Condensed Consolidated Balance
Condensed Consolidated Balance Sheets (Unaudited) (USD $) | ||
In Millions | 9 Months Ended
Sep. 30, 2009 | 12 Months Ended
Dec. 31, 2008 |
ASSETS | ||
Cash and cash equivalents | $15,382 | $17,933 |
Restricted cash | 483 | 529 |
Federal funds sold and securities purchased under agreements to resell | 34,856 | 57,418 |
Investments in securities: | ||
Trading, at fair value | 97,288 | 90,806 |
Available-for-sale, at fair value | 270,557 | 266,488 |
Total investments in securities | 367,845 | 357,294 |
Mortgage loans: | ||
Loans held for sale, at lower of cost or fair value | 28,948 | 13,270 |
Loans held for investment, at amortized cost | 388,416 | 415,065 |
Allowance for loan losses [N] | (8,991) | (2,923) |
Total loans held for investment, net of allowance | 379,425 | 412,142 |
Total mortgage loans | 408,373 | 425,412 |
Advances to lenders | 4,587 | 5,766 |
Accrued interest receivable | 4,080 | 3,816 |
Acquired property, net | 7,735 | 6,918 |
Derivative assets at fair value | 766 | 869 |
Guaranty assets | 7,726 | 7,043 |
Deferred tax assets, net | 1,418 | 3,926 |
Partnership investments | 7,756 | 9,314 |
Servicer and MBS trust receivable | 17,722 | 6,482 |
Other assets | 11,546 | 9,684 |
Total assets | 890,275 | 912,404 |
Liabilities: | ||
Accrued interest payable | 5,032 | 5,947 |
Federal funds purchased and securities sold under agreements to repurchase | 112 | 77 |
Short-term debt | 240,795 | 330,991 |
Long-term debt | 562,195 | 539,402 |
Derivative liabilities at fair value | 1,330 | 2,715 |
Reserve for guaranty losses | 56,905 | 21,830 |
Guaranty obligations | 13,169 | 12,147 |
Partnership liabilities | 2,783 | 3,243 |
Servicer and MBS trust payable | 19,343 | 6,350 |
Other liabilities | 3,571 | 4,859 |
Total liabilities | 905,235 | 927,561 |
Commitments and contingencies | - | - |
Fannie Mae stockholders' equity (deficit): | ||
Senior preferred stock | 45,900 | 1,000 |
Preferred stock | 20,457 | 21,222 |
Common stock, no par value, no maximum authorization | 663 | 650 |
Additional paid-in capital | 3,111 | 3,621 |
Accumulated deficit | (75,063) | (26,790) |
Accumulated other comprehensive loss | (2,739) | (7,673) |
Treasury stock, at cost [N] | (7,394) | (7,344) |
Total Fannie Mae stockholders' deficit | (15,065) | (15,314) |
Noncontrolling interest | 105 | 157 |
Total deficit | (14,960) | (15,157) |
Total liabilities and equity (deficit) | $890,275 | $912,404 |
1_Condensed Consolidated Balanc
Condensed Consolidated Balance Sheets (Unaudited) (Parentheticals) (USD $) | ||
In Millions, except Share data | Sep. 30, 2009
| Dec. 31, 2008
|
ASSETS | ||
Cash equivalents pledged as collateral that may be sold or repledged | $5,000 | |
Investments in securities: | ||
Fannie Mae MBS at FV included in Trading Securities at FV | 61,824 | 58,006 |
Fannie Mae MBS at FV included in Available-for-sale, at fair value | 164,201 | 176,244 |
Liabilities: | ||
FV of Short-term debt | 0 | 4,500 |
FV of Long-term debt | 11,074 | 21,565 |
Reserve for guaranty losses related to Fannie Mae MBS included in investments in securities | 4,993 | 1,946 |
Guaranty obligations related to Fannie Mae MBS included in investments in securities | $520 | $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 | 581,915,187 | 597,071,401 |
Common stock issued | 1,262,316,235 | 1,238,880,988 |
Common stock outstanding | 1,109,987,342 | 1,085,424,213 |
Common stock par or stated value per share | 0 | 0 |
Common stock authorized | no maximum | |
Treasury stock, shares | 152,328,893 | 153,456,775 |
Condensed Consolidated Statemen
Condensed Consolidated Statements of Operations (Unaudited) (USD $) | ||||
In Millions, except Per Share data | 3 Months Ended
Sep. 30, 2009 | 3 Months Ended
Sep. 30, 2008 | 9 Months Ended
Sep. 30, 2009 | 9 Months Ended
Sep. 30, 2008 |
Interest income: | ||||
Trading securities | $862 | $1,416 | $2,775 | $4,529 |
Available-for-sale securities | 3,475 | 3,295 | 10,503 | 9,467 |
Mortgage loans | 5,290 | 5,742 | 16,499 | 17,173 |
Other | 48 | 310 | 314 | 1,000 |
Total interest income | 9,675 | 10,763 | 30,091 | 32,169 |
Interest expense: | ||||
Interest expense, short-term debt | 390 | 1,680 | 2,097 | 5,928 |
Interest expense, long-term debt | 5,455 | 6,728 | 17,181 | 20,139 |
Total interest expense | 5,845 | 8,408 | 19,278 | 26,067 |
Net interest income | 3,830 | 2,355 | 10,813 | 6,102 |
Guaranty fee income | 1,923 | 1,475 | 5,334 | 4,835 |
Trust management income | 12 | 65 | 36 | 247 |
Investment gains (losses), net | 785 | 219 | 963 | (213) |
Other-than-temporary impairments | (1,018) | (1,843) | (7,768) | (2,405) |
Less: Noncredit portion of other-than-temporary impairments recognized in other comprehensive income | 79 | 0 | 423 | 0 |
Net other-than-temporary impairments [N] | (939) | (1,843) | (7,345) | (2,405) |
Fair value losses, net | (1,536) | (3,947) | (2,173) | (7,807) |
Debt extinguishment gains (losses), net | (11) | 23 | (280) | (158) |
Losses from partnership investments | (520) | (587) | (1,448) | (923) |
Fee and other income | 182 | 164 | 547 | 616 |
Non-interest income (loss) | (104) | (4,431) | (4,366) | (5,808) |
Administrative expenses: | ||||
Salaries and employee benefits | 293 | 167 | 831 | 757 |
Professional services | 178 | 139 | 501 | 389 |
Occupancy expenses | 47 | 52 | 141 | 161 |
Other administrative expenses | 44 | 43 | 122 | 118 |
Total administrative expenses | 562 | 401 | 1,595 | 1,425 |
Provision for credit losses | 21,896 | 8,763 | 60,455 | 16,921 |
Foreclosed property expense | 64 | 478 | 1,161 | 912 |
Other expenses | 231 | 195 | 828 | 802 |
Total expenses | 22,753 | 9,837 | 64,039 | 20,060 |
