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Washington, D.C. 20549
OF THE SECURITIES EXCHANGE ACT OF 1934
Federally chartered corporation | 52-0883107 | |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |
3900 Wisconsin Avenue, NW Washington, DC (Address of principal executive offices) | 20016 (Zip Code) |
(202) 752-7000
Title of Each Class | Name of Each Exchange on Which Registered | |
Common Stock, without par value | New York Stock Exchange Chicago Stock Exchange | |
8.25% Non-Cumulative Preferred Stock, Series T, stated value $25 per share | New York Stock Exchange | |
8.75% Non-Cumulative Mandatory Convertible Preferred Stock,Series 2008-1, stated value $50 per share | New York Stock Exchange | |
Fixed-to-Floating Rate Non-Cumulative Preferred Stock, Series S, stated value $25 per share | New York Stock Exchange | |
7.625% Non-Cumulative Preferred Stock, Series R, stated value $25 per share | New York Stock Exchange | |
6.75% Non-Cumulative Preferred Stock, Series Q, stated value $25 per share | New York Stock Exchange | |
Variable Rate Non-Cumulative Preferred Stock, Series P, stated value $25 per share | New York Stock Exchange | |
5.50% Non-Cumulative Preferred Stock, Series N, stated value $50 per share | New York Stock Exchange | |
4.75% Non-Cumulative Preferred Stock, Series M, stated value $50 per share | New York Stock Exchange | |
5.125% Non-Cumulative Preferred Stock, Series L, stated value $50 per share | New York Stock Exchange | |
5.375% Non-Cumulative Preferred Stock, Series I, stated value $50 per share | New York Stock Exchange | |
5.81% Non-Cumulative Preferred Stock, Series H, stated value $50 per share | New York Stock Exchange | |
Variable Rate Non-Cumulative Preferred Stock, Series G, stated value $50 per share | New York Stock Exchange | |
Variable Rate Non-Cumulative Preferred Stock, Series F, stated value $50 per share | New York Stock Exchange |
Large accelerated filer þ | Accelerated filer o | Non-accelerated filer o | Smaller reporting company o |
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Table | Description | Page | ||||||
— | Selected Financial Data | 69 | ||||||
1 | Credit Statistics, Single-Family Guaranty Book of Business | 10 | ||||||
2 | Level 3 Recurring Financial Assets at Fair Value | 74 | ||||||
3 | Summary of Consolidated Results of Operations | 83 | ||||||
4 | Analysis of Net Interest Income and Yield | 84 | ||||||
5 | Rate/Volume Analysis of Changes in Net Interest Income | 85 | ||||||
6 | Guaranty Fee Income and Average Effective Guaranty Fee Rate | 87 | ||||||
7 | Fair Value Gains (Losses), Net | 89 | ||||||
8 | Credit-Related Expenses | 92 | ||||||
9 | Allowance for Loan Losses and Reserve for Guaranty Losses (Combined Loss Reserves) | 94 | ||||||
10 | Nonperforming Single-Family and Multifamily Loans | 97 | ||||||
11 | Statistics on Credit-Impaired Loans Acquired from MBS Trusts | 98 | ||||||
12 | Activity of Credit-Impaired Loans Acquired from MBS Trusts | 99 | ||||||
13 | Credit Loss Performance Metrics | 100 | ||||||
14 | Credit Loss Concentration Analysis | 101 | ||||||
15 | Single-Family Credit Loss Sensitivity | 102 | ||||||
16 | Impairments and Fair Value Losses on Loans in HAMP | 104 | ||||||
17 | Business Segment Summary | 105 | ||||||
18 | Single-Family Business Results | 106 | ||||||
19 | HCD Business Results | 108 | ||||||
20 | Capital Markets Group Results | 109 | ||||||
21 | Mortgage Portfolio Activity | 111 | ||||||
22 | Mortgage Portfolio Composition | 112 | ||||||
23 | Amortized Cost, Fair Value, Maturity and Average Yield of Investments inAvailable-for-Sale Securities | 114 | ||||||
24 | Investments in Private-Label Mortgage-Related Securities (Excluding Wraps), CMBS, and Mortgage Revenue Bonds | 115 | ||||||
25 | Analysis of Losses on Alt-A and Subprime Private-Label Mortgage-Related Securities (Excluding Wraps) | 116 | ||||||
26 | Credit Statistics of Loans Underlying Alt-A and Subprime Private-Label Mortgage-Related Securities (Including Wraps) | 117 | ||||||
27 | Changes in Risk Management Derivative Assets (Liabilities) at Fair Value, Net | 119 | ||||||
28 | Comparative Measures—GAAP Change in Stockholders’ Deficit and Non-GAAP Change in Fair Value of Net Assets (Net of Tax Effect) | 120 | ||||||
29 | Supplemental Non-GAAP Consolidated Fair Value Balance Sheets | 123 | ||||||
30 | Debt Activity | 127 | ||||||
31 | Outstanding Short-Term Borrowings and Long-Term Debt | 129 | ||||||
32 | Outstanding Short-Term Borrowings | 130 |
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Table | Description | Page | ||||||
33 | Maturity Profile of Outstanding Debt Maturing Within One Year | 131 | ||||||
34 | Maturity Profile of Outstanding Debt Maturing in More Than One Year | 132 | ||||||
35 | Contractual Obligations | 132 | ||||||
36 | Cash and Other Investments Portfolio | 135 | ||||||
37 | Fannie Mae Credit Ratings | 136 | ||||||
38 | Regulatory Capital Measures | 137 | ||||||
39 | On- and Off-Balance Sheet MBS and Other Guaranty Arrangements | 140 | ||||||
40 | LIHTC Partnership Investments | 143 | ||||||
41 | Composition of Mortgage Credit Book of Business | 147 | ||||||
42 | Risk Characteristics of Conventional Single-Family Business Volume and Guaranty Book of Business | 151 | ||||||
43 | Delinquency Status, Default Rate and Loss Severity of Conventional Single-Family Loans | 155 | ||||||
44 | Serious Delinquency Rates | 156 | ||||||
45 | Conventional Single-Family Serious Delinquency Rate Concentration Analysis | 157 | ||||||
46 | Statistics on Single-Family Loan Workouts | 159 | ||||||
47 | Loan Modification Profile | 161 | ||||||
48 | Single-Family Foreclosed Properties | 162 | ||||||
49 | Single-Family Acquired Property Concentration Analysis | 162 | ||||||
50 | Multifamily Serious Delinquency Rates | 165 | ||||||
51 | Multifamily Foreclosed Properties | 165 | ||||||
52 | Mortgage Insurance Coverage | 169 | ||||||
53 | Activity and Maturity Data for Risk Management Derivatives | 179 | ||||||
54 | Fair Value Sensitivity of Net Portfolio to Changes in Interest Rate Level and Slope of Yield Curve | 181 | ||||||
55 | Duration Gap | 182 | ||||||
56 | Interest Rate Sensitivity of Financial Instruments | 183 |
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Item 1. | Business |
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% Change | ||||||||||||||||||||
2009 | 2008 | 2007 | 2009 | 2008 | ||||||||||||||||
Home sales (units in thousands) | 5,530 | 5,398 | 6,428 | 2.4 | % | (16.0 | )% | |||||||||||||
New home sales | 374 | 485 | 776 | (22.9 | ) | (37.5 | ) | |||||||||||||
Existing home sales | 5,156 | 4,913 | 5,652 | 4.9 | (13.1 | ) | ||||||||||||||
Home price appreciation (depreciation) based on Fannie Mae House Price Index (“HPI”)(2) | (2.2 | )% | (10.1 | )% | (4.0 | )% | — | — | ||||||||||||
Home price appreciation (depreciation) based on FHFA Purchase Only Index(3) | (1.2 | )% | (8.2 | )% | (1.1 | )% | — | — | ||||||||||||
Annual average fixed-rate mortgage interest rate(4) | 5.0 | % | 6.0 | % | 6.3 | % | — | — | ||||||||||||
Single-family mortgage originations (in billions) | $ | 1,976 | $ | 1,580 | $ | 2,380 | 25.1 | (33.6 | ) | |||||||||||
Type of single-family mortgage origination: | ||||||||||||||||||||
Refinance share | 67 | % | 52 | % | 51 | % | — | — | ||||||||||||
Adjustable-rate mortgage share | 4 | % | 11 | % | 20 | % | — | — | ||||||||||||
Total U.S. residential mortgage debt outstanding (in billions)(5) | $ | 11,764 | $ | 11,915 | $ | 11,957 | (1.3 | ) | (0.4 | ) |
(1) | The sources of the housing and mortgage market data in this table are the Federal Reserve Board, the Bureau of the Census, HUD, the National Association of Realtors, the Mortgage Bankers Association and FHFA. Single-family mortgage originations, as well as the adjustable-rate mortgage and refinance shares, are based on February 2010 estimates from Fannie Mae’s Economics & Mortgage Market Analysis Group. Certain previously reported data may have been changed to reflect revised historical data from any or all of these organizations. | |
(2) | Calculated internally using property data information on loans purchased by Fannie Mae, Freddie Mac and other third-party home sales data. Fannie Mae’s HPI is a weighted repeat transactions index, meaning that it measures average price changes in repeat sales on the same properties. Fannie Mae’s HPI excludes prices on properties sold in foreclosure. The reported home price appreciation (depreciation) reflects the percentage change in Fannie Mae’s HPI from the fourth quarter of the prior year to the fourth quarter of the reported year. | |
(3) | FHFA publishes a purchase-only House Price Index quarterly that is based solely on Fannie Mae and Freddie Mac loans. As a result, it excludes loans in excess of conforming loan amounts and includes only a portion of total subprime and Alt-A loans outstanding in the overall market. FHFA’s HPI is also a weighted repeat transactions index. The reported home price appreciation (depreciation) reflects the percentage change in FHFA’s HPI from the fourth quarter of the prior year to the fourth quarter of the reported year. | |
(4) | Based on the annual average30-year fixed-rate mortgage interest rate reported by Freddie Mac. | |
(5) | Information for 2009 is through September 30, 2009 and has been obtained from The Federal Reserve’s September 2009 mortgage debt outstanding release. |
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• | minimizing our credit losses from delinquent mortgages; | |
• | providing liquidity, stability and affordability in the mortgage market; | |
• | providing assistance to the mortgage market and to the struggling housing market; | |
• | limiting the amount of the investment Treasury must make under our senior preferred stock purchase agreement; | |
• | returning to long-term profitability; and | |
• | protecting the interests of the taxpayers. |
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• | In support of homeowners who were current on their loans, we began offering expanded refinance options through Refi Plustm, which permitted over 300,000 borrowers to reduce their monthly mortgage payments by an average of $153, and we began offering borrowers refinancing under the Home Affordable |
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Refinance Program (“HARP”) an opportunity to benefit from lower levels of mortgage insurance and higher LTV ratios than what would have been allowed under our traditional standards. |
• | We strengthened our credit loss management operations by adding 214 new full-time employees and a substantial number of contractors, and by hiring an Executive Vice President—Credit Portfolio Management. We also added 82 new full-time employees to strengthen our REO sales capabilities. | |
• | We developed and deployed new loss mitigation techniques, including through our activities under the Home Affordable Modification Program (“HAMP”), to expand the options available to servicers to manage delinquencies and minimize losses. | |
• | We have worked with some of our servicers to establish “high-touch” servicing protocols designed for managing seriously delinquent loans, and we are working to increase the number of loans that are serviced using these “high-touch” protocols. | |
• | We introduced new lease options that permit tenants and defaulting homeowners to continue living for a period in properties that we obtain through foreclosure ordeed-in-lieu of foreclosure. | |
• | As delinquencies have increased, we have accordingly increased our reviews of delinquent loans to uncover loans that do not meet our underwriting and eligibility requirements. As a result, we have increased the number of demands we make for lenders to repurchase these loans or compensate us for losses sustained on the loans, as well as requests for repurchase or compensation for loans for which the mortgage insurer rescinds coverage. |
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2009 | 2008 | |||||||||||||||||||||||
Full | Full | |||||||||||||||||||||||
Year | Q4 | Q3 | Q2 | Q1 | Year | |||||||||||||||||||
(Dollars in millions) | ||||||||||||||||||||||||
As of the end of each period: | ||||||||||||||||||||||||
Serious delinquency rate(2) | 5.38 | % | 5.38 | % | 4.72 | % | 3.94 | % | 3.15 | % | 2.42 | % | ||||||||||||
Nonperforming loans(3) | $ | 215,505 | $ | 215,505 | $ | 197,415 | $ | 170,483 | $ | 144,523 | $ | 118,912 | ||||||||||||
Foreclosed property inventory | ||||||||||||||||||||||||
(number of properties) | 86,155 | 86,155 | 72,275 | 62,615 | 62,371 | 63,538 | ||||||||||||||||||
Combined loss reserves(4) | $ | 62,848 | $ | 62,848 | $ | 64,724 | $ | 54,152 | $ | 41,082 | $ | 24,649 | ||||||||||||
During the period: | ||||||||||||||||||||||||
Foreclosed property acquisitions (number of properties)(5) | 145,617 | 47,189 | 40,959 | 32,095 | 25,374 | 94,652 | ||||||||||||||||||
Single-family credit-related expenses(6) | $ | 71,320 | $ | 10,943 | $ | 21,656 | $ | 18,391 | $ | 20,330 | $ | 29,725 | ||||||||||||
Single-family credit losses(7) | $ | 13,362 | $ | 3,976 | $ | 3,620 | $ | 3,301 | $ | 2,465 | $ | 6,467 | ||||||||||||
Loan workout activity (number of loans): | ||||||||||||||||||||||||
Total home retention loan workouts(8) | 160,722 | 49,871 | 37,431 | 33,098 | 40,322 | 112,247 | ||||||||||||||||||
Preforeclosure sales anddeeds-in-lieu of foreclosure | 39,617 | 13,459 | 11,827 | 8,360 | 5,971 | 11,696 | ||||||||||||||||||
Total loan workouts | 200,339 | 63,330 | 49,258 | 41,458 | 46,293 | 123,943 | ||||||||||||||||||
Total loan workouts as a percentage of delinquent loans in our single-family guaranty book of business(9) | 12.24 | % | 15.48 | % | 12.98 | % | 12.42 | % | 16.12 | % | 11.32 | % |
(1) | Our single-family guaranty book of business consists of (a) single-family mortgage loans held in our mortgage portfolio, (b) single-family Fannie Mae MBS held in our mortgage portfolio, (c) single-family Fannie Mae MBS held by third parties, and (d) other credit enhancements that we provide on single-family mortgage assets, such as long term-standby commitments. It excludes non-Fannie Mae mortgage-related securities held in our investment portfolio for which we do not provide a guaranty. | |
(2) | Calculated based on the number of conventional single-family loans that are three or more months past due and loans that have been referred to foreclosure but not yet foreclosed upon, divided by the number of loans in our conventional single-family guaranty book of business. We include all of the conventional single-family loans that we own and those that back Fannie Mae MBS in the calculation of the single-family serious delinquency rate. | |
(3) | Represents the total amount of nonperforming loans, including troubled debt restructurings and HomeSaver Advance first-lien loans that are on accrual status. A troubled debt restructuring is a restructuring of a mortgage loan in which a concession is granted to a borrower experiencing financial difficulty. We generally classify loans as nonperforming when the payment of principal or interest on the loan is two months or more past due. | |
(4) | Consists of the allowance for loan losses for loans held for investment in our mortgage portfolio and the reserve for guaranty losses related to both single-family loans backing Fannie Mae MBS and single-family loans that we have guaranteed under long-term standby commitments. | |
(5) | Includes acquisitions through deeds-in-lieu of foreclosure. | |
(6) | Consists of the provision for credit losses and foreclosed property expense. | |
(7) | Consists of (a) charge-offs, net of recoveries and (b) foreclosed property expense; adjusted to exclude the impact of fair value losses resulting from credit-impaired loans acquired from MBS trusts and HomeSaver Advance loans. | |
(8) | Consists of (a) modifications, which do not include trial modifications under the Home Affordable Modification Program, as well as repayment plans and forbearances that have been initiated but not completed; (b) repayment plans and forbearances completed and (c) HomeSaver Advance first-lien loans. See “Table 46: Statistics on Single-Family Loan Workouts” in “MD&A—Risk Management—Credit Risk Management” for additional information on our various types of loan workouts. | |
(9) | Calculated based on annualized problem loan workouts during the period as a percentage of delinquent loans in our single-family guaranty book of business as of the end of the period. |
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Business Segment | Primary Business Activities | Primary Revenues | Primary Expenses | ||||||
Single-Family Credit Guaranty, or Single-Family | • Mortgage securitizations: Works with our lender customers to securitize single-family mortgage loans delivered to us by lenders into Fannie Mae MBS, which we refer to as “lender swap” transactions • Mortgage acquisitions: Works with our Capital Markets group to facilitate the purchase of single-family mortgage loans for our mortgage portfolio • Credit risk management:Prices and manages the credit risk on loans in our single-family guaranty book of business • Credit loss management:Works to prevent foreclosures and reduce costs of defaulted loans through foreclosure alternatives—including through our role in the Making Home Affordable Program, through management of real-estate owned, or REO, we acquire upon foreclosure or through a deed-in-lieu of foreclosure, and through lender repurchase evaluations | • Guaranty fees:Compensation for assuming and managing the credit risk on our single-family guaranty book of business • Trust management income: Derived from the interest earned on cash flows between the date of remittance of mortgage payments to us by servicers and the date of distribution of these payments to MBS certificateholders • Fee and other income: Compensation received for providing lender services | • Credit-related expenses. Consists of provision for credit losses and foreclosed property expense on loans underlying our single-family guaranty book of business • Administrative expenses: Consists of salaries and benefits, occupancy costs, professional services, and other expenses associated with the Single-Family Credit Guaranty business operations | ||||||
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Business Segment | Primary Business Activities | Primary Revenues | Primary Expenses | ||||||
Housing and Community Development Business, or HCD | • Mortgage securitizations: Works with our lender customers to securitize multifamily mortgage loans delivered to us by lenders into Fannie Mae MBS • Mortgage acquisitions: Works with our Capital Markets group to facilitate the purchase of multifamily mortgage loans for our mortgage portfolio • Affordable housing investments: Provides funding for investments in affordable multifamily rental and for-sale housing projects • Credit risk management:Prices and manages the credit risk on loans in our multifamily guaranty book of business • Credit loss management:Works to prevent foreclosures and reduce costs of defaulted loans through foreclosure alternatives, through management REO we acquire upon foreclosure or through a deed-in-lieu of foreclosure, and through lender repurchase evaluations. | • Guaranty fees:Compensation for assuming and managing the credit risk on our multifamily guaranty book of business • Fee and other income: Compensation received for multifamily transactions and bond credit enhancements | • Credit-related expenses: Consists of provision for credit losses and foreclosed property expense on loans underlying our multifamily guaranty book of business • Net operating losses: Generated by our affordable housing investments, net of any tax benefits generated by these investments that we are able to utilize • Administrative expenses: Consists of salaries and benefits, occupancy costs, professional services, and other expenses associated with our HCD business operations | ||||||
Capital Markets | • Mortgage and other investments:Purchases mortgage assets and makes investments in other non-mortgage interest-earning assets • Mortgage securitizations and other customer services:Issues structured Fannie Mae MBS for customers in exchange for a transaction fee and provides other fee-related services to our lender customers • Interest rate risk management:Manages the interest rate risk on our portfolio by issuing a variety of debt securities in a wide range of maturities and through the use of derivatives | • Net interest income: Generated from the difference between the interest income earned on our interest-earning assets and the interest expense associated with the debt funding those assets • Fee and other income: Compensation received for providing structured transactions and other lender services | • Fair value gains and losses: Primarily consists of fair value gains and losses on derivatives and trading securities • Investment gains and losses: Primarily consists of gains and losses on the sale or securitization of mortgage assets • Other-than-temporary impairment: Consists of impairment recognized on our investments • Administrative expenses: Consists of salaries and benefits, occupancy costs, professional services, and other expenses associated with our Capital Markets business operations | ||||||
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• | Whole Loan Conduit. Whole loan conduit activities involve our purchase of loans principally for the purpose of securitizing them. We purchase loans from a large group of lenders and then securitize them as Fannie Mae MBS, which may then be sold to dealers and investors. | |
• | Early Funding. Lenders who deliver whole loans or pools of whole loans to us in exchange for MBS typically must wait between 30 and 45 days from the closing and settlement of the loans or pools and the issuance of the MBS. This delay may limit lenders’ ability to originate new loans. Under our early lender funding programs, we purchase whole loans or pools of loans on an accelerated basis, allowing lenders to receive quicker payment for the whole loans and pools, which replenishes their funds and allows them to originate more mortgage loans. | |
• | Dollar Roll Transactions. We had a significant amount of dollar roll activity in 2009 as a result of attractive implied financing costs of the dollar roll versus our funding levels and a desire to increase market liquidity. A dollar roll transaction is a commitment to purchase a mortgage-related security with a concurrent agreement to re-sell a substantially similar security at a later date or vice versa. | |
• | REMICs and Other Structured Securitizations. We issue structured Fannie Mae MBS (including REMICs), typically for our lender customers or securities dealer customers, in exchange for a transaction fee. |
• | Portfolio securitizations. Our Capital Markets group creates single-class and multi-class Fannie Mae MBS from mortgage-related assets held in our mortgage portfolio. Our Capital Markets group may sell these Fannie Mae MBS into the secondary market or may retain the Fannie Mae MBS in our investment portfolio. | |
• | Lender swap securitizations: Our Capital Markets group creates single-class and multi-class structured Fannie Mae MBS, typically for our lender customers or securities dealer customers, in exchange for a transaction fee. In these transactions, the customer “swaps” a mortgage-related asset that it owns (typically a mortgage security) in exchange for a structured Fannie Mae MBS we issue. Our Capital Markets group earns transaction fees for creating structured Fannie Mae MBS for third parties. |
