—Market Risk Management, including Interest-Rate Risk Management.”
Item 4.  Controls and Procedures
Overview
We are required under applicable laws and regulations to designmaintain controls and implement a complete set ofprocedures, which include disclosure controls and procedures relating to Fannie Mae, particularly with respect to current reporting pursuant to Form 8-K. Similarly, as a regulated entity, we are limited in our ability to design, implement, operate and test the controls and procedures for which FHFA is responsible.
Due to these circumstances, we have not been able to update our disclosure controls and procedures in a manner that adequately ensures the accumulation and communication to management of information known to FHFA that is needed to meet our disclosure obligations under the federal securities laws, including disclosures affecting our condensed consolidated financial statements. As a result, we did not maintain effective controls and procedures designed to ensure complete and accurate disclosurewell as required by GAAP as of March 31, 2020 or as of the date of filing this report. Based on discussions with FHFA and the structural nature of this weakness, we do not expect to remediate this material weakness while we are under conservatorship.
Mitigating Actions Related to Material Weakness
As described above under “Description of Material Weakness,” we continue to have a material weakness in our internal control over financial reporting, relating to our disclosure controls and procedures. However, we and FHFA have engaged in the following practices intended to permit accumulation and communication to management of information needed to meet our disclosure obligations under the federal securities laws:
•FHFA has established the Division of Resolutions, which is intended to facilitate operation of the company with the oversight of the conservator.
•We have provided drafts of our SEC filings to FHFA personnel for their review and comment prior to filing. We also have provided drafts of external press releases, statements and speeches to FHFA personnel for their review and comment prior to release.
•FHFA personnel, including senior officials, have reviewed our SEC filings prior to filing, including this quarterly report on Form 10-Q for the quarter ended March 31, 2020 (“First Quarter 2020 Form 10-Q”), and engaged in discussions regarding issues associated with the information contained in those filings. Prior to filing our First Quarter 2020 Form 10-Q, FHFA provided Fannie Mae management with written acknowledgment that it had reviewed the First Quarter 2020 Form 10-Q, and it was not aware of any material misstatements or omissions in the First Quarter 2020 Form 10-Q and had no objection to our filing the First Quarter 2020 Form 10-Q.
•Our senior management meets regularly with senior leadership at FHFA, including, but not limited to, the Director.
•FHFA representatives attend meetings frequently with various groups within the company to enhance the flow of information and to provide oversight on a variety of matters, including accounting, credit and market risk management, external communications and legal matters.
•Senior officials within FHFA’s Office of the Chief Accountant have met frequently with our senior finance executives regarding our accounting policies, practices and procedures.
Changes in Internal Control Over Financial Reporting
Management has evaluated, with the participation of our Chief Executive Officer and Chief Financial Officer, whether any changes in our internal control over financial reporting that occurred during our last fiscal quarter have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. Below we describe changes in our internal control over financial reporting since December 31, 2019 that management believes have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting:
•Overview. In the ordinary course of business, we review our system of internal control over financial reporting and make changes that we believe will improve these controls and increase efficiency, while continuing to ensure that we maintain effective internal controls. Changes may include implementing new, more efficient systems, automating manual processes and updating existing systems. For example, we are currently implementing changes to various financial system applications in stages across the company. As we continue to implement these changes, each implementation may become a significant component of our internal control over financial reporting.
•Implementation of the CECL standard. We began using new and enhanced models, new systems and enhanced business processes related to our adoption of the CECL standard as of January 1, 2020. In connection with the adoption and related business process changes, we redesigned multiple existing controls that were previously considered effective with new or modified controls and, in some cases, removed controls that are no longer applicable. We will continue to monitor and test these new and modified controls for adequate design and operating effectiveness. These new and enhanced models, systems, business processes and controls were fully implemented in January 2020 and were used to prepare our first quarter 2020 condensed consolidated financial statements included in this report.

Fannie Mae First Quarter 2020 Form 10-Q111
Other Information

PART II—OTHER INFORMATION
Item 1.  Legal Proceedings
The information in this item supplements and updates information regarding certain legal proceedings set forth in “Legal Proceedings” in our 2019 Form 10-K. We also provide information regarding material legal proceedings in “Note 13, Commitments and Contingencies,” which is incorporated herein by reference. In addition to the matters specificallyfurther described or incorporated by reference in this item, we are involved in a number of legal and regulatory proceedings that arise in the ordinary course of business that we do not expect will have a material impact on our business or financial condition. However, litigation claims and proceedings of all types are subject to many factors and their outcome and effect on our business and financial condition generally cannot be predicted accurately.below.
We establish an accrual for legal claims only when a loss is probable and we can reasonably estimate the amount of such loss. The actual costs of resolving legal claims may be substantially higher or lower than the amounts accrued for those claims. If certain of these matters are determined against us, FHFA or Treasury, it could have a material adverse effect on our results of operations, liquidity and financial condition, including our net worth.
Senior Preferred Stock Purchase Agreements Litigation
A consolidated putative class action (“In re Fannie Mae/Freddie Mac Senior Preferred Stock Purchase Agreement Class Action Litigations”) and two non-class action lawsuits, Arrowood Indemnity Company v. Fannie Mae and Fairholme Funds v. FHFA, filed by Fannie Mae and Freddie Mac shareholders against us, FHFA as our conservator, and Freddie Mac are pending in the U.S. District Court for the District of Columbia. The lawsuits challenge the August 2012 amendment to each company’s senior preferred stock purchase agreement with Treasury.
Plaintiffs filed amended complaints in all three lawsuits on November 1, 2017 alleging that the net worth sweep dividend provisions of the senior preferred stock that were implemented pursuant to the August 2012 amendments nullified certain of the shareholders’ rights, particularly the right to receive dividends. Plaintiffs seek unspecified damages, equitable and injunctive relief, and costs and expenses, including attorneys’ fees. Plaintiffs in the class action seek to represent several classes of preferred and/or common shareholders of Fannie Mae and/or Freddie Mac who held stock as of the public announcement of the August 2012 amendments. On September 28, 2018, the court dismissed all of the plaintiffs’ claims except for their claims for breach of an implied covenant of good faith and fair dealing.
Given the stage of these lawsuits, the substantial and novel legal questions that remain, and our substantial defenses, we are currently unable to estimate the reasonably possible loss or range of loss arising from this litigation.
Fannie Mae (In conservatorship) First Quarter 2021 Form 10-Q119
Quantitative and Qualitative Disclosures about Market Risk

Item 3.  Quantitative and Qualitative Disclosures about Market Risk
Information about market risk is set forth in “MD&A—Risk Management—Market Risk Management, including Interest-Rate Risk Management.”
