v3.25.4
Derivative Instruments
 12 Months Ended
Dec. 31, 2025
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Derivative Instruments Derivative InstrumentsDerivative 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 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 fall
into these broad categories:
•Interest-rate swap contracts. An interest-rate swap is a transaction between two parties in which each party
agrees to exchange payments tied to different interest rates or indices for a specified period of time, generally
based on a notional amount of principal. The types of interest-rate swaps we use include pay-fixed swaps,
receive-fixed swaps and basis swaps.
•Interest-rate option contracts. These contracts primarily include pay-fixed swaptions, receive-fixed swaptions,
cancellable swaps and interest-rate caps. A swaption is an option contract that allows us or a counterparty to
enter into a pay-fixed or receive-fixed swap at some point in the future.
•Foreign currency swaps. These swaps convert debt that we issue in foreign denominated currencies into U.S.
dollars. We enter into foreign currency swaps only to the extent that we hold foreign currency debt.
•Futures. These are standardized exchange-traded contracts that either obligate a buyer to buy an asset at a
predetermined date and price or a seller to sell an asset at a predetermined date and price. The types of
futures contracts we enter into include SOFR and U.S. Treasury.
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 consolidated balance sheets at their fair value on a
trade-date basis. See “Note 16, Fair Value” for additional information on derivatives recorded at fair value.
Fair Value Hedge Accounting
Pursuant to our fair value hedge accounting 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 consolidated
statements of operations and comprehensive income line item used to recognize the earnings effect of the hedged
item’s basis adjustment. We record all gains and losses, including accrued interest, on derivatives while they are not in
a qualifying designated hedging relationship in “Fair value gains (losses), net” in our consolidated statements of
operations and comprehensive income. The objective of our fair value hedges is to reduce GAAP earnings volatility
related to changes in benchmark interest rates.
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, including derivative instruments designated as hedges.
As of December 31,
2025
2024
Notional
Amount
Estimated Fair Value
Notional
Amount
Estimated Fair Value
Asset
Derivatives
Liability
Derivatives
Asset
Derivatives
Liability
Derivatives
(Dollars in millions)
Risk management derivatives designated as
hedging instruments:
Swaps:(1)
Pay-fixed
$38,759
$—
$—
$26,704
$—
$—
Receive-fixed
8,439
—
—
10,057
—
—
Total risk management derivatives
designated as hedging instruments
47,198
—
—
36,761
—
—
Risk management derivatives not designated
as hedging instruments:
Swaps:(1)
Pay-fixed
199,744
—
—
146,628
—
—
Receive-fixed
194,394
145
(1,082)
135,686
71
(2,164)
Basis
250
28
—
250
26
—
Foreign currency
334
—
(56)
310
—
(81)
Swaptions:(1)
Pay-fixed
11,956
91
(4)
7,006
280
(31)
Receive-fixed
11,661
13
(114)
5,916
24
(92)
Futures(1)
11,546
—
—
86
—
—
Total risk management derivatives not
designated as hedging instruments
429,885
277
(1,256)
295,882
401
(2,368)
Netting adjustment(2)
—
(199)
1,242
—
(362)
2,367
Total risk management derivatives portfolio
477,083
78
(14)
332,643
39
(1)
Mortgage commitment derivatives:
Mortgage commitments to purchase whole
loans
4,005
7
(1)
2,634
1
(9)
Forward contracts to purchase mortgage-
related securities
47,122
48
(13)
31,883
3
(118)
Forward contracts to sell mortgage-related
securities
111,868
—
(117)
78,934
108
(10)
Total mortgage commitment derivatives
162,995
55
(131)
113,451
112
(137)
Credit enhancement derivatives
27,269
44
(3)
28,775
28
(16)
Other derivatives
732
—
(4)
—
—
—
Derivatives at fair value
$668,079
$177
$(152)
$474,869
$179
$(154)
(1)Centrally cleared derivatives 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 $1.1 billion and $2.0
billion as of December 31, 2025 and 2024, respectively. Cash collateral received was $27 million and $3 million as of December 31, 2025
and 2024, respectivelyThe following table displays, by type of derivative instrument, the fair value gains and losses, net on our derivatives.
