Federal National Mortgage Association (FNMA) 10-Q 6 Aug 09 2009 Q2 Quarterly report Financial data

Condensed Consolidated Balance

Condensed Consolidated Balance Sheets (Unaudited) (USD $)
In Millions	6 Months Ended Jun. 30, 2009	12 Months Ended Dec. 31, 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	82,400	90,806
Available-for-sale, at fair value	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 [N]	(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:
Accrued interest payable	5,115	5,947
Federal funds purchased and securities sold under agreements to repurchase	0	77
Short-term debt	259,781	330,991
Long-term debt	573,329	539,402
Derivative liabilities at fair value	2,047	2,715
Reserve for guaranty losses	48,280	21,830
Guaranty obligations	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	-	-
Fannie Mae stockholders' equity (deficit):
Senior preferred stock	35,200	1,000
Preferred stock	20,486	21,222
Common stock, no par value, no maximum authorization	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 [N]	(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

1_Condensed Consolidated Balanc

Condensed Consolidated Balance Sheets (Unaudited) (Parentheticals) (USD $)
In Millions, except Share data	Jun. 30, 2009	Dec. 31, 2008
Investments in securities:
Fannie Mae MBS at FV included in Trading Securities at FV	$52,103	$58,006
Fannie Mae MBS at FV included in Available-for-sale, at fair value	190,591	176,244
Liabilities:
FV of Short-term debt	0	4,500
FV of Long-term debt	22,437	21,565
Reserve for guaranty losses related to Fannie Mae MBS included in investments in securities	4,238	1,946
Guaranty obligations related to Fannie Mae MBS included in investments in securities	$755	$755
Fannie Mae stockholders' equity (deficit):
Senior preferred stock issued	1,000,000	1,000,000
Senior preferred stock outstanding	1,000,000	1,000,000
Preferred stock authorized	700,000,000	700,000,000
Preferred stock issued	582,508,752	597,071,401
Common stock issued	1,261,401,675	1,238,880,988
Common stock outstanding	1,109,063,047	1,085,424,213
Common stock par or stated value per share	0	0
Common stock authorized	no maximum	no maximum
Treasury stock, shares	152,338,628	153,456,775

Condensed Consolidated Statemen

Condensed Consolidated Statements of Operations (Unaudited) (USD $)
In Millions, except Per Share data	3 Months Ended Jun. 30, 2009	3 Months Ended Jun. 30, 2008	6 Months Ended Jun. 30, 2009	6 Months Ended Jun. 30, 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:
Interest expense, short-term debt	600	1,687	1,707	4,248
Interest expense, 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	1,659	1,608	3,411	3,360
Trust management income	13	75	24	182
Investment losses, net	(45)	(376)	178	(432)
Other-than-temporary impairments	(1,097)	(507)	(6,750)	(562)
Less: Noncredit portion of other-than-temporary impairments recognized in other comprehensive income	344	0	344	0
Net other-than-temporary impairments [N]	(753)	(507)	(6,406)	(562)
Fair value 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 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)
Benefit (provision) for federal income taxes	(23)	476	600	3,404
Loss before extraordinary losses	(14,780)	(2,264)	(37,965)	(4,449)
Extraordinary (gains) losses, net of tax effect	0	(33)	0	(34)
Net loss	(14,780)	(2,297)	(37,965)	(4,483)
Less: Net 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 [N]	(411)	(303)	(440)	(625)
Net loss available to common stockholders	($15,165)	($2,603)	($38,362)	($5,111)
Basic earnings (loss) per share:
Basic loss per share	-2.67	-2.54	-6.76	-5.11
Diluted earnings (loss) per share:
Diluted loss per share	-2.67	-2.54	-6.76	-5.11
Cash dividends per common share	$0	0.35	$0	0.7
Weighted-average common shares outstanding:
Basic and Diluted	5,681	1,025	5,674	1,000

2_Condensed Consolidated Statem

Condensed Consolidated Statements of Operations (Unaudited) (Parentheticals) (USD $)
In Millions	3 Months Ended Jun. 30, 2009	3 Months Ended Jun. 30, 2008	6 Months Ended Jun. 30, 2009	6 Months Ended Jun. 30, 2008
Income Statement Paranthetical
Imputed Interest included in guaranty fee income	$321	$319	$471	$554

3_Condensed Consolidated Statem

Condensed Consolidated Statements of Cash Flows (Unaudited) (USD $)
In Millions	6 Months Ended Jun. 30, 2009	6 Months Ended Jun. 30, 2008
Cash flows (used in) provided by operating activities:
Net loss	($37,965)	($4,483)
Reconciliation of net income (loss) to net cash provided by operating activities:
Amortization of debt cost basis adjustments	2,172	4,609
Provision for credit losses	38,559	8,158
Valuation losses	4,537	2,941
Current and deferred federal income taxes	(1,690)	(4,249)
Derivatives fair value adjustments	(1,045)	399
Purchases of loans held for sale [N]	(72,172)	(27,426)
Proceeds from repayments of loans held for sale	1,204	288
Net change in trading securities [N]	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 investing activities:
Purchases of trading securities held for investment [N]	0	(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 of available-for-sale securities	(108,105)	(79,331)
Proceeds from maturities of available-for-sale securities	23,705	17,689
Proceeds from sales of available-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 (SCF) [N]	(53,646)	(51,573)
Proceeds from disposition of acquired property	9,873	4,191
Reimbursements to servicers for loan advances [N]	(9,024)	(5,588)
Net change in federal funds sold and securities purchased under agreements to resell	32,147	13,315
Other, net (investing)	(356)	222
Net cash provided by investing activities	84,021	(24,069)
Cash flows used in 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 [N]	(154,264)	(172,191)
Proceeds from senior preferred stock agreement with U.S. Treasury	34,200	0
Proceeds from issuance of common and preferred stock	0	7,211
Net change in federal funds purchased and securities sold under agreements to repurchase	(65)	(442)
Other, net (financing)	(434)	(1,307)
Net cash used in financing activities	(6,183)	3,688
Net increase (decrease) 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 paid	15,430	19,371
Income taxes paid	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 from available-for-sale securities to mortgage loans held for sale	867	616
Transfers from advances to lenders to investments in securities	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	$0	$56,217

