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SEC Filings

10-Q
FEDERAL NATIONAL MORTGAGE ASSOCIATION FANNIE MAE filed this Form 10-Q on 11/02/2018
Entire Document
 
 
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 of
 
September 30, 2018
 
December 31, 2017
 
Loans(1)
 
Long-Term Debt of Fannie Mae
 
Long-Term Debt of Consolidated Trusts
 
Loans(1)
 
Long-Term Debt of Fannie Mae
 
Long-Term Debt of Consolidated Trusts
 
(Dollars in millions)
Fair value
 
$
9,153

 
 
 
$
7,251

 
 
 
$
24,948

 
 
 
$
10,596

 
 
 
$
8,186

 
 
 
$
30,493

 
Unpaid principal balance
 
9,140

 
 
 
6,496

 
 
 
23,245

 
 
 
10,246

 
 
 
7,368

 
 
 
27,717

 
__________
(1) 
Includes nonaccrual loans with a fair value of $160 million and $227 million as of September 30, 2018 and December 31, 2017, respectively. The difference between unpaid principal balance and the fair value of these nonaccrual loans as of September 30, 2018 and December 31, 2017 was $19 million and $46 million, respectively. Includes loans that are 90 days or more past due with a fair value of $106 million and $159 million as of September 30, 2018 and December 31, 2017, respectively. The difference between unpaid principal balance and the fair value of these 90 or more days past due loans as of September 30, 2018 and December 31, 2017 was $15 million and $34 million, respectively.
Changes in Fair Value under the Fair Value Option Election
We recorded losses of $63 million and $239 million for the three and nine months ended September 30, 2018, respectively, and gains of $30 million and $166 million for the three and nine months ended September 30, 2017, respectively, from changes in the fair value of loans recorded at fair value in “Fair value gains (losses), net” in our condensed consolidated statements of operations and comprehensive income.
We recorded gains of $128 million and $629 million for the three and nine months ended September 30, 2018, respectively, and gains of $35 million and losses of $422 million for the three and nine months ended September 30, 2017, respectively, from changes in the fair value of long-term debt recorded at fair value in “Fair value gains (losses), net” in our condensed consolidated statements of operations and comprehensive income.
14.  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.

Fannie Mae (In conservatorship) Third Quarter 2018 Form 10-Q
101