For the Year Ended December 31,
2025
2024
2023
(Dollars in millions)
Risk management derivatives:
Swaps:
Pay-fixed
$(1,003)
$1,472
$(1,441)
Receive-fixed
1,806
242
2,441
Basis
4
(22)
39
Foreign currency
25
(15)
32
Swaptions:
Pay-fixed
(190)
66
(2)
Receive-fixed
(60)
(20)
(10)
Futures
21
1
—
Net contractual interest expense on interest-rate swaps
(532)
(964)
(711)
Total risk management derivatives fair value gains (losses), net
71
760
348
Mortgage commitment derivatives fair value gains (losses), net
(1,006)
533
120
Credit enhancement derivatives fair value gains (losses), net
(23)
(82)
46
Other derivatives fair value gains (losses), net
1
—
—
Total derivatives fair value gains (losses), net
$(957)
$1,211
$514
Effect of Fair Value Hedge Accounting
The following table displays the effect of fair value hedge accounting on our consolidated statements of operations and
comprehensive income, including gains and losses recognized on fair value hedging relationships.
For the Year Ended December 31,
2025
2024
Interest
Income:
Mortgage
Loans
Interest
Expense:
Long-
Term
Debt
Interest
Income:
Mortgage
Loans
Interest
Expense:
Long-
Term
Debt
(Dollars in millions)
Total amounts presented in our consolidated statements of operations and
comprehensive income
$152,149
$(129,425)
$144,152
$(121,223)
Gains (losses) from fair value hedging relationships:
Mortgage loans HFI and related interest-rate contracts:
Hedged items
$441
$—
$(675)
$—
Discontinued hedge-related basis adjustment amortization
31
—
33
—
Derivatives designated as hedging instruments
(364)
—
636
—
Interest accruals on derivative hedging instruments
217
—
315
—
Debt of Fannie Mae and related interest-rate contracts:
Hedged items
—
(233)
—
502
Discontinued hedge-related basis adjustment amortization
—
(802)
—
(863)
Derivatives designated as hedging instruments
—
224
—
(363)
Interest accruals on derivative hedging instruments
—
(91)
—
(425)
Gains (losses) recognized in net interest income on fair value hedging relationships
$325
$(902)
$309
$(1,149)
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 consolidated balance sheets, including the hedged item’s cumulative basis adjustments and the closed
portfolio balances under the portfolio layer method. The hedged item carrying amounts and total basis adjustments
include both open and discontinued hedges. The amortized cost and designated UPB consists only of open hedges as
of December 31, 2025 and 2024.
As of December 31, 2025
Carrying
Amount Assets
(Liabilities)
Cumulative Amount of Fair Value
Hedging Basis Adjustments
Included in the Carrying Amount
Closed Portfolio of Mortgage Loans
Under Portfolio Layer Method
Total Basis
Adjustments(1)
Remaining
Adjustments -
Discontinued
Hedge
Total Amortized
Cost
Designated UPB
(Dollars in millions)
Mortgage loans HFI
$1,343,231
$(344)
$(344)
$251,659
$39,605
Debt of Fannie Mae
(28,764)
2,355
2,355
N/A
N/A
As of December 31, 2024
Carrying
Amount Assets
(Liabilities)
Cumulative Amount of Fair Value
Hedging Basis Adjustments
Included in the Carrying Amount
Closed Portfolio of Mortgage Loans
Under Portfolio Layer Method
Total Basis
Adjustments(1)
Remaining
Adjustments -
Discontinued
Hedge
Total Amortized
Cost
Designated UPB
(Dollars in millions)
Mortgage loans HFI
$1,109,445
$(816)
$(816)
$813,536
$26,825
Debt of Fannie Mae
(47,849)
3,390
3,390
N/A
N/A
(1)No basis adjustment associated with open hedges, as all hedges are designated at the close of business, with a one-day term.
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 15, Netting Arrangements” for information on our rights to offset
assets and liabilities as of December 31, 2025 and 2024.
For certain OTC derivatives, the amount of collateral we pledge to counterparties related to our derivative instruments is
determined after considering our credit ratings. Currently, our long-term senior debt is rated AA+ or above by the three
major rating agencies. If our long-term senior debt credit ratings were downgraded to established thresholds in our OTC
derivative contracts, which range from A3/A- to Baa2/BBB or below, we would be required to provide additional
collateral to certain counterparties. The aggregate fair value of our OTC derivative instruments with credit-risk-related
contingent features that were in a net liability position was $651 million and $1.3 billion, for which we posted collateral of
$552 million and $948 million as of December 31, 2025 and 2024, respectively. If our credit ratings were downgraded to
Baa2/BBB or below, the maximum additional collateral we would have been required to post to our counterparties as of
December 31, 2025 and 2024 would have been $316 million and $725 million, respectively.