4_Condensed Consolidated Statem

Condensed Consolidated Statements of Cash Flows (Unaudited) (Parenthenticals) (USD $)
In Millions	6 Months Ended Jun. 30, 2009	6 Months Ended Jun. 30, 2008
Cash flows parenthetical
(including transfers to trading securities)	$0	$28,877

5_Condensed Consolidated Statem

Condensed Consolidated Statements of Changes in Stockholders' Equity (Unaudited) (USD $)
In Millions	Senior preferred, stock	Preferred, stock	Common, stock	Senior preferred, value	Preferred, value	Common, value	Additional paid-in capital (Equity)	Retained earnings (accumulated deficit)	Accumulated other comprehensive income (loss)		Treasury stock	Non controlling interest	Total
Stockholders' equity, shares issued, beginning balance at Dec. 31, 2007	0	466	974
Stockholders' equity, beginning balance at Dec. 31, 2007				$0	$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
Stockholders' equity, beginning balance adjusted								33,696	(1,455)				44,173
Change in investment in noncontrolling interest												54	54
Comprehensive loss:
Net loss								(4,486)				3	(4,483)
Other comprehensive loss, net of tax effect:
Unrealized gains on available-for-sale securities net of tax									(4,270)	[1]			(4,270)
Reclassification adjustment for gains included in net loss, net of tax [N]									(21)				(21)
Unrealized gains on guaranty assets and guaranty fee buy-ups, net of tax									7				7
Net cash flow hedging gains, net of tax									1				1
Common stock dividends [N]								(687)					(687)
Preferred stock dividends declared [N]								(625)					(625)
Preferred stock issued, value					4,812		(127)						4,685
Preferred stock issued, shares		141
Common stock issued, value						49	2,477						2,526
Common stock issued, shares			94
Other, employee benefit plans							(187)				217		30
Other, Employees benefit plans, shares			2
Stockholders' equity, ending balance at Jun. 30, 2008					21,725	642	3,994	27,898	(5,738)		(7,295)	164	41,390
Stockholders' equity, shares issued, ending balance at Jun. 30, 2008		607	1,070
Other comprehensive loss, net of tax effect:
Stockholders' equity, shares issued, beginning balance at Dec. 31, 2008	1	597	1,085
Stockholders' equity, beginning balance at Dec. 31, 2008				1,000	21,222	650	3,621	(26,790)	(7,673)		(7,344)	157	(15,157)
Cumulative effect from the adoption of FSP FAS 115-2, net of tax (Note 2)								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 on available-for-sale securities net of tax									5,854	[1]			5,854
Unrealized other-than-temporary impairment losses, net of tax									(245)				(245)
Reclassification adjustment for gains included in net loss, net of tax [N]									86				86
Unrealized gains (losses) related to hedging									9				9
Unrealized gains on guaranty assets and guaranty fee buy-ups, net of tax									79				79
Prior service cost and actuarial gains, net of amortization for defined benefit plans									17				17
Senior preferred stock dividends							(434)						(434)
Increase to Senior Preferred Liquidation Preference				34,200									34,200
Conversion of convertible preferred stock into common stock					(736)	12	724						0
Conversion of convertible preferred stock into common stock, shares		(15)	23
Other, employee benefit plans							36	1			(41)		(4)
Other, Employees benefit plans, shares			1
Stockholders' equity, ending balance at Jun. 30, 2009				$35,200	$20,486	$662	$3,947	($56,191)	($7,429)		($7,385)	$108	($10,602)
Stockholders' equity, shares issued, ending balance at Jun. 30, 2009	1	582	1,109
Stockholders' equity, shares issued, beginning balance at Mar. 31, 2009	1
Other comprehensive loss, net of tax effect:
Stockholders' equity, shares issued, ending balance at Jun. 30, 2009	1
[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

6_Condensed Consolidated Statem

Condensed Consolidated Statements of Changes in Stockholders' Equity (Unaudited) (Parentheticals) (USD $)
In Millions, except Per Share data	1/1/2009 - 6/30/2009	1/1/2008 - 6/30/2008
Condensed Consolidated Statement of Changes in Equity (Deficit) (Parentheticals)
(Tax on unrealized gains on available-for-sale securities)	$3,152	$2,299
(Tax on unrealized losses on other-than-temporary-impairment-losses)	99
(Tax on reclassification adjustment for gains included in net loss)	46	11
(Tax on unrealized gains on guaranty assets and guaranty fee buy-ups)		4
(Tax on net cash flow hedging losses)		$1
Cash dividends per common share	$0	0.7

