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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 | 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 carrying value of HFI loans at the unpaid principal balance, net of unamortized premiums and discounts, other cost basis adjustments, and an allowance for loan losses. We report the carrying value of HFS loans at the lower of cost or fair value and record valuation changes in “Investment gains, net” in our condensed consolidated statements of operations and comprehensive income. We define the recorded investment of HFI loans as unpaid principal balance, net of unamortized premiums and discounts, other cost basis adjustments, and accrued interest receivable.
For purposes of the single-family mortgage loan disclosures in this footnote, we define “primary” class as mortgage loans that are not included in other loan classes; “government” class as mortgage loans that are guaranteed or insured, in whole or in part, by the U.S. government or one of its agencies, and that are not Alt-A; and “other” class as loans with higher-risk characteristics, such as interest-only loans and negative-amortizing loans, that are neither government nor Alt-A.
The following table displays the carrying value of our mortgage loans.
 
As of
 
September 30, 2018
 
December 31, 2017
 
(Dollars in millions)
Single-family
$
2,924,857

 
$
2,890,634

Multifamily
284,298

 
265,069

Total unpaid principal balance of mortgage loans
3,209,155

 
3,155,703

Cost basis and fair value adjustments, net
39,642

 
41,906

Allowance for loan losses for loans held for investment
(15,663
)
 
(19,084
)
Total mortgage loans
$
3,233,134

 
$
3,178,525


The following table displays information about our redesignated mortgage loans.
 
For the Three Months Ended September 30,
 
For the Nine Months Ended September 30,
 
 
 
2018
 
2017
 
2018
 
2017
 
(Dollars in millions)
Carrying value of loans redesignated from HFI to HFS
$
4,249

 
$
2,077

 
$
17,851

 
$
7,499

Carrying value of loans redesignated from HFS to HFI
6

 
59

 
36

 
111

Loans sold - unpaid principal balance
9,373

 
3,433

 
13,831

 
6,473

Realized gains on sale of mortgage loans
93

 
158

 
301

 
211


The recorded investment of single-family mortgage loans for which formal foreclosure proceedings are in process was $10.6 billion and $13.0 billion as of September 30, 2018 and December 31, 2017, 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.
Nonaccrual Loans
We discontinue accruing interest on loans when we believe collectibility of principal or 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 is reversed through interest income at the date a loan is placed on nonaccrual status. We return a non-modified single-family loan 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. We place a multifamily loan on nonaccrual status when the loan becomes three months or more past due according to its contractual terms or is deemed to be individually impaired, unless the loan is well secured such that collectibility of principal and accrued interest is reasonably assured. We return a multifamily loan to accrual stat

Fannie Mae (In conservatorship) Third Quarter 2018 Form 10-Q
61