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• | the rights of the shareholders are suspended during the conservatorship. Accordingly, our common shareholders do not have the ability to elect directors or to vote on other matters during the conservatorship unless the conservator delegates this authority to them; | |
• | the conservator has eliminated common and preferred stock dividends (other than dividends on the senior preferred stock issued to Treasury) during the conservatorship; and | |
• | because we are in conservatorship, we are no longer managed with a strategy to maximize shareholder returns. In a letter to the Chairmen and Ranking Members of the Congressional Banking and Financial Services Committees dated February 2, 2010, the Acting Director of FHFA stated that the focus of conservatorship is on conserving assets, minimizing corporate losses, ensuring Fannie Mae and Freddie Mac continue to serve their mission, overseeing remediation of identified weaknesses in corporate operations and risk management, and ensuring that sound corporate governance principles are followed. For additional information about our business strategy, please see “Executive Summary—Our Business Objectives and Strategy.” |
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• | paying dividends or other distributions on or repurchasing our equity securities (other than the senior preferred stock or warrant); | |
• | issuing additional equity securities (except in limited instances); | |
• | selling, transferring, leasing or otherwise disposing of any assets, other than dispositions for fair market value, except in limited circumstances including if the transaction is in the ordinary course of business and consistent with past practice; | |
• | issuing subordinated debt; and | |
• | entering into any new compensation arrangements or increasing amounts or benefits payable under existing compensation arrangements for any of our executive officers (as defined by SEC rules) without the consent of the Director of FHFA, in consultation with the Secretary of the Treasury. |
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• | Mortgage Asset Limit. We are restricted in the amount of mortgage assets that we may own. The maximum allowable amount was $900 billion on December 31, 2009. Beginning on December 31, 2010 and each year thereafter, we are required to reduce our mortgage assets to 90% of the maximum allowable amount that we were permitted to own as of December 31 of the immediately preceding calendar year, until the amount of our mortgage assets reaches $250 billion. Accordingly, the maximum allowable amount of mortgage assets we may own on December 31, 2010 is $810 billion. The definition of mortgage asset is based on the unpaid principal balance of such assets and does not reflect market valuation adjustments, allowance for loan losses, impairments, unamortized premiums and discounts and the impact of consolidation of variable interest entities. Under this definition, our mortgage assets on December 31, 2009 were $773 billion. We disclose the amount of our mortgage assets on a monthly basis under the caption “Gross Mortgage Portfolio” in our Monthly Summaries, which are available on our Web site and announced in a press release. In February 2010, FHFA informed Congress that it expects that any net additions to our retained mortgage portfolio would be related to the purchase of delinquent mortgages out of Fannie Mae MBS trusts. See “MD&A—Consolidated Balance Sheet Analysis—Mortgage Investments” for information on our plans to purchase delinquent loans from single-family Fannie Mae MBS trusts. | |
• | Debt Limit. We are subject to a limit on the amount of our indebtedness. Our debt limit through December 30, 2010 equals $1,080 billion. Beginning December 31, 2010, and on December 31 of each year thereafter, our debt cap that will apply through December 31 of the following year will equal 120% of the amount of mortgage assets we are allowed to own on December 31 of the immediately preceding calendar year. The definition of indebtedness is based on the par value of each applicable loan for purposes of our debt cap. Under this definition, our indebtedness as of December 31, 2009 was $786 billion. We disclose the amount of our indebtedness on a monthly basis under the caption “Total Debt Outstanding” in our Monthly Summaries, which are available on our Web site and announced in a press release. |
• | the senior preferred stock ranks senior to the common stock and all other series of preferred stock as to both dividends and distributions upon dissolution, liquidation or winding up of the company; | |
• | the senior preferred stock purchase agreement prohibits the payment of dividends on common or preferred stock (other than the senior preferred stock) without the prior written consent of Treasury; and | |
• | the warrant provides Treasury with the right to purchase shares of our common stock equal to up to 79.9% of the total number of shares of our common stock outstanding on a fully diluted basis on the date of exercise for a nominal price, thereby substantially diluting the ownership in Fannie Mae of our common shareholders at the time of exercise. Until Treasury exercises its rights under the warrant or its right to exercise the warrant expires on September 7, 2028 without having been exercised, the holders of our common stock continue to have the risk that, as a group, they will own no more than 20.1% of the total voting power of the company. Under our charter, bylaws and applicable law, 20.1% is insufficient to |
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control the outcome of any vote that is presented to the common shareholders. Accordingly, existing common shareholders have no assurance that, as a group, they will be able to control the election of our directors or the outcome of any other vote after the conservatorship ends. |
• | returning them to their previous status as GSEs with the paired interests of maximizing returns for private shareholders and pursuing public policy home ownership goals; | |
• | gradually winding down the GSEs’ operations and liquidating their assets; | |
• | incorporating the GSEs’ functions into a federal agency; | |
• | implementing a public utility model where the government regulates the GSEs’ profit margin, sets guaranty fees, and provides explicit backing for GSE commitments; | |
• | converting the GSEs’ role to providing insurance for covered bonds; and | |
• | dissolving Fannie Mae and Freddie Mac into many smaller companies. |
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• | provide stability in the secondary market for residential mortgages; | |
• | respond appropriately to the private capital market; | |
• | provide ongoing assistance to the secondary market for residential mortgages (including activities relating to mortgages on housing for low- and moderate-income families involving a reasonable economic return that may be less than the return earned on other activities) by increasing the liquidity of mortgage investments and improving the distribution of investment capital available for residential mortgage financing; and | |
• | promote access to mortgage credit throughout the nation (including central cities, rural areas and underserved areas) by increasing the liquidity of mortgage investments and improving the distribution of investment capital available for residential mortgage financing. |
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• | Principal Balance Limitations. Our charter permits us to purchase and securitize mortgage loans secured by either a single-family or multifamily property. Single-family conventional mortgage loans are subject to maximum original principal balance limits, known as “conforming loan limits.” The conforming loan limits are established each year based on the average prices of one-family residences. In 2009, the general loan limit for mortgages that finance one-family residences was $417,000, with higher limits for mortgages secured by two- to four-family residences and in certain statutorily-designated high-cost states and territories (Alaska, Hawaii, Guam and the U.S. Virgin Islands) and high-cost areas (counties or county-equivalent areas) that are designated by FHFA annually up to a ceiling of 150% of our general loan limit (for example, $625,000 for a one-family residence, higher for two- tofour-units and in high-cost states and territories). |
• | Loan-to-Value and Credit Enhancement Requirements. The Charter Act generally requires credit enhancement on any conventional single-family mortgage loan that we purchase or securitize if it has aloan-to-value ratio over 80% at the time of purchase. We also do not purchase or securitize second lien single-family mortgage loans when the combinedloan-to-value ratio exceeds 80%, unless the second lien mortgage loan has credit enhancement in accordance with the requirements of the Charter Act. The credit enhancement required by our charter may take the form of one or more of the following: (1) insurance or a guaranty by a qualified insurer; (2) a seller’s agreement to repurchase or replace any mortgage loan in default (for such period and under such circumstances as we may require); or (3) retention by the seller of at least a 10% participation interest in the mortgage loans. Regardless ofloan-to-value ratio, the Charter Act does not require us to obtain credit enhancement to purchase or securitize loans insured by FHA or guaranteed by the VA, home improvement loans or loans secured by manufactured housing. |
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• | Issuances of Our Securities. We are authorized, upon the approval of the Secretary of the Treasury, to issue debt obligations and mortgage-related securities. Neither the U.S. government nor any of its agencies guarantees, directly or indirectly, our debt or mortgage-related securities. | |
• | Exemptions for Our Securities. Securities we issue are exempted securities under laws administered by the SEC, except that as a result of the 2008 Reform Act, our equity securities are not treated as exempted securities for purposes of Sections 12, 13, 14 or 16 of the Securities Exchange Act of 1934 (the “Exchange Act”). Consequently, we are required to file periodic and current reports with the SEC, including annual reports onForm 10-K, quarterly reports onForm 10-Q and current reports onForm 8-K. However, we are not required to file registration statements with the SEC under the Securities Act of 1933 (the “Securities Act”) with respect to offerings of our securities pursuant to this exemption. | |
• | Exemption from Specified Taxes. We are exempt from taxation by states, counties, municipalities and local taxing authorities, except for taxation by those authorities on our real property. We are not exempt from the payment of federal corporate income taxes. | |
• | Other Limitations and Requirements. We may not originate mortgage loans or advance funds to a mortgage seller on an interim basis, using mortgage loans as collateral, pending the sale of the mortgages in the secondary market. In addition, we may only purchase or securitize mortgages on properties located in the United States, including the Commonwealth of Puerto Rico, and the territories and possessions of the United States. |
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• | 2.50% of on-balance sheet assets; | |
• | 0.45% of the unpaid principal balance of outstanding Fannie Mae MBS held by third parties; and | |
• | 0.45% of other off-balance sheet obligations, which may be adjusted by FHFA under certain circumstances. |
• | 1.25% of on-balance sheet assets; | |
• | 0.25% of the unpaid principal balance of outstanding Fannie Mae MBS held by third parties; and | |
• | 0.25% of other off-balance sheet obligations, which may be adjusted by the Director of FHFA under certain circumstances. |
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2009 | 2008 | 2007 | ||||||||||||||||||||||
Result(1) | Goal | Result | Goal | Result | Goal | |||||||||||||||||||
Housing goals:(2) | ||||||||||||||||||||||||
Low- and moderate-income housing | 47.7 | % | 43.0 | % | 53.7 | % | 56.0 | % | 55.5 | % | 55.0 | % | ||||||||||||
Underserved areas | 28.8 | 32.0 | 39.4 | 39.0 | 43.4 | 38.0 | ||||||||||||||||||
Special affordable housing | 20.8 | 18.0 | 26.4 | 27.0 | 26.8 | 25.0 | ||||||||||||||||||
Housing subgoals: | ||||||||||||||||||||||||
Home purchase subgoals:(3) | ||||||||||||||||||||||||
Low- and moderate-income housing | 51.8 | % | 40.0 | % | 38.8 | % | 47.0 | % | 42.1 | % | 47.0 | % | ||||||||||||
Underserved areas | 31.1 | 30.0 | 30.4 | 34.0 | 33.4 | 33.0 | ||||||||||||||||||
Special affordable housing | 23.2 | 14.0 | 13.6 | 18.0 | 15.5 | 18.0 | ||||||||||||||||||
Multifamily special affordable housing subgoal ($ in billions)(4) | $ | 6.47 | $ | 6.56 | $ | 13.31 | $ | 5.49 | $ | 19.84 | $ | 5.49 |
(1) | These results may differ from the results FHFA determines for our 2009 reporting. | |
(2) | Goals are expressed as a percentage of the total number of dwelling units financed by eligible mortgage loan purchases during the period. | |
(3) | Home purchase subgoals measure our performance by the number of loans (not dwelling units) providing purchase money for owner-occupied single-family housing in metropolitan areas. | |
(4) | The multifamily subgoal is measured by loan amount and expressed as a dollar amount. |
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• | Ownership. We must own or guarantee the mortgage loan being refinanced. |
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• | Unpaid Principal Balance. Upon HARP’s initial implementation in April 2009, the unpaid principal balance on the mortgage loan was limited to 105% of the current value of the property covered by the mortgage. In other words, the maximum LTV ratio was 105%. In July 2009, FHFA authorized expansion of the program to permit refinancings of existing mortgage loans with an LTV of 125%. | |
• | Mortgage Insurance. Mortgage insurance for the new mortgage loan is only required if the existing loan had an original LTV ratio greater than 80% and mortgage insurance is in force on the existing loan. In that case, mortgage insurance is required only up to the coverage level on the existing loan, which may be less than our standard coverage requirements. FHFA has provided guidance that permits us to implement this feature of the program in compliance with our charter requirements for loans originated through June 10, 2010 and acquired through October 2010, and we have requested an extension of this flexibility for loans originated through June 2011 and acquired through October 2011. | |
• | New Loan Restrictions. The new mortgage loan cannot (1) be an adjustable-rate mortgage loan, or ARM, if the initial fixed period is less than five years; (2) have an interest-only feature, which permits the payment of interest without a payment of principal; (3) be a balloon mortgage loan; or (4) have the potential for negative amortization. |
• | Status of Mortgage Loan. The mortgage loan must be delinquent (and may be in foreclosure) or, for loans owned or guaranteed by Fannie Mae or Freddie Mac, a payment default must be imminent. All borrowers must attest to a financial hardship. | |
• | Modifications Permitted. Servicers must apply the permitted modification terms available in the order listed below until the borrower’s new monthly mortgage payment achieves the target payment ratio of 31%: |
• | Reduction of Interest Rate.Reduce the interest rate to as low as 2% for the first five years following modification, increasing by 1% per year thereafter until it reaches the market rate at the time of modification. | |
• | Extension of Loan Term.Extend the loan term to up to 40 years. | |
• | Deferral of Principal.Defer payment of a portion of the principal of the loan, interest-free, until (1) the borrower sells the property, (2) the end of the loan term, or (3) the borrower pays off the loan, whichever occurs first. |
• | Limits on Risk Features in Modified Mortgage Loans. |
• | ARMs and Interest-Only Loans.If a borrower has an adjustable-rate or interest-only loan, the loan will convert to a fixed interest rate, fully amortizing loan. | |
• | Prohibition on Negative Amortization.Negative amortization is prohibited following the effective date of the modification. |
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• | Trial Period Required before Modification. Borrowers must satisfy the terms of a trial modification plan for a trial payment period, typically for at least three months. The modification will become effective upon final execution of a modification agreement following satisfactory completion of the trial period. | |
• | Preforeclosure Eligibility Evaluation. Servicers have been directed not to proceed with a foreclosure sale until the borrower has been evaluated for a modification under the program and, if eligible, has been extended an offer to participate in the program. |
• | Implementing the guidelines and policies of the program; | |
• | Preparing the requisite forms, tools and training to facilitate efficient loan modifications by servicers; | |
• | Creating, making available and managing the process for servicers to report modification activity and program performance; | |
• | Acting as paying agent to calculate and remit subsidies and compensation consistent with program guidelines; | |
• | Acting as record-keeper for executed loan modifications and program administration; | |
• | Coordinating with Treasury and other parties toward achievement of the program’s goals, including assisting with development and implementation of updates to the program and initiatives expanding the program’s reach; and | |
• | Performing other tasks as directed by Treasury from time to time. |
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• | Our belief that the weak economy and stressed housing market will continue and will adversely impact our results of operations, liquidity and financial condition in 2010; | |
• | Our expectation that adverse credit performance trends may continue into 2010; | |
• | Our expectation that we will not be able to return to long-term profitability anytime in the foreseeable future; | |
• | Our expectation that we will not earn profits in excess of our annual dividend obligation to Treasury for the indefinite future; | |
• | Our expectation that unemployment rates will decline modestly yet remain elevated throughout 2010; | |
• | Our belief that ongoing adverse conditions in the housing and mortgage markets, along with the continuing deterioration throughout our book of business and the costs associated with our efforts to assist the mortgage market pursuant to our mission, will increase the amount of funds that Treasury is required to provide to us; | |
• | Our expectation that the conservatorship and investment by Treasury will continue to have a material adverse effect on our common and preferred shareholders; | |
• | Our expectation that, due to current trends in the housing and financial markets, we will have a net worth deficit in future periods, and therefore will be required to obtain additional funding from Treasury pursuant to the senior preferred stock purchase agreement; | |
• | Our expectation that dividends and commitment fees we must pay or that accrue on Treasury’s investments will increase and will have a significant adverse impact on our future financial position and net worth; | |
• | Our expectation that permanent Home Affordable Modification Program modifications will increase as trial periods are completed and permanent modification offers are extended; | |
• | Our expectation that the actions we take to stabilize the housing market and minimize our credit losses will continue to have, at least in the short term, a material adverse effect on our business, results of operations, financial condition and net worth; | |
• | Our belief that activities our regulators, other U.S. government agencies or Congress may request or require us to take to support the mortgage market and help homeowners may adversely affect our business; | |
• | Our expectation that we will no longer be able to sell or otherwise transfer, or use or otherwise realize future tax benefits from, our LIHTC investments; | |
• | Our expectation that heightened default and severity rates will continue during 2010 and that home prices, particularly in some geographic areas, may decline further; |
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• | Our expectation of further increases in the level of foreclosures and single-family delinquency rates as well as in the level of multifamily defaults and loss severity in 2010; | |
• | Our expectation that home sales will start a longer term growth path by the end of 2010; | |
• | Our expectation that home prices will stabilize in 2010 and that thepeak-to-trough home price decline on a national basis will range between 17% to 24%; | |
• | Our expectation that U.S. residential single-family mortgage debt outstanding will decrease by 1.7% in 2010; | |
• | Our expectation that a decline in total originations as well as a potential shift of the market away from refinance activity during 2010 will have a significant adverse impact on our business volumes; | |
• | Our expectation that our credit-related expenses will remain high in 2010, and that our credit losses will continue to increase during 2010; | |
• | Our expectation that we will continue to have losses throughout our guaranty book of business due to high unemployment and continuing declines in home prices; | |
• | Our expectation of the ongoing uncertainty regarding the future of our business, including whether we will continue to exist in our current form after the termination of the conservatorship; | |
• | Our belief that it is likely we will not remediate the material weakness in our disclosure controls and procedures while we are under conservatorship; | |
• | Our expectation that we will experience high levels ofperiod-to-period volatility in our results of operations and financial condition; | |
• | Our projections with respect to interest rates and any effects of those interest rate projections on our credit loss expectations; | |
• | Our expectation that we will experience periodic fluctuations in the fair value of our net assets due to our business activities and changes in market conditions; | |
• | Our belief that changes or perceived changes in the government’s support of us or the financial markets could increase our roll-over risk and materially adversely affect our ability to refinance our debt as it becomes due; | |
• | Our belief that demand for our debt securities could decline, perhaps significantly, as the Federal Reserve concludes its agency debt and MBS purchase programs; | |
• | Our belief that we could use the unencumbered mortgage assets in our mortgage portfolio as a source of liquidity in the event our access to the unsecured debt market becomes impaired, by using these assets as collateral for secured borrowing; | |
• | Our expectations regarding the impact of the new consolidation accounting standards on our accounting, financial statements, financial results and net worth; | |
• | Our expectation that our acquisitions of Alt-A and subprime mortgage loans will be minimal in future periods and that the percentage of the book of business attributable to Alt-A and subprime will shrink over time; | |
• | Our expectation that the challenging mortgage and credit market conditions will likely continue to adversely affect the liquidity and financial condition of us and our institutional counterparties; | |
