December 31, 2013 | Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Fair Value | |||||||||||
(in millions) | |||||||||||||||
Available-for-sale securities: | |||||||||||||||
Freddie Mac | $ | 39,001 | $ | 1,847 | $ | (189 | ) | $ | 40,659 | ||||||
Fannie Mae | 10,140 | 660 | (3 | ) | 10,797 | ||||||||||
Ginnie Mae | 149 | 18 | — | 167 | |||||||||||
CMBS | 29,151 | 1,524 | (337 | ) | 30,338 | ||||||||||
Subprime | 29,897 | 382 | (2,780 | ) | 27,499 | ||||||||||
Option ARM | 6,617 | 338 | (381 | ) | 6,574 | ||||||||||
Alt-A and other | 8,322 | 526 | (142 | ) | 8,706 | ||||||||||
Obligations of states and political subdivisions | 3,533 | 23 | (61 | ) | 3,495 | ||||||||||
Manufactured housing | 629 | 61 | (6 | ) | 684 | ||||||||||
Total available-for-sale securities | $ | 127,439 | $ | 5,379 | $ | (3,899 | ) | $ | 128,919 | ||||||
December 31, 2012 | |||||||||||||||
Available-for-sale securities: | |||||||||||||||
Freddie Mac | $ | 53,965 | $ | 4,602 | $ | (52 | ) | $ | 58,515 | ||||||
Fannie Mae | 14,183 | 1,099 | (2 | ) | 15,280 | ||||||||||
Ginnie Mae | 183 | 26 | — | 209 | |||||||||||
CMBS | 47,606 | 3,882 | (181 | ) | 51,307 | ||||||||||
Subprime | 35,503 | 83 | (9,129 | ) | 26,457 | ||||||||||
Option ARM | 7,454 | 48 | (1,785 | ) | 5,717 | ||||||||||
Alt-A and other | 11,861 | 244 | (1,201 | ) | 10,904 | ||||||||||
Obligations of states and political subdivisions | 5,647 | 154 | (3 | ) | 5,798 | ||||||||||
Manufactured housing | 716 | 24 | (31 | ) | 709 | ||||||||||
Total available-for-sale securities | $ | 177,118 | $ | 10,162 | $ | (12,384 | ) | $ | 174,896 |
Less than 12 Months | 12 Months or Greater | Total | |||||||||||||||||||||||||||||||||||||||||||||
Gross Unrealized Losses | Gross Unrealized Losses | Gross Unrealized Losses | |||||||||||||||||||||||||||||||||||||||||||||
December 31, 2013 | Fair Value | Other-Than- Temporary Impairment(1) | Temporary Impairment(2) | Total | Fair Value | Other-Than- Temporary Impairment(1) | Temporary Impairment(2) | Total | Fair Value | Other-Than- Temporary Impairment(1) | Temporary Impairment(2) | Total | |||||||||||||||||||||||||||||||||||
(in millions) | |||||||||||||||||||||||||||||||||||||||||||||||
Available-for-sale securities: | |||||||||||||||||||||||||||||||||||||||||||||||
Freddie Mac | $ | 7,957 | $ | — | $ | (144 | ) | $ | (144 | ) | $ | 649 | $ | — | $ | (45 | ) | $ | (45 | ) | $ | 8,606 | $ | — | $ | (189 | ) | $ | (189 | ) | |||||||||||||||||
Fannie Mae | 248 | — | (2 | ) | (2 | ) | 19 | — | (1 | ) | (1 | ) | 267 | — | (3 | ) | (3 | ) | |||||||||||||||||||||||||||||
CMBS | 1,147 | (7 | ) | (78 | ) | (85 | ) | 1,992 | (16 | ) | (236 | ) | (252 | ) | 3,139 | (23 | ) | (314 | ) | (337 | ) | ||||||||||||||||||||||||||
Subprime | 472 | (19 | ) | — | (19 | ) | 19,103 | (2,448 | ) | (313 | ) | (2,761 | ) | 19,575 | (2,467 | ) | (313 | ) | (2,780 | ) | |||||||||||||||||||||||||||
Option ARM | 77 | (2 | ) | — | (2 | ) | 2,608 | (374 | ) | (5 | ) | (379 | ) | 2,685 | (376 | ) | (5 | ) | (381 | ) | |||||||||||||||||||||||||||
Alt-A and other | 262 | (5 | ) | — | (5 | ) | 1,854 | (113 | ) | (24 | ) | (137 | ) | 2,116 | (118 | ) | (24 | ) | (142 | ) | |||||||||||||||||||||||||||
Obligations of states and political subdivisions | 1,885 | (7 | ) | (49 | ) | (56 | ) | 24 | — | (5 | ) | (5 | ) | 1,909 | (7 | ) | (54 | ) | (61 | ) | |||||||||||||||||||||||||||
Manufactured housing | — | — | — | — | 65 | (4 | ) | (2 | ) | (6 | ) | 65 | (4 | ) | (2 | ) | (6 | ) | |||||||||||||||||||||||||||||
Total available-for-sale securities in a gross unrealized loss position | $ | 12,048 | $ | (40 | ) | $ | (273 | ) | $ | (313 | ) | $ | 26,314 | $ | (2,955 | ) | $ | (631 | ) | $ | (3,586 | ) | $ | 38,362 | $ | (2,995 | ) | $ | (904 | ) | $ | (3,899 | ) | ||||||||||||||