Item 4.  Controls and Procedures
Overview
We are required under applicable laws and regulations to maintain controls and procedures, which include disclosure controls and procedures as well as internal control over financial reporting, as further described below.
Evaluation of Disclosure Controls and Procedures
Disclosure Controls and Procedures
Disclosure controls and procedures refer to controls and other procedures designed to provide reasonable assurance that information required to be disclosed in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC. Disclosure controls and procedures include, without limitation, controls and procedures designed to provide reasonable assurance that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding our required disclosure. In designing and evaluating our disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management was required to apply its judgment in evaluating and implementing possible controls and procedures.
Evaluation of Disclosure Controls and Procedures
As required by Rule 13a-15 under the Exchange Act, management has evaluated, with the participation of our Chief Executive Officer and Chief Financial Officer, the effectiveness of our disclosure controls and procedures in effect as of March 31, 2021, the end of the period covered by this report. As a result of management’s evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were not effective at a reasonable assurance level as of March 31, 2021 or as of the date of filing this report.
Our disclosure controls and procedures were not effective as of March 31, 2021 or as of the date of filing this report because they did not adequately ensure the accumulation and communication to management of information known to FHFA that is needed to meet our disclosure obligations under the federal securities laws. As a result, we were not able to rely upon the disclosure controls and procedures that were in place as of March 31, 2021 or as of the date of this filing, and we continue to have a material weakness in our internal control over financial reporting. This material weakness is described in more detail below under “Description of Material Weakness.” Based on discussions with FHFA and the structural nature of this material weakness, we do not expect to remediate this material weakness while we are under conservatorship.
Description of Material Weakness
The Public Company Accounting Oversight Board’s Auditing Standard 2201 defines a material weakness as a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company’s annual or interim financial statements will not be prevented or detected on a timely basis.
Management has determined that we continued to have the following material weakness as of March 31, 2021 and as of the date of filing this report:
•Disclosure Controls and Procedures. We have been under the conservatorship of FHFA since September 6, 2008. Under the GSE Act, FHFA is an independent agency that currently functions as both our conservator and our regulator with respect to our safety, soundness and mission. Because of the nature of the conservatorship under the GSE Act, which places us under the “control” of FHFA (as that term is defined by securities laws), some of the information that we may need to meet our disclosure obligations may be solely within the knowledge of FHFA. As our conservator, FHFA has the power to take actions without our knowledge that could be material to our shareholders and other stakeholders, and could significantly affect our financial performance or our continued existence as an ongoing business. Although we and FHFA attempted to design and implement
Fannie Mae First Quarter 2021 Form 10-Q120
Controls and Procedures

disclosure policies and procedures that would account for the conservatorship and accomplish the same objectives as a disclosure controls and procedures policy of a typical reporting company, there are inherent structural limitations on our ability to design, implement, test or operate effective disclosure controls and procedures. As both our regulator and our conservator under the GSE Act, FHFA is limited in its ability to design and implement a complete set of disclosure controls and procedures relating to Fannie Mae, particularly with respect to current reporting pursuant to Form 8-K. Similarly, as a regulated entity, we are limited in our ability to design, implement, operate and test the controls and procedures for which FHFA is responsible.
Due to these circumstances, we have not been able to update our disclosure controls and procedures in a manner that adequately ensures the accumulation and communication to management of information known to FHFA that is needed to meet our disclosure obligations under the federal securities laws, including disclosures affecting our condensed consolidated financial statements. As a result, we did not maintain effective controls and procedures designed to ensure complete and accurate disclosure as required by GAAP as of March 31, 2021 or as of the date of filing this report. Based on discussions with FHFA and the structural nature of this weakness, we do not expect to remediate this material weakness while we are under conservatorship.
Mitigating Actions Related to Material Weakness
As described above under “Description of Material Weakness,” we continue to have a material weakness in our internal control over financial reporting relating to our disclosure controls and procedures. However, we and FHFA have engaged in the following practices intended to permit accumulation and communication to management of information needed to meet our disclosure obligations under the federal securities laws:
•FHFA has established the Division of Resolutions, which is intended to facilitate operation of the company with the oversight of the conservator.
•We have provided drafts of our SEC filings to FHFA personnel for their review and comment prior to filing. We also have provided drafts of external press releases, statements and speeches to FHFA personnel for their review and comment prior to release.
•FHFA personnel, including senior officials, have reviewed our SEC filings prior to filing, including this quarterly report on Form 10-Q for the quarter ended March 31, 2021 (“First Quarter 2021 Form 10-Q”), and engaged in discussions regarding issues associated with the information contained in those filings. Prior to filing our First Quarter 2021 Form 10-Q, FHFA provided Fannie Mae management with written acknowledgment that it had reviewed the First Quarter 2021 Form 10-Q, and it was not aware of any material misstatements or omissions in the First Quarter 2021 Form 10-Q and had no objection to our filing the First Quarter 2021 Form 10-Q.
•Our senior management meets regularly with senior leadership at FHFA, including, but not limited to, the Director.
•FHFA representatives attend meetings frequently with various groups within the company to enhance the flow of information and to provide oversight on a variety of matters, including accounting, credit and market risk management, external communications and legal matters.
•Senior officials within FHFA’s Office of the Chief Accountant have met frequently with our senior finance executives regarding our accounting policies, practices and procedures.
Changes in Internal Control Over Financial Reporting
Management has evaluated, with the participation of our Chief Executive Officer and Chief Financial Officer, whether any changes in our internal control over financial reporting that occurred during our last fiscal quarter have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. Below we describe changes in our internal control over financial reporting from January 1, 2021 through March 31, 2021 that management believes have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting:
•Overview. In the ordinary course of business, we review our system of internal control over financial reporting and make changes that we believe will improve these controls and increase efficiency, while continuing to ensure that we maintain effective internal controls. Changes may include implementing new, more efficient systems, automating manual processes and updating existing systems. For example, we are currently implementing changes to various financial system applications in stages across the company. As we continue to implement these changes, each implementation may become a significant component of our internal control over financial reporting.
•Implementation of hedge accounting. In January 2021, we implemented a hedge accounting program, which resulted in significant changes to our accounting processes and control environment. The implementation
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included the development of a new model and significant modifications to existing applications, including our existing accounting systems for loans, debt and derivatives. The hedge accounting program was utilized during the first quarter of 2021, and the new processes and controls implemented as part of this program were used to prepare our condensed consolidated financial statements for the first quarter of 2021 included in this report. We will continue to monitor and test these new and modified controls for adequate design and operating effectiveness.