• | Our belief that, if our assessment of one or more of our mortgage insurer counterparty’s ability to fulfill its obligations to us worsens or its credit rating is downgraded, it could result in a significant increase in our loss reserves and a significant increase in the fair value of our guaranty obligations; | |
• | Our belief that one or more of our financial guarantor counterparties may not be able to fully meet their obligations to us in the future; |
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• | Our belief that we may experience further losses relating to our derivative contracts; | |
• | Our belief that our remaining deferred tax assets related to certainavailable-for-sale securities we hold are recoverable; | |
• | Our belief that the credit losses we experience in future periods are likely to be larger, and perhaps substantially larger, than our current combined loss reserves; | |
• | Our expectation that we will experience additionalother-than-temporary impairment writedowns of our investments in private-label mortgage-related securities, including those that continue to be AAA-rated; | |
• | Our belief that the performance of our 2008 and 2009 workouts will be highly dependent on economic factors, such as unemployment rates and home prices; | |
• | Our belief that exposure to refinancing risk may be higher for multifamily loans that are due to mature during the next several years; | |
• | Our intention to use the funds we receive from Treasury under the senior preferred stock purchase agreement to repay our debt obligations and pay dividends on the senior preferred stock; | |
• | Our belief that the amount of financing we could obtain in the event of a liquidity crisis or significant market disruption by borrowing against our mortgage-related securities is substantially lower than the amount of mortgage-related securities we hold; | |
• | Our intention to either continue to sell or allow to mature non-mortgage-related securities from time to time as market conditions permit; | |
• | Our belief that our liquidity contingency plan is unlikely to be sufficient to provide us with alternative sources of liquidity for 90 days; | |
• | Our expectation that we will experience further losses and write-downs relating to our investment securities; | |
• | Our expectation that credit deterioration will continue at a slower pace, coupled with an increase in the pace of foreclosures and problem loan workouts, and result in a slower rate of increase in delinquencies; | |
• | Our expectation that, as interest rates change, we are likely to take actions to rebalance our portfolio to manage our interest rate exposure; | |
• | Our belief that the ultimate amount of realized credit losses and realized values we receive from holding our assets and liabilities is likely to differ materially from the current estimated fair values; | |
• | Our intention to repay our short-term and long-term debt obligations as they become due primarily through proceeds from the issuance of additional debt securities; | |
• | Our expectation that single-family loans we acquired in 2009 loans may have relatively slow prepayment speeds, and therefore remain in our book of business for a relatively long time, due to the historically low interest rates throughout 2009; | |
• | Our expectation that we will significantly increase our purchases of delinquent loans from single-family MBS trusts; | |
• | Our expectations regarding our new executive compensation program, including our belief that it will enable us to recruit and retain well-qualified executives; and | |
• | Descriptions of assumptions underlying or relating to any of the foregoing matters and any other statements contained in this report that are or may be forward-looking statements. |
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Item 1A. | Risk Factors |
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Item 1B. | Unresolved Staff Comments |
Item 2. | Properties |
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Item 3. | Legal Proceedings |
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Item 4. | Submission of Matters to a Vote of Security Holders |
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Item 5. | Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities |
Quarter | High | Low | Dividend | |||||||||
2008 | ||||||||||||
First Quarter | $ | 40.20 | $ | 18.25 | $ | 0.35 | ||||||
Second Quarter | 32.31 | 19.23 | 0.35 | |||||||||
Third Quarter | 19.96 | 0.35 | 0.05 | |||||||||
Fourth Quarter | 1.83 | 0.30 | — | |||||||||
2009 | ||||||||||||
First Quarter | $ | 1.43 | $ | 0.35 | $ | — | ||||||
Second Quarter | 1.05 | 0.51 | — | |||||||||
Third Quarter | 2.13 | 0.51 | — | |||||||||
Fourth Quarter | 1.55 | 0.88 | — |
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Total Number of | Maximum Number of | |||||||||||||||
Total | Shares Purchased as | Shares that | ||||||||||||||
Number of | Average | Part of Publicly | May Yet be | |||||||||||||
Shares | Price Paid | Announced | Purchased Under | |||||||||||||
Purchased(1) | per Share | Program(2) | the Program(3) | |||||||||||||
(Shares in thousands) | ||||||||||||||||
2009 | ||||||||||||||||
October 1-31 | 3 | $ | 1.33 | — | 47,720 | |||||||||||
November 1-30 | 1 | 1.04 | — | 46,457 | ||||||||||||
December 1-31 | 3 | 1.02 | — | 46,354 | ||||||||||||
Total | 7 | |||||||||||||||
(1) | Consists of shares of common stock reacquired from employees to pay an aggregate of approximately $7,714 in withholding taxes due upon the vesting of previously issued restricted stock. Does not include 2,179,730 shares of 8.75% Non-Cumulative Mandatory ConvertibleSeries 2008-1 Preferred Stock received from holders upon conversion of those shares into 3,358,526 shares of common stock. |
(2) | On January 21, 2003, we publicly announced that the Board of Directors had approved a share repurchase program (the “General Repurchase Authority”) under which we could purchase in open market transactions the sum of (a) up to 5% of the shares of common stock outstanding as of December 31, 2002 (49.4 million shares) and (b) additional shares to offset stock issued or expected to be issued under our employee benefit plans. No shares were repurchased during the fourth quarter of 2009 pursuant to the General Repurchase Authority. The General Repurchase Authority has no specified expiration date. Under the terms of the senior preferred stock purchase agreement, we are prohibited from purchasing Fannie Mae common stock without the prior written consent of Treasury. As a result of this prohibition, we do not intend to make further purchases under the General Repurchase Authority at this time. |
(3) | Consists of the total number of shares that may yet be purchased under the General Repurchase Authority as of the end of the month, including the number of shares that may be repurchased to offset stock that may be issued pursuant to awards outstanding under our employee benefit plans. Repurchased shares are first offset against any issuances of stock under our employee benefit plans. To the extent that we repurchase more shares in a given month than have been issued under our plans, the excess number of shares is deducted from the 49.4 million shares approved for repurchase under the General Repurchase Authority. Please see “Note 13, Stock-Based Compensation,” for information about shares issued, shares expected to be issued, and shares remaining available for grant under our employee benefit plans. Shares that remain available for grant under our employee benefit plans are not included in the amount of shares that may yet be purchased reflected in the table. |
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Item 6. | Selected Financial Data |
For the Year Ended December 31, | ||||||||||||||||||||
2009 | 2008 | 2007 | 2006 | 2005 | ||||||||||||||||
(Dollars in millions, except per share amounts) | ||||||||||||||||||||
Statement of operations data:(1) | ||||||||||||||||||||
Net interest income | $ | 14,510 | $ | 8,782 | $ | 4,581 | $ | 6,752 | $ | 11,505 | ||||||||||
Guaranty fee income | 7,211 | 7,621 | 5,071 | 4,250 | 4,006 | |||||||||||||||
Losses on certain guaranty contracts | — | — | (1,424 | ) | (439 | ) | (146 | ) | ||||||||||||
Netother-than-temporary impairments | (9,861 | ) | (6,974 | ) | (814 | ) | (853 | ) | (1,246 | ) | ||||||||||
Investment gains (losses), net | 1,458 | (246 | ) | (53 | ) | 162 | 354 | |||||||||||||
Trust management income(2) | 40 | 261 | 588 | 111 | — | |||||||||||||||
Fair value losses, net(3) | (2,811 | ) | (20,129 | ) | (4,668 | ) | (1,744 | ) | (4,013 | ) | ||||||||||
Administrative expenses | (2,207 | ) | (1,979 | ) | (2,669 | ) | (3,076 | ) | (2,115 | ) | ||||||||||
Credit-related expenses(4) | (73,536 | ) | (29,809 | ) | (5,012 | ) | (783 | ) | (428 | ) | ||||||||||
Other income (expenses), net(5) | (6,327 | ) | (1,004 | ) | (87 | ) | 244 | (98 | ) | |||||||||||
(Provision) benefit for federal income taxes | 985 | (13,749 | ) | 3,091 | (166 | ) | (1,277 | ) | ||||||||||||
Net (loss) income attributable to Fannie Mae | 71,969 | (58,707 | ) | (2,050 | ) | 4,059 | 6,347 | |||||||||||||
Preferred stock dividends and issuance costs at redemption | (2,474 | ) | (1,069 | ) | (513 | ) | (511 | ) | (486 | ) | ||||||||||
Net (loss) income attributable to common stockholders | (74,443 | ) | (59,776 | ) | (2,563 | ) | 3,548 | 5,861 | ||||||||||||
Per common share data: | ||||||||||||||||||||
Earnings (loss) per share: | ||||||||||||||||||||
Basic | $ | (13.11 | ) | $ | (24.04 | ) | $ | (2.63 | ) | $ | 3.65 | $ | 6.04 | |||||||
Diluted | (13.11 | ) | (24.04 | ) | (2.63 | ) | 3.65 | 6.01 | ||||||||||||
Weighted-average common shares outstanding:(6) | ||||||||||||||||||||
Basic | 5,680 | 2,487 | 973 | 971 | 970 | |||||||||||||||
Diluted | 5,680 | 2,487 | 973 | 972 | 998 | |||||||||||||||
Cash dividends declared per share | $ | — | $ | 0.75 | $ | 1.90 | $ | 1.18 | $ | 1.04 | ||||||||||
New business acquisition data: | ||||||||||||||||||||
Fannie Mae MBS issues acquired by third parties(7) | $ | 496,067 | $ | 434,711 | $ | 563,648 | $ | 417,471 | $ | 465,632 | ||||||||||
Mortgage portfolio purchases(8) | 327,578 | 196,645 | 182,471 | 185,507 | 146,640 | |||||||||||||||
New business acquisitions | $ | 823,645 | $ | 631,356 | $ | 746,119 | $ | 602,978 | $ | 612,272 | ||||||||||
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As of December 31, | ||||||||||||||||||||
2009 | 2008 | 2007 | 2006 | 2005 | ||||||||||||||||
(Dollars in millions) | ||||||||||||||||||||
Balance sheet data:(1) | ||||||||||||||||||||
Investments in securities: | ||||||||||||||||||||
Fannie Mae MBS | $ | 229,169 | $ | 234,250 | $ | 179,401 | $ | 196,678 | $ | 232,451 | ||||||||||
Other agency MBS | 43,905 | 35,440 | 32,957 | 31,484 | 30,684 | |||||||||||||||
Mortgage revenue bonds | 13,446 | 13,183 | 16,213 | 17,221 | 19,178 | |||||||||||||||
Other mortgage-related securities | 54,265 | 56,781 | 90,827 | 97,156 | 86,645 | |||||||||||||||
Non-mortgage-related securities | 8,882 | 17,640 | 38,115 | 47,573 | 37,116 | |||||||||||||||
Mortgage loans:(9) | ||||||||||||||||||||
Loans held for sale | 18,462 | 13,270 | 7,008 | 4,868 | 5,064 | |||||||||||||||
Loans held for investment, net of allowance | 375,563 | 412,142 | 396,516 | 378,687 | 362,479 | |||||||||||||||
Total assets | 869,141 | 912,404 | 879,389 | 841,469 | 831,686 | |||||||||||||||
Short-term debt | 200,437 | 330,991 | 234,160 | 165,810 | 173,186 | |||||||||||||||
Long-term debt | 574,117 | 539,402 | 562,139 | 601,236 | 590,824 | |||||||||||||||
Total liabilities | 884,422 | 927,561 | 835,271 | 799,827 | 792,263 | |||||||||||||||
Senior preferred stock | 60,900 | 1,000 | — | — | — | |||||||||||||||
Preferred stock | 20,348 | 21,222 | 16,913 | 9,108 | 9,108 | |||||||||||||||
Total Fannie Mae stockholders’ equity (deficit) | (15,372 | ) | (15,314 | ) | 44,011 | 41,506 | 39,302 | |||||||||||||
Regulatory capital data: | ||||||||||||||||||||
Net worth surplus (deficit)(10) | $ | (15,281 | ) | $ | (15,157 | ) | $ | 44,118 | $ | 41,642 | $ | 39,423 | ||||||||
Book of business data: | ||||||||||||||||||||
Mortgage portfolio(11) | $ | 769,252 | $ | 792,196 | $ | 727,903 | $ | 728,932 | $ | 737,889 | ||||||||||
Fannie Mae MBS held by third parties(12) | 2,432,789 | 2,289,459 | 2,118,909 | 1,777,550 | 1,598,918 | |||||||||||||||
Other guarantees(13) | 27,624 | 27,809 | 41,588 | 19,747 | 19,152 | |||||||||||||||
Mortgage credit book of business | $ | 3,229,665 | $ | 3,109,464 | $ | 2,888,400 | $ | 2,526,229 | $ | 2,355,959 | ||||||||||
Guaranty book of business(14) | $ | 3,097,201 | $ | 2,975,710 | $ | 2,744,237 | $ | 2,379,986 | $ | 2,219,201 | ||||||||||
Credit quality: | ||||||||||||||||||||
Nonperforming loans(15) | $ | 216,455 | $ | 119,232 | $ | 27,156 | $ | 13,846 | $ | 14,194 | ||||||||||
Combined loss reserves | 64,891 | 24,753 | 3,391 | 859 | 724 | |||||||||||||||
Combined loss reserves as a percentage of total guaranty book of business | 2.10 | % | 0.83 | % | 0.12 | % | 0.04 | % | 0.03 | % | ||||||||||
Combined loss reserves as a percentage of total nonperforming loans | 29.98 | 20.76 | 12.49 | 6.20 | 5.10 |
For the Year Ended December 31, | ||||||||||||||||||||
2009 | 2008 | 2007 | 2006 | 2005 | ||||||||||||||||
Performance ratios: | ||||||||||||||||||||
Net interest yield(16) | 1.65 | % | 1.03 | % | 0.57 | % | 0.85 | % | 1.31 | % | ||||||||||
Average effective guaranty fee rate (in basis points)(17) | 27.6 | bp | 31.0 | bp | 23.7 | bp | 22.2 | bp | 22.3 | bp | ||||||||||
Credit loss ratio (in basis points)(18) | 44.6 | bp | 22.7 | bp | 5.3 | bp | 2.2 | bp | 1.1 | bp | ||||||||||
Return on assets(19)* | (8.27 | )% | (6.77 | )% | (0.30 | )% | 0.42 | % | 0.63 | % | ||||||||||
Return on equity(20)* | N/A | (1,704.3 | ) | (8.3 | ) | 11.3 | 19.5 | |||||||||||||
Equity to assets(21)* | N/A | 2.7 | 4.9 | 4.8 | 4.2 | |||||||||||||||
Dividend payout(22) | N/A | N/A | N/A | 32.4 | 17.2 | |||||||||||||||
Earnings to combined fixed charges and preferred stock dividends and issuance costs at redemption | N/A | N/A | 0.89:1 | 1.12:1 | 1.23:1 |
(1) | Certain prior period amounts have been reclassified to conform to the current period presentation. |
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(2) | We began separately reporting the revenues from trust management income in our consolidated statements of operations effective November 2006. We previously included these revenues as a component of interest income. We have not reclassified prior period amounts to conform to the current period presentation. | |
(3) | Consists of the following: (a) derivatives fair value gains (losses), net; (b) trading securities gains (losses), net; (c) hedged mortgage assets gains (losses), net; (d) debt foreign exchange gains (losses), net; and (e) debt fair value gains (losses), net. | |
(4) | Consists of provision for credit losses and foreclosed property expense. | |
(5) | Consists of the following: (a) debt extinguishment gains (losses), net; (b) losses from partnership investments; and (c) fee and other income. | |
(6) | Includes the weighted-average shares of common stock that would be issuable upon the full exercise of the warrant issued to Treasury from the date of conservatorship through the end of the period for 2008 and for the full year for 2009. Because the warrant’s exercise price of $0.00001 per share is considered non-substantive (compared to the market price of our common stock), the warrant was evaluated based on its substance over form. It was determined to have characteristics of non-voting common stock, and thus included in the computation of basic earnings (loss) per share. | |
(7) | Reflects unpaid principal balance of Fannie Mae MBS issued and guaranteed by us during the reporting period less: (a) securitizations of mortgage loans held in our mortgage portfolio during the reporting period and (b) Fannie Mae MBS purchased for our mortgage portfolio during the reporting period. | |
(8) | Reflects unpaid principal balance of mortgage loans and mortgage-related securities we purchased for our investment portfolio during the reporting period. Includes acquisition of mortgage-related securities accounted for as the extinguishment of debt because the entity underlying the mortgage-related securities has been consolidated in our consolidated balance sheet. Includes capitalized interest beginning in 2006. | |
(9) | Mortgage loans consist solely of domestic residential real-estate mortgages. | |
(10) | Total assets less total liabilities. | |
(11) | Unpaid principal balance of mortgage loans and mortgage-related securities (including Fannie Mae MBS) held in our portfolio. | |
(12) | Reflects unpaid principal balance of Fannie Mae MBS held by third-party investors. The principal balance of resecuritized Fannie Mae MBS is included only once in the reported amount. | |
(13) | Primarily includes long-term standby commitments we have issued and single-family and multifamily credit enhancements we have provided and that are not otherwise reflected in the table. | |
(14) | Reflects mortgage credit book of business less non-Fannie Mae mortgage-related securities held in our investment portfolio for which we do not provide a guaranty. | |
(15) | Consists of on-balance sheet nonperforming loans held in our mortgage portfolio and off-balance sheet nonperforming loans in Fannie Mae MBS held by third parties. Includes all nonaccrual loans, as well as troubled debt restructurings (“TDRs”) and HomeSaver Advance first-lien loans on accrual status. We generally classify single family and multifamily loans as nonperforming when the payment of principal or interest on the loan is equal to or greater than two and three months past due, respectively. A troubled debt restructuring is a restructuring of a mortgage loan in which a concession is granted to a borrower experiencing financial difficulty. Prior to 2008, the nonperforming loans that we reported consisted of on-balance sheet nonperforming loans held in our mortgage portfolio and did not include off-balance nonperforming loans in Fannie Mae MBS held by third parties. We have revised previously reported amounts to conform to the current period presentation. | |
(16) | Calculated based on net interest income for the reporting period divided by the average balance of total interest-earning assets during the period, expressed as a percentage. | |
(17) | Calculated based on guaranty fee income for the reporting period divided by average outstanding Fannie Mae MBS and other guarantees during the period, expressed in basis points. | |
(18) | Consists of (a) charge-offs, net of recoveries and (b) foreclosed property expense for the reporting period divided by the average guaranty book of business during the period, expressed in basis points. | |
(19) | Calculated based on net income (loss) available to common stockholders for the reporting period divided by average total assets during the period, expressed as a percentage. | |
(20) | Calculated based on net income (loss) available to common stockholders for the reporting period divided by average outstanding common equity during the period, expressed as a percentage. | |
(21) | Calculated based on average stockholders’ equity divided by average total assets during the reporting period, expressed as a percentage. | |
(22) | Calculated based on common dividends declared during the reporting period divided by net income available to common stockholders for the reporting period, expressed as a percentage. |
* | Average balances for purposes of ratio calculations are based on balances at the beginning of the year and at the end of each respective quarter for 2009, 2008 and 2007. Average balances for purposes of ratio calculations for all other years are based on beginning and end of year balances. |
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Item 7. | Management’s Discussion and Analysis of Financial Condition and Results of Operations |
• | Fair Value Measurement | |
• | Other-Than-Temporary Impairment of Investment Securities | |
• | Allowance for Loan Losses and Reserve for Guaranty Losses |
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Level 1: | Quoted prices (unadjusted) in active markets for identical assets or liabilities. | |
Level 2: | Observable market-based inputs, other than quoted prices in active markets for identical assets or liabilities. | |
Level 3: | Unobservable inputs. |
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As of December 31, | ||||||||
Balance Sheet Category | 2009 | 2008 | ||||||
(Dollars in millions) | ||||||||
Trading securities | $ | 8,861 | $ | 12,765 | ||||
Available-for-sale securities | 36,154 | 47,837 | ||||||
Derivatives assets | 150 | 362 | ||||||
Guaranty assets andbuy-ups | 2,577 | 1,083 | ||||||
Level 3 recurring assets | $ | 47,742 | $ | 62,047 | ||||
Total assets | $ | 869,141 | $ | 912,404 | ||||
Total recurring assets measured at fair value | $ | 353,718 | $ | 359,246 | ||||
Level 3 recurring assets as a percentage of total assets | 5 | % | 7 | % | ||||
Level 3 recurring assets as a percentage of total recurring assets measured at fair value | 13 | % | 17 | % | ||||
Total recurring assets measured at fair value as a percentage of total assets | 41 | % | 39 | % |
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(a) | We acquire a credit-impaired loan from an MBS trust that has an unpaid principal balance and accrued interest of $100 at a cost of $100. The estimated fair value at the date of purchase is $70. |
(b) | We foreclose upon the mortgage loan and record the acquired REO property at the appraised fair value, net of estimated selling costs, which is $80. |
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Accounting Impact of Assumptions | ||||||||||||||||
(a) | ||||||||||||||||
Initial | (c) | |||||||||||||||
Acquisition | (b) | Sale of | Cumulative | |||||||||||||
of Loans | Subsequent | Foreclosed | Earnings | |||||||||||||
from Trust | Foreclosure | Property | Impact | |||||||||||||
Consolidated Balance Sheet: | ||||||||||||||||
Assets: | ||||||||||||||||
Mortgage loans | $ | 70 | $ | (70 | ) | $ | — | |||||||||
Acquired property, net | — | 80 | (80 | ) | ||||||||||||
Liabilities: | ||||||||||||||||
Reserve for guaranty losses-beginning balance | $ | — | $ | — | $ | — | ||||||||||
Plus: Provision for credit losses attributable to acquiredcredit-impaired loans fair value losses(1) | 30 | — | — | |||||||||||||
Less: Charge-offs related to initial purchase discount on acquired credit-impaired loans | (30 | ) | — | — | ||||||||||||
Plus: Recoveries | — | — | — | |||||||||||||
Reserve for guaranty losses-ending balance | $ | — | $ | — | $ | — | ||||||||||
Consolidated Statement of Operations: | ||||||||||||||||
Provision for credit losses attributable to acquired credit-impaired loans fair value losses | $ | (30 | ) | $ | — | $ | — | $ | (30 | ) | ||||||
Foreclosed property income (expense) | — | 10 | 5 | 15 | ||||||||||||
Net pre-tax income (loss) effect | $ | (30 | ) | $ | 10 | $ | 5 | $ | (15 | ) | ||||||
(1) | The adjustment to the “Provision for credit losses” is presented for illustrative purposes only. We actually determine our “Reserve for guaranty losses” by aggregating homogeneous loans into pools based on similar underlying risk characteristics in accordance with the FASB standard on accounting for contingencies. Accordingly, we do not have a specific reserve or provision attributable to each delinquent loan purchased from an MBS trust prior to its purchase. |
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For the Year Ended December 31, | Variance | |||||||||||||||||||
2009 | 2008 | 2007 | 2009 vs. 2008 | 2008 vs. 2007 | ||||||||||||||||
(Dollars in millions, except per share amounts) | ||||||||||||||||||||