Less than 12 Months | 12 Months or Greater | Total | |||||||||||||||||||||||||||||||||||||||||||||
Gross Unrealized Losses | Gross Unrealized Losses | Gross Unrealized Losses | |||||||||||||||||||||||||||||||||||||||||||||
December 31, 2012 | Fair Value | Other-Than- Temporary Impairment(1) | Temporary Impairment(2) | Total | Fair Value | Other-Than- Temporary Impairment(1) | Temporary Impairment(2) | Total | Fair Value | Other-Than- Temporary Impairment(1) | Temporary Impairment(2) | Total | |||||||||||||||||||||||||||||||||||
(in millions) | |||||||||||||||||||||||||||||||||||||||||||||||
Available-for-sale securities: | |||||||||||||||||||||||||||||||||||||||||||||||
Freddie Mac | $ | 1,811 | $ | — | $ | (25 | ) | $ | (25 | ) | $ | 1,872 | $ | — | $ | (27 | ) | $ | (27 | ) | $ | 3,683 | $ | — | $ | (52 | ) | $ | (52 | ) | |||||||||||||||||
Fannie Mae | 170 | — | — | — | 55 | — | (2 | ) | (2 | ) | 225 | — | (2 | ) | (2 | ) | |||||||||||||||||||||||||||||||
CMBS | 340 | — | (3 | ) | (3 | ) | 3,425 | (22 | ) | (156 | ) | (178 | ) | 3,765 | (22 | ) | (159 | ) | (181 | ) | |||||||||||||||||||||||||||
Subprime | 298 | (23 | ) | — | (23 | ) | 25,676 | (7,830 | ) | (1,276 | ) | (9,106 | ) | 25,974 | (7,853 | ) | (1,276 | ) | (9,129 | ) | |||||||||||||||||||||||||||
Option ARM | 82 | (3 | ) | — | (3 | ) | 5,182 | (1,759 | ) | (23 | ) | (1,782 | ) | 5,264 | (1,762 | ) | (23 | ) | (1,785 | ) | |||||||||||||||||||||||||||
Alt-A and other | 50 | (4 | ) | — | (4 | ) | 7,938 | (961 | ) | (236 | ) | (1,197 | ) | 7,988 | (965 | ) | (236 | ) | (1,201 | ) | |||||||||||||||||||||||||||
Obligations of states and political subdivisions | 37 | — | (1 | ) | (1 | ) | 45 | — | (2 | ) | (2 | ) | 82 | — | (3 | ) | (3 | ) | |||||||||||||||||||||||||||||
Manufactured housing | 46 | — | — | — | 222 | (26 | ) | (5 | ) | (31 | ) | 268 | (26 | ) | (5 | ) | (31 | ) | |||||||||||||||||||||||||||||
Total available-for-sale securities in a gross unrealized loss position | $ | 2,834 | $ | (30 | ) | $ | (29 | ) | $ | (59 | ) | $ | 44,415 | $ | (10,598 | ) | $ | (1,727 | ) | $ | (12,325 | ) | $ | 47,249 | $ | (10,628 | ) | $ | (1,756 | ) | $ | (12,384 | ) |
(1) | Represents the gross unrealized losses for securities for which we have previously recognized other-than-temporary impairments in earnings. |
(2) | Represents the gross unrealized losses for securities for which we have not previously recognized other-than-temporary impairments in earnings. |
• | whether we intend to sell the security or it is more likely than not that we will be required to sell the security before sufficient time elapses to recover all unrealized losses; |
• | the use of a third-party model for single-family non-agency mortgage-related securities that considers the credit performance of the underlying collateral, including current LTV ratio, delinquency status, servicer performance, loan modification terms and status, and borrower credit information. The model also incorporates assumptions about the economic environment, including future home prices, unemployment, and interest rates to project underlying collateral prepayment speeds, default rates, loss severities, and delinquency rates. Our estimation approach for CMBS includes the use of a separate third-party model that utilizes underlying collateral performance, current and expected credit enhancements, and incorporates assumptions about the underlying collateral cash flows; and |
• | the incorporation of security-level subordination information and the priority of cash flow payments by the models to project and estimate cash flows expected to be collected for each security. |
December 31, 2013 | |||||||||||||||||||
Alt-A(1) | |||||||||||||||||||
Subprime First Lien(2) | Option ARM | Fixed Rate | Variable Rate | Hybrid Rate | |||||||||||||||
(dollars in millions) | |||||||||||||||||||