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PART II—OTHER INFORMATION
Item 1.  Legal Proceedings
The information in this item supplements and updates information regarding certain legal proceedings set forth in “Legal Proceedings” in our 2020 Form 10-K. We also provide information regarding material legal proceedings in “Note 13, Commitments and Contingencies,” which is incorporated herein by reference. In addition to the matters specifically described or incorporated by reference in this item, we are involved in a number of legal and regulatory proceedings that arise in the ordinary course of business that we do not expect will have a material impact on our business or financial condition. However, litigation claims and proceedings of all types are subject to many factors and their outcome and effect on our business and financial condition generally cannot be predicted accurately.
We establish an accrual for legal claims only when a loss is probable and we can reasonably estimate the amount of such loss. The actual costs of resolving legal claims may be substantially higher or lower than the amounts accrued for those claims. If certain of these matters are determined against us, FHFA or Treasury, it could have a material adverse effect on our results of operations, liquidity and financial condition, including our net worth.
Senior Preferred Stock Purchase Agreements Litigation
Between June 2013 and August 2018, preferred and common stockholders of Fannie Mae and Freddie Mac filed lawsuits in multiple federal courts against one or more of the United States, Treasury and FHFA, challenging actions taken by the defendants relating to the Fannie Mae and Freddie Mac senior preferred stock purchase agreements and the conservatorships of Fannie Mae and Freddie Mac. Some of these lawsuits also contain claims against Fannie Mae and Freddie Mac. The legal claims being advanced by one or more of these lawsuits include challenges to the net worth sweep dividend provisions of the senior preferred stock that were implemented pursuant to August 2012 amendments to the agreements, the payment of dividends to Treasury under the net worth sweep dividend provisions, and FHFA’s decision to require Fannie Mae and Freddie Mac to draw funds from Treasury in order to pay dividends to Treasury prior to the August 2012 amendments. Some of the lawsuits also challenge the constitutionality of FHFA’s structure. The plaintiffs seek various forms of equitable and injunctive relief, including rescission of the August 2012 amendments, as well as damages.
Amendments to our senior preferred stock purchase agreement made pursuant to the January 2021 letter agreement provide that we may take certain actions without Treasury’s prior written consent only when all currently pending significant litigation relating to the conservatorship and to the August 2012 amendments to the agreement has been resolved. For more information, see “Business—Conservatorship, Treasury Agreements and Housing Finance Reform—Treasury Agreements” in our 2020 Form 10-K. The cases that remain pending after December 31, 20192020 are as follows:
District of Columbia. Fannie Mae is a defendant in three cases pending in the U.S. District Court for the District of Columbia—a consolidated putative class action and two additional cases. In all three cases, Fannie Mae and Freddie Mac stockholders filed amended complaints on November 1, 2017 against us, FHFA as our conservator and Freddie Mac. On September 28, 2018, the court dismissed all of the plaintiffs’ claims in these cases, except for their claims for breach of an implied covenant of good faith and fair dealing. In a fourth case that was filed in the U.S. District Court for the District of Columbia on May 21, 2018, the court granted defendants’ motion to dismiss on March 6, 2019, and on March 18, 2019, plaintiff moved to alter or amend the judgment and to file an amended complaint. On May 24, 2019, the court denied this motion. On April 24, 2020, the U.S. Court of Appeals for the District of Columbia Circuit affirmed the lower court’s judgment. All fourthree cases are described in “Note 13, Commitments and Contingencies.”
Southern District of Texas (Collins v. Mnuchin). On October 20, 2016, preferred and common stockholders filed a complaint against FHFA and Treasury in the U.S. District Court for the Southern District of Texas. On May 22, 2017, the court dismissed the case. On September 6, 2019, the U.S. Court of Appeals for the Fifth Circuit, sitting en banc, affirmed the district court’s dismissal of claims against Treasury, but reversed the dismissal of claims against FHFA. The court held that plaintiffs could pursue their claim that FHFA exceeded its statutory powers as conservator when it implemented the net worth sweep dividend provisions of the senior preferred stock purchase agreements in August 2012. The court also held that the provision of the Housing and Economic Recovery Act that insulates the FHFA Director from removal without cause violates constitutional separation of powers principles and, thus, that the FHFA Director may be removed by the president for any reason. The court held that the appropriate remedy for this violation is to declare the provision severed from the statute. Plaintiffs have requested thatBoth the plaintiffs and the government filed petitions with the Supreme Court review the constitutional claim, arguing that the relief granted by Fifth Circuit is insufficient, and the government has requestedseeking review of the Fifth Circuit’s decision. The Supreme Court heard oral argument on December 9, 2020, and we expect a decision to allowin that case within the plaintiffs’ statutory claims to go forward.next few months.
Western District of Michigan. On June 1, 2017, preferred and common stockholders of Fannie Mae and Freddie Mac filed a complaint for declaratory and injunctive relief against FHFA and Treasury in the U.S. District Court for the Western District of Michigan. FHFA and Treasury moved to dismiss the case on September 8, 2017, and plaintiffs filed a motion for summary judgment on October 6, 2017. On September 8, 2020, the court denied plaintiffs’ motion for
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summary judgment and granted defendants’ motion to dismiss. The plaintiffs filed a notice of appeal with the U.S. Court for the Sixth Circuit on October 27, 2020.
District of Minnesota. On June 22, 2017, preferred and common stockholders of Fannie Mae and Freddie Mac filed a complaint for declaratory and injunctive relief against FHFA and Treasury in the U.S. District Court for the District of Minnesota. The court dismissed the case on July 6, 2018, and plaintiffs filed a notice of appeal with the U.S. Court of Appeals for the Eighth Circuit on July 10, 2018.
Eastern District of Pennsylvania. On August 16, 2018, common stockholders of Fannie Mae and Freddie Mac filed a complaint for declaratory and injunctive relief against FHFA and Treasury in the U.S. District Court for the Eastern District of
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Pennsylvania. FHFA and Treasury moved to dismiss the case on November 16, 2018, and plaintiffs filed a motion for summary judgment on December 21, 2018.
