þ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
For the quarterly period ended June 30, 2009 | ||
OR | ||
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
For the transition period from to |
Federally chartered corporation | 52-0883107 | |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |
3900 Wisconsin Avenue, NW Washington, DC (Address of principal executive offices) | 20016 (Zip Code) |
Large accelerated filer þ | Accelerated filer o |
Non-accelerated filer o (Do not check if a smaller reporting company) | Smaller reporting company o |
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Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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• | providing liquidity, stability and affordability in the mortgage market; | |
• | immediately providing additional assistance to the mortgage market and to the struggling housing market; | |
• | limiting the amount of the investment Treasury must make under our senior preferred stock purchase agreement with Treasury in order to eliminate a net worth deficit; | |
• | returning to long-term profitability; and | |
• | protecting the interests of the taxpayers. |
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2009 | 2008 | |||||||||||||||||||||||||||||||
Q2 YTD | Q2 | Q1 | Full Year | Q4 | Q3 | Q2 | Q1 | |||||||||||||||||||||||||
(Dollars in millions) | ||||||||||||||||||||||||||||||||
As of the end of each period: | ||||||||||||||||||||||||||||||||
Serious delinquency rate(2) | 3.94 | % | 3.94 | % | 3.15 | % | 2.42 | % | 2.42 | % | 1.72 | % | 1.36 | % | 1.15 | % | ||||||||||||||||
On-balance sheet nonperforming loans(3) | $ | 26,300 | $ | 26,300 | $ | 23,145 | $ | 20,484 | $ | 20,484 | $ | 14,148 | $ | 11,275 | $ | 10,947 | ||||||||||||||||
Off-balance sheet nonperforming loans(4) | $ | 144,183 | $ | 144,183 | $ | 121,378 | $ | 98,428 | $ | 98,428 | $ | 49,318 | $ | 34,765 | $ | 23,983 | ||||||||||||||||
Combined loss reserves(5) | $ | 54,152 | $ | 54,152 | $ | 41,082 | $ | 24,649 | $ | 24,649 | $ | 15,528 | $ | 8,866 | $ | 5,140 | ||||||||||||||||
Foreclosed property inventory (number of properties)(6) | 62,615 | 62,615 | 62,371 | 63,538 | 63,538 | 67,519 | 54,173 | 43,167 | ||||||||||||||||||||||||
During the period: | ||||||||||||||||||||||||||||||||
Loan modifications (number of loans)(7) | 29,130 | 16,684 | 12,446 | 33,388 | 6,313 | 5,291 | 10,229 | 11,555 | ||||||||||||||||||||||||
HomeSaver Advance problem loan workouts (number of loans)(8) | 32,093 | 11,662 | 20,431 | 70,967 | 25,788 | 27,278 | 16,749 | 1,152 | ||||||||||||||||||||||||
Foreclosed property acquisitions (number of properties)(9) | 57,469 | 32,095 | 25,374 | 94,652 | 20,998 | 29,583 | 23,963 | 20,108 | ||||||||||||||||||||||||
Single-family credit-related expenses (10) | $ | 38,721 | $ | 18,391 | $ | 20,330 | $ | 29,725 | $ | 11,917 | $ | 9,215 | $ | 5,339 | $ | 3,254 | ||||||||||||||||
Single-family credit losses(11) | $ | 5,766 | $ | 3,301 | $ | 2,465 | $ | 6,467 | $ | 2,197 | $ | 2,164 | $ | 1,249 | $ | 857 |
(1) | The single-family guaranty book of business consists of single-family mortgage loans held in our mortgage portfolio, single-family Fannie Mae MBS held in our mortgage portfolio, single-family Fannie Mae MBS held by third parties, and other credit enhancements that we provide on single-family mortgage assets. It excludes non-Fannie Mae mortgage-related securities held in our investment portfolio for which we do not provide a guaranty. | |
(2) | Calculated based on number of conventional single-family loans that are three or more months past due and loans that have been referred to foreclosure but not yet foreclosed upon, divided by the number of loans in our conventional single-family guaranty book of business. We include all of the conventional single-family loans that we own and those that back Fannie Mae MBS in the calculation of the single-family serious delinquency rate. | |
(3) | Represents the total amount of nonaccrual loans, troubled debt restructurings, and first-lien loans associated with unsecured HomeSaver Advance loans including troubled debt restructurings and HomeSaver Advance first-lien loans on accrual status. A troubled debt restructuring is a restructuring of a mortgage loan in which a concession is granted to a borrower experiencing financial difficulty. Prior to the fourth quarter of 2008, we generally classified loans as nonperforming when the payment of principal or interest on the loan was three months or more past due. In the fourth quarter of 2008, we began classifying loans as nonperforming at an earlier stage in the delinquency cycle, generally when the payment of principal or interest on the loan is two months or more past due. | |
(4) | Represents unpaid principal balance of nonperforming loans in our outstanding and unconsolidated Fannie Mae MBS held by third parties, including first-lien loans associated with unsecured HomeSaver Advance loans that are not seriously delinquent. Prior to the fourth quarter of 2008, we generally classified loans as nonperforming when the payment of principal or interest on the loan was three months or more past due. In the fourth quarter of 2008, we began classifying loans as nonperforming at an earlier stage in the delinquency cycle, generally when the payment of principal or interest on the loan is two months or more past due. Loans have been classified as nonperforming according to the classification standard in effect at the time the loan became a nonperforming loan, and prior periods have not been revised to reflect changes in classification. | |
(5) | Consists of the allowance for loan losses for loans held for investment in our mortgage portfolio and reserve for guaranty losses related to both loans backing Fannie Mae MBS and loans that we have guaranteed under long-term standby commitments. |
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(6) | Reflects the number of single-family foreclosed properties we held in inventory as of the end of each period. Includes properties we acquired through deeds in lieu of foreclosure. | |
(7) | Modifications are granted for borrowers experiencing financial difficulty and include troubled debt restructurings as well as other modifications to the terms of the loan. A troubled debt restructuring of a mortgage loan is a restructuring in which a concession is granted to the borrower. It is the only form of modification in which we agree to accept less than the full original contractual principal and interest amount due under the loan, although other resolutions and modifications may result in our receiving the full amount due, or certain installments due, under the loan over a period of time that is longer than the period of time originally provided for under the terms of the loans. | |
(8) | Represents number of first-lien loans associated with unsecured HomeSaver Advance loans. | |
(9) | Includes deeds in lieu of foreclosure. | |
(10) | Consists of the provision for credit losses and foreclosed property expense. | |
(11) | Consists of (a) charge-offs, net of recoveries and (b) foreclosed property expense; adjusted to exclude the impact ofSOP 03-3 and HomeSaver Advance fair value losses for the reporting period. Interest forgone on single-family nonperforming loans in our mortgage portfolio is not reflected in our credit losses total. In addition, we excludeother-than-temporary impairment losses resulting from deterioration in the credit quality of our mortgage-related securities and accretion of interest income on single-family loans subject to Statement of PositionNo. 03-3,Accounting for Certain Loans or Debt Securities Acquired in a Transfer(“SOP 03-3”), from credit losses. See “Consolidated Results of Operations—Credit-Related Expenses—Provision Attributable toSOP 03-3 and HomeSaver Advance Fair Value Losses” for a discussion ofSOP 03-3. |
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• | reduce the borrower’s monthly principal and interest payment, or | |
• | provide a more stable loan product. |
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• | On April 28, 2009, the Obama Administration announced the Second Lien Modification Program. Under the program when a borrower’s first lien mortgage loan is modified under the Home Affordable Modification Program, a servicer participating in the Second Lien Program will be required to offer either to modify the associated second lien according to a pre-set protocol or to extinguish the second lien mortgage loan in return for a lump sum payment under a pre-set formula determined by Treasury. | |
• | On May 14, 2009, the Obama Administration announced two new components of the Making Home Affordable Program to help distressed borrowers: |
º | The Foreclosure Alternatives Program is aimed at assisting distressed borrowers by promoting alternatives to foreclosure when it is not an option for the borrower to keep the home. The program is designed to mitigate the impact of foreclosure on borrowers and communities by encouraging a “short sale” of the home (in which the borrower, working with the servicer, sells the home for less than the amount owed on the mortgage loan in full satisfaction of the loan) or a transfer of the home by a deed in lieu of foreclosure in cases where a borrower meets the eligibility requirements for a Home Affordable Modification but does not receive a modification offer or cannot maintain the required payments during the trial period or following modification. | |
º | Home Price Decline Protection Incentives are intended to provide investors with additional incentives for Home Affordable Modifications of loans secured by homes in areas where home prices have recently declined and where investors are concerned that price declines may persist. |
• | On May 29, 2009, we announced a 2% limit on the cumulative loan level price adjustments and adverse market delivery charge we apply to loans refinanced through our Refi Plustm initiatives, through which we refinance loans under the Home Affordable Refinance Program. This limit was designed to reduce the cost of refinancing for some borrowers and thereby permit more borrowers to refinance under the program. | |
• | On June 25, 2009, we announced that we are easing the restrictions on the type of credit enhancement to which an existing loan can be subject, allowing more loans to be eligible for refinancing through the Home Affordable Refinance Program. | |
• | On July 1, 2009, FHFA authorized Fannie Mae and Freddie Mac to expand the Home Affordable Refinance Program to refinance their existing mortgage loans with an unpaid principal balance of up to 125% of the current value of the property covered by the mortgage loan, instead of the program’s initial 105% limit. We will begin acquiring these mortgage loans on September 1, 2009. |
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• | Servicer Capacity to Handle a New and Complex Process. Modifications require servicers to handle a multi-step process that includes identifying loans that are candidates for modification, making contact with the borrower, obtaining current financial information from the borrower, evaluating whether the program is a viable workout option, structuring the terms of the modification, communicating those terms to the borrower, providing the legal documentation, and receiving the borrower’s agreements to both enter the trial period and modify the loan. As with the Home Affordable Refinance Program, during the early phase of the Home Affordable Modification program, servicers took a number of steps to implement the program, such as establishing or modifying systems and operations, and training personnel, that required time to put in place. Many servicers are still increasing their capacity to implement the program by hiring staff, enhancing technology, and changing their processes. Servicers will need to continue to adapt and take actions to implement new program elements as they are introduced to the program in an effort to assist more borrowers. The number of loans ultimately modified under the program depends on the extent to which servicers are able and willing to increase their capacity sufficiently to address the demand for modifications. | |
• | Borrower Awareness, Initiation and Agreement. Before a loan can be modified under the program, a borrower must learn of the program, initiate a request for a modification or respond to solicitations to apply for the program, provide current, accurate financial information, agree to the terms of a proposed modification and successfully complete the trial payment period. Many distressed borrowers are reluctant or unwilling even to contact their lenders, as demonstrated by the substantial percentage of foreclosures that are completed without the borrower having ever contacted the lender. Thus, extensive borrower outreach is required to encourage distressed borrowers to initiate a modification. | |
• | Borrower Inability or Unwillingness to Make Payments Even under a Modified Loan. Modifications under the Home Affordable Modification Program, or indeed under any program, will not be sufficient to help some borrowers keep their homes, particularly borrowers who have significant non-mortgage debt obligations or who are suffering from loss of income or other life events that impair their ability to maintain their mortgage even if it is modified. Other borrowers, particularly those whose mortgage obligations significantly exceed the value of their homes, may be unwilling to make payments even on a modified mortgage. |
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• | The requirement that we acquire any loan held in a Fannie Mae MBS prior to modifying it which, prior to January 1, 2010, will result in fair value loss charge-offs underSOP 03-3 against the “Reserve for guaranty losses” at the time we acquire the loan; | |
• | Incentive and “pay for success” fees paid to our servicers for modification of loans we own or guarantee; | |
• | Incentives to some borrowers under the program in the form of principal balance reductions if the borrowers continue to make payments due on the modified loan for specified periods; and | |
• | The effect of holding modified loans in our mortgage portfolio, to the extent the loans provide a below market yield, which may be lower than our cost of funds. |
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• | Whole Loan Conduit. Whole loan conduit activities involve our purchase of loans principally for the purpose of securitizing them. We purchase loans from a large group of lenders and then securitize them as Fannie Mae MBS, which may then be sold to dealers and investors. | |
• | Early Funding. Normally, lenders must wait 30 to 45 days between loan closing and settlement of an MBS transaction before they receive payment for the loans they sell to us. Our early lender funding program allows lenders to deliver closed loans to us and receive payment for those loans within a more accelerated timeframe, which allows lenders to replenish their funds and make new loans as soon as possible. | |
• | Dollar Roll Transactions. We have increased the amount of our dollar roll activity in the second quarter of 2009 as a result of continued strain on financial institutions’ balance sheets, higher lending rates from prepayment uncertainty, attractive discount note funding and a desire to increase market liquidity by lending our balance sheet to the market at positive economic returns to us. A dollar roll transaction is a commitment to purchase a mortgage-related security with a concurrent agreement to re-sell a substantially similar security at a later date or vice versa. An entity who sells a mortgage-related security to us with a concurrent agreement to repurchase a security in the future gains immediate financing for their balance sheet. |
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• | returning them to their previous status as GSEs with the paired interests of maximizing returns for private shareholders and pursuing public policy home ownership goals; | |
• | gradually winding down the GSEs’ operations and liquidating their assets; | |
• | incorporating the GSEs’ functions into a federal agency; | |
• | implementing a public utility model where the government regulates the GSEs’ profit margin, sets guarantee fees, and provides explicit backing for GSE commitments; | |
• | converting the GSEs’ role to providing insurance for covered bonds; and | |
• | dissolving Fannie Mae and Freddie Mac into many smaller companies. |
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2009 | ||||
Goal | ||||
Housing goals:(1) | ||||
Low- and moderate-income housing | 43.0 | % | ||
Underserved areas | 32.0 | |||
Special affordable housing | 18.0 | |||
Housing subgoals: | ||||
Home purchase subgoals:(2) | ||||
Low- and moderate-income housing | 40.0 | % | ||
Underserved areas | 30.0 | |||
Special affordable housing | 14.0 | |||
Multifamily special affordable housing subgoal ($ in billions)(3) | $ | 6.56 |
(1) | Goals are expressed as a percentage of the total number of dwelling units financed by eligible mortgage loan purchases during the period. | |
(2) | Home purchase subgoals measure our performance by the number of loans (not dwelling units) providing purchase money for owner-occupied single-family housing in metropolitan areas. | |
(3) | The multifamily subgoal is measured by loan amount and expressed as a dollar amount. |
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• | Fair Value of Financial Instruments | |
• | Other-Than-Temporary Impairment of Investment Securities | |
• | Allowance for Loan Losses and Reserve for Guaranty Losses | |
• | Deferred Tax Assets |
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Level 1: | Quoted prices (unadjusted) in active markets for identical assets or liabilities. | |
Level 2: | Observable market-based inputs, other than quoted prices in active markets for identical assets or liabilities. | |
Level 3: | Unobservable inputs. |
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• | Trading andAvailable-for-Sale Investment Securities. Our financial instruments within these asset categories that are classified as level 3 primarily consist of mortgage-related securities backed by Alt-A loans, subprime loans and manufactured housing loans and mortgage revenue bonds. We have relied on external pricing services to estimate the fair value of these securities and validated those results with our internally derived prices, which may incorporate spread, yield, or vintage and product matrices, and standard cash flow discounting techniques. The inputs we use in estimating these values are based on multiple factors, including market observations, relative value to other securities, and non-binding dealer quotes. If we are not able to corroborate vendor-based prices, we rely on management’s best estimate of fair value. | |
• | Derivatives. Our derivative financial instruments that are classified as level 3 primarily consist of a limited population of certain highly structured, complex interest rate risk management derivatives. Examples include certain swaps with embedded caps and floors that reference non-standard indices. We determine the fair value of these derivative instruments using indicative market prices obtained from independent third parties. If we obtain a price from a single source and we are not able to corroborate that price, the fair value measurement is classified as level 3. | |
• | Guaranty Assets andBuy-ups. We determine the fair value of our guaranty assets andbuy-ups based on the present value of the estimated compensation we expect to receive for providing our guaranty. We generally estimate the fair value using proprietary internal models that calculate the present value of expected cash flows. Key model inputs and assumptions include prepayment speeds, forward yield curves and discount rates that are commensurate with the level of estimated risk. | |
• | Guaranty Obligations. The fair value of all guaranty obligations, measured subsequent to their initial recognition, reflects our estimate of a hypothetical transaction price that we would receive if we were to issue our guaranty to an unrelated party in a standalone arm’s-length transaction at the measurement date. We estimate the fair value of the guaranty obligations using internal valuation models that calculate the present value of expected cash flows based on management’s best estimate of certain key assumptions, such as default rates, severity rates and a required rate of return. During 2008, we further adjusted the model-generated values based on our current market pricing to arrive at our estimate of a hypothetical transaction price for our existing guaranty obligations. Beginning in the first quarter of 2009, we concluded that the credit characteristics of the pools of loans upon which we were issuing new guarantees increasingly did not reflect the credit characteristics of our existing guaranteed pools; thus, current market prices for our new guarantees were not a relevant input to our estimate of the hypothetical transaction price for our existing guaranty obligations. Therefore, at June 30, 2009, we based our estimate of the fair value of our existing guaranty obligations solely upon our model without further adjustment. |
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As of | ||||||||
June 30, | December 31, | |||||||
Balance Sheet Category | 2009 | 2008 | ||||||
(Dollars in millions) | ||||||||
Trading securities | $ | 9,728 | $ | 12,765 | ||||
Available-for-sale securities | 39,915 | 47,837 | ||||||
Derivatives assets | 256 | 362 | ||||||
Guaranty assets andbuy-ups | 1,483 | 1,083 | ||||||
Level 3 recurring assets | $ | 51,382 | $ | 62,047 | ||||
Total assets | $ | 911,382 | $ | 912,404 | ||||
Total recurring assets measured at fair value | $ | 369,205 | $ | 359,246 | ||||
Level 3 recurring assets as a percentage of total assets | 6 | % | 7 | % | ||||
Level 3 recurring assets as a percentage of total recurring assets measured at fair value | 14 | % | 17 | % | ||||
Total recurring assets measured at fair value as a percentage of total assets | 41 | % | 39 | % |
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For the | For the | |||||||||||||||||||||||||||||||
Three Months Ended | Six Months Ended | Quarterly | Year-to-Date | |||||||||||||||||||||||||||||
June 30, | June 30, | Variance | Variance | |||||||||||||||||||||||||||||
2009 | 2008 | 2009 | 2008 | $ | % | $ | % | |||||||||||||||||||||||||
(Dollars in millions, except per share amounts) | ||||||||||||||||||||||||||||||||
Net interest income | $ | 3,735 | $ | 2,057 | $ | 6,983 | $ | 3,747 | $ | 1,678 | 82 | % | $ | 3,236 | 86 | % | ||||||||||||||||
Guaranty fee income | 1,659 | 1,608 | 3,411 | 3,360 | 51 | 3 | 51 | 2 | ||||||||||||||||||||||||
Trust management income | 13 | 75 | 24 | 182 | (62 | ) | (83 | ) | (158 | ) | (87 | ) | ||||||||||||||||||||
Fee and other income | 184 | 225 | 365 | 452 | (41 | ) | (18 | ) | (87 | ) | (19 | ) | ||||||||||||||||||||
Net revenues | 5,591 | 3,965 | 10,783 | 7,741 | 1,626 | 41 | 3,042 | 39 | ||||||||||||||||||||||||
Investment gains (losses), net(1) | (45 | ) | (376 | ) | 178 | (432 | ) | 331 | 88 | 610 | 141 | |||||||||||||||||||||
Netother-than-temporary impairments(1) | (753 | ) | (507 | ) | (6,406 | ) | (562 | ) | (246 | ) | (49 | ) | (5,844 | ) | (1,040 | ) | ||||||||||||||||
Fair value gains (losses), net(2) | 823 | 517 | (637 | ) | (3,860 | ) | 306 | 59 | 3,223 | 83 | ||||||||||||||||||||||
Losses from partnership investments | (571 | ) | (195 | ) | (928 | ) | (336 | ) | (376 | ) | (193 | ) | (592 | ) | (176 | ) | ||||||||||||||||
Administrative expenses | (510 | ) | (512 | ) | (1,033 | ) | (1,024 | ) | 2 | — | (9 | ) | (1 | ) | ||||||||||||||||||
Credit-related expenses(3) | (18,784 | ) | (5,349 | ) | (39,656 | ) | (8,592 | ) | (13,435 | ) | (251 | ) | (31,064 | ) | (362 | ) | ||||||||||||||||
Other non-interest expenses(4) | (508 | ) | (283 | ) | (866 | ) | (788 | ) | (225 | ) | (80 | ) | (78 | ) | (10 | ) | ||||||||||||||||
Loss before federal income taxes and extraordinary losses | (14,757 | ) | (2,740 | ) | (38,565 | ) | (7,853 | ) | (12,017 | ) | (439 | ) | (30,712 | ) | (391 | ) | ||||||||||||||||
Benefit (provision) for federal income taxes | (23 | ) | 476 | 600 | 3,404 | (499 | ) | (105 | ) | (2,804 | ) | (82 | ) | |||||||||||||||||||
Extraordinary losses, net of tax effect | — | (33 | ) | — | (34 | ) | 33 | 100 | 34 | 100 | ||||||||||||||||||||||
Net loss | (14,780 | ) | (2,297 | ) | (37,965 | ) | (4,483 | ) | (12,483 | ) | (543 | ) | (33,482 | ) | (747 | ) | ||||||||||||||||
Less: Net (income) loss attributable to the noncontrolling interest | 26 | (3 | ) | 43 | (3 | ) | 29 | 967 | 46 | 1,533 | ||||||||||||||||||||||
Net loss attributable to Fannie Mae | $ | (14,754 | ) | $ | (2,300 | ) | $ | (37,922 | ) | $ | (4,486 | ) | $ | (12,454 | ) | (541 | )% | $ | (33,436 | ) | (745 | )% | ||||||||||
Diluted loss per common share | $ | (2.67 | ) | $ | (2.54 | ) | $ | (6.76 | ) | $ | (5.11 | ) | $ | (0.13 | ) | (5.12 | )% | $ | (1.65 | ) | (32.29 | )% | ||||||||||
Performance metrics: | ||||||||||||||||||||||||||||||||
Net interest yield(5) | 1.69 | % | 1.00 | % | 1.57 | % | 0.91 | % | ||||||||||||||||||||||||
Average effective guaranty fee rate (in basis points)(6) | 25.5 | bp | 26.3 | bp | 26.4 | bp | 27.9 | bp | ||||||||||||||||||||||||
Credit loss ratio (in basis points)(7) | 44.1 | 17.5 | 38.6 | 15.1 |
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(1) | Certain prior period amounts have been reclassified to conform with the current period presentation in our consolidated statements of operations. | |
(2) | Consists of the following: (a) derivatives fair value gains (losses), net; (b) trading securities gains (losses), net; (c) hedged mortgage assets losses, net; (d) debt foreign exchange gains (losses), net; and (e) debt fair value gains (losses), net. | |
(3) | Consists of provision for credit losses and foreclosed property expense. | |
(4) | Consists of the following: (a) debt extinguishment gains (losses), net and (b) other expenses. | |
(5) | Calculated based on annualized net interest income for the reporting period divided by the average balance of total interest-earning assets during the period, expressed as a percentage. | |
(6) | Calculated based on annualized guaranty fee income for the reporting period divided by average outstanding Fannie Mae MBS and other guarantees during the period, expressed in basis points. | |
(7) | Calculated based on annualized (a) charge-offs, net of recoveries; plus (b) foreclosed property expense; adjusted to exclude (c) the impact ofSOP 03-3 and HomeSaver Advance fair value losses for the reporting period divided by the average guaranty book of business during the period, expressed in basis points. |
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For the Three Months Ended June 30, | ||||||||||||||||||||||||
2009 | 2008 | |||||||||||||||||||||||
Interest | Average | Interest | Average | |||||||||||||||||||||
Average | Income/ | Rates | Average | Income/ | Rates | |||||||||||||||||||
Balance(1) | Expense | Earned/Paid | Balance(1) | Expense | Earned/Paid | |||||||||||||||||||
(Dollars in millions) | ||||||||||||||||||||||||
Interest-earning assets: | ||||||||||||||||||||||||
Mortgage loans(2) | $ | 428,975 | $ | 5,611 | 5.23 | % | $ | 418,504 | $ | 5,769 | 5.51 | % | ||||||||||||
Mortgage securities | 343,031 | 4,162 | 4.85 | 318,396 | 4,063 | 5.10 | ||||||||||||||||||
Non-mortgage securities(3) | 55,338 | 68 | 0.49 | 57,504 | 400 | 2.75 | ||||||||||||||||||
Federal funds sold and securities purchased under agreements to resell | 49,678 | 110 | 0.87 | 26,869 | 186 | 2.74 | ||||||||||||||||||
Advances to lenders | 5,970 | 29 | 1.92 | 3,332 | 46 | 5.46 | ||||||||||||||||||
Total interest-earning assets | $ | 882,992 | $ | 9,980 | 4.52 | % | $ | 824,605 | $ | 10,464 | 5.07 | % | ||||||||||||
Interest-bearing liabilities: | ||||||||||||||||||||||||
Short-term debt | $ | 290,189 | $ | 600 | 0.82 | % | $ | 242,453 | $ | 1,685 | 2.75 | % | ||||||||||||
Long-term debt | 576,008 | 5,645 | 3.92 | 550,940 | 6,720 | 4.88 | ||||||||||||||||||
Federal funds purchased and securities sold under agreements to repurchase | 3 | — | 4.27 | 303 | 2 | 2.61 | ||||||||||||||||||
Total interest-bearing liabilities | $ | 866,200 | $ | 6,245 | 2.88 | % | $ | 793,696 | $ | 8,407 | 4.23 | % | ||||||||||||
Impact of net non-interest bearing funding | $ | 16,792 | 0.05 | % | $ | 30,909 | 0.16 | % | ||||||||||||||||
Net interest income/net interest yield(4) | $ | 3,735 | 1.69 | % | $ | 2,057 | 1.00 | % | ||||||||||||||||
Selected benchmark interest rates at end of period:(5) | ||||||||||||||||||||||||
3-month LIBOR | 0.60 | % | 2.78 | % | ||||||||||||||||||||
2-year swap interest rate | 1.53 | 3.55 | ||||||||||||||||||||||
5-year swap interest rate | 2.97 | 4.26 | ||||||||||||||||||||||
30-year Fannie Mae MBS par coupon rate | 4.59 | 5.84 |
For the Six Months Ended June 30, | ||||||||||||||||||||||||
2009 | 2008 | |||||||||||||||||||||||
Interest | Average | Interest | Average | |||||||||||||||||||||
Average | Income/ | Rates | Average | Income/ | Rates | |||||||||||||||||||
Balance(1) | Expense | Earned/Paid | Balance(1) | Expense | Earned/Paid | |||||||||||||||||||
(Dollars in millions) | ||||||||||||||||||||||||
Interest-earning assets: | ||||||||||||||||||||||||
Mortgage loans(2) | $ | 429,969 | $ | 11,209 | 5.21 | % | $ | 414,163 | $ | 11,431 | 5.52 | % | ||||||||||||
Mortgage securities | 344,985 | 8,782 | 5.09 | 317,107 | 8,207 | 5.18 | ||||||||||||||||||
Non-mortgage securities(3) | 51,862 | 159 | 0.61 | 62,067 | 1,078 | 3.44 | ||||||||||||||||||
Federal funds sold and securities purchased under agreements to resell | 56,893 | 214 | 0.74 | 31,551 | 579 | 3.63 | ||||||||||||||||||
Advances to lenders | 5,118 | 52 | 2.02 | 3,780 | 111 | 5.81 | ||||||||||||||||||
Total interest-earning assets | $ | 888,827 | $ | 20,416 | 4.59 | % | $ | 828,668 | $ | 21,406 | 5.16 | % | ||||||||||||
Interest-bearing liabilities: | ||||||||||||||||||||||||
Short-term debt | $ | 310,200 | 1,707 | 1.09 | % | $ | 249,949 | $ | 4,243 | 3.36 | % | |||||||||||||
Long-term debt | 565,407 | 11,726 | 4.15 | 548,244 | 13,411 | 4.89 | ||||||||||||||||||
Federal funds purchased and securities sold under agreements to repurchase | 41 | — | 1.24 | 371 | 5 | 2.67 | ||||||||||||||||||
Total interest-bearing liabilities | $ | 875,648 | $ | 13,433 | 3.07 | % | $ | 798,564 | $ | 17,659 | 4.41 | % | ||||||||||||
Impact of net non-interest bearing funding | $ | 13,179 | 0.05 | % | $ | 30,104 | 0.16 | % | ||||||||||||||||
Net interest income/net interest yield(4) | $ | 6,983 | 1.57 | % | $ | 3,747 | 0.91 | % | ||||||||||||||||
(1) | We have calculated the average balances for mortgage loans based on the average of the amortized cost amounts as of the beginning of the period and as of the end of each month in the period. For all other categories, the average balances have been calculated based on a daily average. | |
(2) | Average balance amounts include nonaccrual loans with an average balance totaling $20.9 billion and $8.4 billion for the three months ended June 30, 2009 and 2008, respectively, and $19.7 billion and $8.3 billion for the six months ended June 30, 2009 and 2008, respectively. Interest income includes interest income on loans purchased from MBS |
29
trusts subject toSOP 03-3, which totaled $256 million and $168 million for the three months ended June 30, 2009 and 2008, respectively, and $409 million and $313 million for the six months ended June 30, 2009 and 2008, respectively. These interest income amounts included accretion of $198 million and $53 million for the three months ended June 30, 2009 and 2008, respectively and $263 million and $88 million for the six months ended June 30, 2009 and 2008, respectively, relating to a portion of the fair value losses recorded upon the acquisition of loans subject toSOP 03-3. | ||
(3) | Includes cash equivalents. | |
(4) | We compute net interest yield by dividing annualized net interest income for the period by the average balance of our total interest-earning assets during the period. | |
(5) | Data from British Bankers’ Association, Thomson Reuters Indices and Bloomberg. |
For the Three Months | For the Six Months | |||||||||||||||||||||||
Ended June 30, | Ended June 30, | |||||||||||||||||||||||
2009 vs. 2008 | 2009 vs. 2008 | |||||||||||||||||||||||
Total | Variance Due to:(1) | Total | Variance Due to:(1) | |||||||||||||||||||||
Variance | Volume | Rate | Variance | Volume | Rate | |||||||||||||||||||
(Dollars in millions) | ||||||||||||||||||||||||
Interest income: | ||||||||||||||||||||||||
Mortgage loans | $ | (158 | ) | $ | 142 | $ | (300 | ) | $ | (222 | ) | $ | 426 | $ | (648 | ) | ||||||||
Mortgage securities | 99 | 304 | (205 | ) | 575 | 712 | (137 | ) | ||||||||||||||||
Non-mortgage securities(2) | (332 | ) | (15 | ) | (317 | ) | (919 | ) | (153 | ) | (766 | ) | ||||||||||||
Federal funds sold and securities purchased under agreements to resell | (76 | ) | 99 | (175 | ) | (365 | ) | 279 | (644 | ) | ||||||||||||||
Advances to lenders | (17 | ) | 23 | (40 | ) | (59 | ) | 30 | (89 | ) | ||||||||||||||
Total interest income | (484 | ) | 553 | (1,037 | ) | (990 | ) | 1,294 | (2,284 | ) | ||||||||||||||
Interest expense: | ||||||||||||||||||||||||
Short-term debt | (1,085 | ) | 281 | (1,366 | ) | (2,536 | ) | 841 | (3,377 | ) | ||||||||||||||
Long-term debt | (1,075 | ) | 294 | (1,369 | ) | (1,685 | ) | 409 | (2,094 | ) | ||||||||||||||
Federal funds purchased and securities sold under agreements to repurchase | (2 | ) | (3 | ) | 1 | (5 | ) | (3 | ) | (2 | ) | |||||||||||||
Total interest expense | (2,162 | ) | 572 | (2,734 | ) | (4,226 | ) | 1,247 | (5,473 | ) | ||||||||||||||
Net interest income | $ | 1,678 | $ | (19 | ) | $ | 1,697 | $ | 3,236 | $ | 47 | $ | 3,189 | |||||||||||
(1) | Combined rate/volume variances are allocated to both rate and volume based on the relative size of each variance. | |
(2) | Includes cash equivalents. |
30
31
For the Three Months Ended June 30, | ||||||||||||||||||||
2009 | 2008 | |||||||||||||||||||
Amount | Rate(2) | Amount | Rate(2) | %Change | ||||||||||||||||
(Dollars in millions) | ||||||||||||||||||||
Guaranty fee income/average effective guaranty fee rate excluding certain fair value adjustments andbuy-up impairment | $ | 1,545 | 23.7 | bp | $ | 1,458 | 23.8 | bp | 6 | % | ||||||||||
Net change in fair value ofbuy-ups and certain guaranty assets | 116 | 1.8 | 152 | 2.5 | (24 | ) | ||||||||||||||
Buy-up impairment | (2 | ) | — | (2 | ) | — | — | |||||||||||||
Guaranty fee income/average effective guaranty fee rate | $ | 1,659 | 25.5 | bp | $ | 1,608 | 26.3 | bp | 3 | % | ||||||||||
Average outstanding Fannie Mae MBS and other guarantees(3) | $ | 2,600,781 | $ | 2,442,886 | 6 | % | ||||||||||||||
Fannie Mae MBS issues(4) | 315,911 | 177,763 | 78 |
For the Six Months Ended June 30, | ||||||||||||||||||||
2009 | 2008 | |||||||||||||||||||
Amount | Rate(2) | Amount | Rate(2) | %Change | ||||||||||||||||
(Dollars in millions) | ||||||||||||||||||||
Guaranty fee income/average effective guaranty fee rate excluding certain fair value adjustments andbuy-up impairment | $ | 3,271 | 25.3 | bp | $ | 3,177 | 26.4 | bp | 3 | % | ||||||||||
Net change in fair value ofbuy-ups and certain guaranty assets | 162 | 1.3 | 214 | 1.8 | (24 | ) | ||||||||||||||
Buy-up impairment | (22 | ) | (0.2 | ) | (31 | ) | (0.3 | ) | 29 | |||||||||||
Guaranty fee income/average effective guaranty fee rate | $ | 3,411 | 26.4 | bp | $ | 3,360 | 27.9 | bp | 2 | % | ||||||||||
Average outstanding Fannie Mae MBS and other guarantees(3) | $ | 2,581,968 | $ | 2,407,296 | 7 | % | ||||||||||||||
Fannie Mae MBS issues(4) | 470,231 | 346,355 | 36 |
(1) | Guaranty fee income includes the accretion of losses recognized at inception on certain guaranty contracts for periods prior to January 1, 2008. | |
(2) | Presented in basis points and calculated based on annualized guaranty fee income components divided by average outstanding Fannie Mae MBS and other guarantees for each annualized respective period. | |
(3) | Includes unpaid principal balance of other guarantees totaling $26.1 billion and $27.8 billion as of June 30, 2009 and December 31, 2008, respectively, and $31.8 billion and $41.6 billion on June 30, 2008 and December 31, 2007, respectively. | |
(4) | Reflects unpaid principal balance of Fannie Mae MBS issued and guaranteed by us, including mortgage loans held in our portfolio that we securitized during the period and Fannie Mae MBS issued during the period that we acquired for our portfolio. |
32
33
For the | For the | |||||||||||||||
Three Months | Six Months | |||||||||||||||
Ended | Ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2009 | 2008 | 2009 | 2008 | |||||||||||||
(Dollars in millions) | ||||||||||||||||
Derivatives fair value gains (losses), net | $ | (537 | ) | $ | 2,293 | $ | (2,243 | ) | $ | (710 | ) | |||||
Trading securities gains (losses), net | 1,561 | (965 | ) | 1,728 | (2,192 | ) | ||||||||||
Hedged mortgage assets losses, net(1) | — | (803 | ) | — | (803 | ) | ||||||||||
Fair value gains (losses) on derivatives, trading securities, and hedged mortgage assets, net | 1,024 | 525 | (515 | ) | (3,705 | ) | ||||||||||
Debt foreign exchange losses, net | (169 | ) | (12 | ) | (114 | ) | (169 | ) | ||||||||
Debt fair value gains (losses), net | (32 | ) | 4 | (8 | ) | 14 | ||||||||||
Fair value gains (losses), net | $ | 823 | $ | 517 | $ | (637 | ) | $ | (3,860 | ) | ||||||
(1) | Represents adjustments to the carrying value of mortgage assets designated for hedge accounting that are attributable to changes in interest rates. |
34
For the | For the | |||||||||||||||
Three Months | Six Months | |||||||||||||||
Ended | Ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2009 | 2008 | 2009 | 2008 | |||||||||||||
(Dollars in millions) | ||||||||||||||||
Risk management derivatives: | ||||||||||||||||
Swaps: | ||||||||||||||||
Pay-fixed | $ | 19,430 | $ | 15,782 | $ | 22,744 | $ | (113 | ) | |||||||
Receive-fixed | (16,877 | ) | (11,092 | ) | (18,239 | ) | 1,700 | |||||||||
Basis | 45 | (73 | ) | 22 | (68 | ) | ||||||||||
Foreign currency(1) | 159 | (20 | ) | 86 | 126 | |||||||||||
Swaptions: | ||||||||||||||||
Pay-fixed | 900 | 270 | 885 | 81 | ||||||||||||
Receive-fixed | (4,250 | ) | (2,499 | ) | (7,488 | ) | (2,226 | ) | ||||||||
Interest rate caps | 21 | 4 | 21 | 3 | ||||||||||||
Other(2) | (52 | ) | (13 | ) | (23 | ) | 51 | |||||||||
Total risk management derivatives fair value gains (losses), net | (624 | ) | 2,359 | (1,992 | ) | (446 | ) | |||||||||
Mortgage commitment derivatives fair value gains (losses), net | 87 | (66 | ) | (251 | ) | (264 | ) | |||||||||
Total derivatives fair value gains (losses), net | $ | (537 | ) | $ | 2,293 | $ | (2,243 | ) | $ | (710 | ) | |||||
Risk management derivatives fair value gains (losses) attributable to: | ||||||||||||||||
Net contractual interest income (expense) accruals on interest rate swaps | (779 | ) | (304 | ) | (1,719 | ) | (330 | ) | ||||||||
Net change in fair value of terminated derivative contracts from end of prior period to date of termination | (1,000 | ) | (108 | ) | (1,825 | ) | 174 | |||||||||
Net change in fair value of outstanding derivative contracts, including derivative contracts entered into during the period | 1,155 | 2,771 | 1,552 | (290 | ) | |||||||||||