Issuance Date | |||||||||||||||||||
2004 and prior: | |||||||||||||||||||
UPB | $ | 896 | $ | 49 | $ | 498 | $ | 336 | $ | 342 | |||||||||
Weighted average collateral defaults(3) | 37 | % | 23 | % | 13 | % | 31 | % | 19 | % | |||||||||
Weighted average collateral severities(4) | 58 | % | 46 | % | 47 | % | 43 | % | 37 | % | |||||||||
Weighted average voluntary prepayment rates(5) | 7 | % | 8 | % | 11 | % | 7 | % | 8 | % | |||||||||
Average credit enhancements(6) | 38 | % | 4 | % | 15 | % | 15 | % | 12 | % | |||||||||
2005: | |||||||||||||||||||
UPB | $ | 3,687 | $ | 2,221 | $ | 714 | $ | 591 | $ | 3,068 | |||||||||
Weighted average collateral defaults(3) | 46 | % | 34 | % | 20 | % | 40 | % | 24 | % | |||||||||
Weighted average collateral severities(4) | 60 | % | 51 | % | 46 | % | 48 | % | 41 | % | |||||||||
Weighted average voluntary prepayment rates(5) | 4 | % | 7 | % | 9 | % | 7 | % | 9 | % | |||||||||
Average credit enhancements(6) | 46 | % | 3 | % | — | % | 21 | % | 2 | % | |||||||||
2006: | |||||||||||||||||||
UPB | $ | 16,547 | $ | 4,870 | $ | 397 | $ | 846 | $ | 907 | |||||||||
Weighted average collateral defaults(3) | 54 | % | 44 | % | 28 | % | 47 | % | 26 | % | |||||||||
Weighted average collateral severities(4) | 61 | % | 53 | % | 47 | % | 53 | % | 40 | % | |||||||||
Weighted average voluntary prepayment rates(5) | 2 | % | 6 | % | 8 | % | 6 | % | 10 | % | |||||||||
Average credit enhancements(6) | 5 | % | (5 | )% | — | % | (9 | )% | (3 | )% | |||||||||
2007: | |||||||||||||||||||
UPB | $ | 18,287 | $ | 3,286 | $ | 138 | $ | 1,085 | $ | 225 | |||||||||
Weighted average collateral defaults(3) | 53 | % | 44 | % | 47 | % | 46 | % | 43 | % | |||||||||
Weighted average collateral severities(4) | 61 | % | 52 | % | 52 | % | 52 | % | 48 | % | |||||||||
Weighted average voluntary prepayment rates(5) | 2 | % | 6 | % | 6 | % | 6 | % | 7 | % | |||||||||
Average credit enhancements(6) | 4 | % | 4 | % | (1 | )% | (20 | )% | — | % | |||||||||
Total: | |||||||||||||||||||
UPB | $ | 39,417 | $ | 10,426 | $ | 1,747 | $ | 2,858 | $ | 4,542 | |||||||||
Weighted average collateral defaults(3) | 52 | % | 42 | % | 22 | % | 43 | % | 25 | % | |||||||||
Weighted average collateral severities(4) | 61 | % | 52 | % | 47 | % | 51 | % | 41 | % | |||||||||
Weighted average voluntary prepayment rates(5) | 2 | % | 6 | % | 9 | % | 6 | % | 9 | % | |||||||||
Average credit enhancements(6) | 9 | % | — | % | 4 | % | (4 | )% | 1 | % |
(1) | Excludes non-agency mortgage-related securities backed by other loans, which primarily consist of securities backed by home equity lines of credit. |
(2) | Excludes non-agency mortgage-related securities backed exclusively by subprime second liens. Certain securities identified as subprime first lien may be backed in part by subprime second-lien loans, as the underlying loans of these securities were permitted to include a small percentage of subprime second-lien loans. |
(3) | The expected cumulative default rate is expressed as a percentage of the current collateral UPB. |
(4) | The expected average loss given default is calculated as the ratio of cumulative loss over cumulative default for each security. |
(5) | The security’s voluntary prepayment rate represents the average of the monthly voluntary prepayment rate weighted by the security’s outstanding UPB. |
(6) | Positive values reflect the amount of subordination and other financial support (excluding credit enhancement provided by bond insurance) that will incur losses in the securitization structure before any losses are allocated to securities that we own. Percentage generally calculated based on: (a) the total UPB of securities subordinate to the securities we own; divided by (b) the total UPB of all of the securities issued by the trust (excluding notional balances). Negative values are shown when unallocated collateral losses will be allocated to the securities that we own in excess of current remaining credit enhancement, if any. The unallocated collateral losses have been considered in our assessment of other-than-temporary impairment. |