Loss before federal income taxes and extraordinary losses | (19,027) | (11,913) | (57,592) | (19,766) |
Benefit (provision) for federal income taxes | 143 | (17,011) | 743 | (13,607) |
Loss before extraordinary losses | (18,884) | (28,924) | (56,849) | (33,373) |
Extraordinary (gains) losses, net of tax effect | 0 | (95) | 0 | (129) |
Net loss | (18,884) | (29,019) | (56,849) | (33,502) |
Less: Net loss attributable to the noncontrolling interest | 12 | 25 | 55 | 22 |
Net loss attributable to Fannie Mae | (18,872) | (28,994) | (56,794) | (33,480) |
Preferred stock dividends [N] | (883) | (419) | (1,323) | (1,044) |
Net loss available to common stockholders | ($19,755) | ($29,413) | ($58,117) | ($34,524) |
Basic earnings (loss) per share: | ||||
Basic loss per share | -3.47 | ($13) | -10.24 | -24.24 |
Diluted earnings (loss) per share: | ||||
Diluted loss per share | -3.47 | ($13) | -10.24 | -24.24 |
Cash dividends per common share | $0 | 0.05 | $0 | 0.75 |
Weighted-average common shares outstanding: | ||||
Basic and Diluted | 5,685 | 2,262 | 5,677 | 1,424 |
2_Condensed Consolidated Statem
Condensed Consolidated Statements of Operations (Unaudited) (Parentheticals) (USD $) | ||||
In Millions | 3 Months Ended
Sep. 30, 2009 | 3 Months Ended
Sep. 30, 2008 | 9 Months Ended
Sep. 30, 2009 | 9 Months Ended
Sep. 30, 2008 |
Income Statement Paranthetical | ||||
Imputed Interest included in guaranty fee income | $461 | $481 | $932 | $1,035 |
3_Condensed Consolidated Statem
Condensed Consolidated Statements of Cash Flows (Unaudited) (USD $) | ||
In Millions | 9 Months Ended
Sep. 30, 2009 | 9 Months Ended
Sep. 30, 2008 |
Cash flows (used in) provided by operating activities: | ||
Net loss | ($56,849) | ($33,502) |
Reconciliation of net income (loss) to net cash provided by operating activities: | ||
Amortization of debt cost basis adjustments | 2,802 | 6,497 |
Provision for credit losses | 60,455 | 16,921 |
Valuation losses | 2,961 | 7,303 |
Current and deferred federal income taxes | (1,861) | 12,762 |
Derivatives fair value adjustments | (708) | (1,952) |
Purchases of loans held for sale [N] | (91,889) | (38,351) |
Proceeds from repayments of loans held for sale | 1,991 | 443 |
Net change in trading securities [N] | 9,150 | 71,193 |
Other, net | (4,575) | (1,184) |
Net cash (used in) provided by operating activities | (78,523) | 40,130 |
Cash flows provided by investing activities: | ||
Purchases of trading securities held for investment [N] | (27,183) | (7,625) |
Proceeds from maturities of trading securities held for investment | 9,413 | 7,318 |
Proceeds from sales of trading securities held for investment | 7,395 | 2,824 |
Purchases of available-for-sale securities | (158,893) | (102,761) |
Proceeds from maturities of available-for-sale securities | 37,842 | 25,799 |
Proceeds from sales of available-for-sale securities | 270,678 | 102,044 |
Purchases of loans held for investment | (35,169) | (48,874) |
Proceeds from repayments of loans held for investment | 45,786 | 37,169 |
Advances to lenders (SCF) [N] | (66,017) | (69,541) |
Proceeds from disposition of acquired property | 15,791 | 7,013 |
Reimbursements to servicers for loan advances [N] | (19,186) | (10,389) |
Net change in federal funds sold and securities purchased under agreements to resell | 23,101 | 15,135 |
Other, net (investing) | (446) | (107) |
Net cash provided by investing activities | 103,112 | (41,995) |
Cash flows used in financing activities: | ||
Proceeds from issuance of short-term debt | 1,118,028 | 1,439,170 |
Payments to redeem short-term debt | (1,210,316) | (1,398,756) |
Proceeds from issuance of long-term debt | 232,978 | 218,052 |
Payments to redeem long-term debt [N] | (211,457) | (230,081) |
Proceeds from senior preferred stock agreement with U.S. Treasury | 44,900 | 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 | 47 | 403 |
Other, net (financing) | (1,320) | (1,774) |
Net cash used in financing activities | (27,140) | 34,225 |
Net (decrease) increase in cash and cash equivalents | (2,551) | 32,360 |
Cash and cash equivalents at beginning of period | 17,933 | 3,941 |
Cash and cash equivalents at end of period | 15,382 | 36,301 |
Cash paid during the period for: | ||
Interest paid | 21,403 | 27,464 |
Income taxes paid | 876 | 845 |
Non-cash activities: | ||
Securitization-related transfers from mortgage loans held for sale to investments in securities | 102,027 | 32,609 |
Net transfers of mortgage loans held for investments to mortgage loans held for sale | 7,604 | (5,819) |
Net consolidation transfers from investments in securities to mortgage loans held for sale | 19,762 | (850) |
Net transfers from available-for-sale securities to mortgage loans held for sale | 1,536 | 1,073 |
Transfers from advances to lenders to investments in securities | 65,218 | 68,909 |
Net consolidation-related transfers from investments in securities to mortgage loans held for investment | 2,217 | (16,210) |
Net transfers from mortgage loans to acquired property | 3,744 | 3,143 |
Transfers to trading securities from the effect of adopting the FASB guidance on the fair value option for financial instruments | $56,217 |
4_Condensed Consolidated Statem
Condensed Consolidated Statements of Cash Flows (Unaudited) (Parenthenticals) (USD $) | ||
In Millions | 9 Months Ended
Sep. 30, 2009 | 9 Months Ended
Sep. 30, 2008 |
Cash flows parenthetical | ||
(including transfers to trading securities) | $2,032 | $40,660 |
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 adoption of the FASB guidance on the fair option for financial instruments and the FASB, net of tax | 148 | (93) | 55 | ||||||||||||||||
Stockholders' equity, beginning balance adjusted | 33,696 | (1,455) | 44,173 | ||||||||||||||||