U.S. Court of Federal Claims. Numerous cases are pending against the United States in the U.S. Court of Federal Claims. Fannie Mae is a nominal defendant in four of these cases: Fisher v. United States of America,, filed on December 2, 2013; Rafter v. United States of America,, filed on August 14, 2014; Perry Capital LLC v. United States of America,, filed on August 15, 2018; and Fairholme Funds Inc. v. United States,, which was originally filed on July 9, 2013, and amended publicly to include Fannie Mae as a nominal defendant on October 2, 2018. Plaintiffs in these cases allege that the net worth sweep dividend provisions of the senior preferred stock that were implemented pursuant to the August 2012 amendment constitute a taking of Fannie Mae’s property without just compensation in violation of the U.S. Constitution. The Fisher plaintiffs are pursuing this claim derivatively on behalf of Fannie Mae, while the Rafter,, Perry Capital and Fairholme Funds plaintiffs are pursingpursuing the claim both derivatively and directly against the United States. Plaintiffs in Rafter also allege direct and derivative breach of contract claims against the government. The Perry Capital and Fairholme Funds plaintiffs allege similar breach of contract claims, as well as direct and derivative breach of fiduciary duty claims against the government. Plaintiffs in Fisher request just compensation to Fannie Mae in an unspecified amount. Plaintiffs in Rafter,, Perry Capital and Fairholme Funds seek just compensation for themselves on their direct claims and payment of damages to Fannie Mae on their derivative claims. The United States filed a motion to dismiss the Fisher,, Rafter and Fairholme Funds cases on August 1, 2018. On December 6, 2019, the court entered an order in the Fairholme Funds case that granted the government’s motion to dismiss all the direct claims but denied the motion as to all of the derivative claims brought on behalf of Fannie Mae. On March 9,June 18, 2020, the court certified the case for appeal to the U.S. Court of Appeals for the Federal Circuit. Both the government and the Fairholme Funds plaintiffs filed petitions with the U.S. Court of Appeals for the Federal Circuit on March 19, 2020 requesting thatagreed to hear the appeal of the court’s December 6, 2019 order. In the Fisher case, the court heardenied the government’s motion to dismiss on May 8, 2020 and, on August 21, 2020, the Federal Circuit denied the Fisher plaintiffs’ request for interlocutory appeal.
Item 1A.  Risk Factors
In addition to the information in this report, you should carefully consider the risks relating to our business that we identify in “Risk Factors” in our 20192020 Form 10-K. This10-K.This section supplements and updates that discussion. Also refer to “MD&A—Risk Management,” “MD&A—Single-Family Business” and “MD&A—Multifamily Business” in our 20192020 Form 10-K and in this report for more detailed descriptions of the primary risks to our business and how we seek to manage those risks.
The risks we face could materially adversely affect our business, results of operations, financial condition, liquidity and net worth, and could cause our actual results to differ materially from our past results or the results contemplated by any forward-looking statements we make. We believe the risks described in the sections of this report and our 20192020 Form 10-K identified above are the most significant we face; however, these are not the only risks we face. We face additional risks and uncertainties not currently known to us or that we currently believe are immaterial.
The COVID-19 outbreak has adversely affectedOperational Risk
A breach of the security of our systems or facilities, or those of third parties with which we do business, including as a result of cyber attacks, could damage or disrupt our business financial resultsor result in the disclosure or misuse of confidential information, which could damage our reputation, result in regulatory sanctions and/or increase our costs and financial condition,cause losses.
Our operations rely on the secure receipt, processing, storage and we expecttransmission of confidential and other information in our computer systems and networks and with our business partners, including proprietary, confidential or personal information that it will continueis subject to do so. The adverse impactprivacy laws, regulations or contractual obligations. Information security risks for large institutions like us have significantly increased in recent years in part because of the COVID-19 outbreak on our business, financial results and financial condition could be materially greater than we currently anticipate.
The rapid global outbreakproliferation of COVID-19, a new respiratory disease caused by a novel coronavirus, has caused substantial financial market volatility in recent weeks and has significantly adversely affected both the U.S.technologies and the global economy. On March 11, 2020,use of the World Health Organization characterized COVID-19 as a pandemic,Internet and on March 13, 2020, President Trump declared the COVID-19 outbreak in the United States a national emergency. The COVID-19 outbreak in the United States has expanded in recent weeks, and has resulted in stay-at-home orders, school closures and widespread business shutdowns across the country. These shutdownstelecommunications technologies to conduct or automate financial transactions. A number of financial services companies, consumer-based companies and other reductions in business activityorganizations have substantially increased unemployment levels. Whilereported the federal government is taking many actions to reduceunauthorized disclosure of client, customer or other confidential information, as well as cyber attacks involving the negative economic impactdissemination, theft and destruction of the COVID-19 outbreak, as described in “Executive Summary—COVID-19 Impact—Economic Impact,” the extent to which these actions will mitigate the short-term and long-term negative impacts of the COVID-19 outbreak on the U.S. economy and our business is unclear. The outbreak has already resulted in a contraction in U.S. GDP for the first quarter of 2020, and could result in a sustained drop in the level of U.S. economic activity.
We expect the impact of the COVID-19 outbreak to continue to negatively affect our financial results and contribute to lower net income in 2020 than in 2019. We could have a net loss in onecorporate information, intellectual property, cash or more future periods or possibly could have a net worth deficit that requires a draw from Treasury under the senior preferred stock purchase agreement. Our forecasts and expectations relating to the impact of the COVID-19 outbreak are subject to many uncertainties and may change, perhaps substantially, from our current forecasts and expectations. It is difficult to assess or predict the impact of this unprecedented event on our business, financial results or financial condition. Factors that will impact the extent to which the COVID-19 outbreak affects our business, financial results and financial condition include: the duration, spread and severity of the outbreak; the actions taken to contain the virus or treat its impact, including government actions to mitigate the economic impact of the outbreak; the nature and extent of the forbearance and modification options we offer borrowers affected by the outbreak; accounting elections and estimates relating to the impact of the COVID-19 outbreak; borrower and renter behavior in response to the outbreak and its economic impact; how quickly and to what extent normal economic and operating conditions can resume, including whether any future outbreaks interrupt economic recovery; and how quickly and to what extent affected borrowers, renters and counterparties can recover from the negative economic impact of the outbreak. While we are unable to predict the future course of these events or their longer-term effects on our business, key areas we have identified where theother valuable assets. There
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COVID-19 outbreakhave also been several highly publicized cases where hackers have requested “ransom” payments in exchange for not disclosing stolen customer information or for not disabling the target company’s computer or other systems.