Total risk management derivatives fair value gains (losses), net(3) | $ | (624 | ) | $ | 2,359 | $ | (1,992 | ) | $ | (446 | ) | |||||
2009 | 2008 | |||||||
5-year swap interest rate: | ||||||||
As of January 1 | 2.13 | % | 4.19 | % | ||||
As of March 31 | 2.22 | 3.31 | ||||||
As of June 30 | 2.97 | 4.26 |
(1) | Includes the effect of net contractual interest income accruals of $9 million and $6 million for the three months ended June 30, 2009 and 2008, respectively, and $15 million and $3 million for the six months ended June 30, 2009 and 2008, respectively. The change in fair value of foreign currency swaps excluding this item resulted in a net gain of $150 million and a net loss of $26 million for the three months ended June 30, 2009 and 2008, and a net gain of $71 million and $123 million for the six months ended June 30, 2009 and 2008, respectively. | |
(2) | Includes MBS options, swap credit enhancements and mortgage insurance contracts. | |
(3) | Reflects net derivatives fair value gains (losses), excluding mortgage commitments, recognized in the condensed consolidated statements of operations. |
35
36
For the | For the | |||||||||||||||
Three Months | Six Months | |||||||||||||||
Ended | Ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2009 | 2008 | 2009 | 2008 | |||||||||||||
(Dollars in millions) | ||||||||||||||||
Provision for credit losses attributable to guaranty book of business | $ | 16,060 | $ | 4,591 | $ | 34,869 | $ | 6,927 | ||||||||
Provision for credit losses attributable toSOP 03-3 and HomeSaver Advance fair value losses | 2,165 | 494 | 3,690 | 1,231 | ||||||||||||
Total provision for credit losses(1) | 18,225 | 5,085 | 38,559 | 8,158 | ||||||||||||
Foreclosed property expense | 559 | 264 | 1,097 | 434 | ||||||||||||
Credit-related expenses | $ | 18,784 | $ | 5,349 | $ | 39,656 | $ | 8,592 | ||||||||
(1) | Reflects total provision for credit losses reported in our condensed consolidated statements of operations and in Table 10 below under “Combined loss reserves.” |
37
For the | For the | |||||||||||||||
Three Months | Six Months | |||||||||||||||
Ended | Ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2009 | 2008 | 2009 | 2008 | |||||||||||||
(Dollars in millions) | ||||||||||||||||
Changes in combined loss reserves: | ||||||||||||||||
Allowance for loan losses: | ||||||||||||||||
Beginning balance(1) | $ | 4,830 | $ | 993 | $ | 2,923 | $ | 698 | ||||||||
Provision for credit losses | 2,615 | 880 | 5,124 | 1,424 | ||||||||||||
Charge-offs(2) | (672 | ) | (495 | ) | (1,309 | ) | (774 | ) | ||||||||
Recoveries | 68 | 98 | 103 | 128 | ||||||||||||
Ending balance(1) | $ | 6,841 | $ | 1,476 | $ | 6,841 | $ | 1,476 | ||||||||
Reserve for guaranty losses: | ||||||||||||||||
Beginning balance | 36,876 | 4,202 | 21,830 | 2,693 | ||||||||||||
Provision for credit losses | 15,610 | 4,205 | 33,435 | 6,734 | ||||||||||||
Charge-offs(3)(4) | (4,314 | ) | (989 | ) | (7,258 | ) | (2,026 | ) | ||||||||
Recoveries | 108 | 32 | 273 | 49 | ||||||||||||
Ending balance | $ | 48,280 | $ | 7,450 | $ | 48,280 | $ | 7,450 | ||||||||
Combined loss reserves: | ||||||||||||||||
Beginning balance(1) | 41,706 | 5,195 | 24,753 | 3,391 | ||||||||||||
Provision for credit losses | 18,225 | 5,085 | 38,559 | 8,158 | ||||||||||||
Charge-offs(2)(3)(4) | (4,986 | ) | (1,484 | ) | (8,567 | ) | (2,800 | ) | ||||||||
Recoveries | 176 | 130 | 376 | 177 | ||||||||||||
Ending balance(1) | $ | 55,121 | $ | 8,926 | $ | 55,121 | $ | 8,926 | ||||||||
As of | ||||||||
June 30, | December 31, | |||||||
2009 | 2008 | |||||||
(Dollars in millions) | ||||||||
Combined loss reserves | $ | 55,121 | $ | 24,753 | ||||
Allocation of combined loss reserves: | ||||||||
Balance at end of each period attributable to: | ||||||||
Single-family | $ | 54,152 | $ | 24,649 | ||||
Multifamily | 969 | 104 | ||||||
Total | $ | 55,121 | $ | 24,753 | ||||
Single-family and multifamily loss reserve ratios:(5) | ||||||||
Single-family loss reserves as a percentage of single-family guaranty book of business | 1.88 | % | 0.88 | % | ||||
Multifamily loss reserves as a percentage of multifamily guaranty book of business | 0.54 | 0.06 | ||||||
Combined loss reserves as a percentage of: | ||||||||
Total guaranty book of business | 1.80 | % | 0.83 | % | ||||
Total nonperforming loans(6) | 32.24 | 20.76 |
(1) | Includes $309 million and $114 million as of June 30, 2009 and 2008, respectively, and $150 million as of December 31, 2008, for acquired loans subject to the application ofSOP 03-3. | |
(2) | Includes accrued interest of $328 million and $161 million for the three months ended June 30, 2009 and 2008, respectively, and $575 million and $239 million for the six months ended June 30, 2009 and 2008, respectively. |
38
(3) | Includes charges of $73 million and $114 million for the three months ended June 30, 2009 and 2008, respectively, and $188 million and $123 million for the six months ended June 30, 2009 and 2008, respectively, related to unsecured HomeSaver Advance loans. | |
(4) | Includes charges recorded at the date of acquisition totaling $2.1 billion and $380 million for the three months ended June 30, 2009 and 2008, respectively, and $3.5 billion and $1.1 billion for the six months ended June 30, 2009 and 2008, respectively, for acquired loans subject to the application ofSOP 03-3 where the acquisition cost exceeded the fair value of the acquired loan. | |
(5) | Represents amount of loss reserves attributable to each loan type as a percentage of the guaranty book of business for each loan type. | |
(6) | Loans are classified as nonperforming when we believe collectability of interest or principal on the loan is not reasonably assured, which typically occurs when payment of principal or interest on the loan is two months or more past due. Additionally, troubled debt restructurings and HomeSaver Advance first-lien loans are classified as nonperforming loans. See Table 41: Nonperforming Single-Family and Multifamily Loans for additional information on our nonperforming loans. |
39
2009 | 2008 | |||||||||||||||||||||||
Q2 | Q1 | Q4 | Q3 | Q2 | Q1 | |||||||||||||||||||
(Dollars in millions) | ||||||||||||||||||||||||
Number of acquired loans from MBS trusts subject toSOP 03-3 | 17,580 | 12,223 | 6,124 | 3,678 | 4,618 | 10,586 | ||||||||||||||||||
Average indicative market price(1) | 43 | % | 45 | % | 50 | % | 53 | % | 53 | % | 60 | % | ||||||||||||
Unpaid principal balance and accrued interest of loans acquired | $ | 3,717 | $ | 2,561 | $ | 1,286 | $ | 744 | $ | 807 | $ | 1,704 |
(1) | Calculated based on the estimated fair value at the date of acquisition of delinquent loans subject toSOP 03-3 divided by the unpaid principal balance and accrued interest of these loans at the date of acquisition. The value of primary mortgage insurance is included as a component of the average market price. Beginning in the first quarter of 2009, we incorporated the average fair value of acquired multifamily loans subject toSOP 03-3 into the calculation of our average indicative market price. We have revised the previously reported prior period amounts to reflect this change. |
40
For the Three Months Ended | For the Six Months Ended | |||||||||||||||||||||||||||||||
June 30, | June 30, | |||||||||||||||||||||||||||||||
2009 | 2008 | 2009 | 2008 | |||||||||||||||||||||||||||||
Amount | Ratio(1) | Amount | Ratio(1) | Amount | Ratio(1) | Amount | Ratio(1) | |||||||||||||||||||||||||
(Dollars in millions) | ||||||||||||||||||||||||||||||||
Charge-offs, net of recoveries | $ | 4,810 | 63.4 | bp | $ | 1,354 | 18.9 | bp | $ | 8,191 | 54.3 | bp | $ | 2,623 | 18.6 | bp | ||||||||||||||||
Foreclosed property expense | 559 | 7.4 | 264 | 3.7 | 1,097 | 7.3 | 434 | 3.1 | ||||||||||||||||||||||||
Less:SOP 03-3 and HomeSaver Advance fair value losses(2) | (2,165 | ) | (28.5 | ) | (494 | ) | (6.9 | ) | (3,690 | ) | (24.5 | ) | (1,231 | ) | (8.7 | ) | ||||||||||||||||
Plus: Impact ofSOP 03-3 on charge-offs and foreclosed property expense(3) | 139 | 1.8 | 129 | 1.8 | 228 | 1.5 | 298 | 2.1 | ||||||||||||||||||||||||
Credit losses(4) | $ | 3,343 | 44.1 | bp | $ | 1,253 | 17.5 | bp | $ | 5,826 | 38.6 | bp | $ | 2,124 | 15.1 | bp | ||||||||||||||||
(1) | Based on the annualized amount for each line item presented divided by the average guaranty book of business during the period. | |
(2) | Represents the amount recorded as a loss when the acquisition cost of a delinquent loan purchased from an MBS trust that is subject toSOP 03-3 exceeds the fair value of the loan at acquisition. Also includes the difference between the unpaid principal balance of unsecured HomeSaver Advance loans at origination and the estimated fair value of these loans that we record in our consolidated balance sheets. | |
(3) | For delinquent loans purchased from MBS trusts that are recorded at a fair value amount at acquisition that is lower than the acquisition cost, any loss recorded at foreclosure is less than it would have been if we had recorded the loan at its acquisition cost instead of at fair value. Accordingly, we have added back to our credit losses the amount of |
41
charge-offs and foreclosed property expense that we would have recorded if we had calculated these amounts based on the purchase price. | ||
(4) | Interest forgone on nonperforming loans in our mortgage portfolio, which is presented in Table 42, reduces our net interest income but is not reflected in our credit losses total. In addition,other-than-temporary impairment losses resulting from deterioration in the credit quality of our mortgage-related securities and accretion of interest income on loans subject toSOP 03-3 are excluded from credit losses. |
• | California, Florida, Arizona and Nevada, which represented 28% and 27% of our single-family conventional mortgage credit book of business as of June 30, 2009 and 2008, respectively, accounted for 57% and 48% of our single-family credit losses for the second quarter of 2009 and 2008, respectively, and 57% and 42% of our single-family credit losses for the first six months of 2009 and 2008, respectively. | |
• | Michigan and Ohio, two key states driving credit losses in the Midwest, represented 5% and 6% of our single-family conventional mortgage credit book of business as of June 30, 2009 and 2008, respectively, but accounted for 10% and 18% of our single-family credit losses for the second quarter of 2009 and 2008, respectively, and 10% and 23% of our single-family credit losses for the first six months of 2009 and 2008, respectively. | |
• | Certain higher risk loan categories, including Alt-A loans, interest-only loans, loans to borrowers with low FICO credit scores and loans with highloan-to-value ratios, represented 26% and 29% of our single-family conventional mortgage credit book of business as of June 30, 2009 and 2008, respectively, but accounted for approximately 63% and 72% of our single-family credit losses for the second quarter of 2009 and 2008, respectively, and 64% and 70% of our single-family credit losses for the first six months of 2009 and 2008, respectively. A significant portion of these higher risk loan categories were originated in 2006 and 2007 in states that have experienced the steepest declines in home prices, such as California, Florida, Arizona and Nevada. |
42
As of | ||||||||
June 30, | December 31, | |||||||
2009 | 2008 | |||||||
(Dollars in millions) | ||||||||
Gross single-family credit loss sensitivity | $ | 22,910 | $ | 13,232 | ||||
Less: Projected credit risk sharing proceeds | (3,520 | ) | (3,478 | ) | ||||
Net single-family credit loss sensitivity | $ | 19,390 | $ | 9,754 | ||||
Outstanding single-family whole loans and Fannie Mae MBS | $ | 2,793,295 | $ | 2,724,253 | ||||
Single-family net credit loss sensitivity as a percentage of outstanding single-family whole loans and Fannie Mae MBS | 0.69 | % | 0.36 | % |
(1) | Represents total economic credit losses, which consist of credit losses and forgone interest. Calculations are based on approximately 97% of our total single-family guaranty book of business as of both June 30, 2009 and December 31, 2008. The mortgage loans and mortgage-related securities that are included in these estimates consist of: (i) single-family Fannie Mae MBS (whether held in our mortgage portfolio or held by third parties), excluding certain whole loan Real Estate Mortgage Investment Conduits (“REMICs”) and private-label wraps; (ii) single-family mortgage loans, excluding mortgages secured only by second liens, subprime mortgages, manufactured housing chattel loans and reverse mortgages; and (iii) long-term standby commitments. We expect the inclusion in our estimates of the excluded products may impact the estimated sensitivities set forth in this table. |
43
44
For the | For the | |||||||||||||||||||||||||||||||
Three Months Ended | Six Months Ended | Quarterly | Year-to-Date | |||||||||||||||||||||||||||||
June 30, | June 30, | Variance | Variance | |||||||||||||||||||||||||||||
2009 | 2008 | 2009 | 2008 | $ | % | $ | % | |||||||||||||||||||||||||
(Dollars in millions) | ||||||||||||||||||||||||||||||||
Statement of operations data: | ||||||||||||||||||||||||||||||||
Guaranty fee income | $ | 1,865 | $ | 1,819 | $ | 3,831 | $ | 3,761 | $ | 46 | 3 | % | $ | 70 | 2 | % | ||||||||||||||||
Trust management income | 13 | 74 | 24 | 179 | (61 | ) | (82 | ) | (155 | ) | (87 | ) | ||||||||||||||||||||
Other income(1) | 264 | 197 | 437 | 385 | 67 | 34 | 52 | 14 | ||||||||||||||||||||||||
Credit-related expenses(2) | (18,391 | ) | (5,339 | ) | (38,721 | ) | (8,593 | ) | (13,052 | ) | (244 | ) | (30,128 | ) | (351 | ) | ||||||||||||||||
Other expenses(3) | (529 | ) | (461 | ) | (1,052 | ) | (994 | ) | (68 | ) | (15 | ) | (58 | ) | (6 | ) | ||||||||||||||||
Loss before federal income taxes | (16,778 | ) | (3,710 | ) | (35,481 | ) | (5,262 | ) | (13,068 | ) | (352 | ) | (30,219 | ) | (574 | ) | ||||||||||||||||
Benefit for federal income taxes | 138 | 1,304 | 783 | 1,848 | (1,166 | ) | (89 | ) | (1,065 | ) | (58 | ) | ||||||||||||||||||||
Net loss attributable to Fannie Mae | $ | (16,640 | ) | $ | (2,406 | ) | $ | (34,698 | ) | $ | (3,414 | ) | $ | (14,234 | ) | (592 | )% | $ | (31,284 | ) | (916 | )% | ||||||||||
Other key performance data: | ||||||||||||||||||||||||||||||||
Average single-family guaranty book of business(4) | $ | 2,855,504 | $ | 2,704,345 | $ | 2,837,800 | $ | 2,668,099 | $ | 151,159 | 6 | % | $ | 169,701 | 6 | % |
(1) | Consists of net interest income, investment gains and losses, and fee and other income. | |
(2) | Consists of the provision for credit losses and foreclosed property expense. | |
(3) | Consists of administrative expenses and other expenses. | |
(4) | The single-family guaranty book of business consists of single-family mortgage loans held in our mortgage portfolio, single-family Fannie Mae MBS held in our mortgage portfolio, single-family Fannie Mae MBS held by third parties, and other credit enhancements that we provide on single-family mortgage assets. Excludes non-Fannie Mae mortgage-related securities held in our investment portfolio for which we do not provide a guarantee. |
• | A modest increase in guaranty fee income, primarily attributable to growth in the average single-family guaranty book of business, and a decrease in our average effective guaranty fee rate. |
— | Our average single-family guaranty book of business increased by 6% for both the second quarter and first six months of 2009, over the second quarter and first six months of 2008. We experienced an increase in our average outstanding Fannie Mae MBS and other guarantees throughout 2008 and for the first six months of 2009 as our market share of new single-family mortgage-related securities issuances remained high and new MBS issuances outpaced liquidations. | |
— | The decrease in our average effective guaranty fee rate for the second quarter and first six months of 2009 was attributable to a lower average charged guaranty fee on new business, as well as lower fair value adjustments onbuy-ups and certain guaranty assets. This was partially offset by the recognition of deferred amounts into income as interest rates in the second quarter and first six months of 2009 were lower than comparable perior year periods. The average charged guaranty fee on our new single-family business for the second quarter and first six months of 2009 was 23.7 basis points and 22.5 basis points, respectively, compared with 28.0 basis points and 26.9 basis points for the second quarter and first six months of 2008, respectively. The average charged guaranty fee represents the average contractual fee rate for our single-family guaranty arrangements plus the recognition of any upfront cash payments ratably over an estimated average life. The decrease in the average charged fee was primarily the result of a shift in the composition of our new business given changes in underwriting and eligibility standards. The change in the average charged guaranty fee reflects a reduction in our acquisition of higher risk, higher fee categories such as higher LTV and lower FICO |
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scores. Beginning in 2009, we extended the estimated average life used in calculating the recognition of upfront cash payments for the purpose of determining our single-family new business average charged guaranty fee to reflect a longer expected duration because of the record low interest rate environment. This change did not have a material impact on the average charged guaranty fee on our new single-family business in the second quarter or first six months of 2009. |
• | A substantial increase in credit-related expenses, reflecting a significantly higher incremental provision for credit losses as well as higher charge-offs due to worsening credit performance trends, including significant increases in delinquencies, defaults and loss severities, across our entire guaranty book of business as the credit performance of loans with fewer risk layers has deteriorated reflecting the adverse impact of the continued rise in unemployment and the decline in home prices. Certain higher risk loan categories, loan vintages and loans within certain states that have had the greatest home price depreciation from their recent peaks continue to account for a disproportionate share of our credit losses. We also experienced a significant increase inSOP 03-3 fair value losses during the second quarter and first six months of 2009, reflecting the increase in the number of delinquent loans we purchased from MBS trusts for loan modification as part of our increased efforts in preventing foreclosures and the decreases in the estimated fair value of these loans. | |
• | A significant reduction in the relative tax benefits associated with our pre-tax losses. We recorded a tax benefit of $138 million and $783 million on pre-tax losses of $16.8 billion and $35.5 billion for the second quarter and first six months of 2009, respectively, compared with a tax benefit of $1.3 billion and $1.8 billion on pre-tax losses of $3.7 billion and $5.3 billion for the second quarter and first six months of 2008, respectively. We recorded a valuation allowance for the majority of the tax benefits associated with the pre-tax losses recognized in the second quarter and first six months of 2009 as there has been no change in the conclusion we reached in 2008 that it was more likely than not that we would not generate sufficient taxable income in the foreseeable future to realize all of the tax benefits generated from these losses. |
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For the | For the | |||||||||||||||||||||||||||||||
Three Months Ended | Six Months Ended | Quarterly | Year-to-Date | |||||||||||||||||||||||||||||
June 30, | June 30, | Variance | Variance | |||||||||||||||||||||||||||||
2009 | 2008 | 2009 | 2008 | $ | % | $ | % | |||||||||||||||||||||||||
(Dollars in millions) | ||||||||||||||||||||||||||||||||
Statement of operations data:(1) | ||||||||||||||||||||||||||||||||
Guaranty fee income | $ | 164 | $ | 134 | $ | 322 | $ | 282 | $ | 30 | 22 | % | $ | 40 | 14 | % | ||||||||||||||||
Other income(2) | 20 | 52 | 47 | 116 | (32 | ) | (62 | ) | (69 | ) | (59 | ) | ||||||||||||||||||||
Losses on partnership investments | (571 | ) | (195 | ) | (928 | ) | (336 | ) | (376 | ) | (193 | ) | (592 | ) | (176 | ) | ||||||||||||||||
Credit-related income (expenses)(3) | (393 | ) | (10 | ) | (935 | ) | 1 | (383 | ) | (3,830 | ) | (936 | ) | (93,600 | ) | |||||||||||||||||
Other expenses(4) | (133 | ) | (222 | ) | (302 | ) | (476 | ) | 89 | 40 | 174 | 37 | ||||||||||||||||||||
Loss before federal income taxes | (913 | ) | (241 | ) | (1,796 | ) | (413 | ) | (672 | ) | (279 | ) | (1,383 | ) | (335 | ) | ||||||||||||||||
Benefit (provision) for federal income taxes | (43 | ) | 316 | (211 | ) | 638 | (359 | ) | (114 | ) | (849 | ) | (133 | ) | ||||||||||||||||||
Net income (loss) | (956 | ) | 75 | (2,007 | ) | 225 | (1,031 | ) | (1,375 | )% | (2,232 | ) | (992 | )% | ||||||||||||||||||
Less: Net (income) loss attributable to the noncontrolling interest | 26 | (3 | ) | 43 | (3 | ) | 29 | 967 | 46 | 1,533 | ||||||||||||||||||||||
Net income (loss) attributable to Fannie Mae | $ | (930 | ) | $ | 72 | $ | (1,964 | ) | $ | 222 | $ | (1,002 | ) | (1,392 | )% | $ | (2,186 | ) | (985 | )% | ||||||||||||
Other key performance data: | ||||||||||||||||||||||||||||||||
Average multifamily guaranty book of business(5) | $ | 177,475 | $ | 158,444 | $ | 176,089 | $ | 155,173 | $ | 19,031 | 12 | % | $ | 20,916 | 13 | % |
(1) | Certain prior period amounts have been reclassified to conform to the current period presentation. | |
(2) | Consists of trust management income and fee and other income. | |
(3) | Consists of the provision for credit losses and foreclosed property income/expense. | |
(4) | Consists of net interest expense, administrative expenses and other expenses. | |
(5) | The multifamily guaranty book of business consists of multifamily mortgage loans held in our mortgage portfolio, multifamily Fannie Mae MBS held in our mortgage portfolio, multifamily Fannie Mae MBS held by third parties and other credit enhancements that we provide on multifamily mortgage assets. Excludes non-Fannie Mae mortgage-related securities held in our investment portfolio for which we do not provide a guarantee. |
• | An increase in guaranty fee income, which was attributable to growth in the average multifamily guaranty book of business, and an increase in the average effective multifamily guaranty fee rate. The increases in our book of business and guaranty fee rate reflected the investment and liquidity we provided to the multifamily mortgage market. | |
• | A $383 million and $936 million increase in credit-related expenses, as we increased our multifamily combined loss reserves by $345 million and $865 million during the second quarter and first six months of 2009, respectively. This increase reflects the continuing stress on our multifamily guaranty book of business due to the economic recession and lack of liquidity in the market, which has adversely affected multifamily property values, vacancy rates and rent levels, the cash flows generated from these investments and refinancing options. | |
• | A $376 million and $592 million increase in losses on partnership investments for the second quarter and first six months of 2009, respectively, largely due to the recognition ofother-than-temporary impairment of $302 million and $449 million, respectively, on a portion of our LIHTC partnership investments and other affordable housing investments. In addition, our partnership losses for both the second quarter and first six months of 2008 were partially reduced by a gain on the sale of some of our LIHTC investments. We did not have any sales of LIHTC investments during the first six months of 2009. If we determine that in the future a market for our LIHTC investments does not exist or that we do not have both the intent and ability to participate in the LIHTC market, we may not be able to realize the full value of this |
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asset. This would result in significant additionalother-than-temporary impairment on our LIHTC investments. |
• | A provision for federal income taxes of $43 million and $211 million for the second quarter and first six months of 2009, respectively, compared with a tax benefit of $316 million and $638 million for the second quarter and first six months of 2008, respectively. The tax provision recognized in the second quarter and first six months of 2009 was attributable to the reversal of previously utilized tax credits because of our ability to carry back, for tax purposes, to prior years net operating losses expected to be generated in the current year. In addition, we recorded a valuation allowance for the majority of the tax benefits associated with the pre-tax losses and tax credits generated by our partnership investments in the second quarter and first six months of 2009. |
For the | For the | |||||||||||||||||||||||||||||||
Three Months | Six Months | |||||||||||||||||||||||||||||||
Ended | Ended | Quarterly | Year-to-date | |||||||||||||||||||||||||||||
June 30, | June 30, | Variance | Variance | |||||||||||||||||||||||||||||
2009 | 2008 | 2009 | 2008 | $ | % | $ | % | |||||||||||||||||||||||||
(Dollars in millions) | ||||||||||||||||||||||||||||||||
Statement of operations data:(1) | ||||||||||||||||||||||||||||||||
Net interest income | $ | 3,600 | $ | 2,003 | $ | 6,895 | $ | 3,662 | $ | 1,597 | 80 | % | $ | 3,233 | 88 | % | ||||||||||||||||
Investment gains (losses), net | (30 | ) | (339 | ) | 120 | (347 | ) | 309 | 91 | 467 | 135 | |||||||||||||||||||||
Netother-than-temporary impairments | (753 | ) | (507 | ) | (6,406 | ) | (562 | ) | (246 | ) | (49 | ) | (5,844 | ) | (1,040 | ) | ||||||||||||||||
Fair value gains (losses), net | 823 | 517 | (637 | ) | (3,860 | ) | 306 | 59 | 3,223 | 83 | ||||||||||||||||||||||
Fee and other income, net | 71 | 82 | 140 | 145 | (11 | ) | (13 | ) | (5 | ) | (3 | ) | ||||||||||||||||||||
Other expenses(2) | (777 | ) | (545 | ) | (1,400 | ) | (1,216 | ) | (232 | ) | (43 | ) | (184 | ) | (15 | ) | ||||||||||||||||
Income (loss) before federal income taxes and extraordinary losses, net of tax effect | 2,934 | 1,211 | (1,288 | ) | (2,178 | ) | 1,723 | 142 | 890 | 41 | ||||||||||||||||||||||
Benefit (provision) for federal income taxes | (118 | ) | (1,144 | ) | 28 | 918 | 1,026 | 90 | (890 | ) | (97 | ) | ||||||||||||||||||||
Extraordinary losses, net of tax effect | — | (33 | ) | — | (34 | ) | 33 | 100 | 34 | 100 | ||||||||||||||||||||||
Net income (loss) attributable to Fannie Mae | $ | 2,816 | $ | 34 | $ | (1,260 | ) | $ | (1,294 | ) | $ | 2,782 | 8,182 | % | $ | 34 | 3 | % | ||||||||||||||
(1) | Certain prior period amounts have been reclassified to conform to the current period presentation. | |
(2) | Consists of debt extinguishment losses, allocated guaranty fee expense, administrative expenses and other expenses. |
• | An increase in net interest income, primarily attributable to an expansion of our net interest yield driven by a reduction in the average cost of our debt that more than offset a decline in the average yield on our interest-earning assets. |
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— | The significant reduction in the average cost of our debt during the second quarter and first six months of 2009 from the comparable prior year periods was primarily attributable to a decline in borrowing rates, a shift in our funding mix in the second half of 2008 to more short-term debt because of the reduced demand for our longer-term and callable debt securities, and significant repurchasing activity of callable debt. Due to the improved demand and attractive pricing for our non-callable and callable long-term debt during the first half of 2009, we issued a significant amount of long-term debt during this period, which we then used to repay maturing short-term debt and prepay more expensive long-term debt. Our net interest yield for the second quarter and first six months of 2008 reflected a benefit from the redemption of step-rate debt securities, which reduced the average cost of our debt. | |
— | Our net interest income does not include the effect of the periodic net contractual interest accruals on our interest rate swaps, which increased to an expense of $779 million and $1.7 billion in the second quarter and first six months of 2009, respectively, from an expense of $304 million and $330 million in the second quarter and first six months of 2008, respectively. These amounts are included in derivatives gains (losses) and reflected in our condensed consolidated statements of operations as a component of “Fair value gains (losses), net.” |
• | An increase in fair value gains for the second quarter of 2009 and a decrease in fair value losses in the first six months of 2009. |
— | The gains on our trading securities during the second quarter and first six months of 2009 were primarily attributable to the narrowing of spreads CMBS asset-backed securities and corporate debt securities. Narrowing of spreads on agency MBS also contributed to the gains in the first six months. The losses on our trading securities during the second quarter and first six months of 2008 were attributable to an increase in long-term interest rates during the second quarter of 2008 and a significant widening of credit spreads during the first six months of 2008. | |
— | We recorded derivatives fair value losses of $537 million and $2.2 billion in the second quarter and first six months of 2009, respectively, compared with a gain of $2.3 billion and a loss of $710 million in the second quarter and first six months of 2008, respectively. During the second quarter and first six months of 2009, increases in swap rates resulted in gains on our net pay-fixed swap position. These gains were more than offset by losses on our option-based derivatives as swap rate increases drove losses on our receive-fixed swaptions. The derivatives fair value gain of $2.3 billion in the second quarter of 2008 was attributable to our interest rate swaps due to a considerable increase in the5-year swap interest rate during the quarter and was offset by $803 million of losses on our hedged mortgage assets. The derivatives fair value loss of $710 million in the first six months of 2008 was attributable to our interest rate swaps due to a decrease in the5-year swap interest rate during the six months period. | |
— | Due to our discontinuation of hedge accounting in the fourth quarter of 2008, we had no losses on hedged mortgage assets during the second quarter and first six months of 2009 compared with $803 million in losses on hedged mortgage assets in the second quarter and first six months of 2008. |
• | A decrease in investment losses in the second quarter of 2009 and a shift from losses to gains in the first six months of 2009 from increased gains on securitizations as a result of increased whole loan conduit activity as we focus on providing liquidity to the market, as well as realized gains on sales ofavailable-for-sale securities, partially offset by higher lower of cost or market adjustments on loans. | |
• | A significant increase in netother-than-temporary impairment, attributable toother-than-temporary impairment onavailable-for-sale securities totaling $753 million and $6.4 billion in the second quarter and first six months of 2009, respectively, compared with $507 million and $562 million in the second quarter and first six months of 2008, respectively. Theother-than-temporary impairment losses that we recognized in the second quarter and first six months of 2009 included additional impairment losses on some of our Alt-A and subprime private-label securities that we had previously impaired, as well as impairment losses on other Alt-A and subprime securities attributable to continued deterioration in the |
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credit quality of the loans underlying these securities and further declines in the expected cash flows. Beginning in the second quarter of 2009, only the credit portion of ourother-than-temporary impairment is recognized in our condensed consolidated statement of operations as a result of our adoption of FSPFAS 115-2. |
• | We recorded a tax provision of $118 million and a tax benefit of $28 million on pre-tax income of $2.9 billion and a pre-tax loss of $1.3 billion for the second quarter and first six months of 2009, respectively, compared with a tax provision of $1.1 billion and a tax benefit of $918 million on pre-tax income of $1.2 billion and a pre-tax loss of $2.2 billion for the second quarter and first six months of 2008, respectively. We recorded a valuation allowance for the majority of the tax benefits associated with the pre-tax income or losses recognized in the second quarter or first six months of 2009 as there has been no change in the conclusion we reached in 2008 that it was more likely than not that we would not generate sufficient taxable income in the foreseeable future to realize all of the tax benefits generated from Fannie Mae losses. |
For the | For the | |||||||||||||||||||||||||||||||
Three Months Ended | Six Months Ended | |||||||||||||||||||||||||||||||
June 30, | Variance | June 30, | Variance | |||||||||||||||||||||||||||||
2009 | 2008 | $ | % | 2009 | 2008 | $ | % | |||||||||||||||||||||||||
(Dollars in millions) | ||||||||||||||||||||||||||||||||
Purchases(2) | $ | 108,833 | $ | 60,315 | $ | 48,518 | 80 | % | $ | 158,420 | $ | 95,815 | $ | 62,605 | 65 | % | ||||||||||||||||
Sales | 65,839 | 9,051 | 56,788 | 627 | 89,931 | 22,580 | 67,351 | 298 | ||||||||||||||||||||||||
Liquidations(3) | 37,688 | 25,020 | 12,668 | 51 | 67,073 | 48,591 | 18,482 | 38 |
(1) | Excludes unamortized premiums, discounts and other cost basis adjustments. | |
(2) | Excludes advances to lenders and mortgage-related securities acquired through the extinguishment of debt. |
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(3) | Includes scheduled repayments, prepayments, foreclosures and lender repurchases. |
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As of | ||||||||
June 30 | December 31, | |||||||
2009 | 2008 | |||||||
(Dollars in millions) | ||||||||
Mortgage loans:(2) | ||||||||
Single-family: | ||||||||
Government insured or guaranteed(3)(9) | $ | 51,173 | $ | 43,799 | ||||
Conventional: | ||||||||
Long-term, fixed-rate | 180,173 | 186,550 | ||||||
Intermediate-term, fixed-rate(4) | 36,774 | 37,546 | ||||||
Adjustable-rate | 37,796 | 44,157 | ||||||
Total conventional single-family | 254,743 | 268,253 | ||||||
Total single-family | 305,916 | 312,052 | ||||||
Multifamily: | ||||||||
Government insured or guaranteed(3) | 644 | 699 | ||||||
Conventional: | ||||||||
Long-term, fixed-rate | 5,671 | 5,636 | ||||||
Intermediate-term, fixed-rate(4) | 92,634 | 90,837 | ||||||
Adjustable-rate | 21,845 | 20,269 | ||||||
Total conventional multifamily | 120,150 | 116,742 | ||||||
Total multifamily | 120,794 | 117,441 | ||||||
Total mortgage loans | 426,710 | 429,493 | ||||||
Unamortized premiums and other cost basis adjustments, net | (3,826 | ) | (894 | ) | ||||
Lower of cost or market adjustments on loans held for sale | (462 | ) | (264 | ) | ||||
Allowance for loan losses for loans held for investment | (6,841 | ) | (2,923 | ) | ||||
Total mortgage loans, net | 415,581 | 425,412 | ||||||
Mortgage-related securities: | ||||||||
Fannie Mae single-class MBS | 171,160 | 159,712 | ||||||
Fannie Mae structured MBS | 63,472 | 69,238 | ||||||
Non-Fannie Mae single-class mortgage securities | 33,231 | 26,976 | ||||||
Non-Fannie Mae structured mortgage securities(5) | 58,225 | 62,642 | ||||||
Commercial mortgage backed securities | 25,769 | 25,825 | ||||||
Mortgage revenue bonds | 15,019 | 15,447 | ||||||
Other mortgage-related securities | 2,670 | 2,863 | ||||||
Total mortgage-related securities | 369,546 | 362,703 | ||||||
Market value adjustments(6) | (15,119 | ) | (15,996 | ) | ||||
Other-than-temporary impairments, net of accretion | (4,752 | ) | (7,349 | ) | ||||
Unamortized discounts and other cost basis adjustments, net(7) | 920 | 296 | ||||||
Total mortgage-related securities, net | 350,595 | 339,654 | ||||||
Mortgage portfolio, net(8) | $ | 766,176 | $ | 765,066 | ||||
(1) | Mortgage loans and mortgage-related securities are reported at unpaid principal balance. | |
(2) | Mortgage loans include unpaid principal balances totaling $152.1 billion and $65.8 billion as of June 30, 2009 and December 31, 2008, respectively, related to mortgage-related securities that were consolidated under FASB Interpretation (“FIN”) No. 46R (revised December 2003),Consolidation of Variable Interest Entities (an interpretation of ARB No. 51)(“FIN 46R”), and mortgage-related securities created from securitization transactions that did not meet |
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the sales criteria under SFAS No. 140,Accounting for Transfer and Servicing of Financial Assets and Extinguishments of Liabilities (a replacement of FASB Statement No. 125)(“SFAS 140”), which effectively resulted in mortgage-related securities being accounted for as loans. | ||
(3) | Refers to mortgage loans that are guaranteed or insured by the U.S. government or its agencies, such as the Department of Veterans Affairs, Federal Housing Administration or the Rural Development Housing and Community Facilities Program of the Department of Agriculture. | |
(4) | Intermediate-term, fixed-rate consists of mortgage loans with contractual maturities at purchase equal to or less than 15 years. | |
(5) | Includes private-label mortgage-related securities backed by subprime or Alt-A mortgage loans totaling $48.7 billion and $52.4 billion as of June 30, 2009 and December 31, 2008, respectively. Refer to “Trading andAvailable-for-Sale Investment Securities—Investments in Private-Label Mortgage-Related Securities—Investments in Alt-A and Subprime Private-Label Mortgage-Related Securities” for a description of our investments in subprime and Alt-A securities. | |
(6) | Includes unrealized gains and losses on mortgage-related securities and securities commitments classified as trading and available for sale. | |
(7) | Includes the impact ofother-than-temporary impairments of cost basis adjustments. | |
(8) | Includes consolidated mortgage-related assets acquired through the assumption of debt. Also includes $1.4 billion and $720 million as of June 30, 2009 and December 31, 2008, respectively, of mortgage loans and mortgage-related securities that we have pledged as collateral and that counterparties have the right to sell or repledge. | |
(9) | Includes reverse mortgages with an outstanding unpaid principal balance of approximately $48.6 billion and $41.2 billion as of June 30, 2009 and December 31, 2008, respectively. |
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�� | ||||||||||||||||||||||||||||||||||||
As of June 30, 2009 | ||||||||||||||||||||||||||||||||||||
Less Than 12 | 12 Consecutive | |||||||||||||||||||||||||||||||||||
Gross | Gross | Consecutive Months(3) | Months or Longer(3) | |||||||||||||||||||||||||||||||||
Total | Gross | Unrealized | Unrealized | Total | Gross | Total | Gross | Total | ||||||||||||||||||||||||||||
Amortized | Unrealized | Losses | Losses | Fair | Unrealized | Fair | Unrealized | Fair | ||||||||||||||||||||||||||||
Cost(1) | Gains | OTTI(2) | Other | Value | Losses | Value | Losses | Value | ||||||||||||||||||||||||||||