Change in investment in noncontrolling interest | 74 | 74 | |||||||||||||||||
Comprehensive loss: | |||||||||||||||||||
Net loss | (33,480) | (22) | (33,502) | ||||||||||||||||
Other comprehensive loss, net of tax effect: | |||||||||||||||||||
Unrealized gains on available-for-sale securities net of tax | (6,740) | [1] | (6,740) | ||||||||||||||||
Reclassification adjustment for gains included in net loss, net of tax [N] | (65) | (65) | |||||||||||||||||
Unrealized gains on guaranty assets and guaranty fee buy-ups, net of tax | (113) | (113) | |||||||||||||||||
Net cash flow hedging gains, net of tax | (5) | (5) | |||||||||||||||||
Prior service cost and actuarial gains, net of amortization for defined benefit plans | 9 | 9 | |||||||||||||||||
Common stock dividends [N] | (741) | (741) | |||||||||||||||||
Common stock issued, value | 49 | 2,477 | 2,526 | ||||||||||||||||
Common stock issued, shares | 94 | ||||||||||||||||||
Common stock warrant issued | 3,518 | 3,518 | |||||||||||||||||
Preferred stock dividends declared | (1,038) | (1,038) | |||||||||||||||||
Senior preferred stock issued, value[N] | 1,000 | 1,000 | |||||||||||||||||
Senior preferred stock issued, shares[N] | 1 | ||||||||||||||||||
Preferred stock issued, value | 4,812 | (127) | 4,685 | ||||||||||||||||
Preferred stock issued, shares | 141 | ||||||||||||||||||
Treasury Commitment | (4,518) | (4,518) | |||||||||||||||||
Other, employee benefit plans | (28) | 200 | 172 | ||||||||||||||||
Other, Employees benefit plans, shares | 2 | ||||||||||||||||||
Stockholders' equity, ending balance at Sep. 30, 2008 | 1,000 | 21,725 | 642 | 3,153 | (1,563) | (8,369) | (7,312) | 159 | 9,435 | ||||||||||
Stockholders' equity, shares issued, ending balance at Sep. 30, 2008 | 1 | 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 the FASB guidance on the recognition and presentation of the other-than-temporary impairments, net of tax | 8,520 | (5,556) | 2,964 | ||||||||||||||||
Change in investment in noncontrolling interest | 3 | 3 | |||||||||||||||||
Comprehensive loss: | |||||||||||||||||||
Net loss | (56,794) | (55) | (56,849) | ||||||||||||||||
Other comprehensive loss, net of tax effect: | |||||||||||||||||||
Unrealized gains on available-for-sale securities net of tax | 8,970 | [1] | 8,970 | ||||||||||||||||
Unrealized other-than-temporary impairment losses, net of tax | 1,483 | 1,483 | |||||||||||||||||
Reclassification adjustment for gains included in net loss, net of tax [N] | (190) | (190) | |||||||||||||||||
Unrealized gains (losses) related to hedging | 9 | 9 | |||||||||||||||||
Unrealized gains on guaranty assets and guaranty fee buy-ups, net of tax | 196 | 196 | |||||||||||||||||
Prior service cost and actuarial gains, net of amortization for defined benefit plans | 22 | 22 | |||||||||||||||||
Senior preferred stock dividends | (1,320) | (1,320) | |||||||||||||||||
Increase to Senior Preferred Liquidation Preference | 44,900 | 44,900 | |||||||||||||||||
Conversion of convertible preferred stock into common stock | (765) | 13 | 752 | 0 | |||||||||||||||
Conversion of convertible preferred stock into common stock, shares | (15) | 24 | |||||||||||||||||
Other, employee benefit plans | 58 | 1 | (50) | 9 | |||||||||||||||
Other, Employees benefit plans, shares | 1 | ||||||||||||||||||
Stockholders' equity, ending balance at Sep. 30, 2009 | $45,900 | $20,457 | $663 | $3,111 | ($75,063) | ($2,739) | ($7,394) | $105 | ($14,960) | ||||||||||
Stockholders' equity, shares issued, ending balance at Sep. 30, 2009 | 1 | 582 | 1,110 | ||||||||||||||||
Stockholders' equity, shares issued, beginning balance at Jun. 30, 2009 | 1 | ||||||||||||||||||
Other comprehensive loss, net of tax effect: | |||||||||||||||||||
Stockholders' equity, shares issued, ending balance at Sep. 30, 2009 | 1 | ||||||||||||||||||
[1]As of September 30, 2009, accumulated other comprehensive loss is comprised of $4.1 billion in net unrealized losses on available-for-sale securities for which an other-than-temporary impairment was previously recognized, net of tax; $1.5 billion in net unrealized gains on available-for-sale securities for which other-than-temporary impairment has not been previously recognized, net of tax; and $120 million in net unrealized losses on all other components. As of September 30, 2008, accumulated other comprehensive loss is comprised of $8.5 billion in net unrealized losses on available-for-sale securities, net of tax, and $175 million in net unrealized gains on all other components, net of tax. |
6_Condensed Consolidated Statem
Condensed Consolidated Statements of Changes in Stockholders' Equity (Unaudited) (Parentheticals) (USD $) | ||
In Millions, except Per Share data | 1/1/2009 - 9/30/2009
| 1/1/2008 - 9/30/2008
|
Condensed Consolidated Statement of Changes in Equity (Deficit) (Parentheticals) | ||
(Tax on unrealized gains on available-for-sale securities) | $4,830 | $3,629 |
(Tax on unrealized losses on other-than-temporary-impairment-losses) | 745 | |
(Tax on reclassification adjustment for gains included in net loss) | $102 | $35 |
Cash dividends per common share | $0 | 0.75 |
Organization and Conservatorshi
Organization and Conservatorship | |
9 Months Ended
Sep. 30, 2009 USD / shares | |
Note to Condensed Consolidated Financial Statements | |
Organization and Conservatorship | FANNIE MAE(In 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 |
Summary of Significant Accounti
Summary of Significant Accounting Policies | |
9 Months Ended
Sep. 30, 2009 USD / shares | |
Note to Condensed Consolidated Financial Statements | |