Organization and Conservatorshi

Organization and Conservatorship
	6 Months Ended Jun. 30, 2009 USD / shares
Note to Condensed Consolidated Financial Statements
Organization and Conservatorship	NOTESTO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)(UNAUDITED) 1. Organization and ConservatorshipWe are a stockholder-owned corporation organized and existing under the Federal National Mortgage Association Charter Act (The Charter Act or our charter). We are a government-sponsored enterprise (GSE), and we are subject to government oversight and regulation. Our regulators include the Federal Housing Finance Agency (FHFA), the U.S.Department of Housing and Urban Development (HUD), the U.S.Securities and Exchange Commission (SEC), and the U.S.Department of Treasury (Treasury). Through July29, 2008, we were regulated by the Office of Federal Housing Enterprise Oversight (OFHEO), which was replaced on July30, 2008 with FHFA upon the enactment of the Federal Housing Finance Regulatory Reform Act of 2008 (Regulatory Reform Act). On September6, 2008, we were placed into conservatorship by the Director of FHFA. See Conservatorship below in this note. The U.S.government does not guarantee, directly or indirectly, our securities or other obligations.We operate in the secondary mortgage market by purchasing mortgage loans and mortgage-related securities, including mortgage-related securities guaranteed by us, from primary mortgage market institutions, such as commercial banks, savings and loan associations, mortgage banking companies, securities dealers and other investors. We do not lend money directly to consumers in the primary mortgage market. We provide additional liquidity in the secondary mortgage market by issuing guaranteed mortgage-related securities.We operate under three business segments: Single-Family Credit Guaranty (Single-Family), Housing and Community Development (HCD) and Capital Markets. Our Single-Family segment generates revenue primarily from the guaranty fees on the mortgage loans underlying guaranteed single-family Fannie Mae mortgage-backed securities (Fannie Mae MBS). Our HCD segment generates revenue from a variety of sources, including guaranty fees on the mortgage loans underlying multifamily Fannie Mae MBS and on the multifamily mortgage loans held in our portfolio, transaction fees associated with the multifamily business and bond credit enhancement fees. In addition, HCD investments in rental housing projects eligible for the federal low-income housing tax credit (LIHTC) generate both tax credits and net operating losses. As described in Note12, Income Taxes, we determined that it is more likely than not that we will not realize a portion of our deferred tax assets in the future. As a result, we are not recognizing a majority of the tax benefits associated with tax credits and net operating losses in our condensed consolidated financial statements. Other investments in affordable rental and for-sale housing generate revenue and losses from operations and the eventual sale of the assets. Our Capital Markets segment invests in mortgage loans, mortgage-related securities and other investments, and generates income primarily from the difference, or spread, between the yield on the mortgage assets we own and the interest we pay on the debt we issue in the global capital markets to fund the purchases of these

Summary of Significant Accounti

Summary of Significant Accounting Policies
	6 Months Ended Jun. 30, 2009 USD / shares
Note to Condensed Consolidated Financial Statements
Summary of Significant Accounting Policies	2.Summary of Significant Accounting PoliciesBasis of PresentationThe accompanying unaudited interim condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP) for the interim financial information and with the SECs instructions to Form10-Q and Article10 of Regulations S-X. Accordingly, they do not include all of the information and note disclosures required by GAAP for complete consolidated financial statements. In the opinion of management, all adjustments of a normal recurring nature considered necessary for a fair presentation have been included. Results for the three and six months ended June 30, 2009may not necessarily be indicative of the results for the year ending December31, 2009. The unaudited interim condensed consolidated financial statements as of June 30, 2009 and our condensed consolidated financial statements as of December31, 2008 should be read in conjunction with our audited consolidated financial statements and related notes included in our Annual Report on Form10-K for the year ended December31, 2008, filed with the SEC on February26, 2009. We have completed our analysis of subsequent eventsrelated to our condensed consolidated financial statements through August 6, 2009.We are currently in conservatorship, with FHFA acting as our conservator. As conservator, FHFA succeeded to all rights, titles, powers and privileges of the company and of any shareholder, officer or director of the company with respect to the company and its assets. As a result, we are currently under the control of our conservator. FHFA, in its role as conservator, has overall management authority over our business.We receive, directly and indirectly, substantial support from various agencies of the United States Government, including the Federal Reserve, Treasury, and FHFA, as our conservator and regulator. We are dependent upon the continued support of the U.S.Government and these agencies in order to maintain a positive net worth, which avoids our being placed into receivership. We also believe that our improved access to the debt markets is due to federal government support. Based on consideration of all the relevant conditions and events affecting our operations, including our dependence on the U.S.Government, we continue to operate as a going concern and in accordance with our delegation of authority from FHFA.The conservatorship has no specified termination date and the future structure of our business following termination of the conservatorship is uncertain. We do not know when or how the conservatorship will be terminated or what changes to our business structure will be made during or following the termination of the conservatorship. We do not know whether we will exist in the same or a similar form or continue to conduct our business as we did before the conservatorship, or whether the conservatorship will end in receivership. Under the Regulatory Reform Act, FHFA must place us into receivership if the Director of FHFA makes a written determination that our assets are less than our obligations or if we have not been paying our debts, in

Consolidations

Consolidations
	6 Months Ended Jun. 30, 2009 USD / shares
Note to Condensed Consolidated Financial Statements
Consolidations	3. ConsolidationsWe have interests in various entities that are considered to be VIEs, as defined by FIN46R. These interests include investments in securities issued by VIEs, such as Fannie Mae MBS created pursuant to our securitization transactions, mortgage and asset-backed trusts that were not created by us, and limited partnership interests in LIHTC and other housing partnerships that are established to finance the acquisition, construction, development or rehabilitation of affordable multifamily and single-family housing. These interests may also include our guaranty to the entity.As of June 30, 2009 and December31, 2008, we had LIHTC partnership investments of $5.8 billion and $6.3 billion, respectively. As a result of our tax position, we did not make any LIHTC investments in the first six months of 2009 other than pursuant to commitments existing prior to 2008 and are not currently recognizing a majority of the tax benefits associated with tax credits and net operating losses in our condensed consolidated financial statements.We recorded $302million and $33million for thethree months ended June 30, 2009 and 2008, respectively, and $449million and $47million for the six months ended June 30, 2009 and 2008, respectively,of impairment related to our limited partnerships in Losses from partnership investments in our condensed consolidated statements of operations.Consolidated VIEsThe following table displays the carrying amount and classification of assets and liabilities of consolidated VIEs as of June 30, 2009 and December31, 2008. 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 1,992 2,208 Loans held for sale 1,488 1,429 Trading securities 901 993 Total MBS trusts 59,190 63,756 Limited partnerships: Partnership investment 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: Short-term debt $ - $ - 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 $23million and $54 million as of June 30, 2009 and December31, 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 $3.0billion as of June 30, 2009 and December31, 2008, respectively. As of June 30, 2009, we consolidated $565million in assets which were not consolidated as of December31, 2008. These assets were not consolidated as of December31, 2008 because we did not have the unilateral ability to liquidate the trusts. These assets were consolidated because we purchased additional MBS during the period such that we owned 100% of the trusts as of June 30, 2009. As of December31, 2008, we consolidated $3.6billion in assets which were no longer consolidated as of