We have been, and likely will continue to be, the target of cyber attacks, computer viruses, malicious code, phishing attacks, denial of service attacks and other information security threats. To date, cyber attacks have not had a material impact on our financial condition, results or business. However, we could suffer material financial or other losses in the future as a result of cyber attacks, and these attacks and their impacts are hard to predict. Our risk and exposure to these matters remains heightened because of, among other things:
•the evolving nature of these threats;
•the current global economic and political environment;
•our prominent size and scale and our role in the financial services industry;
•the outsourcing of some of our business operations;
•the ongoing shortage of qualified cybersecurity professionals;
•our migration to cloud-based systems;
•our increased use of employee-owned devices for business communication;
•the large number of our employees working remotely; and
•the interconnectivity and interdependence of third parties to our systems.
Despite our efforts to ensure the integrity of our software, computers, systems and information, we may not be able to anticipate, detect or recognize threats to our systems and assets, or to implement effective preventive measures against all cyber threats, especially because the techniques used are increasingly sophisticated, change frequently, are complex, and are often not recognized until launched. In addition, although we have not experienced any material impacts from the SolarWinds Orion cyber breach in late 2020, which reportedly affected roughly 18,000 organizations, or the Microsoft Exchange cyber attack in early 2021, which reportedly affected over 30,000 organizations, these two recent large-scale cyber attacks suggest that the risk of damaging cyberattacks impacting us and/or third-parties with whom we do business is negatively affectingincreasing. We believe these incidents are likely to continue, and we are unable to predict the direct or indirect impact of future attacks or breaches on business operations. We routinely identify cyber threats as well as vulnerabilities in our systems and work to address them, but these efforts may negativelybe insufficient. Further, these efforts involve costs that can be significant as cyber attack methods continue to rapidly evolve. Cyber attacks can originate from a variety of sources, including external parties who are affiliated with foreign governments or are involved with organized crime or terrorist organizations. Third parties may also attempt to induce employees, customers or other users of our systems to disclose sensitive information or provide access to our systems or network, or to our data or that of our counterparties or borrowers, and these types of risks may be difficult to detect or prevent.
The occurrence of a cyber attack, breach, unauthorized access, misuse, computer virus or other malicious code or other cybersecurity event could jeopardize or result in the unauthorized disclosure, gathering, monitoring, misuse, corruption, loss or destruction of confidential and other information that belongs to us, our customers, our counterparties, third-party service providers or borrowers that is processed and stored in, and transmitted through, our computer systems and networks. The occurrence of such an event could also result in damage to our software, computers or systems, or otherwise cause interruptions or malfunctions in our, our customers’, our counterparties’ or third parties’ operations. This could result in significant financial losses, loss of customers and business opportunities, reputational damage, litigation, regulatory fines, penalties or intervention, reimbursement or other compensatory costs, or otherwise adversely affect our business, financial condition or results of operations.
Cyber attacks can occur and financial conditionpersist for an extended period of time without detection. Investigations of cyber attacks are described below:
•Increased borrower credit risk. Among other factors, income growthinherently unpredictable, and unemployment levels affect borrowers’ abilityit takes time to repay their mortgage loans. Ascomplete an investigation and have full and reliable information. While we are investigating a result,cyber attack, we expect that current and future declines in economic activity and resulting higher unemployment rates will likely lead to significantly higher rates of delinquencies and may ultimately lead to significantly higher defaults ondo not necessarily know the mortgage loans in our guaranty book of business. Because of this expectation, our credit-related expenses were substantially higher in the first quarter of 2020. As there is significant uncertainty associated with the impactextent of the COVID-19 outbreak,harm or how best to remediate it, and we may ultimately experience greater losses thancan repeat or compound certain errors or actions before we currently expectdiscover and also may have high credit-related expenses in future quarters. Moreover, at FHFA's direction and/remediate them. In addition, announcing that a cyber attack has occurred increases the risk of additional cyber attacks, and preparing for this elevated risk can delay the announcement of a cyber attack. All or as required byany of these challenges could further increase the CARES Act, we are takingcosts and consequences of a number of actions to help borrowers affected by the COVID-19 outbreak that we expect will adversely affect our financial results and financial condition, including requiring that our servicers:
◦provide up to 12 months of forbearance to single-family borrowers impacted by COVID-19-related financial hardships who request forbearance;
◦provide up to 3 months of forbearance to eligible multifamily borrowers impacted by COVID-19-related financial hardships on the condition that such borrowers suspend evictions and other penalties relating to late payments during the forbearance period; and
◦suspend foreclosures and foreclosure-related activities for single-family loans (other than for vacant or abandoned properties) through at least May 17, 2020.
The CARES Act also instituted a temporary moratorium through July 25, 2020 on tenant evictions for nonpayment of rent that applies to any single-family or multifamily property that secures a mortgage loan we own or guarantee, which is likely to adversely affect the ability of some of our borrowers to make payments on their loans.
If a large number of borrowers cannot repay the amounts owed at the end of their forbearance plans or over time, or fail to qualify for modifications, this could result in significantly higher defaults on the mortgage loans in our guaranty book of business. Some states and localities have also implemented or are considering borrower and renter protections that are more extensive than the CARES Act requirements and our requirements. These additional protections, depending on their scope and whether and to what extent they apply to our business, could contribute to a higher number of single-family and multifamily borrowers becoming delinquent on their loans or could limit our ability to complete foreclosures.cyber attack.
In addition, we expect the economic dislocation resultingmay be required to expend significant additional resources to modify our protective measures and to investigate and remediate vulnerabilities or other exposures arising from the COVID-19 outbreak will likely negatively affect housing activities, home price growthoperational and multifamily property valuation growth, and could leadsecurity risks. Although we maintain insurance coverage relating to declines in home prices and multifamily property valuations. If this occurs, it would increase the amount ofcybersecurity risks, our loss in the event a borrower defaults on their loan. Lower home prices and multifamily property valuations would likely also lead to deterioration in loan performance and changes in borrower behavior, and potentially prohibit some borrowers from being able to refinance their loan. The magnitude of the impact would likely vary significantly across geographic regions and based on the credit characteristics of the loans.
The COVID-19 outbreak is also affecting the credit quality of our new loan acquisitions. Some of the new single-family loans we are acquiring beginning May 1, 2020 are already receiving payment forbearance. In addition, due to CARES Act provisions prohibiting lenders from reporting previously-current borrowers receiving COVID-19-related payment accommodations as delinquent to the credit bureaus, we may not have accurate data on a borrower’s credit history when we are determining the eligibility of the single-family loans we acquire.
•Increased human capital and business resiliency risk. As of April 29, 2020, according to the U.S. Centers for Disease Control and Prevention, there were more than 1 million reported cases of COVID-19 in the United States, and many public health experts expect this number to continue to increase. While we have succession plans in place, theyinsurance may not be effective. If a significant number of our executives orsufficient to provide adequate loss coverage in all circumstances.