Summary of Significant Accounting Policies | 2.Summary of Significant Accounting PoliciesBasis of Presentation The 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 nine months ended September 30, 2009may not necessarily be indicative of the results for the year ending December31, 2009. The unaudited interim condensed consolidated financial statements as of September 30, 2009 and our condensed consolidated financial statements as of December 31, 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 December 31, 2008, filed with the SEC on February26, 2009. We have completed our analysis of subsequent eventsrelated to our condensed consolidated financial statements through November 5, 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 eliminate our net worth deficit, which avoids our being placed into receivership. 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 either case, for a period of 60days. In addition, we could be put in receivership |
Consolidations
Consolidations | |
9 Months Ended
Sep. 30, 2009 USD / shares | |
Note to Condensed Consolidated Financial Statements | |
Consolidations | 3. ConsolidationsWe have interests in various entities that are considered to be VIEs. 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 September 30, 2009 and December 31, 2008, we had LIHTC partnership investments, excluding restricted cash from consolidations, of $5.2 billion and $6.3 billion, respectively. As a result of our tax position, we did not make any LIHTC investments in the first nine months of 2009 other than pursuant to commitments existing prior to 2008, and we 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 $380million and $322million for thethree months ended September 30, 2009 and 2008, respectively, and $829million and $369million for the nine months ended September 30, 2009 and 2008, respectively,of impairment related to our limited partnerships in Losses from partnership investments in our condensed consolidated statements of operations.Prior to September 30, 2009, we entered into a nonbinding letter of intent to transfer equity interests in our LIHTC investments. Under the terms of the transaction as currently contemplated, we would transfer to unrelated thirdparty investors approximately one-half of our LIHTC investments for a price that exceeds their current carrying value. Upon completion ofthe contemplatedtransfer, the unrelated third-partyinvestors would be entitled to receive substantially all of the tax benefits from our LIHTC investments for a specified period of time. At a specified future date, the percentage of tax benefits the investors would receive would automatically be reduced and the percentage of tax benefits wewould receive would be increased by the same amount. In addition, we could have the obligation toreacquire all or a portion of the transferred interests.We have requested the approval of FHFA, as our conservator, to complete this transaction. FHFA has advised us that it has no objection to this transaction as it is consistent with the conservation of the assets of the corporation and has requested Treasurys approval under the senior preferred stock purchase agreement. As of November 5, 2009, FHFA has not yet received this approval. If in the future we determine we no longer have the intent and ability to sell or otherwise transfer our LIHTC investments for value, we would record additional other-than-temporary impairment to reduce the carrying value of our LIHTC investments to zero. As of September 30, 2009, the carrying value of our LIHTC investments was $5.2 billion.Consolidated VIEsThe following table displays the carrying amount and classification of assets and liabilities of consolidated VIEs as of September 30, 2009 and December |
Mortgage Loans
Mortgage Loans | |
9 Months Ended
Sep. 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 September 30, 2009 and December 31, 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 September 30, December 31, 2009 2008 (Dollars in millions) Single-family $ 302,752 $ 312,052 Multifamily 121,786 117,441 Total unpaid principal balance of mortgage loans(1)(2) 424,538 429,493 Unamortized premiums (discounts) and other cost basis adjustments, net (6,487) (894) Lower of cost or market adjustments on loans held for sale (687) (264) Allowance for loan losses for loans held for investment (8,991) (2,923) Total mortgage loans $ 408,373 $ 425,412 __________ (1) Includes construction to permanent loans with an unpaid principal balance of $63 million and $125million as of September 30, 2009 and December 31, 2008, respectively. (2) Includes unpaid principal balance totaling $163.1 billion and $65.8 billion as of September 30, 2009 and December 31, 2008, respectively, related to mortgage-related securities that were held in consolidated variable interest entities and mortgage-related securities created from securitization transactions that did not meet the sales accounting criteria which effectively resulted in mortgage-related securities being accounted for as loans. For the three and nine months ended September 30, 2009, we redesignated loans with a carrying value of $161 million and $786 million, respectively, from held for sale (HFS) to held for investment (HFI). We did not redesignate any HFI loans to HFS for the three months ended September 30, 2009. However, we did redesignate $8.4 billion of HFI loans to HFS for the nine months ended September 30, 2009.Loans Acquired in a TransferLoans can be acquired either through purchase or upon consolidating MBS trusts that hold loans as underlying collateral. When a loan underlying a Fannie Mae MBS trust is delinquent, in whole or in part, as to four or more consecutive monthly payments, we have the option to purchase the loan from the trust. Our acquisition cost for these loans is the unpaid principal balance of that mortgage loan plus accrued interest. With respect to single-family mortgage loans in MBS trusts with issue dates on or after January 1, 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. Under long-term standby commitments, we purchase loans from lenders when the loans subject to these commitments meet certain delinquency criteria. We acquired delinquent loans with an unpaid principal balance plus accrued interest of $13.8billion and $744 million for the three months ended September 30, 2009 and 2008, respectively, and $20.0billion and $3.3 billion for the nine months ended Septembe |