Net interest income | $ | 14,510 | $ | 8,782 | $ | 4,581 | $ | 5,728 | $ | 4,201 | ||||||||||
Guaranty fee income | 7,211 | 7,621 | 5,071 | (410 | ) | 2,550 | ||||||||||||||
Trust management income | 40 | 261 | 588 | (221 | ) | (327 | ) | |||||||||||||
Fee and other income | 733 | 772 | 965 | (39 | ) | (193 | ) | |||||||||||||
Net revenues | $ | 22,494 | $ | 17,436 | $ | 11,205 | $ | 5,058 | $ | 6,231 | ||||||||||
Losses on certain guaranty contracts | — | — | (1,424 | ) | — | 1,424 | ||||||||||||||
Investment gains (losses), net(1) | 1,458 | (246 | ) | (53 | ) | 1,704 | (193 | ) | ||||||||||||
Netother-than-temporary impairments(1) | (9,861 | ) | (6,974 | ) | (814 | ) | (2,887 | ) | (6,160 | ) | ||||||||||
Fair value losses, net | (2,811 | ) | (20,129 | ) | (4,668 | ) | 17,318 | (15,461 | ) | |||||||||||
Losses from partnership investments | (6,735 | ) | (1,554 | ) | (1,005 | ) | (5,181 | ) | (549 | ) | ||||||||||
Administrative expenses | (2,207 | ) | (1,979 | ) | (2,669 | ) | (228 | ) | 690 | |||||||||||
Credit-related expenses | (73,536 | ) | (29,809 | ) | (5,012 | ) | (43,727 | ) | (24,797 | ) | ||||||||||
Other non-interest expenses | (1,809 | ) | (1,315 | ) | (707 | ) | (494 | ) | (608 | ) | ||||||||||
Loss before federal income taxes and extraordinary losses | (73,007 | ) | (44,570 | ) | (5,147 | ) | (28,437 | ) | (39,423 | ) | ||||||||||
Benefit (provision) for federal income taxes | 985 | (13,749 | ) | 3,091 | 14,734 | (16,840 | ) | |||||||||||||
Extraordinary losses, net of tax effect | — | (409 | ) | (15 | ) | 409 | (394 | ) | ||||||||||||
Net loss | (72,022 | ) | (58,728 | ) | (2,071 | ) | (13,294 | ) | (56,657 | ) | ||||||||||
Less: Net loss attributable to the noncontrolling interest | 53 | 21 | 21 | 32 | — | |||||||||||||||
Net loss attributable to Fannie Mae | $ | (71,969 | ) | $ | (58,707 | ) | $ | (2,050 | ) | $ | (13,262 | ) | $ | (56,657 | ) | |||||
Diluted loss per common share | $ | (13.11 | ) | $ | (24.04 | ) | $ | (2.63 | ) | $ | 10.93 | $ | (21.41 | ) | ||||||
(1) | Prior to the April 2009 change in accounting for impairments, netother-than-temporary impairments also included the non-credit portion, which in subsequent periods is recorded in other comprehensive income. Certain prior period amounts have been reclassified to conform with the current period presentation. |
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For the Year Ended December 31, | ||||||||||||||||||||||||||||||||||||
2009 | 2008 | 2007 | ||||||||||||||||||||||||||||||||||
Interest | Average | Interest | Average | Interest | Average | |||||||||||||||||||||||||||||||
Average | Income/ | Rates | Average | Income/ | Rates | Average | Income/ | Rates | ||||||||||||||||||||||||||||
Balance | Expense | Earned/Paid | Balance | Expense | Earned/Paid | Balance | Expense | Earned/Paid | ||||||||||||||||||||||||||||
(Dollars in millions) | ||||||||||||||||||||||||||||||||||||
Interest-earning assets: | ||||||||||||||||||||||||||||||||||||
Mortgage loans(1) | $ | 425,779 | $ | 21,521 | 5.05 | % | $ | 416,616 | $ | 22,692 | 5.45 | % | $ | 393,827 | $ | 22,218 | 5.64 | % | ||||||||||||||||||
Mortgage securities | 347,467 | 17,230 | 4.96 | 332,442 | 17,344 | 5.22 | 328,769 | 18,052 | 5.49 | |||||||||||||||||||||||||||
Non-mortgage securities(2) | 53,724 | 247 | 0.46 | 60,230 | 1,748 | 2.90 | 64,204 | 3,441 | 5.36 | |||||||||||||||||||||||||||
Federal funds sold and securities purchased under agreements to resell | 46,073 | 260 | 0.56 | 41,991 | 1,158 | 2.76 | 15,405 | 828 | 5.37 | |||||||||||||||||||||||||||
Advances to lenders | 4,580 | 97 | 2.12 | 3,521 | 181 | 5.14 | 6,633 | 227 | 3.42 | |||||||||||||||||||||||||||
Total interest-earning assets | $ | 877,623 | $ | 39,355 | 4.48 | % | $ | 854,800 | $ | 43,123 | 5.04 | % | $ | 808,838 | $ | 44,766 | 5.53 | % | ||||||||||||||||||
Interest-bearing liabilities: | ||||||||||||||||||||||||||||||||||||
Short-term debt | $ | 280,215 | $ | 2,305 | 0.82 | % | $ | 277,503 | $ | 7,806 | 2.81 | % | $ | 176,071 | $ | 8,992 | 5.11 | % | ||||||||||||||||||
Long-term debt | 567,940 | 22,539 | 3.97 | 549,833 | 26,526 | 4.82 | 605,498 | 31,186 | 5.15 | |||||||||||||||||||||||||||
Federal funds purchased and securities sold under agreements to repurchase | 45 | 1 | 1.44 | 428 | 9 | 2.10 | 161 | 7 | 4.35 | |||||||||||||||||||||||||||
Total interest-bearing liabilities | $ | 848,200 | $ | 24,845 | 2.93 | % | $ | 827,764 | $ | 34,341 | 4.15 | % | $ | 781,730 | $ | 40,185 | 5.14 | % | ||||||||||||||||||
Impact of net non-interest bearing funding | $ | 29,423 | 0.10 | % | $ | 27,036 | 0.14 | % | $ | 27,108 | 0.18 | % | ||||||||||||||||||||||||
Net interest income/net interest yield | $ | 14,510 | 1.65 | % | $ | 8,782 | 1.03 | % | $ | 4,581 | 0.57 | % | ||||||||||||||||||||||||
Selected benchmark interest rates at end of period:(3) | ||||||||||||||||||||||||||||||||||||
3-month LIBOR | 0.25 | % | 1.43 | % | 4.70 | % | ||||||||||||||||||||||||||||||
2-year swap interest rate | 1.42 | 1.47 | 3.82 | |||||||||||||||||||||||||||||||||
5-year swap interest rate | 2.98 | 2.13 | 4.19 | |||||||||||||||||||||||||||||||||
30-year Fannie Mae MBS par coupon rate | 4.56 | 3.89 | 5.51 |
(1) | Interest income includes interest income on acquired credit-impaired loans, which totaled $619 million, $634 million, and $496 million for 2009, 2008, and 2007, respectively. These interest income amounts also include accretion of $405 million, $158 million, and $80 million for 2009, 2008, and 2007, respectively, relating to a portion of the fair value losses recorded upon the acquisition of the loans. | |
(2) | Includes cash equivalents. | |
(3) | Data from British Bankers’ Association, Thomson Reuters Indices and Bloomberg. |
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2009 vs. 2008 | 2008 vs. 2007 | |||||||||||||||||||||||
Total | Variance Due to:(1) | Total | Variance Due to:(1) | |||||||||||||||||||||
Variance | Volume | Rate | Variance | Volume | Rate | |||||||||||||||||||
(Dollars in millions) | ||||||||||||||||||||||||
Interest income: | ||||||||||||||||||||||||
Mortgage loans | $ | (1,171 | ) | $ | 491 | $ | (1,662 | ) | $ | 474 | $ | 1,258 | $ | (784 | ) | |||||||||
Mortgage securities | (114 | ) | 765 | (879 | ) | (708 | ) | 200 | (908 | ) | ||||||||||||||
Non-mortgage securities(2) | (1,501 | ) | (171 | ) | (1,330 | ) | (1,693 | ) | (201 | ) | (1,492 | ) | ||||||||||||
Federal funds sold and securities purchased under agreements to resell | (898 | ) | 103 | (1,001 | ) | 330 | 886 | (556 | ) | |||||||||||||||
Advances to lenders | (84 | ) | 44 | (128 | ) | (46 | ) | (132 | ) | 86 | ||||||||||||||
Total interest income | (3,768 | ) | 1,232 | (5,000 | ) | (1,643 | ) | 2,011 | (3,654 | ) | ||||||||||||||
Interest expense: | ||||||||||||||||||||||||
Short-term debt | (5,501 | ) | 76 | (5,577 | ) | (1,186 | ) | 3,873 | (5,059 | ) | ||||||||||||||
Long-term debt | (3,987 | ) | 849 | (4,836 | ) | (4,660 | ) | (2,760 | ) | (1,900 | ) | |||||||||||||
Federal funds purchased and securities sold under agreements to repurchase | (8 | ) | (6 | ) | (2 | ) | 2 | 7 | (5 | ) | ||||||||||||||
Total interest expense | (9,496 | ) | 919 | (10,415 | ) | (5,844 | ) | 1,120 | (6,964 | ) | ||||||||||||||
Net interest income | $ | 5,728 | $ | 313 | $ | 5,415 | $ | 4,201 | $ | 891 | $ | 3,310 | ||||||||||||
(1) | Combined rate/volume variances are allocated to both rate and volume based on the relative size of each variance. | |
(2) | Includes cash equivalents. |
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For the Year Ended December 31, | % Change | ||||||||||||||||||||||||||||||||||
2009 | 2008 | 2007 | 2009 vs. | 2008 vs. | |||||||||||||||||||||||||||||||
Amount | Rate | Amount | Rate | Amount | Rate | 2008 | 2007 | ||||||||||||||||||||||||||||
(Dollars in millions, rate in basis points) | |||||||||||||||||||||||||||||||||||
Guaranty fee income/average effective guaranty fee rate excluding certain fair value adjustments andbuy-up impairment | $ | 6,449 | 24 | .7 bp | $ | 7,913 | 32 | .2 bp | $ | 5,063 | 23 | .7 bp | (19 | )% | 56 | % | |||||||||||||||||||
Net change in fair value ofbuy-ups and certain guaranty assets | 787 | 3 | .0 | (18 | ) | (0 | .1) | 24 | 0 | .1 | 4,472 | (175 | ) | ||||||||||||||||||||||
Buy-up impairment | (25 | ) | (0 | .1) | (274 | ) | (1 | .1) | (16 | ) | (0 | .1) | 91 | 1,613 | |||||||||||||||||||||
Guaranty fee income/average effective guaranty fee rate | $ | 7,211 | 27 | .6 bp | $ | 7,621 | 31 | .0 bp | $ | 5,071 | 23 | .7 bp | (5 | )% | 50 | % | |||||||||||||||||||
Average outstanding Fannie Mae MBS and other guarantees | $ | 2,617,273 | $ | 2,459,383 | $ | 2,139,481 | 6 | % | 15 | % | |||||||||||||||||||||||||
Fannie Mae MBS issues | 807,853 | 542,813 | 629,607 | 49 | (14 | ) |
(1) | Guaranty fee income includes $537 million, $1.1 billion, and $603 million for 2009, 2008 and 2007, respectively, related to the accretion of deferred amounts on guarantee contracts where we recognized losses at the inception of the contract. |
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For the Year Ended December 31, | ||||||||||||||||
2009 | 2008 | 2007 | ||||||||||||||
(Dollars in millions) | ||||||||||||||||
Risk management derivatives fair value gains (losses) attributable to: | ||||||||||||||||
Net contractual interest income (expense) accruals on interest rate swaps | $ | (3,359 | ) | $ | (1,576 | ) | $ | 261 | ||||||||
Net change in fair value during the period(1) | (1,337 | ) | (13,387 | ) | (4,419 | ) | ||||||||||
Total risk management derivatives fair value losses, net | (4,696 | ) | (14,963 | ) | (4,158 | ) | ||||||||||
Mortgage commitment derivatives fair value gains (losses), net | (1,654 | ) | (453 | ) | 45 | |||||||||||
Total derivatives fair value losses, net | (6,350 | ) | (15,416 | ) | (4,113 | ) | ||||||||||
Trading securities gains (losses), net(2) | 3,744 | (7,040 | ) | (365 | ) | |||||||||||
Hedged mortgage assets gains, net(3) | — | 2,154 | — | |||||||||||||
Debt foreign exchange gains (losses), net | (173 | ) | 230 | (190 | ) | |||||||||||
Debt fair value losses, net | (32 | ) | (57 | ) | — | |||||||||||
Fair value losses, net | $ | (2,811 | ) | $ | (20,129 | ) | $ | (4,668 | ) | |||||||
2009 | 2008 | 2007 | ||||||||||||||
5-year swap interest rate: | ||||||||||||||||
As of March 31 | 2.22 | % | 3.31 | % | 4.99 | % | ||||||||||
As of June 30 | 2.97 | 4.26 | 5.50 | |||||||||||||
As of September 30 | 2.65 | 4.11 | 4.87 | |||||||||||||
As of December 31 | 2.98 | 2.13 | 4.19 |
(1) | Includes losses of approximately $104 million in 2008 that resulted from the termination of our derivative contracts with a subsidiary of Lehman Brothers. | |
(2) | Includes trading losses of $608 million in 2008 that resulted from the write-down to fair value of our investment in corporate debt securities issued by Lehman Brothers. | |
(3) | Represents adjustments to the carrying value of mortgage assets designated for hedge accounting that are attributable to changes in interest rates. |
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• | Changes in interest rates: Our derivatives, in combination with our issuances of debt securities, are intended to offset changes in the fair value of our mortgage assets, which tend to increase in value when interest rates decrease and, conversely, decrease in value when interest rates rise. Because our derivatives portfolio predominately consists of pay-fixed swaps, we typically report declines in fair value as swap interest rates decrease and increases in fair value as swap interest rates increase. | |
• | Implied interest rate volatility: Our derivatives portfolio includes option-based derivatives, which we use to economically hedge the embedded prepayment option in our mortgage investments. A key variable in estimating the fair value of option-based derivatives is implied volatility, which reflects the market’s expectation of the magnitude of future changes in interest rates. Assuming all other factors are held equal, including interest rates, a decrease in implied volatility would reduce the fair value of our derivatives and an increase in implied volatility would increase the fair value. | |
• | Changes in our derivative activity: As interest rates change, we are likely to take actions to rebalance our portfolio to manage our interest rate exposure. As interest rates decrease, expected mortgage prepayments are likely to increase, which reduces the duration of our mortgage investments. In this scenario, we generally will rebalance our existing portfolio to manage this risk by terminating pay-fixed swaps or adding receive-fixed swaps, which shortens the duration of our liabilities. Conversely, when interest rates increase and the duration of our mortgage assets increases, we are likely to rebalance our existing portfolio by adding pay-fixed swaps that have the effect of extending the duration of our liabilities. We also add derivatives in various interest rate environments to hedge the risk of incremental mortgage purchases that we are not able to accomplish solely through our issuance of debt securities. | |
• | Time value of purchased options: Intrinsic value and time value are the two primary components of an option’s price. The intrinsic value is the amount that can be immediately realized by exercising the option—the amount by which the market rate exceeds or is below the exercise, or strike rate, such that the option isin-the-money. The time value of an option is the amount by which the price of an option exceeds its intrinsic value. Time decay refers to the diminishing value of an option over time as less time remains to exercise the option. We have a significant amount of purchased options where the time value of the upfront premium we pay for these options decreases due to the passage of time relative to the expiration date of these options. |
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For the Year Ended | ||||||||||||
December 31, | ||||||||||||
2009 | 2008 | 2007 | ||||||||||
(Dollars in millions) | ||||||||||||
Provision for credit losses attributable to guaranty book of business | $ | 52,071 | $ | 25,522 | $ | 3,200 | ||||||
Provision for credit losses attributable to acquired credit-impaired loans and HomeSaver Advance fair value losses | 20,555 | 2,429 | 1,364 | |||||||||
Total provision for credit losses | 72,626 | 27,951 | 4,564 | |||||||||
Foreclosed property expense | 910 | 1,858 | 448 | |||||||||
Credit-related expenses | $ | 73,536 | $ | 29,809 | $ | 5,012 | ||||||
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As of December 31, | ||||||||||||||||||||
2009 | 2008 | 2007 | 2006 | 2005 | ||||||||||||||||
(Dollars in millions) | ||||||||||||||||||||
Changes in combined loss reserves: | ||||||||||||||||||||
Allowance for loan losses: | ||||||||||||||||||||
Beginning balance | $ | 2,923 | $ | 698 | $ | 340 | $ | 302 | $ | 349 | ||||||||||
Provision for credit losses | 9,569 | 4,022 | 658 | 174 | 124 | |||||||||||||||
Charge-offs(1) | (2,245 | ) | (1,987 | ) | (407 | ) | (206 | ) | (267 | ) | ||||||||||
Recoveries | 214 | 190 | 107 | 70 | 96 | |||||||||||||||
Ending balance(2) | $ | 10,461 | $ | 2,923 | $ | 698 | $ | 340 | $ | 302 | ||||||||||
Reserve for guaranty losses: | ||||||||||||||||||||
Beginning balance | $ | 21,830 | $ | 2,693 | $ | 519 | $ | 422 | $ | 396 | ||||||||||
Provision for credit losses | 63,057 | 23,929 | 3,906 | 415 | 317 | |||||||||||||||
Charge-offs | (31,142 | ) | (4,986 | ) | (1,782 | ) | (336 | ) | (302 | ) | ||||||||||
Recoveries | 685 | 194 | 50 | 18 | 11 | |||||||||||||||
Ending balance | $ | 54,430 | $ | 21,830 | $ | 2,693 | $ | 519 | $ | 422 | ||||||||||
Combined loss reserves: | ||||||||||||||||||||
Beginning balance | $ | 24,753 | $ | 3,391 | $ | 859 | $ | 724 | $ | 745 | ||||||||||
Provision for credit losses | 72,626 | 27,951 | 4,564 | 589 | 441 | |||||||||||||||
Charge-offs(1) | (33,387 | ) | (6,973 | ) | (2,189 | ) | (542 | ) | (569 | ) | ||||||||||
Recoveries | 899 | 384 | 157 | 88 | 107 | |||||||||||||||
Ending balance(2) | $ | 64,891 | $ | 24,753 | $ | 3,391 | $ | 859 | $ | 724 | ||||||||||
Attribution of charge-offs: | ||||||||||||||||||||
Charge-offs attributable to guaranty book of business | $ | (12,832 | ) | $ | (4,544 | ) | $ | (825 | ) | $ | (338 | ) | $ | (318 | ) | |||||
Charge-offs attributable to fair value losses on: | ||||||||||||||||||||
Credit-impaired loans acquired from MBS trusts | (20,327 | ) | (2,096 | ) | (1,364 | ) | (204 | ) | (251 | ) | ||||||||||
HomeSaver Advance loans | (228 | ) | (333 | ) | — | — | — | |||||||||||||
Total charge-offs | $ | (33,387 | ) | $ | (6,973 | ) | $ | (2,189 | ) | $ | (542 | ) | $ | (569 | ) | |||||
Allocation of combined loss reserves: | ||||||||||||||||||||
Balance at end of each period attributable to: | ||||||||||||||||||||
Single-family | $ | 62,848 | $ | 24,649 | $ | 3,318 | $ | 785 | $ | 647 | ||||||||||
Multifamily | 2,043 | 104 | 73 | 74 | 77 | |||||||||||||||
Total | $ | 64,891 | $ | 24,753 | $ | 3,391 | $ | 859 | $ | 724 | ||||||||||
Single-family and multifamily loss reserves as a percentage of applicable guaranty book of business: | ||||||||||||||||||||
Single-family | 2.16 | % | 0.88 | % | 0.13 | % | 0.03 | % | 0.03 | % | ||||||||||
Multifamily | 1.10 | 0.06 | 0.05 | 0.06 | 0.06 | |||||||||||||||
Combined loss reserves as a percentage of: | ||||||||||||||||||||
Total guaranty book of business | 2.10 | 0.83 | 0.12 | 0.04 | 0.03 | |||||||||||||||
Total nonperforming loans | 29.98 | 20.76 | 12.49 | 6.20 | 5.10 |
(1) | Includes accrued interest of $1.5 billion, $642 million, $128 million, $39 million and $24 million for 2009, 2008, 2007, 2006 and 2005, respectively. | |
(2) | Includes $726 million, $150 million, $39 million, $28 million and $22 million as of December 31, 2009, 2008, 2007, 2006 and 2005, respectively, for acquired credit-impaired loans. |
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• | An increase in nonperforming loans, delinquencies, and defaults due to the general deterioration in our guaranty book of business during both 2009 and 2008, reflecting the combination of high unemployment and the prolonged downturn in the housing market. As shown in Table 43, our conventional single-family serious delinquency rate and average default rate increased in 2009 compared with 2008. Factors contributing to these conditions include the following: |
• | Stress on a broader segment of borrowers due to the rise in unemployment and underemployment and the decline in home prices has resulted in higher delinquency rates on loans in our single-family guaranty book of business that do not have characteristics typically associated with higher risk loans. | |
• | Certain loan categories continued to contribute disproportionately to the increase in our nonperforming loans and credit losses in 2009. These categories include: loans on properties in certain Midwest states, California, Florida, Arizona and Nevada; loans originated in 2006 and 2007; and loans related to higher-risk product types, such as Alt-A loans. | |
• | The decline in home prices has also produced negative home equity for some borrowers, including the impact of existing second mortgage liens, affecting their ability to refinance or willingness to make their mortgage payments, causing higher delinquencies. | |
• | The number of loans seriously delinquent also increased due to delays in foreclosures as we require servicers to exhaust foreclosure prevention alternatives as part of our effort to keep borrowers in their homes, and new laws enacted in a number of states that lengthen the time required to complete a foreclosure. |
• | As shown in Table 43, our average loan loss severity, or average initial charge-off per default, increased primarily as a result of the decline in home prices and a higher percentage of loan charge-offs for loans that are not covered by mortgage insurance. | |
• | A greater proportion of the loans in our guaranty book of business are subject to individual impairment rather than the collective reserve for loan losses. |
• | We consider a loan to be individually impaired when, based on current information, it is probable that we will not receive all amounts due, including interest, in accordance with the contractual terms of the loan agreement. Individually impaired loans currently include, among others, those restructured in a troubled debt restructuring. Any impairment recognized on these loans is part of our provision for credit losses and allowance for loan losses. The higher levels of workouts initiated as a result of our foreclosure prevention efforts during 2009, including HAMP, increased the number individually impaired loans, especially those considered to be troubled debt restructurings. |
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As of December 31, | ||||||||||||||||||||
2009 | 2008 | 2007 | 2006 | 2005 | ||||||||||||||||
(Dollars in millions) | ||||||||||||||||||||
On-balance sheet nonperforming loans: | ||||||||||||||||||||
Nonaccrual loans | $ | 34,079 | $ | 17,634 | $ | 8,343 | $ | 5,961 | $ | 8,356 | ||||||||||
Troubled debt restructurings on accrual status | 6,922 | 1,931 | 1,765 | 1,086 | 661 | |||||||||||||||
HomeSaver Advance first-lien loans on accrual status | 866 | 1,121 | — | — | — | |||||||||||||||
Total on-balance sheet nonperforming loans | 41,867 | 20,686 | 10,108 | 7,047 | 9,017 | |||||||||||||||
Off-balance sheet nonperforming loans in unconsolidated | ||||||||||||||||||||
Fannie Mae MBS trusts: | ||||||||||||||||||||
Off-balance sheet nonperforming loans, excluding HomeSaver Advance first-lien loans(1) | 161,406 | 89,617 | 17,048 | 6,799 | 5,177 | |||||||||||||||
HomeSaver Advance first-lien loans(2) | 13,182 | 8,929 | — | — | — | |||||||||||||||
Total off-balance sheet nonperforming loans | 174,588 | 98,546 | 17,048 | 6,799 | 5,177 | |||||||||||||||
Total nonperforming loans | $ | 216,455 | $ | 119,232 | $ | 27,156 | $ | 13,846 | $ | 14,194 | ||||||||||
Accruing on-balance sheet loans past due 90 days or more(3) | $ | 612 | $ | 317 | $ | 204 | $ | 147 | $ | 185 | ||||||||||
For the Year Ended December 31, | ||||||||||||||||||||
2009 | 2008 | 2007 | 2006 | 2005 | ||||||||||||||||
(Dollars in millions) | ||||||||||||||||||||
Interest related to on-balance sheet nonperforming loans: | ||||||||||||||||||||
Interest income forgone(4) | $ | 1,341 | $ | 401 | $ | 215 | $ | 163 | $ | 184 | ||||||||||
Interest income recognized for the period(5) | 1,206 | 771 | 328 | 295 | 405 |
(1) | Represents loans that would meet our criteria for nonaccrual status if the loans had been on-balance sheet. | |
(2) | Represents all off-balance sheet first-lien loans associated with unsecured HomeSaver Advance loans, including first-lien loans that are not seriously delinquent. | |
(3) | Recorded investment of loans as of the end of each period that are 90 days or more past due and continuing to accrue interest, including loans insured or guaranteed by the U.S. government and loans where we have recourse against the seller in the event of a default. | |
(4) | Forgone interest income represents the amount of interest income that would have been recorded during the period for on-balance sheet nonperforming loans as of the end of each period had the loans performed according to their contractual terms. | |
(5) | Represents interest income recognized during the period for on-balance sheet loans classified as nonperforming as of the end of each period. |
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2009 | 2008 | |||||||||||||||||||||||||||||||
Q4 | Q3 | Q2 | Q1 | Q4 | Q3 | Q2 | Q1 | |||||||||||||||||||||||||
(Dollars in millions) | ||||||||||||||||||||||||||||||||
Number of credit-impaired loans acquired from MBS trusts | 74,739 | 62,546 | 17,580 | 12,223 | 6,124 | 3,678 | 4,618 | 10,586 | ||||||||||||||||||||||||