Net Impairment of Available-For-Sale Securities Recognized in Earnings For the Year Ended December 31, | |||||||||||
2013 | 2012 | 2011 | |||||||||
(in millions) | |||||||||||
Available-for-sale securities:(1) | |||||||||||
CMBS | $ | (14 | ) | $ | (138 | ) | $ | (353 | ) | ||
Subprime | (1,258 | ) | (1,274 | ) | (1,315 | ) | |||||
Option ARM | (58 | ) | (556 | ) | (424 | ) | |||||
Alt-A and other | (179 | ) | (196 | ) | (198 | ) | |||||
Manufactured housing | (1 | ) | (4 | ) | (11 | ) | |||||
Total net impairment of available-for-sale securities recognized in earnings | $ | (1,510 | ) | $ | (2,168 | ) | $ | (2,301 | ) |
(1) | Includes $568 million, $0 million, and $181 million of other-than-temporary impairments recognized in earnings for the years ended December 31, 2013, 2012, and 2011, respectively, as we had the intent to sell the related securities before recovery of their amortized cost basis. |
Year Ended December 31, | |||||||
2013 | 2012 | ||||||
(in millions) | |||||||
Credit-related other-than-temporary impairments on available-for-sale securities recognized in earnings: | |||||||
Beginning balance — remaining credit losses on available-for-sale securities where other-than-temporary impairments were recognized in earnings | $ | 16,745 | $ | 15,988 | |||
Additions: | |||||||
Amounts related to credit losses for which an other-than-temporary impairment was not previously recognized | 46 | 141 | |||||
Amounts related to credit losses for which an other-than-temporary impairment was previously recognized | 896 | 2,027 | |||||
Reductions: | |||||||
Amounts related to securities which were sold, written off, or matured | (1,193 | ) | (1,289 | ) | |||
Amounts for which we intend to sell the security or it is more likely than not that we will be required to sell the security before recovery of its amortized cost basis | (1,536 | ) | (15 | ) | |||
Amounts related to amortization resulting from significant increases in cash flows expected to be collected and/or due to the passage of time that are recognized over the remaining life of the security | (495 | ) | (107 | ) | |||
Ending balance — remaining credit losses on available-for-sale securities where other-than-temporary impairments were recognized in earnings(1) | $ | 14,463 | $ | 16,745 |
(1) | Excludes other-than-temporary impairments on securities that we intend to sell or it is more likely than not that we will be required to sell before recovery of the unrealized losses. |
Year Ended December 31, | |||||||||||
2013 | 2012 | 2011 | |||||||||
(in millions) | |||||||||||
Gross realized gains | |||||||||||
Mortgage-related securities: | |||||||||||
Freddie Mac | $ | 547 | $ | 34 | $ | 77 | |||||
Fannie Mae | 17 | 14 | 14 | ||||||||
CMBS | 1,301 | 82 | 37 | ||||||||
Option ARM | 1 | 3 | — | ||||||||
Alt-A and other | 70 | — | — | ||||||||
Obligations of states and political subdivisions | 13 | 19 | 11 | ||||||||
Subprime | 1 | — | — | ||||||||
Total mortgage-related securities gross realized gains | 1,950 | 152 | 139 | ||||||||
Gross realized gains | 1,950 | 152 | 139 | ||||||||
Gross realized losses | |||||||||||
Mortgage related securities:(1) | |||||||||||
Freddie Mac | (25 | ) | — | — | |||||||
CMBS | — | — | (81 | ) | |||||||
Option ARM | (4 | ) | — | — | |||||||
Alt-A and other | (19 | ) | — | — | |||||||
Subprime | (3 | ) | — | — | |||||||
Total mortgage-related securities gross realized losses | (51 | ) | — | (81 | ) | ||||||
Gross realized losses | (51 | ) | — | (81 | ) | ||||||
Net realized gains (losses) | $ | 1,899 | $ | 152 | $ | 58 |