Allowance for Loan Losses and R
Allowance for Loan Losses and Reserve for Guaranty Losses | |
9 Months Ended
Sep. 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 nine months ended September 30, 2009 as compared to the three and nine months ended September 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 September 30, 2009.The following table displays changes in the allowance for loan losses and reserve for guaranty losses for the three and nine months ended September 30, 2009 and 2008. For the For the Three Months Nine Months Ended Ended September 30, September 30, 2009 2008 2009 2008 (Dollars in millions) Allowance for loan losses: Beginning balance $ 6,841 $ 1,476 $ 2,923 $ 698 Provision 2,546 1,120 7,670 2,544 Charge-offs(1) (448) (829) (1,757) (1,603) Recoveries 52 36 155 164 Ending balance(2) $ 8,991 $ 1,803 $ 8,991 $ 1,803 Reserve for guaranty losses: Beginning balance $ 48,280 $ 7,450 $ 21,830 $ 2,693 Provision 19,350 7,643 52,785 14,377 Charge-offs(3)(4) (10,901) (1,369) (18,159) (3,395) Recoveries 176 78 449 127 Ending balance $ 56,905 $ 13,802 $ 56,905 $ 13,802 ___________ (1) Includes accrued interest of $416million and $229million for the three months ended September 30, 2009 and 2008, respectively, and $990million and $468million for the nine months ended September 30, 2009 and 2008, respectively. (2) Includes $1.1 billion and $108 million as of September 30, 2009 and 2008, respectively, for acquired credit-impaired loans. (3) Includes charges of $24million and $171million for the three months ended September 30, 2009 and 2008, respectively, and $212million and $294million for the nine months ended September 30, 2009 and 2008, respectively, related to unsecured HomeSaver Advance loans. (4) Includes charges recorded at the date of acquisition of $7.7billion and $348million for the three months ended September 30, 2009 and 2008, respectively, and $11.2billion and $1.5 billion for the nine months ended September 30, 2009 and 2008, respectively, for acquired credit-impaired loans where the acquisition cost exceeded the fair value of the acquired loan. |
Investments in Securities
Investments in Securities | |
9 Months Ended
Sep. 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 September 30, 2009 and December 31, 2008. As of September 30, December 31, 2009 2008(1) (Dollars in millions) Mortgage-related securities: Fannie Mae single-classMBS $ 163,534 $ 164,241 Fannie Mae structured MBS 62,491 70,009 Non-Fannie Mae single-class 55,938 27,497 Non-Fannie Mae structured 37,880 43,119 Non-Fannie Mae structured multifamily (CMBS) 22,127 19,691 Mortgage revenue bonds 13,977 13,183 Other 2,111 1,914 Total 358,058 339,654 Non-mortgage-related securities: Asset-backed securities 9,263 10,598 Corporate debt securities 521 6,037 Other 3 1,005 Total 9,787 17,640 Total investments in securities $ 367,845 $ 357,294 __________ (1) Certain amounts have been reclassified to conform to the current period presentation. As of September 30, 2009, we held a security with a carrying value of $5.0 billion, which approximates its fair value. We have elected to classify this as cash and cash equivalents on our condensed consolidated balance sheet.Trading SecuritiesTrading securities are recorded at fair value with subsequent changes in fair value recorded as Fair value 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 September 30, 2009 and December 31, 2008. As of September 30, December 31, 2009 2008(1) (Dollars in millions) Mortgage-related securities: Fannie Mae single-classMBS $ 53,160 $ 48,134 Fannie Mae structured MBS 8,664 9,872 Non-Fannie Mae single-class 11,332 1,061 Non-Fannie Mae structured 4,560 5,199 Non-Fannie Mae structured multifamily (CMBS) 9,158 8,205 Mortgage revenue bonds 627 695 Total 87,501 73,166 Non-mortgage-related securities: Asset-backed securities 9,263 10,598 Corporate debt securities 521 6,037 Other 3 1,005 Total 9,787 17,640 Total trading securities $ 97,288 $ 90,806 Losses on trading securities held in our portfolio, net $ 2,790 $ 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 nine months ended September 30, 2009 and 2008. For the For the Three Months Nine Months Ended Ended September 30, September 30, 2009 2008 2009 2008 (Dollars in millions) Net trading gains (losses): Mortgage-related securities $ 1,482 $ (1,424) $ 2,172 $ (3,191) Non-mortgage-related securities 201 (1,510) 1,239 (1,935) Total $ 1,683 $ (2,934) $ 3,411 $ (5,126) Net trading gains (losses) recorded in the period related to securities still held at period end: Mortgage-related securities $ 1,481 $ (1,495) $ 2,139 $ (3,347) |
Portfolio Securitizations
Portfolio Securitizations | |
9 Months Ended