Average indicative market price(1) | 44 | % | 44 | % | 43 | % | 45 | % | 50 | % | 53 | % | 53 | % | 60 | % | ||||||||||||||||
Unpaid principal balance and accrued interest of loans acquired | $ | 16,364 | $ | 13,757 | $ | 3,717 | $ | 2,561 | $ | 1,286 | $ | 744 | $ | 807 | $ | 1,704 |
(1) | Calculated based on the estimated fair value at the date of acquisition of credit-impaired loans divided by the unpaid principal balance and accrued interest of these loans at the date of acquisition. The value of primary mortgage insurance is included as a component of the average market price. Beginning in 2009, we incorporated the average fair value of acquired credit-impaired multifamily loans into the calculation of our average indicative market price. We have revised the previously reported prior period amounts to reflect this change. |
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Allowance | ||||||||||||||||
Contractual | Market | for Loan | Net | |||||||||||||
Amount(1) | Discount | Losses | Investment | |||||||||||||
(Dollars in millions) | ||||||||||||||||
Balance as of December 31, 2007 | $ | 8,096 | $ | (991 | ) | $ | (39 | ) | $ | 7,066 | ||||||
Purchases of delinquent loans | 4,542 | (2,096 | ) | — | 2,446 | |||||||||||
Provision for credit losses | — | — | (184 | ) | (184 | ) | ||||||||||
Principal repayments | (648 | ) | 114 | 5 | (529 | ) | ||||||||||
Modifications and troubled debt restructurings | (3,255 | ) | 1,247 | 37 | (1,971 | ) | ||||||||||
Foreclosures, transferred to REO | (1,710 | ) | 460 | 32 | (1,218 | ) | ||||||||||
Balance as of December 31, 2008 | $ | 7,025 | $ | (1,266 | ) | $ | (149 | ) | $ | 5,610 | ||||||
Purchases of delinquent loans | 36,530 | (20,419 | ) | — | 16,111 | |||||||||||
Provision for credit losses | — | — | (691 | ) | (691 | ) | ||||||||||
Principal repayments | (68 | ) | 47 | 13 | (8 | ) | ||||||||||
Modifications and troubled debt restructurings | (18,228 | ) | 9,539 | 74 | (8,615 | ) | ||||||||||
Foreclosures, transferred to REO | (1,554 | ) | 632 | 27 | (895 | ) | ||||||||||
Balance as of December 31, 2009 | $ | 23,705 | $ | (11,467 | ) | $ | (726 | ) | $ | 11,512 | ||||||
(1) | Reflects contractually required principal and accrued interest payments that we believe are probable of collection. |
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• | We include the impact of any credit losses that ultimately result from foreclosure. | |
• | We exclude the impact of fair value losses recorded upon acquisition. | |
• | We add back to our credit losses the amount of charge-offs and foreclosed property expense that we would have recorded if we had calculated these amounts based on the acquisition cost. Because the fair value amount at acquisition was lower than the acquisition cost, any loss recorded at foreclosure is less than it would have been if we had recorded the loan at its acquisition cost. |
For the Year Ended December 31, | ||||||||||||||||||||||||
2009 | 2008 | 2007 | ||||||||||||||||||||||
Amount | Ratio(1) | Amount | Ratio(1) | Amount | Ratio(1) | |||||||||||||||||||
(Dollars in millions) | ||||||||||||||||||||||||
Charge-offs, net of recoveries | $ | 32,488 | 106.7 | bp | $ | 6,589 | 22.9 | bp | $ | 2,032 | 8.0 | bp | ||||||||||||
Foreclosed property expense | 910 | 3.0 | 1,858 | 6.5 | 448 | 1.8 | ||||||||||||||||||
Credit losses including the effect of fair value losses on credit-impaired loans acquired from MBS trusts and | ||||||||||||||||||||||||
HomeSaver Advance loans | 33,398 | 109.7 | 8,447 | 29.4 | 2,480 | 9.8 | ||||||||||||||||||
Less: Fair value losses resulting from acquired credit-impaired loans and HomeSaver Advance loans | (20,555 | ) | (67.5 | ) | (2,429 | ) | (8.4 | ) | (1,364 | ) | (5.4 | ) | ||||||||||||
Plus: Impact of acquired credit-impaired loans on charge-offs and foreclosed property expense | 739 | 2.4 | 501 | 1.7 | 223 | 0.9 | ||||||||||||||||||
Credit losses and credit loss ratio | $ | 13,582 | 44.6 | bp | $ | 6,519 | 22.7 | bp | $ | 1,339 | 5.3 | bp | ||||||||||||
Credit losses attributable to: | ||||||||||||||||||||||||
Single-family | $ | 13,362 | $ | 6,467 | $ | 1,331 | ||||||||||||||||||
Multifamily | 220 | 52 | 8 | |||||||||||||||||||||
Total | $ | 13,582 | $ | 6,519 | $ | 1,339 | ||||||||||||||||||
(1) | Based on the amount for each line item presented divided by the average guaranty book of business during the period. |
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Percentage of | ||||||||||||||||||||||||
Single-Family Conventional Guaranty Book | Percentage of Single-Family Credit Losses | |||||||||||||||||||||||
of Business Outstanding(1) | For the Year Ended | |||||||||||||||||||||||
As of December 31, | December 31, | |||||||||||||||||||||||
2009 | 2008 | 2007 | 2009 | 2008 | 2007 | |||||||||||||||||||
Geographical distribution: | ||||||||||||||||||||||||
Arizona, California, Florida and Nevada | 28 | % | 27 | % | 27 | % | 57 | % | 49 | % | 15 | % | ||||||||||||
Illinois, Indiana, Michigan and Ohio | 11 | 11 | 12 | 15 | 21 | 47 | ||||||||||||||||||
All other states | 61 | 62 | 61 | 28 | 30 | 38 | ||||||||||||||||||
Select higher risk product features(2) | 24 | 28 | 29 | 69 | 75 | 58 | ||||||||||||||||||
Vintages: | ||||||||||||||||||||||||
2006 | 11 | 14 | 17 | 31 | 35 | 21 | ||||||||||||||||||
2007 | 15 | 20 | 21 | 36 | 28 | 2 | ||||||||||||||||||
All other vintages | 74 | 66 | 62 | 33 | 37 | 77 |
(1) | Calculated based on the unpaid principal balance of loans, where we have detailed loan-level information, for each category divided by the unpaid principal balance of our single-family conventional guaranty book of business. | |
(2) | Includes Alt-A loans, subprime loans, interest-only loans, loans with originalloan-to-value ratio greater than 90%, and loans with FICO credit scores less than 620. |
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As of December 31, | ||||||||
2009 | 2008 | |||||||
(Dollars in millions) | ||||||||
Gross single-family credit loss sensitivity | $ | 18,311 | $ | 13,232 | ||||
Less: Projected credit risk sharing proceeds | (2,533 | ) | (3,478 | ) | ||||
Net single-family credit loss sensitivity | $ | 15,778 | $ | 9,754 | ||||
Outstanding single-family whole loans and Fannie Mae MBS | $ | 2,830,004 | $ | 2,724,253 | ||||
Single-family net credit loss sensitivity as a percentage of outstanding single-family whole loans and Fannie Mae MBS | 0.56 | % | 0.36 | % |
(1) | Represents total economic credit losses, which consist of credit losses and forgone interest. Calculations are based on approximately 97% of our total single-family guaranty book of business as of both December 31, 2009 and 2008. The mortgage loans and mortgage-related securities that are included in these estimates consist of: (a) single-family Fannie Mae MBS (whether held in our mortgage portfolio or held by third parties), excluding certain whole loan REMICs and private-label wraps; (b) single-family mortgage loans, excluding mortgages secured only by second liens, subprime mortgages, manufactured housing chattel loans and reverse mortgages; and (c) long-term standby commitments. We expect the inclusion in our estimates of the excluded products may impact the estimated sensitivities set forth in this table. |
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For the Year | ||||
Ended | ||||
December 31, | ||||
2009 | ||||
(Dollars in millions) | ||||
Impairments(2) | $ | 15,777 | ||
Fair value losses on credit-impaired loans acquired from MBS trusts(3) | 10,637 | |||
Total | $ | 26,414 | ||
Loans entered into a trial modification under the program | 333,300 | |||
Credit-impaired loans in trial modifications under the program acquired from MBS trusts | 83,700 |
(1) | Includes amounts for loans that entered into a trial modification under the program but that have not yet received, or that have been determined to be ineligible for, a permanent modification under the program, including loans that entered into a trial modification prior to December 31, 2009, but were reported from servicers to us subsequent to that date. Some of these ineligible loans have since been modified outside of the program. | |
(2) | Impairments consist of (a) impairments recognized on loans accounted for as loans restructured in a troubled debt restructuring and (b) incurred credit losses on loans in MBS trusts that have entered into a trial modification and been individually assessed for incurred credit losses. | |
(3) | These fair value losses are recorded as charge-offs against the “Reserve for guaranty losses” and have the effect of increasing the provision for credit losses in our consolidated statement of operations. |
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For the Year Ended December 31, | ||||||||||||
2009 | 2008 | 2007 | ||||||||||
(Dollars in millions) | ||||||||||||
Net revenues:(1) | ||||||||||||
Single-Family | $ | 8,784 | $ | 9,434 | $ | 7,062 | ||||||
Housing and Community Development | 582 | 476 | 425 | |||||||||
Capital Markets | 13,128 | 7,526 | 3,718 | |||||||||
Total | $ | 22,494 | $ | 17,436 | $ | 11,205 | ||||||
Net income (loss): | ||||||||||||
Single-Family | $ | (63,798 | ) | $ | (27,101 | ) | $ | (858 | ) | |||
Housing and Community Development | (9,028 | ) | (2,189 | ) | 157 | |||||||
Capital Markets | 857 | (29,417 | ) | (1,349 | ) | |||||||
Total | $ | (71,969 | ) | $ | (58,707 | ) | $ | (2,050 | ) | |||
As of December 31, | ||||||||||||
2009 | 2008 | 2007 | ||||||||||
(Dollars in millions) | ||||||||||||
Total assets: | ||||||||||||
Single-Family | $ | 19,991 | $ | 24,115 | $ | 23,356 | ||||||
Housing and Community Development | 5,698 | 10,994 | 15,094 | |||||||||
Capital Markets | 843,452 | 877,295 | 840,939 | |||||||||
Total | $ | 869,141 | $ | 912,404 | $ | 879,389 | ||||||
(1) | Includes net interest income, guaranty fee income, trust management income, and fee and other income. |
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For the Year Ended December 31, | Variance | |||||||||||||||||||
2009 | 2008 | 2007 | 2009 vs. 2008 | 2008 vs. 2007 | ||||||||||||||||
(Dollars in millions) | ||||||||||||||||||||
Statement of operations data:(1) | ||||||||||||||||||||
Guaranty fee income | $ | 8,002 | $ | 8,390 | $ | 5,816 | $ | (388 | ) | $ | 2,574 | |||||||||
Trust management income | 39 | 256 | 553 | (217 | ) | (297 | ) | |||||||||||||
Other income(2) | 741 | 716 | 629 | 25 | 87 | |||||||||||||||
Losses on certain guaranty contracts | — | — | (1,387 | ) | — | 1,387 | ||||||||||||||
Credit-related expenses(3) | (71,320 | ) | (29,725 | ) | (5,003 | ) | (41,595 | ) | (24,722 | ) | ||||||||||
Other expenses(4) | (2,635 | ) | (1,950 | ) | (1,928 | ) | (685 | ) | (22 | ) | ||||||||||
Loss before federal income taxes | (65,173 | ) | (22,313 | ) | (1,320 | ) | (42,860 | ) | (20,993 | ) | ||||||||||
Benefit (provision) for federal income taxes | 1,375 | (4,788 | ) | 462 | 6,163 | (5,250 | ) | |||||||||||||
Net loss attributable to Fannie Mae | $ | (63,798 | ) | $ | (27,101 | ) | $ | (858 | ) | $ | (36,697 | ) | $ | (26,243 | ) | |||||
Other key performance data: | ||||||||||||||||||||
Average single-family guaranty book of business | $ | 2,864,759 | $ | 2,715,606 | $ | 2,406,422 | $ | 149,153 | $ | 309,184 |
(1) | Certain prior period amounts have been reclassified to conform with the current period presentation. | |
(2) | Consists of net interest income, investment gains and losses, and fee and other income. | |
(3) | Consists of the provision for credit losses and foreclosed property expense. | |
(4) | Consists of administrative expenses and other expenses. |
• | A decrease in guaranty fee income, due to a decrease in our average effective guaranty fee rate partially offset by growth in the average single-family guaranty book of business. |
• | The decrease in our average effective guaranty fee rate was primarily attributable to lower amortization of deferred revenue in 2009 as the sharp decline in interest rates in 2008 generated an acceleration of deferred amounts. This decline was partially offset by a higher fair value adjustment on ourbuy-ups and certain guaranty assets recorded during 2009 due to increased market prices on interest only-strips. | |
• | Our average single-family guaranty book of business increased by 5.5% in 2009 over 2008. We experienced an increase in our average outstanding Fannie Mae MBS and other guarantees as our market share of new single-family mortgage-related securities issuances remained high and new MBS issuances outpaced liquidations. Our estimated market share of new single-family mortgage-related securities issuances, which is based on publicly available data and excludes previously securitized mortgages, increased to 46.3% for 2009 from 45.4% for 2008. | |
• | The average charged guaranty fee on our new single-family business for 2009 was 23.8 basis points compared with 28.0 basis points in 2008. The average charged guaranty fee represents the average contractual fee rate for our single-family guaranty arrangements plus the recognition of any upfront cash payments ratably over an estimated average life. The decrease in the average charged fee was primarily the result of a reduction in our acquisition of loans with higher risk, higher fee categories such as higher LTV and lower FICO scores due to (1) changes in our underwriting and eligibility standards; (2) changes in the eligibility standards of the mortgage insurance companies; and (3) the increased presence of FHA in the higher-LTV market. | |
• | In October 2008, we canceled a planned 25 basis point increase in our adverse market delivery charge on new Single-Family business. If we had not cancelled the planned fee increase, we would have collected, based on our 2009 volumes, approximately $1.7 billion in additional adverse market delivery fees in 2009. These fees would have been deferred and amortized into income over the expected life of |
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our guaranty. We estimate that approximately $200 million of the $1.7 billion would have been recognized into our 2009 consolidated statement of operations. |
• | A substantial increase in credit-related expenses, reflecting a significantly higher incremental provision for credit losses as well as higher charge-offs. |
• | The increase in credit-related expenses was due to worsening credit performance trends, including significant increases in delinquencies, defaults and loss severities, throughout our guaranty book of business, reflecting the adverse impact of the decline in home prices, the weak economy and high unemployment. Certain higher risk loan categories, loan vintages and loans within certain states that have had the greatest home price depreciation from their peaks continue to account for a disproportionate share of our credit losses, but we are also experiencing deterioration in the credit performance of loans with fewer risk layers. In addition, the increased level of troubled debt restructurings, particularly through workouts initiated as part of our foreclosure prevention efforts, increased the number of loans that were individually impaired, contributing to the increase in the provision for credit losses. | |
• | We also experienced a significant increase in fair value losses on credit-impaired loans acquired from MBS trusts for the purpose of modifying them during 2009, reflecting the increase in the number of delinquent loans acquired from MBS trusts, and the decrease in the estimated fair value of these loans compared with 2008. | |
• | Credit-related expenses in the Single-Family business represent the substantial majority of the company’s total credit-related expenses. We provide additional information on total credit-related expenses in “Consolidated Results of Operations—Credit-Related Expenses.” |
• | The net tax benefit recognized in 2009 was attributable to our ability to carry back current year tax losses to previous tax years. We recorded a valuation allowance for the majority of the tax benefits associated with the pre-tax losses recognized in 2009 that we were unable to carry back to previous tax years as there has been no change in the conclusion we reached in 2008 that it was more likely than not that we would not generate sufficient taxable income in the foreseeable future to realize all of the tax benefits generated from these losses. We recorded a non-cash charge in 2008 to establish a partial deferred tax asset valuation allowance against our net deferred tax assets. |
• | Increased guaranty fee income, primarily attributable to an increase in the average effective guaranty fee rate, coupled with growth in the average single-family guaranty book of business. |
• | The average effective single-family guaranty fee rate increased to 30.9 basis points in 2008, from 24.2 basis points in 2007. The growth in our average effective single-family guaranty fee rate during 2008 was primarily driven by the accelerated recognition of deferred amounts into income, as interest rates fell significantly during 2008, resulting in higher expected prepayment rates. Our average effective guaranty fee rate for 2008 also reflected the impact of guaranty fee pricing changes we implemented to address the current risks in the housing market and a shift in the composition of our new business to a greater proportion of higher-quality, lower risk and lower guaranty fee mortgages. The combined effect of these changes resulted in a reduction in the average charged guaranty fee on new single-family business to 28.0 basis points in 2008, from 28.6 basis points for 2007. | |
• | Our average single-family guaranty book of business increased by 13% in 2008 reflecting a significant increase in our market share. Our estimated market share of new single-family mortgage-related securities issuances, which is based on publicly available data and excludes previously securitized mortgages, increased to 45.4% for 2008, from 33.9% for 2007. |
• | A substantial increase in credit-related expenses, reflecting a significantly higher incremental provision for credit losses as well as higher charge-offs due to worsening credit performance trends, including significant increases in delinquencies, defaults and loss severities, particularly in certain higher risk loan |
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categories and vintages and certain states. We also experienced an increase in fair value losses on credit-impaired loans in 2008. |
• | A non-cash charge in 2008 to establish a partial deferred tax asset valuation allowance against our net deferred tax assets. As a result of the partial deferred tax valuation allowance, we did not record tax benefits for the majority of the losses we incurred during 2008. The allocation of this charge to our Single-Family business resulted in a provision for federal income taxes of $4.8 billion for 2008, compared with a tax benefit of $462 million for 2007. |
For the Year Ended December 31, | Variance | |||||||||||||||||||
2009 | 2008 | 2007 | 2009 vs. 2008 | 2008 vs. 2007 | ||||||||||||||||
(Dollars in millions) | ||||||||||||||||||||
Statement of operations data:(1) | ||||||||||||||||||||
Guaranty fee income | $ | 675 | $ | 633 | $ | 470 | $ | 42 | $ | 163 | ||||||||||
Other income(2) | 100 | 186 | 359 | (86 | ) | (173 | ) | |||||||||||||
Losses on partnership investments | (6,735 | ) | (1,554 | ) | (1,005 | ) | (5,181 | ) | (549 | ) | ||||||||||
Credit-related expenses(3) | (2,216 | ) | (84 | ) | (9 | ) | (2,132 | ) | (75 | ) | ||||||||||
Other expenses(4) | (594 | ) | (880 | ) | (1,188 | ) | 286 | 308 | ||||||||||||
Loss before federal income taxes | (8,770 | ) | (1,699 | ) | (1,373 | ) | (7,071 | ) | (326 | ) | ||||||||||
Benefit (provision) for federal income taxes | (311 | ) | (511 | ) | 1,509 | 200 | (2,020 | ) | ||||||||||||
Net income (loss) | (9,081 | ) | (2,210 | ) | 136 | (6,871 | ) | (2,346 | ) | |||||||||||
Less: Net loss attributable to the noncontrolling interest | 53 | 21 | 21 | 32 | — | |||||||||||||||
Net income (loss) attributable to Fannie Mae | $ | (9,028 | ) | $ | (2,189 | ) | $ | 157 | $ | (6,839 | ) | $ | (2,346 | ) | ||||||
Other key performance data: | ||||||||||||||||||||
Average multifamily guaranty book of business | $ | 179,315 | $ | 161,722 | $ | 131,375 | $ | 17,593 | $ | 30,347 |
(1) | Certain prior period amounts have been reclassified to conform to the current period presentation. | |
(2) | Consists of trust management income and fee and other income. | |
(3) | Consists of the provision for credit losses and foreclosed property expense. | |
(4) | Consists of net interest expense, losses on certain guaranty contracts, administrative expenses and other expenses. |
• | An increase in guaranty fee income, which was primarily attributable to growth in the average multifamily guaranty book of business. The increase in the average multifamily guaranty book of business reflected the investment and liquidity we have been providing to the multifamily mortgage market. Compared with 2008, during 2009 there was also an increase in the average charged guaranty fee rate, which was offset by lower guaranty-related amortization income. | |
• | We recorded $5.0 billion ofother-than-temporary impairment on our LIHTC investments during the fourth quarter of 2009. We provide further discussion of losses from partnership investments, including details regardingother-than-temporary impairments of these assets, in “Consolidated Results of Operations—Losses from Partnership Investments.” | |
• | An increase in credit-related expenses largely reflecting the increase in our multifamily combined loss reserves to $2.0 billion, or 1.10% of our multifamily guaranty book of business, as of December 31, 2009 from $104 million, or 0.06% of our multifamily guaranty book of business as of December 31, 2008. The increase in the multifamily reserve was driven by several factors including higher severity, deterioration in |
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some large loans, lower property values, and weaker financial results from borrowers, all of which are a reflection of the weak economy. Net charge-offs and foreclosed property expenses totaled $220 million in 2009 compared with $52 million in 2008. |
• | The net tax provision recognized in 2009 was attributable to the reversal of the use of certain tax credits, net of our ability to carryback current tax losses. In addition, we recorded a valuation allowance for all of the tax benefits associated with the tax credits generated by our partnership investments in 2009. We recorded a non-cash charge in 2008 to establish a partial deferred tax asset valuation allowance against our net deferred tax assets. |
• | Increased guaranty fee income, attributable to growth in the average multifamily guaranty book of business, an increase in the average effective multifamily guaranty fee rate and the accelerated amortization of our deferred guaranty obligation due to the decline in interest rates. The increases in our book of business and guaranty fee rate reflected the increased investment and liquidity that we provided to the multifamily mortgage market in 2008. | |
• | A decrease in other income, primarily attributable to lower multifamily fees due to a reduction in multifamily loan prepayments during 2008. | |
• | An increase in losses on partnership investments. We discuss details on losses from partnership investments in “Consolidated Results of Operations—Losses from Partnership Investments.” | |