(Dollars in millions) | ||||||||||||||||||||||||||||||||||||
Trading: | ||||||||||||||||||||||||||||||||||||
Fannie Mae single-class MBS | $ | 40,886 | $ | — | $ | — | $ | — | $ | 42,973 | $ | — | $ | — | $ | — | $ | — | ||||||||||||||||||
Fannie Mae structured MBS | 8,980 | — | — | — | 9,130 | — | — | — | — | |||||||||||||||||||||||||||
Non-Fannie Mae single-classmortgage-related securities | 918 | — | — | — | 959 | — | — | — | — | |||||||||||||||||||||||||||
Non-Fannie Mae structured mortgage-related securities | 8,230 | — | — | — | 4,626 | — | — | — | — | |||||||||||||||||||||||||||
Non-Fannie Mae structured multifamily mortgage-related securities (CMBS)(4) | 11,001 | — | — | — | 8,349 | — | — | — | — | |||||||||||||||||||||||||||
Mortgage revenue bonds | 788 | — | — | — | 617 | — | — | — | — | |||||||||||||||||||||||||||
Asset-backed securities | 10,143 | — | — | — | 9,808 | — | — | — | — | |||||||||||||||||||||||||||
Corporate debt securities | 946 | — | — | — | 935 | — | — | — | — | |||||||||||||||||||||||||||
Other non-mortgage-related securities(5) | 5,003 | — | — | — | 5,003 | — | — | — | — | |||||||||||||||||||||||||||
Total trading | $ | 86,895 | $ | — | $ | — | $ | — | $ | 82,400 | $ | — | $ | — | $ | — | $ | — | ||||||||||||||||||
Available for sale: | ||||||||||||||||||||||||||||||||||||
Fannie Mae single-class MBS | 130,623 | 3,856 | — | (79 | ) | 134,400 | (79 | ) | 16,104 | — | 26 | |||||||||||||||||||||||||
Fannie Mae structured MBS | 54,300 | 1,984 | (41 | ) | (52 | ) | 56,191 | (57 | ) | 1,718 | (36 | ) | 572 | |||||||||||||||||||||||
Non-Fannie Mae single-class mortgage-related securities | 32,117 | 1,100 | — | (8 | ) | 33,209 | (7 | ) | 551 | (1 | ) | 48 | ||||||||||||||||||||||||
Non-Fannie Mae structured mortgage-related securities | 45,219 | 252 | (7,971 | ) | (4,089 | ) | 33,411 | (6,991 | ) | 13,412 | (5,069 | ) | 14,152 | |||||||||||||||||||||||
Non-Fannie Mae structured multifamily mortgage-related securities (CMBS)(4) | 15,918 | — | — | (4,123 | ) | 11,795 | — | — | (4,123 | ) | 11,795 | |||||||||||||||||||||||||
Mortgage revenue bonds | 14,241 | 40 | (53 | ) | (1,187 | ) | 13,041 | (85 | ) | 1,786 | (1,155 | ) | 8,516 | |||||||||||||||||||||||
Other mortgage-related securities | 2,494 | 25 | (560 | ) | (65 | ) | 1,894 | (457 | ) | 1,259 | (168 | ) | 610 | |||||||||||||||||||||||
Total available for sale | $ | 294,912 | $ | 7,257 | $ | (8,625 | ) | $ | (9,603 | ) | $ | 283,941 | $ | (7,676 | ) | $ | 34,830 | $ | (10,552 | ) | $ | 35,719 | ||||||||||||||
Total investments in securities | $ | 381,807 | $ | 7,257 | $ | (8,625 | ) | $ | (9,603 | ) | $ | 366,341 | $ | (7,676 | ) | $ | 34,830 | $ | (10,552 | ) | $ | 35,719 | ||||||||||||||
(1) | Amortized cost includes unamortized premiums, discounts and other cost basis adjustments, and is adjusted to reflect netother-than-temporary impairment write downs recognized in our condensed consolidated statements of operations. | |
(2) | Reflects the noncredit component ofother-than-temporary losses recorded in OCI as of June 30, 2009. | |
(3) | Reflects total gross unrealized losses, including the noncredit component ofother-than-temporary impairment, and the related fair value of securities that are in a loss position as of June 30, 2009. | |
(4) | Consists of non-Fannie Mae CMBS. Prior to June 30, 2009, we reported these securities as a component of non-Fannie Mae structured mortgage-related securities. | |
(5) | Includes a certificate of deposit issued by Bank of America that had a fair value of $5.0 billion as of June 30, 2009, which exceeded 10% of our stockholders’ deficit as of June 30, 2009. |
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As of June 30, 2009 | As of July 28, 2009 | |||||||||||||||||||||||
Unpaid | Average | % Below | ||||||||||||||||||||||
Principal | Credit | % AA | Investment | Current % | ||||||||||||||||||||
Balance | Enhancement(1) | % AAA(2) | to BBB-(2) | Grade(2) | Watchlist(3) | |||||||||||||||||||
(Dollars in millions) | ||||||||||||||||||||||||
Private-label mortgage-related securities backed by: | ||||||||||||||||||||||||
Alt-A mortgage loans: | ||||||||||||||||||||||||
Option ARM Alt-A mortgage loans | $ | 6,421 | 52 | % | 3 | % | 20 | % | 77 | % | 11 | % | ||||||||||||
Other Alt-A mortgage loans | 19,709 | 13 | 22 | 26 | 52 | 1 | ||||||||||||||||||
Total Alt-A mortgage loans | 26,130 | |||||||||||||||||||||||
Subprime mortgage loans(4) | 22,603 | 33 | 11 | 9 | 80 | 2 | ||||||||||||||||||
Total Alt-A and subprime mortgage loans | 48,733 | |||||||||||||||||||||||
Multifamily mortgage loans (CMBS) | 25,769 | 30 | 96 | 4 | — | 75 | ||||||||||||||||||
Manufactured housing mortgage loans | 2,647 | 36 | 2 | 21 | 77 | 1 | ||||||||||||||||||
Other mortgage loans | 2,226 | 6 | 53 | 28 | 19 | — | ||||||||||||||||||
Total private-label mortgage-related securities | 79,375 | |||||||||||||||||||||||
Mortgage revenue bonds(5) | 15,019 | 35 | 36 | 61 | 3 | 15 | ||||||||||||||||||
Total | $ | 94,394 | ||||||||||||||||||||||
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(1) | Average credit enhancement percentage reflects both subordination and financial guarantees. Reflects the ratio of the current amount of the securities that will incur losses in the securitization structure before any losses are allocated to securities that we own. Percentage generally calculated based on the quotient of the total unpaid principal balance of all credit enhancement in the form of subordination or financial guarantee of the security divided by the total unpaid principal balance of all of the tranches of collateral pools from which credit support is drawn for the security that we own. | |
(2) | Reflects credit ratings as of July 28, 2009, calculated based on unpaid principal balance as of June 30, 2009. Investment securities that have a credit rating below BBB- or its equivalent or that have not been rated are classified as below investment grade. | |
(3) | Reflects percentage of investment securities, calculated based on unpaid principal balance as of June 30, 2009, that have been placed under review by either Standard & Poor’s, Moody’s, Fitch or DBRS Limited. | |
(4) | Excludes resecuritizations, or wraps, of private-label securities backed by subprime loans that we have guaranteed and hold in our mortgage portfolio. These wraps totaled $6.5 billion as of June 30, 2009. | |
(5) | Reflects that 35% of the outstanding unpaid principal balance of our mortgage revenue bonds are guaranteed by third parties. See “Risk Management—Credit Risk Management—Institutional Counterparty Credit Risk Management—Financial Guarantors” for additional information on our financial guarantor exposure and the counterparty exposure associated with our financial guarantors. |
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As of June 30, 2009 | ||||||||||||||||||||
Unpaid | Total | |||||||||||||||||||
Principal | Fair | Cumulative | Noncredit | Net | ||||||||||||||||
Balance | Value | Losses(2) | Component(3) | Losses(4) | ||||||||||||||||
(Dollars in millions) | ||||||||||||||||||||
Trading securities: | ||||||||||||||||||||
Alt-A private-label securities | $ | 3,468 | $ | 1,232 | $ | 2,225 | $ | 1,330 | $ | 895 | ||||||||||
Subprime private-label securities | 3,667 | 2,121 | 1,551 | 654 | 897 | |||||||||||||||
Total Alt-A and subprime private-label securities classified as trading | $ | 7,135 | $ | 3,353 | $ | 3,776 | $ | 1,984 | $ | 1,792 | ||||||||||
Available-for-sale securities: | ||||||||||||||||||||
Alt-A private-label securities | 22,662 | 13,635 | 9,067 | 6,479 | 2,588 | |||||||||||||||
Subprime private-label securities | 18,936 | 11,927 | 7,045 | 5,097 | 1,948 | |||||||||||||||
Total Alt-A and subprime private-label securities classified as available for sale | $ | 41,598 | $ | 25,562 | $ | 16,112 | $ | 11,576 | $ | 4,536 | ||||||||||
(1) | Excludes resecuritizations, or wraps, of private-label securities backed by subprime loans that we have guaranteed and hold in our mortgage portfolio. These wraps totaled $6.5 billion as of June 30, 2009. | |
(2) | Amounts reflect the difference between the amortized cost basis (unpaid principal balance net of unamortized premiums, discounts and cost basis adjustments), excludingother-than-temporary impairment losses recorded in earnings and the fair value. | |
(3) | Represents the estimated portion of the total cumulative losses that is noncredit related. We have calculated the credit component based on the difference between the amortized cost basis of the securities and the present value of expected future cash flows. The remaining difference between the fair value and the present value of expected future cash flows is classified as noncredit-related. | |
(4) | For securities classified as trading, net loss amounts reflect the estimated portion of the total cumulative losses that is credit-related. For securities classified as available for sale, net loss amounts reflect the portion ofother-than-temporary impairment losses that is recognized in earnings in accordance with the newother-than-temporary impairment accounting guidance that we adopted on April 1, 2009. |
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Table 22: | Credit Statistics of Loans Underlying Alt-A and Subprime Private-Label Mortgage-Related Securities, Including Wraps |
As of June 30, 2009 | ||||||||||||||||||||||||||||
Unpaid Principal Balance | Monoline | |||||||||||||||||||||||||||
Available | Average | Average | Financial | |||||||||||||||||||||||||
for | ³ 60 Days | Loss | Credit | Guaranteed | ||||||||||||||||||||||||
Trading | Sale | Wraps(1) | Delinquent(2)(3) | Severity(3)(4) | Enhancement(3)(5) | Amount(6) | ||||||||||||||||||||||
Dollars in Millions | ||||||||||||||||||||||||||||
Private-label mortgage-related securities backed by:(7) | ||||||||||||||||||||||||||||
Alt-A mortgage loans: | ||||||||||||||||||||||||||||
Option ARM Alt-A mortgage loans: | ||||||||||||||||||||||||||||
2004 and prior | $ | — | $ | 618 | $ | — | 28.8 | % | 53.6 | % | 22.7 | % | $ | — | ||||||||||||||
2005 | — | 1,609 | — | 36.8 | 57.3 | 47.3 | 312 | |||||||||||||||||||||
2006 | — | 1,734 | — | 43.5 | 62.6 | 51.4 | 384 | |||||||||||||||||||||
2007 | 2,460 | — | — | 37.6 | 61.8 | 62.8 | 892 | |||||||||||||||||||||
Other Alt-A mortgage loans: | ||||||||||||||||||||||||||||
2004 and prior | — | 7,990 | — | 6.7 | 54.5 | 12.0 | 21 | |||||||||||||||||||||
2005 | — | 5,226 | 190 | 19.6 | 53.6 | 12.1 | — | |||||||||||||||||||||
2006 | 78 | 5,331 | — | 28.2 | 56.9 | 10.5 | — | |||||||||||||||||||||
2007 | 930 | — | 263 | 42.3 | 64.5 | 37.1 | 384 | |||||||||||||||||||||
2008(8) | — | 154 | — | — | ||||||||||||||||||||||||
Total Alt-A mortgage loans: | 3,468 | 22,662 | 453 | 1,993 | ||||||||||||||||||||||||
Subprime mortgage loans: | ||||||||||||||||||||||||||||
2004 and prior(9) | — | 2,759 | 694 | 21.6 | 74.7 | 57.7 | 671 | |||||||||||||||||||||
2005(8) | — | 319 | 2,080 | 43.8 | 73.6 | 58.8 | 243 | |||||||||||||||||||||
2006 | — | 15,080 | — | 49.1 | 73.2 | 27.0 | 52 | |||||||||||||||||||||
2007 | 3,667 | 778 | 6,899 | 44.2 | 71.0 | 27.6 | 205 | |||||||||||||||||||||
Total subprime mortgage loans: | 3,667 | 18,936 | 9,673 | 1,171 | ||||||||||||||||||||||||
Total Alt-A and subprime mortgage loans: | $ | 7,135 | $ | 41,598 | $ | 10,126 | $ | 3,164 | ||||||||||||||||||||
(1) | Represents our exposure to private-label Alt-A and subprime mortgage-related securities that have been resecuritized (or wrapped) to include our guarantee. The unpaid principal balance of these Fannie Mae guaranteed securities held by third parties is included in outstanding and unconsolidated Fannie Mae MBS held by third parties. We include incurred credit losses related to these wraps in our reserve for guaranty losses. | |
(2) | Delinquency data provided by Intex, where available, for loans backing Alt-A and subprime private-label securities that we own or guarantee. The reported Intex delinquency data reflects information from June 2009 remittances for May 2009 payments. For consistency purposes, we have adjusted the Intex delinquency data, where appropriate, to include all bankruptcies, foreclosures and real estate owned in the delinquency rates. | |
(3) | The average delinquency, severity and credit enhancement metrics are calculated for each loan pool associated with securities where Fannie Mae has exposure and are weighted based on the unpaid principal balance of those securities. | |
(4) | Severity data obtained from First American CoreLogic, where available, for loans backing Alt-A and subprime private-label mortgage-related securities that we own or guarantee. The First American CoreLogic severity data reflects information from June 2009 remittances for May 2009 payments. For consistency purposes, we have adjusted the severity data, where appropriate. | |
(5) | Average credit enhancement percentage reflects both subordination and financial guarantees. Reflects the ratio of the current amount of the securities that will incur losses in the securitization structure before any losses are allocated to securities that we own or guarantee. Percentage generally calculated based on the quotient of the total unpaid principal balance of all credit enhancement in the form of subordination or financial guarantee of the security divided by the total unpaid principal balance of all of the tranches of collateral pools from which credit support is drawn for the security that we own or guarantee. | |
(6) | Reflects amount of unpaid principal balance supported by financial guarantees from monoline financial guarantors. | |
(7) | Vintages are based on series date and not loan origination date. |
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(8) | The unpaid principal balance includes private-label REMIC securities that have been resecuritized totaling $154 million for the 2008 vintage of other Alt-A loans and $50 million for the 2005 vintage of subprime loans. These securities are excluded from the delinquency, severity and credit enhancement statistics reported in this table. | |
(9) | Includes a wrap transaction that has been consolidated on our balance sheet under FIN 46R, which effectively resulted in the underlying structure of the transaction being accounted for and reported asavailable-for-sale securities. Although the wrap transaction is supported by financial guarantees that cover all of our credit risk, we have not included the amount of these financial guarantees in this table. |
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For the | ||||
Six Months | ||||
Ended | ||||
June 30, | ||||
2009 | ||||
(Dollars in | ||||
Millions) | ||||
Net derivative liability as of December 31, 2008(2) | $ | (1,761 | ) | |
Effect of cash payments: | ||||
Fair value at inception of contracts entered into during the period(3) | 752 | |||
Fair value at date of termination of contracts settled during the period(4) | 630 | |||
Net collateral posted | 43 | |||
Periodic net cash contractual interest payments (receipts)(5) | 1,884 | |||
Total cash payments (receipts) | 3,309 | |||
Statement of operations impact of recognized amounts: | ||||
Periodic net contractual interest income (expense) accruals on interest rate swaps | (1,719 | ) | ||
Net change in fair value of terminated derivative contracts from end of prior year to date of termination | (1,825 | ) | ||
Net change in fair value of outstanding derivative contracts, including derivative contracts entered into during the period | 1,552 | |||
Derivatives fair value losses, net(6) | (1,992 | ) | ||
Net derivative liability as of June 30, 2009(2) | $ | (444 | ) | |
(1) | Excludes mortgage commitments. | |
(2) | Reflects the net amount of “Derivative liabilities at fair value” recorded in our condensed consolidated balance sheets, excluding mortgage commitments. | |
(3) | Cash payments made to purchase derivative option contracts (purchased options premiums) increase the derivative asset recorded in the condensed consolidated balance sheets. Primarily includes upfront premiums paid or received on option contracts. Also includes upfront cash paid or received on other derivative contracts. | |
(4) | Cash payments to terminate and/or sell derivative contracts reduce the derivative liability recorded in the condensed consolidated balance sheets. Primarily represents cash paid (received) upon termination of derivative contracts. | |
(5) | We accrue interest on our interest rate swap contracts based on the contractual terms and recognize the accrual as an increase to the net derivative liability recorded in the condensed consolidated balance sheets. The corresponding offsetting amount is recorded as an expense and included as a component of derivatives fair value losses in the condensed consolidated statements of operations. Net periodic interest payments on our interest rate swap contracts reduce the derivative liability. | |
(6) | Reflects net derivatives fair value losses, excluding mortgage commitments, recognized in the condensed consolidated statements of operations. |
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For the Six | ||||
Months Ended | ||||
June 30, 2009 | ||||
(Dollars in | ||||
millions) | ||||
GAAP consolidated balance sheets: | ||||
Fannie Mae stockholders’ deficit as of January 1(1) | $ | (15,314 | ) | |
Change in Fannie Mae stockholders’ deficit | 4,604 | |||
Fannie Mae stockholders’ deficit as of June 30(1) | $ | (10,710 | ) | |
Non-GAAP fair value balance sheets: | ||||
Estimated fair value of net assets as of January 1 | $ | (105,150 | ) | |
Change in estimated fair value of net assets | 3,114 | |||
Estimated fair value of net assets as of June 30 | $ | (102,036 | ) | |
(1) | Our net worth, as defined under the Treasury senior preferred stock purchase agreement, is equivalent to the “Total deficit” amount reported in our condensed consolidated balance sheets. Our net worth, or total deficit, is comprised of “Fannie Mae’s stockholders’ equity (deficit)” and “Noncontrolling interests” reported in our condensed consolidated balance sheets. |
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• | Credit Losses under GAAP: In our GAAP condensed consolidated financial statements, we may only recognize those credit losses that we believe have been actually incurred as of each balance sheet date. A loss is considered to have been incurred when the event triggering the loss, such as a borrower’s loss of employment or a decline in home prices, actually happens. Expected credit losses that may arise as a result of future anticipated changes in market conditions, such as further declines in home prices or increases in unemployment, can only be recognized in our condensed consolidated financial statements if and when the anticipated loss triggering event occurs. For additional information, see “Part II—Item 7—MD&A—Critical Accounting Policies and Estimates—Allowance for Loan Losses and Reserve for Guaranty Losses” and “Notes to Consolidated Financial Statements—Note 2, Summary of Significant Accounting Policies” of our 2008Form 10-K and “Consolidated Results of Operations—Credit-Related Expenses” in this report. | |
• | Credit Losses in Fair Value Balance Sheet: The credit losses incorporated into the estimated fair values in our fair value balance sheet reflect future expected credit losses plus a current market-based risk premium, or profit amount. The fair value of our guaranty obligations as of each balance sheet date is greater than our estimate of future expected credit losses in our existing guaranty book of business as of that date because the fair value of our guaranty obligations includes an estimated market risk premium. We provide additional information on the components of our guaranty obligations and how we estimate the fair value of these obligations in “Part II—Item 7—MD&A—Critical Accounting Policies and |
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Estimates—Fair Value of Financial Instruments—Fair Value of Guaranty Obligations” of our 2008Form 10-K. |
• | A pre-tax increase of approximately $12.4 billion in the fair value of the net portfolio attributable to the positive impact of changes in the net spread between our mortgage assets and our debt. We provide additional information on the composition and estimated fair value of our mortgage investments in “Consolidated Balance Sheet Analysis—Mortgage Investments.” | |
• | A pre-tax decrease of approximately $44.8 billion in the fair value of our net guaranty assets, driven by a substantial increase in the estimated fair value of our guaranty obligations, largely attributable to an increase in expected credit losses as a result of continued weakness in the housing market and general economy. In addition, but to a smaller degree, the fair value of our net guaranty assets was affected by a change we made in the first quarter of 2009 in how we estimate the fair value of certain of our guaranty obligations, which is more fully described in “Critical Accounting Policies and Estimates.” |
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As of June 30, 2009 | As of December 31, 2008 | |||||||||||||||||||||||
GAAP | GAAP | |||||||||||||||||||||||
Carrying | Fair Value | Estimated | Carrying | Fair Value | Estimated | |||||||||||||||||||
Value | Adjustment(1) | Fair Value | Value | Adjustment(1) | Fair Value | |||||||||||||||||||
(Dollars in millions) | ||||||||||||||||||||||||
Assets: | ||||||||||||||||||||||||
Cash and cash equivalents | $ | 28,991 | $ | — | $ | 28,991 | (2) | $ | 18,462 | $ | — | $ | 18,462 | (2) | ||||||||||
Federal funds sold and securities | ||||||||||||||||||||||||
purchased under agreements to resell | 25,810 | — | 25,810 | (2) | 57,418 | 2 | 57,420 | (2) | ||||||||||||||||
Trading securities | 82,400 | — | 82,400 | (2) | 90,806 | — | 90,806 | (2) | ||||||||||||||||
Available-for-sale securities | 283,941 | — | 283,941 | (2) | 266,488 | — | 266,488 | (2) | ||||||||||||||||
Mortgage loans: | ||||||||||||||||||||||||
Mortgage loans held for sale | 29,174 | 902 | 30,076 | (3) | 13,270 | 351 | 13,621 | (3) | ||||||||||||||||
Mortgage loans held for investment, net of allowance for loan losses | 386,407 | 6,196 | 392,603 | (3) | 412,142 | 3,069 | 415,211 | (3) | ||||||||||||||||
Guaranty assets of mortgage loans held in portfolio | — | 2,283 | 2,283 | (3)(4) | — | 2,255 | 2,255 | (3)(4) | ||||||||||||||||
Guaranty obligations of mortgage loans held in portfolio | — | (18,053 | ) | (18,053 | )(3)(4) | — | (11,396 | ) | (11,396 | )(3)(4) | ||||||||||||||
Total mortgage loans | 415,581 | (8,672 | ) | 406,909 | (2)(3) | 425,412 | (5,721 | ) | 419,691 | (2)(3) | ||||||||||||||
Advances to lenders | 18,938 | (411 | ) | 18,527 | (2) | 5,766 | (354 | ) | 5,412 | (2) | ||||||||||||||
Derivative assets at fair value | 1,406 | — | 1,406 | (2) | 869 | — | 869 | (2) | ||||||||||||||||
Guaranty assets andbuy-ups, net | 7,799 | 1,853 | 9,652 | (2)(4) | 7,688 | 1,336 | 9,024 | (2)(4) | ||||||||||||||||
Total financial assets | 864,866 | (7,230 | ) | 857,636 | (2) | 872,909 | (4,737 | ) | 868,172 | (2) | ||||||||||||||
Master servicing assets and credit enhancements | 797 | 4,834 | 5,631 | (4)(5) | 1,232 | 7,035 | 8,267 | (4)(5) | ||||||||||||||||
Other assets | 45,719 | 51 | 45,770 | (5)(6) | 38,263 | (2 | ) | 38,261 | (5)(6) | |||||||||||||||
Total assets | $ | 911,382 | $ | (2,345 | ) | $ | 909,037 | $ | 912,404 | $ | 2,296 | $ | 914,700 | |||||||||||
Liabilities: | ||||||||||||||||||||||||
Federal funds purchased and securities sold under agreements to repurchase | $ | — | $ | — | $ | — | (2) | $ | 77 | $ | — | $ | 77 | (2) | ||||||||||
Short-term debt | 259,781 | (7) | 326 | 260,107 | (2) | 330,991 | (7) | 1,299 | 332,290 | (2) | ||||||||||||||
Long-term debt | 573,329 | (7) | 22,859 | 596,188 | (2) | 539,402 | (7) | 34,879 | 574,281 | (2) | ||||||||||||||
Derivative liabilities at fair value | 2,047 | — | 2,047 | (2) | 2,715 | — | 2,715 | (2) | ||||||||||||||||
Guaranty obligations | 12,358 | 114,729 | 127,087 | (2) | 12,147 | 78,728 | 90,875 | (2) | ||||||||||||||||
Total financial liabilities | 847,515 | 137,914 | 985,429 | (2) | 885,332 | 114,906 | 1,000,238 | (2) | ||||||||||||||||
Other liabilities | 74,469 | (48,933 | ) | 25,536 | (8) | 42,229 | (22,774 | ) | 19,455 | (8) | ||||||||||||||
Total liabilities | 921,984 | 88,981 | 1,010,965 | 927,561 | 92,132 | 1,019,693 | ||||||||||||||||||
Equity (deficit): | ||||||||||||||||||||||||
Fannie Mae stockholders’ equity (deficit): | ||||||||||||||||||||||||
Senior preferred(9) | 35,200 | — | 35,200 | 1,000 | — | 1,000 | ||||||||||||||||||
Preferred | 20,486 | (19,665 | ) | 821 | 21,222 | (20,674 | ) | 548 | ||||||||||||||||
Common | (66,396 | ) | (71,661 | ) | (138,057 | ) | (37,536 | ) | (69,162 | ) | (106,698 | ) | ||||||||||||
Total Fannie Mae stockholders’ deficit/non-GAAP fair value of net assets | $ | (10,710 | ) | $ | (91,326 | ) | $ | (102,036 | ) | $ | (15,314 | ) | $ | (89,836 | ) | $ | (105,150 | ) | ||||||
Noncontrolling interests | 108 | — | 108 | 157 | — | 157 | ||||||||||||||||||
Total deficit | (10,602 | ) | (91,326 | ) | (101,928 | ) | (15,157 | ) | (89,836 | ) | (104,993 | ) | ||||||||||||
Total liabilities and stockholders’ equity | $ | 911,382 | $ | (2,345 | ) | $ | 909,037 | $ | 912,404 | $ | 2,296 | $ | 914,700 | |||||||||||
(1) | Each of the amounts listed as a “fair value adjustment” represents the difference between the carrying value included in our GAAP consolidated balance sheets and our best judgment of the estimated fair value of the listed item. | |
(2) | We determined the estimated fair value of these financial instruments in accordance with the fair value guidelines outlined in SFAS 157, as described in “Notes to Condensed Consolidated Financial Statements—Note 18, Fair Value of Financial Instruments.” | |
(3) | For business segment reporting purposes, we allocate intra-company guaranty fee income to our Single-Family and HCD businesses for managing the credit risk on mortgage loans held in portfolio by our Capital Markets group and charge a corresponding fee to our Capital Markets group. In computing this intra-company allocation, we disaggregate |
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the total mortgage loans reported in our GAAP condensed consolidated balance sheets, which consists of “Mortgage loans held for sale” and “Mortgage loans held for investment, net of allowance for loan losses” into components that separately reflect the value associated with credit risk, which is managed by our guaranty businesses, and the interest rate risk, which is managed by our Capital Markets group. We report the estimated fair value of the credit risk components separately in our supplemental non-GAAP consolidated fair value balance sheets as “Guaranty assets of mortgage loans held in portfolio” and “Guaranty obligations of mortgage loans held in portfolio.” We report the estimated fair value of the interest rate risk components in our supplemental non-GAAP consolidated fair value balance sheets as “Mortgage loans held for sale” and “Mortgage loans held for investment, net of allowance for loan losses.” Taken together, these four components represent the estimated fair value of the total mortgage loans reported in our GAAP condensed consolidated balance sheets. We believe this presentation provides transparency into the components of the fair value of the mortgage loans associated with the activities of our guaranty businesses and the components of the activities of our Capital Markets group, which is consistent with the way we manage risks and allocate revenues and expenses for segment reporting purposes. While the carrying values and estimated fair values of the individual line items may differ from the amounts presented in “Notes to Condensed Consolidated Financial Statements—Note 18, Fair Value of Financial Instruments” of the condensed consolidated financial statements in this report, the combined amounts together equal the carrying value and estimated fair value amounts of total mortgage loans in Note 18. | ||
(4) | In our GAAP condensed consolidated balance sheets, we report the guaranty assets associated with our outstanding Fannie Mae MBS and other guarantees as a separate line item and includebuy-ups, master servicing assets and credit enhancements associated with our guaranty assets in “Other assets.” On a GAAP basis, our guaranty assets totaled $7.1 billion and $7.0 billion as of June 30, 2009 and December 31, 2008, respectively. The associatedbuy-ups totaled $708 million and $645 million as of June 30, 2009 and December 31, 2008, respectively. In our non-GAAP fair value balance sheets, we also disclose the estimated guaranty assets and obligations related to mortgage loans held in our portfolio. The aggregate estimated fair value of the guaranty asset-related components totaled $(0.5) billion and $8.2 billion as of June 30, 2009 and December 31, 2008, respectively. These components represent the sum of the following line items in this table: (i) Guaranty assets of mortgage loans held in portfolio; (ii) Guaranty obligations of mortgage loans held in portfolio, (iii) Guaranty assets andbuy-ups; and (iv) Master servicing assets and credit enhancements. See “Part II—Item 7—MD&A—Critical Accounting Policies and Estimates—Fair Value of Financial Instruments—Fair Value of Guaranty Obligations” of our 2008Form 10-K. | |
(5) | The line items “Master servicing assets and credit enhancements” and “Other assets” together consist of the assets presented on the following six line items in our GAAP condensed consolidated balance sheets: (i) Accrued interest receivable; (ii) Acquired property, net; (iii) Deferred tax assets, net; (iv) Partnership investments; (v) Servicer and MBS trust receivable and (vi) Other assets. The carrying value of these items in our GAAP condensed consolidated balance sheets together totaled $47.2 billion and $40.1 billion as of June 30, 2009 and December 31, 2008, respectively. We deduct the carrying value of thebuy-ups associated with our guaranty obligation, which totaled $708 million and $645 million as of June 30, 2009 and December 31, 2008, respectively, from “Other assets” reported in our GAAP condensed consolidated balance sheets becausebuy-ups are a financial instrument that we combine with guaranty assets in our disclosure in Note 18. We have estimated the fair value of master servicing assets and credit enhancements based on our fair value methodologies described in “Notes to Consolidated Financial Statements—Note 20, Fair Value of Financial Instruments” of our 2008 Form10-K. | |
(6) | With the exception of LIHTC partnership investments, the GAAP carrying values of other assets generally approximate fair value. Our LIHTC partnership investments had a carrying value of $5.8 billion and $6.3 billion and an estimated fair value of $5.9 billion and $6.5 billion as of June 30, 2009 and December 31, 2008, respectively. We assume that certain other assets, consisting primarily of prepaid expenses, have no fair value. | |
(7) | Includes certain short-term debt and long-term debt instruments that we elected to report at fair value under SFAS No. 159,The Fair Value Option for Financial Assets and Financial Liabilities—Including an amendment of FASB Statement No. 115, in our GAAP condensed consolidated balance sheets. We did not elect to report any short-term debt instruments at fair value as of June 30, 2009. Includes long-term debt with a reported fair value of $22.4 billion as of June 30, 2009. Includes short-term and long-term debt instruments with a reported fair value of $4.5 billion and $21.6 billion, respectively, as of December 31, 2008. | |
(8) | The line item “Other liabilities” consists of the liabilities presented on the following five line items in our GAAP condensed consolidated balance sheets: (i) Accrued interest payable; (ii) Reserve for guaranty losses; (iii) Partnership liabilities; (iv) Servicer and MBS trust payable; and (v) Other liabilities. The carrying value of these items in our GAAP condensed consolidated balance sheets together totaled $74.5 billion and $42.2 billion as of June 30, 2009 and December 31, 2008, respectively. The GAAP carrying values of these other liabilities generally approximate fair value. We assume that certain other liabilities, such as deferred revenues, have no fair value. Although we report the “Reserve for guaranty losses” as a separate line item on our condensed consolidated balance sheets, it is incorporated into and reported as part of the fair value of our guaranty obligations in our non-GAAP supplemental consolidated fair value balance sheets. | |
(9) | The estimated fair value of the senior preferred stock is the same as the carrying value, as the fair value is based on the liquidation preference. |
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For the Six | ||||
Months | ||||
Ended | ||||
June 30, | ||||
2009 | ||||
(Dollars in | ||||
millions) | ||||
Estimated fair value of net assets as of January 1(1) | $ | (105,150 | ) | |
Capital transactions:(2) | ||||
Common stock issuances and repurchases, net | 732 | |||
Preferred stock conversion | (736 | ) | ||
Investments by Treasury under senior preferred stock purchase agreement(3) | 33,766 | |||
Capital transactions, net | 33,762 | |||
Change in estimated fair value of net assets, excluding effect of capital transactions | (30,648 | ) | ||
Increase in estimated fair value of net assets, net | 3,114 | |||
Estimated fair value of net assets as of June 30(1) | $ | (102,036 | ) | |
(1) | Represents estimated fair value of net assets (net of tax effect) presented in Table 25: Supplemental Non-GAAP Consolidated Fair Value Balance Sheets. | |
(2) | Represents net capital transactions, which are reflected in the condensed consolidated statements of changes in equity. | |
(3) | Net of senior preferred stock dividends. |
• | principal and interest payments received on mortgage loans, mortgage-related securities and non-mortgage investments we own; | |
• | proceeds from the sale of mortgage loans, mortgage-related securities and non-mortgage assets; | |
• | equity funding received from Treasury pursuant to the senior preferred stock purchase agreement; | |
• | borrowings under secured and unsecured intraday funding lines of credit we have established with several large financial institutions; | |
• | guaranty fees received on Fannie Mae MBS; |
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• | borrowings against mortgage-related securities and other investment securities we hold pursuant to repurchase agreements and loan agreements; | |
• | payments received from mortgage insurance counterparties; and | |
• | net receipts on derivative instruments. |
• | the repayment of matured, paid off and repurchased debt; | |
• | the purchase of mortgage loans, mortgage-related securities and other investments; | |
• | interest payments on outstanding debt; | |
• | dividend payments made to Treasury pursuant to the senior preferred stock purchase agreement; | |
• | net payments on derivative instruments; | |
• | the pledging of collateral under derivative instruments; | |
• | administrative expenses; and | |
• | losses incurred in connection with our Fannie Mae MBS guaranty obligations. |
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For the | For the | |||||||||||||||
Three Months Ended | Six Months Ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2009 | 2008 | 2009 | 2008 | |||||||||||||
(Dollars in millions) | ||||||||||||||||
Issued during the period:(1) | ||||||||||||||||
Short-term:(2) | ||||||||||||||||
Amount(3) | $ | 388,028 | $ | 404,431 | $ | 689,848 | $ | 840,884 | ||||||||
Weighted average interest rate | 0.37 | % | 2.07 | % | 0.33 | % | 2.50 | % | ||||||||
Long-term:(4) | ||||||||||||||||
Amount(3) | $ | 83,982 | $ | 83,589 | $ | 192,483 | $ | 171,867 | ||||||||
Weighted average interest rate | 2.40 | % | 3.71 | % | 2.35 | % | 3.88 | % | ||||||||
Total issued: | ||||||||||||||||
Amount(3) | $ | 472,010 | $ | 488,020 | $ | 882,331 | $ | 1,012,751 | ||||||||
Weighted average interest rate | 0.72 | % | 2.35 | % | 0.76 | % | 2.73 | % | ||||||||
Paid off during the period:(1)(5) | ||||||||||||||||
Short-term:(2) | ||||||||||||||||
Amount(3) | $ | 403,310 | $ | 380,417 | $ | 762,200 | $ | 836,047 | ||||||||
Weighted average interest rate | 0.47 | % | 2.58 | % | 0.71 | % | 3.07 | % | ||||||||
Long-term:(4) | ||||||||||||||||
Amount(3) | $ | 91,866 | $ | 65,730 | $ | 157,104 | $ | 171,869 | ||||||||
Weighted average interest rate | 4.76 | % | 4.90 | % | 4.54 | % | 5.00 | % | ||||||||
Total paid off: | ||||||||||||||||
Amount(3) | $ | 495,176 | $ | 446,147 | $ | 919,304 | $ | 1,007,916 | ||||||||
Weighted average interest rate | 1.26 | % | 2.92 | % | 1.37 | % | 3.40 | % |
(1) | Excludes debt activity resulting from consolidations and intraday loans. | |
(2) | Short-term debt consists of borrowings with an original contractual maturity of one year or less. Includes Federal funds purchased and securities sold under agreements to repurchase. | |
(3) | Represents the face amount at issuance or redemption. | |
(4) | Long-term debt consists of borrowings with an original contractual maturity of greater than one year. | |
(5) | Represents all payments on debt, including regularly scheduled principal payments, payments at maturity, payments as the result of a call and payments for any other repurchases. |
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• | Treasury’s $200 billion funding commitment to us under the senior preferred stock purchase agreement; | |
• | making the Treasury credit facility available to us; | |
• | the Federal Reserve’s active program to purchase up to $200 billion in debt securities of Fannie Mae, Freddie Mac and the Federal Home Loan Banks, as well as up to $1.25 trillion in Fannie Mae, Freddie Mac and Ginnie Mae mortgage-backed securities; and | |
• | Treasury’s agency MBS purchase program. |
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As of | ||||||||||||||||||||||||
June 30, 2009 | December 31, 2008 | |||||||||||||||||||||||
Weighted | Weighted | |||||||||||||||||||||||
Average | Average | |||||||||||||||||||||||
Interest | Interest | |||||||||||||||||||||||
Maturities | Outstanding | Rate | Maturities | Outstanding | Rate | |||||||||||||||||||
Federal funds purchased and securities sold under agreements to repurchase | — | $ | — | — | % | — | $ | 77 | 0.01 | % | ||||||||||||||
Short-term debt:(2) | ||||||||||||||||||||||||
Fixed rate short-term debt: | ||||||||||||||||||||||||
Discount notes | — | $ | 256,266 | 0.74 | % | — | $ | 322,932 | 1.75 | % | ||||||||||||||
Foreign exchange discount notes | — | 189 | 1.18 | — | 141 | 2.50 | ||||||||||||||||||
Other short-term debt | — | 224 | 1.35 | — | 333 | 2.80 | ||||||||||||||||||
Total fixed rate short-term debt | 256,679 | 0.74 | 323,406 | 1.75 | ||||||||||||||||||||
Floating-rate short-term debt(4) | — | 3,102 | 1.17 | — | 7,585 | 1.66 | ||||||||||||||||||
Total short-term debt | $ | 259,781 | 0.74 | % | $ | 330,991 | 1.75 | % | ||||||||||||||||
Long-term debt:(3) | ||||||||||||||||||||||||
Senior fixed rate long-term debt: | ||||||||||||||||||||||||
Benchmark notes and bonds | 2009-2030 | $ | 277,360 | 4.39 | % | 2009-2030 | $ | 251,063 | 4.92 | % | ||||||||||||||
Medium-term notes | 2009-2019 | 153,146 | 3.13 | 2009-2018 | 151,277 | 4.20 | ||||||||||||||||||
Foreign exchange notes and bonds | 2010-2028 | 1,204 | 5.57 | 2009-2028 | 1,513 | 4.70 | ||||||||||||||||||
Other long-term debt(4) | 2009-2039 | 57,200 | 5.76 | 2009-2038 | 73,061 | 5.95 | ||||||||||||||||||