Mortgage Loans

Mortgage Loans
	6 Months Ended Jun. 30, 2009 USD / shares
Note to Condensed Consolidated Financial Statements
Mortgage Loans	4.Mortgage LoansThe following table displays the loans in our mortgage portfolio as of June 30, 2009 and December31, 2008 and does not include loans underlying securities that are not consolidated, since in those instances the mortgage loans are not included in our condensed consolidated balance sheets. 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 $125million as of June 30, 2009 and December31, 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. Loans Acquired in a TransferIf a loan underlying a Fannie Mae MBS is in default, we have the option to purchase the loan from the MBS trust, at the unpaid principal balance of that mortgage loan plus accrued interest, after four or more consecutive monthly payments due under the loan are delinquent in whole or in part. With respect to Single-family mortgage loans in MBS trusts with issue dates on or after January1, 2009, we also have the option to purchase the loan from the trust after the loan has been delinquent for at least one monthly payment, if the delinquency has not been fully cured on or before the next payment date (i.e., 30days delinquent), and it is determined that it is appropriate to execute a loss mitigation activity that is not permissible while the loan is held in an MBS trust. Loans can be acquired either through purchase or consolidation. We acquired delinquent loans with an unpaid principal balance plus accrued interest of $3.7billion and $807 million for the three months ended June 30, 2009 and 2008, respectively, and $6.3billion and $2.5 billion for the six months ended June 30, 2009 and 2008, respectively. Under long-term standby commitments, we purchase loans from lenders when the loans subject to these commitments meet certain delinquency criteria. We also acquire loans upon consolidating MBS trusts when the underlying collateral of these trusts includes loans.We account for such acquired loans in accordance with American Institute of Certified Public Accountants Statement of Position 03-3, Accounting for Certain Loans or Debt Securities Acquired in a Transfer (SOP03-3), if, at acquisition, (i)there has been evidence of deterioration in the loans credit quality subsequent to origination; and (ii)it is p

Allowance for Loan Losses and R

Allowance for Loan Losses and Reserve for Guaranty Losses
	6 Months Ended Jun. 30, 2009 USD / shares
Note to Condensed Consolidated Financial Statements
Allowance for Loan Losses and Reserve for Guaranty Losses	5. Allowance for Loan Losses and Reserve for Guaranty LossesWe maintain an allowance for loan losses for loans held for investment in our mortgage portfolio and a reserve for guaranty losses related to loans backing Fannie Mae MBS and loans that we have guaranteed under long-term standby commitments. The allowance and reserve are calculated based on our estimate of incurred losses as of the balance sheet date. Determining the adequacy of our allowance for loan losses and reserve for guaranty losses is complex and requires judgment about the effect of matters that are inherently uncertain. Although our loss models include extensive historical loan performance data, our loss reserve process is subject to risks and uncertainties particularly in the rapidly changing credit environment. We have experienced higher default and loan loss severity rates during the three and six months ended June 30, 2009 as compared to the three and six months ended June 30, 2008, which has increased our estimates of incurred losses resulting in a significant increase to our allowance for loan losses and reserve for guaranty losses as of June 30, 2009.The following table displays changes in the allowance for loan losses and reserve for guaranty losses for the three and six months ended June 30, 2009 and 2008. 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 $328million and $161million for the three months ended June 30, 2009 and 2008, respectively, and $575million and $239million for the six months ended June 30, 2009 and 2008, respectively. (2) Includes $309million and $114million as of June 30, 2009 and 2008, respectively, associated with acquired loans subject to SOP03-3. (3) Includes charges of $73million and $114million for the three months ended June 30, 2009 and 2008, respectively, and $188million and $123million 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 $2.1billion and $380million for the three months ended June 30, 2009 and 2008, respectively, and $3.5billion and $1.1 billion for the six months ended June 30, 2009 and 2008, respectively for acquired loans subject to SOP03-3 where the acquisition cost exceeded the fair value of the acquired loan.

Investments in Securities

Investments in Securities
	6 Months Ended Jun. 30, 2009 USD / shares
Note to Condensed Consolidated Financial Statements
Investments in Securities	6. Investments in SecuritiesOur securities portfolio contains mortgage-related and non-mortgage-related securities. The following table displays our investments in trading and AFS securities, which are presented at fair value as of June 30, 2009 and December31, 2008. As of June 30, December 31, 2009 2008 (Dollars in millions) Mortgage-related securities: Fannie Mae single-classMBS $ 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. Trading SecuritiesTrading securities are recorded at fair value with subsequent changes in fair value recorded as Fair value gains (losses), net in our condensed consolidated statements of operations. The following table displays our investments in trading securities and the cumulative amount of net losses recognized from holding these securities as of June 30, 2009 and December31, 2008. As of June 30, December 31, 2009 2008 (Dollars in millions) Mortgage-related securities: Fannie Mae single-classMBS $ 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. The following table displays information about our net trading gains and losses for the three and six months ended June 30, 2009 and 2008. For the For the Three Months Ended Six Months 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 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) Available-for-Sale SecuritiesAFS securities