Sep. 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 September 30, 2009 and 2008, the unpaid principal balance of portfolio securitizations was $39.5 billion and $9.0 billion, respectively. For the nine months ended September 30, 2009 and 2008, the unpaid principal balance of portfolio securitizations was $197.9 billion and $33.6 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) and master servicing liability (MSL) as of September 30, 2009 and December 31, 2008. As of September 30, December 31, 2009 2008 (Dollars in millions) Fannie Mae MBS $ 47,860 $ 45,705 Guaranty asset 1,086 438 MSA 18 10 Guaranty obligation (excluding deferred profit) (1,011) (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 solving |
Financial Guarantees and Master
Financial Guarantees and Master Servicing | |
9 Months Ended
Sep. 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, (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 $11.4billion and $9.7billion as of September 30, 2009 and December 31, 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 September 30, 2009 and December 31, 2008, respectively. In addition, we had exposure of $142.8billion and $172.2billion for other guarantees not recorded in our condensed consolidated balance sheets as of September 30, 2009 and December 31, 2008, respectively, which primarily represents the unpaid principal balance of loans underlying guarantees issued prior to the effective date of the current FASB guidance on guaranty accounting.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 recover through available credit enhancements and recourse with third parties on guarantees recorded in our condensed consolidated balance sheets was $118.3billion and $124.4bil |
Acquired Propery Net
Acquired Propery Net | |
9 Months Ended
Sep. 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 nine months ended September 30, 2009 and 2008. For the Three Months Ended For the Nine Months Ended September 30, 2009 September 30, 2009 Acquired Property Valuation Allowance (1) Acquired Property, Net Acquired Property Valuation Allowance (1) Acquired Property, Net (Dollars in millions) Balance as of beginning of period $ 7,380 $ (772) $ 6,608 $ 8,040 $ (1,122) $ 6,918 Additions 3,985 (25) 3,960 9,536 (56) 9,480 Disposals (3,039) 294 (2,745) (9,250) 1,146 (8,104) Write-downs, net of recoveries - (88) (88) - (559) (559) Balance as of end of period $ 8,326 $ (591) $ 7,735 $ 8,326 $ (591) $ 7,735 For the Three Months Ended For the Nine Months Ended September 30, 2008 September 30, 2008 Acquired Property Valuation Allowance (1) Acquired Property, Net Acquired Property Valuation Allowance (1) Acquired Property, Net (Dollars in millions) Balance as of beginning of period $ 6,453 $ (458) $ 5,995 $ 3,853 $ (251) $ 3,602 Additions 3,468 (22) 3,446 8,494 (38) 8,456 Disposals (1,765) 164 (1,601) (4,191) 395 (3,796) Write-downs, net of recoveries - (347) (347) - (769) (769) Balance as of end of period $ 8,156 $ (663) $ 7,493 $ 8,156 $ (663) $ 7,493 __________ (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 | |
9 Months Ended
Sep. 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 September 30, 2009 and December 31, 2008. As of September 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 $ 112 3.77 % $ 77 0.01 % Fixed short-term debt: Discount notes $ 237,399 0.52 % $ 322,932 1.75 % Foreign exchange discount notes 227 1.35 141 2.50 Other short-term debt 100 0.53 333 2.80 Total fixed short-term debt 237,726 0.52 323,406 1.75 Floating-rate short-term debt(2) 3,069 0.59 7,585 1.66 Total short-term debt $ 240,795 0.52 % $ 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 September 30, 2009 and December 31, 2008. As of September 30, 2009 December 31, 2008(1) Weighted Weighted Average Average Interest Interest Maturities Outstanding Rate(2) Maturities Outstanding Rate(2) (Dollars in millions) Senior fixed: Benchmark notes and bonds 2009-2030 $ 271,442 4.23 % 2009-2030 $ 251,063 4.92 % Medium-term notes 2009-2019 161,336 2.99 2009-2018 151,277 4.20 Foreign exchange notes and bonds 2010-2028 1,230 5.69 2009-2028 1,513 4.70 Other long-term debt(3) 2009-2039 61,500 5.88 2009-2038 73,061 5.95 Total senior fixed 495,508 4.03 476,914 4.85 Senior floating: Medium-term notes 2009-2014 50,008 0.46 2009-2017 45,737 2.21 Other long-term debt(3) 2020-2037 1,134 4.16 2020-2037 874 7.22 Total senior floating 51,142 0.53 46,611 2.30 Subordinated fixed: Qualifying subordinated(4) 2011-2014 7,391 5.55 2011-2014 7,391 5.47 Subordinated debentures 2019 2,379 9.89 2019 2,225 9.90 Total subordinated fixed 9,770 6.60 9,616 6.50 Debt from consolidations 2009-2039 5,775 5.76 2009-2039 6,261 5.87 Total long-term debt(5) $ 562,195 3.78 % $ 539,402 4.67 % __________ (1) Certain prior year amounts have been reclassified to conform to the current period presentation. (2) Includes discounts, premiums and other cost basis adjustments. (3) Includes a portion of structured debt instruments that is reported at fair value. (4) Subordinated debt issued with an interest deferral feature. (5) Reported amounts include a net discount and other c |
Derivative Instruments
Derivative Instruments | |
9 Months Ended
Sep. 30, 2009 USD / shares | |
Note to Condensed Consolidated Financial Statements | |
Derivative Instruments | 11.Derivative Instruments and Hedging ActivitiesWe adopted the FASB amended guidance on disclosures about derivative instruments and hedging activities, effective January1, 2009. As the amended guidance only requires expanded 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 the FASB guidance on derivative instruments and hedging activities, 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 second and third quarters of 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 accordance with our policies for amortization of carrying value adjustments. For the three and nine monthsended September 30, 2008, we recorded $2.0 billion and $1.2 billion, res |