• | A non-cash charge in 2008 to establish a partial deferred tax asset valuation allowance against our net deferred tax assets. As a result of the partial deferred tax valuation allowance, we did not record tax benefits for the majority of the losses we incurred during 2008. The allocation of this charge to our HCD business largely resulted in a provision for federal income taxes of $511 million for 2008. In comparison, we recorded a tax benefit of $1.5 billion for 2007, driven by tax credits of $1.0 billion. |
For the Year Ended December 31, | Variance | |||||||||||||||||||
2009 | 2008 | 2007 | 2009 vs. 2008 | 2008 vs. 2007 | ||||||||||||||||
(Dollars in millions) | ||||||||||||||||||||
Statement of operations data:(1) | ||||||||||||||||||||
Net interest income | $ | 14,275 | $ | 8,664 | $ | 4,620 | $ | 5,611 | $ | 4,044 | ||||||||||
Investment gains (losses), net | 1,460 | (174 | ) | 11 | 1,634 | (185 | ) | |||||||||||||
Netother-than-temporary impairments | (9,861 | ) | (6,974 | ) | (814 | ) | (2,887 | ) | (6,160 | ) | ||||||||||
Fair value losses, net | (2,811 | ) | (20,129 | ) | (4,668 | ) | 17,318 | (15,461 | ) | |||||||||||
Fee and other income, net | 319 | 264 | 313 | 55 | (49 | ) | ||||||||||||||
Other expenses(2) | (2,446 | ) | (2,209 | ) | (1,916 | ) | (237 | ) | (293 | ) | ||||||||||
Income (loss) before federal income taxes and extraordinary losses, net of tax effect | 936 | (20,558 | ) | (2,454 | ) | 21,494 | (18,104 | ) | ||||||||||||
Benefit (provision) for federal income taxes | (79 | ) | (8,450 | ) | 1,120 | 8,371 | (9,570 | ) | ||||||||||||
Extraordinary losses, net of tax effect | — | (409 | ) | (15 | ) | 409 | (394 | ) | ||||||||||||
Net income (loss) attributable to Fannie Mae | $ | 857 | $ | (29,417 | ) | $ | (1,349 | ) | $ | 30,274 | $ | (28,068 | ) | |||||||
(1) | Certain prior period amounts have been reclassified to conform to the current period presentation. | |
(2) | Consists of debt extinguishment losses, allocated guaranty fee expense, administrative expenses and other expenses. |
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• | An increase in net interest income, primarily attributable to an expansion of our net interest yield driven by a reduction in the average cost of our debt that more than offset a decline in the average yield on our interest-earning assets. |
• | The significant reduction in the average cost of our debt during 2009 compared with 2008 was primarily attributable to a decline in borrowing rates as we replaced higher cost debt with lower cost debt. | |
• | Our net interest income does not include the effect of the periodic net contractual interest accruals on our interest rate swaps totaling $3.4 billion in 2009, compared with $1.6 billion in 2008. These amounts are included in derivatives gains (losses) and reflected in our consolidated statements of operations as a component of “Fair value gains (losses), net.” |
• | A substantial decrease in fair value losses. We discuss our fair value losses in “Consolidated Results of Operations—Fair Value Gains (Losses), Net.” | |
• | The shift to investment gains in 2009 compared with investment losses in 2008 was primarily attributable to: (1) an increase in gains on portfolio securitizations as we increased our MBS issuance volumes and sales related to whole loan conduit activity; and (2) an increase in realized gains on sales ofavailable-for-sale securities as tightening of investment spreads on agency MBS led to higher sale prices. These gains were partially offset by an increase in lower of cost or fair value adjustments on loans, primarily driven by a decline in the credit quality of these loans and an increase in interest rates. | |
• | An increase in netother-than-temporary impairment during 2009. We discuss net-other-than-temporary impairment in “Consolidated Results of Operations—NetOther-Than-Temporary Impairment.” | |
• | We recorded a non-cash charge in 2008 to establish a partial deferred tax asset valuation allowance against our net deferred tax assets. |
• | An increase in net interest income, primarily attributable to an expansion of our net interest yield driven by a reduction in the average cost of our debt that more than offset a decline in the average yield on our interest-earning assets. The decrease in the average cost of our debt was due to the decline in short-term interest rates during 2008 and a shift in our funding mix to more short-term debt. The reversal of accrued interest expense on step-rate debt that we paid off during 2008 also reduced the average cost of our debt. The increase in our net interest income does not reflect the impact of a significant increase in the net contractual interest expense on our interest rate swaps. | |
• | A substantial increase in fair value losses. We discuss details on our fair value losses in “Consolidated Results of Operations-Fair Value Gains (Losses), Net.” | |
• | An increase in netother-than-temporary impairment during 2008. We discuss details on net-other-than-temporary impairment in “Consolidated Results ofOperations-NetOther-Than-Temporary Impairment.” | |
• | A non-cash charge in 2008 to establish a partial deferred tax asset valuation allowance against our net deferred tax assets. As a result of the partial deferred tax valuation allowance, we did not record tax benefits for the majority of the losses we incurred during 2008. The allocation of this charge to our Capital Markets group resulted in a provision for federal income taxes of $8.5 billion for 2008, compared with a tax benefit of $1.1 billion for 2007. |
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Purchases(2) | Sales | Liquidations(3) | ||||||||||||||||||||||
2009 | 2008 | 2009 | 2008 | 2009 | 2008 | |||||||||||||||||||
(Dollars in millions) | ||||||||||||||||||||||||
Mortgage loans: | ||||||||||||||||||||||||
Fixed-rate: | ||||||||||||||||||||||||
Long-term | $ | 129,472 | $ | 72,956 | $ | — | $ | — | $ | 41,182 | $ | 22,913 | ||||||||||||
Intermediate-term(4) | 27,444 | 30,004 | — | — | 13,804 | 10,797 | ||||||||||||||||||
Total fixed-rate loans | 156,916 | 102,960 | — | — | 54,986 | 33,710 | ||||||||||||||||||
Adjustable-rate loans | 6,825 | 14,313 | — | — | 9,787 | 9,447 | ||||||||||||||||||
Total mortgage loans | 163,741 | 117,273 | — | — | 64,773 | 43,157 | ||||||||||||||||||
Mortgage securities: | ||||||||||||||||||||||||
Fixed-rate: | ||||||||||||||||||||||||
Long-term | 154,735 | 50,509 | 195,757 | 33,595 | 40,299 | 21,137 | ||||||||||||||||||
Intermediate-term(5) | 5,595 | 11,970 | 22,167 | 6,734 | 7,000 | 4,716 | ||||||||||||||||||
Total fixed-rate securities | 160,330 | 62,479 | 217,924 | 40,329 | 47,299 | 25,853 | ||||||||||||||||||
Adjustable-rate securities | 1,232 | 14,794 | 825 | 2,711 | 13,794 | 17,091 | ||||||||||||||||||
Total mortgage securities | 161,562 | 77,273 | 218,749 | 43,040 | 61,093 | 42,944 | ||||||||||||||||||
Total mortgage portfolio | $ | 325,303 | $ | 194,546 | $ | 218,749 | $ | 43,040 | $ | 125,866 | $ | 86,101 | ||||||||||||
Annual liquidation rate | 16.3 | % | 11.5 | % |
(1) | Amounts represent unpaid principal balance and exclude unamortized premiums, discounts and other cost basis adjustments. | |
(2) | Excludes advances to lenders and mortgage-related securities acquired through the extinguishment of debt. | |
(3) | Includes scheduled repayments, prepayments, foreclosures and lender repurchases. | |
(4) | Consists of mortgage loans with contractual maturities at purchase equal to or less than 15 years. | |
(5) | Consists of mortgage securities with maturities at issue date equal to or less than 15 years. |
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As of December 31, | ||||||||
2009 | 2008 | |||||||
(Dollars in millions) | ||||||||
Mortgage loans:(2) | ||||||||
Single-family: | ||||||||
Government insured or guaranteed(3)(4) | $ | 52,399 | $ | 43,799 | ||||
Conventional: | ||||||||
Long-term, fixed-rate | 179,654 | 186,550 | ||||||
Intermediate-term, fixed-rate(5) | 29,474 | 37,546 | ||||||
Adjustable-rate(6) | 34,602 | 44,157 | ||||||
Total conventional single-family | 243,730 | 268,253 | ||||||
Total single-family | 296,129 | 312,052 | ||||||
Multifamily: | ||||||||
Government insured or guaranteed(3) | 585 | 699 | ||||||
Conventional: | ||||||||
Long-term, fixed-rate | 5,727 | 5,636 | ||||||
Intermediate-term, fixed-rate(5) | 91,760 | 90,837 | ||||||
Adjustable-rate | 22,342 | 20,269 | ||||||
Total conventional multifamily | 119,829 | 116,742 | ||||||
Total multifamily | 120,414 | 117,441 | ||||||
Total mortgage loans | 416,543 | 429,493 | ||||||
Unamortized premiums and other cost basis adjustments, net | (11,168 | ) | (894 | ) | ||||
Lower of cost or market adjustments on loans held for sale | (889 | ) | (264 | ) | ||||
Allowance for loan losses for loans held for investment | (10,461 | ) | (2,923 | ) | ||||
Total mortgage loans, net | 394,025 | 425,412 | ||||||
Mortgage-related securities: | ||||||||
Fannie Mae | 220,245 | 228,949 | ||||||
Freddie Mac | 41,390 | 33,383 | ||||||
Ginnie Mae | 1,277 | 1,518 | ||||||
Alt-A | 24,505 | 27,858 | ||||||
Subprime | 20,527 | 24,551 | ||||||
CMBS | 25,703 | 25,825 | ||||||
Mortgage revenue bonds | 14,453 | 15,447 | ||||||
Other mortgage-related securities | 4,609 | 5,172 | ||||||
Total mortgage-related securities | 352,709 | 362,703 | ||||||
Market value adjustments(7) | (5,275 | ) | (15,996 | ) | ||||
Other-than-temporary impairments, net of accretion | (7,835 | ) | (7,349 | ) | ||||
Unamortized discounts and other cost basis adjustments, net(8) | 1,186 | 296 | ||||||
Total mortgage-related securities, net | 340,785 | 339,654 | ||||||
Mortgage portfolio, net(9) | $ | 734,810 | $ | 765,066 | ||||
(1) | Mortgage loans and mortgage-related securities are reported at unpaid principal balance. Certain prior period amounts have been reclassified to conform with the current period presentation. | |
(2) | Mortgage loans include unpaid principal balances totaling $147.0 billion and $65.8 billion as of December 31, 2009 and 2008, respectively, related to mortgage-related securities that were held in consolidated variable interest entities |
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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. | ||
(3) | Refers to mortgage loans that are guaranteed or insured by the U.S. government or its agencies, such as the VA, FHA or the Rural Development Housing and Community Facilities Program of the Department of Agriculture. | |
(4) | Includes reverse mortgages with an outstanding unpaid principal balance of $49.9 billion and $41.2 billion as of December 31, 2009 and 2008, respectively. | |
(5) | Intermediate-term, fixed-rate consists of mortgage loans with contractual maturities at purchase equal to or less than 15 years. | |
(6) | Includes reverse mortgages with an outstanding unpaid principal balance of $327 million and $353 million as of December 31, 2009 and 2008, respectively. | |
(7) | Includes unrealized gains and losses on mortgage-related securities and securities commitments classified as trading and available for sale. | |
(8) | Includes the impact ofother-than-temporary impairments of cost basis adjustments. | |
(9) | Includes consolidated mortgage-related assets acquired through the assumption of debt. Also includes $3.0 billion and $720 million as of December 31, 2009 and 2008, respectively, of mortgage loans and mortgage-related securities that we have pledged as collateral and that counterparties have the right to sell or repledge. |
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As of December 31, 2009 | ||||||||||||||||||||||||||||||||||||||||
After One Year | After Five Years | |||||||||||||||||||||||||||||||||||||||
Total | Total | One Year or Less | Through Five Years | Through Ten Years | After Ten Years | |||||||||||||||||||||||||||||||||||
Amortized | Fair | Amortized | Fair | Amortized | Fair | Amortized | Fair | Amortized | Fair | |||||||||||||||||||||||||||||||
Cost | Value | Cost | Value | Cost | Value | Cost | Value | Cost | Value | |||||||||||||||||||||||||||||||
(Dollars in millions) | ||||||||||||||||||||||||||||||||||||||||
Fannie Mae | $ | 148,074 | $ | 154,419 | $ | 20 | $ | 21 | $ | 681 | $ | 718 | $ | 21,743 | $ | 22,719 | $ | 125,630 | $ | 130,961 | ||||||||||||||||||||
Freddie Mac | 26,281 | 27,469 | 25 | 25 | 62 | 64 | 1,738 | 1,822 | 24,456 | 25,558 | ||||||||||||||||||||||||||||||
Ginnie Mae | 1,253 | 1,353 | — | — | — | — | 5 | 5 | 1,248 | 1,348 | ||||||||||||||||||||||||||||||
Alt-A | 17,836 | 14,150 | — | — | — | — | 351 | 332 | 17,485 | 13,818 | ||||||||||||||||||||||||||||||
Subprime | 13,232 | 10,746 | — | — | — | — | — | — | 13,232 | 10,746 | ||||||||||||||||||||||||||||||
CMBS | 15,797 | 13,193 | — | — | 375 | 366 | 15,057 | 12,584 | 365 | 243 | ||||||||||||||||||||||||||||||
Mortgage revenue bonds | 13,679 | 12,846 | 29 | 29 | 377 | 388 | 822 | 823 | 12,451 | 11,606 | ||||||||||||||||||||||||||||||
Other mortgage-related securities | 4,225 | 3,552 | — | — | — | — | — | 21 | 4,225 | 3,531 | ||||||||||||||||||||||||||||||
Total | $ | 240,377 | $ | 237,728 | $ | 74 | $ | 75 | $ | 1,495 | $ | 1,536 | $ | 39,716 | $ | 38,306 | $ | 199,092 | $ | 197,811 | ||||||||||||||||||||
Yield(1) | 5.67 | % | 12.13 | % | 5.29 | % | 5.37 | % | 5.73 | % |
(1) | Yields are determined by dividing interest income (including the amortization and accretion of premiums, discounts and other cost basis adjustments) by amortized cost balances of year-end. |
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Table 24: | Investments in Private-Label Mortgage-Related Securities (Excluding Wraps), CMBS, and Mortgage Revenue Bonds |
As of December 31, 2009 | As of February 24, 2010 | |||||||||||||||||||||||
Unpaid | Average | % Below | ||||||||||||||||||||||
Principal | Credit | % AA | Investment | Current % | ||||||||||||||||||||
Balance | Enhancement(1) | % AAA(2) | to BBB-(2) | Grade(2) | Watchlist(3) | |||||||||||||||||||
(Dollars in millions) | ||||||||||||||||||||||||
Private-label mortgage-related securities backed by: | ||||||||||||||||||||||||
Alt-A mortgage loans: | ||||||||||||||||||||||||
Option ARM Alt-A mortgage loans | $ | 6,099 | 49 | % | — | % | 20 | % | 80 | % | 40 | % | ||||||||||||
Other Alt-A mortgage loans | 18,406 | 12 | 17 | 25 | 58 | 16 | ||||||||||||||||||
Total Alt-A mortgage loans | 24,505 | |||||||||||||||||||||||
Subprime mortgage loans(4) | 20,527 | 31 | 11 | 7 | 82 | 30 | ||||||||||||||||||
Total Alt-A and subprime mortgage loans | 45,032 | |||||||||||||||||||||||
Manufactured housing mortgage loans | 2,485 | 35 | 2 | 19 | 79 | — | ||||||||||||||||||
Other mortgage loans | 2,124 | 6 | 54 | 25 | 21 | — | ||||||||||||||||||
Total private-label mortgage-related securities | 49,641 | |||||||||||||||||||||||
CMBS | 25,703 | 30 | 34 | 66 | — | — | ||||||||||||||||||
Mortgage revenue bonds | 14,453 | 37 | 33 | 57 | 10 | 2 | ||||||||||||||||||
Total | $ | 89,797 | ||||||||||||||||||||||
(1) | Average credit enhancement percentage reflects both subordination and financial guarantees. Reflects the ratio of the current amount of the securities that will incur losses in the securitization structure before any losses are allocated to securities that we own. Percentage generally calculated based on the quotient of the total unpaid principal balance of all credit enhancement in the form of subordination of the security divided by the total unpaid principal balance of all of the tranches of collateral pools from which credit support is drawn for the security that we own. Bonds that are guaranteed by third parties are deemed to be 100%. | |
(2) | Represents the lowest rating of the four credit rating agencies as of February 24, 2010, calculated based on unpaid principal balance as of December 31, 2009. Investment securities that have a credit rating below BBB- or its equivalent or that have not been rated are classified as below investment grade. | |
(3) | Reflects percentage of investment securities, calculated based on unpaid principal balance as of December 31, 2009, that are under review for further downgrade by the four rating agencies. | |
(4) | Excludes resecuritizations, or wraps, of private-label securities backed by subprime loans that we have guaranteed and hold in our mortgage portfolio. These wraps totaled $5.9 billion as of December 31, 2009. |
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Table 25: | Analysis of Losses on Alt-A and Subprime Private-Label Mortgage-Related Securities (Excluding Wraps)(1) |
As of December 31, 2009 | ||||||||||||||||||||
Unpaid | Total | |||||||||||||||||||
Principal | Fair | Cumulative | Noncredit | Net | ||||||||||||||||
Balance | Value | Losses(2) | Component(3) | Losses(4) | ||||||||||||||||
(Dollars in millions) | ||||||||||||||||||||
Trading securities: | ||||||||||||||||||||
Alt-A private-label securities | $ | 3,303 | $ | 1,355 | $ | (1,938 | ) | $ | (791 | ) | $ | (1,147 | ) | |||||||
Subprime private-label securities | 3,007 | 1,780 | (1,227 | ) | (371 | ) | (856 | ) | ||||||||||||
Total Alt-A and subprime private-label securities classified as trading | $ | 6,310 | $ | 3,135 | $ | (3,165 | ) | $ | (1,162 | ) | $ | (2,003 | ) | |||||||
Available-for-sale securities: | ||||||||||||||||||||
Alt-A private-label securities | 21,202 | 14,150 | (7,143 | ) | (3,686 | ) | (3,457 | ) | ||||||||||||
Subprime private-label securities | 17,520 | 10,746 | (6,989 | ) | (2,486 | ) | (4,503 | ) | ||||||||||||
Total Alt-A and subprime private-label securities classified as available for sale | $ | 38,722 | $ | 24,896 | $ | (14,132 | ) | $ | (6,172 | ) | $ | (7,960 | ) | |||||||
(1) | Excludes resecuritizations, or wraps, of private-label securities backed by subprime loans that we have guaranteed and hold in our mortgage portfolio. These wraps totaled $5.9 billion as of December 31, 2009. | |
(2) | Amounts reflect the difference between the amortized cost basis (unpaid principal balance net of unamortized premiums, discounts and cost basis adjustments), excludingother-than-temporary impairment losses recorded in earnings, and the fair value. |
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(3) | Represents the estimated portion of the total cumulative losses that is noncredit related. We have calculated the credit component based on the difference between the amortized cost basis of the securities and the present value of expected future cash flows. The remaining difference between the fair value and the present value of expected future cash flows is classified as noncredit-related. | |
(4) | For securities classified as trading, net loss amounts reflect the estimated portion of the total cumulative losses that is credit-related. For securities classified as available for sale, net loss amounts reflect the portion ofother-than-temporary impairment losses that is recognized in earnings in accordance with the newother-than-temporary impairment accounting guidance that we adopted on April 1, 2009. |
Table 26: | Credit Statistics of Loans Underlying Alt-A and Subprime Private-Label Mortgage-Related Securities (Including Wraps) |
As of December 31, 2009 | ||||||||||||||||||||||||||||
Unpaid Principal Balance | Monoline | |||||||||||||||||||||||||||
Available | Average | Average | Financial | |||||||||||||||||||||||||
for | ³ 60 Days | Loss | Credit | Guaranteed | ||||||||||||||||||||||||
Trading | Sale | Wraps(1) | Delinquent(2)(3) | Severity(3)(4) | Enhancement(5) | Amount(6) | ||||||||||||||||||||||
(Dollars in Millions) | ||||||||||||||||||||||||||||
Private-label mortgage-related securities backed by:(7) | ||||||||||||||||||||||||||||
Alt-A mortgage loans: | ||||||||||||||||||||||||||||
Option ARM Alt-A mortgage loans: | ||||||||||||||||||||||||||||
2004 and prior | $ | — | $ | 582 | $ | — | 38.5 | % | 41.2 | % | 21.7 | % | $ | — | ||||||||||||||
2005 | — | 1,527 | — | 41.3 | 52.9 | 45.6 | 297 | |||||||||||||||||||||
2006 | — | 1,632 | — | 47.1 | 60.6 | 43.7 | 271 | |||||||||||||||||||||
2007 | 2,358 | — | — | 44.1 | 62.0 | 62.1 | 858 | |||||||||||||||||||||
Other Alt-A mortgage loans: | ||||||||||||||||||||||||||||
2004 and prior | — | 7,671 | — | 8.7 | 49.8 | 12.2 | 18 | |||||||||||||||||||||
2005 | — | 4,659 | 165 | 22.6 | 49.4 | 10.3 | — | |||||||||||||||||||||
2006 | 74 | 4,986 | — | 31.7 | 54.9 | 6.9 | — | |||||||||||||||||||||
2007 | 871 | — | 241 | 47.7 | 61.9 | 34.7 | 360 | |||||||||||||||||||||
2008(8) | — | 145 | — | — | ||||||||||||||||||||||||
Total Alt-A mortgage loans: | 3,303 | 21,202 | 406 | 1,804 | ||||||||||||||||||||||||
Subprime mortgage loans: | ||||||||||||||||||||||||||||
2004 and prior(9) | — | 2,595 | 640 | 24.2 | 66.6 | 57.5 | 623 | |||||||||||||||||||||
2005(8) | — | 269 | 1,842 | 46.0 | 73.1 | 58.4 | 235 | |||||||||||||||||||||
2006 | — | 13,939 | — | 54.0 | 70.9 | 23.8 | 52 | |||||||||||||||||||||
2007 | 3,007 | 717 | 6,422 | 51.8 | 69.7 | 26.4 | 193 | |||||||||||||||||||||
Total subprime mortgage loans: | 3,007 | 17,520 | 8,904 | 1,103 | ||||||||||||||||||||||||
Total Alt-A and subprime mortgage loans: | $ | 6,310 | $ | 38,722 | $ | 9,310 | $ | 2,907 | ||||||||||||||||||||
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(1) | Represents our exposure to private-label Alt-A and subprime mortgage-related securities that have been resecuritized (or wrapped) to include our guaranty. The unpaid principal balance of these Fannie Mae guaranteed securities held by third parties is included in outstanding and unconsolidated Fannie Mae MBS held by third parties. We include incurred credit losses related to these wraps in our reserve for guaranty losses. | |
(2) | Delinquency data provided by Intex, where available, for loans backing Alt-A and subprime private-label securities that we own or guarantee. The reported Intex delinquency data reflects information from December 2009 remittances for November 2009 payments. For consistency purposes, we have adjusted the Intex delinquency data, where appropriate, to include all bankruptcies, foreclosures and real estate owned in the delinquency rates. | |
(3) | The average delinquency and severity metrics are calculated at loan level for each loan pool associated with securities where Fannie Mae has exposure and are weighted based on the unpaid principal balance of those securities. | |
(4) | Severity data obtained from First American CoreLogic, where available, for loans backing Alt-A and subprime private-label mortgage-related securities that we own or guarantee. The First American CoreLogic severity data reflects information from December 2009 remittances for November 2009 payments. For consistency purposes, we have adjusted the severity data, where appropriate. | |
(5) | Average credit enhancement percentage reflects both subordination and financial guarantees. Reflects the ratio of the current amount of the securities that will incur losses in the securitization structure before any losses are allocated to securities that we own or guarantee. Percentage generally calculated based on the quotient of the total unpaid principal balance of all credit enhancement in the form of subordination or financial guarantee of the security divided by the total unpaid principal balance of all of the tranches of collateral pools from which credit support is drawn for the security that we own or guarantee. | |
(6) | Reflects amount of unpaid principal balance supported by financial guarantees from monoline financial guarantors. | |
(7) | Vintages are based on series date and not loan origination date. | |
(8) | The unpaid principal balance includes private-label REMIC securities that have been resecuritized totaling $145 million for the 2008 vintage of other Alt-A loans and $43 million for the 2005 vintage of subprime loans. These securities are excluded from the delinquency, severity and credit enhancement statistics reported in this table. | |