Total senior fixed rate debt | 488,910 | 4.16 | 476,914 | 4.85 | ||||||||||||||||||||
Senior floating rate long-term debt: | ||||||||||||||||||||||||
Medium-term notes | 2009-2013 | 67,556 | 0.83 | 2009-2017 | 45,737 | 2.21 | ||||||||||||||||||
Other long-term debt(4) | 2020-2037 | 1,210 | 6.38 | 2020-2037 | 874 | 7.22 | ||||||||||||||||||
Total senior floating rate debt | 68,766 | 0.93 | 46,611 | 2.30 |
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As of | ||||||||||||||||||||||||
June 30, 2009 | December 31, 2008 | |||||||||||||||||||||||
Weighted | Weighted | |||||||||||||||||||||||
Average | Average | |||||||||||||||||||||||
Interest | Interest | |||||||||||||||||||||||
Maturities | Outstanding | Rate | Maturities | Outstanding | Rate | |||||||||||||||||||
Subordinated fixed rate long-term debt: | ||||||||||||||||||||||||
Medium-term notes | 2011-2011 | 2,500 | 6.29 | 2011-2011 | 2,500 | 6.24 | ||||||||||||||||||
Other subordinated debt | 2012-2019 | 7,217 | 6.65 | 2012-2019 | 7,116 | 6.58 | ||||||||||||||||||
Total subordinated fixed rate long-term debt | 9,717 | 6.56 | 9,616 | 6.50 | ||||||||||||||||||||
Debt from consolidations | 2009-2039 | 5,936 | 5.76 | 2009-2039 | 6,261 | 5.87 | ||||||||||||||||||
Total long-term debt | $ | 573,329 | 3.83 | % | $ | 539,402 | 4.67 | % | ||||||||||||||||
Outstanding callable debt(5) | $ | 186,729 | 3.58 | % | $ | 192,480 | 4.71 | % |
(1) | Outstanding debt amounts and weighted average interest rates reported in this table include the effect of unamortized discounts, premiums and other cost basis adjustments. Reported amounts as of June 30, 2009 and December 31, 2008 include fair value gains and losses associated with debt that we elected to carry at fair value. | |
(2) | Short-term debt 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. Includes unamortized discounts, premiums and other cost basis adjustments of $476 million as of June 30, 2009. | |
(3) | Long-term debt consists of borrowings with an original contractual maturity of greater than one year. Included is the current portion of long-term debt that is due within one year, which totaled $107.2 billion and $86.5 billion as of June 30, 2009 and December 31, 2008, respectively. Reported amounts include net discount and other cost basis adjustments of $16.8 billion and $15.5 billion as of June 30, 2009 and December 31, 2008, respectively. The unpaid principal balance of long-term debt, which excludes unamortized discounts, premiums and other cost basis adjustments and amounts related to debt from consolidation, totaled $584.1 billion and $548.6 billion as June 30, 2009 and December 31, 2008, respectively. | |
(4) | Includes a portion of structured debt instruments that are reported at fair value. | |
(5) | Consists of long-term callable debt that can be paid off in whole or in part at our option at any time on or after a specified date. Includes the unpaid principal balance, and excludes unamortized discounts, premiums and other cost basis adjustments. |
(1) Includes unamortized discounts, premiums and other cost basis adjustments of $476 million as of June 30, 2009. |
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(1) Includes unamortized discounts, premiums and other cost basis adjustments of $16.8 billion as of June 30, 2009. Excludes debt from consolidations of $5.9 billion as of June 30, 2009. |
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• | daily monitoring and reporting of our liquidity position; | |
• | daily forecasting of our ability to meet our liquidity needs over a90-day period without relying upon the issuance of long-term or short-term unsecured debt securities; | |
• | daily forecasting and statistical analysis of our daily cash needs over a 28-business-day period; | |
• | routine operational testing of our ability to rely upon identified sources of liquidity, such as mortgage repurchase agreements; | |
• | periodic reporting to management and the conservator regarding our liquidity position; and | |
• | periodic review and testing of our liquidity management controls by our Internal Audit department. |
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• | the Treasury credit facility; | |
• | our cash and other investments portfolio; and | |
• | our unencumbered mortgage portfolio. |
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As of | ||||||||
June 30, | December 31, | |||||||
2009 | 2008 | |||||||
(Dollars in millions) | ||||||||
Cash and cash equivalents | $ | 28,234 | $ | 17,933 | ||||
Federal funds sold and securities purchased under agreements to resell | 25,810 | 57,418 | ||||||
Non-mortgage-related securities: | ||||||||
Asset-backed securities | 9,808 | 10,598 | ||||||
Corporate debt securities | 935 | 6,037 | ||||||
Other | 5,003 | 1,005 | ||||||
Total | $ | 69,790 | $ | 92,991 | ||||
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As of August 1, 2009 | ||||||
Standard & | ||||||
Poor’s | Moody’s | Fitch | ||||
Long-term senior debt | AAA | Aaa | AAA | |||
Short-term senior debt | A-1+ | P-1 | F1+ | |||
Subordinated debt | A | Aa2 | AA- | |||
Preferred stock | C | Ca | C/RR6 | |||
Bank financial strength rating | — | E+ | — | |||
Outlook | Stable (for Long Term Senior Debt and Subordinated Debt) | Stable (for all ratings) | Stable (for AAA rated Long Term Issue Default Rating) |
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As of | ||||||||
June 30, | December 31, | |||||||
2009(1) | 2008(1) | |||||||
(Dollars in millions) | ||||||||
Core capital(2) | $ | (38,480 | ) | $ | (8,641 | ) | ||
Statutory minimum capital requirement(3) | 33,878 | 33,552 | ||||||
Deficit of core capital over statutory minimum capital requirement | $ | (72,358 | ) | $ | (42,193 | ) | ||
Deficit of core capital percentage over statutory minimum capital requirement | (213.6 | )% | (125.8 | )% |
(1) | Amounts as of June 30, 2009 represent estimates that have been submitted to FHFA. Amounts as of December 31, 2008 are as published by FHFA on its website. As noted above, FHFA is not issuing capital classifications during conservatorship. | |
(2) | The sum of (a) the stated value of our outstanding common stock (common stock less treasury stock); (b) the stated value of our outstanding non-cumulative perpetual preferred stock; (c) our paid-in capital; and (d) our retained earnings (accumulated deficit). Core capital does not include: (a) accumulated other comprehensive income (loss) or (b) senior preferred stock. |
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(3) | Generally, the sum of (a) 2.50% of on-balance sheet assets; (b) 0.45% of the unpaid principal balance of outstanding Fannie Mae MBS held by third parties; and (c) up to 0.45% of other off-balance sheet obligations, which may be adjusted by the Director of FHFA under certain circumstances (See 12 CFR 1750.4 for existing adjustments made by the Director). |
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As of | ||||||||
June 30, | December 31, | |||||||
2009 | 2008 | |||||||
(Dollars in millions) | ||||||||
Fannie Mae MBS and other guarantees outstanding(1) | $ | 2,627,382 | $ | 2,546,217 | ||||
Less: Fannie Mae MBS held in portfolio(2) | (234,632 | ) | (228,949 | ) | ||||
Fannie Mae MBS held by third parties and other guarantees | $ | 2,392,750 | $ | 2,317,268 | ||||
(1) | Includes $26.1 billion and $27.8 billion in unpaid principal balance of other guarantees as of June 30, 2009 and December 31, 2008, respectively. Excludes $151.5 billion and $65.3 billion in unpaid principal balance of consolidated Fannie Mae MBS as of June 30, 2009 and December 31, 2008, respectively. | |
(2) | Amounts represent unpaid principal balance and are recorded in “Investments in Securities” in the condensed consolidated balance sheets. |
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82
As of June 30, 2009 | ||||||||||||||||||||||||
Single-Family(1) | Multifamily(2) | Total | ||||||||||||||||||||||
Conventional(3) | Government(4) | Conventional(3) | Government(4) | Conventional(3) | Government(4) | |||||||||||||||||||
(Dollars in millions) | ||||||||||||||||||||||||
Mortgage portfolio:(5) | ||||||||||||||||||||||||
Mortgage loans(6) | $ | 254,743 | $ | 51,173 | $ | 120,150 | $ | 644 | $ | 374,893 | $ | 51,817 | ||||||||||||
Fannie Mae MBS(7) | 232,325 | 1,905 | 387 | 15 | 232,712 | 1,920 | ||||||||||||||||||
Agency mortgage-related | ||||||||||||||||||||||||
securities(7)(8) | 39,061 | 1,438 | — | 21 | 39,061 | 1,459 | ||||||||||||||||||
Mortgage revenue bonds(7) | 2,879 | 2,316 | 7,800 | 2,024 | 10,679 | 4,340 | ||||||||||||||||||
Other mortgage-related securities(7)(9) | 51,708 | 1,875 | 25,769 | 23 | 77,477 | 1,898 | ||||||||||||||||||
Total mortgage portfolio | 580,716 | 58,707 | 154,106 | 2,727 | 734,822 | 61,434 | ||||||||||||||||||
Fannie Mae MBS held by third | ||||||||||||||||||||||||
parties(10) | 2,313,101 | 12,383 | 40,443 | 706 | 2,353,544 | 13,089 | ||||||||||||||||||
Other credit guarantees(11) | 8,853 | — | 17,236 | 28 | 26,089 | 28 | ||||||||||||||||||
Mortgage credit book of business | $ | 2,902,670 | $ | 71,090 | $ | 211,785 | $ | 3,461 | $ | 3,114,455 | $ | 74,551 | ||||||||||||
Guaranty book of business | $ | 2,809,022 | $ | 65,461 | $ | 178,216 | $ | 1,393 | $ | 2,987,238 | $ | 66,854 | ||||||||||||
As of December 31, 2008 | ||||||||||||||||||||||||
Single-Family(1) | Multifamily(2) | Total | ||||||||||||||||||||||
Conventional(3) | Government(4) | Conventional(3) | Government(4) | Conventional(3) | Government(4) | |||||||||||||||||||
(Dollars in millions) | ||||||||||||||||||||||||
Mortgage portfolio:(5) | ||||||||||||||||||||||||
Mortgage loans(6) | $ | 268,253 | $ | 43,799 | $ | 116,742 | $ | 699 | $ | 384,995 | $ | 44,498 | ||||||||||||
Fannie Mae MBS(7) | 226,654 | 1,850 | 376 | 69 | 227,030 | 1,919 | ||||||||||||||||||
Agency mortgage-related securities(7)(8) | 33,320 | 1,559 | — | 22 | 33,320 | 1,581 | ||||||||||||||||||
Mortgage revenue bonds(7) | 2,951 | 2,480 | 7,938 | 2,078 | 10,889 | 4,558 | ||||||||||||||||||
Other mortgage-related securities(7)(9) | 55,597 | 1,960 | 25,825 | 24 | 81,422 | 1,984 | ||||||||||||||||||
Total mortgage portfolio | 586,775 | 51,648 | 150,881 | 2,892 | 737,656 | 54,540 | ||||||||||||||||||
Fannie Mae MBS held by third parties(10) | 2,238,257 | 13,117 | 37,298 | 787 | 2,275,555 | 13,904 | ||||||||||||||||||
Other credit guarantees(11) | 10,464 | — | 17,311 | 34 | 27,775 | 34 | ||||||||||||||||||
Mortgage credit book of business | $ | 2,835,496 | $ | 64,765 | $ | 205,490 | $ | 3,713 | $ | 3,040,986 | $ | 68,478 | ||||||||||||
Guaranty book of business | $ | 2,743,628 | $ | 58,766 | $ | 171,727 | $ | 1,589 | $ | 2,915,355 | $ | 60,355 | ||||||||||||
(1) | The amounts reported above reflect our total single-family mortgage credit book of business. Of these amounts, the portion of our single-family mortgage credit book of business for which we have access to detailed loan-level information represented approximately 95% and 96% of our total conventional single-family mortgage credit book of business as of June 30, 2009 and December 31, 2008, respectively. Unless otherwise noted, the credit statistics we provide in the discussion that follows relate only to this specific portion of our conventional single-family mortgage credit book of business. The remaining portion of our conventional single-family mortgage credit book of business consists of Freddie Mac securities, Ginnie Mae securities, private-label mortgage-related securities, Fannie Mae MBS backed by private-label mortgage-related securities, housing-related municipal revenue bonds, other single-family government related loans and securities, and credit enhancements that we provide on single-family mortgage assets. |
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See “Consolidated Balance Sheet Analysis—Trading andAvailable-For-Sale Investment Securities—Investments in Private-Label Mortgage-Related Securities” for additional information on our private-label mortgage securities. | ||
(2) | The amounts reported above reflect our total multifamily mortgage credit book of business. Of these amounts, the portion of our multifamily mortgage credit book of business for which we have access to detailed loan-level information represented approximately 83% and 82% of our total multifamily mortgage credit book of business as of June 30, 2009 and December 31, 2008, respectively. Unless otherwise noted, the credit statistics we provide in the discussion that follows relate only to this specific portion of our multifamily mortgage credit book of business. | |
(3) | Refers to mortgage loans and mortgage-related securities that are not guaranteed or insured by the U.S. government or any of its agencies. | |
(4) | Refers to mortgage loans and mortgage-related securities guaranteed or insured by the U.S. government or one of its agencies. | |
(5) | Mortgage portfolio data is reported based on unpaid principal balance. | |
(6) | Includes unpaid principal balance totaling $152.1 billion and $65.8 billion as of June 30, 2009 and December 31, 2008, respectively, related to mortgage-related securities that were consolidated under FIN 46R and mortgage-related securities created from securitization transactions that did not meet the sales criteria under SFAS 140, which effectively resulted in these mortgage-related securities being accounted for as loans. | |
(7) | Includes unpaid principal balance totaling $12.2 billion and $13.3 billion as of June 30, 2009 and December 31, 2008, respectively, related to mortgage-related securities that were consolidated under FIN 46R and mortgage-related securities created from securitization transactions that did not meet the sales criteria under SFAS 140, which effectively resulted in these mortgage-related securities being accounted for as securities. | |
(8) | Consists of mortgage-related securities issued by Freddie Mac and Ginnie Mae. As of June 30, 2009, we held mortgage-related securities issued by Freddie Mac with both a carrying value and a fair value of $40.1 billion, which exceeded 10% of our stockholders’ equity as of June 30, 2009. | |
(9) | Includes mortgage-related securities issued by entities other than Fannie Mae, Freddie Mac or Ginnie Mae. | |
(10) | Includes Fannie Mae MBS held by third-party investors. The principal balance of resecuritized Fannie Mae MBS is included only once in the reported amount. | |
(11) | Includes single-family and multifamily credit enhancements that we have provided and that are not otherwise reflected in the table. |
Table 36: | Risk Characteristics of Conventional Single-Family Business Volume and Mortgage Credit Book of Business(1) |
Percent of Conventional | ||||||||||||||||||||||||
Single-Family Business Volume(2) | ||||||||||||||||||||||||
For the | Percent of Conventional | |||||||||||||||||||||||
For the | Six Months | Single-Family | ||||||||||||||||||||||
Three Months | Ended | Book of Business(3) | ||||||||||||||||||||||
Ended | June 30, | As of | ||||||||||||||||||||||
June 30, | March 31, | June 30, | December 31, | |||||||||||||||||||||
2009 | 2009 | 2009 | 2008 | 2009 | 2008 | |||||||||||||||||||
Original LTV ratio:(4) | ||||||||||||||||||||||||
<= 60% | 36 | % | 30 | % | 33 | % | 22 | % | 23 | % | 22 | % | ||||||||||||
60.01% to 70% | 18 | 18 | 18 | 17 | 16 | 16 | ||||||||||||||||||
70.01% to 80% | 39 | 42 | 40 | 38 | 42 | 43 | ||||||||||||||||||
80.01% to 90%(5) | 5 | 7 | 6 | 11 | 9 | 9 | ||||||||||||||||||
90.01% to 100%(5) | 2 | 3 | 3 | 12 | 10 | 10 | ||||||||||||||||||
Greater than 100%(5) | — | — | — | — | — | — | ||||||||||||||||||
Total | 100 | % | 100 | % | 100 | % | 100 | % | 100 | % | 100 | % | ||||||||||||
Weighted average | 65 | % | 67 | % | 66 | % | 72 | % | 72 | % | 72 | % | ||||||||||||
Average loan amount | $ | 214,413 | $ | 218,185 | $ | 215,999 | $ | 207,593 | $ | 150,966 | $ | 148,824 |
84
Percent of Conventional | ||||||||||||||||||||||||
Single-Family Business Volume(2) | ||||||||||||||||||||||||
For the | Percent of Conventional | |||||||||||||||||||||||
For the | Six Months | Single-Family | ||||||||||||||||||||||
Three Months | Ended | Book of Business(3) | ||||||||||||||||||||||
Ended | June 30, | As of | ||||||||||||||||||||||
June 30, | March 31, | June 30, | December 31, | |||||||||||||||||||||
2009 | 2009 | 2009 | 2008 | 2009 | 2008 | |||||||||||||||||||
Estimatedmark-to-market LTV ratio:(6) | ||||||||||||||||||||||||
<= 60% | 31 | % | 36 | % | ||||||||||||||||||||
60.01% to 70% | 13 | 13 | ||||||||||||||||||||||
70.01% to 80% | 18 | 17 | ||||||||||||||||||||||
80.01% to 90% | 14 | 14 | ||||||||||||||||||||||
90.01% to 100% | 10 | 8 | ||||||||||||||||||||||
Greater than 100% | 14 | 12 | ||||||||||||||||||||||
Total | 100 | % | 100 | % | ||||||||||||||||||||
Weighted average | 74 | % | 70 | % | ||||||||||||||||||||
Product type: | ||||||||||||||||||||||||
Fixed-rate:(7) | ||||||||||||||||||||||||
Long-term | 83 | % | 86 | % | 84 | % | 75 | % | 75 | % | 74 | % | ||||||||||||
Intermediate-term | 15 | 13 | 14 | 13 | 13 | 13 | ||||||||||||||||||
Interest-only | — | — | — | 2 | 3 | 3 | ||||||||||||||||||
Total fixed-rate | 98 | 99 | 98 | 90 | 91 | 90 | ||||||||||||||||||
Adjustable-rate: | ||||||||||||||||||||||||
Interest-only | 1 | — | 1 | 5 | 4 | 5 | ||||||||||||||||||
Negative-amortizing | — | — | — | — | 1 | 1 | ||||||||||||||||||
Other ARMs | 1 | 1 | 1 | 5 | 4 | 4 | ||||||||||||||||||
Total adjustable-rate | 2 | 1 | 2 | 10 | 9 | 10 | ||||||||||||||||||
Total | 100 | % | 100 | % | 100 | % | 100 | % | 100 | % | 100 | % | ||||||||||||
Number of property units: | ||||||||||||||||||||||||
1 unit | 99 | % | 99 | % | 99 | % | 97 | % | 96 | % | 96 | % | ||||||||||||
2-4 units | 1 | 1 | 1 | 3 | 4 | 4 | ||||||||||||||||||
Total | 100 | % | 100 | % | 100 | % | 100 | % | 100 | % | 100 | % | ||||||||||||
Property type: | ||||||||||||||||||||||||
Single-family homes | 93 | % | 93 | % | 93 | % | 90 | % | 91 | % | 91 | % | ||||||||||||
Condo/Co-op | 7 | 7 | 7 | 10 | 9 | 9 | ||||||||||||||||||
Total | 100 | % | 100 | % | 100 | % | 100 | % | 100 | % | 100 | % | ||||||||||||
Occupancy type: | ||||||||||||||||||||||||
Primary residence | 94 | % | 94 | % | 94 | % | 90 | % | 90 | % | 90 | % | ||||||||||||
Second/vacation home | 4 | 4 | 4 | 5 | 4 | 4 | ||||||||||||||||||
Investor | 2 | 2 | 2 | 5 | 6 | 6 | ||||||||||||||||||
Total | 100 | % | 100 | % | 100 | % | 100 | % | 100 | % | 100 | % | ||||||||||||
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Percent of Conventional | ||||||||||||||||||||||||
Single-Family Business Volume(2) | ||||||||||||||||||||||||
For the | Percent of Conventional | |||||||||||||||||||||||
For the | Six Months | Single-Family | ||||||||||||||||||||||
Three Months | Ended | Book of Business(3) | ||||||||||||||||||||||
Ended | June 30, | As of | ||||||||||||||||||||||
June 30, | March 31, | June 30, | December 31, | |||||||||||||||||||||
2009 | 2009 | 2009 | 2008 | 2009 | 2008 | |||||||||||||||||||
FICO credit score: | ||||||||||||||||||||||||
< 620 | — | % | — | % | — | % | 3 | % | 4 | % | 5 | % | ||||||||||||
620 to < 660 | 1 | 2 | 2 | 7 | 9 | 9 | ||||||||||||||||||
660 to < 700 | 6 | 7 | 6 | 16 | 17 | 17 | ||||||||||||||||||
700 to < 740 | 17 | 17 | 17 | 22 | 22 | 23 | ||||||||||||||||||
>= 740 | 76 | 74 | 75 | 52 | 47 | 45 | ||||||||||||||||||
Not available | — | — | — | — | 1 | 1 | ||||||||||||||||||
Total | 100 | % | 100 | % | 100 | % | 100 | % | 100 | % | 100 | % | ||||||||||||
Weighted average | 763 | 761 | 762 | 733 | 727 | 724 | ||||||||||||||||||
Loan purpose: | ||||||||||||||||||||||||
Purchase | 16 | % | 16 | % | 16 | % | 34 | % | 37 | % | 41 | % | ||||||||||||
Cash-out refinance | 30 | 31 | 30 | 34 | 32 | 32 | ||||||||||||||||||
Other refinance | 54 | 53 | 54 | 32 | 31 | 27 | ||||||||||||||||||
Total | 100 | % | 100 | % | 100 | % | 100 | % | 100 | % | 100 | % | ||||||||||||
Geographic concentration:(8) | ||||||||||||||||||||||||
Midwest | 17 | % | 19 | % | 18 | % | 16 | % | 16 | % | 16 | % | ||||||||||||
Northeast | 19 | 17 | 18 | 18 | 19 | 19 | ||||||||||||||||||
Southeast | 20 | 21 | 20 | 24 | 24 | 25 | ||||||||||||||||||
Southwest | 15 | 16 | 16 | 16 | 16 | 16 | ||||||||||||||||||
West | 29 | 27 | 28 | 26 | 25 | 24 | ||||||||||||||||||
Total | 100 | % | 100 | % | 100 | % | 100 | % | 100 | % | 100 | % | ||||||||||||
Origination year: | ||||||||||||||||||||||||
<=1999 | 2 | % | 2 | % | ||||||||||||||||||||
2000 | — | — | ||||||||||||||||||||||
2001 | 1 | 2 | ||||||||||||||||||||||
2002 | 5 | 5 | ||||||||||||||||||||||
2003 | 16 | 18 | ||||||||||||||||||||||
2004 | 9 | 10 | ||||||||||||||||||||||
2005 | 12 | 13 | ||||||||||||||||||||||
2006 | 12 | 14 | ||||||||||||||||||||||
2007 | 17 | 20 | ||||||||||||||||||||||
2008 | 14 | 16 | ||||||||||||||||||||||
2009 | 12 | — | ||||||||||||||||||||||
Total | 100 | % | 100 | % | ||||||||||||||||||||
(1) | As noted in Table 35 above, we generally have access to detailed loan-level statistics only on conventional single-family mortgage loans held in our portfolio and backing Fannie Mae MBS. We typically obtain the data for the statistics presented in this table from the sellers or servicers of the mortgage loans and receive representations and warranties from them as to the accuracy of the information. While we perform various quality assurance checks by sampling loans to assess compliance with our underwriting and eligibility criteria, we do not independently verify all reported information. We reflect second lien loans in the original LTV ratio calculation only when we own both the |
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first and second mortgage liens or we only own the second mortgage lien. Second lien mortgage loans represented less than 0.5% of our conventional single-family business volume for each of the three months ended June 30, 2009 and 2008, and less than 0.5% of our single-family mortgage credit book of business as of June 30, 2009 and December 31, 2008. Second lien loans held by third parties are not reflected in the original LTV ormark-to-market LTV ratios in this table. | ||
(2) | Percentages calculated based on unpaid principal balance of loans at time of acquisition. Single-family business volume refers to both single-family mortgage loans we purchase for our mortgage portfolio and single-family mortgage loans we securitize into Fannie Mae MBS. | |
(3) | Percentages calculated based on unpaid principal balance of loans as of the end of each period. | |
(4) | The originalloan-to-value ratio generally is based on the appraised property value reported to us at the time of acquisition of the loan and the original unpaid principal balance of the loan. Excludes loans for which this information is not readily available. | |
(5) | We purchase loans with originalloan-to-value ratios above 80% to fulfill our mission to serve the primary mortgage market and provide liquidity to the housing system. Except as permitted under the Home Affordable Refinance Program, our charter generally requires primary mortgage insurance or other credit enhancement for loans that we acquire that has a LTV ratio over 80%. | |
(6) | The aggregate estimatedmark-to-marketloan-to-value ratio is based on the estimated current value of the property, calculated using an internal valuation model that estimates periodic changes in home value, and the unpaid principal balance of the loan as of the date of each reported period. 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 have maturities equal to or less than 15 years. Loans with interest-only terms are included in the interest-only category regardless of their maturities. | |
(8) | Midwest consists of IL, IN, IA, MI, MN, NE, ND, OH, SD and WI. Northeast includes 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. |
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Percent of Conventional | ||||||||||||||||
Single-Family | ||||||||||||||||
Outstanding | Mortgage Credit | |||||||||||||||
Unpaid Principal Balance | Book of Business | |||||||||||||||
As of | As of | |||||||||||||||
June 30, | December 31, | June 30, | December 31, | |||||||||||||
2009 | 2008 | 2009 | 2008 | |||||||||||||
(Dollars in millions) | ||||||||||||||||
Product type: | ||||||||||||||||
Alt-A loans(1) | $ | 269,290 | $ | 292,355 | 9.8 | % | 10.7 | % | ||||||||
Subprime loans(2) | 7,918 | 8,415 | 0.3 | 0.3 | ||||||||||||
Jumbo-conforming and high-balance loans(3) | 35,986 | 19,653 | 1.3 | 0.7 |
(1) | Consists of Alt-A mortgage loans held in our portfolio or backing Fannie Mae MBS, excluding resecuritized private-label mortgage-related securities backed by Alt-A mortgage loans. | |
(2) | Consists of subprime mortgage loans held in our portfolio or backing Fannie Mae MBS, excluding resecuritized private-label mortgage-related securities backed by subprime mortgage loans. | |
(3) | Refers to high-balance loans we acquired pursuant to the Economic Stimulus Act of 2008, HERA and the American Recovery and Reinvestment Act of 2009, which together, among other things, increased our conforming loan limits in certain high-cost areas above our standard conforming loan limit. The standard conforming loan limit for aone-unit property was $417,000 in 2009 and 2008. See “Part I—Item 1—Business—Conservatorship, Treasury Agreements, Our Charter and Regulation of Our Activities—Charter Act—Loan Standards” of our 2008Form 10-K for additional information on our loan limits. |
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• | Early Stage Delinquency |
As of | ||||||||||||
June 30, | December 31, | June 30, | ||||||||||
2009 | 2008 | 2008 | ||||||||||
Delinquency status:(1) | ||||||||||||
30 to 59 days delinquent | 2.39 | % | 2.52 | % | 2.05 | % | ||||||
60 to 89 days delinquent | 0.96 | 1.00 | 0.62 | |||||||||
Seriously delinquent(2) | 3.94 | 2.42 | 1.36 |
(1) | Calculated based on the number of conventional single-family loans that are delinquent divided by the number of loans in our conventional single-family guaranty book of business. We include conventional single-family loans that we own and that back Fannie Mae MBS in the calculation of the single-family delinquency rate. | |
(2) | Includes conventional single-family loans that are three or more monthly payments past due and loans that have been referred to foreclosure but not yet foreclosed upon. |
• | Serious Delinquency |
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June 30, 2009 | December 31, 2008 | June 30, 2008 | ||||||||||||||||||||||||||
Percentage of | Serious | Percentage of | Serious | Percentage of | Serious | |||||||||||||||||||||||
Book | Delinquency | Book | Delinquency | Book | Delinquency | |||||||||||||||||||||||
Outstanding(1) | Rate(2) | Outstanding(1) | Rate(2) | Outstanding(1) | Rate(2) | |||||||||||||||||||||||
Conventional single-family delinquency rates by geographic region:(3) | ||||||||||||||||||||||||||||
Midwest | 16 | % | 3.71 | % | 16 | % | 2.44 | % | 16 | % | 1.57 | % | ||||||||||||||||
Northeast | 19 | 3.20 | 19 | 1.97 | 19 | 1.21 | ||||||||||||||||||||||
Southeast | 24 | 5.21 | 25 | 3.27 | 25 | 1.80 | ||||||||||||||||||||||
Southwest | 16 | 3.07 | 16 | 1.98 | 16 | 1.08 | ||||||||||||||||||||||
West | 25 | 3.96 | 24 | 2.10 | 24 | 0.97 | ||||||||||||||||||||||
Total conventional single- family loans | 100 | % | 3.94 | % | 100 | % | 2.42 | % | 100 | % | 1.36 | % | ||||||||||||||||
Conventional single-family loans: | ||||||||||||||||||||||||||||
Credit enhanced | 19 | % | 10.25 | % | 21 | % | 6.42 | % | 21 | % | 3.74 | % | ||||||||||||||||
Non-credit enhanced | 81 | 2.47 | 79 | 1.40 | 79 | 0.74 | ||||||||||||||||||||||
Total conventional single- family loans | 100 | % | 3.94 | % | 100 | % | 2.42 | % | 100 | % | 1.36 | % | ||||||||||||||||
Multifamily loans: | ||||||||||||||||||||||||||||
Credit enhanced | 90 | % | 0.43 | % | 86 | % | 0.26 | % | 87 | % | 0.09 | % | ||||||||||||||||
Non-credit enhanced | 10 | 1.23 | 14 | 0.54 | 13 | 0.22 | ||||||||||||||||||||||
Total multifamily loans | 100 | % | 0.51 | % | 100 | % | 0.30 | % | 100 | % | 0.11 | % | ||||||||||||||||
(1) | Calculated based on unpaid principal balance of loans, where we have detailed loan-level information. | |
(2) | Calculated based on number of loans for single-family and unpaid principal balance for multifamily. We include conventional single-family loans that we own and that back Fannie Mae MBS in the calculation of the single-family delinquency rate. We include the unpaid principal balance of all multifamily loans that we own or that back Fannie Mae MBS and any housing bonds for which we provide credit enhancement in the calculation of the multifamily serious delinquency rate. | |
(3) | See footnote 8 to Table 36 for states included in each geographic region. |
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As of | ||||||||||||||||||||||||||||
June 30, 2009 | December 31, 2008 | June 30, 2008 | ||||||||||||||||||||||||||
Percentage of | Serious | Percentage of | Serious | Percentage of | Serious | |||||||||||||||||||||||
Book | Delinquency | Book | Delinquency | Book | Delinquency | |||||||||||||||||||||||
Outstanding(1) | Rate(2) | Outstanding(1) | Rate(2) | Outstanding(1) | Rate(2) | |||||||||||||||||||||||
States: | ||||||||||||||||||||||||||||
Arizona | 3 | % | 6.54 | % | 3 | % | 3.41 | % | 3 | % | 1.51 | % | ||||||||||||||||
California | 17 | 4.23 | 16 | 2.30 | 16 | 1.05 | ||||||||||||||||||||||
Florida | 7 | 9.71 | 7 | 6.14 | 7 | 3.21 | ||||||||||||||||||||||
Nevada | 1 | 9.33 | 1 | 4.74 | 1 | 2.25 | ||||||||||||||||||||||
Select Midwest states(3) | 11 | 4.16 | 11 | 2.70 | 12 | 1.73 | ||||||||||||||||||||||
All other states | 61 | 2.95 | 62 | 1.86 | 61 | 1.10 | ||||||||||||||||||||||
Product type: | ||||||||||||||||||||||||||||
Alt-A | 10 | 11.91 | 11 | 7.03 | 12 | 3.79 | ||||||||||||||||||||||
Subprime | — | 21.75 | — | 14.29 | — | 9.08 | ||||||||||||||||||||||
Vintages: | ||||||||||||||||||||||||||||
2006 | 12 | 9.05 | 14 | 5.11 | 15 | 2.79 | ||||||||||||||||||||||
2007 | 17 | 9.22 | 20 | 4.70 | 21 | 2.01 | ||||||||||||||||||||||
Estimatedmark-to-market LTV ratio: | ||||||||||||||||||||||||||||
Greater than 100% | 14 | 16.63 | 12 | 10.98 | 6 | 7.33 |
(1) | Reported based on unpaid principal of loans. | |
(2) | Calculated based on number of seriously delinquent single-family loans within each specified category divided by the total number of single-family loans within the specified category. | |
(3) | Consists of Illinois, Indiana, Michigan and Ohio. |
• | Nonperforming Loans |
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As of | ||||||||
June 30, | December 31, | |||||||
2009 | 2008 | |||||||
(Dollars in millions) | ||||||||
On-balance sheet nonperforming loans: | ||||||||
Nonaccrual loans(2) | $ | 22,449 | $ | 17,634 | ||||
Troubled debt restructurings(3) | 3,162 | 1,931 | ||||||
HomeSaver Advance first-lien loans(4) | 1,032 | 1,121 | ||||||
Total on-balance sheet nonperforming loans | 26,643 | 20,686 | ||||||
Off-balance sheet nonperforming loans:(5) | ||||||||
Off-balance sheet nonperforming loans, excluding HomeSaver Advance first-lien loans(6) | 131,343 | 89,617 | ||||||
HomeSaver Advance first-lien loans(7) | 12,978 | 8,929 | ||||||
Total off-balance sheet nonperforming loans | 144,321 | 98,546 | ||||||
Total nonperforming loans | $ | 170,964 | $ | 119,232 | ||||
Accruing on-balance sheet loans past due 90 days or more(8) | $ | 474 | $ | 317 | ||||
For the | For the | |||||||
Six Months Ended | Year Ended | |||||||
June 30, 2009 | December 31, 2008 | |||||||
Interest related to on-balance sheet nonperforming loans: | ||||||||
Interest income forgone(9) | $ | 569 | $ | 401 | ||||
Interest income recognized for the period(10) | 522 | 771 |
(1) | We classify conventional single-family and multifamily loans held in our mortgage portfolio, including delinquent single-family loans purchased from MBS trusts, as nonperforming and place them on nonaccrual status when we believe collectability of principal or interest on the loan is not reasonably assured. We generally conclude that collectability is not reasonably assured when a loan is two payments or more past due. We continue to accrue interest on nonperforming loans that are federally insured or guaranteed by the U.S. government. | |
(2) | Includes all nonaccrual loans inclusive of troubled debt restructurings and on-balance sheet first-lien loans on nonaccrual status associated with unsecured HomeSaver Advance loans. | |
(3) | A troubled debt restructuring is a restructuring of a mortgage loan in which a concession is granted to a borrower experiencing financing difficulty. The reported amounts represent troubled debt restructurings that are on accrual status. | |
(4) | Represents the amount of on-balance sheet first-lien loans on accrual status associated with unsecured HomeSaver Advance loans. | |
(5) | Represents unpaid principal balance of nonperforming loans in our outstanding and unconsolidated Fannie Mae MBS trusts held by third parties. | |
(6) | Represents loans that would meet our criteria for nonaccrual status if the loans had been on-balance sheet. | |
(7) | Represents all off-balance sheet first-lien loans associated with unsecured HomeSaver Advance loans, including first-lien loans that are not seriously delinquent. | |
(8) | Recorded investment of loans as of the end of each period that are 90 days or more past due and continuing to accrue interest, including loans insured or guaranteed by the U.S. government and loans where we have recourse against the seller of the loan in the event of a default. |
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(9) | Forgone interest income represents the amount of interest income that would have been recorded during the period for on-balance sheet nonperforming loans as of the end of each period had the loans performed according to their contractual terms. | |
(10) | Represents interest income recognized during the period for on-balance sheet loans classified as nonperforming as of the end of each period. |
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For the | For the | |||||||||||||||
Six Months Ended | Year Ended | |||||||||||||||
June 30, 2009 | December 31, 2008 | |||||||||||||||
Unpaid | Unpaid | |||||||||||||||
Principal | Number | Principal | Number | |||||||||||||
Balance | of Loans | Balance | of Loans | |||||||||||||
(Dollars in millions) | ||||||||||||||||
Home retention strategies: | ||||||||||||||||
Modifications(1) | $ | 5,433 | 29,130 | $ | 5,119 | 33,388 | ||||||||||
Repayment plans and forbearances completed(2) | 1,511 | 12,197 | 936 | 7,892 | ||||||||||||
HomeSaver Advance first-lien loans(3) | 5,078 | 32,093 | 11,196 | 70,967 | ||||||||||||
$ | 12,022 | 73,420 | $ | 17,251 | 112,247 | |||||||||||
Foreclosure alternatives: | ||||||||||||||||
Preforeclosure sales | 2,997 | 13,086 | 2,212 | 10,355 | ||||||||||||
Deeds in lieu of foreclosure | 233 | 1,245 | 252 | 1,341 | ||||||||||||
$ | 3,230 | 14,331 | $ | 2,464 | 11,696 | |||||||||||
Total problem loan workouts | $ | 15,252 | 87,751 | $ | 19,715 | 123,943 | ||||||||||
Problem loan workouts as a percent of single-family guaranty book of business(4) | 1.06 | % | 0.96 | % | 0.70 | % | 0.68 | % | ||||||||
(1) | Modifications include troubled debt restructurings, as well as other modifications to the terms of the loan. A troubled debt restructuring is a restructuring of a mortgage loan in which a concession is granted to the borrower and is the only form of modification in which we do not expect to collect the full original contractual principal and interest due under the loan. Other resolutions and modifications may result in our receiving the full amount due, or certain installments due, under the loan over a period of time that is longer than the period of time originally provided for under the terms of the loan. | |
(2) | For the six months ended June 30, 2009, repayment plans reflected only those plans associated with loans that were 60 days or more delinquent. For the year ended December 31, 2008, repayment plans reflected only those plans associated with loans that were 90 days or more delinquent. Had we included repayment plans associated with loans that were 60 days or more delinquent for the year ended December 31, 2008, the unpaid principal balance and number of loans that had repayment plans and forbearances completed would have been $2.8 billion and 22,337 loans, respectively. | |
(3) | Reflects unpaid principal balance and the number of first-lien loans associated with unsecured HomeSaver Advance loans. | |
(4) | Calculated based on annualized problem loan workouts during the period as a percent of our single-family guaranty book of business as of the end of the period. |
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For the | ||||||||
Six Months Ended | ||||||||
June 30, | ||||||||
2009 | 2008 | |||||||
Single-family foreclosed properties (number of properties): | ||||||||
Beginning of period inventory of single-family foreclosed properties (REO)(1) | 63,538 | 33,729 | ||||||
Acquisitions by geographic area:(2) | ||||||||
Midwest | 14,626 | 15,265 | ||||||
Northeast | 2,948 | 2,916 | ||||||
Southeast | 14,480 | 11,347 | ||||||
Southwest | 12,711 | 8,377 | ||||||
West | 12,704 | 6,166 | ||||||
Total properties acquired through foreclosure | 57,469 | 44,071 | ||||||
Dispositions of REO | (58,392 | ) | (23,627 | ) | ||||
End of period inventory of single-family foreclosed properties (REO)(1) | 62,615 | 54,173 | ||||||
Carrying value of single-family foreclosed properties (dollars in millions)(3) | $ | 6,002 | $ | 5,808 | ||||
Single-family foreclosure rate(4) | 0.63 | % | 0.48 | % | ||||
Multifamily foreclosed properties (number of properties): | ||||||||
Ending inventory of multifamily foreclosed properties (REO) | 49 | 20 | ||||||
Carrying value of multifamily foreclosed properties (dollars in millions)(3) | $ | 192 | $ | 85 | ||||
(1) | Includes deeds in lieu of foreclosure. | |
(2) | See footnote 8 to Table 36 for states included in each geographic region. | |
(3) | Excludes foreclosed property claims receivables, which are reported in our consolidated balance sheets as a component of “Acquired property, net.” | |
(4) | Estimated based on annualized total number of properties acquired through foreclosure as a percentage of the total number of loans in our conventional single-family mortgage credit book of business as of the end of each respective period. |
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• | mortgage servicers that service the loans we hold in our investment portfolio or that back our Fannie Mae MBS; | |
• | third-party providers of credit enhancement on the mortgage assets that we hold in our investment portfolio or that back our Fannie Mae MBS, including mortgage insurers, financial guarantors and lenders with risk sharing arrangements; | |
• | custodial depository institutions that hold principal and interest payments for Fannie Mae portfolio loans and MBS certificateholders, as well as collateral posted by derivatives counterparties, repurchase transaction counterparties and mortgage originators or servicers; | |
• | issuers of securities held in our cash and other investments portfolio; | |
• | derivatives counterparties; | |
• | mortgage originators and investors; | |
• | debt security and mortgage dealers; and | |
• | document custodians. |
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As of June 30, 2009 | As of July 27, 2009 | |||||||||||||||||
Maximum Coverage(2) | Insurer Financial Strength Ratings | |||||||||||||||||
Counterparty:(1) | Primary | Pool | Total | Moody’s | S&P | Fitch | ||||||||||||