Because we are interconnected with and dependent on third-party vendors, exchanges, clearing houses, fiscal and paying agents, and other employees, or their family members for whom they provide care, contract COVID-19 during the same time period, itfinancial intermediaries, including CSS, we could be materially adversely affect our ability to manage our business, which could have a material adverse effect on our resultsimpacted if any of operations and financial condition.
Since mid-March, we have required nearly all of our workforce to work remotely, which we refer to as telework. In addition, nearly all of our workforce is located in a geographic region where the state or local government has issued a stay-at-home order and/or closed schools; these orders and closures may be extended in whole or in part for several weeks or months. The strain on our workforce and our business operations caused by this shift in the work and home environment may result in business interruptions, significantly reduced productivity and other adverse impacts on our operations. While our technological systems to date have continued to function with our workforce working remotely, this telework arrangement increases the risk of technological or cybersecurity incidents that negatively affect our business operations. This telework arrangement, as well as the risk that a significant number of employees or their family members could contract COVID-19 and our reliance on third parties for some functions, also could adversely affect our ability to maintain effective controls and procedures, which could result in material errors in our reported results or disclosures that are not complete or accurate.
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•Increased counterparty creditthem is subject to a successful cyber attack or other information security event. Third parties with which we do business may also be sources of cybersecurity or other technological risks. We outsource certain functions and operational risk. The economic dislocation caused bythese relationships allow for the COVID-19 outbreak could lead to default by one or moreexternal storage and processing of our institutional counterpartiesinformation, as well as customer, counterparty and borrower information, including on cloud-based systems. We also share this type of information with regulatory agencies and their obligationsvendors. While we engage in actions to us. If a counterparty were to default on its obligationsmitigate our exposure resulting from our information-sharing activities, ongoing threats may result in unauthorized access, loss or destruction of data or other cybersecurity incidents with increased costs and consequences to us it could result in significant financial losses. Counterparty defaults could also negatively impactsuch as those described above.
We routinely transmit and receive personal, confidential and proprietary information by electronic means. In addition, our ability to operate our business, ascustomers maintain personal, confidential and proprietary information on systems we outsource some of our critical functions toprovide. We have discussed and worked with customers, vendors, service providers, counterparties and other third parties such as mortgage servicing, single-family Fannie Mae MBS issuanceto develop secure transmission capabilities and administration, and certain technology functions.
For the majority of our single-family guaranty book of business, when borrowersprotect against cyber attacks, but we do not pay their mortgages, our Single-Family Servicing Guide generally requires servicershave, and may be unable to advance the missed scheduled principal and interest payments to MBS trusts for payment to MBS holders. As describedput in “MD&A—Legislation and Regulation,” currently this obligation continues until we purchase the loan from the MBS trust, but effective in August 2020, our servicers’ obligations to advance these payments will end after four months of missed borrower payments. Single-family servicers are also required to advance property tax and insurance payments to taxing authorities, hazard insurers and mortgage insurers. For nearlyplace, secure capabilities with all of our multifamily guaranty book of business, when borrowers do not pay their mortgages, our Multifamily Sellingclients, vendors, service providers, counterparties and Servicing Guide requires lenders to advance the missed scheduled principalother third parties and interest payments to MBS trusts for payment to MBS holders for up to four months before they are eligible for reimbursement. If a large number of single-family or multifamily borrowers do not pay their mortgages as a result of the economic dislocation caused by the COVID-19 outbreak, our servicers may not have sufficient liquidity to advance the missed payments to MBS trusts. In such case, we would be required to make the payments, which could require us to obtain substantial additional funding. See below for a description of our increased liquidity risk.
In addition, if multiple single-family or multifamily servicers were to fail to meet their obligations to us, it could cause substantial disruption to our business, borrowers and the mortgage industry. We may not be able to transferensure that these third parties have appropriate controls in place to protect the servicingconfidentiality of loansthe information. An interception, misuse or mishandling of personal, confidential or proprietary information being sent to new servicers without significant operational disruptionsor received from a customer, vendor, service provider, counterparty or other third party could result in legal liability, regulatory action and reputational harm.
Market and Industry Risk
A deterioration in general economic conditions, including home prices and employment trends, or the financial markets may materially adversely affect our business and financial losses,condition.
Our business is significantly affected by the status of the U.S. economy, particularly home prices and there may not be sufficient industry capacity to take on large servicing transfers.employment trends. A large portionprolonged period of our single-family and multifamily guaranty books of business are serviced by non-depository servicers. We believe the counterparty risks associated with our non-depository servicers are higher than the risks associated with our depository servicers, as our non-depository servicers typically have lower financial strength, liquidity and operational capacity than our depository servicers, which may negatively affect their ability to fully satisfy their financial obligations or to properly service the loans on our behalf. The actions we have taken to mitigate our credit risk exposure to mortgage servicers may not be sufficient to prevent us from experiencing significant financial losses or business interruptionsslow growth in the event they cannot fulfill their obligationsU.S. economy or any deterioration in general economic conditions or the financial markets could materially adversely affect our results of operations, net worth and financial condition. Given the level of fiscal and monetary policy support for the economy in 2020 and 2021, there is a risk that inflation may exceed the level desired by policy makers and currently anticipated in financial markets. This could lead the government to us.
As noted above,adopt various corrective measures designed to restrict the economic dislocation caused byavailability of credit and regulate growth to contain inflation, including curtailing its purchase of Treasury bonds and mortgage-backed securities or raising the COVID-19 outbreakinterest the Federal Reserve charges financial institutions. Furthermore, interest rates may rise in anticipation of further inflation or a shift in monetary policy, which could lead to a rise in mortgage rates, a slowdown in housing demand and negatively affect home price appreciation. In general, if home prices decrease, or the unemployment rate increases, it could result in significantly higher defaults on mortgage loans. Although we strengthenedlevels of credit losses and credit-related expense.
Global economic conditions can also adversely affect our business and financial results. Changes or volatility in market conditions resulting from deterioration in or uncertainty regarding global economic conditions can adversely affect the value of our assets, which could materially adversely affect our results of operations, net worth and financial condition. Differing rates of economic recovery from the COVID-19 pandemic around the world along with continued dislocations in supply chains remain a concern for policy makers and financial markets. To the extent global economic conditions negatively affect the U.S. economy, they also could negatively affect the credit performance of the loans in our book of business.