Portfolio Securitizations

Portfolio Securitizations
	6 Months Ended Jun. 30, 2009 USD / shares
Note to Condensed Consolidated Financial Statements
Portfolio Securitizations	7.Portfolio SecuritizationsWe issue Fannie Mae MBS through securitization transactions by transferring pools of mortgage loans or mortgage-related securities to one or more trusts or special purpose entities. We are considered to be the transferor when we transfer assets from our own portfolio in a portfolio securitization. For the three months ended June 30, 2009 and June 30, 2008, the unpaid principal balance of portfolio securitizations was $135.5 billion and $13.4 billion, respectively. For the six months ended June 30, 2009 and June 30, 2008, the unpaid principal balance of portfolio securitizations was $158.4 billion and $24.6 billion, respectively.For the transfers that were recorded as sales, we have continuing involvement in the assets transferred to a trust as a result of our investments in securities issued by the trusts and our guaranty and master servicing relationships. The following table displays our continuing involvement in the form of Fannie Mae MBS, guaranty asset, guaranty obligation and master servicing asset (MSA) or master servicing liability (MSL) as of June30, 2009 and December31, 2008. 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) Our exposure to credit losses on the loans underlying our Fannie Mae MBS resulting from our guaranty has been recorded in our condensed consolidated balance sheets in Guaranty obligations, as it relates to our obligation to stand ready to perform on our guaranty, and Reserve for guaranty losses, as it relates to incurred losses.Since our guaranty asset and MSA or MSL do not trade in active financial markets, we estimate their fair value by using internally developed models and market inputs for securities with similar characteristics. The key assumptions are discount rate, or yield, derived using a projected interest rate path, or paths, consistent with the observed yield curve at the valuation date (forward rates), and the prepayment speed based on our proprietary models that are consistent with the projected interest rate path, or paths, and expressed as a 12-month constant prepayment rate (CPR).The fair value of all guaranty obligations measured subsequent to their initial recognition is our estimate of a hypothetical transaction price we would receive if we were to issue our guaranty to an unrelated party in a stand-alone arms length transaction at the measurement date. The key assumptions associated with the fair value of the guaranty obligations are future home prices and current loan to-value ratios.Our investments in Fannie Mae single-classMBS, Fannie Mae Megas, real estate mortgage investments conduits (REMICs) and stripped mortgage-backed securities (SMBS) are interests in securities with active markets. We primarily rely on third party prices to estimate the fair value of these interests. For the purpose of this disclosure, we aggregate similar securities in order to measure the key assumptions associated with the fair values of our interests, which are approximated by sol

Financial Guarantees and Master

Financial Guarantees and Master Servicing
	6 Months Ended Jun. 30, 2009 USD / shares
Note to Condensed Consolidated Financial Statements
Financial Guarantees and Master Servicing	8.Financial Guarantees and Master ServicingWe generate revenue by absorbing the credit risk of mortgage loans and mortgage-related securities backing our Fannie Mae MBS in exchange for a guaranty fee. We primarily issue single-class and multi-classFannie Mae MBS and guarantee to the respective MBS trusts that we will supplement amounts received by the MBS trusts as required to permit timely payment of principal and interest on the related Fannie Mae MBS, irrespective of the cash flows received from borrowers. We also provide credit enhancements on taxable or tax-exempt mortgage revenue bonds issued by state and local governmental entities to finance multifamily housing for low- and moderate-income families. Additionally, we issue long-term standby commitments that require us to purchase loans from lenders if the loans meet certain delinquency criteria.We record a guaranty obligation for (i)guarantees on lender swap transactions issued or modified on or after January1, 2003, pursuant to FINNo.45, Guarantors Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others (an interpretation of FASB Statements No.5, 57 and 107 and rescission of FINNo.34) (FIN45), (ii)guarantees on portfolio securitization transactions, (iii)credit enhancements on mortgage revenue bonds, and (iv)our obligation to absorb losses under long-term standby commitments. Our guaranty obligation represents our obligation to stand ready to perform on these guarantees. Our guaranty obligation is recorded at fair value at inception. The carrying amount of the guaranty obligation, excluding deferred profit, was $10.4billion and $9.7billion as of June30, 2009 and December31, 2008, respectively. We also record an estimate of incurred credit losses on these guarantees in the Reserve for guaranty losses in our condensed consolidated balance sheets, as discussed further in Note5, Allowance for Loan Losses and Reserve for Guaranty Losses.We have a portion of our guarantees reflected in our condensed consolidated balance sheets. For those guarantees recorded in our condensed consolidated balance sheets, our maximum potential exposure under these guarantees is primarily comprised of the unpaid principal balance of the underlying mortgage loans, which totaled $2.5 trillion and $2.4 trillion as of June 30, 2009 and December31, 2008, respectively. In addition, we had exposure of $152.5billion and $172.2billion for other guarantees not recorded in our condensed consolidated balance sheets as of June30, 2009 and December31, 2008, respectively, which primarily represents the unpaid principal balance of loans underlying guarantees issued prior to the effective date of FIN45.The maximum exposure from our guarantees is not representative of the actual loss we are likely to incur, based on our historical loss experience. In the event we were required to make payments under our guarantees, we would pursue recovery of these payments by exercising our rights to the collateral backing the underlying loans and through available credit enhancements, which includes all recourse with third parties and mortgage insurance. The maximum amount we could reco

Acquired Propery Net

Acquired Propery Net
	6 Months Ended Jun. 30, 2009 USD / shares
Note to Condensed Consolidated Financial Statements
Acquired Propery Net	9.Acquired Property, NetAcquired property, net consists of foreclosed property received in full satisfaction of a loan net of a valuation allowance for declines in the fair value of foreclosed properties after initial acquisition. The following table displays the activity in acquired property and the related valuation allowance for the three and six months ended June30, 2009 and 2008. For the Three Months EndedJune 30, 2009 For the Six Months Ended June 30, 2009 Acquired Property Valuation Allowance Acquired Property, Net Acquired Property Valuation Allowance Acquired 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 June 30, 2008 For the Six Months Ended June 30, 2008 Acquired Property Valuation Allowance Acquired Property, Net Acquired Property Valuation Allowance Acquired 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.