Income Taxes
Income Taxes | |
9 Months Ended
Sep. 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 September 30, 2009 and 2008 was 1% and 143%, respectively, and 1% and 69% for the nine months ended September 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 nine months ended September 30, 2009 were impacted by a valuation allowance of $7.0 billion and $21.1 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 nine months ended September 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. In the three month and nine months ended September 30, 2008, our effective tax rate was also impacted by the establishment of a valuation allowance of $21.4 billion.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 $1.4billion and $3.9billion as of September 30, 2009 and December 31, 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. Thes |
Earnings
Earnings (Loss) Per Share | |
9 Months Ended
Sep. 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 nine months ended September 30, 2009 and 2008. For the Three Months For the Nine Months Ended Ended September 30, September 30, 2009 2008 2009 2008 (Dollars and shares in millions, except per share amounts) Net loss attributable to Fannie Mae $ (18,872) $ (28,994) $ (56,794) $ (33,480) Preferred stock dividends(1) (883) (419) (1,323) (1,044) Net loss attributable to common stockholdersbasic and diluted $ (19,755) $ (29,413) $ (58,117) $ (34,524) Weighted-average common shares outstandingbasic and diluted (2) 5,685 2,262 5,677 1,424 Basic and diluted loss per share $ (3.47) $ (13.00) $ (10.24) $ (24.24) __________ (1) Amount for the three months ended September 30, 2009 includes $885million of dividends declared and paid and $4 million of dividends accumulated, but undeclared, as of September 30, 2009, less $6 million of dividends accumulated, but undeclared, as of June 30, 2009 on our outstanding cumulative senior preferred stock. Amount for the nine months ended September 30, 2009 includes $1.3 billion of dividends declared and paid and $4 million of dividends accumulated, but undeclared, as of September 30, 2009 on our outstanding cumulative senior preferred stock. (2) Amounts for the three and nine months ended September 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 September 30, 2009. There were no dilutive potential common shares for the three and nine months ended September 30, 2009 and 2008. |
Employee Retirement Benefits
Employee Retirement Benefits | |
9 Months Ended
Sep. 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 nine months ended September 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 September 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 $ - $ 1 $ 7 $ 2 $ 1 Interest cost 13 3 2 12 3 3 Expected return on plan assets (12) - - (15) - - Amortization of net actuarial (gain) loss 6 (1) 1 - (1) - Amortization of net prior service cost (credit) 1 1 (1) - - (1) Curtailment gain - - - - (1) - Net periodic benefit cost $ 17 $ 3 $ 3 $ 4 $ 3 $ 3 For the Nine Months Ended September 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 $ 27 $ 1 $ 4 $ 29 $ 6 $ 4 Interest cost 40 7 7 37 8 7 Expected return on plan assets (33) - - (44) - - Amortization of net actuarial (gain) loss 17 (2) 1 - (1) 1 Amortization of net prior service cost (credit) 1 1 (4) - 1 (4) Amortization of initial transition obligation - - 1 - - 1 Curtailment gain - (1) - - (1) - Special termination benefit charge - - - - - 3 Net periodic benefit cost $ 52 $ 6 $ 9 $ 22 $ 13 $ 12 We contributed $55 million to our qualified pension plan for both the three and nine months ended September 30, 2009. During the three and nine months ended September 30, 2009, we contributed $2 million and $5 million to our nonqualified pension plans and $2million and $7 million to our postretirement benefit plan, respectively. During the remaining period of 2009, we anticipate contributing an additional $25million to our benefit plans, consisting of $21 million to our qualified pension plan and $2 million each to our nonqualified pension plans and to our postretirement benefit plan. |
Segment Reporting
Segment Reporting | |
9 Months Ended
Sep. 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 nine months ended September 30, 2009 and 2008. For the Three Months Ended September 30, 2009 Capital Single-Family HCD Markets Total (Dollars in millions) Net interest income (expense)(1) $ 176 $ (47) $ 3,701 $ 3,830 Guaranty fee income (expense)(2) 2,112 172 (361) 1,923 Trust management income 11 1 - 12 Investment gains, net 7 - 778 785 Net other-than-temporary impairments - - (939) (939) Fair value losses, net - - (1,536) (1,536) Debt extinguishment losses, net - - (11) (11) Losses from partnership investments - (520) - (520) Fee and other income 69 22 91 182 Administrative expenses (365) (91) (106) (562) Provision for credit losses (21,618) (278) - (21,896) Foreclosed property expense (38) (26) - (64) Other expenses (177) (16) (38) (231) Income (loss) before federal income taxes (19,823) (783) 1,579 (19,027) Provision (benefit) for federal income taxes (276) 99 34 (143) Net income (loss) (19,547) (882) 1,545 (18,884) Less: Net loss attributable to the noncontrolling interest - 12 - 12 Net income (loss) attributable to Fannie Mae $ (19,547) $ (870) $ 1,545 $ (18,872) For the Nine Months Ended September 30, 2009 Capital Single-Family HCD Markets Total (Dollars in millions) Net interest income (expense)(1) $ 377 $ (160) $ 10,596 $ 10,813 Guaranty fee income (expense) (2) 5,943 494 (1,103) 5,334 Trust management income 35 1 - 36 Investment gains, net 65 - 898 963 Net other-than-temporary impairments - - (7,345) (7,345) Fair value losses, net - - (2,173) (2,173) Debt extinguishment losses, net - - (280) (280) Losses from partnership investments - (1,448) - (1,448) Fee and other income 247 69 231 547 Administrative expenses (1,023) (262) (310) (1,595) Provision for credit losses (59,253) (1,202) - (60,455) Foreclosed property expense (1,124) (37) - (1,161) Other expenses (571) (34) (223) (828) Income (loss) before federal income taxes (55,304) (2,579) 291 (57,592) Provision (benefit) for federal income taxes (1,059) 310 6 (743) Net income (los |