(1) | The individual sales do not change our conclusion, at period end, that we do not intend to sell our remaining mortgage-related available-for-sale securities that are in an unrealized loss position and it is not more likely than not that we will be required to sell these securities before a sufficient time to recover all unrealized losses. |
As of December 31, 2013 | |||||||||||||||||||||||||||||||||||||||
After One Year Through | After Five Years | ||||||||||||||||||||||||||||||||||||||
Total | Total | One Year or Less | Five Years | Through Ten Years | After Ten Years | ||||||||||||||||||||||||||||||||||
Amortized | Fair | Amortized | Fair | Amortized | Fair | Amortized | Fair | Amortized | Fair | ||||||||||||||||||||||||||||||
Cost | Value | Cost | Value | Cost | Value | Cost | Value | Cost | Value | ||||||||||||||||||||||||||||||
(dollars in millions) | |||||||||||||||||||||||||||||||||||||||
Available-for-sale securities: | |||||||||||||||||||||||||||||||||||||||
Freddie Mac | $ | 39,001 | $ | 40,659 | $ | 4 | $ | 4 | $ | 570 | $ | 599 | $ | 613 | $ | 654 | $ | 37,814 | $ | 39,402 | |||||||||||||||||||
Fannie Mae | 10,140 | 10,797 | 3 | 3 | 275 | 291 | 163 | 177 | 9,699 | 10,326 | |||||||||||||||||||||||||||||
Ginnie Mae | 149 | 167 | — | — | 7 | 8 | 12 | 14 | 130 | 145 | |||||||||||||||||||||||||||||
CMBS | 29,151 | 30,338 | — | — | 677 | 735 | — | — | 28,474 | 29,603 | |||||||||||||||||||||||||||||
Subprime | 29,897 | 27,499 | — | — | — | — | — | — | 29,897 | 27,499 | |||||||||||||||||||||||||||||
Option ARM | 6,617 | 6,574 | — | — | — | — | — | — | 6,617 | 6,574 | |||||||||||||||||||||||||||||
Alt-A and other | 8,322 | 8,706 | 1 | 2 | 71 | 70 | 12 | 12 | 8,238 | 8,622 | |||||||||||||||||||||||||||||
Obligations of states and political subdivisions | 3,533 | 3,495 | 5 | 5 | 39 | 42 | 106 | 107 | 3,383 | 3,341 | |||||||||||||||||||||||||||||
Manufactured housing | 629 | 684 | — | — | — | — | — | — | 629 | 684 | |||||||||||||||||||||||||||||
Total available-for-sale securities | $ | 127,439 | $ | 128,919 | $ | 13 | $ | 14 | $ | 1,639 | $ | 1,745 | $ | 906 | $ | 964 | $ | 124,881 | $ | 126,196 | |||||||||||||||||||
Weighted Average Yield(2) | 2.99 | % | 5.62 | % | 5.19 | % | 5.16 | % | 2.95 | % |
(1) | Maturity information provided is based on contractual maturities, which may not represent the expected life as obligations underlying these securities may be prepaid at any time without penalty. |
(2) | The weighted average yield is calculated based on a yield for each individual lot held at December 31, 2013 excluding any fully taxable-equivalent adjustments related to tax exempt sources of interest income. The numerator for the individual lot yield consists of the sum of: (a) the year-end interest coupon rate multiplied by the year-end UPB; and (b) the annualized amortization income or expense calculated for December 2013 (excluding the accretion of non-credit-related other-than-temporary impairments and any adjustments recorded for changes in the effective rate). The denominator for the individual lot yield consists of the year-end amortized cost of the lot excluding effects of other-than-temporary impairments on the UPB of impaired lots. |
December 31, 2013 | December 31, 2012 | ||||||
(in millions) | |||||||
Mortgage-related securities: | |||||||
Freddie Mac | $ | 9,349 | $ | 10,354 | |||
Fannie Mae | 7,180 | 10,338 | |||||
Ginnie Mae | 98 | 131 | |||||
Other | 141 | 156 | |||||
Total mortgage-related securities | 16,768 | 20,979 | |||||
Non-mortgage-related securities: | |||||||
Asset-backed securities | — | 292 | |||||
Treasury bills | 2,254 | 1,160 | |||||
Treasury notes | 4,382 | 19,061 | |||||
Total non-mortgage-related securities | 6,636 | 20,513 | |||||
Total fair value of trading securities | $ | 23,404 | $ | 41,492 |