Short-term Borrowings and Long-

Short-term Borrowings and Long-term Debt
	6 Months Ended Jun. 30, 2009 USD / shares
Note to Condensed Consolidated Financial Statements
Short-term Borrowings and Long-term Debt	10.Short-term Borrowings and Long-term DebtShort-term BorrowingsOur short-term borrowings (borrowings with an original contractual maturity of one year or less) consist of both Federal funds purchased and securities sold under agreements to repurchase and Short-term debt in our condensed consolidated balance sheets. The following table displays our outstanding short-term borrowings and weighted-average interest rates as of June 30, 2009 and December31, 2008. As of June 30, 2009 December 31, 2008 Weighted Weighted Average Average Interest Interest Outstanding Rate Outstanding Rate (Dollars in millions) Federal funds purchased and securities sold under agreements to repurchase $ - 0.00 % $ 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 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. Long-term DebtLong-term debt represents borrowings with an original contractual maturity of greater than one year. The following table displays our outstanding long-term debt as of June 30, 2009 and December31, 2008. As of June 30, 2009 December 31, 2008 Weighted Weighted Average Average Interest Interest Maturities Outstanding Rate Maturities Outstanding Rate (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 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 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 $16.8billion and $15.5billion as of June 30, 2009 and December31, 2008, respectively. Intraday Lines of CreditWe periodically use sec

Derivative Instruments

Derivative Instruments
	6 Months Ended Jun. 30, 2009 USD / shares
Note to Condensed Consolidated Financial Statements
Derivative Instruments	11.Derivative Instruments and Hedging ActivitiesWe adopted SFAS161, Disclosures about Derivative Instruments and Hedging Activities, an amendment of FASB Statement No.133 (SFAS161), effective January1, 2009. SFAS161 amends and expands the disclosure provisions in SFASNo.133, Accounting for Derivative Instruments and Hedging Activities (SFAS133), for derivative instruments and hedging activities. As SFAS161 only requires additional note disclosures, it impacts the notes to our condensed consolidated financial statements, but has no impact to our condensed consolidated financial statements themselves.We account for our derivatives pursuant to SFAS133, as amended and interpreted, and recognize all derivatives as either assets or liabilities in our condensed consolidated balance sheets at their fair value on a trade date basis. Fair value amounts are recorded in Derivative assets at fair value or Derivative liabilities at fair value in our condensed consolidated balance sheets. With the exception of commitments accounted for as derivatives, we do not settle the notional amount of our derivative instruments. Notional amounts, therefore, simply provide the basis for calculating actual payments or settlement amounts.The derivatives we use for interest rate risk management purposes consist primarily of over-the-counter contracts that fall into three broad categories: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.Although derivative instruments are critical to our interest rate risk management strategy, we did not apply hedge accountingduring2009. In the three months ended June 30,2008, weemployed fair value hedge accounting for some of our interest rate risk management activities by designating hedging relationships between certain of our interest rate derivatives and mortgage assets. We achievedhedge accounting by designating all or a fixed percentage of a pay-fixed receive variable interest rate swapas a hedge of the changes in the fair value attributable to the changes in LIBOR for a specific mortgage asset.All derivative gains and losses, includingaccrued interest, are recorded in Fair value gains (losses), netin our condensed consolidated statements of operations.When we determinedthat a hedging relationshipwas highly effective, changes in the fair value of the hedgeditem attributable to changes in the benchmark interest ratewere recorded as an adjustment to the carrying valueof the hedged item. These adjustmentsare amortized into earnings over the remaining life of the hedged itemin ac

Income Taxes

Income Taxes
	6 Months Ended Jun. 30, 2009 USD / shares
Note to Condensed Consolidated Financial Statements
Income Taxes	12.Income TaxesOur effective tax rate is the provision (benefit) for federal income taxes, excluding the tax effect of extraordinary items, expressed as a percentage of income or loss before federal income taxes. The effective tax rate for the three months ended June 30, 2009 and 2008 was less than 1% and 17%, respectively, and 2% and 43% for the six months ended June 30, 2009 and 2008 respectively. Our effective tax rates were different from the federal statutory rate of 35% due to the benefits of our holdings of tax-exempt investments. In addition, our effective tax rates for the three and six months ended June 30, 2009 were also impacted by a valuation allowance of $5.3billion and $14.1 billion, respectively, as well as a benefit for our ability to carry back net operating losses expected to be generated in the current year to prior years. Our effective tax rates for the three and six months ended June 30, 2008 were also impacted by the benefits of our investments in housing projects eligible for the low-income housing tax credit and other equity investments that provide tax credits.We recognize deferred tax assets and liabilities for the future tax consequences related to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases, and for tax credits. Our deferred tax assets, net of a valuation allowance, totaled $3.8billion and $3.9billion as of June 30, 2009 and December31, 2008, respectively. We evaluate our deferred tax assets for recoverability using a consistent approach which considers the relative impact of negative and positive evidence, including our historical profitability and projections of future taxable income. We are required to establish a valuation allowance for deferred tax assets and record a charge in our condensed consolidated statements of operations or Fannie Mae stockholders equity (deficit) if we determine, based on available evidence at the time the determination is made, that it is more likely than not that some portion or all of the deferred tax assets will not be realized. In evaluating the need for a valuation allowance, we estimate future taxable income based on management-approved business plans and ongoing tax planning strategies. This process involves significant management judgment about assumptions that are subject to change from period to period based on changes in tax laws or variances between our projected operating performance, our actual results and other factors.We are in a cumulative book taxable loss position and have been for more than a twelve-quarter period. For purposes of establishing a deferred tax valuation allowance, this cumulative book taxable loss position is considered significant, objective evidence that we may not be able to realize some portion of our deferred tax assets in the future. Our cumulative book taxable loss position was caused by the negative impact on our results from the weak housing and credit market conditions. These conditions deteriorated dramatically during 2008, causing a significant increase in our pre-tax loss, due in part to much higher credit losses, and downward revisions to our project

Earnings

Earnings (Loss) Per Share
	6 Months Ended Jun. 30, 2009 USD / shares
Note to Condensed Consolidated Financial Statements
Earnings (Loss) Per Share	13.Loss Per ShareThe following table displays the computation of basic and diluted loss per share of common stock for the three and six months ended June 30, 2009 and 2008. For the Three Months For the Six Months Ended 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 stockholdersbasic and diluted $ (15,165) $ (2,603) $ (38,362) $ (5,111) Weighted-average common shares outstandingbasic 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 $409million 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.