(9) | Includes a wrap transaction that was consolidated on our balance sheet which effectively resulted in the underlying structure of the transaction being accounted for and reported asavailable-for-sale securities. Although the wrap transaction is supported by financial guarantees that cover all of our credit risk, we have not included the amount of these financial guarantees in this table. |
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Table 27: | Changes in Risk Management Derivative Assets (Liabilities) at Fair Value, Net(1) |
2009 | ||||||||
(Dollars in millions) | ||||||||
Net derivative liability as of December 31, 2008(2) | $ | (1,761 | ) | |||||
Effect of cash payments: | ||||||||
Fair value at inception of contracts entered into during the period(3) | 1,955 | |||||||
Fair value at date of termination of contracts settled during the period(4) | 7,407 | |||||||
Net collateral posted | (6,886 | ) | ||||||
Periodic net cash contractual interest payments(5) | 3,641 | |||||||
Total cash payments | 6,117 | |||||||
Statement of operations impact of recognized amounts: | ||||||||
Net contractual interest expense accruals on interest rate swaps | (3,359 | ) | ||||||
Net change in fair value during the period | (1,337 | ) | ||||||
Derivatives fair value losses, net(6) | (4,696 | ) | ||||||
Net derivative liability as of December 31, 2009(2) | $ | (340 | ) | |||||
(1) | Excludes mortgage commitments. | |
(2) | Reflects the net amount of “Derivative liabilities at fair value” recorded in our consolidated balance sheets, excluding mortgage commitments. | |
(3) | Cash payments made to purchase derivative option contracts (purchased options premiums) increase the derivative asset recorded in the consolidated balance sheets. Primarily includes upfront premiums paid on option contracts. Also includes upfront cash paid on other derivative contracts. | |
(4) | Cash payments made to terminate and/or sell derivative contracts reduce the derivative liability recorded in the consolidated balance sheets. Primarily represents cash paid (received) upon termination of derivative contracts. | |
(5) | Interest is accrued on interest rate swap contracts based on the contractual terms. Accrued interest income increases our derivative asset and accrued interest expense increases our derivative liability. The offsetting interest income and expense are included as components of derivatives fair value gains (losses), net in the consolidated statements of operations. Net periodic interest receipts reduce the derivative asset and net periodic interest payments reduce the derivative liability. | |
(6) | Reflects net derivatives fair value losses, excluding mortgage commitments, recognized in the consolidated statements of operations. |
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Table 28: | Comparative Measures—GAAP Change in Stockholders’ Deficit and Non-GAAP Change in Fair Value of Net Assets (Net of Tax Effect) |
2009 | ||||
(Dollars in millions) | ||||
GAAP consolidated balance sheets: | ||||
Fannie Mae stockholders’ deficit as of January 1(1) | $ | (15,314 | ) | |
Cumulative effect from the adoption of the FASB guidance onother-than-temporary impairments, net of tax | 2,964 | |||
Net loss attributable to Fannie Mae | (71,969 | ) | ||
Changes in net unrealized losses onavailable-for-sale securities, net of tax | 4,936 | |||
Reclassification adjustment forother-than-temporary impairments recognized in net loss, net of tax | 6,420 | |||
Capital transactions:(2) | ||||
Funds received from Treasury under the senior preferred stock purchase agreement | 59,900 | |||
Senior preferred stock dividends | (2,470 | ) | ||
Other capital transactions | 20 | |||
Capital transactions, net | 57,450 | |||
Other | 141 | |||
Fannie Mae stockholders’ deficit as of December 31(1) | $ | (15,372 | ) | |
Non-GAAP fair value balance sheets: | ||||
Estimated fair value of net assets as of January 1(3) | $ | (105,150 | ) | |
Capital transactions, net | 57,450 | |||
Change in estimated fair value of net assets, excluding effect of capital transactions | (51,092 | ) | ||
Increase in estimated fair value of net assets, net | 6,358 | |||
Estimated fair value of net assets as of December 31(3) | $ | (98,792 | ) | |
(1) | Our net worth, as defined under the Treasury senior preferred stock purchase agreement, is equivalent to the “Total deficit” amount reported in our consolidated balance sheets. Our net worth, or total deficit, is comprised of “Fannie Mae’s stockholders’ equity (deficit)” and “Noncontrolling interests” reported in our consolidated balance sheets. | |
(2) | Represents capital transactions, which are reflected in the consolidated statements of changes in equity. | |
(3) | Represents estimated fair value of net assets (net of tax effect) presented in “Table 29: Supplemental Non-GAAP Consolidated Fair Value Balance Sheets.” |
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• | Credit Losses under GAAP: In our GAAP consolidated financial statements, we may only recognize those credit losses that we believe have been actually incurred as of each balance sheet date. A loss is considered to have been incurred when the event triggering the loss, such as a borrower’s loss of employment or a decline in home prices, actually happens. Expected credit losses that may arise as a result of future anticipated changes in market conditions, such as further declines in home prices or increases in unemployment, can only be recognized in our consolidated financial statements if and when the anticipated loss triggering event occurs. For additional information, see “Critical Accounting Policies and Estimates—Allowance for Loan Losses and Reserve for Guaranty Losses,” “Note 1, Summary of Significant Accounting Policies” and “Consolidated Results of Operations—Credit-Related Expenses.” | |
• | Credit Losses in Fair Value Balance Sheet: The credit losses incorporated into the estimated fair values in our fair value balance sheet reflect future expected credit losses plus a current market-based risk premium, or profit amount. The fair value of our guaranty obligations as of each balance sheet date is greater than our estimate of future expected credit losses in our existing guaranty book of business as of that date because the fair value of our guaranty obligations includes an estimated market risk premium. We provide additional information on the components of our guaranty obligations and how we estimate the fair value of these obligations in “Critical Accounting Policies and Estimates—Fair Value Measurement—Fair Value of Guaranty Obligations.” |
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• | A pre-tax decrease of approximately $60 billion in the fair value of our net guaranty assets, driven by a substantial increase in the estimated fair value of our guaranty obligations, largely attributable to an increase in expected credit losses as a result of continued weakness in the housing market and general economy. In addition, but to a smaller degree, the fair value of our net guaranty assets was affected by a change we made in the first quarter of 2009 in how we estimate the fair value of certain of our guaranty obligations, which is more fully described in “Critical Accounting Policies and Estimates.” | |
• | In connection with our MBS guarantees, we acquired loans from MBS trusts at par plus accrued interest, which substantially exceeded fair value. These purchases reduced the fair value of our net assets by approximately $20 billion. As these loans are acquired and reflected at fair value on the Fair Value Balance Sheet, any guaranty obligations previously associated with these loans are reversed. Hence, as loans are acquired from Trust, the fair value of our guaranty obligations declines. | |
• | A pre-tax increase of approximately $18 billion in the fair value of the net portfolio attributable to the positive impact of changes in the spread between mortgage assets and associated debt and derivatives. We provide additional information on the composition and estimated fair value of our mortgage investments in “Consolidated Balance Sheet Analysis—Mortgage Investments.” |
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As of December 31, 2009 | As of December 31, 2008 | |||||||||||||||||||||||
GAAP | GAAP | |||||||||||||||||||||||
Carrying | Fair Value | Estimated | Carrying | Fair Value | Estimated | |||||||||||||||||||
Value | Adjustment(1) | Fair Value | Value | Adjustment(1) | Fair Value | |||||||||||||||||||
(Dollars in millions) | ||||||||||||||||||||||||
Assets: | ||||||||||||||||||||||||
Cash and cash equivalents | $ | 9,882 | $ | — | $ | 9,882 | (2) | $ | 18,462 | $ | — | $ | 18,462 | (2) | ||||||||||
Federal funds sold and securities purchased | ||||||||||||||||||||||||
under agreements to resell | 53,684 | (28 | ) | 53,656 | (2) | 57,418 | 2 | 57,420 | (2) | |||||||||||||||
Trading securities | 111,939 | — | 111,939 | (2) | 90,806 | — | 90,806 | (2) | ||||||||||||||||
Available-for-sale securities | 237,728 | — | 237,728 | (2) | 266,488 | — | 266,488 | (2) | ||||||||||||||||
Mortgage loans: | ||||||||||||||||||||||||
Mortgage loans held for sale | 18,462 | 655 | 19,117 | (3) | 13,270 | 351 | 13,621 | (3) | ||||||||||||||||
Mortgage loans held for investment, net of allowance for loan losses | 375,563 | 20,166 | 395,729 | (3) | 412,142 | 3,069 | 415,211 | (3) | ||||||||||||||||
Guaranty assets of mortgage loans held in portfolio | — | 2,936 | 2,936 | (3)(4) | — | 2,255 | 2,255 | (3)(4) | ||||||||||||||||
Guaranty obligations of mortgage loans held in portfolio | — | (28,322 | ) | (28,322 | )(3)(4) | — | (11,396 | ) | (11,396 | )(3)(4) | ||||||||||||||
Total mortgage loans | 394,025 | (4,565 | ) | 389,460 | (2)(3) | 425,412 | (5,721 | ) | 419,691 | (2)(3) | ||||||||||||||
Advances to lenders | 5,449 | (305 | ) | 5,144 | (2) | 5,766 | (354 | ) | 5,412 | (2) | ||||||||||||||
Derivative assets at fair value | 1,474 | — | 1,474 | (2) | 869 | — | 869 | (2) | ||||||||||||||||
Guaranty assets andbuy-ups, net | 9,520 | 5,104 | 14,624 | (2)(4) | 7,688 | 1,336 | 9,024 | (2)(4) | ||||||||||||||||
Total financial assets | 823,701 | 206 | 823,907 | (2) | 872,909 | (4,737 | ) | 868,172 | (2) | |||||||||||||||
Master servicing assets and credit enhancements | 651 | 5,917 | 6,568 | (4)(5) | 1,232 | 7,035 | 8,267 | (4)(5) | ||||||||||||||||
Other assets | 44,789 | (163 | ) | 44,626 | (5)(6) | 38,263 | (2 | ) | 38,261 | (5)(6) | ||||||||||||||
Total assets | $ | 869,141 | $ | 5,960 | $ | 875,101 | $ | 912,404 | $ | 2,296 | $ | 914,700 | ||||||||||||
Liabilities: | ||||||||||||||||||||||||
Federal funds purchased and securities sold under agreements to repurchase | $ | — | $ | — | $ | — | (2) | $ | 77 | $ | — | $ | 77 | (2) | ||||||||||
Short-term debt | 200,437 | (7) | 56 | 200,493 | (2) | 330,991 | (7) | 1,299 | 332,290 | (2) | ||||||||||||||
Long-term debt | 574,117 | (7) | 19,616 | 593,733 | (2) | 539,402 | (7) | 34,879 | 574,281 | (2) | ||||||||||||||
Derivative liabilities at fair value | 1,029 | — | 1,029 | (2) | 2,715 | — | 2,715 | (2) | ||||||||||||||||
Guaranty obligations | 13,996 | 124,586 | 138,582 | (2) | 12,147 | 78,728 | 90,875 | (2) | ||||||||||||||||
Total financial liabilities | 789,579 | 144,258 | 933,837 | (2) | 885,332 | 114,906 | 1,000,238 | (2) | ||||||||||||||||
Other liabilities | 94,843 | (54,878 | ) | 39,965 | (8) | 42,229 | (22,774 | ) | 19,455 | (8) | ||||||||||||||
Total liabilities | 884,422 | 89,380 | 973,802 | 927,561 | 92,132 | 1,019,693 | ||||||||||||||||||
Equity (deficit): | ||||||||||||||||||||||||
Fannie Mae stockholders’ equity (deficit): | ||||||||||||||||||||||||
Senior preferred(9) | 60,900 | — | 60,900 | 1,000 | — | 1,000 | ||||||||||||||||||
Preferred | 20,348 | (19,629 | ) | 719 | 21,222 | (20,674 | ) | 548 | ||||||||||||||||
Common | (96,620 | ) | (63,791 | ) | (160,411 | ) | (37,536 | ) | (69,162 | ) | (106,698 | ) | ||||||||||||
Total Fannie Mae stockholders’ deficit/non-GAAP fair value of net assets | $ | (15,372 | ) | $ | (83,420 | ) | $ | (98,792 | ) | $ | (15,314 | ) | $ | (89,836 | ) | $ | (105,150 | ) | ||||||
Noncontrolling interests | 91 | — | 91 | 157 | — | 157 | ||||||||||||||||||
Total deficit | (15,281 | ) | (83,420 | ) | (98,701 | ) | (15,157 | ) | (89,836 | ) | (104,993 | ) | ||||||||||||
Total liabilities and stockholders’ equity | $ | 869,141 | $ | 5,960 | $ | 875,101 | $ | 912,404 | $ | 2,296 | $ | 914,700 | ||||||||||||
(1) | Each of the amounts listed as a “fair value adjustment” represents the difference between the carrying value included in our GAAP consolidated balance sheets and our best judgment of the estimated fair value of the listed item. |
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(2) | We determined the estimated fair value of these financial instruments in accordance with the FASB fair value guidance as described in “Note 19, Fair Value.” | |
(3) | For business segment reporting purposes, we allocate intra-company guaranty fee income to our Single-Family and HCD businesses for managing the credit risk on mortgage loans held in portfolio by our Capital Markets group and charge a corresponding fee to our Capital Markets group. In computing this intra-company allocation, we disaggregate the total mortgage loans reported in our GAAP consolidated balance sheets, which consists of “Mortgage loans held for sale” and “Mortgage loans held for investment, net of allowance for loan losses” into components that separately reflect the value associated with credit risk, which is managed by our guaranty businesses, and the interest rate risk, which is managed by our Capital Markets group. We report the estimated fair value of the credit risk components separately in our supplemental non-GAAP consolidated fair value balance sheets as “Guaranty assets of mortgage loans held in portfolio” and “Guaranty obligations of mortgage loans held in portfolio.” We report the estimated fair value of the interest rate risk components in our supplemental non-GAAP consolidated fair value balance sheets as “Mortgage loans held for sale” and “Mortgage loans held for investment, net of allowance for loan losses.” Taken together, these four components represent the estimated fair value of the total mortgage loans reported in our GAAP consolidated balance sheets. We believe this presentation provides transparency into the components of the fair value of the mortgage loans associated with the activities of our guaranty businesses and the components of the activities of our Capital Markets group, which is consistent with the way we manage risks and allocate revenues and expenses for segment reporting purposes. While the carrying values and estimated fair values of the individual line items may differ from the amounts presented in “Note 19, Fair Value” of the consolidated financial statements in this report, the combined amounts together equal the carrying value and estimated fair value amounts of total mortgage loans in Note 19. | |
(4) | In our GAAP consolidated balance sheets, we report the guaranty assets associated with our outstanding Fannie Mae MBS and other guarantees as a separate line item and includebuy-ups, master servicing assets and credit enhancements associated with our guaranty assets in “Other assets.” On a GAAP basis, our guaranty assets totaled $8.4 billion and $7.0 billion as of December 31, 2009 and 2008, respectively. The associatedbuy-ups totaled $1.2 billion and $645 million as of December 31, 2009 and 2008, respectively. In our non-GAAP fair value balance sheets, we also disclose the estimated guaranty assets and obligations related to mortgage loans held in our portfolio. The aggregate estimated fair value of the guaranty obligation-related components totaled $4.2 billion and the guaranty asset-related components totaled $8.2 billion as of December 31, 2009 and 2008, respectively. These components represent the sum of the following line items in this table: (a) Guaranty assets of mortgage loans held in portfolio; (b) Guaranty obligations of mortgage loans held in portfolio, (c) Guaranty assets andbuy-ups; and (d) Master servicing assets and credit enhancements. See “Critical Accounting Policies and Estimates—Fair Value Measurement—Fair Value of Guaranty Obligations.” | |
(5) | The line items “Master servicing assets and credit enhancements” and “Other assets” together consist of the assets presented on the following six line items in our GAAP consolidated balance sheets: (a) Accrued interest receivable; (b) Acquired property, net; (c) Deferred tax assets, net; (d) Partnership investments; (e) Servicer and MBS trust receivable and (f) Other assets. The carrying value of these items in our GAAP consolidated balance sheets together totaled $46.6 billion and $40.1 billion as of December 31, 2009 and 2008, respectively. We deduct the carrying value of thebuy-ups associated with our guaranty obligation, which totaled $1.2 billion and $645 million as of December 31, 2009 and 2008, respectively, from “Other assets” reported in our GAAP consolidated balance sheets becausebuy-ups are a financial instrument that we combine with guaranty assets in our disclosure in “Note 19, Fair Value.” We have estimated the fair value of master servicing assets and credit enhancements based on our fair value methodologies described in Note 19. | |
(6) | The GAAP carrying values of other assets generally approximates fair value, except for our LIHTC partnership investments as of December 31, 2008. Our LIHTC partnership investments, including restricted cash from consolidations, had a carrying value of $6.3 billion and an estimated fair value of $6.5 billion as of December 31, 2008. As discussed in “Consolidated Results of Operations—Losses from Partnership Investments,” we recognizedother-than-temporary impairment losses to reduce the carrying value of our LIHTC partnership investments to zero. Our LIHTC partnership investments carrying value of zero is included in the estimated fair value in the Fair Value Balance Sheet as of December 31, 2009. | |
(7) | Includes debt instruments that we elected to report at fair value in our GAAP consolidated balance sheets. We did not elect to report any short-term debt instruments at fair value as of December 31, 2009. Includes long-term debt with a reported fair value of $3.3 billion as of December 31, 2009. Includes short-term and long-term debt instruments with a reported fair value of $4.5 billion and $21.6 billion, respectively, as of December 31, 2008. | |
(8) | The line item “Other liabilities” consists of the liabilities presented on the following five line items in our GAAP consolidated balance sheets: (a) Accrued interest payable; (b) Reserve for guaranty losses; (c) Partnership liabilities; |
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(d) Servicer and MBS trust payable; and (e) Other liabilities. The carrying value of these items in our GAAP consolidated balance sheets together totaled $94.8 billion and $42.2 billion as of December 31, 2009 and 2008, respectively. The GAAP carrying values of these other liabilities generally approximate fair value. We assume that certain other liabilities, such as deferred revenues, have no fair value. Although we report the “Reserve for guaranty losses” as a separate line item on our consolidated balance sheets, it is incorporated into and reported as part of the fair value of our guaranty obligations in our non-GAAP supplemental consolidated fair value balance sheets. | ||
(9) | The amount included in “estimated fair value” of the senior preferred stock is the liquidation preference, which is the same as the GAAP carrying value, and does not reflect fair value. |
• | principal and interest payments received on mortgage loans, mortgage-related securities and non-mortgage investments we own; | |
• | proceeds from the sale of mortgage loans, mortgage-related securities and non-mortgage assets; | |
• | funds from Treasury pursuant to the senior preferred stock purchase agreement; | |
• | borrowings under secured and unsecured intraday funding lines of credit we have established with several large financial institutions; | |
• | guaranty fees received on Fannie Mae MBS; | |
• | borrowings against mortgage-related securities and other investment securities we hold pursuant to repurchase agreements and loan agreements; | |
• | payments received from mortgage insurance counterparties; and | |
• | net receipts on derivative instruments. |
• | the repayment of matured, redeemed and repurchased debt; | |
• | the purchase of mortgage loans (including delinquent loans from MBS trusts), mortgage-related securities and other investments; | |
• | interest payments on outstanding debt; |
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• | dividend payments made to Treasury pursuant to the senior preferred stock purchase agreement; | |
• | net payments on derivative instruments; | |
• | the pledging of collateral under derivative instruments; | |
• | administrative expenses; and | |
• | losses incurred in connection with our Fannie Mae MBS guaranty obligations. |
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Table 30: | Debt Activity |
For the Year Ended December 31, | ||||||||||||
2009 | 2008 | 2007 | ||||||||||
(Dollars in millions) | ||||||||||||
Issued during the period:(1) | ||||||||||||
Short-term:(2) | ||||||||||||
Amount(3) | $ | 1,381,640 | $ | 1,624,868 | $ | 1,543,387 | ||||||
Weighted-average interest rate | 0.30 | % | 2.11 | % | 4.87 | % | ||||||
Long-term:(4) | ||||||||||||
Amount(3) | $ | 295,147 | $ | 248,168 | $ | 193,910 | ||||||
Weighted-average interest rate | 2.52 | % | 3.76 | % | 5.45 | % | ||||||
Total issued: | ||||||||||||
Amount(3) | $ | 1,676,787 | $ | 1,873,036 | $ | 1,737,297 | ||||||
Weighted-average interest rate | 0.70 | % | 2.33 | % | 4.93 | % | ||||||
Paid off during the period:(1)(5) | ||||||||||||
Short-term:(2) | ||||||||||||
Amount(3) | $ | 1,513,683 | $ | 1,529,368 | $ | 1,473,283 | ||||||
Weighted-average interest rate | 0.53 | % | 2.54 | % | 4.96 | % | ||||||
Long-term:(4) | ||||||||||||
Amount(3) | $ | 260,578 | $ | 266,764 | $ | 233,393 | ||||||
Weighted-average interest rate | 4.09 | % | 4.89 | % | 4.79 | % | ||||||
Total paid off: | ||||||||||||
Amount(3) | $ | 1,774,261 | $ | 1,796,132 | $ | 1,706,676 | ||||||
Weighted-average interest rate | 1.05 | % | 2.89 | % | 4.94 | % |
(1) | Excludes debt activity resulting from consolidations and intraday loans. | |
(2) | Short-term debt consists of borrowings with an original contractual maturity of one year or less. Includes federal funds purchased and securities sold under agreements to repurchase. Includes debt issued and repaid to Fannie Mae MBS trusts of $766.8 billion, $482.5 billion and $420.5 billion for the years ended December 31, 2009, 2008 and 2007, respectively. | |
(3) | Represents the face amount at issuance or redemption. | |
(4) | Long-term debt consists of borrowings with an original contractual maturity of greater than one year. | |
(5) | Represents all payments on debt, including regularly scheduled principal payments, payments at maturity, payments as of the result of calls and payments for any other repurchases. |
• | Treasury’s funding commitment to us under the senior preferred stock purchase agreement; | |
• | making the Treasury credit facility available to us through December 31, 2009; |
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• | the Federal Reserve’s active program to purchase approximately $175 billion of debt securities of Fannie Mae, Freddie Mac and the Federal Home Loan Banks, as well as $1.25 trillion in Fannie Mae, Freddie Mac and Ginnie Mae mortgage-backed securities; | |
• | Treasury’s agency MBS purchase program which ended December 31, 2009; and | |