(Dollars in millions) | ||||||||||||||||||
Mortgage Guaranty Insurance Corporation | $ | 24,639 | $ | 2,396 | $ | 27,035 | Ba2 | BB | BBB- | |||||||||
Radian Guaranty, Inc. | 16,152 | 809 | 16,961 | Ba3 | BB- | NR | ||||||||||||
Genworth Mortgage Insurance Corporation | 16,411 | 420 | 16,831 | Baa2 | BBB+ | NR | ||||||||||||
PMI Mortgage Insurance Co. | 14,317 | 1,593 | 15,910 | Ba3 | BB- | NR | ||||||||||||
United Guaranty Residential Insurance Company | 15,273 | 269 | 15,542 | A3 | BBB+ | BBB | ||||||||||||
Republic Mortgage Insurance Company | 11,416 | 1,610 | 13,026 | Baa2 | A- | BBB | ||||||||||||
Triad Guaranty Insurance Corporation(3) | 3,763 | 1,283 | 5,046 | NR | NR | NR | ||||||||||||
CMG Mortgage Insurance Company(4) | 2,029 | — | 2,029 | NR | BBB+ | A+ |
(1) | Insurance coverage amounts provided for each counterparty may include coverage provided by consolidated subsidiaries of the counterparty. | |
(2) | Maximum coverage refers to the aggregate dollar amount of insurance coverage (i.e., “risk in force”) on single-family loans in our guaranty book of business and represents our maximum potential loss recovery under the applicable mortgage insurance policies. | |
(3) | In June 2008, we suspended Triad Guaranty Insurance Corporation as a qualified Fannie Mae mortgage insurer for loans not closed prior to July 15, 2008. In April 2009, Triad’s regulator issued an order under which claims will be paid 60% in cash and 40% by the creation of a deferred payment obligation, as discussed below. | |
(4) | CMG Mortgage Insurance Company is a joint venture owned by PMI Mortgage Insurance Co. and CUNA Mutual Investment Corporation. |
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102
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• | Debt Instruments. We issue a broad range of both callable and non-callable debt instruments to manage the duration and prepayment risk of expected cash flows of the mortgage assets we own. | |
• | Derivative Instruments. We supplement our issuance of debt with derivative instruments to further reduce duration and prepayment risks. | |
• | Monitoring and Active Portfolio Rebalancing. We continually monitor our risk positions and actively rebalance our portfolio of interest rate-sensitive financial instruments to maintain a close match between the duration of our assets and liabilities. |
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Interest Rate | ||||||||||||||||||||||||||||||||||||
Interest Rate Swaps | Swaptions | |||||||||||||||||||||||||||||||||||
Receive- | Foreign | Pay- | Receive- | Interest | ||||||||||||||||||||||||||||||||
Pay-Fixed(2) | Fixed(3) | Basis(4) | Currency(5) | Fixed | Fixed | Rate Caps | Other(6) | Total | ||||||||||||||||||||||||||||
(Dollars in millions) | ||||||||||||||||||||||||||||||||||||
Notional balance as of | ||||||||||||||||||||||||||||||||||||
December 31, 2008 | $ | 546,916 | $ | 451,081 | $ | 24,560 | $ | 1,652 | $ | 79,500 | $ | 93,560 | $ | 500 | $ | 827 | $ | 1,198,596 | ||||||||||||||||||
Additions | 177,444 | 184,638 | 2,565 | 324 | 13,850 | 6,700 | 2,500 | 13 | 388,034 | |||||||||||||||||||||||||||
Terminations(7) | (73,913 | ) | (63,917 | ) | (4,925 | ) | (546 | ) | (7,000 | ) | (15,580 | ) | — | (92 | ) | (165,973 | ) | |||||||||||||||||||
Notional balance as of June 30, 2009 | $ | 650,447 | $ | 571,802 | $ | 22,200 | $ | 1,430 | $ | 86,350 | $ | 84,680 | $ | 3,000 | $ | 748 | $ | 1,420,657 | ||||||||||||||||||
Future maturities of notional amounts:(8) | ||||||||||||||||||||||||||||||||||||
Less than 1 year | $ | 74,746 | $ | 57,986 | $ | 18,700 | $ | 327 | $ | 2,700 | $ | — | $ | — | $ | — | $ | 154,459 | ||||||||||||||||||
1 year to 5 years | 306,920 | 309,968 | 2,265 | — | 42,000 | — | 3,000 | 466 | 664,619 | |||||||||||||||||||||||||||
5 years to 10 years | 232,913 | 188,624 | — | 403 | 19,150 | 23,695 | — | 282 | 465,067 | |||||||||||||||||||||||||||
Over 10 years | 35,868 | 15,224 | 1,235 | 700 | 22,500 | 60,985 | — | — | 136,512 | |||||||||||||||||||||||||||
Total | $ | 650,447 | $ | 571,802 | $ | 22,200 | $ | 1,430 | $ | 86,350 | $ | 84,680 | $ | 3,000 | $ | 748 | $ | 1,420,657 | ||||||||||||||||||
Weighted-average interest rate as of June 30, 2009: | ||||||||||||||||||||||||||||||||||||
Pay rate | 3.92 | % | 0.83 | % | 0.57 | % | — | 5.66 | % | — | — | — | ||||||||||||||||||||||||
Receive rate | 0.83 | % | 3.71 | % | 0.78 | % | — | — | 4.37 | % | — | — | ||||||||||||||||||||||||
Other | — | — | — | — | — | — | 3.70 | % | — | |||||||||||||||||||||||||||
Weighted-average interest rate as of December 31, 2008: | ||||||||||||||||||||||||||||||||||||
Pay rate | 4.66 | % | 2.54 | % | 2.68 | % | — | 5.88 | % | — | — | — | ||||||||||||||||||||||||
Receive rate | 2.79 | % | 4.24 | % | 0.77 | % | — | — | 4.38 | % | — | — | ||||||||||||||||||||||||
Other | — | — | — | — | — | — | 5.84 | % | — |
(1) | Excludes mortgage commitments accounted for as derivatives. Dollars represent notional amounts that indicate only the amount on which payments are being calculated and do not represent the amount at risk of loss. | |
(2) | Notional amounts include swaps callable by Fannie Mae of $1.7 billion as of June 30, 2009 and December 31, 2008. | |
(3) | Notional amounts include swaps callable by derivatives counterparties of $25 million and $10.4 billion as of June 30, 2009 and December 31, 2008, respectively. | |
(4) | Notional amounts include swaps callable by derivatives counterparties of $885 million and $925 million as of June 30, 2009 and December 31, 2008, respectively. | |
(5) | Exchange rate adjustments to revalue foreign currency swaps existing at both the beginning and the end of the period are included in terminations. Beginning in the second quarter of 2009, exchange rate adjustments for foreign currency swaps that are added or terminated during the period are reflected in the respective categories. Terminations include foreign currency exchange rate gains of $158 million and $102 million for the three and six months ended June 30, 2009, respectively. Additions for the first quarter of 2009 were not reclassified from terminations. | |
(6) | Includes MBS options, swap credit enhancements and mortgage insurance contracts. | |
(7) | Includes matured, called, exercised, assigned and terminated amounts. | |
(8) | Based on contractual maturities. |
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109
As of June 30, 2009 | As of December 31, 2008 | |||||||||||||||
Without PLS(2)(4) | With PLS(3)(4) | Without PLS(2)(4)(5) | With PLS(3)(4)(5) | |||||||||||||
(Dollars in billions) | ||||||||||||||||
Rate level shock: | ||||||||||||||||
−100 basis points | $ | (1.4 | ) | $ | (0.1 | ) | $ | (2.8 | ) | $ | (0.4 | ) | ||||
−50 basis points | (0.6 | ) | — | (1.0 | ) | 0.1 | ||||||||||
+50 basis points | — | (0.5 | ) | (0.7 | ) | (1.6 | ) | |||||||||
+100 basis points | (0.3 | ) | (1.1 | ) | (1.6 | ) | (3.3 | ) | ||||||||
Rate slope shock: | ||||||||||||||||
−25 basis points | (0.2 | ) | (0.2 | ) | (0.5 | ) | (0.4 | ) | ||||||||
+25 basis points | 0.2 | 0.2 | 0.4 | 0.3 |
(1) | Computed based on changes in LIBOR swap rates. | |
(2) | Calculated excluding the sensitivities of our Alt-A and subprime private-label mortgage-related investment securities to changes in interest rates. | |
(3) | Calculated including the interest rate sensitivities for our Alt-A and subprime private-label mortgage-related investment securities generated by our existing internal models. | |
(4) | Amounts include the sensitivities of our LIHTC partnership investments. | |
(5) | Amounts include the sensitivities of our preferred stock. |
(1) | We use duration hedges, including longer term debt and interest rate swaps, to reduce the duration of our net portfolio. | |
(2) | We use option-based hedges, including callable debt and interest rate swaptions, to reduce the convexity or the duration changes of our net portfolio as interest rates move. | |
(3) | We take rebalancing actions to adjust our net portfolio position in response to movements in interest rates. |
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(4) | Our mortgage portfolio includes not only30-year fixed rate mortgage assets, but also other mortgage assets that typically have a shorter duration, such as adjustable-rate mortgage loans, and mortgage assets that generally have a somewhat longer duration, such as multifamily loans and CMBS. |
Barclays Capital | ||||||||||||
Fannie Mae | Fannie Mae | 30-Year Fannie Mae | ||||||||||
Effective | Effective | Mortgage Index | ||||||||||
Duration Gap | Duration Gap | Option Adjusted | ||||||||||
Month | without PLS(1) | with PLS | Duration(2) | |||||||||
(In months) | ||||||||||||
December 2008 | (1 | ) | 1 | 21 | ||||||||
January 2009 | 0 | 2 | 13 | |||||||||
February 2009 | 1 | 3 | 30 | |||||||||
March 2009 | (2 | ) | 1 | 26 | ||||||||
April 2009 | (1 | ) | 2 | 23 | ||||||||
May 2009 | 1 | 3 | 30 | |||||||||
June 2009 | 1 | 2 | 41 |
(1) | Calculated excluding the sensitivities of our Alt-A and subprime private-label mortgage-related investment securities to changes in interest rates. | |
(2) | Reflects average daily option-adjusted duration, expressed in months, based on the30-year Fannie Mae MBS component of the Barclays Capital U.S. Aggregate index obtained from Barclays Capital Live. |
As of June 30, 2009 | ||||||||||||||||||||
Pre-tax Effect on Estimated Fair Value | ||||||||||||||||||||
Estimated | Change in Interest Rates (in basis points) | |||||||||||||||||||
Fair Value | −100 | −50 | +50 | +100 | ||||||||||||||||
(Dollars in millions) | ||||||||||||||||||||
Trading financial instruments | $ | 82,400 | $ | 1,566 | $ | 857 | $ | (941 | ) | $ | (1,941 | ) | ||||||||
Guaranty assets and guaranty obligations, net(2) | (133,205 | ) | 7,520 | 3,593 | (3,321 | ) | (5,347 | ) | ||||||||||||
Other financial instruments, net(3) | (76,988 | ) | (1,368 | ) | (629 | ) | 295 | 457 |
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As of December 31, 2008 | ||||||||||||||||||||
Pre-tax Effect on Estimated Fair Value | ||||||||||||||||||||
Estimated | Change in Interest Rates (in basis points) | |||||||||||||||||||
Fair Value | −100 | −50 | +50 | +100 | ||||||||||||||||
(Dollars in millions) | ||||||||||||||||||||
Trading financial instruments | $ | 90,806 | $ | 1,425 | $ | 758 | $ | (962 | ) | $ | (1,983 | ) | ||||||||
Guaranty assets and guaranty obligations, net(2) | (90,992 | ) | 11,934 | 5,620 | (6,739 | ) | (7,603 | ) | ||||||||||||
Other financial instruments, net(3) | (131,881 | ) | (1,589 | ) | (445 | ) | (893 | ) | (1,829 | ) |
(1) | Excludes some instruments that we believe have interest rate risk exposure, such as LIHTC partnership assets and preferred stock. However, we include the interest rate sensitivities of LIHTC partnership assets in calculating the fair value sensitivities of our net portfolio to changes in the level and slope of the yield curve and in calculating our duration gap. | |
(2) | Consists of the net of “Guaranty assets” and “Guaranty obligations” reported in our condensed consolidated balance sheets. In addition, includes certain amounts that have been reclassified from “Mortgage loans” reported in our condensed consolidated balance sheets to reflect how the risk of the interest rate and credit risk components of these loans is managed by our business segments. | |
(3) | Consists of the net of all other financial instruments reported in “Notes to Condensed Consolidated Financial Statements—Note 18, Fair Value of Financial Instruments.” |
112
• | Our pursuit of our mission creating conflicts in strategic andday-to-day decision-making that could hamper achievement of some or all of our objectives; | |
• | Our belief that our financial results are likely to suffer, at least in the short term, as we expand our efforts to assist the mortgage market, thereby increasing the amount of funds that Treasury is required to provide to us and further limiting our ability to return to long-term profitability; | |
• | The likelihood that concentrating our efforts on keeping people in their homes and preventing foreclosures while continuing to be active in the secondary mortgage market, rather than concentrating solely on returning to long-term profitability, will contribute, at least in the short term, to additional financial losses and declines in our net worth; | |
• | The likelihood that continuing deterioration in the housing and mortgage markets, along with the continuing deterioration in our book of business and the costs associated with our efforts to assist the |
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mortgage market pursuant to our mission, will increase the amount of funds that Treasury is required to provide to us; |
• | The possibility that if the Making Home Affordable Program is successful in reducing foreclosures and keeping borrowers in their homes, it may benefit the overall housing market and help in reducing our long-term credit losses; | |
• | Our expectation that, due to current trends in the housing and financial markets, we will have a net worth deficit in future periods, and therefore will be required to obtain additional funding from Treasury pursuant to the senior preferred stock purchase agreement; | |
• | Our expectation that our senior preferred stock dividend obligation, combined with potentially substantial commitment fees payable to Treasury starting in 2010 and our effective inability to pay down draws under the senior preferred stock purchase agreement, will have an adverse impact on our future financial position and net worth; | |
• | Our belief that the most significant factor that will affect the number of borrowers refinancing under the Home Affordable Refinance Program is mortgage rates; | |
• | The likelihood that the number of borrowers who refinance under the Home Affordable Refinance Program will also be constrained by a number of other factors, including lack of borrower awareness, lack of borrower action to initiate a refinancing, and borrower ineligibility; | |
• | Our expectation that increased activity will occur under the Home Affordable Modification Program in the coming months as servicers gain experience with the program, borrower awareness grows, and new updates aimed at expanding the program’s reach are implemented; | |
• | Our expectations that modifications under the Home Affordable Modification Program of loans we own or guarantee will adversely affect our financial condition and results of operations; | |
• | Our expectation that we will incur significant additional operational expenses associated with the Making Home Affordable Program; | |
• | The likelihood that the Making Home Affordable Program will have a material adverse effect on our business, results of operations and financial condition, including our net worth; | |
• | Our expectation that adverse conditions in the financial markets will continue through 2009, and that adverse market dynamics and certain of our activities undertaken, pursuant to our mission, to stabilize and support the housing and mortgage markets will continue to negatively affect our credit results, financial condition and performance through the remainder of 2009 and into 2010; | |
• | Our expectation that there will be further home price declines and rising default and severity rates, all of which may worsen if unemployment rates continue to increase and if the U.S. continues to experience a broad-based economic recession; | |
• | Our expectation that there will be further increases in the level of foreclosures and single-family delinquency rates in 2009 and into 2010, as well as in the level of multifamily defaults and loss severity; | |
• | Our expectation that growth in residential mortgage debt outstanding will be flat in 2009 and 2010; | |
• | Our expectation that home prices will decline another 7% to 12% on a national basis in 2009, and 20% to 30% on a national basispeak-to-trough (with significant regional variation in home price decline percentages), based on our home price index, and that future home price declines will be on the lower end of our estimated ranges; | |
• | Our expectation that our credit losses and our credit loss ratio in 2009 will exceed our credit losses and our credit loss ratio in 2008 by a significant amount; | |
• | Our expectation that ourSOP 03-3 fair value losses will significantly increase in 2009 as we increase the number of loans we repurchase from MBS trusts in order to modify them, particularly as more servicers participate in the Home Affordable Modification Program; |
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• | Our expectation that our credit-related expenses will be higher in 2009 than they were in 2008; | |
• | Our expectation that we will continue to have losses as our guaranty book of business continues to deteriorate and as we continue to incur ongoing costs in our efforts to keep people in homes and provide liquidity to the mortgage market pursuant to our mission; | |
• | Our expectation that we will not operate profitably in the foreseeable future; | |
• | The possibility that future activities that our regulators, other U.S. government agencies or Congress may request or require us to take to support the mortgage market and help borrowers pursuant to our mission may adversely affect our business, results of operations, financial condition, liquidity and net worth; | |
• | Our belief that additional GSE reform legislation is likely to be introduced in the future; | |
• | Our belief that FHFA’s interim final rule on the review of new products and activities could have an adverse impact on our ability to develop and introduce new products and activities to the marketplace that may be beneficial to our business and customers; | |
• | Our expectation that, for the foreseeable future, the earnings of the company, if any, will not be sufficient to pay the dividends on the senior preferred stock; | |
• | Our expectation that we will experience high levels ofperiod-to-period volatility in our results of operations and financial condition, principally due to changes in market conditions that result in periodic fluctuations in our earnings as a result of changes in the estimated fair value of financial instruments that wemark-to-market; | |
• | Our belief that the performance of the underlying collateral for the Alt-A and subprime securities that we have not impaired will still allow us to recover our initial investment, although at significantly lower yields than what is being required currently by new investors; | |
• | Our current expectation that our debt funding needs will generally decline in future periods; | |
• | Our belief that changes or perceived changes in the government’s support of us or the markets could lead to an increase in our debt roll-over risk in future periods and have a material adverse effect on our ability to fund our operations; | |
• | The possibility that demand for our debt securities could decline if the government does not extend or replace the Treasury credit facility and the Federal Reserve’s agency debt and MBS purchase programs, or for other reasons; | |
• | Our belief that we may be unable to find sufficient alternative sources of liquidity for a90-day period, particularly after the expiration of the Treasury credit facility on December 31, 2009; | |
• | The possibility that we could use our unencumbered mortgage assets in our mortgage portfolio as a source of liquidity in the event our access to the unsecured debt market becomes impaired, by using these assets as collateral for secured borrowing; | |
• | Our expectations that we will consolidate the substantial majority of our existing off-balance sheet MBS trusts and record the underlying loans in these trusts as assets on our balance sheet upon our adoption of new accounting guidance effective January 1, 2010; | |
• | Our belief that recent government actions to provide liquidity and other support to specified financial market participants may continue to help improve the financial condition and liquidity position of a number of our institutional counterparties; | |
• | The possibility that the financial difficulties that a number of our institutional counterparties, including mortgage insurers and mortgage servicers, are currently experiencing may negatively affect the ability of these counterparties to meet their obligations to us and the amount or quality of the products or services they provide to us; |
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• | The possibility that a default by a counterparty with significant obligations to us could result in significant financial losses to us and could materially adversely affect our ability to conduct our operations, which would adversely affect our business, results of operations, financial condition, liquidity and net worth; | |
• | Our belief that our financial guarantor counterparties will not fully meet their obligations to us in the future; | |
• | The possibilities that we may further increase the concentration of our business with our derivatives counterparties, experience further losses relating to our derivative contracts, or find that our ability to manage our interest rate risk is adversely affected by ratings downgrades of or a payment default by a derivatives counterparty; | |
• | Our expectation that the operational and system changes we are making to implement new consolidation accounting rules will have a substantial impact on our overall internal control environment and our belief that we will be able to implement these new accounting rules by the January 1, 2010 effective date; | |
• | Our belief that the deferred tax asset amount that is related to unrealized losses recorded through AOCI for certainavailable-for-sale securities is recoverable; | |
• | Our intention to complete implementation and remediation of our material weakness related to the data inputs into the models used in measuring expected cash flows for theother-than-temporary impairment assessment process for private-label mortgage-related securities by September 30, 2009; and | |
• | Our expectation that potential limitations on, and uncertainty regarding, employee compensation will continue to adversely affect our ability to recruit and retain well-qualified employees. |
• | legislative or other governmental actions relating to our business or the financial markets; | |
• | our ability to manage our business to positive net worth; | |
• | adverse effects from activities we undertake, such as the Making Home Affordable Program and other federal government initiatives, to support the mortgage market and help borrowers; | |
• | the investment by Treasury and its effect on our business; | |
• | future amendments and guidance by the FASB; | |
• | changes in the structure and regulation of the financial services industry, including government efforts to bring about an economic recovery; | |
• | our ability to access the debt capital markets; | |
• | the conservatorship and its effect on our business (including our business strategies and practices); | |
• | further disruptions in the housing, credit and stock markets; | |
• | the depth and duration of the housing market downturn, including the extent of home price declines on a national and regional basis; | |
• | the depth and duration of the economic recession, including unemployment rates; |
116
• | the level and volatility of interest rates and credit spreads; | |
• | the adequacy of our combined loss reserves; | |
• | pending government investigations and litigation; | |
• | changes in management; | |
• | the accuracy of subjective estimates used in critical accounting policies; and | |
• | other factors described in “Part I—Item 1A—Risk Factors” of our 2008Form 10-K, as updated by “Part II—Item 1A—Risk Factors” of this report. |
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Item 1. | Financial Statements |
(In conservatorship)
Condensed Consolidated Balance Sheets
(Dollars in millions, except share amounts)
(Unaudited)
As of | ||||||||
June 30, | December 31, | |||||||
2009 | 2008 | |||||||
ASSETS | ||||||||
Cash and cash equivalents | $ | 28,234 | $ | 17,933 | ||||
Restricted cash | 757 | 529 | ||||||
Federal funds sold and securities purchased under agreements to resell | 25,810 | 57,418 | ||||||
Investments in securities: | ||||||||
Trading, at fair value (includes Fannie Mae MBS of $52,103 and $58,006, respectively) | 82,400 | 90,806 | ||||||
Available-for-sale, at fair value (includes Fannie Mae MBS of $190,591 and $176,244, respectively) | 283,941 | 266,488 | ||||||
Total investments in securities | 366,341 | 357,294 | ||||||
Mortgage loans: | ||||||||
Loans held for sale, at lower of cost or fair value | 29,174 | 13,270 | ||||||
Loans held for investment, at amortized cost | 393,248 | 415,065 | ||||||
Allowance for loan losses | (6,841 | ) | (2,923 | ) | ||||
Total loans held for investment, net of allowance | 386,407 | 412,142 | ||||||
Total mortgage loans | 415,581 | 425,412 | ||||||
Advances to lenders | 18,938 | 5,766 | ||||||
Accrued interest receivable | 3,786 | 3,816 | ||||||
Acquired property, net | 6,608 | 6,918 | ||||||
Derivative assets at fair value | 1,406 | 869 | ||||||
Guaranty assets | 7,091 | 7,043 | ||||||
Deferred tax assets, net | 3,791 | 3,926 | ||||||
Partnership investments | 8,304 | 9,314 | ||||||
Servicer and MBS trust receivable | 13,817 | 6,482 | ||||||
Other assets | 10,918 | 9,684 | ||||||
Total assets | $ | 911,382 | $ | 912,404 | ||||
LIABILITIES AND EQUITY (DEFICIT) | ||||||||
Liabilities: | ||||||||
Accrued interest payable | 5,115 | 5,947 | ||||||
Federal funds purchased and securities sold under agreements to repurchase | — | 77 | ||||||
Short-term debt (includes debt at fair value of $- and $4,500, respectively) | 259,781 | 330,991 | ||||||
Long-term debt (includes debt at fair value of $22,437 and $21,565, respectively) | 573,329 | 539,402 | ||||||
Derivative liabilities at fair value | 2,047 | 2,715 | ||||||
Reserve for guaranty losses (includes $4,238 and $1,946, respectively, | ||||||||
related to Fannie Mae MBS included in Investments in securities) | 48,280 | 21,830 | ||||||
Guaranty obligations (includes $755 and $755, respectively, | ||||||||
related to Fannie Mae MBS included in Investments in securities) | 12,358 | 12,147 | ||||||
Partnership liabilities | 2,855 | 3,243 | ||||||
Servicer and MBS trust payable | 12,909 | 6,350 | ||||||
Other liabilities | 5,310 | 4,859 | ||||||
Total liabilities | 921,984 | 927,561 | ||||||
Commitments and contingencies (Note 19) | — | — | ||||||
Equity (Deficit): | ||||||||
Fannie Mae stockholders’ equity (deficit): | ||||||||
Senior preferred stock, 1,000,000 shares issued and outstanding as of June 30, 2009 and December 31, 2008 | 35,200 | 1,000 | ||||||
Preferred stock, 700,000,000 shares are authorized — 582,508,752 and 597,071,401 shares issued | ||||||||
and outstanding as of June 30, 2009 and December 31, 2008, respectively | 20,486 | 21,222 | ||||||
Common stock, no par value, no maximum authorization — 1,261,401,675 and 1,238,880,988 shares issued as of June 30, 2009 and December 31, 2008, respectively; 1,109,063,047 shares and 1,085,424,213 shares outstanding as of June 30, 2009 and December 31, 2008, respectively | 662 | 650 | ||||||
Additional paid-in capital | 3,947 | 3,621 | ||||||
Accumulated deficit | (56,191 | ) | (26,790 | ) | ||||
Accumulated other comprehensive loss | (7,429 | ) | (7,673 | ) | ||||
Treasury stock, at cost, 152,338,628 shares and 153,456,775 shares as of June 30, 2009 and December 31, 2008, respectively | (7,385 | ) | (7,344 | ) | ||||
Total Fannie Mae stockholders’ deficit | (10,710 | ) | (15,314 | ) | ||||
Noncontrolling interest | 108 | 157 | ||||||
Total deficit | (10,602 | ) | (15,157 | ) | ||||
Total liabilities and equity (deficit) | $ | 911,382 | $ | 912,404 | ||||
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(In conservatorship)
Condensed Consolidated Statements of Operations
(Dollars and shares in millions, except per share amounts)
(Unaudited)
For the | ||||||||||||||||
For the | Six Months | |||||||||||||||
Three Months Ended | Ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2009 | 2008 | 2009 | 2008 | |||||||||||||
Interest income: | ||||||||||||||||
Trading securities | $ | 923 | $ | 1,376 | $ | 1,913 | $ | 3,113 | ||||||||
Available-for-sale securities | 3,307 | 3,087 | 7,028 | 6,172 | ||||||||||||
Mortgage loans | 5,611 | 5,769 | 11,209 | 11,431 | ||||||||||||
Other | 139 | 232 | 266 | 690 | ||||||||||||
Total interest income | 9,980 | 10,464 | 20,416 | 21,406 | ||||||||||||
Interest expense: | ||||||||||||||||
Short-term debt | 600 | 1,687 | 1,707 | 4,248 | ||||||||||||
Long-term debt | 5,645 | 6,720 | 11,726 | 13,411 | ||||||||||||
Total interest expense | 6,245 | 8,407 | 13,433 | 17,659 | ||||||||||||
Net interest income | 3,735 | 2,057 | 6,983 | 3,747 | ||||||||||||
Guaranty fee income (includes imputed interest of $321 and $319, for the three months ended June 30, 2009 and 2008, respectively, and $471 and $554 for the six months ended June 30, 2009 and 2008, respectively) | 1,659 | 1,608 | 3,411 | 3,360 | ||||||||||||
Trust management income | 13 | 75 | 24 | 182 | ||||||||||||
Investment gains (losses), net | (45 | ) | (376 | ) | 178 | (432 | ) | |||||||||
Other-than-temporary impairments | (1,097 | ) | (507 | ) | (6,750 | ) | (562 | ) | ||||||||
Less: Noncredit portion ofother-than-temporary impairments recognized in other comprehensive loss | 344 | — | 344 | — | ||||||||||||
Netother-than-temporary impairments | (753 | ) | (507 | ) | (6,406 | ) | (562 | ) | ||||||||
Fair value gains (losses), net | 823 | 517 | (637 | ) | (3,860 | ) | ||||||||||
Debt extinguishment losses, net | (190 | ) | (36 | ) | (269 | ) | (181 | ) | ||||||||
Losses from partnership investments | (571 | ) | (195 | ) | (928 | ) | (336 | ) | ||||||||
Fee and other income | 184 | 225 | 365 | 452 | ||||||||||||
Non-interest income (loss) | 1,120 | 1,311 | (4,262 | ) | (1,377 | ) | ||||||||||
Administrative expenses: | ||||||||||||||||
Salaries and employee benefits | 245 | 304 | 538 | 590 | ||||||||||||
Professional services | 180 | 114 | 323 | 250 | ||||||||||||
Occupancy expenses | 46 | 55 | 94 | 109 | ||||||||||||
Other administrative expenses | 39 | 39 | 78 | 75 | ||||||||||||
Total administrative expenses | 510 | 512 | 1,033 | 1,024 | ||||||||||||
Provision for credit losses | 18,225 | 5,085 | 38,559 | 8,158 | ||||||||||||
Foreclosed property expense | 559 | 264 | 1,097 | 434 | ||||||||||||
Other expenses | 318 | 247 | 597 | 607 | ||||||||||||
Total expenses | 19,612 | 6,108 | 41,286 | 10,223 | ||||||||||||
Loss before federal income taxes and extraordinary losses | (14,757 | ) | (2,740 | ) | (38,565 | ) | (7,853 | ) | ||||||||
Provision (benefit) for federal income taxes | 23 | (476 | ) | (600 | ) | (3,404 | ) | |||||||||
Loss before extraordinary losses | (14,780 | ) | (2,264 | ) | (37,965 | ) | (4,449 | ) | ||||||||
Extraordinary losses, net of tax effect | — | (33 | ) | — | (34 | ) | ||||||||||
Net loss | (14,780 | ) | (2,297 | ) | (37,965 | ) | (4,483 | ) | ||||||||
Less: Net (income) loss attributable to the noncontrolling interest | 26 | (3 | ) | 43 | (3 | ) | ||||||||||
Net loss attributable to Fannie Mae | (14,754 | ) | (2,300 | ) | (37,922 | ) | (4,486 | ) | ||||||||
Preferred stock dividends | (411 | ) | (303 | ) | (440 | ) | (625 | ) | ||||||||
Net loss attributable to common stockholders | $ | (15,165 | ) | $ | (2,603 | ) | $ | (38,362 | ) | $ | (5,111 | ) | ||||
Loss per share: | ||||||||||||||||
Basic | $ | (2.67 | ) | $ | (2.54 | ) | $ | (6.76 | ) | $ | (5.11 | ) | ||||
Diluted | (2.67 | ) | (2.54 | ) | (6.76 | ) | (5.11 | ) | ||||||||
Cash dividends per common share | $ | — | $ | 0.35 | $ | — | $ | 0.70 | ||||||||
Weighted-average common shares outstanding: | ||||||||||||||||
Basic and Diluted | 5,681 | 1,025 | 5,674 | 1,000 |
119
(In conservatorship)
Condensed Consolidated Statements of Cash Flows
(Dollars in millions)
(Unaudited)
For the | ||||||||
Six Months | ||||||||
Ended June 30, | ||||||||
2009 | 2008 | |||||||
Cash flows (used in) provided by operating activities: | ||||||||
Net loss | $ | (37,965 | ) | $ | (4,483 | ) | ||
Amortization of debt cost basis adjustments | 2,172 | 4,609 | ||||||
Provision for credit losses | 38,559 | 8,158 | ||||||
Valuation losses | 4,537 | 2,941 | ||||||
Derivatives fair value adjustments | (1,045 | ) | 399 | |||||
Current and deferred federal income taxes | (1,690 | ) | (4,249 | ) | ||||
Purchases of loans held for sale | (72,172 | ) | (27,426 | ) | ||||
Proceeds from repayments of loans held for sale | 1,204 | 288 | ||||||
Net change in trading securities | 3,165 | 50,952 | ||||||
Other, net | (4,302 | ) | (1,256 | ) | ||||
Net cash (used in) provided by operating activities | (67,537 | ) | 29,933 | |||||
Cash flows provided by (used in) investing activities: | ||||||||
Purchases of trading securities held for investment | — | (833 | ) | |||||
Proceeds from maturities of trading securities held for investment | 6,076 | 5,069 | ||||||
Proceeds from sales of trading securities held for investment | 1,313 | 2,481 | ||||||
Purchases ofavailable-for-sale securities | (108,105 | ) | (79,331 | ) | ||||
Proceeds from maturities ofavailable-for-sale securities | 23,705 | 17,689 | ||||||
Proceeds from sales ofavailable-for-sale securities | 168,933 | 76,937 | ||||||
Purchases of loans held for investment | (19,322 | ) | (37,645 | ) | ||||
Proceeds from repayments of loans held for investment | 32,427 | 30,997 | ||||||
Advances to lenders | (53,646 | ) | (51,573 | ) | ||||
Proceeds from disposition of acquired property | 9,873 | 4,191 | ||||||
Reimbursements to servicers for loan advances | (9,024 | ) | (5,588 | ) | ||||
Net change in federal funds sold and securities purchased under agreements to resell | 32,147 | 13,315 | ||||||
Other, net | (356 | ) | 222 | |||||
Net cash provided by (used in) investing activities | 84,021 | (24,069 | ) | |||||
Cash flows (used in) provided by financing activities: | ||||||||
Proceeds from issuance of short-term debt | 747,971 | 1,009,691 | ||||||
Payments to redeem short-term debt | (820,868 | ) | (1,007,819 | ) | ||||
Proceeds from issuance of long-term debt | 187,277 | 168,545 | ||||||
Payments to redeem long-term debt | (154,264 | ) | (172,191 | ) | ||||
Proceeds from issuance of common stock and preferred stock | — | 7,211 | ||||||
Proceeds from senior preferred stock agreement with Treasury | 34,200 | — | ||||||
Net change in federal funds purchased and securities sold under agreements to repurchase | (65 | ) | (442 | ) | ||||
Other, net | (434 | ) | (1,307 | ) | ||||
Net cash (used in) provided by financing activities | (6,183 | ) | 3,688 | |||||
Net increase in cash and cash equivalents | 10,301 | 9,552 | ||||||
Cash and cash equivalents at beginning of period | 17,933 | 3,941 | ||||||
Cash and cash equivalents at end of period | $ | 28,234 | $ | 13,493 | ||||
Cash paid during the period for: | ||||||||
Interest | $ | 15,430 | $ | 19,371 | ||||
Income taxes | 848 | 845 | ||||||
Non-cash activities: | ||||||||
Securitization-related transfers from mortgage loans held for sale to investments in securities | $ | 63,172 | $ | 23,551 | ||||
Net transfers of mortgage loans held for investments to mortgage loans held for sale | 7,765 | (4,441 | ) | |||||
Net consolidation transfers from investments in securities to mortgage loans held for sale | 527 | 671 | ||||||
Net transfers fromavailable-for-sale securities to mortgage loans held for sale | 867 | 616 | ||||||
Transfers from advances to lenders to investments in securities (including transfers to trading securities of $— and $28,877 for the six months ended June 30, 2009 and 2008, respectively) | 38,943 | 52,114 | ||||||
Net consolidation-related transfers from investments in securities to mortgage loans held for investment | 2,308 | 5,628 | ||||||
Net transfers from mortgage loans to acquired property | 2,211 | 2,103 | ||||||
Transfers to trading securities from the effect of adopting SFAS 159 | — | 56,217 |
120
(In conservatorship)
Condensed Consolidated Statements of Changes in Equity (Deficit)
(Dollars and shares in millions, except per share amounts)
(Unaudited)
Fannie Mae Stockholders’ Equity | ||||||||||||||||||||||||||||||||||||||||||||||||
Retained | Accumulated | |||||||||||||||||||||||||||||||||||||||||||||||
Shares Outstanding | Additional | Earnings | Other | Non | Total | |||||||||||||||||||||||||||||||||||||||||||
Senior | Senior | Preferred | Common | Paid-In | (Accumulated | Comprehensive | Treasury | Controlling | Equity | |||||||||||||||||||||||||||||||||||||||
Preferred | Preferred | Common | Preferred | Stock | Stock | Capital | Deficit) | Loss(1) | Stock | Interest | (Deficit) | |||||||||||||||||||||||||||||||||||||
Balance as of December 31, 2007 | — | 466 | 974 | $ | — | $ | 16,913 | $ | 593 | $ | 1,831 | $ | 33,548 | $ | (1,362 | ) | $ | (7,512 | ) | $ | 107 | $ | 44,118 | |||||||||||||||||||||||||
Cumulative effect from the adoption of SFAS 157 and SFAS 159, net of tax | — | — | — | — | — | — | — | 148 | (93 | ) | — | — | 55 | |||||||||||||||||||||||||||||||||||
Balance as of January 1, 2008, adjusted | — | 466 | 974 | — | 16,913 | 593 | 1,831 | 33,696 | (1,455 | ) | (7,512 | ) | 107 | 44,173 | ||||||||||||||||||||||||||||||||||
Change in Investment in noncontrolling interest | 54 | 54 | ||||||||||||||||||||||||||||||||||||||||||||||
Comprehensive loss: | ||||||||||||||||||||||||||||||||||||||||||||||||
Net income (loss) | — | — | — | — | — | — | — | (4,486 | ) | — | — | 3 | (4,483 | ) | ||||||||||||||||||||||||||||||||||
Other comprehensive loss, net of tax effect: | ||||||||||||||||||||||||||||||||||||||||||||||||
Unrealized losses onavailable-for-sale securities (net of tax of $2,299) | — | — | — | — | — | — | — | — | (4,270 | ) | — | — | (4,270 | ) | ||||||||||||||||||||||||||||||||||
Reclassification adjustment for gains included in net loss (net of tax of $11) | — | — | — | — | — | — | — | — | (21 | ) | — | — | (21 | ) | ||||||||||||||||||||||||||||||||||
Unrealized gains on guaranty assets and guaranty feebuy-ups (net of tax of $4) | — | — | — | — | — | — | — | — | 7 | — | — | 7 | ||||||||||||||||||||||||||||||||||||
Net cash flow hedging gains (net of tax of $1) | — | — | — | — | — | — | — | — | 1 | — | — | 1 | ||||||||||||||||||||||||||||||||||||
Total comprehensive loss | (8,766 | ) | ||||||||||||||||||||||||||||||||||||||||||||||
Common stock dividends ($0.70 per share) | — | — | — | — | — | — | (687 | ) | — | — | (687 | ) | ||||||||||||||||||||||||||||||||||||
Common stock issued | — | — | 94 | — | — | 49 | 2,477 | — | — | — | 2,526 | |||||||||||||||||||||||||||||||||||||
Preferred stock dividends declared | — | — | — | — | — | — | (625 | ) | — | — | (625 | ) | ||||||||||||||||||||||||||||||||||||
Preferred stock issued | — | 141 | — | — | 4,812 | — | (127 | ) | — | — | — | 4,685 | ||||||||||||||||||||||||||||||||||||
Other, employee benefit plans | — | — | 2 | — | — | — | (187 | ) | — | — | 217 | — | 30 | |||||||||||||||||||||||||||||||||||
Balance as of June 30, 2008 | — | 607 | 1,070 | $ | — | $ | 21,725 | $ | 642 | $ | 3,994 | $ | 27,898 | $ | (5,738 | ) | $ | (7,295 | ) | $ | 164 | $ | 41,390 | |||||||||||||||||||||||||
Balance as of January 1, 2009 | 1 | 597 | 1,085 | 1,000 | 21,222 | 650 | 3,621 | (26,790 | ) | (7,673 | ) | (7,344 | ) | 157 | (15,157 | ) | ||||||||||||||||||||||||||||||||
Cumulative effect from the adoption of FSPFAS 115-2, net of tax | — | — | — | — | — | — | — | 8,520 | (5,556 | ) | — | — | 2,964 | |||||||||||||||||||||||||||||||||||