Volatility or uncertainty in global or domestic political conditions also can significantly affect economic conditions and the financial and operational requirements for our mortgage insurer counterparties in 2019 and our primary mortgage insurer counterparties approved to write new business for us currently meet these requirements, a substantially higher level of mortgage defaultsmarkets. Global or domestic political unrest also could affect these counterparties' abilitygrowth and financial markets. We describe in our 2020 Form 10-K the risks to fully meet their payment obligations to us.
•Increased liquidity risk. As describedour business posed by changes in “MD&A—Liquidityinterest rates and Capital Management,” while market conditions improvedchanges in April, adverse market conditions in March limited our ability to issue debt with a maturity greater than two years. If market conditions limit our ability to issue longer-term debt, it could require that we fund longer-term assets with short-term debt, which would increase the roll-over risk on our outstanding debt.spreads. In addition, we expect our debt funding needs to increase in future periods, as significantly higher rates of loan delinquencies and an increase in forbearances and other loss mitigation activity driven by the COVID-19 outbreak require us to fund greater amounts of principal, interest, tax and insurance payments on delinquent loans and to purchase a larger volume of delinquent loans from MBS trusts. We also may continue to fund a high volume of whole loan conduit activity.
If substantial volatilitychanges or disruptions in the financial markets continues or intensifies it could significantly adversely affectchange the amount, mix and cost of funds we obtain, as well as our liquidity position. If we are unable to issue both short- and long-term debt securities at attractive rates and in amounts sufficient to operate our business and meet our obligations, it likely would interfere with the operation of our business and have a material adverse effect on our liquidity, results of operations, financial condition and net worth. If the COVID-19 outbreak results in a sustained market liquidity crisis, our liquidity contingency plans may be difficult or impossible to execute. If we cannot access the unsecured debt markets, our ability to repay maturing indebtedness and fund our operations could be eliminated or significantly impaired. In this event, our alternative source of liquidity, our other investments portfolio, may not be sufficient to meet our liquidity needs.
•Increased market risk. As described in “MD&A—Risk Management—Market Risk Management, Including Interest-Rate Risk Management,” the significant volatility in the financial markets makes it more challenging to manage our interest-rate risk. In addition, the overall decline in rates during the first quarter of 2020 resulted in declines in the fair value of some of the financial instruments that we mark to market through our earnings, which contributed to our fair value losses for the quarter. If this volatility continues or intensifies, it could further negatively affect our ability to manage our interest-rate risk and result in additional fair value losses. Furthermore, with the anticipated decline in borrower performance due to impact of the COVID-19 outbreak and increased uncertainty regarding the value of
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mortgage-related assets in the current environment, we may have higher investment losses in future periods relating to decreases in the fair value of our loans that are held for sale.
•Limitations on ability to engage in new credit risk transfer transactions. In recent weeks, we have been significantly restricted in our ability to enter into credit risk transfer transactions due to detrimental market conditions as a result of the COVID-19 outbreak. We do not anticipate being able to enter into new credit risk transfer transactions until market conditions improve. Credit risk transfer transactions are an important tool that we use to manage the credit risk of our loan acquisitions, as well as to reduce our overall conservatorship capital requirements. If we continue to be unable to enter into new credit risk transfer transactions, it would impact our ability to reduce our credit risk exposure to the loans we acquire, which could negatively affect our financial results or require that we reduce the amount or type of loans we acquire, and also could result in higher conservatorship capital requirements.
•Suspension of nonperforming and reperforming loan sales. We do not anticipate entering into any new contracts for sales of nonperforming or reperforming loans in the near future because in recent weeks there has been insufficient investor interest in these transactions as a result of the COVID-19 outbreak. Our suspension of these transactions limits our ability to reduce the amount of nonperforming and reperforming loans in our retained mortgage portfolio, which has been a way for us to reduce our credit risk and conservatorship capital requirements.
•Increased model and accounting estimate risk. Given the unprecedented nature and timing of the COVID-19 outbreak and its uncertain impact, we believe our model results relating to our allowance for loan losses currently cannot accurately capture the loan losses we will ultimately incur relating to COVID-19. For the first quarter of 2020, management used its judgment to increase our loss projections to reflect our current expectations relating to COVID-19’s impact on our loan losses, but this judgment may be inaccurate and we may ultimately experience greater losses, perhaps substantially, than we currently expect. The unprecedented nature of the COVID-19 outbreak may also negatively affect our ability to rely on models to effectively manage the risks to our business.
•Potential reduced demand for mortgages. The COVID-19 outbreak may reduce demand for both single-family and multifamily mortgage loans, which could reduce our future loan acquisitions and guaranty fee income. In addition, government and business closures relating to COVID-19 are likely to delay or prevent some closings on both new purchase loans and refinances.
•Increased risk of additional government action affecting our business. Federal, state and local governments have taken many actions that have or that we expect will adversely affect our financial results, such as the stay-at-home orders currently in place across the country and the loan forbearance requirements of the CARES Act. The U.S. Congress, Treasury, the Federal Reserve, FHFA or other national, state or local government agencies or legislatures may take additional steps in response to the COVID-19 outbreak that could adversely affect our business, financial results and financial condition, such as expanding or extending our obligations to help borrowers, renters or counterparties affected by the outbreak or expanding the amounts and types of businesses that are shut down.
•Increased uncertainty relating to our exit from conservatorship. The COVID-19 outbreak could delay or prevent our exit from conservatorship, particularly as it may delay our ability to build and raise sufficient capital to exit conservatorship. In addition, as we, FHFA and Treasury focus on responding to the COVID-19 outbreak, it may reduce our and their capacity to work toward meeting other preconditions for exiting conservatorship.
•Increased risk of mortgage fraud. In response to the COVID-19 outbreak, we are offering certain temporary flexibilities relating to our Single-Family Selling Guide requirements. This could increase the risk of mortgage fraud relating to the loans we acquire during the COVID-19 outbreak. In addition, the CARES Act provides that a single-family borrower may obtain mortgage payment forbearance with no additional documentation required other than the borrower's attestation to a financial hardship caused by COVID-19, which creates the risk that borrowers who are not experiencing financial hardship may request a forbearance.
For more information on the risks to our business relating to borrower credit risk, counterparty credit risk, economic conditions, market risk, liquidity risk, operational risk, model risk and other types of risks described above, see “Risk Factors” in our 2019 Form 10-K.
Fannie Mae First Quarter 2020 Form 10-Q116
Other Information

Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds
Common Stock
Our common stock is traded in the over-the-counter market and quoted on the OTCQB, operated by OTC Markets Group Inc., under the ticker symbol “FNMA.”