Employee Retirement Benefits

Employee Retirement Benefits
	6 Months Ended Jun. 30, 2009 USD / shares
Note to Condensed Consolidated Financial Statements
Employee Retirement Benefits	14.Employee Retirement BenefitsThe following table displays components of our net periodic benefit cost for our qualified and nonqualified pension plans and other postretirement plan for the three and six months ended June 30, 2009 and 2008. The net periodic benefit cost for each period is calculated based on assumptions at the end of the prior year. 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 During the three and six months ended June 30, 2009, we contributed $1million and $3 million to our nonqualified pension plans and $3million and $5 million to other postretirement benefit plans, respectively. During the remaining period of 2009, we anticipate contributing an additional $83million to our benefit plans, $76 million to our qualified pension plan, $3million to our nonqualified pension plans and $4million to our postretirement benefit plan.

Segment Reporting

Segment Reporting
	6 Months Ended Jun. 30, 2009 USD / shares
Note to Condensed Consolidated Financial Statements
Segment Reporting	15.Segment ReportingOur three reportable segments are: Single-Family, HCD, and Capital Markets. We use these three segments to generate revenue and manage business risk, and each segment is based on the type of business activities it performs.Our segment financial results include directly attributable revenues and expenses. Additionally, we allocate to each of our segments: (i)capital using FHFA minimum capital requirements adjusted for over- or under-capitalization; (ii)indirect administrative costs; and (iii)a provision (benefit) for federal income taxes. In addition, we allocate intercompany guaranty fee income as a charge to Capital Markets from the Single-Family and HCD segments for managing the credit risk on mortgage loans held by the Capital Markets segment.The following table displays our segment results for the three and six months ended June 30, 2009 and 2008. For the Three Months Ended June 30, 2009 Capital Single-Family HCD Markets Total (Dollars in millions) Net interest income (expense) $ 186 $ (51) $ 3,600 $ 3,735 Guaranty fee income (expense) 1,865 164 (370) 1,659 Trust management income 13 - - 13 Investment losses, net (15) - (30) (45) Net other-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) For the Six Months Ended June 30, 2009 Capital Single-Family HCD Markets Total (Dollars in millions) Net interest income (expense) $ 201 $ (113) $ 6,895 $ 6,983 Guaranty fee income (expense) 3,831 322 (742) 3,411 Trust management income 24 - - 24 Investment gains, net 58 - 120 178 Net other-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

Regulatory Capital Requirements

Regulatory Capital Requirements
	6 Months Ended Jun. 30, 2009 USD / shares
Note to Condensed Consolidated Financial Statements
Regulatory Capital Requirements	16.Regulatory Capital RequirementsIn October 2008, FHFA announced that our existing statutory and FHFA-directed regulatory capital requirements will not be binding during the conservatorship, and that FHFA will not issue quarterly capital classifications during the conservatorship. We will continue to submit capital reports to FHFA during the conservatorship and FHFA will continue to closely monitor our capital levels. FHFA has stated that it does not intend to report our critical capital, risk-based capital or subordinated debt levels during the conservatorship. As of June 30, 2009 and December31, 2008, we had a minimum capital deficiency of $72.4billion and $42.2billion, respectively. These amounts exclude the funds provided to us by Treasury pursuant to the senior preferred stock purchase agreement, since senior preferred stock is not included in core capital due to its cumulative dividend provisions.FHFA has directed us, during the time we are under conservatorship, to focus on managing to a positive net worth. As of June 30, 2009 and December31, 2008, we had a net worth deficit of $10.6billion and $15.2billion, respectively.Pursuant to the Regulatory Reform Act, if our total assets are less than our total obligations for a period of 60days, FHFA will be mandated by law to appoint a receiver for Fannie Mae. Treasurys funding commitment under the senior preferred stock purchase agreement is intended to ensure that we avoid a net worth deficit, in order to avoid this mandatory trigger of receivership under the Regulatory Reform Act. In order to avoid a net worth deficit, we may draw up to $200billion in funds from Treasury under the senior preferred stock purchase agreement as amended on May6, 2009.Under the senior preferred stock purchase agreement, we are restricted from engaging in certain capital transactions, such as the declaration of dividends (other than on the senior preferred stock), without the prior written consent of Treasury, until the senior preferred stock is repaid or redeemed in full.

Concentrations of Credit Risk

Concentrations of Credit Risk
	6 Months Ended Jun. 30, 2009 USD / shares
Note to Condensed Consolidated Financial Statements
Concentrations of Credit Risk	17.Concentrations of Credit RiskNon-traditional Loans; Alt-A and Subprime Loans and SecuritiesWe own and guarantee loans with non-traditional features, such as interest-only loans and negative-amortizing loans. We also own and guarantee Alt-A and subprime mortgage loans and mortgage-related securities. An Alt-A mortgage loan generally refers to a mortgage loan that can be underwritten with reduced or alternative documentation than that required for a full documentation mortgage loan but may also include other alternative product features. As a result, Alt-A mortgage loans generally have a higher risk of default than non-Alt-A mortgage loans. In reporting our Alt-A exposure, we have classified mortgage loans as Alt-A if the lenders that deliver the mortgage loans to us have classified the loans as Alt-A based on documentation or other product features. We have classified private-label mortgage-related securities held in our investment portfolio as Alt-A if the securities were labeled as such when issued. A subprime mortgage loan generally refers to a mortgage loan made to a borrower with a weaker credit profile than that of a prime borrower. As a result of the weaker credit profile, subprime borrowers have a higher likelihood of default than prime borrowers. Subprime mortgage loans are typically originated by lenders specializing in this type of business or by subprime divisions of large lenders, using processes unique to subprime loans. In reporting our subprime exposure, we have classified mortgage loans as subprime if the mortgage loans are originated by one of these specialty lenders or a subprime division of a large lender. We have classified private-label mortgage-related securities held in our investment portfolio as subprime if the securities were labeled as such when issued. We reduce our risk associated with these loans through credit enhancements, as described below under Mortgage Insurers.The following table displays the percentage of our conventional single-family mortgage credit book of business that consists of interest-only loans, negative-amortizing adjustable rate mortgages (ARMs) and loans with an estimated mark-to-market loan to value (LTV) ratio of greater than 80% as of June 30, 2009 and December31, 2008. 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 The following table displays information regarding the Alt-A and subprime mortgage loans and mortgage-related securities in our single-family mortgage credit book of business as of June 30, 2009 and December31, 2008. As of June 30, 2009 December 31, 2008 Unpaid Percent of Unpaid Percent of Principal Book of Principal Book of Balance Business Balance Business (Dollars in millions) Loans and Fannie Mae MBS: Alt-A $ 272,303 9 % $ 295,622 10 % Subprime 17,591 1 19,086 1 Total $ 289,894 10 % $ 314,708 11 % Private-label securities: Alt-A $ 26,130 1 % $ 27,858 1 % Subprime 22,603 1 24,551 1 Total $ 48,733 2 %