Change in investment in noncontrolling interest | — | — | — | — | — | — | — | — | — | — | (6 | ) | (6 | ) | ||||||||||||||||||||||||||||||||||
Comprehensive loss: | ||||||||||||||||||||||||||||||||||||||||||||||||
Net loss | — | — | — | — | — | — | — | (37,922 | ) | — | — | (43 | ) | (37,965 | ) | |||||||||||||||||||||||||||||||||
Other comprehensive loss, net of tax effect: | ||||||||||||||||||||||||||||||||||||||||||||||||
Unrealized gains onavailable-for-sale securities (net of tax of $3,152) | — | — | — | — | — | — | — | — | 5,854 | — | — | 5,854 | ||||||||||||||||||||||||||||||||||||
Unrealizedother-than-temporary impairment losses (net of tax of $99) | — | — | — | — | — | — | — | — | (245 | ) | — | — | (245 | ) | ||||||||||||||||||||||||||||||||||
Reclassification adjustment for gains included in net loss (net of tax of $46) | — | — | — | — | — | — | — | — | 86 | — | — | 86 | ||||||||||||||||||||||||||||||||||||
Write-off of pre-2001 cash flow hedging gains | — | — | — | — | — | — | — | — | 9 | — | — | 9 | ||||||||||||||||||||||||||||||||||||
Unrealized gains on guaranty assets and guaranty feebuy-ups | — | — | — | — | — | — | — | — | 79 | — | — | 79 | ||||||||||||||||||||||||||||||||||||
Prior service cost and actuarial gains, net of amortization for defined benefit plans | — | — | — | — | — | — | — | — | 17 | — | — | 17 | ||||||||||||||||||||||||||||||||||||
Total comprehensive loss | — | (32,165 | ) | |||||||||||||||||||||||||||||||||||||||||||||
Senior preferred stock dividends | — | — | — | — | — | — | (434 | ) | — | — | — | — | (434 | ) | ||||||||||||||||||||||||||||||||||
Increase to senior preferred liquidation preference | — | — | — | 34,200 | — | — | — | — | — | — | — | 34,200 | ||||||||||||||||||||||||||||||||||||
Conversion of convertible preferred stock into common stock | — | (15 | ) | 23 | — | (736 | ) | 12 | 724 | — | — | — | — | — | ||||||||||||||||||||||||||||||||||
Other, employee benefit plans | — | — | 1 | — | — | — | 36 | 1 | — | (41 | ) | — | (4 | ) | ||||||||||||||||||||||||||||||||||
Balance as of June 30, 2009 | 1 | 582 | 1,109 | $ | 35,200 | $ | 20,486 | $ | 662 | $ | 3,947 | $ | (56,191 | ) | $ | (7,429 | ) | $ | (7,385 | ) | $ | 108 | $ | (10,602 | ) | |||||||||||||||||||||||
(1) | Accumulated other comprehensive loss is comprised of $1.5 billion and $6.0 billion in net unrealized losses onavailable-for-sale securities, net of tax, and $(342) million and $291 million in net unrealized gains (losses) on all other components, net of tax, as of June 30, 2009 and 2008, respectively. Also included in accumulated other comprehensive loss is a $5.6 billion transition adjustment associated with the adoption of FSPFAS 115-2, net of tax. |
121
(In conservatorship)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. | Organization and Conservatorship |
122
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
• | Treasury’s maximum funding commitment to us under the agreement was increased from $100 billion to $200 billion. | |
• | The covenant limiting the amount of mortgage assets we can own on December 31, 2009 was increased from $850 billion to $900 billion. We continue to be required to reduce our mortgage assets, beginning on December 31, 2010 and each year thereafter, to 90% of the amount of our mortgage assets as of December 31 of the immediately preceding calendar year, until the amount of our mortgage assets reaches $250 billion. | |
• | The covenant limiting the amount of our indebtedness was changed. Prior to the amendment, our debt cap was equal to 110% of our indebtedness as of June 30, 2008. As amended, our debt cap through December 30, 2010 equals $1,080 billion. Beginning December 31, 2010, and on December 31 of each |
123
(In conservatorship)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
year thereafter, our debt cap that will apply through December 31 of the following year will equal 120% of the amount of mortgage assets we are allowed to hold on December 31 of the immediately preceding calendar year. |
• | The agreement continues to provide that, for purposes of evaluating our compliance with the limitation on the amount of mortgage assets we may own, the effect of changes in generally accepted accounting principles that occur subsequent to the date of the agreement and that require us to recognize additional mortgage assets on our consolidated balance sheet (Statement of Financial Accounting Standards (“SFAS”) No. 140,Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities (a replacement of FASB Statement No. 125)(“SFAS 140”)), will not be considered. In addition, the definition of indebtedness in the agreement was revised to clarify that it also does not give effect to any change that may be made in respect of SFAS 140 or any similar accounting standard. |
2. | Summary of Significant Accounting Policies |
124
(In conservatorship)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
• | Treasury’s $200 billion funding commitment to us under the senior preferred stock purchase agreement; | |
• | making the Treasury credit facility available to us; | |
• | the Federal Reserve’s active program to purchase up to $200 billion in debt securities of Fannie Mae, Freddie Mac and the Federal Home Loan Banks, as well as up to $1.25 trillion in Fannie Mae, Freddie Mac and Ginnie Mae mortgage-backed securities; and | |
• | Treasury’s agency MBS purchase program. |
125
(In conservatorship)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
126
(In conservatorship)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
127
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
128
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
129
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
For the | For the | |||||||||||||||
Three Months | Six Months | |||||||||||||||
Ended | Ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2009 | 2008 | 2009 | 2008 | |||||||||||||
(Dollars in millions) | ||||||||||||||||
Derivatives fair value gains (losses), net | $ | (537 | ) | $ | 2,293 | $ | (2,243 | ) | $ | (710 | ) | |||||
Trading securities gains (losses), net | 1,561 | (965 | ) | 1,728 | (2,192 | ) | ||||||||||
Hedged mortgage asset (losses), net(1) | — | (803 | ) | — | (803 | ) | ||||||||||
Debt foreign exchange losses, net | (169 | ) | (12 | ) | (114 | ) | (169 | ) | ||||||||
Debt fair value gains (losses), net | (32 | ) | 4 | (8 | ) | 14 | ||||||||||
Fair value gains (losses), net | $ | 823 | $ | 517 | $ | (637 | ) | $ | (3,860 | ) | ||||||
(1) | Represents fair value losses, net on mortgage assets designated for hedge accounting that are attributable to changes in interest rates and will be accreted through interest income over the life of the hedged assets. |
130
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
131
(In conservatorship)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
3. | Consolidations |
132
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
As of | ||||||||
June 30, | December 31, | |||||||
2009 | 2008 | |||||||
(Dollars in millions) | ||||||||
Assets: | ||||||||
MBS trusts: | ||||||||
Loans held for investment | $ | 54,809 | $ | 59,126 | ||||
Available-for-sale securities(1) | 1,992 | 2,208 | ||||||
Loans held for sale | 1,488 | 1,429 | ||||||
Trading securities | 901 | 993 | ||||||
Total MBS trusts(2) | 59,190 | 63,756 | ||||||
Limited partnerships: | ||||||||
Partnership investment(3) | 5,053 | 5,697 | ||||||
Cash, cash equivalents and restricted cash | 170 | 146 | ||||||
Total limited partnership investments | 5,223 | 5,843 | ||||||
Total assets of consolidated VIEs | $ | 64,413 | $ | 69,599 | ||||
Liabilities: | ||||||||
Long-term debt | 4,906 | 5,094 | ||||||
Partnership liabilities | 2,359 | 2,585 | ||||||
Total liabilities of consolidated VIEs | $ | 7,265 | $ | 7,679 | ||||
(1) | Includes assets of consolidated mortgage revenue bonds of $23 million and $54 million as of June 30, 2009 and December 31, 2008, respectively. | |
(2) | The assets of consolidated MBS trusts are restricted solely for the purpose of servicing the related MBS. | |
(3) | Includes LIHTC partnerships of $2.8 billion and $3.0 billion as of June 30, 2009 and December 31, 2008, respectively. |
133
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
As of | ||||||||
June 30, | December 31, | |||||||
2009 | 2008 | |||||||
(Dollars in millions) | ||||||||
Assets of Non-consolidated VIEs and QSPEs:(1) | ||||||||
Mortgage-backed trusts(2) | $ | 3,042,983 | $ | 3,017,030 | ||||
Asset-backed trusts | 510,681 | 563,633 | ||||||
Limited partnership investments | 13,410 | 12,884 | ||||||
Other(3) | 8,040 | 5,701 | ||||||
Total assets of non-consolidated VIEs and QSPEs | $ | 3,575,114 | $ | 3,599,248 | ||||
(1) | Amounts do not include QSPEs for which we are the transferor. | |
(2) | Includes $588.5 billion and $604.4 billion of assets of non-QSPE securitization trusts as of June 30, 2009 and December 31, 2008, respectively. | |
(3) | Includes mortgage revenue bonds of $8.0 billion and $5.7 billion as of June 30, 2009 and December 31, 2008, respectively, and the unpaid principal balance of credit enhanced bonds of $17 million and $19 million as of June 30, 2009 and December 31, 2008, respectively. |
134
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
As of | ||||||||
June 30, | December 31,(1) | |||||||
2009 | 2008 | |||||||
(Dollars in millions) | ||||||||
Assets: | ||||||||
Available-for-sale securities | $ | 200,390 | $ | 180,694 | ||||
Trading securities | 56,708 | 63,265 | ||||||
Guaranty assets | 6,176 | 6,431 | ||||||
Partnership investments | 3,052 | 3,405 | ||||||
Servicer and MBS trust receivable | 10,988 | 6,111 | ||||||
Other assets | 993 | 1,326 | ||||||
Total carrying amount of assets related to our interests in non-consolidated VIEs and QSPEs | $ | 278,307 | $ | 261,232 | ||||
Liabilities: | ||||||||
Reserve for guaranty losses | $ | 46,742 | $ | 21,614 | ||||
Guaranty obligations | 10,893 | 10,823 | ||||||
Partnership liabilities | 460 | 617 | ||||||
Servicer and MBS trust payable | 9,778 | 4,259 | ||||||
Other liabilities | 530 | 767 | ||||||
Total carrying amount of liabilities related to our interests in non-consolidated VIEs and QSPEs | $ | 68,403 | $ | 38,080 | ||||
(1) | Prior period amounts include additional categories to conform to the current period presentation. |
Maximum | ||||||||
Exposure | Recognized | |||||||
to Loss(1) | Liabilities(2) | |||||||
(Dollars in millions) | ||||||||
As of June 30, 2009 | $ | 2,586,551 | $ | 67,943 | ||||
As of December 31, 2008(3) | 2,536,469 | 37,463 |
(1) | Represents the greater of our recorded investment in the entity or the unpaid principal balance of the assets that are covered by our guaranty. Includes $98.0 billion and $95.9 billion related to non-QSPE securitization trusts as of June 30, 2009 and December 31, 2008, respectively. | |
(2) | Amounts consist of guaranty obligations, reserve for guaranty losses, servicer and MBS trust payable, and other liabilities recognized for the respective periods. | |
(3) | Prior period amounts include additional categories to conform to the current period presentation. |
135
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
4. | Mortgage Loans |
As of | ||||||||
June 30, | December 31, | |||||||
2009 | 2008 | |||||||
(Dollars in millions) | ||||||||
Single-family | $ | 305,916 | $ | 312,052 | ||||
Multifamily | 120,794 | 117,441 | ||||||
Total unpaid principal balance of mortgage loans(1)(2) | 426,710 | 429,493 | ||||||
Unamortized premiums (discounts) and other cost basis adjustments, net | (3,826 | ) | (894 | ) | ||||
Lower of cost or market adjustments on loans held for sale | (462 | ) | (264 | ) | ||||
Allowance for loan losses for loans held for investment | (6,841 | ) | (2,923 | ) | ||||
Total mortgage loans | $ | 415,581 | $ | 425,412 | ||||
(1) | Includes construction to permanent loans with an unpaid principal balance of $76 million and $125 million as of June 30, 2009 and December 31, 2008, respectively. | |
(2) | Includes unpaid principal balance totaling $152.1 billion and $65.8 billion as of June 30, 2009 and December 31, 2008, respectively, related to mortgage-related securities that were consolidated under FIN 46R and mortgage-related securities created from securitization transactions that did not meet the sales criteria under SFAS 140, which effectively resulted in mortgage-related securities being accounted for as loans. |
136
(In conservatorship)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
As of | ||||||||
June 30, | December 31, | |||||||
2009 | 2008 | |||||||
(Dollars in millions) | ||||||||
Outstanding contractual balance | $ | 8,586 | $ | 7,206 | ||||
Carrying amount: | ||||||||
Loans on accrual status | 2,592 | 2,902 | ||||||
Loans on nonaccrual status | 3,089 | 2,708 | ||||||
Total carrying amount of loans | $ | 5,681 | $ | 5,610 | ||||
For the | ||||||||||||||||
For the | Six Months | |||||||||||||||
Three Months Ended | Ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2009 | 2008 | 2009 | 2008 | |||||||||||||
(Dollars in millions) | ||||||||||||||||
Contractually required principal and interest payments at acquisition(1) | $ | 3,938 | $ | 892 | $ | 6,798 | $ | 2,786 | ||||||||
Nonaccretable difference | 1,038 | 97 | 1,719 | 276 | ||||||||||||
Cash flows expected to be collected at acquisition(1) | 2,900 | 795 | 5,079 | 2,510 | ||||||||||||
Accretable yield | 1,288 | 368 | 2,241 | 1,107 | ||||||||||||
Initial investment in acquired loans at acquisition | $ | 1,612 | $ | 427 | $ | 2,838 | $ | 1,403 | ||||||||
(1) | Contractually required principal and interest payments at acquisition and cash flows expected to be collected at acquisition are adjusted for the estimated timing and amount of prepayments. |
For the | ||||||||||||||||
For the | Six Months | |||||||||||||||
Three Months Ended | Ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2009 | 2008 | 2009 | 2008 | |||||||||||||
(Dollars in millions) | ||||||||||||||||
Beginning balance | $ | 1,799 | $ | 2,245 | $ | 1,559 | $ | 2,252 | ||||||||
Additions | 1,288 | 368 | 2,241 | 1,107 | ||||||||||||
Accretion | (50 | ) | (73 | ) | (106 | ) | (145 | ) | ||||||||
Reductions(1) | (1,461 | ) | (569 | ) | (2,484 | ) | (1,159 | ) | ||||||||
Change in estimated cash flows(2) | 907 | 508 | 1,214 | 511 | ||||||||||||
Reclassifications to nonaccretable difference(3) | (187 | ) | (154 | ) | (128 | ) | (241 | ) | ||||||||
Ending balance | $ | 2,296 | $ | 2,325 | $ | 2,296 | $ | 2,325 | ||||||||
(1) | Reductions are the result of liquidations and loan modifications due to troubled debt restructurings (“TDRs”). |
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(2) | Represents changes in expected cash flows due to changes in prepayment assumptions. | |
(3) | Represents changes in expected cash flows due to changes in credit quality or credit assumptions. |
For the | For the | |||||||||||||||
Three Months Ended | Six Months Ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2009 | 2008 | 2009 | 2008 | |||||||||||||
(Dollars in millions) | ||||||||||||||||
Accretion ofSOP 03-3 fair value losses(1) | $ | 198 | $ | 53 | $ | 263 | $ | 88 | ||||||||
Interest income onSOP 03-3 loans returned to accrual status or | ||||||||||||||||
subsequently modified as TDRs | 58 | 115 | 146 | 225 | ||||||||||||
TotalSOP 03-3 interest income recognized | $ | 256 | $ | 168 | $ | 409 | $ | 313 | ||||||||
Increase in “Provision for credit losses” subsequent to the acquisition of | ||||||||||||||||
SOP 03-3 loans | $ | 137 | $ | 86 | $ | 200 | $ | 121 | ||||||||
(1) | Represents accretion of the fair value discount that was recorded upon acquisition of SOP 03-3 loans. |
As of | ||||||||
June 30, | December 31, | |||||||
2009 | 2008 | |||||||
(Dollars in millions) | ||||||||
Unpaid principal balance | $ | 497 | $ | 461 | ||||
Carrying value | 3 | 8 |
138
(In conservatorship)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
5. | Allowance for Loan Losses and Reserve for Guaranty Losses |
For the | For the | |||||||||||||||
Three Months | Six Months | |||||||||||||||
Ended | Ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2009 | 2008 | 2009 | 2008 | |||||||||||||
(Dollars in millions) | ||||||||||||||||
Allowance for loan losses: | ||||||||||||||||
Beginning balance, January 1 | $ | 4,830 | $ | 993 | $ | 2,923 | $ | 698 | ||||||||
Provision | 2,615 | 880 | 5,124 | 1,424 | ||||||||||||
Charge-offs(1) | (672 | ) | (495 | ) | (1,309 | ) | (774 | ) | ||||||||
Recoveries | 68 | 98 | 103 | 128 | ||||||||||||
Ending balance, June 30(2) | $ | 6,841 | $ | 1,476 | $ | 6,841 | $ | 1,476 | ||||||||
Reserve for guaranty losses: | ||||||||||||||||
Beginning balance, January 1 | $ | 36,876 | $ | 4,202 | $ | 21,830 | $ | 2,693 | ||||||||
Provision | 15,610 | 4,205 | 33,435 | 6,734 | ||||||||||||
Charge-offs(3)(4) | (4,314 | ) | (989 | ) | (7,258 | ) | (2,026 | ) | ||||||||
Recoveries | 108 | 32 | 273 | 49 | ||||||||||||
Ending balance, June 30 | $ | 48,280 | $ | 7,450 | $ | 48,280 | $ | 7,450 | ||||||||
(1) | Includes accrued interest of $328 million and $161 million for the three months ended June 30, 2009 and 2008, respectively, and $575 million and $239 million for the six months ended June 30, 2009 and 2008, respectively. | |
(2) | Includes $309 million and $114 million as of June 30, 2009 and 2008, respectively, associated with acquired loans subject toSOP 03-3. | |
(3) | Includes charges of $73 million and $114 million for the three months ended June 30, 2009 and 2008, respectively, and $188 million and $123 million for the six months ended June 30, 2009 and 2008, respectively, related to unsecured HomeSaver Advance loans. | |
(4) | Includes charges recorded at the date of acquisition of $2.1 billion and $380 million for the three months ended June 30, 2009 and 2008, respectively, and $3.5 billion and $1.1 billion for the six months ended June 30, 2009 and 2008, respectively for acquired loans subject toSOP 03-3 where the acquisition cost exceeded the fair value of the acquired loan. |
139
(In conservatorship)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
6. | Investments in Securities |
As of | ||||||||
June 30, | December 31, | |||||||
2009 | 2008(1) | |||||||
(Dollars in millions) | ||||||||
Mortgage-related securities: | ||||||||
Fannie Mae single-class MBS | $ | 177,373 | $ | 164,241 | ||||
Fannie Mae structured MBS | 65,321 | 70,009 | ||||||
Non-Fannie Mae single-class | 34,168 | 27,497 | ||||||
Non-Fannie Mae structured | 38,037 | 43,119 | ||||||
Non-Fannie Mae structured multifamily (CMBS) | 20,144 | 19,691 | ||||||
Mortgage revenue bonds | 13,658 | 13,183 | ||||||
Other | 1,894 | 1,914 | ||||||
Total | 350,595 | 339,654 | ||||||
Non-mortgage-related securities: | ||||||||
Asset-backed securities | 9,808 | 10,598 | ||||||
Corporate debt securities | 935 | 6,037 | ||||||
Other | 5,003 | 1,005 | ||||||
Total | 15,746 | 17,640 | ||||||
Total investments in securities | $ | 366,341 | $ | 357,294 | ||||
(1) | Certain amounts have been reclassified to conform to the current period presentation. |
140
(In conservatorship)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
As of | ||||||||
June 30, | December 31, | |||||||
2009 | 2008(1) | |||||||
(Dollars in millions) | ||||||||
Mortgage-related securities: | ||||||||
Fannie Mae single-class MBS | $ | 42,973 | $ | 48,134 | ||||
Fannie Mae structured MBS | 9,130 | 9,872 | ||||||
Non-Fannie Mae single-class | 959 | 1,061 | ||||||
Non-Fannie Mae structured | 4,626 | 5,199 | ||||||
Non-Fannie Mae structured multifamily (CMBS) | 8,349 | 8,205 | ||||||
Mortgage revenue bonds | 617 | 695 | ||||||
Total | 66,654 | 73,166 | ||||||
Non-mortgage-related securities: | ||||||||
Asset-backed securities | 9,808 | 10,598 | ||||||
Corporate debt securities | 935 | 6,037 | ||||||
Other | 5,003 | 1,005 | ||||||
Total | 15,746 | 17,640 | ||||||
Total trading securities | $ | 82,400 | $ | 90,806 | ||||
Losses in trading securities held in our portfolio, net | $ | 4,494 | $ | 7,195 | ||||
(1) | Certain amounts have been reclassified to conform to the current period presentation. |
For the | For the | |||||||||||||||
Three Months | Six Months | |||||||||||||||
Ended | Ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2009 | 2008 | 2009 | 2008 | |||||||||||||
(Dollars in millions) | ||||||||||||||||
Net trading gains (losses): | ||||||||||||||||
Mortgage-related securities | $ | 811 | $ | (1,104 | ) | $ | 690 | $ | (1,767 | ) | ||||||
Non-mortgage-related securities | 750 | 139 | 1,038 | (425 | ) | |||||||||||
Total | $ | 1,561 | $ | (965 | ) | $ | 1,728 | $ | (2,192 | ) | ||||||
Net trading gains (losses) recorded in the period related to securities still held at period end | ||||||||||||||||
Mortgage-related securities | $ | 787 | $ | (1,093 | ) | $ | 655 | $ | (1,911 | ) | ||||||
Non-mortgage-related securities | 694 | 156 | 1,028 | (379 | ) | |||||||||||
Total | $ | 1,481 | $ | (937 | ) | $ | 1,683 | $ | (2,290 | ) | ||||||
141
(In conservatorship)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
For the | For the | |||||||||||||||
Three Months | Six Months | |||||||||||||||
Ended | Ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2009 | 2008 | 2009 | 2008 | |||||||||||||
(Dollars in millions) | ||||||||||||||||
Gross realized gains | $ | 1,370 | $ | 1,398 | $ | 2,169 | $ | 1,473 | ||||||||
Gross realized losses | 1,283 | 1,418 | 1,946 | 1,460 | ||||||||||||
Total proceeds | 75,821 | 66,545 | 107,731 | 69,600 |
As of June 30, 2009 | ||||||||||||||||||||
Gross | Gross | |||||||||||||||||||
Total | Gross | Unrealized | Unrealized | Total | ||||||||||||||||
Amortized | Unrealized | Losses- | Losses- | Fair | ||||||||||||||||
Cost(1) | Gains | OTTI(2) | Other | Value | ||||||||||||||||
(Dollars in millions) | ||||||||||||||||||||
Fannie Mae single-class MBS | $ | 130,623 | $ | 3,856 | $ | — | $ | (79 | ) | $ | 134,400 | |||||||||
Fannie Mae structured MBS | 54,300 | 1,984 | (41 | ) | (52 | ) | 56,191 | |||||||||||||
Non-Fannie Mae single-class mortgage- related securities | 32,117 | 1,100 | — | (8 | ) | 33,209 | ||||||||||||||
Non-Fannie Mae structured mortgage-related securities | 45,219 | 252 | (7,971 | ) | (4,089 | ) | 33,411 | |||||||||||||
Non-Fannie Mae structured mortgage-related securities (CMBS) | 15,918 | — | — | (4,123 | ) | 11,795 | ||||||||||||||
Mortgage revenue bonds | 14,241 | 40 | (53 | ) | (1,187 | ) | 13,041 | |||||||||||||
Other mortgage-related securities | 2,494 | 25 | (560 | ) | (65 | ) | 1,894 | |||||||||||||
Total | $ | 294,912 | $ | 7,257 | $ | (8,625 | ) | $ | (9,603 | ) | $ | 283,941 | ||||||||
142
(In conservatorship)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
As of December 31, 2008(3) | ||||||||||||||||
Total | Gross | Gross | Total | |||||||||||||
Amortized | Unrealized | Unrealized | Fair | |||||||||||||
Cost(1) | Gains | Losses | Value | |||||||||||||
(Dollars in millions) | ||||||||||||||||
Fannie Mae single-class MBS | $ | 112,943 | $ | 3,231 | $ | (67 | ) | $ | 116,107 | |||||||
Fannie Mae structured MBS | 59,002 | 1,333 | (198 | ) | 60,137 | |||||||||||
Non-Fannie Mae single-class mortgage-related securities | 25,798 | 665 | (27 | ) | 26,436 | |||||||||||
Non-Fannie Mae structured mortgage-related securities | 46,972 | 195 | (9,247 | ) | 37,920 | |||||||||||
Non-Fannie Mae structured multifamily mortgage-related securities (CMBS) | 16,036 | — | (4,550 | ) | 11,486 | |||||||||||
Mortgage revenue bonds | 14,636 | 29 | (2,177 | ) | 12,488 | |||||||||||
Other mortgage-related securities | 2,319 | 29 | (434 | ) | 1,914 | |||||||||||
Total | $ | 277,706 | $ | 5,482 | $ | (16,700 | ) | $ | 266,488 | |||||||
(1) | Amortized cost includes unamortized premiums, discounts and other cost basis adjustments, as well asother-than-temporary impairments recognized in our condensed consolidated statements of operations. | |
(2) | Reflects the noncredit component ofother-than-temporary impairment losses recorded in other comprehensive loss as well as subsequent changes in fair value for which another-than-temporary impairment has previously occured. | |
(3) | Certain amounts have been reclasssified to conform to the current period presentation. |
As of June 30, 2009 | ||||||||||||||||
Less than 12 | 12 Consecutive | |||||||||||||||
Consecutive Months | Months or Longer | |||||||||||||||
Gross | Total | Gross | Total | |||||||||||||
Unrealized | Fair | Unrealized | Fair | |||||||||||||
Losses | Value | Losses | Value | |||||||||||||
(Dollars in millions) | ||||||||||||||||
Fannie Mae single-class MBS | $ | (79 | ) | $ | 16,104 | $ | — | $ | 26 | |||||||
Fannie Mae structured MBS | (57 | ) | 1,718 | (36 | ) | 572 | ||||||||||
Non-Fannie Mae single-class mortgage-related securities | (7 | ) | 551 | (1 | ) | 48 | ||||||||||
Non-Fannie Mae structured mortgage-related securities | (6,991 | ) | 13,412 | (5,069 | ) | 14,152 | ||||||||||
Non-Fannie Mae structured multifamily mortgage-related securities (CMBS) | — | — | (4,123 | ) | 11,795 | |||||||||||
Mortgage revenue bonds | (85 | ) | 1,786 | (1,155 | ) | 8,516 | ||||||||||
Other mortgage-related securities | (457 | ) | 1,259 | (168 | ) | 610 | ||||||||||
Total temporarily-impairedavailable-for-sale securities | $ | (7,676 | ) | $ | 34,830 | $ | (10,552 | ) | $ | 35,719 | ||||||
143
(In conservatorship)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
As of December 31, 2008(1) | ||||||||||||||||
Less than 12 | 12 Consecutive | |||||||||||||||
Consecutive Months | Months or Longer | |||||||||||||||
Gross | Total | Gross | Total | |||||||||||||
Unrealized | Fair | Unrealized | Fair | |||||||||||||
Losses | Value | Losses | Value | |||||||||||||
(Dollars in millions) | ||||||||||||||||
Fannie Mae single-class MBS | $ | (64 | ) | $ | 4,842 | $ | (3 | ) | $ | 330 | ||||||
Fannie Mae structured MBS | (105 | ) | 2,471 | (93 | ) | 2,514 | ||||||||||
Non-Fannie Mae single-class mortgage-related securities | �� | (23 | ) | 1,775 | (4 | ) | 643 | |||||||||
Non-Fannie Mae structured mortgage-related securities | (1,259 | ) | 4,567 | (7,989 | ) | 18,170 | ||||||||||
Non-Fannie Mae structured multifamily mortgage-related securities (CMBS) | (2,533 | ) | 6,821 | (2,016 | ) | 4,666 | ||||||||||
Mortgage revenue bonds | (854 | ) | 6,230 | (1,323 | ) | 4,890 | ||||||||||
Other mortgage-related Securities | (388 | ) | 1,313 | (46 | ) | 77 | ||||||||||
Total temporarily-impairedavailable-for-sale securities | $ | (5,226 | ) | $ | 28,019 | $ | (11,474 | ) | $ | 31,290 | ||||||
(1) | Certain amounts have been reclassified to conform to the current presentation. |
144
(In conservatorship)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(Dollars in millions) | ||||
Balance, March 31, 2009 | $ | — | ||
Credit component ofother-than-temporary impairment not reclassified to AOCI in conjunction with the cumulative effect transition adjustment | 4,265 | |||
Additions for the credit component on debt securities for which OTTI was not previously recognized | 222 | |||
Increase for credit losses related to securities for which credit-related OTTI was previously recognized | 531 | |||
Reductions for increases in cash flows expected to be collected over the remaining life of the security | (64 | ) | ||
Balance, June 30, 2009 | $ | 4,954 | ||
Range | ||||||||||||
Weighted Average | Minimum | Maximum | ||||||||||
Prepayment rates | 4.0 | % | 0.5 | % | 10.4 | % | ||||||
Default rates | 68.8 | 16.2 | 83.0 | |||||||||
Loss severity | 60.8 | 29.2 | 93.6 |
145
(In conservatorship)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
As of June 30, 2009 | ||||||||||||||||||||||||||||||||||||||||
After One Year | After Five Years | |||||||||||||||||||||||||||||||||||||||
Total | Total | One Year or Less | Through Five Years | Through Ten Years | After Ten Years | |||||||||||||||||||||||||||||||||||
Amortized | Fair | Amortized | Fair | Amortized | Fair | Amortized | Fair | Amortized | Fair | |||||||||||||||||||||||||||||||
Cost(1) | Value | Cost(1) | Value | Cost(1) | Value | Cost(1) | Value | Cost(1) | Value | |||||||||||||||||||||||||||||||
(Dollars in millions) | ||||||||||||||||||||||||||||||||||||||||
Fannie Mae single-class MBS(2) | $ | 130,623 | $ | 134,400 | $ | 1 | $ | 1 | $ | 720 | $ | 753 | $ | 18,378 | $ | 19,022 | $ | 111,524 | $ | 114,624 | ||||||||||||||||||||
Fannie Mae structured MBS(2) | 54,300 | 56,191 | — | — | 80 | 85 | 7,063 | 7,325 | 47,157 | 48,781 | ||||||||||||||||||||||||||||||
Non-Fannie Mae single-class mortgage-related securities(2) | 32,117 | 33,209 | — | — | 98 | 100 | 858 | 892 | 31,161 | 32,217 | ||||||||||||||||||||||||||||||
Non-Fannie Mae structured mortgage-related securities(2) | 45,219 | 33,411 | — | — | 13 | 13 | 1,426 | 1,437 | 43,780 | 31,961 | ||||||||||||||||||||||||||||||
Non-Fannie Mae structured mortgage-related securities (CMBS) | 15,918 | 11,795 | 200 | 140 | 377 | 352 | 15,171 | 11,243 | 170 | 60 | ||||||||||||||||||||||||||||||
Mortgage revenue bonds | 14,241 | 13,041 | 27 | 27 | 316 | 321 | 780 | 777 | 13,118 | 11,916 | ||||||||||||||||||||||||||||||
Other mortgage-related securities | 2,494 | 1,894 | — | — | — | — | — | 25 | 2,494 | 1,869 | ||||||||||||||||||||||||||||||
Total | $ | 294,912 | $ | 283,941 | $ | 228 | $ | 168 | $ | 1,604 | $ | 1,624 | $ | 43,676 | $ | 40,721 | $ | 249,404 | $ | 241,428 | ||||||||||||||||||||
(1) | Amortized cost includes unamortized premiums, discounts and other cost basis adjustments, as well asother-than-temporary impairments recognized in our consolidated statements of operations. | |
(2) | Mortgage-backed securities are reported based on contractual maturities assuming no prepayments. |
7. | Portfolio Securitizations |
146
(In conservatorship)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
As of | ||||||||
June 30, | December 31, | |||||||
2009 | 2008 | |||||||
(Dollars in millions) | ||||||||
Fannie Mae MBS | $ | 46,096 | $ | 45,705 | ||||
Guaranty asset | 775 | 438 | ||||||
MSA | 8 | 10 | ||||||
Guaranty obligation (excluding deferred profit) | (976 | ) | (769 | ) | ||||
MSL | (28 | ) | (27 | ) |
147
(In conservatorship)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Fannie Mae | ||||||||
Single-class | ||||||||
MBS & Fannie | REMICS & | |||||||
Mae Megas | SMBS | |||||||
(Dollars in millions) | ||||||||
As of June 30, 2009 | ||||||||
Unpaid principal balance | $ | 19,460 | $ | 25,109 | ||||
Fair value | 20,282 | 25,814 | ||||||
Impact on value from a 10% adverse change | (2,028 | ) | (2,581 | ) | ||||
Impact on value from a 20% adverse change | (4,056 | ) | (5,163 | ) | ||||
Weighted-average coupon | 5.86 | % | 6.91 | % | ||||
Weighted-average loan age | 2.9 years | 4.5 years | ||||||
Weighted-average maturity | 24.7 years | 26.7 years | ||||||
As of December 31, 2008 | ||||||||
Unpaid principal balance | $ | 17,872 | $ | 27,117 | ||||
Fair value | 18,360 | 27,345 | ||||||
Impact on value from a 10% adverse change | (1,836 | ) | (2,735 | ) | ||||
Impact on value from a 20% adverse change | (3,672 | ) | (5,469 | ) | ||||
Weighted-average coupon | 5.92 | % | 7.03 | % | ||||
Weighted-average loan age | 2.9 years | 4.2 years | ||||||
Weighted-average maturity | 24.5 years | 27.0 years |
Guaranty | ||||
Assets(4) | ||||
For the six months ended June 30, 2009 | ||||
Weighted-average life(1) | 5.2 years | |||
Average12-month CPR(2) | 28.8 | % | ||
Average discount rate assumption(3) | 4.26 | % |
(1) | The average number of years for which each dollar of unpaid principal on a loan or mortgage-related security remains outstanding. | |
(2) | Represents the expected12-month average payment rate, which is based on the constant annualized prepayment rate for mortgage loans. | |
(3) | The interest rate used in determining the present value of future cash flows, derived for the forward curve based on interest rate swaps, excluding the option adjusted spreads. | |
(4) | The weighted-average life and average12-month CPR assumptions for our guaranty asset approximate the assumptions used for our guaranty obligation at time of securitization. |
148
(In conservatorship)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
As of | ||||||||
June 30, | December 31, | |||||||
2009 | 2008 | |||||||
(Dollars in millions) | ||||||||
Guaranty Assets | ||||||||
Valuation at period end: | ||||||||
Fair value | $ | 778 | $ | 440 | ||||
Weighted-average life(1) | 4.9 years | 2.2 years | ||||||
Prepayment speed assumptions: | ||||||||
Average12-month CPR prepayment speed assumption(2) | 29.3 | % | 59.30 | % | ||||
Impact on value from a 10% adverse change | $ | (31 | ) | $ | (38 | ) | ||
Impact on value from a 20% adverse change | (60 | ) | (71 | ) | ||||
Discount rate assumptions: | ||||||||
Average discount rate assumption(3) | 4.06 | % | 5.69 | % | ||||
Impact on value from a 10% adverse change | $ | (26 | ) | $ | (10 | ) | ||
Impact on value from a 20% adverse change | (50 | ) | (19 | ) | ||||
Guaranty Obligations | ||||||||
Valuation at period end: | ||||||||
Fair value | $ | 4,364 | $ | 2,703 | ||||
Anticipated credit losses(4) | 3,472 | 2,246 | ||||||
Weighted-average life(1) | 4.9 years | 2.2 years | ||||||
Home price assumptions: | ||||||||
24 month average home price assumption | (5.6 | )% | (5.0 | )% | ||||
Impact on credit losses due to a 2.5% decline in home prices | $ | 319 | $ | 454 | ||||
Impact on credit losses due to a 5% decline in home prices | 649 | 723 | ||||||
Loan-to-value assumptions: | ||||||||
Average estimated currentloan-to-value ratio | 72.9 | % | 72.3 | % | ||||
Impact on credit losses due to a 2.5% increase inloan-to-value | $ | 328 | $ | 585 | ||||
Impact on credit losses due to a 5% increase inloan-to-value | 669 | 905 |
(1) | The average number of years for which each dollar of unpaid principal on a loan or mortgage-related security remains outstanding. | |
(2) | Represents the12-month average payment rate, which is based on the constant annualized prepayment rate for mortgage loans. | |
(3) | The interest rate used in determining the present value of future cash flows, derived from the forward curve based on interest rate swaps, excluding the option adjusted spreads. | |
(4) | The present value of anticipated credit losses is calculated as the average across a distribution of possible outcomes and may not be indicative of actual future losses such that actual results may vary materially. |
149
(In conservatorship)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
For the | For the | |||||||||||||||
Three Months | Six Months | |||||||||||||||
Ended | Ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2009 | 2008 | 2009 | 2008 | |||||||||||||
(Dollars in millions) | ||||||||||||||||
Proceeds from new securitizations | $ | 39,276 | $ | 7,350 | $ | 61,339 | $ | 17,923 | ||||||||
Guaranty and other income | 89 | 37 | 152 | 81 | ||||||||||||
Principal and interest received on retained interests | 2,543 | 2,045 | 4,836 | 4,042 | ||||||||||||
Purchases of previously transferred financial asstes | (182 | ) | (21 | ) | (305 | ) | (55 | ) |
Unpaid Principal | Principal Amount of | |||||||
Balance | Delinquent Loans(1) | |||||||
(Dollars in millions) | ||||||||
As of June 30, 2009 | ||||||||
Loans held for investment | $ | 395,666 | $ | 26,752 | ||||
Loans held for sale | 31,044 | 119 | ||||||
Securitized loans | 153,105 | 6,334 | ||||||
Total loans managed | $ | 579,815 | $ | 33,205 | ||||
As of December 31, 2008 | ||||||||
Loans held for investment | $ | 415,485 | $ | 19,363 | ||||
Loans held for sale | 14,008 | 79 | ||||||
Securitized loans | 114,163 | 2,560 | ||||||
Total loans managed | $ | 543,656 | $ | 22,002 | ||||
(1) | Represents the unpaid principal balance of loans held for investment and loans held for sale for which interest is no longer being accrued. We discontinue accruing interest when payment of principal and interest in full is not reasonably assured. |
150
(In conservatorship)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
As of | ||||||||
June 30, | December 31, | |||||||
2009 | 2008 | |||||||
(Dollars in millions) | ||||||||
Assets: | ||||||||
Loans held for investment | $ | 89,445 | $ | 83 | ||||
Available-for-sale securities | 8,897 | 9,660 | ||||||
Loans held for sale | 2,015 | 2,383 | ||||||
Trading securities | 562 | 593 | ||||||
Total | $ | 100,919 | $ | 12,719 | ||||
Liabilities—Long-term debt | $ | 1,029 | $ | 1,168 | ||||
8. | Financial Guarantees and Master Servicing |
151
(In conservatorship)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
As of June 30, 2009(1) | As of December 31, 2008(1) | |||||||||||||||||||||||
30 days | 60 days | Seriously | 30 days | 60 days | Seriously | |||||||||||||||||||
Delinquent | Delinquent | Delinquent(2) | Delinquent | Delinquent | Delinquent(2) | |||||||||||||||||||
Percentage of single-family conventional guaranty book of business(3) | 2.37 | % | 1.06 | % | 4.97 | % | 2.53 | % | 1.10 | % | 2.96 | % | ||||||||||||
Percentage of single-family conventional loans(4) | 2.39 | 0.96 | 3.94 | 2.52 | 1.00 | 2.42 |
152
(In conservatorship)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
As of June 30, 2009(1) | As of December 31, 2008(1) | |||||||||||||||
Percentage of | Percentage of | |||||||||||||||
Single-family | Percentage | Single-family | Percentage | |||||||||||||
Guaranty Book | Seriously | Guaranty Book | Seriously | |||||||||||||
of Business(3) | Delinquent(2)(5) | of Business(3) | Delinquent(2)(5) | |||||||||||||
Estimatedmark-to-marketloan-to-value ratio:(7) | ||||||||||||||||
100.01% to 110% | 5 | % | 10.68 | % | 5 | % | 7.12 | % | ||||||||
110.01% to 120% | 3 | 13.60 | 3 | 9.91 | ||||||||||||
120.01% to 125% | 1 | 15.67 | 1 | 11.79 | ||||||||||||
Greater than 125% | 5 | 25.20 | 3 | 18.43 | ||||||||||||
Geographical Distribution: | ||||||||||||||||
Arizona | 3 | 6.54 | 3 | 3.41 | ||||||||||||
California | 17 | 4.23 | 16 | 2.30 | ||||||||||||
Florida | 7 | 9.71 | 7 | 6.14 | ||||||||||||
Nevada | 1 | 9.33 | 1 | 4.74 | ||||||||||||
Midwest(8) | 11 | 4.16 | 11 | 2.70 | ||||||||||||
All other states | 61 | 2.95 | 62 | 1.86 | ||||||||||||
Product Distribution (not mutually exclusive):(5) | ||||||||||||||||
Alt-A | 10 | 11.91 | 11 | 7.03 | ||||||||||||
Subprime(9) | — | 21.75 | — | 14.29 | ||||||||||||
Negatively amortizing adjustable rate | 1 | 8.48 | 1 | 5.61 | ||||||||||||
Interest only | 7 | 15.09 | 8 | 8.42 | ||||||||||||
Investor property | 6 | 4.65 | 6 | 2.95 | ||||||||||||
Condo/Coop | 9 | 4.58 | 9 | 2.73 | ||||||||||||
Originalloan-to-value ratio >90%(6) | 10 | 9.66 | 10 | 6.33 | ||||||||||||
FICO score <620(6) | 4 | 13.07 | 5 | 9.03 | ||||||||||||
Originalloan-to-value ratio >90% and FICO score <620(6) | 1 | 21.37 | 1 | 15.97 | ||||||||||||
Vintages: | ||||||||||||||||
2005 | 12 | 5.09 | 13 | 2.99 | ||||||||||||
2006 | 12 | 9.05 | 14 | 5.11 | ||||||||||||
2007 | 17 | 9.22 | 20 | 4.70 | ||||||||||||
2008 | 14 | 1.95 | 16 | 0.67 | ||||||||||||
All other vintages | 45 | 1.78 | 37 | 1.35 |
(1) | Consists of the portion of our conventional single-family mortgage credit book of business for which we have access to detailed loan level information, which constitutes approximately 95% and 96% of our total conventional single-family mortgage credit book of business as of June 30, 2009 and December 31, 2008, respectively. | |
(2) | Includes single-family loans that are three months or more past due or in foreclosure. | |
(3) | Percentage based on unpaid principal balance. | |
(4) | Percentage based on loan amount. | |
(5) | Represents percentage of each respective category based on loan count of seriously delinquent loans divided by total loan count of respective category. | |