Fannie Mae First Quarter 2021 Form 10-Q126
Other Information

Recent Sales of Unregistered Equity Securities
Under the terms of our senior preferred stock purchase agreement with Treasury, we are prohibited from selling or issuing our equity interests other than as required by (and pursuant to) the terms of a binding agreement in effect on September 7, 2008, without the prior written consent of Treasury.Treasury except under limited circumstances, which are described in “Business—Conservatorship, Treasury Agreements and Housing Finance Reform—Treasury Agreements—Covenants under Treasury Agreements” in our 2020 Form 10-K. During the quarter ended March 31, 2020,2021, we did not sell any equity securities.
Information about Certain Securities Issuances by Fannie Mae
Pursuant to SEC regulations, public companies are required to disclose certain information when they incur a material direct financial obligation or become directly or contingently liable for a material obligation under an off-balance sheet arrangement. The disclosure must be made in a current report on Form 8-K under Item 2.03 or, if the obligation is incurred in connection with certain types of securities offerings, in prospectuses for that offering that are filed with the SEC.
Because the securities we issue are exempted securities under the Securities Act of 1933, we do not file registration statements or prospectuses with the SEC with respect to our securities offerings. To comply with the disclosure requirements of Form 8-K relating to the incurrence of material financial obligations, we report our incurrence of these types of obligations either in offering circulars or prospectuses (or supplements thereto) that we post on our website or in a current report on Form 8-K that we file with the SEC, in accordance with a “no-action” letter we received from the SEC staff in 2004. In cases where the information is disclosed in a prospectus or offering circular posted on our website, the document will be posted on our website within the same time period that a prospectus for a non-exempt securities offering would be required to be filed with the SEC.
The website address for disclosure about our debt securities is www.fanniemae.com/debtsearch. From this address, investors can access the offering circular and related supplements for debt securities offerings under Fannie Mae’s universal debt facility, including pricing supplements for individual issuances of debt securities.
Disclosure about our obligations pursuant to the MBS we issue, some of which may be off-balance sheet obligations, can be found at www.fanniemae.com/mbsdisclosure. From this address, investors can access information and documents about our MBS, including prospectuses and related prospectus supplements.
We are providing our website address solely for your information. Information appearing on our website is not incorporated into this report.
Our Purchases of Equity Securities
We did not repurchase any of our equity securities during the first quarter of 2020.2021.
Dividend Restrictions
Our payment of dividends is subject to the following restrictions:
Restrictions Relating to Conservatorship. Our conservator announced on September 7, 2008 that we would not pay any dividends on the common stock or on any series of preferred stock, other than the senior preferred stock. In addition, FHFA’s regulations relating to conservatorship and receivership operations prohibit us from paying any dividends while in conservatorship unless authorized by the Director of FHFA. The Director of FHFA has directed us to make dividend payments on the senior preferred stock on a quarterly basis for every dividend period for which dividends were payable.
Restrictions Under Senior Preferred Stock Purchase Agreement and Senior Preferred Stock. The senior preferred stock purchase agreement prohibits us from declaring or paying any dividends on Fannie Mae equity securities (other than the senior preferred stock) without the prior written consent of Treasury. In addition, pursuantthe agreement requires us to comply with the terms of the enterprise regulatory capital framework published by FHFA in November 2020. That requirement, combined with the dividend provisions of the senior preferred stock, and directives from our conservator, we are obligated to pay Treasury each quarter any dividends declared consisting of the amount, if any, by which our net worth as of the end of the immediately preceding fiscal quarter exceeds $25 billion. As a result in our net income is not availablebeing unavailable to common stockholders. For more information on the terms of the senior preferred stock purchase agreement and senior preferred stock, see “Business—Conservatorship, Treasury Agreements and Housing Finance Reform” in our 20192020 Form 10-K. For more information on the enterprise regulatory capital framework, see “Business—Legislation and Regulation” in our 2020 Form 10-K.
Additional Restrictions Relating to Preferred Stock. Payment of dividends on our common stock is also subject to the prior payment of dividends on our preferred stock and our senior preferred stock. Payment of dividends on all outstanding preferred stock, other than the senior preferred stock, is also subject to the prior payment of dividends on the senior preferred stock.
Fannie Mae First Quarter 2020 Form 10-Q117
Other Information

Statutory Restrictions. Under the GSE Act, FHFA has authority to prohibit capital distributions, including payment of dividends, if we fail to meet our capital requirements. If FHFA classifies us as significantly undercapitalized, approval of
Fannie Mae First Quarter 2021 Form 10-Q127
Other Information

the Director of FHFA is required for any dividend payment. Under the Charter Act and the GSE Act, we are not permitted to make a capital distribution if, after making the distribution, we would be undercapitalized. The Director of FHFA, however, may permit us to repurchase shares if the repurchase is made in connection with the issuance of additional shares or obligations in at least an equivalent amount and will reduce our financial obligations or otherwise improve our financial condition.
Item 3.  Defaults Upon Senior Securities
None.
Item 4.  Mine Safety Disclosures
None.
Item 5.  Other Information
None.
Item 6.  Exhibits
The exhibits listed below are being filed or furnished with or incorporated by reference into this report.
ItemDescription
3.1
3.2
4.1
Fourth Amended and Restated Certificate of Designation of Terms of Variable Liquidation Preference Senior Preferred Stock, Series 2008-2, datedApril 13, 2021
4.2
10.1
31.1
31.2
32.1
32.2
101. INSInline XBRL Instance Document* - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document
101. SCHInline XBRL Taxonomy Extension Schema*
101. CALInline XBRL Taxonomy Extension Calculation*
101. DEFInline XBRL Taxonomy Extension Definition*
101. LABInline XBRL Taxonomy Extension Label*
101. PREInline XBRL Taxonomy Extension Presentation*
104Cover Page Interactive Data File* - the cover page interactive data file does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document included as Exhibit 101
*    The financial information contained in these Inline XBRL documents is unaudited.

Fannie Mae First Quarter 20202021 Form 10-Q118128
Signatures

SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Federal National Mortgage Association
By:/s/ Hugh R. Frater

Hugh R. Frater
Chief Executive Officer
Date: May 1, 2020April 30, 2021
By:/s/ Celeste M. Brown
Celeste M. Brown
Executive Vice President and
Chief Financial Officer
Date: May 1, 2020April 30, 2021
Fannie Mae First Quarter 20202021 Form 10-Q119129
























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