Regulatory Capital Requirements
Regulatory Capital Requirements | |
9 Months Ended
Sep. 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 September 30, 2009 and December 31, 2008, we had a minimum capital deficiency of $91.7billion 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 September 30, 2009 and December 31, 2008, we had a net worth deficit of $15.0 billion 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 | |
9 Months Ended
Sep. 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 guaranty 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) ratios greater than 80% as of September 30, 2009 and December 31, 2008. Percentage of Conventional Single-Family Guaranty Book of Business As of September 30, 2009 December 31, 2008 Interest-only 7 % 8 % Negative-amortizing ARMs 1 1 Estimated mark-to-market LTV greater than 80% 36 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 September 30, 2009 and December 31, 2008. As of September 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) $ 261,685 9 % $ 295,622 10 % Subprime(3) 16,889 - 19,086 1 Total $ 278,574 9 % $ 314,708 11 % Private-label securities: Alt-A(4) $ 25,255 1 % $ 27,858 1 % Subprime(5) 21,741 1 |
Fair Value of Financial Instrum
Fair Value of Financial Instruments | |
9 Months Ended
Sep. 30, 2009 USD / shares | |
Note to Condensed Consolidated Financial Statements | |
Fair Value of Financial Instruments | 18.Fair Value of Financial InstrumentsThe FASB requires our disclosures about fair value of financial instruments to include commitments to purchase multifamily mortgage and single-family 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 September 30, 2009 and December 31, 2008. As of September 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) $ 15,865 $ 15,865 $ 18,462 $ 18,462 Federal funds sold and securities purchased under agreements to resell 34,856 34,856 57,418 57,420 Trading securities 97,288 97,288 90,806 90,806 Available-for-sale securities 270,557 270,557 266,488 266,488 Mortgage loans held for sale 28,948 29,672 13,270 13,458 Mortgage loans held for investment, net of allowance for loan losses 379,425 374,732 412,142 406,233 Advances to lenders 4,587 4,280 5,766 5,412 Derivative assets 766 766 869 869 Guaranty assets and buy-ups 8,739 12,893 7,688 9,024 Total financial assets $ 841,031 $ 840,909 $ 872,909 $ 868,172 Financial liabilities: Federal funds purchased and securities sold under agreements to repurchase $ 112 113 $ 77 $ 77 Short-term debt 240,795 240,999 330,991 332,290 Long-term debt 562,195 588,626 539,402 574,281 Derivative liabilities 1,330 1,330 2,715 2,715 Guaranty obligations 13,169 125,097 12,147 90,875 Total financial liabilities $ 817,601 $ 956,165 $ 885,332 $ 1,000,238 __________ (1) Includes restricted cash of $483million and $529million as of September 30, 2009 and December 31, 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 AFS SecuritiesOur investments in securities are recognized at fair value in our condensed consolidated |
Commitments and Contingencies
Commitments and Contingencies | |
9 Months Ended
Sep. 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. We have recorded a reserve for legal claims related to matters for which we were able to determine a loss was probable and reasonably estimable. For all other pending matters, we have concluded that a loss was not both probable and reasonably estimable as of November 5, 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 amortization of premiums and discounts. The lead plaintiffs contend that the alleged fraud resulted in artificially inf |
Subsequent Events
Subsequent Events | |
9 Months Ended
Sep. 30, 2009 USD / shares | |
Note to Condensed Consolidated Financial Statements | |
Subsequent Events | 20.Subsequent EventOn October 19, 2009, we entered into a memorandum of understanding with Treasury, FHFA and Freddie Mac. The memorandum of understanding sets forth the terms under which we, Freddie Mac and Treasury intend to provide assistance to state and local housing finance agencies (HFAs) so that the HFAs can continue to meet their mission of providing affordable financing for both single-family and multifamily housing. The memorandum of understanding contemplates providing assistance to the HFAs through three separate assistance programs: a temporary credit and liquidity facilities program, a new issue bond program and a multifamily credit enhancement program. The parties obligations with respect to transactions under the three assistance programs contemplated by the memorandum of understanding will become binding when the parties execute definitive transaction documentation. |
Entity information
Entity information (USD $) | |
In Millions, except Share data | 3 Months Ended
Sep. 30, 2009 |
Entity Information | |
Entity registrant name | FEDERAL NATIONAL MORTGAGE ASSOCIATION FANNIE MAE |
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 | 1,112,759,202 |
Entity public float | $20,932 |
Document information
Document information | |
3 Months Ended
Sep. 30, 2009 USD / shares | |
Document Information | |
Document type | 10-Q |
Document period end date | 2009-09-30 |
Amendment flag | false |