(6) | Includes housing goals oriented loans such as MyCommunityMortgage® and Expanded Approval®. | |
(7) | The aggregate estimatedmark-to-market loan-to value ratio is based on the estimated periodic changes in home value, and the unpaid principal balance of the loan as of the date of each reported period. Excludes loans for which this information is not readily available. |
153
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(8) | Selected midwest states include Illinois, Indiana, Michigan, and Ohio. | |
(9) | Due to rounding, the percentage of the Single-Family book represented by Subprime is below one half of one percent. |
As of June 30, 2009(1) | As of December 31, 2008(1) | |||||||||||||||
30 days | Seriously | 30 days | Seriously | |||||||||||||
Delinquent(2) | Delinquent(1)(2) | Delinquent(2) | Delinquent(1) | |||||||||||||
Percentage of multifamily guaranty book of business | 0.22 | % | 0.51 | % | 0.12 | % | 0.30 | % |
As of June 30, 2009 | As of December 31, 2008 | |||||||||||||||
Percentage of | Percentage of | |||||||||||||||
Multifamily | Percentage | Multifamily | Percentage | |||||||||||||
Guaranty | Seriously | Guaranty | Seriously | |||||||||||||
Book of Business | Delinquent(2)(3) | Book of Business | Delinquent(2)(3) | |||||||||||||
Originatingloan-to-value ratio: | ||||||||||||||||
Greater than 80% | 5 | % | 0.50 | % | 5 | % | 0.92 | % | ||||||||
Less than or equal to 80% | 95 | 0.51 | 95 | 0.27 | ||||||||||||
Operating debt service coverage ratio: | ||||||||||||||||
Less than or equal to 1.10% | 11 | 0.09 | 11 | — | ||||||||||||
Greater than 1.10% | 89 | 0.56 | 89 | 0.33 | ||||||||||||
Originating loan size distribution: | ||||||||||||||||
Less than or equal to $750,000 | 3 | 0.81 | 3 | 0.55 | ||||||||||||
Greater than $750,000 and less than or equal to $3 million | 13 | 0.79 | 13 | 0.52 | ||||||||||||
Greater than $3 million and less than or equal to $5 million | 10 | 0.90 | 10 | 0.39 | ||||||||||||
Greater than $5 million and less than or equal to $25 million | 40 | 0.53 | 41 | 0.43 | ||||||||||||
Greater than $25 million | 34 | 0.26 | 33 | — | ||||||||||||
Maturing dates: | ||||||||||||||||
Maturing in 2009 | 5 | 0.55 | 6 | 0.10 | ||||||||||||
Maturing in 2010 | 3 | 0.31 | 3 | 0.32 | ||||||||||||
Maturing in 2011 | 5 | 0.32 | 5 | 0.37 | ||||||||||||
Maturing in 2012 | 9 | 1.21 | 10 | 0.16 | ||||||||||||
Maturing in 2013 | 11 | 0.19 | — | — |
(1) | Consists of the portion of our multifamily mortgage credit book of business for which we have access to detailed loan level information, which constitutes approximately 83% and 82% of our total multifamily mortgage credit book of business as of June 30, 2009 and December 31, 2008, respectively. | |
(2) | Percentage based on unpaid principal balance. | |
(3) | Includes multifamily loans that are two months or more past due. |
154
(In conservatorship)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
For the | For the | |||||||||||||||
Three Months | Six Months | |||||||||||||||
Ended | Ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2009 | 2008 | 2009 | 2008 | |||||||||||||
(Dollars in millions) | ||||||||||||||||
Balance as of beginning of period | $ | 11,673 | $ | 15,521 | $ | 12,147 | $ | 15,393 | ||||||||
Additions to guaranty obligations(1) | 2,079 | 2,347 | 3,414 | 4,470 | ||||||||||||
Amortization of guaranty obligation into guaranty fee income | (1,265 | ) | (1,140 | ) | (3,028 | ) | (2,979 | ) | ||||||||
Impact of consolidation activity(2) | (129 | ) | (287 | ) | (175 | ) | (443 | ) | ||||||||
Balance as of end of period | $ | 12,358 | $ | 16,441 | $ | 12,358 | $ | 16,441 | ||||||||
(1) | Represents the fair value of the contractual obligation and deferred profit at issuance of new guarantees. | |
(2) | Upon consolidation of MBS trusts, we derecognize our guaranty obligation to the respective trusts. |
155
(In conservatorship)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
For the | For the | |||||||||||||||
Three Months | Six Months | |||||||||||||||
Ended | Ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2009 | 2008 | 2009 | 2008 | |||||||||||||
(Dollars in millions) | ||||||||||||||||
Cost basis: | ||||||||||||||||
Beginning balance | $ | 650 | $ | 1,083 | $ | 764 | $ | 1,171 | ||||||||
Additions | 12 | 102 | 37 | 203 | ||||||||||||
Amortization | (9 | ) | (47 | ) | (39 | ) | (118 | ) | ||||||||
Other-than-temporary impairments | (276 | ) | (76 | ) | (385 | ) | (186 | ) | ||||||||
Reductions for MBS trusts paid-off and impact of consolidation activity | (1 | ) | (10 | ) | (1 | ) | (18 | ) | ||||||||
Ending balance | 376 | 1,052 | 376 | 1,052 | ||||||||||||
Valuation allowance: | ||||||||||||||||
Beginning balance | 103 | 74 | 73 | 10 | ||||||||||||
LOCOM adjustments | 248 | 177 | 517 | 412 | ||||||||||||
LOCOM recoveries | (268 | ) | (165 | ) | (507 | ) | (336 | ) | ||||||||
Ending balance | 83 | 86 | 83 | 86 | ||||||||||||
Carrying value | $ | 293 | $ | 966 | $ | 293 | $ | 966 | ||||||||
Fair value, beginning of period | $ | 617 | $ | 1,319 | $ | 855 | $ | 1,808 | ||||||||
Fair value, end of period | $ | 319 | $ | 1,261 | $ | 319 | $ | 1,261 | ||||||||
156
(In conservatorship)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
9. | Acquired Property, Net |
For the Three Months Ended | For the Six Months Ended | |||||||||||||||||||||||
June 30, 2009 | June 30, 2009 | |||||||||||||||||||||||
Acquired | Valuation | Acquired | Acquired | Valuation | Acquired | |||||||||||||||||||
Property | Allowance(1) | Property, Net | Property | Allowance(1) | Property, Net | |||||||||||||||||||
(Dollars in millions) | ||||||||||||||||||||||||
Balance as of beginning of period | $ | 7,759 | $ | (1,129 | ) | $ | 6,630 | $ | 8,040 | $ | (1,122 | ) | $ | 6,918 | ||||||||||
Additions | 3,009 | (15 | ) | 2,994 | 5,551 | (31 | ) | 5,520 | ||||||||||||||||
Disposals | (3,388 | ) | 479 | (2,909 | ) | (6,211 | ) | 852 | (5,359 | ) | ||||||||||||||
Write-downs, net of recoveries | — | (107 | ) | (107 | ) | — | (471 | ) | (471 | ) | ||||||||||||||
Balance as of end of period | $ | 7,380 | $ | (772 | ) | $ | 6,608 | $ | 7,380 | $ | (772 | ) | $ | 6,608 | ||||||||||
For the Three Months Ended | For the Six Months Ended | |||||||||||||||||||||||
June 30, 2008 | June 30, 2008 | |||||||||||||||||||||||
Acquired | Valuation | Acquired | Acquired | Valuation | Acquired | |||||||||||||||||||
Property | Allowance(1) | Property, Net | Property | Allowance(1) | Property, Net | |||||||||||||||||||
(Dollars in millions) | ||||||||||||||||||||||||
Balance as of beginning of period | $ | 5,069 | $ | (348 | ) | $ | 4,721 | $ | 3,853 | $ | (251 | ) | $ | 3,602 | ||||||||||
Additions | 2,756 | (8 | ) | �� | 2,748 | 5,026 | (16 | ) | 5,010 | |||||||||||||||
Disposals | (1,372 | ) | 129 | (1,243 | ) | (2,426 | ) | 231 | (2,195 | ) | ||||||||||||||
Write-downs, net of recoveries | — | (231 | ) | (231 | ) | — | (422 | ) | (422 | ) | ||||||||||||||
Balance as of end of period | $ | 6,453 | $ | (458 | ) | $ | 5,995 | $ | 6,453 | $ | (458 | ) | $ | 5,995 | ||||||||||
(1) | Reflects activities in the valuation allowance for acquired properties held primarily by our Single-family segment. |
157
(In conservatorship)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
10. | Short-term Borrowings and Long-term Debt |
As of | ||||||||||||||||
June 30, 2009 | December 31, 2008 | |||||||||||||||
Weighted | Weighted | |||||||||||||||
Average | Average | |||||||||||||||
Interest | Interest | |||||||||||||||
Outstanding | Rate(1) | Outstanding | Rate(1) | |||||||||||||
(Dollars in millions) | ||||||||||||||||
Federal funds purchased and securities sold under | ||||||||||||||||
agreements to repurchase | $ | — | — | % | $ | 77 | 0.01 | % | ||||||||
Fixed short-term debt: | ||||||||||||||||
Discount notes | $ | 256,266 | 0.74 | % | $ | 322,932 | 1.75 | % | ||||||||
Foreign exchange discount notes | 189 | 1.18 | 141 | 2.50 | ||||||||||||
Other short-term debt | 224 | 1.35 | 333 | 2.80 | ||||||||||||
Total fixed short-term debt | 256,679 | 0.74 | 323,406 | 1.75 | ||||||||||||
Floating-rate short-term debt(2) | 3,102 | 1.17 | 7,585 | 1.66 | ||||||||||||
Total short-term debt | $ | 259,781 | 0.74 | % | $ | 330,991 | 1.75 | % | ||||||||
(1) | Includes discounts, premiums and other cost basis adjustments. | |
(2) | Includes a portion of structured debt instruments that is reported at fair value as of December 31, 2008. |
158
(In conservatorship)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
As of | ||||||||||||||||||||||||
June 30, 2009 | December 31, 2008 | |||||||||||||||||||||||
Weighted | Weighted | |||||||||||||||||||||||
Average | Average | |||||||||||||||||||||||
Interest | Interest | |||||||||||||||||||||||
Maturities | Outstanding | Rate(1) | Maturities | Outstanding | Rate(1) | |||||||||||||||||||
(Dollars in millions) | ||||||||||||||||||||||||
Senior fixed: | ||||||||||||||||||||||||
Benchmark notes and bonds | 2009-2030 | $ | 277,360 | 4.39 | % | 2009-2030 | $ | 251,063 | 4.92 | % | ||||||||||||||
Medium-term notes | 2009-2019 | 153,146 | 3.13 | 2009-2018 | 151,277 | 4.20 | ||||||||||||||||||
Foreign exchange notes and bonds | 2010-2028 | 1,204 | 5.57 | 2009-2028 | 1,513 | 4.70 | ||||||||||||||||||
Other long-term debt(2) | 2009-2039 | 57,200 | 5.76 | 2009-2038 | 73,061 | 5.95 | ||||||||||||||||||
Total senior fixed | 488,910 | 4.16 | 476,914 | 4.85 | ||||||||||||||||||||
Senior floating: | ||||||||||||||||||||||||
Medium-term notes | 2009-2013 | 67,556 | 0.83 | 2009-2017 | 45,737 | 2.21 | ||||||||||||||||||
Other long-term debt(2) | 2020-2037 | 1,210 | 6.38 | 2020-2037 | 874 | 7.22 | ||||||||||||||||||
Total senior floating | 68,766 | 0.93 | 46,611 | 2.30 | ||||||||||||||||||||
Subordinated fixed: | ||||||||||||||||||||||||
Medium-term notes | 2011-2011 | 2,500 | 6.29 | 2011-2011 | 2,500 | 6.24 | ||||||||||||||||||
Other subordinated debt | 2012-2019 | 7,217 | 6.65 | 2012-2019 | 7,116 | 6.58 | ||||||||||||||||||
Total subordinated fixed | 9,717 | 6.56 | 9,616 | 6.50 | ||||||||||||||||||||
Debt from consolidations | 2009-2039 | 5,936 | 5.76 | 2009-2039 | 6,261 | 5.87 | ||||||||||||||||||
Total long-term debt(3) | $ | 573,329 | 3.83 | % | $ | 539,402 | 4.67 | % | ||||||||||||||||
(1) | Includes discounts, premiums and other cost basis adjustments. | |
(2) | Includes a portion of structured debt instruments that is reported at fair value. | |
(3) | Reported amounts include a net discount and other cost basis adjustments of $16.8 billion and $15.5 billion as of June 30, 2009 and December 31, 2008, respectively. |
159
(In conservatorship)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
11. | Derivative Instruments and Hedging Activities |
• | Interest rate swap contracts. An interest rate swap is a transaction between two parties in which each 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, cancelable swaps and interest rate caps. | |
• | 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 issue foreign currency debt. |
160
(In conservatorship)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
As of June 30, 2009 | ||||||||||||||||
Asset Derivatives | Liability Derivatives | |||||||||||||||
Notional | Estimated | Notional | Estimated | |||||||||||||
Amount | Fair Value | Amount | Fair Value | |||||||||||||
(Dollars in millions) | ||||||||||||||||
Risk management derivatives: | ||||||||||||||||
Swaps: | ||||||||||||||||
Pay-fixed(1) | $ | 67,920 | $ | 2,840 | $ | 582,527 | $ | (37,988 | ) | |||||||
Receive-fixed(2) | 398,652 | 22,961 | 173,150 | (6,877 | ) | |||||||||||
Basis | 6,705 | 31 | 15,495 | (14 | ) | |||||||||||
Foreign currency | 657 | 117 | 774 | (85 | ) | |||||||||||
Swaptions: | ||||||||||||||||
Pay-fixed | 83,300 | 1,876 | 3,050 | (3 | ) | |||||||||||
Receive-fixed | 84,680 | 5,568 | — | — | ||||||||||||
Interest rate caps | 3,000 | 64 | — | — | ||||||||||||
Other(3) | 739 | 63 | 8 | — | ||||||||||||
Total gross risk management derivatives | 645,653 | 33,520 | 775,004 | (44,967 | ) | |||||||||||
Collateral receivable (payable)(4) | — | 13,545 | — | (2,214 | ) | |||||||||||
Accrued interest receivable (payable) | — | 6,200 | — | (6,528 | ) | |||||||||||
Total net risk management derivatives | $ | 645,653 | $ | 53,265 | $ | 775,004 | $ | (53,709 | ) | |||||||
Mortgage commitment derivatives: | ||||||||||||||||
Mortgage commitments to purchase whole loans | $ | 3,290 | $ | 26 | $ | 4,568 | $ | (56 | ) | |||||||
Forward contracts to purchase mortgage-related securities | 31,284 | 381 | 24,322 | (355 | ) | |||||||||||
Forward contracts to sell mortgage-related securities | 38,554 | 533 | 72,165 | (726 | ) | |||||||||||
Total mortgage commitment derivatives | $ | 73,128 | $ | 940 | $ | 101,055 | $ | (1,137 | ) | |||||||
Derivatives at fair value | $ | 718,781 | $ | 54,205 | $ | 876,059 | $ | (54,846 | ) | |||||||
161
(In conservatorship)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(1) | Estimated fair value amount includes approximately $60 million of fees on unsettled swap terminations related to liability derivatives. | |
(2) | Estimated fair value amount includes approximately $24 million of fees on unsettled swap terminations related to asset derivatives, and approximately $7 million of fees on unsettled swap terminations related to liability derivatives. | |
(3) | Includes MBS options, swap credit enhancements and mortgage insurance contracts that are accounted for as derivatives. The mortgage insurance contracts have payment provisions that are not based on a notional amount. | |
(4) | Collateral receivable represents collateral posted by us for derivatives in a loss position. Collateral payable represents collateral posted by counterparties to reduce our exposure for derivatives in a gain position. |
As of December 31, 2008 | ||||||||
Notional | Estimated | |||||||
Amount | Fair Value | |||||||
(Dollars in millions) | ||||||||
Risk management derivatives: | ||||||||
Swaps: | ||||||||
Pay-fixed | $ | 546,916 | $ | (68,379 | ) | |||
Receive-fixed | 451,081 | 42,246 | ||||||
Basis | 24,560 | (57 | ) | |||||
Foreign currency | 1,652 | (12 | ) | |||||
Swaptions: | ||||||||
Pay-fixed | 79,500 | 506 | ||||||
Receive-fixed | 93,560 | 13,039 | ||||||
Interest rate caps | 500 | 1 | ||||||
Other(1) | 827 | 100 | ||||||
Net collateral receivable | — | 11,286 | ||||||
Accrued interest payable, net | — | (491 | ) | |||||
Total risk management derivatives | $ | 1,198,596 | $ | (1,761 | ) | |||
Mortgage commitment derivatives: | ||||||||
Mortgage commitments to purchase whole loans | $ | 9,256 | $ | 27 | ||||
Forward contracts to purchase mortgage-related securities | 25,748 | 239 | ||||||
Forward contracts to sell mortgage-related securities | 36,232 | (351 | ) | |||||
Total mortgage commitment derivatives | $ | 71,236 | $ | (85 | ) | |||
(1) | Includes MBS options, swap credit enhancements and mortgage insurance contracts that are accounted for as derivatives. The mortgage insurance contracts have payment provisions that are not based on a notional amount. |
162
(In conservatorship)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
For the Three | For the Six | |||||||||||||||
Months Ended | Months Ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2009 | 2008 | 2009 | 2008 | |||||||||||||
(Dollars in millions) | ||||||||||||||||
Risk management derivatives: | ||||||||||||||||
Swaps: | ||||||||||||||||
Pay-fixed | $ | 19,430 | $ | 15,782 | $ | 22,744 | $ | (113 | ) | |||||||
Receive-fixed | (16,877 | ) | (11,092 | ) | (18,239 | ) | 1,700 | |||||||||
Basis | 45 | (73 | ) | 22 | (68 | ) | ||||||||||
Foreign currency(1) | 159 | (20 | ) | 86 | 126 | |||||||||||
Swaptions: | ||||||||||||||||
Pay-fixed | 900 | 270 | 885 | 81 | ||||||||||||
Receive-fixed | (4,250 | ) | (2,499 | ) | (7,488 | ) | (2,226 | ) | ||||||||
Interest rate caps | 21 | 4 | 21 | 3 | ||||||||||||
Other(2) | (52 | ) | (13 | ) | (23 | ) | 51 | |||||||||
Total risk management fair value gains (losses), net(3) | (624 | ) | 2,359 | (1,992 | ) | (446 | ) | |||||||||
Mortgage commitment derivatives fair value gains (losses), net | 87 | (66 | ) | (251 | ) | (264 | ) | |||||||||
Total derivatives fair value gains (losses), net | $ | (537 | ) | $ | 2,293 | $ | (2,243 | ) | $ | (710 | ) | |||||
(1) | Includes the effect of net contractual interest income accruals of $9 million and $6 million for the three months ended June 30, 2009 and 2008, respectively, and interest income accruals of $15 million and $3 million for the six months ended June 30, 2009 and 2008, respectively. The change in fair value of foreign currency swaps excluding this item resulted in a net gain of $150 million and a net loss of $26 million for the three months ended June 30, 2009 and 2008, respectively, and a net gain of $71 million and $123 million for the six months ended June 30, 2009 and 2008, respectively. | |
(2) | Includes MBS options, swap credit enhancements and mortgage insurance contracts. | |
(3) | Reflects net derivatives fair value gains (losses), excluding mortgage commitments, recognized in our condensed consolidated statements of operations. |
For the Three Months Ended June 30, 2009 | ||||||||||||||||||||||||||||||||||||
Interest Rate Swaps | Interest Rate Swaptions | |||||||||||||||||||||||||||||||||||
Pay- | Receive- | Foreign | Pay- | Receive- | Interest | |||||||||||||||||||||||||||||||
Fixed(1) | Fixed(2) | Basis(3) | Currency(4) | Fixed | Fixed | Rate Caps | Other(5) | Total | ||||||||||||||||||||||||||||
(Dollars in millions) | ||||||||||||||||||||||||||||||||||||
Notional balance as of April 1, 2009 | $ | 620,850 | $ | 549,823 | $ | 19,815 | $ | 1,222 | $ | 85,150 | $ | 89,630 | $ | 500 | $ | 748 | $ | 1,367,738 | ||||||||||||||||||
Additions | 78,509 | 56,680 | 2,385 | 126 | 8,200 | 4,500 | 2,500 | — | 152,900 | |||||||||||||||||||||||||||
Terminations(6) | (48,912 | ) | (34,701 | ) | — | 82 | (7,000 | ) | (9,450 | ) | — | — | (99,981 | ) | ||||||||||||||||||||||
Notional balance as of June 30, 2009 | $ | 650,447 | $ | 571,802 | $ | 22,200 | $ | 1,430 | $ | 86,350 | $ | 84,680 | $ | 3,000 | $ | 748 | $ | 1,420,657 | ||||||||||||||||||
163
(In conservatorship)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
For the Six Months Ended June 30, 2009 | ||||||||||||||||||||||||||||||||||||
Interest Rate Swaps | Interest Rate Swaptions | |||||||||||||||||||||||||||||||||||
Pay- | Receive- | Foreign | Pay- | Receive- | Interest | |||||||||||||||||||||||||||||||
Fixed(1) | Fixed(2) | Basis(3) | Currency(4) | Fixed | Fixed | Rate Caps | Other(5) | Total | ||||||||||||||||||||||||||||
(Dollars in millions) | ||||||||||||||||||||||||||||||||||||
Notional balance as of January 1, 2009 | $ | 546,916 | $ | 451,081 | $ | 24,560 | $ | 1,652 | $ | 79,500 | $ | 93,560 | $ | 500 | $ | 827 | $ | 1,198,596 | ||||||||||||||||||
Additions | 177,444 | 184,638 | 2,565 | 324 | 13,850 | 6,700 | 2,500 | 13 | 388,034 | |||||||||||||||||||||||||||
Terminations(6) | (73,913 | ) | (63,917 | ) | (4,925 | ) | (546 | ) | (7,000 | ) | (15,580 | ) | — | (92 | ) | (165,973 | ) | |||||||||||||||||||
Notional balance as of June 30, 2009 | $ | 650,447 | $ | 571,802 | $ | 22,200 | $ | 1,430 | $ | 86,350 | $ | 84,680 | $ | 3,000 | $ | 748 | $ | 1,420,657 | ||||||||||||||||||
(1) | Notional amounts include swaps callable by us of $1.7 billion as of June 30, 2009, March 31, 2009 and December 31, 2008. | |
(2) | Notional amounts include swaps callable by derivatives counterparties of $25 million, $1.0 billion and $10.4 billion as of June 30, 2009, March 31, 2009 and December 31, 2008, respectively. | |
(3) | Notional amounts include swaps callable by derivatives counterparties of $885 million, $500 million and $925 million as of June 30, 2009, March 31, 2009 and December 31, 2008, respectively. | |
(4) | Exchange rate adjustments to revalue foreign currency swaps existing at both the beginning and the end of the period are included in terminations. Beginning in the three month period ended June 30, 2009, exchange rate adjustments for foreign currency swaps that are added or terminated during the period are reflected in the respective categories. Terminations include foreign exchange rate gains of $158 million and $102 million for the three and six months ended June 30, 2009, respectively. | |
(5) | Includes MBS options, swap credit enhancements and mortgage insurance contracts. | |
(6) | Includes matured, called, exercised, assigned and terminated amounts. |
For the Three Months Ended | For the Six Months Ended | |||||||||||||||
June 30, 2009 | June 30, 2009 | |||||||||||||||
Purchase | Sale | Purchase | Sale | |||||||||||||
Commitments | Commitments | Commitments | Commitments | |||||||||||||
(Dollars in millions) | ||||||||||||||||
Notional balance as of the beginning of the period(1) | $ | 55,922 | $ | 71,984 | $ | 35,004 | $ | 36,232 | ||||||||
Mortgage related securities: | ||||||||||||||||
Open commitments(2) | 268,085 | 296,829 | 392,519 | 462,414 | ||||||||||||
Settled commitments(3) | (254,654 | ) | (258,094 | ) | (362,662 | ) | (387,927 | ) | ||||||||
Loans: | ||||||||||||||||
Open commitments(2) | 35,669 | — | 76,435 | — | ||||||||||||
Settled commitments(3) | (41,558 | ) | — | (77,832 | ) | — | ||||||||||
Notional balance as of the end of the period(1) | $ | 63,464 | $ | 110,719 | $ | 63,464 | $ | 110,719 | ||||||||
(1) | Represents the balance of open mortgage commitment derivatives. | |
(2) | Represents open mortgage commitment derivatives traded during the three and six months ended June 30, 2009. | |
(3) | Represents mortgage commitment derivatives settled during the three and six months ended June 30, 2009. |
164
(In conservatorship)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
As of June 30, 2009 | ||||||||||||||||||||||||
Credit Rating(1) | ||||||||||||||||||||||||
AAA | AA+/AA/AA- | A+/A/A- | Subtotal | Other(2) | Total | |||||||||||||||||||
(Dollars in millions) | ||||||||||||||||||||||||
Credit loss exposure(3) | $ | — | $ | 1,544 | $ | 868 | $ | 2,412 | $ | 63 | $ | 2,475 | ||||||||||||
Less: Collateral held(4) | — | 1,446 | 810 | 2,256 | — | 2,256 | ||||||||||||||||||
Exposure net of collateral | $ | — | $ | 98 | $ | 58 | $ | 156 | $ | 63 | $ | 219 | ||||||||||||
Additional information: | ||||||||||||||||||||||||
Notional amount(5) | $ | 250 | $ | 295,914 | $ | 1,123,703 | $ | 1,419,867 | $ | 790 | $ | 1,420,657 | ||||||||||||
Number of counterparties(5) | 1 | 6 | 10 | 17 |
As of December 31, 2008 | ||||||||||||||||||||||||
Credit Rating(1) | ||||||||||||||||||||||||
AAA | AA+/AA/AA- | A+/A/A- | Subtotal | Other(2) | Total | |||||||||||||||||||
(Dollars in millions) | ||||||||||||||||||||||||
Credit loss exposure(3) | $ | — | $ | 3,044 | $ | 686 | $ | 3,730 | $ | 101 | $ | 3,831 | ||||||||||||
Less: Collateral held(4) | — | 2,951 | 673 | 3,624 | — | 3,624 | ||||||||||||||||||
Exposure net of collateral | $ | — | $ | 93 | $ | 13 | $ | 106 | $ | 101 | $ | 207 | ||||||||||||
Additional information: | ||||||||||||||||||||||||
Notional amount(5) | $ | 250 | $ | 533,317 | $ | 664,155 | $ | 1,197,722 | $ | 874 | $ | 1,198,596 | ||||||||||||
Number of counterparties(5) | 1 | 8 | 10 | 19 |
(1) | We manage collateral requirements based on the lower credit rating of the legal entity, as issued by Standard & Poor’s and Moody’s. The credit rating reflects the equivalent Standard & Poor’s rating for any ratings based on Moody’s scale. |
165
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(2) | Includes defined benefit mortgage insurance contracts, guaranteed guarantor trust swaps and swap credit enhancements accounted for as derivatives where the right of legal offset does not exist. | |
(3) | Represents the exposure to credit loss on derivative instruments, which is estimated by approximating the fair value of all outstanding derivative contracts in a gain position. Derivative gains and losses with the same counterparty are netted where a legal right of offset exists under an enforceable master netting agreement. This table excludes mortgage commitments accounted for as derivatives. | |
(4) | Represents both cash and noncash collateral posted by our counterparties to us as of June 30, 2009 and December 31, 2008. The value of the non-cash collateral is reduced in accordance with the counterparty agreements to help ensure recovery of any loss through the disposition of the collateral. We posted cash collateral of $13.5 billion related to our counterparties’ credit exposure to us as of June 30, 2009 and $15.0 billion related to our counterparties’ credit exposure to us as of December 31, 2008. | |
(5) | Interest rate and foreign currency derivatives in a net gain position had a total notional amount of $271.8 billion and $103.1 billion as of June 30, 2009 and December 31, 2008, respectively. Total number of interest rate and foreign currency counterparties in a net gain position was 4 and 2 as of June 30, 2009 and December 31, 2008, respectively. |
12. | Income Taxes |
166
(In conservatorship)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
167
(In conservatorship)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
For the Three | For the Six | |||||||||||||||
Months Ended | Months Ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2009 | 2008 | 2009 | 2008 | |||||||||||||
(Dollars in millions) | ||||||||||||||||
Unrecognized tax benefit as of beginning of period | $ | 169 | $ | 668 | $ | 1,745 | $ | 124 | ||||||||
Gross increases—tax positions in prior years | — | 1,300 | — | 1,844 | ||||||||||||
Settlements | — | — | (1,576 | ) | — | |||||||||||
Unrecognized tax benefit as of end of period(1) | $ | 169 | $ | 1,968 | $ | 169 | $ | 1,968 | ||||||||
(1) | Amounts exclude tax credits of $30 million and $540 million as of June 30, 2009 and 2008, respectively. |
13. | Loss Per Share |
For the Three | For the Six | |||||||||||||||
Months Ended | Months Ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2009 | 2008 | 2009 | 2008 | |||||||||||||
Net loss attributable to Fannie Mae | $ | (14,754 | ) | $ | (2,300 | ) | $ | (37,922 | ) | $ | (4,486 | ) | ||||
Preferred stock dividends(1) | (411 | ) | (303 | ) | (440 | ) | (625 | ) | ||||||||
Net loss attributable to common stockholders—basic and diluted | $ | (15,165 | ) | $ | (2,603 | ) | $ | (38,362 | ) | $ | (5,111 | ) | ||||
Weighted-average common shares outstanding—basic and diluted(2) | 5,681 | 1,025 | 5,674 | 1,000 | ||||||||||||
Basic and diluted loss per share | $ | (2.67 | ) | $ | (2.54 | ) | $ | (6.76 | ) | $ | (5.11 | ) |
(1) | Amounts for the three and six months ended June 30, 2009 include approximately $409 million and $434 million, respectively, of dividends declared and paid as of June 30, 2009 on our outstanding cumulative senior preferred stock and $6 million of dividends accumulated, but undeclared, on our outstanding cumulative senior preferred stock. | |
(2) | Amount for the three and six months ended June 30, 2009 include 4.6 billion weighted-average shares of common stock that would be issued upon the full exercise of the warrant issued to Treasury from the date the warrant was issued through June 30, 2009. There were no dilutive potential common shares for the three and six months ended June 30, 2009 and 2008. |
168
(In conservatorship)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
14. | Employee Retirement Benefits |
For the Three Months Ended June 30, | ||||||||||||||||||||||||
2009 | 2008 | |||||||||||||||||||||||
Pension Plans | Other Post- | Pension Plans | Other Post- | |||||||||||||||||||||
Non- | Retirement | Non- | Retirement | |||||||||||||||||||||
Qualified | Qualified | Plan | Qualified | Qualified | Plan | |||||||||||||||||||
(Dollars in millions) | ||||||||||||||||||||||||
Service cost | $ | 9 | $ | — | $ | 2 | $ | 11 | $ | 2 | $ | 2 | ||||||||||||
Interest cost | 14 | 2 | 3 | 12 | 3 | 2 | ||||||||||||||||||
Expected return on plan assets | (10 | ) | — | — | (14 | ) | — | — | ||||||||||||||||
Amortization of net actuarial (gain) loss | 2 | (1 | ) | — | — | — | 1 | |||||||||||||||||
Amortization of net prior service credit | — | — | (2 | ) | — | — | (2 | ) | ||||||||||||||||
Special termination benefit charge | — | — | — | — | — | 3 | ||||||||||||||||||
Net periodic benefit cost | $ | 15 | $ | 1 | $ | 3 | $ | 9 | $ | 5 | $ | 6 | ||||||||||||
For the Six Months Ended June 30, | ||||||||||||||||||||||||
2009 | 2008 | |||||||||||||||||||||||
Pension Plans | Other Post- | Pension Plans | Other Post- | |||||||||||||||||||||
Non- | Retirement | Non- | Retirement | |||||||||||||||||||||
Qualified | Qualified | Plan | Qualified | Qualified | Plan | |||||||||||||||||||
(Dollars in millions) | ||||||||||||||||||||||||
Service cost | $ | 18 | $ | 1 | $ | 3 | $ | 22 | $ | 4 | $ | 3 | ||||||||||||
Interest cost | 27 | 4 | 5 | 25 | 5 | 4 | ||||||||||||||||||
Expected return on plan assets | (21 | ) | — | — | (29 | ) | — | — | ||||||||||||||||
Amortization of net actuarial (gain) loss | 11 | (1 | ) | — | — | — | 1 | |||||||||||||||||
Amortization of net prior service cost (credit) | — | — | (3 | ) | — | 1 | (3 | ) | ||||||||||||||||
Amortization of initial transition | ||||||||||||||||||||||||
obligation | — | — | 1 | — | — | 1 | ||||||||||||||||||
Curtailment gain | — | (1 | ) | — | — | — | — | |||||||||||||||||
Special termination benefit charge | — | — | — | — | — | 3 | ||||||||||||||||||
Net periodic benefit cost | $ | 35 | $ | 3 | $ | 6 | $ | 18 | $ | 10 | $ | 9 | ||||||||||||
15. | Segment Reporting |
169
(In conservatorship)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
For the Three Months Ended June 30, 2009 | ||||||||||||||||
Capital | ||||||||||||||||
Single-Family | HCD | Markets | Total | |||||||||||||
(Dollars in millions) | ||||||||||||||||
Net interest income (expense)(1) | $ | 186 | $ | (51 | ) | $ | 3,600 | $ | 3,735 | |||||||
Guaranty fee income (expense)(2) | 1,865 | 164 | (370 | ) | 1,659 | |||||||||||
Trust management income | 13 | — | — | 13 | ||||||||||||
Investment losses, net | (15 | ) | — | (30 | ) | (45 | ) | |||||||||
Netother-than-temporary impairments | — | — | (753 | ) | (753 | ) | ||||||||||
Fair value gains, net | — | — | 823 | 823 | ||||||||||||
Debt extinguishment losses, net | — | — | (190 | ) | (190 | ) | ||||||||||
Losses from partnership investments | — | (571 | ) | — | (571 | ) | ||||||||||
Fee and other income | 93 | 20 | 71 | 184 | ||||||||||||
Administrative expenses | (338 | ) | (80 | ) | (92 | ) | (510 | ) | ||||||||
Provision for credit losses | (17,844 | ) | (381 | ) | — | (18,225 | ) | |||||||||
Other expenses | (738 | ) | (14 | ) | (125 | ) | (877 | ) | ||||||||
Income (loss) before federal income taxes | (16,778 | ) | (913 | ) | 2,934 | (14,757 | ) | |||||||||
Provision (benefit) for federal income taxes | (138 | ) | 43 | 118 | 23 | |||||||||||
Net income (loss) | (16,640 | ) | (956 | ) | 2,816 | (14,780 | ) | |||||||||
Less: Net loss attributable to noncontrolling interest | — | 26 | — | 26 | ||||||||||||
Net income (loss) attributable to Fannie Mae | $ | (16,640 | ) | $ | (930 | ) | $ | 2,816 | $ | (14,754 | ) | |||||
170
(In conservatorship)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
For the Six Months Ended June 30, 2009 | ||||||||||||||||
Capital | ||||||||||||||||
Single-Family | HCD | Markets | Total | |||||||||||||
(Dollars in millions) | ||||||||||||||||
Net interest income (expense)(1) | $ | 201 | $ | (113 | ) | $ | 6,895 | $ | 6,983 | |||||||
Guaranty fee income (expense)(2) | 3,831 | 322 | (742 | ) | 3,411 | |||||||||||
Trust management income | 24 | — | — | 24 | ||||||||||||
Investment gains, net | 58 | — | 120 | 178 | ||||||||||||
Netother-than-temporary impairments | — | — | (6,406 | ) | (6,406 | ) | ||||||||||
Fair value losses, net | — | — | (637 | ) | (637 | ) | ||||||||||
Debt extinguishment losses, net | — | — | (269 | ) | (269 | ) | ||||||||||
Losses from partnership investments | — | (928 | ) | — | (928 | ) | ||||||||||
Fee and other income | 178 | 47 | 140 | 365 | ||||||||||||
Administrative expenses | (658 | ) | (171 | ) | (204 | ) | (1,033 | ) | ||||||||
Provision for credit losses | (37,635 | ) | (924 | ) | — | (38,559 | ) | |||||||||
Other expenses | (1,480 | ) | (29 | ) | (185 | ) | (1,694 | ) | ||||||||
Loss before federal income taxes | (35,481 | ) | (1,796 | ) | (1,288 | ) | (38,565 | ) | ||||||||
Provision (benefit) for federal income taxes | (783 | ) | 211 | (28 | ) | (600 | ) | |||||||||
Net loss | (34,698 | ) | (2,007 | ) | (1,260 | ) | (37,965 | ) | ||||||||
Less: Net loss attributable to noncontrolling interest | — | 43 | — | 43 | ||||||||||||
Net loss attributable to Fannie Mae | $ | (34,698 | ) | $ | (1,964 | ) | $ | (1,260 | ) | $ | (37,922 | ) | ||||
(1) | Includes cost of capital charge. | |
(2) | The charge to Capital Markets represents an intercompany guaranty fee expense allocated to Capital Markets from Single-Family and HCD for absorbing the credit risk on mortgage loans held in our portfolio. |
171
(In conservatorship)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
For the Three Months Ended June 30, 2008 | ||||||||||||||||
Capital | ||||||||||||||||
Single-Family | HCD | Markets | Total | |||||||||||||
(Dollars in millions) | ||||||||||||||||
Net interest income (expense)(1) | $ | 142 | $ | (88 | ) | $ | 2,003 | $ | 2,057 | |||||||
Guaranty fee income (expense)(2) | 1,819 | 134 | (345 | ) | 1,608 | |||||||||||
Trust management income | 74 | 1 | — | 75 | ||||||||||||
Investment losses, net(3) | (37 | ) | — | (339 | ) | (376 | ) | |||||||||
Netother-than-temporary impairments(3) | — | — | (507 | ) | (507 | ) | ||||||||||
Fair value gains, net | — | — | 517 | 517 | ||||||||||||
Debt extinguishment losses, net | — | — | (36 | ) | (36 | ) | ||||||||||
Losses from partnership investments | — | (195 | ) | — | (195 | ) | ||||||||||
Fee and other income | 92 | 51 | 82 | 225 | ||||||||||||
Administrative expenses | (288 | ) | (104 | ) | (120 | ) | (512 | ) | ||||||||
Provision for credit losses | (5,077 | ) | (8 | ) | — | (5,085 | ) | |||||||||
Other expenses(3) | (435 | ) | (32 | ) | (44 | ) | (511 | ) | ||||||||
Income (loss) before federal income taxes and extraordinary losses | (3,710 | ) | (241 | ) | 1,211 | (2,740 | ) | |||||||||
Provision (benefit) for federal income taxes | (1,304 | ) | (316 | ) | 1,144 | (476 | ) | |||||||||
Income (loss) before extraordinary losses | (2,406 | ) | 75 | 67 | (2,264 | ) | ||||||||||
Extraordinary losses, net of tax effect | — | — | (33 | ) | (33 | ) | ||||||||||
Net income (loss) | (2,406 | ) | 75 | 34 | (2,297 | ) | ||||||||||
Less: Net income attributable to the noncontrolling interest(3) | — | 3 | — | 3 | ||||||||||||
Net income (loss) attributable to Fannie Mae | $ | (2,406 | ) | $ | 72 | $ | 34 | $ | (2,300 | ) | ||||||
172
(In conservatorship)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
For the Six Months Ended June 30, 2008 | ||||||||||||||||
Capital | ||||||||||||||||
Single-Family | HCD | Markets | Total | |||||||||||||
(Dollars in millions) | ||||||||||||||||
Net interest income (expense)(1) | $ | 276 | $ | (191 | ) | $ | 3,662 | $ | 3,747 | |||||||
Guaranty fee income (expense)(2) | 3,761 | 282 | (683 | ) | 3,360 | |||||||||||
Trust management income | 179 | 3 | — | 182 | ||||||||||||
Investment losses, net(3) | (85 | ) | — | (347 | ) | (432 | ) | |||||||||
Netother-than-temporary impairments(3) | — | — | (562 | ) | (562 | ) | ||||||||||
Fair value losses, net | — | — | (3,860 | ) | (3,860 | ) | ||||||||||
Debt extinguishment losses, net | — | — | (181 | ) | (181 | ) | ||||||||||
Losses from partnership investments | — | (336 | ) | — | (336 | ) | ||||||||||
Fee and other income | 194 | 113 | 145 | 452 | ||||||||||||
Administrative expenses | (574 | ) | (212 | ) | (238 | ) | (1,024 | ) | ||||||||
Provision for credit losses | (8,158 | ) | — | — | (8,158 | ) | ||||||||||
Other expenses(3) | (855 | ) | (72 | ) | (114 | ) | (1,041 | ) | ||||||||
Loss before federal income taxes and extraordinary events | (5,262 | ) | (413 | ) | (2,178 | ) | (7,853 | ) | ||||||||
Benefit for federal income taxes | (1,848 | ) | (638 | ) | (918 | ) | (3,404 | ) | ||||||||
Income (loss) before extraordinary losses | (3,414 | ) | 225 | (1,260 | ) | (4,449 | ) | |||||||||
Extraordinary losses, net of tax effect | — | — | (34 | ) | (34 | ) | ||||||||||
Net income (loss) | (3,414 | ) | 225 | (1,294 | ) | (4,483 | ) | |||||||||
Less: Net income attributable to noncontrolling interest(3) | — | 3 | — | 3 | ||||||||||||
Net income (loss) attributable to Fannie Mae | $ | (3,414 | ) | $ | 222 | $ | (1,294 | ) | $ | (4,486 | ) | |||||
(1) | Includes cost of capital charge. | |
(2) | Includes intercompany guaranty fee income (expense) allocated to Single-Family and HCD from Capital Markets for absorbing the credit risk on mortgage loans held in our portfolio. | |
(3) | Certain prior period amounts have been reclassified to conform to the current period presentation. |
16. | Regulatory Capital Requirements |
173
(In conservatorship)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
17. | Concentrations of Credit Risk |
Percentage of Conventional | ||||||||
Single-Family Mortgage Credit | ||||||||
Book of Business | ||||||||
As of | ||||||||
June 30, 2009 | December 31, 2008 | |||||||
Interest-only loans | 7 | % | 8 | % | ||||
Negative-amortizing ARMs | 1 | 1 | ||||||
80%+ LTV loans | 38 | 34 |
174
(In conservatorship)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
As of | ||||||||||||||||
June 30, 2009 | December 31, 2008 | |||||||||||||||
Unpaid | Percent of | Unpaid | Percent of | |||||||||||||
Principal | Book of | Principal | Book of | |||||||||||||
Balance | Business(1) | Balance | Business(1) | |||||||||||||
(Dollars in millions) | ||||||||||||||||
Loans and Fannie Mae MBS: | ||||||||||||||||
Alt-A(2) | $ | 272,303 | 9 | % | $ | 295,622 | 10 | % | ||||||||
Subprime(3) | 17,591 | 1 | 19,086 | 1 | ||||||||||||
Total | $ | 289,894 | 10 | % | $ | 314,708 | 11 | % | ||||||||
Private-label securities: | ||||||||||||||||
Alt-A(4) | $ | 26,130 | 1 | % | $ | 27,858 | 1 | % | ||||||||
Subprime(5) | 22,603 | 1 | 24,551 | 1 | ||||||||||||
Total | $ | 48,733 | 2 | % | $ | 52,409 | 2 | % | ||||||||
(1) | Calculated based on total unpaid principal balance of our single-family mortgage credit book of business. | |
(2) | Represents Alt-A mortgage loans held in our portfolio and Fannie Mae MBS backed by Alt-A mortgage loans. | |
(3) | Represents subprime mortgage loans held in our portfolio and Fannie Mae MBS backed by subprime mortgage loans. | |
(4) | Represents private-label mortgage-related securities backed by Alt-A mortgage loans. | |
(5) | Represents private-label mortgage-related securities backed by subprime mortgage loans. |
175
(In conservatorship)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
18. | Fair Value of Financial Instruments |
176
(In conservatorship)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
As of | ||||||||||||||||
June 30, 2009 | December 31, 2008 | |||||||||||||||
Carrying | Estimated | Carrying | Estimated | |||||||||||||
Value | Fair Value | Value | Fair Value | |||||||||||||
(Dollars in millions) | ||||||||||||||||
Financial assets: | ||||||||||||||||
Cash and cash equivalents(1) | $ | 28,991 | $ | 28,991 | $ | 18,462 | $ | 18,462 | ||||||||
Federal funds sold and securities purchased under agreements to resell | 25,810 | 25,810 | 57,418 | 57,420 | ||||||||||||
Trading securities | 82,400 | 82,400 | 90,806 | 90,806 | ||||||||||||
Available-for-sale securities | 283,941 | 283,941 | 266,488 | 266,488 | ||||||||||||
Mortgage loans held for sale | 29,174 | 29,782 | 13,270 | 13,458 | ||||||||||||
Mortgage loans held for investment, net of allowance for loan losses | 386,407 | 377,127 | 412,142 | 406,233 | ||||||||||||