Fair Value of Financial Instrum

Fair Value of Financial Instruments
	6 Months Ended Jun. 30, 2009 USD / shares
Note to Condensed Consolidated Financial Statements
Fair Value of Financial Instruments	18.Fair Value of Financial InstrumentsThe fair value of financial instruments disclosure required by SFASNo.107, Disclosures about Fair Value of Financial Instruments, includes commitments to purchase multifamily mortgage loans and single-family reverse mortgage loans, which are off-balance sheet financial instruments that are not recorded in our condensed consolidated balance sheets. The fair values of these commitments are included as Mortgage loans held for investment, net of allowance for loan losses. The disclosure excludes certain financial instruments, such as plan obligations for pension and other postretirement benefits, employee stock option and stock purchase plans, and also excludes all non-financial instruments. As a result, the fair value of our financial assets and liabilities does not represent the underlying fair value of our total consolidated assets and liabilities.The following table displays the carrying value and estimated fair value of our financial instruments as of June 30, 2009 and December31, 2008. 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 $ 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 and buy-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 $ 0 $ 0 $ 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 $757million and $529million as of June 30, 2009 and December31, 2008, respectively. Notes to Fair Value of Financial InstrumentsCash and Cash EquivalentsThe carrying value of cash and cash equivalents is a reasonable estimate of their approximate fair value.Federal Funds Sold and Securities Purchased Under Agreements to ResellThe carrying value of our federal funds sold and securities purchased under agreements to resell approximates the fair value of these instruments due to their short-term nature, exclusive of dollar roll resell transactions. The fair value of our dollar roll resell transactions reflects prices for similar securities in the market.Trading Securities and Available-for-Sale SecuritiesOur investments in secur

Commitments and Contingencies

Commitments and Contingencies
	6 Months Ended Jun. 30, 2009 USD / shares
Note to Condensed Consolidated Financial Statements
Commitments and Contingencies	19.Commitments and ContingenciesLegal ContingenciesWe are party to various types of legal proceedings. Litigation claims and proceedings of all types are subject to many uncertain factors that generally cannot be predicted with assurance. The following describes our material legal proceedings, investigations and other matters. An unfavorable outcome in certain of these legal proceedings could have a material adverse effect on our business, financial condition, results of operations, cash flows, and net worth. In view of the inherent difficulty of predicting the outcome of these proceedings, we cannot state with confidence what the eventual outcome of the pending matters will be and we may ultimately pay amounts that differ materially from our estimates. Reserves are established for legal claims when losses associated with the claims become probable and the amounts can be reasonably estimated. In the first quarter of 2009, we recorded a reserve for legal claims related to matters for which we were able to determine a loss was probable and reasonably estimable. We did not record any additional reserves for such matters in the second quarter of 2009. For all other pending matters, we have concluded that a loss was not both probable and reasonably estimable as of August6, 2009; therefore, we have not recorded a reserve for those matters. With respect to the lawsuits described below, whether or not we have recorded a reserve, we believe we have valid defenses to the claims in these lawsuits and intend to defend these lawsuits vigorously. In addition to the matters specifically described herein, we are involved in a number of legal and regulatory proceedings that arise in the ordinary course of business that we do not expect will have a material impact on our business.During 2009 and 2008, we advanced fees and expenses of certain current and former officers and directors in connection with various legal proceedings pursuant to indemnification agreements. None of these amounts was material. Securities ClassAction LawsuitsIn re Fannie Mae Securities LitigationBeginning on September23, 2004, 13 separate complaints were filed by holders of certain of our securities against us, as well as certain of our former officers, in three federal district courts. All of the cases were consolidated and/or transferred to the U.S.District Court for the District of Columbia. The court entered an order naming the Ohio Public Employees Retirement System and State Teachers Retirement System of Ohio as lead plaintiffs. The lead plaintiffs filed a consolidated complaint on March4, 2005 against us and certain of our former officers, which complaint was subsequently amended on April17, 2006 and on August14, 2006. The lead plaintiffs second amended complaint added KPMG LLP and Goldman, Sachs Co. as additional defendants. The lead plaintiffs allege that the defendants made materially false and misleading statements in violation of Sections10(b) and 20(a) of the Securities Exchange Act of 1934, and SEC Rule10b-5 promulgated thereunder, largely with respect to accounting statements that were inconsistent with the GAAP requirements relating to hedge accounting and the amortiz

Entity information

Entity information (USD $)
In Millions, except Share data	3 Months Ended Jun. 30, 2009
Entity Information
Entity registrant name	Federal National Mortgage Association
Entity central index key	0000310522
Entity current reporting status	Yes
Entity voluntary filers	No
Current fiscal year end date	--12-31
Entity filer category	Large Accelerated Filer
Entity well known seasoned issuer	Yes
Entity common stock shares outstanding	1,112,020,933
Entity public float	$20,932

Document information

Document information
	3 Months Ended Jun. 30, 2009 USD / shares
Document Information
Document type	10-Q
Document period end date	2009-06-30
Amendment flag	false