Advances to lenders | 18,938 | 18,527 | 5,766 | 5,412 | ||||||||||||
Derivative assets | 1,406 | 1,406 | 869 | 869 | ||||||||||||
Guaranty assets andbuy-ups | 7,799 | 9,652 | 7,688 | 9,024 | ||||||||||||
Total financial assets | $ | 864,866 | $ | 857,636 | $ | 872,909 | $ | 868,172 | ||||||||
Financial liabilities: | ||||||||||||||||
Federal funds purchased and securities sold under agreements to repurchase | $ | — | $ | — | $ | 77 | $ | 77 | ||||||||
Short-term debt | 259,781 | 260,107 | 330,991 | 332,290 | ||||||||||||
Long-term debt | 573,329 | 596,188 | 539,402 | 574,281 | ||||||||||||
Derivative liabilities | 2,047 | 2,047 | 2,715 | 2,715 | ||||||||||||
Guaranty obligations | 12,358 | 127,087 | 12,147 | 90,875 | ||||||||||||
Total financial liabilities | $ | 847,515 | $ | 985,429 | $ | 885,332 | $ | 1,000,238 | ||||||||
(1) | Includes restricted cash of $757 million and $529 million as of June 30, 2009 and December 31, 2008, respectively. |
177
(In conservatorship)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
178
(In conservatorship)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Level 1: | Quoted prices (unadjusted) in active markets for identical assets or liabilities. | |
Level 2: | Observable market-based inputs other than quoted prices in active markets for identical assets or liabilities. | |
Level 3: | Unobservable inputs. |
179
(In conservatorship)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Fair Value Measurements as of June 30, 2009 | ||||||||||||||||||||
Quoted | ||||||||||||||||||||
Prices in | ||||||||||||||||||||
Active | Significant | |||||||||||||||||||
Markets for | Other | Significant | ||||||||||||||||||
Identical | Observable | Unobservable | ||||||||||||||||||
Assets | Inputs | Inputs | Netting | Estimated | ||||||||||||||||
(Level 1) | (Level 2) | (Level 3) | Adjustment(1) | Fair Value | ||||||||||||||||
(Dollars in millions) | ||||||||||||||||||||
Assets: | ||||||||||||||||||||
Trading securities | ||||||||||||||||||||
Mortgage-related securities: | ||||||||||||||||||||
Fannie Mae single-class MBS | $ | — | $ | 42,971 | $ | 2 | $ | — | $ | 42,973 | ||||||||||
Fannie Mae structured MBS | — | 2,732 | 6,398 | — | 9,130 | |||||||||||||||
Non-Fannie Mae single-class | — | 959 | — | — | 959 | |||||||||||||||
Non-Fannie Mae structured | — | 1,934 | 2,692 | — | 4,626 | |||||||||||||||
Non-Fannie Mae structured | ||||||||||||||||||||
multifamily (CMBS) | — | 8,349 | — | — | 8,349 | |||||||||||||||
Mortgage revenue bonds | — | — | 617 | — | 617 | |||||||||||||||
Non-mortgage-related securities: | ||||||||||||||||||||
Asset-backed securities | — | 9,789 | 19 | — | 9,808 | |||||||||||||||
Corporate debt securities | — | 935 | — | — | 935 | |||||||||||||||
Other | 3 | 5,000 | — | — | 5,003 | |||||||||||||||
Total trading securities | 3 | 72,669 | 9,728 | — | 82,400 | |||||||||||||||
Available-for-sale securities | ||||||||||||||||||||
Mortgage-related securities: | ||||||||||||||||||||
Fannie Mae single-class MBS | — | 134,246 | 154 | — | 134,400 | |||||||||||||||
Fannie Mae structured MBS | — | 52,692 | 3,499 | — | 56,191 | |||||||||||||||
Non-Fannie Mae single-class | — | 33,054 | 155 | — | 33,209 | |||||||||||||||
Non-Fannie Mae structured | — | 12,188 | 21,223 | — | 33,411 | |||||||||||||||
Non-Fannie Mae structured | ||||||||||||||||||||
multifamily (CMBS) | — | 11,795 | — | — | 11,795 | |||||||||||||||
Mortgage revenue bonds | — | 26 | 13,015 | — | 13,041 | |||||||||||||||
Other | — | 25 | 1,869 | — | 1,894 | |||||||||||||||
Totalavailable-for-sale securities | — | 244,026 | 39,915 | — | 283,941 | |||||||||||||||
Derivative assets(2) | — | 40,380 | 256 | (39,255 | ) | 1,381 | ||||||||||||||
Guaranty assets andbuy-ups | — | — | 1,483 | — | 1,483 | |||||||||||||||
Total assets at fair value | $ | 3 | $ | 357,075 | $ | 51,382 | $ | (39,255 | ) | $ | 369,205 | |||||||||
Liabilities: | ||||||||||||||||||||
Long-term debt | $ | — | $ | 21,413 | $ | 1,024 | $ | — | $ | 22,437 | ||||||||||
Derivative liabilities(2) | — | 52,541 | 24 | (50,586 | ) | 1,979 | ||||||||||||||
Total liabilities at fair value | $ | — | $ | 73,954 | $ | 1,048 | $ | (50,586 | ) | $ | 24,416 | |||||||||
180
(In conservatorship)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Fair Value Measurements as of December 31, 2008 | ||||||||||||||||||||
Quoted | ||||||||||||||||||||
Prices in | ||||||||||||||||||||
Active | Significant | |||||||||||||||||||
Markets for | Other | Significant | ||||||||||||||||||
Identical | Observable | Unobservable | ||||||||||||||||||
Assets | Inputs | Inputs | Netting | Estimated | ||||||||||||||||
(Level 1) | (Level 2) | (Level 3) | Adjustment(1) | Fair Value | ||||||||||||||||
(Dollars in millions) | ||||||||||||||||||||
Assets: | ||||||||||||||||||||
Trading securities | $ | 6 | $ | 78,035 | $ | 12,765 | $ | — | $ | 90,806 | ||||||||||
Available-for-sale securities | — | 218,651 | 47,837 | — | 266,488 | |||||||||||||||
Derivative assets(2) | — | 62,969 | 362 | (62,462 | ) | 869 | ||||||||||||||
Guaranty assets andbuy-ups | — | — | 1,083 | — | 1,083 | |||||||||||||||
Total assets at fair value | $ | 6 | $ | 359,655 | $ | 62,047 | $ | (62,462 | ) | $ | 359,246 | |||||||||
Liabilities: | ||||||||||||||||||||
Short-term debt | $ | — | $ | 4,500 | $ | — | $ | — | $ | 4,500 | ||||||||||
Long-term debt | — | 18,667 | 2,898 | — | 21,565 | |||||||||||||||
Derivative liabilities(2) | — | 76,412 | 52 | (73,749 | ) | 2,715 | ||||||||||||||
Other liabilities | — | 62 | — | — | 62 | |||||||||||||||
Total liabilities at fair value | $ | — | $ | 99,641 | $ | 2,950 | $ | (73,749 | ) | $ | 28,842 | |||||||||
(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 agreements to settle with the same counterparty on a net basis, as well as cash collateral. | |
(2) | Excludes accrued fees related to the termination of derivative contracts. |
181
(In conservatorship)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Fair Value Measurements Using Significant Unobservable Inputs | ||||||||||||||||||||||||||||
(Level 3) | ||||||||||||||||||||||||||||
For the Three Months Ended June 30, 2009 | ||||||||||||||||||||||||||||
Total Gains or (Losses) | Purchases, | Net Unrealized Gains | ||||||||||||||||||||||||||
(Realized/Unrealized) | Sales, | (Losses) Included in | ||||||||||||||||||||||||||
Included in | Issuances, | Transfers | Net Loss Related to | |||||||||||||||||||||||||
Balance, | Other | and | in (out) of | Balance, | Assets and Liabilities | |||||||||||||||||||||||
April 1, | Included | Comprehensive | Settlements, | Level 3, | June 30, | Still Held as of | ||||||||||||||||||||||
2009 | in Net Loss | Loss | Net | Net(1) | 2009 | June 30, 2009(2) | ||||||||||||||||||||||
(Dollars in millions) | ||||||||||||||||||||||||||||
Trading securities: | ||||||||||||||||||||||||||||
Mortgage-related securities: | ||||||||||||||||||||||||||||
Fannie Mae single-class MBS | $ | 2 | $ | — | $ | — | $ | — | $ | — | $ | 2 | $ | — | ||||||||||||||
Fannie Mae structured MBS | 6,558 | 77 | — | (310 | ) | 73 | 6,398 | 95 | ||||||||||||||||||||
Non-Fannie Mae structured | 2,887 | 169 | — | (164 | ) | (200 | ) | 2,692 | 124 | |||||||||||||||||||
Mortgage revenue bonds | 653 | (29 | ) | — | (7 | ) | — | 617 | (29 | ) | ||||||||||||||||||
Non-mortgage-related securities: | ||||||||||||||||||||||||||||
Asset-backed securities | 92 | — | — | (9 | ) | (64 | ) | 19 | 1 | |||||||||||||||||||
Corporate debt securities | 116 | 1 | — | (57 | ) | (60 | ) | — | — | |||||||||||||||||||
Total Trading Securities | $ | 10,308 | $ | 218 | $ | — | $ | (547 | ) | $ | (251 | ) | $ | 9,728 | $ | 191 | ||||||||||||
Available-for-sale securities: | ||||||||||||||||||||||||||||
Mortgage-related securities: | ||||||||||||||||||||||||||||
Fannie Mae single-class MBS | $ | 166 | $ | — | $ | — | $ | (9 | ) | $ | (3 | ) | $ | 154 | $ | — | ||||||||||||
Fannie Mae structured MBS | 3,410 | (38 | ) | 6 | (111 | ) | 232 | 3,499 | — | |||||||||||||||||||
Non-Fannie Mae single-class | 161 | 1 | — | (7 | ) | — | 155 | — | ||||||||||||||||||||
Non-Fannie Mae structured | 21,647 | (485 | ) | 1,037 | (1,233 | ) | 257 | 21,223 | — | |||||||||||||||||||
Mortgage revenue bonds | 13,185 | (2 | ) | 84 | (252 | ) | — | 13,015 | — | |||||||||||||||||||
Other | 1,843 | (24 | ) | 148 | (98 | ) | — | 1,869 | — | |||||||||||||||||||
Total AFS Securities | $ | 40,412 | $ | (548 | ) | $ | 1,275 | $ | (1,710 | ) | $ | 486 | $ | 39,915 | $ | — | ||||||||||||
Net Derivatives | 308 | (103 | ) | — | 25 | 2 | 232 | (23 | ) | |||||||||||||||||||
Guaranty assets &buy-ups | 1,179 | (90 | ) | 49 | 345 | — | 1,483 | 115 | ||||||||||||||||||||
Long-term debt | (867 | ) | (22 | ) | — | (135 | ) | — | (1,024 | ) | (22 | ) |
182
(In conservatorship)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Fair Value Measurements Using Significant Unobservable Inputs | ||||||||||||||||||||||||||||
(Level 3) | ||||||||||||||||||||||||||||
For the Six Months Ended June 30, 2009 | ||||||||||||||||||||||||||||
Total Gains or (Losses) | Purchases, | Net Unrealized Gains | ||||||||||||||||||||||||||
(realized/unrealized) | Sales, | (Losses) Included in | ||||||||||||||||||||||||||
Included in | Issuances, | Transfers | Net Loss Related to | |||||||||||||||||||||||||
Balance, | Other | and | in (out) | Balance, | Assets and Liabilities | |||||||||||||||||||||||
January 1, | Included | Comprehensive | Settlements, | of Level 3, | June 30, | Still Held as of | ||||||||||||||||||||||
2009 | in Net Loss | Loss | Net | Net(1) | 2009 | June 30, 2009(2) | ||||||||||||||||||||||
(Dollars in millions) | ||||||||||||||||||||||||||||
Trading securities: | ||||||||||||||||||||||||||||
Mortgage-related securities: | ||||||||||||||||||||||||||||
Fannie Mae single-class MBS | $ | 2 | $ | — | $ | — | $ | — | $ | — | $ | 2 | $ | — | ||||||||||||||
Fannie Mae structured MBS | 6,933 | 230 | — | (709 | ) | (56 | ) | 6,398 | 248 | |||||||||||||||||||
Non-Fannie Mae single-class | 1 | — | — | (1 | ) | — | — | — | ||||||||||||||||||||
Non-Fannie Mae structured | 3,602 | (64 | ) | — | (330 | ) | (516 | ) | 2,692 | (37 | ) | |||||||||||||||||
Mortgage revenue bonds | 695 | (71 | ) | — | (7 | ) | — | 617 | (71 | ) | ||||||||||||||||||
Non-mortgage-related securities: | ||||||||||||||||||||||||||||
Asset-backed securities | 1,475 | (45 | ) | — | (42 | ) | (1,369 | ) | 19 | 1 | ||||||||||||||||||
Corporate debt securities | 57 | 3 | — | (116 | ) | 56 | — | — | ||||||||||||||||||||
Total Trading Securities | $ | 12,765 | $ | 53 | $ | — | $ | (1,205 | ) | $ | (1,885 | ) | $ | 9,728 | $ | 141 | ||||||||||||
Available-for-sale securities: | ||||||||||||||||||||||||||||
Mortgage-related securities: | ||||||||||||||||||||||||||||
Fannie Mae single-class MBS | $ | 2,355 | $ | — | $ | 60 | $ | (229 | ) | $ | (2,032 | ) | $ | 154 | $ | — | ||||||||||||
Fannie Mae structured MBS | 3,254 | (37 | ) | 60 | (216 | ) | 438 | 3,499 | — | |||||||||||||||||||
Non-Fannie Mae single-class | 178 | — | (6 | ) | (11 | ) | (6 | ) | 155 | — | ||||||||||||||||||
Non-Fannie Mae structured | 27,707 | (4,386 | ) | 3,383 | (2,704 | ) | (2,777 | ) | 21,223 | — | ||||||||||||||||||
Mortgage revenue bonds | 12,456 | (7 | ) | 981 | (415 | ) | — | 13,015 | — | |||||||||||||||||||
Other | 1,887 | (62 | ) | 236 | (192 | ) | — | 1,869 | — | |||||||||||||||||||
Total AFS Securities | $ | 47,837 | $ | (4,492 | ) | $ | 4,714 | $ | (3,767 | ) | $ | (4,377 | ) | $ | 39,915 | $ | — | |||||||||||
Net Derivatives | 310 | (107 | ) | — | 28 | 1 | 232 | (43 | ) | |||||||||||||||||||
Guaranty assets &buy-ups | 1,083 | (51 | ) | 78 | 373 | — | 1,483 | 159 | ||||||||||||||||||||
Long-term debt | (2,898 | ) | 36 | — | 1,315 | 523 | (1,024 | ) | 23 |
183
(In conservatorship)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Fair Value Measurements Using Significant Unobservable Inputs (Level 3) | ||||||||||||||||||||
For the Three Months Ended June 30, 2008 | ||||||||||||||||||||
Guaranty | ||||||||||||||||||||
Assets | ||||||||||||||||||||
Trading | Available-for-sale | Net | and | Long-Term | ||||||||||||||||
Securities | Securities | Derivatives | Buy-ups | Debt | ||||||||||||||||
(Dollars in millions) | ||||||||||||||||||||
Beginning balance as of April 1, 2008 | $ | 17,972 | $ | 36,183 | $ | 252 | $ | 1,628 | $ | (3,399 | ) | |||||||||
Realized/unrealized gains (losses) included in net loss | 357 | (110 | ) | (60 | ) | 181 | (10 | ) | ||||||||||||
Unrealized gains included in other comprehensive loss | — | (185 | ) | — | 69 | — | ||||||||||||||
Purchases, sales, issuances, and settlements, net | (1,586 | ) | (1,134 | ) | (28 | ) | 69 | 100 | ||||||||||||
Transfers in/out of level 3, net(3) | (2,418 | ) | 5,279 | (1 | ) | — | — | |||||||||||||
Ending balance as of June 30, 2008 | $ | 14,325 | $ | 40,033 | $ | 163 | $ | 1,947 | $ | (3,309 | ) | |||||||||
Net unrealized gains (losses) included in net loss related to assets and liabilities still held as of June 30, 2008(2) | $ | 394 | $ | — | $ | (100 | ) | $ | 149 | $ | (5 | ) | ||||||||
Fair Value Measurements Using Significant Unobservable Inputs | ||||||||||||||||||||
(Level 3) | ||||||||||||||||||||
For the Six Months Ended June 30, 2008 | ||||||||||||||||||||
Guaranty | ||||||||||||||||||||
Assets | ||||||||||||||||||||
Trading | Available-for-sale | Net | and | Long-Term | ||||||||||||||||
Securities | Securities | Derivatives | Buy-ups | Debt | ||||||||||||||||
(Dollars in millions) | ||||||||||||||||||||
Beginning balance as of January 1, 2008 | $ | 18,508 | $ | 20,920 | $ | 161 | $ | 1,568 | $ | (7,888 | ) | |||||||||
Realized/unrealized gains (losses) included in net loss | (443 | ) | (97 | ) | (8 | ) | 201 | 6 | ||||||||||||
Unrealized gains included in other comprehensive loss | — | (1,081 | ) | — | 10 | — | ||||||||||||||
Purchases, sales, issuances, and settlements, net | (2,400 | ) | (1,829 | ) | (92 | ) | 168 | 4,375 | ||||||||||||
Transfers in/out of level 3, net(3) | (1,340 | ) | 22,120 | 102 | — | 198 | ||||||||||||||
Ending balance as of June 30, 2008 | $ | 14,325 | $ | 40,033 | $ | 163 | $ | 1,947 | $ | (3,309 | ) | |||||||||
Net unrealized gains (losses) included in net loss related to assets and liabilities still held as of June 30, 2008(2) | $ | (168 | ) | $ | — | $ | (45 | ) | $ | 208 | $ | 48 | ||||||||
(1) | The net transfers to level 2 from level 3 are due to improvements in pricing transparency from recent transactions, which provided some convergence in prices obtained by third party vendors for certain products, including private-label securities backed by non-fixed rate Alt-A securities. | |
(2) | Amount represents temporary changes in fair value. Amortization, accretion andother-than-temporary impairments are not considered unrealized and are not included in this amount. | |
(3) | During the three and six months ended June 30, 2008, transfers into level 3 consisted primarily of private-label mortgage-related securities backed by Alt-A and subprime mortgage loans. |
184
(In conservatorship)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Fair Value Measurements Using Significant | ||||||||||||||||
Unobservable Inputs (Level 3) | ||||||||||||||||
For the Three Months Ended | For the Six Months Ended | |||||||||||||||
June 30, 2009 | June 30, 2009 | |||||||||||||||
Trading | Available-for-sale | Trading | Available-for-sale | |||||||||||||
Securities | Securities | Securities | Securities | |||||||||||||
(Dollars in millions) | ||||||||||||||||
Realized and unrealized losses included in net loss | $ | 6 | $ | 328 | $ | (2 | ) | $ | 131 | |||||||
Unrealized gains included in other comprehensive loss | — | (235 | ) | — | (6 | ) | ||||||||||
Total gains (losses) | $ | 6 | $ | 93 | $ | (2 | ) | $ | 125 | |||||||
Amount of level 3 transfers in | $ | 129 | $ | 3,260 | $ | 365 | $ | 4,987 | ||||||||
Fair Value Measurements Using Significant | ||||||||||||||||||||
Unobservable Inputs (Level 3) | ||||||||||||||||||||
For the Three Months Ended | For the Six Months Ended | |||||||||||||||||||
June 30, 2008 | June 30, 2008 | |||||||||||||||||||
Trading | Available-for-sale | Trading | Available-for-sale | Net | ||||||||||||||||
Securities | Securities | Securities | Securities | Derivtives | ||||||||||||||||
(Dollars in millions) | ||||||||||||||||||||
Realized and unrealized gains (losses) included in net loss | $ | (19 | ) | $ | (208 | ) | $ | (179 | ) | $ | (219 | ) | $ | 13 | ||||||
Unrealized losses included in other comprehensive loss | — | (74 | ) | — | (2,249 | ) | — | |||||||||||||
Total gains (losses) | $ | (19 | ) | $ | (282 | ) | $ | (179 | ) | $ | (2,468 | ) | $ | 13 | ||||||
Amount of level 3 transfers in | $ | 1,842 | $ | 11,764 | $ | 5,661 | $ | 30,043 | $ | 103 | ||||||||||
For the Three Months Ended June 30, 2009 | ||||||||||||||||||||||||
Interest | Other | |||||||||||||||||||||||
Income | Guaranty | Investment | Fair Value | than | ||||||||||||||||||||
Investment in | Fee | Gains | Gains | Temporary | ||||||||||||||||||||
Securities | Income | (Losses), Net | (Losses), net | Impairments | Total | |||||||||||||||||||
(Dollars in millions) | ||||||||||||||||||||||||
Total realized and unrealized gains (losses) included in net loss as of June 30, 2009 | $ | 55 | $ | 157 | $ | (249 | ) | $ | 97 | $ | (605 | ) | $ | (545 | ) | |||||||||
Net unrealized gains (losses) related to level 3 assets and liabilities still held as of June 30, 2009 | $ | — | $ | 115 | $ | — | $ | 146 | $ | — | $ | 261 |
185
(In conservatorship)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
For the Six Months Ended June 30, 2009 | ||||||||||||||||||||||||
Interest | Fair Value | Other | ||||||||||||||||||||||
Income | Guaranty | Investment | Gains | than | ||||||||||||||||||||
Investment in | Fee | Gains | (Losses), | Temporary | ||||||||||||||||||||
Securities | Income | (Losses), Net | net | Impairments | Total | |||||||||||||||||||
(Dollars in millions) | ||||||||||||||||||||||||
Total realized and unrealized gains (losses) included in net loss as of June 30, 2009 | $ | 390 | $ | (51 | ) | $ | (1 | ) | $ | (12 | ) | $ | (4,887 | ) | $ | (4,561 | ) | |||||||
Net unrealized gains (losses) related to level 3 assets and liabilities still held as of June 30, 2009 | $ | — | $ | 159 | $ | — | $ | 121 | $ | — | $ | 280 |
For the Three Months Ended June 30, 2008 | ||||||||||||||||||||
Interest | Fair | |||||||||||||||||||
Income | Guaranty | Investment | Value Gains | |||||||||||||||||
Investment in | Fee | Gains (Losses), | (Losses), | |||||||||||||||||
Securities | Income | Net | net | Total | ||||||||||||||||
(Dollars in millions) | ||||||||||||||||||||
Total realized and unrealized gains (losses) included in net loss as of June 30, 2008 | $ | (1 | ) | $ | 82 | $ | (11 | ) | $ | 288 | $ | 358 | ||||||||
Net unrealized gains (losses) related to level 3 assets and liabilities still held as of June 30, 2008 | $ | — | $ | 149 | $ | — | $ | 289 | $ | 438 |
For the Six Months Ended June 30, 2008 | ||||||||||||||||||||
Interest | Fair | |||||||||||||||||||
Income | Guaranty | Investment | Value Gains | |||||||||||||||||
Investment in | Fee | Gains (Losses), | (Losses), | |||||||||||||||||
Securities | Income | Net | net | Total | ||||||||||||||||
(Dollars in millions) | ||||||||||||||||||||
Total realized and unrealized gains (losses) included in net loss as of June 30, 2008 | $ | (5 | ) | $ | 12 | $ | 88 | $ | (436 | ) | $ | (341 | ) | |||||||
Net unrealized gains (losses) related to level 3 assets and liabilities still held as of June 30, 2008 | $ | — | $ | 208 | $ | — | $ | (165 | ) | $ | 43 |
186
(In conservatorship)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
For the | For the | |||||||||||||||||||||||
Three Months | Six Months | |||||||||||||||||||||||
Fair Value Measurements | Ended | Ended | ||||||||||||||||||||||
As of June 30, 2009 | June 30, 2009 | June 30, 2009 | ||||||||||||||||||||||
Quoted | ||||||||||||||||||||||||
Prices in | ||||||||||||||||||||||||
Active | Significant | |||||||||||||||||||||||
Markets for | Other | Significant | ||||||||||||||||||||||
Identical | Observable | Unobservable | ||||||||||||||||||||||
Assets | Inputs | Inputs | Estimated | Total Gains | Total Gains | |||||||||||||||||||
(Level 1) | (Level 2) | (Level 3) | Fair Value | (Losses) | (Losses) | |||||||||||||||||||
(Dollars in millions) | ||||||||||||||||||||||||
Assets: | ||||||||||||||||||||||||
Mortgage loans held for sale, at lower of cost or fair value | $ | — | $ | 14,828 | $ | 2,409 | $ | 17,237 | (1) | $ | (359 | ) | $ | (564 | ) | |||||||||
Mortgage loans held for investment, at amortized cost | — | 330 | 2,364 | 2,694 | (2) | (478 | ) | (534 | ) | |||||||||||||||
Acquired property, net | — | — | 8,769 | 8,769 | (3) | 49 | (289 | ) | ||||||||||||||||
Guaranty assets | — | — | 1,882 | 1,882 | (47 | ) | (183 | ) | ||||||||||||||||
Master servicing assets | — | — | 280 | 280 | (256 | ) | (395 | ) | ||||||||||||||||
Partnership investments | — | — | 4,808 | 4,808 | (302 | ) | (449 | )(4) | ||||||||||||||||
Total assets at fair value | $ | — | $ | 15,158 | $ | 20,512 | $ | 35,670 | $ | (1,393 | ) | $ | (2,414 | ) | ||||||||||
Liabilities: | ||||||||||||||||||||||||
Master servicing liabilities | $ | — | $ | — | $ | 49 | $ | 49 | $ | 2 | $ | (11 | ) | |||||||||||
Total liabilities at fair value | $ | — | $ | — | $ | 49 | $ | 49 | $ | 2 | $ | (11 | ) | |||||||||||
187
(In conservatorship)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
For the | For the | |||||||||||||||||||||||
Three Months | Six Months | |||||||||||||||||||||||
Fair Value Measurements | Ended | Ended | ||||||||||||||||||||||
As of June 30, 2008 | June 30, 2008 | June 30, 2008 | ||||||||||||||||||||||
Quoted | ||||||||||||||||||||||||
Prices in | ||||||||||||||||||||||||
Active | Significant | |||||||||||||||||||||||
Markets for | Other | Significant | ||||||||||||||||||||||
Identical | Observable | Unobservable | ||||||||||||||||||||||
Assets | Inputs | Inputs | Estimated | Total | Total | |||||||||||||||||||
(Level 1) | (Level 2) | (Level 3) | Fair Value | Losses | Losses | |||||||||||||||||||
(Dollars in millions) | ||||||||||||||||||||||||
Assets: | ||||||||||||||||||||||||
Mortgage loans held for sale, at | ||||||||||||||||||||||||
lower of cost or fair value | $ | — | $ | 13,524 | $ | 812 | $ | 14,336 | (1) | $ | (240 | ) | $ | (315 | ) | |||||||||
Mortgage loans held for | ||||||||||||||||||||||||
investment, at amortized cost | — | — | 257 | 257 | (2) | (21 | ) | (35 | ) | |||||||||||||||
Acquired property, net | — | — | 3,832 | 3,832 | (3) | (271 | ) | (479 | ) | |||||||||||||||
Guaranty assets | — | — | 3,480 | 3,480 | (31 | ) | (300 | ) | ||||||||||||||||
Master servicing assets | — | — | 615 | 615 | (88 | ) | (262 | ) | ||||||||||||||||
Total assets at fair value | $ | — | $ | 13,524 | $ | 8,996 | $ | 22,520 | $ | (651 | ) | $ | (1,391 | ) | ||||||||||
Liabilities: | ||||||||||||||||||||||||
Master servicing liabilities | $ | — | $ | — | $ | 10 | $ | 10 | $ | 2 | $ | — | ||||||||||||
Total liabilities at fair value | $ | — | $ | — | $ | 10 | $ | 10 | $ | 2 | $ | — | ||||||||||||
(1) | Includes $14.2 billion and $10.4 billion of mortgage loans held for sale that were sold, retained as a mortgage-related security or redesignated to mortgage loans held for investment as of June 30, 2009 and 2008, respectively. | |
(2) | Includes $465 million and $247 million of mortgage loans held for investment that were liquidated or transferred to foreclosed properties as of June 30, 2009 and 2008, respectively. | |
(3) | Includes $4.1 billion and $1.5 billion of foreclosed properties that were sold as of June 30, 2009 and 2008, respectively. | |
(4) | Represents impairment charge related to LIHTC partnerships and other equity investments in multifamily properties as of June 30, 2009. |
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(In conservatorship)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
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(In conservatorship)
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(In conservatorship)
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(In conservatorship)
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For the Three Months Ended | ||||||||||||||||||||||||
June 30, | ||||||||||||||||||||||||
2009 | 2008 | |||||||||||||||||||||||
Short-Term | Long-Term | Total Gains | Short-Term | Long-Term | Total Gains | |||||||||||||||||||
Debt | Debt | (Losses) | Debt | Debt | (Losses) | |||||||||||||||||||
(Dollars in millions) | (Dollars in millions) | |||||||||||||||||||||||
Changes in instrument-specific credit risk | $ | — | $ | 5 | $ | 5 | $ | (3 | ) | $ | (29 | ) | $ | (32 | ) | |||||||||
Other changes in fair value | — | (37 | ) | (37 | ) | 4 | 32 | 36 | ||||||||||||||||
Debt fair value gains (losses), net | $ | — | $ | (32 | ) | $ | (32 | ) | $ | 1 | $ | 3 | $ | 4 | ||||||||||
For the Six Months Ended | ||||||||||||||||||||||||
June 30, | ||||||||||||||||||||||||
2009 | 2008 | |||||||||||||||||||||||
Short-Term | Long-Term | Total Gains | Short-Term | Long-Term | Total Gains | |||||||||||||||||||
Debt | Debt | (Losses) | Debt | Debt | (Losses) | |||||||||||||||||||
(Dollars in millions) | (Dollars in millions) | |||||||||||||||||||||||
Changes in instrument-specific credit risk | $ | — | $ | 32 | $ | 32 | $ | 5 | $ | 63 | $ | 68 | ||||||||||||
Other changes in fair value | — | (40 | ) | (40 | ) | (6 | ) | (48 | ) | (54 | ) | |||||||||||||
Debt fair value gains (losses), net | $ | — | $ | (8 | ) | $ | (8 | ) | $ | (1 | ) | $ | 15 | $ | 14 | |||||||||
19. | Commitments and Contingencies |
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(In conservatorship)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
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(In conservatorship)
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(In conservatorship)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
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(In conservatorship)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
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(In conservatorship)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
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Item 3. | Quantitative and Qualitative Disclosures About Market Risk |
Item 4. | Controls and Procedures |
• | our disclosure controls and procedures 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; and | |
• | we had a material weakness in our internal control over financial reporting relating to the design of our controls over certain inputs to models used in measuring expected cash flows for theother-than-temporary impairment assessment process for private-label mortgage-related securities. |
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• | Disclosure Controls and Procedures. We have been under the conservatorship of FHFA since September 6, 2008. Under the Regulatory Reform 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 Regulatory Reform 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 Regulatory Reform 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 toForm 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. |
• | Model Inputs Used inOther-than-temporary-Impairment Process for Private-label Mortgage-related Securities. We employ models to assess the expected performance of our securities under hypothetical scenarios. These models consider particular attributes of the loans underlying our securities and assumptions about changes in the economic environment, such as home prices and interest rates, to predict borrower behavior and the impact on default frequency, loss severity and remaining credit enhancement. These models were primarily implemented in the fourth quarter of 2007. Beginning in the second quarter of 2009 with the implementation of FSPFAS 115-2, the results of these models became the primary source of expected cash flows used in determining whether a private-label mortgage-related security isother-than-temporarily impaired. The models we use in creating the expected cash flows for assessingother-than-temporary impairment are not used by us for determining the fair value of private-label mortgage-related securities. |
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modification to a model input was made in the fourth quarter of 2008 and initially used in ourother-than-temporary impairment assessment in connection with the preparation of our 2008Form 10-K. |
• | FHFA has established the Office of Conservatorship Operations, which is intended to facilitate operation of the company with the oversight of the conservator. |
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• | 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 onForm 10-Q for the quarter ended June 30, 2009 (“Second Quarter 2009Form 10-Q”), and engaged in discussions regarding issues associated with the information contained in those filings. Prior to filing our Second Quarter 2009Form 10-Q, FHFA provided Fannie Mae management with a written acknowledgement that it had reviewed the Second Quarter 2009Form 10-Q, was not aware of any material misstatements or omissions in the Second Quarter 2009Form 10-Q, and had no objection to our filing the Second Quarter 2009Form 10-Q. | |
• | The Director of FHFA and our Chief Executive Officer have been in frequent communication, typically meeting on a weekly basis. | |
• | FHFA representatives have held frequent meetings, typically weekly, with various groups within the company to enhance the flow of information and to provide oversight on a variety of matters, including accounting, capital markets 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. |
Item 1. | Legal Proceedings |
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Item 1A. | Risk Factors |
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Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds |
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Maximum Number | ||||||||||||||||
Total Number of | of Shares that | |||||||||||||||
Total Number | Average | Shares Purchased | May Yet be | |||||||||||||
of Shares | Price Paid | as Part of Publicly | Purchased Under | |||||||||||||
Period | Purchased(1) | per Share | Announced Program(2) | the Program(3) | ||||||||||||
(Shares in thousands) | ||||||||||||||||
2009 | ||||||||||||||||
April 1-30 | 6 | $ | 0.75 | — | 49,054 | |||||||||||
May 1-31 | 4 | 0.79 | — | 48,524 | ||||||||||||
June 1-30 | 4 | 0.69 | — | 48,469 | ||||||||||||
Total | 14 |
(1) | Consists of shares of common stock reacquired from employees to pay an aggregate of approximately $10,400 in withholding taxes due upon the vesting of previously issued restricted stock. Does not include 2,860,143 shares of 8.75% Non-Cumulative Mandatory ConvertibleSeries 2008-1 Preferred Stock received from holders upon conversion of the preferred shares. | |
(2) | On January 21, 2003, we publicly announced that the Board of Directors had approved a share repurchase program (the “General Repurchase Authority”) under which we could purchase in open market transactions the sum of (a) up to 5% of the shares of common stock outstanding as of December 31, 2002 (49.4 million shares) and (b) additional shares to offset stock issued or expected to be issued under our employee benefit plans. No shares were repurchased during the second quarter of 2009 pursuant to the General Repurchase Authority. The General Repurchase Authority has no specified expiration date. Under the terms of the senior preferred stock purchase agreement, we are prohibited from purchasing Fannie Mae common stock without the prior written consent of Treasury. As a result of this prohibition, we do not intend to make further purchases under the General Repurchase Authority at this time. | |
(3) | Consists of the total number of shares that may yet be purchased under the General Repurchase Authority as of the end of the month, including the number of shares that may be repurchased to offset stock that may be issued pursuant to awards outstanding under our employee benefit plans. Repurchased shares are first offset against any issuances of stock under our employee benefit plans. To the extent that we repurchase more shares in a given month than have been issued under our plans, the excess number of shares is deducted from the 49.4 million shares approved for repurchase under the General Repurchase Authority. See “Notes to Consolidated Financial Statements—Note 14, Stock-Based Compensation Plans” of our 2008 Form10-K, for information about shares issued, shares expected to be issued, and |
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shares remaining available for grant under our employee benefit plans. Shares that remain available for grant under our employee benefit plans are not included in the amount of shares that may yet be purchased reflected in the table above. |
Item 3. | Defaults Upon Senior Securities |
Item 4. | Submission of Matters to a Vote of Security Holders |
Item 5. | Other Information |
Item 6. | Exhibits |
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By: | /s/ Michael J. Williams |
By: | /s/ David M. Johnson |
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Item | Description | |||
3 | .1 | Fannie Mae Charter Act (12 U.S.C. § 1716 et seq.) as amended through July 30, 2008 (Incorporated by reference to Exhibit 3.1 to Fannie Mae’s Quarterly Report onForm 10-Q, filed August 8, 2008.) | ||
3 | .2 | Fannie Mae Bylaws, as amended through January 30, 2009 (Incorporated by reference to Exhibit 3.2 to Fannie Mae’s Annual Report onForm 10-K for the year ended December 31, 2008, filed February 26, 2009.) | ||
4 | .1 | Certificate of Designation of Terms of Fannie Mae Preferred Stock, Series D (Incorporated by reference to Exhibit 4.1 to Fannie Mae’s registration statement on Form 10, filed March 31, 2003.) | ||
4 | .2 | Certificate of Designation of Terms of Fannie Mae Preferred Stock, Series E (Incorporated by reference to Exhibit 4.2 to Fannie Mae’s registration statement on Form 10, filed March 31, 2003.) | ||
4 | .3 | Certificate of Designation of Terms of Fannie Mae Preferred Stock, Series F (Incorporated by reference to Exhibit 4.3 to Fannie Mae’s registration statement on Form 10, filed March 31, 2003.) | ||
4 | .4 | Certificate of Designation of Terms of Fannie Mae Preferred Stock, Series G (Incorporated by reference to Exhibit 4.4 to Fannie Mae’s registration statement on Form 10, filed March 31, 2003.) | ||
4 | .5 | Certificate of Designation of Terms of Fannie Mae Preferred Stock, Series H (Incorporated by reference to Exhibit 4.5 to Fannie Mae’s registration statement on Form 10, filed March 31, 2003.) | ||
4 | .6 | Certificate of Designation of Terms of Fannie Mae Preferred Stock, Series I (Incorporated by reference to Exhibit 4.6 to Fannie Mae’s registration statement on Form 10, filed March 31, 2003.) | ||
4 | .7 | Certificate of Designation of Terms of Fannie Mae Preferred Stock, Series L (Incorporated by reference to Exhibit 4.7 to Fannie Mae’s Quarterly Report onForm 10-Q, filed August 8, 2008.) | ||
4 | .8 | Certificate of Designation of Terms of Fannie Mae Preferred Stock, Series M (Incorporated by reference to Exhibit 4.8 to Fannie Mae’s Quarterly Report onForm 10-Q, filed August 8, 2008.) | ||
4 | .9 | Certificate of Designation of Terms of Fannie Mae Preferred Stock, Series N (Incorporated by reference to Exhibit 4.9 to Fannie Mae’s Quarterly Report onForm 10-Q, filed August 8, 2008.) | ||
4 | .10 | Certificate of Designation of Terms of Fannie Mae Non-Cumulative Convertible Preferred Stock,Series 2004-1 (Incorporated by reference to Exhibit 4.1 to Fannie Mae’s Current Report onForm 8-K, filed January 4, 2005.) | ||
4 | .11 | Certificate of Designation of Terms of Fannie Mae Preferred Stock, Series O (Incorporated by reference to Exhibit 4.2 to Fannie Mae’s Current Report onForm 8-K, filed January 4, 2005.) | ||
4 | .12 | Certificate of Designation of Terms of Fannie Mae Preferred Stock, Series P (Incorporated by reference to Exhibit 4.1 to Fannie Mae’s Current Report onForm 8-K, filed September 28, 2007.) | ||
4 | .13 | Certificate of Designation of Terms of Fannie Mae Preferred Stock, Series Q (Incorporated by reference to Exhibit 4.1 to Fannie Mae’s Current Report onForm 8-K, filed October 5, 2007.) | ||
4 | .14 | Certificate of Designation of Terms of Fannie Mae Preferred Stock, Series R (Incorporated by reference to Exhibit 4.1 to Fannie Mae’s Current Report onForm 8-K, filed November 21, 2007.) | ||
4 | .15 | Certificate of Designation of Terms of Fannie Mae Preferred Stock, Series S (Incorporated by reference to Exhibit 4.1 to Fannie Mae’s Current Report onForm 8-K, filed December 11, 2007.) | ||
4 | .16 | Certificate of Designation of Terms of Fannie Mae Non-Cumulative Mandatory Convertible Preferred Stock,Series 2008-1 (Incorporated by reference to Exhibit 4.1 to Fannie Mae’s Current Report onForm 8-K, filed May 14, 2008.) | ||
4 | .17 | Certificate of Designation of Terms of Fannie Mae Preferred Stock, Series T (Incorporated by reference to Exhibit 4.1 to Fannie Mae’s Current Report onForm 8-K, filed May 19, 2008.) | ||
4 | .18 | Certificate of Designation of Terms of Variable Liquidation Preference Senior Preferred Stock,Series 2008-2 (Incorporated by reference to Exhibit 4.2 to Fannie Mae’s Current Report onForm 8-K, filed September 11, 2008.) | ||
4 | .19 | Warrant to Purchase Common Stock, dated September 7, 2008 conservator (Incorporated by reference to Exhibit 4.3 to Fannie Mae’s Current Report onForm 8-K, filed September 11, 2008.) |
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Item | Description | |||
4 | .20 | Amended and Restated Senior Preferred Stock Purchase Agreement, dated as of September 26, 2008, between the United States Department of the Treasury and Federal National Mortgage Association, acting through the Federal Housing Finance Agency as its duly appointed conservator (Incorporated by reference to Exhibit 4.1 to Fannie Mae’s Current Report onForm 8-K, filed October 2, 2008.) | ||
4 | .21 | Amendment to Amended and Restated Senior Preferred Stock Purchase Agreement, dated as of May 6, 2009, between the United States Department of the Treasury and Federal National Mortgage Association, acting through the Federal Housing Finance Agency as its duly appointed conservator (Incorporated by reference to Exhibit 4.21 to Fannie Mae’s Quarterly Report onForm 10-Q, filed May 8, 2009.) | ||
31 | .1 | Certification of Chief Executive Officer pursuant to Securities Exchange ActRule 13a-14(a) | ||
31 | .2 | Certification of Chief Financial Officer pursuant to Securities Exchange ActRule 13a-14(a) | ||
32 | .1 | Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350 | ||
32 | .2 | Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350 | ||
101 | .INS | XBRL Instance Document* | ||
101 | .SCH | XBRL Taxonomy Extension Schema* | ||
101 | .CAL | XBRL Taxonomy Extension Calculation* | ||
101 | .LAB | XBRL Taxonomy Extension Labels* | ||
101 | .PRE | XBRL Taxonomy Extension Presentation* | ||
101 | .DEF | XBRL Taxonomy Extension Definition* |
* | The financial information contained in these XBRL documents is unaudited. The information in these exhibits shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, or otherwise subject to the liabilities of Section 18, nor shall they be deemed incorporated by reference into any disclosure document relating to Fannie Mae, except to the extent, if any, expressly set forth by specific reference in such filing. |
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