• | the Federal Reserve and Treasury’s programs to support the liquidity of the financial markets overall, including several asset purchase programs and several asset financing programs. |
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Table 31: | Outstanding Short-Term Borrowings and Long-Term Debt(1) |
December 31, 2009 | December 31, 2008 | |||||||||||||||||||||||
Weighted | Weighted | |||||||||||||||||||||||
Average | Average | |||||||||||||||||||||||
Interest | Interest | |||||||||||||||||||||||
Maturities | Outstanding | Rate | Maturities | Outstanding | Rate | |||||||||||||||||||
(Dollars in millions) | ||||||||||||||||||||||||
Federal funds purchased and securities sold under agreements to repurchase | — | $ | — | — | % | — | $ | 77 | 0.01 | % | ||||||||||||||
Short-term debt:(2) | ||||||||||||||||||||||||
Fixed-rate short-term debt: | ||||||||||||||||||||||||
Discount notes | — | $ | 199,987 | 0.27 | % | — | $ | 322,932 | 1.75 | % | ||||||||||||||
Foreign exchange discount notes | — | 300 | 1.50 | — | 141 | 2.50 | ||||||||||||||||||
Other short-term debt | — | 100 | 0.53 | — | 333 | 2.80 | ||||||||||||||||||
Total fixed-rate short-term debt | 200,387 | 0.27 | 323,406 | 1.75 | ||||||||||||||||||||
Floating-rate short-term debt(3) | — | 50 | 0.02 | — | 7,585 | 1.66 | ||||||||||||||||||
Total short-term debt | $ | 200,437 | 0.27 | % | $ | 330,991 | 1.75 | % | ||||||||||||||||
Long-term debt:(4) | ||||||||||||||||||||||||
Senior fixed-rate long-term debt: | ||||||||||||||||||||||||
Benchmark notes and bonds | 2010 - 2030 | $ | 279,945 | 4.10 | % | 2009-2030 | $ | 251,063 | 4.92 | % | ||||||||||||||
Medium-term notes | 2010 - 2019 | 171,207 | 2.97 | 2009-2018 | 151,277 | 4.20 | ||||||||||||||||||
Foreign exchange notes and bonds | 2010 - 2028 | 1,239 | 5.64 | 2009-2028 | 1,513 | 4.70 | ||||||||||||||||||
Other long-term debt(3) | 2010 - 2039 | 62,783 | 5.80 | 2009-2038 | 73,061 | 5.95 | ||||||||||||||||||
Total senior fixed-rate debt | 515,174 | 3.94 | 476,914 | 4.85 | ||||||||||||||||||||
Senior floating-rate long-term debt: | ||||||||||||||||||||||||
Medium-term notes | 2010 - 2014 | 41,911 | 0.26 | 2009-2017 | 45,737 | 2.21 | ||||||||||||||||||
Other long-term debt(3) | 2020 - 2037 | 1,041 | 4.12 | 2020-2037 | 874 | 7.22 | ||||||||||||||||||
Total senior floating-rate debt | 42,952 | 0.34 | 46,611 | 2.30 | ||||||||||||||||||||
Subordinated fixed-rate long-term debt:(5) | ||||||||||||||||||||||||
Qualifying subordinated(6) | 2011 - 2014 | 7,391 | 5.47 | 2011-2014 | 7,391 | 5.47 | ||||||||||||||||||
Subordinated debentures | 2019 | 2,433 | 9.89 | 2019 | 2,225 | 9.90 | ||||||||||||||||||
Total subordinated fixed-rate long-term debt | 9,824 | 6.57 | 9,616 | 6.50 | ||||||||||||||||||||
Debt from consolidations | 2010 - 2039 | 6,167 | 5.63 | 2009-2039 | 6,261 | 5.87 | ||||||||||||||||||
Total long-term debt | $ | 574,117 | 3.73 | % | $ | 539,402 | 4.67 | % | ||||||||||||||||
Outstanding callable debt(7) | $ | 210,181 | 3.48 | % | $ | 192,480 | 4.71 | % |
(1) | Outstanding debt amounts and weighted-average interest rates reported in this table include the effect of unamortized discounts, premiums and other cost basis adjustments. Reported amounts as of December 31, 2009 and 2008 include fair value gains and losses associated with debt that we elected to carry at fair value. The unpaid principal balance of outstanding debt, which excludes unamortized discounts, premiums and other cost basis adjustments and amounts related to debt from consolidations, totaled $784.0 billion and $881.2 billion as December 31, 2009 and 2008, respectively. |
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(2) | Short-term debt consists of borrowings with an original contractual maturity of one year or less and, therefore, does not include the current portion of long-term debt. Reported amounts include a net discount and other cost basis adjustments of $129 million and $1.6 billion as of December 31, 2009, and 2008, respectively. | |
(3) | Includes a portion of structured debt instruments that is reported at fair value. | |
(4) | Long-term debt consists of borrowings with an original contractual maturity of greater than one year. Included is the current portion of long-term debt that is due within one year, which totaled $107.3 billion and $86.5 billion as of December 31, 2009 and 2008, respectively. Reported amounts include a net discount and other cost basis adjustments of $15.6 billion and $15.5 billion as of December 31, 2009 and 2008, respectively. The unpaid principal balance of long-term debt, which excludes unamortized discounts, premiums and other cost basis adjustments and amounts related to debt from consolidations, totaled $583.4 billion and $548.6 billion as December 31, 2009 and 2008, respectively. | |
(5) | The presentation of subordinated debt changed as of September 30, 2009. Prior period was revised to conform to the current period presentation. | |
(6) | Consists of subordinated debt with an interest deferral feature. | |
(7) | Consists of long-term callable debt that can be paid off in whole or in part at our option at any time on or after a specified date. Includes the unpaid principal balance, and excludes unamortized discounts, premiums and other cost basis adjustments. |
Table 32: | Outstanding Short-Term Borrowings(1) |
2009 | ||||||||||||||||||||
As of December 31 | Average During the Year | |||||||||||||||||||
Weighted | Weighted | |||||||||||||||||||
Average | Average | |||||||||||||||||||
Interest | Interest | Maximum | ||||||||||||||||||
Outstanding | Rate | Outstanding(2) | Rate | Outstanding(3) | ||||||||||||||||
(Dollars in millions) | ||||||||||||||||||||
Federal funds purchased and securities sold under agreements to repurchase | $ | — | — | % | $ | 42 | 1.55 | % | $ | 189 | ||||||||||
Fixed-rate short-term debt: | ||||||||||||||||||||
Discount notes | $ | 199,987 | 0.27 | % | $ | 253,884 | 0.92 | % | $ | 325,239 | ||||||||||
Foreign exchange discount notes | 300 | 1.50 | 222 | 1.41 | 300 | |||||||||||||||
Other fixed-rate short-term debt | 100 | 0.53 | 199 | 1.30 | 334 | |||||||||||||||
Floating-rate short-term debt | 50 | 0.02 | 2,744 | 1.20 | 3,136 | |||||||||||||||
Total short-term debt | $ | 200,437 | 0.27 | % | ||||||||||||||||
2008 | ||||||||||||||||||||
As of December 31 | Average During the Year | |||||||||||||||||||
Weighted | Weighted | |||||||||||||||||||
Average | Average | |||||||||||||||||||
Interest | Interest | Maximum | ||||||||||||||||||
Outstanding | Rate | Outstanding(2) | Rate | Outstanding(3) | ||||||||||||||||
(Dollars in millions) | ||||||||||||||||||||
Federal funds purchased and securities sold under agreements to repurchase | $ | 77 | 0.01 | % | $ | 294 | 1.93 | % | $ | 725 | ||||||||||
Fixed-rate short-term debt: | ||||||||||||||||||||
Discount notes | $ | 322,932 | 1.75 | % | $ | 257,845 | 2.51 | % | $ | 326,374 | ||||||||||
Foreign exchange discount notes | 141 | 2.50 | 276 | 3.73 | 363 | |||||||||||||||
Other fixed-rate short-term debt | 333 | 2.80 | 714 | 2.83 | 1,886 | |||||||||||||||
Floating-rate short-term debt(4) | 7,585 | 1.66 | 4,858 | 2.26 | 7,586 | |||||||||||||||
Total short-term debt | $ | 330,991 | 1.75 | % | ||||||||||||||||
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2007 | ||||||||||||||||||||
As of December 31 | Average During the Year | |||||||||||||||||||
Weighted | Weighted | |||||||||||||||||||
Average | Average | |||||||||||||||||||
Interest | Interest | Maximum | ||||||||||||||||||
Outstanding | Rate | Outstanding(2) | Rate | Outstanding(3) | ||||||||||||||||
(Dollars in millions) | ||||||||||||||||||||
Federal funds purchased and securities sold under agreements to repurchase | $ | 869 | 3.48 | % | $ | 932 | 5.09 | % | $ | 3,840 | ||||||||||
Fixed-rate short-term debt: | ||||||||||||||||||||
Discount notes | $ | 233,258 | 4.45 | % | $ | 162,952 | 5.01 | % | $ | 233,258 | ||||||||||
Foreign exchange discount notes | 301 | 4.28 | 341 | 2.88 | 654 | |||||||||||||||
Other fixed-rate short-term debt | 601 | 4.37 | 2,690 | 5.17 | 4,959 | |||||||||||||||
Debt from consolidations(4) | — | — | 826 | 5.34 | 1,176 | |||||||||||||||
Total short-term debt | $ | 234,160 | 4.45 | % | ||||||||||||||||
(1) | Includes unamortized discounts, premiums and other cost basis adjustments. | |
(2) | Average amount outstanding during the year has been calculated using month-end balances. | |
(3) | Maximum outstanding represents the highest month-end outstanding balance during the year. | |
(4) | Includes a portion of structured debt instruments that is reported at fair value. |
Table 33: | Maturity Profile of Outstanding Debt Maturing Within One Year(1) |
(1) | Includes unamortized discounts, premiums and other cost basis adjustments of $181 million as of December 31, 2009. Excludes debt from consolidations of $771 million as of December 31, 2009. |
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Table 34: | Maturity Profile of Outstanding Debt Maturing in More Than One Year(1) |
(1) | Includes unamortized discounts, premiums and other cost basis adjustments of $15.5 billion as of December 31, 2009. Excludes debt from consolidations of $5.4 billion as of December 31, 2009. |
Table 35: | Contractual Obligations |
Payment Due by Period as of December 31, 2009 | ||||||||||||||||||||
Less than | 1 to < 3 | 3 to 5 | More than | |||||||||||||||||
Total | 1 Year | Years | Years | 5 Years | ||||||||||||||||
(Dollars in millions) | ||||||||||||||||||||
Long-term debt obligations(1) | $ | 567,950 | $ | 115,094 | $ | 196,174 | $ | 116,273 | $ | 140,409 | ||||||||||
Contractual interest on long-term debt obligations(2) | 127,292 | 18,816 | 28,615 | 20,307 | 59,554 | |||||||||||||||
Operating lease obligations(3) | 188 | 41 | 73 | 36 | 38 | |||||||||||||||
Purchase obligations: | ||||||||||||||||||||
Mortgage commitments(4) | 31,902 | 31,870 | 32 | — | — | |||||||||||||||
Other purchase obligations(5) | 849 | 306 | 490 | 52 | 1 | |||||||||||||||
Other long-term liabilities reflected in the consolidated balance sheet(6) | 1,970 | 1,617 | 314 | 23 | 16 | |||||||||||||||
Total contractual obligations | $ | 730,151 | $ | 167,744 | $ | 225,698 | $ | 136,691 | $ | 200,018 | ||||||||||
(1) | Represents the carrying amount of our long-term debt assuming payments are made in full at maturity. Amounts exclude $6.2 billion in long-term debt from consolidations. Amounts include an unamortized net discount and other cost basis adjustments of $15.6 billion. | |
(2) | Excludes contractual interest on long-term debt from consolidations. | |
(3) | Includes certain premises and equipment leases. | |
(4) | Includes on- and off-balance sheet commitments to purchase mortgage loans and mortgage-related securities. |
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(5) | Includes only unconditional purchase obligations that are subject to a cancellation penalty for certain telecom services, software and computer services, and other agreements. Excludes arrangements that may be cancelled without penalty. Amounts also include off-balance sheet commitments for the unutilized portion of lending agreements entered into with multifamily borrowers. | |
(6) | Excludes risk management derivative transactions that may require cash settlement in future periods and our obligations to stand ready to perform under our guarantees relating to Fannie Mae MBS and other financial guarantees, because the amount and timing of payments under these arrangements are generally contingent upon the occurrence of future events. For a description of the amount of our on- and off-balance sheet Fannie Mae MBS and other financial guarantees as of December 31, 2009, see “Off-Balance Sheet Arrangements and Variable Interest Entities.” Includes future cash payments due under our contractual obligations to fund LIHTC and other partnerships that are unconditional and legally binding and cash received as collateral from derivative counterparties, which are included in our consolidated balance sheets under “Partnership liabilities” and “Other liabilities,” respectively. Amounts also include our obligation to fund partnerships that have been consolidated and tax liabilities for unrecognized tax benefits. |
• | daily monitoring and reporting of our liquidity position to management and FHFA; | |
• | daily forecasting and statistical analysis of our daily cash needs over a 28-business-day period; |
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• | daily forecasting of our ability to meet our liquidity needs over a90-day period without relying upon the issuance of long-term or short-term unsecured debt securities; | |
• | routine operational testing of our ability to rely upon identified sources of liquidity, such as mortgage repurchase agreements; and | |
• | periodic review and testing of our liquidity management controls by our internal audit department. |
• | our cash and other investments portfolio; and | |
• | our unencumbered mortgage portfolio. |
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Table 36: | Cash and Other Investments Portfolio |
As of December 31, | ||||||||||||
2009 | 2008 | 2007 | ||||||||||
(Dollars in millions) | ||||||||||||
Cash and cash equivalents | $ | 6,812 | $ | 17,933 | $ | 3,941 | ||||||
Federal funds sold and securities purchased under agreements to resell | 53,684 | 57,418 | 49,041 | |||||||||
Non-mortgage-related securities: | ||||||||||||
Asset-backed securities | 8,515 | 10,598 | 15,511 | |||||||||
Corporate debt securities | 364 | 6,037 | 13,515 | |||||||||
Other | 3 | 1,005 | 9,089 | |||||||||
Total | $ | 69,378 | $ | 92,991 | $ | 91,097 | ||||||
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Table 37: | Fannie Mae Credit Ratings |
As of February 20, 2010 | ||||||
Standard & Poor’s | Moody’s | Fitch | ||||
Long-term senior debt | AAA | Aaa | AAA | |||
Short-term senior debt | A-1+ | P-1 | F1+ | |||
Subordinated debt | A | Aa2 | AA- | |||
Preferred stock | C | Ca | C/RR6 | |||
Bank financial strength rating | — | E+ | — | |||
Outlook | Stable | Stable | Stable | |||
(for Long Term Senior Debt and Subordinated Debt) | (for all ratings) | (for AAA rated Long Term Issue Default Rating) |
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Table 38: | Regulatory Capital Measures |
As of December 31, | ||||||||
2009(1) | 2008(1) | |||||||
(Dollars in millions) | ||||||||
Core capital(2) | $ | (74,540 | ) | $ | (8,641 | ) | ||
Statutory minimum capital requirement(3) | 33,057 | 33,552 | ||||||
Deficit of core capital over statutory minimum capital requirement | $ | (107,597 | ) | $ | (42,193 | ) | ||
Deficit of core capital percentage over statutory minimum capital requirement | (325.5 | )% | (125.8 | )% |
(1) | Amounts as of December 31, 2009 and 2008 represent estimates that have been submitted to FHFA. As noted above, FHFA is not issuing capital classifications during conservatorship. | |
(2) | The sum of (a) the stated value of our outstanding common stock (common stock less treasury stock); (b) the stated value of our outstanding non-cumulative perpetual preferred stock; (c) our paid-in capital; and (d) our retained earnings (accumulated deficit). Core capital excludes (a) accumulated other comprehensive income (loss) and (b) senior preferred stock. | |
(3) | Generally, the sum of (a) 2.50% of on-balance sheet assets; (b) 0.45% of the unpaid principal balance of outstanding Fannie Mae MBS held by third parties; and (c) up to 0.45% of other off-balance sheet obligations, which may be adjusted by the Director of FHFA under certain circumstances (See 12 CFR 1750.4 for existing adjustments made by the Director). |
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Table 39: | On- and Off-Balance Sheet MBS and Other Guaranty Arrangements |
As of December 31, | ||||||||
2009 | 2008(1) | |||||||
(Dollars in millions) | ||||||||
Fannie Mae MBS and other guarantees outstanding(2) | $ | 2,828,513 | $ | 2,611,523 | ||||
Less: Consolidated Fannie Mae MBS | (147,855 | ) | (65,306 | ) | ||||
Less: Fannie Mae MBS held in portfolio(3) | (220,245 | ) | (228,949 | ) | ||||
Fannie Mae MBS held by third parties and other guarantees | $ | 2,460,413 | $ | 2,317,268 | ||||
(1) | Certain prior period amounts have been reclassified to conform to the current period presentation. | |
(2) | Includes unpaid principal balance of other guarantees of $27.6 billion as of December 31, 2009 and $27.8 billion as of December 31, 2008. | |
(3) | Amounts represent unpaid principal balance and are recorded in “Investments in Securities” in our consolidated balance sheets. |
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Financial Statement | Accounting and Presentation Changes | |||
Balance Sheet | • | Significant increase in loans and debt and significant decrease in trading and available-for-sale securities | ||
• | Separate presentation of the elements of the consolidated MBS trusts (such as mortgage loans, debt, accrued interest receivable and payable) on the face of the balance sheet | |||
• | Reclassification of substantially all of the previously recorded reserve for guaranty losses to allowance for loan losses | |||
• | Elimination of substantially all previously recorded guaranty assets and guaranty obligations | |||
Statement of Operations | • | Significant increase in interest income and interest expense attributable to the consolidated assets and liabilities of the consolidated MBS trusts | ||
• | Decrease to provision for credit losses and a corresponding decrease in net interest income due to recording interest expense on consolidated MBS trusts when we are not accruing interest on underlying nonperforming consolidated loans | |||
• | Separate presentation of the elements of the MBS trusts (interest income and interest expense) on the face of the statement of operations | |||
• | Reclassification of the substantial majority of guaranty fee income and trust management income to interest income | |||
• | Elimination of fair value losses on credit-impaired loans acquired from the MBS trusts we have consolidated, as the underlying loans in our MBS trusts will be recorded in our consolidated balance sheet | |||
Statement of Cash Flows | • | Significant change in the amounts of cash flows from investing and financing activities | ||
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2009 | 2008 | |||||||||||||||
Consolidated | Unconsolidated | Consolidated | Unconsolidated | |||||||||||||
(Dollars in millions) | ||||||||||||||||
As of December 31: | ||||||||||||||||
Obligation to fund LIHTC partnerships | $ | 282 | $ | 259 | $ | 612 | $ | 545 | ||||||||
For the year ended December 31: | ||||||||||||||||
Tax credits from investments in LIHTC partnerships | $ | 435 | $ | 506 | $ | 423 | $ | 546 | ||||||||
Losses from investments in LIHTC partnerships | 2,997 | 3,073 | 554 | 597 | ||||||||||||
Tax benefits on credits and losses from investments in LIHTC partnerships | 1,484 | 1,581 | 616 | 755 | ||||||||||||
Contributions to LIHTC partnerships | 341 | 293 | 656 | 602 | ||||||||||||
Distributions from LIHTC partnerships | 10 | 3 | 13 | 15 |
• | Credit Risk. Credit risk is the risk of financial loss resulting from the failure of a borrower or institutional counterparty to honor its financial or contractual obligations to us and exists primarily in our mortgage credit book of business and derivatives portfolio. |
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• | Market Risk. Market risk is the exposure generated by adverse changes in the value of financial instruments caused by a change in market prices or interest rates. Two significant market risks we face and actively manage are interest rate risk and liquidity risk. Interest rate risk is the risk of changes in our long-term earnings or in the value of our net assets due to fluctuations in interest rates. Liquidity risk is the potential inability of the Company to meet its funding obligations in a timely manner. | |
• | Operational Risk. Operational risk is the loss resulting from inadequate or failed internal processes, people, systems, or from external events. | |
• | Model Risk. Model risk is the potential for model errors to adversely impact the company. We use models to help manage our business. For example, we use models to measure and monitor our exposures to credit and market risk (including interest rate risk), make key business decisions relating to credit guaranty fee pricing, credit loss mitigation, asset acquisition, and debt issuances. We also use the results of models to report our financial performance and determine asset and liability fair values. As such, modeling errors can occur when predicting prepayments, projecting defaults and losses, or valuing options either through human error or inaccurate assumptions. |
• | Risk Identification: We are exposed to risk through our daily business dealings. Risks are identified through our risk management framework. Employees who manage risk are responsible for identifying and determining potential losses that could arise from specific or unusual events. | |
• | Risk Assessment: We assess risk using a variety of methodologies, such as calculation of potential losses from loans, stress tests relating to interest rate sensitivity, and rebalancing of financial instruments to maintain a close match between the duration of our assets and liabilities. Information obtained from these assessments is reviewed on a regular basis to ensure that our risk assumptions are reasonable and reflect our current positions. | |
• | Risk Mitigation & Control: We manage risk through four control elements that are designed to work in conjunction with each other: (1) risk policies provide guidance for the management of risk; (2) limits establish boundaries for level of risk taking, subject to our risk tolerances. Limits can be established at the Board, management or operating level by the Board of Directors, executive management, or senior management, respectively; (3) delegations of authority exist to provide oversight and accountability in decision making; and (4) our risk committee structure provides a forum for discussing emerging risks, risk mitigation strategies and communicating across functional lines to enhance risk management. Business units are required to proactively develop appropriate controls and procedures to help ensure exposures do not exceed established tolerances. | |
• | Risk Reporting & Monitoring: Our business units actively monitor emerging and identified risks that are taken when executing our strategies. Risks and concerns are reported to the appropriate level of management to ensure that the necessary action is taken to mitigate the risk. |
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As of December 31, 2009 | ||||||||||||||||||||||||
Single-Family | Multifamily | Total | ||||||||||||||||||||||
Conventional(1) | Government(2) | Conventional(1) | Government(2) | Conventional(1) | Government(2) | |||||||||||||||||||
(Dollars in millions) | ||||||||||||||||||||||||
Mortgage portfolio:(3) | ||||||||||||||||||||||||
Mortgage loans(4) | $ | 243,730 | $ | 52,399 | $ | 119,829 | $ | 585 | $ | 363,559 | $ | 52,984 | ||||||||||||
Fannie Mae MBS(5) | 218,033 | 1,816 | 314 | 82 | 218,347 | 1,898 | ||||||||||||||||||
Agency mortgage-related securities(5)(6) | 41,337 | 1,309 | — | 21 | 41,337 | 1,330 | ||||||||||||||||||
Mortgage revenue bonds(5) | 2,709 | 2,056 | 7,734 | 1,954 | 10,443 | 4,010 | ||||||||||||||||||
Other mortgage-related securities(5)(7) | 47,825 | 1,796 | 25,703 | 20 | 73,528 | 1,816 | ||||||||||||||||||
Total mortgage portfolio | 553,634 | 59,376 | 153,580 | 2,662 | 707,214 | 62,038 | ||||||||||||||||||
Fannie Mae MBS held by third parties(8) | 2,370,037 | 15,197 | 46,628 | 927 | 2,416,665 | 16,124 | ||||||||||||||||||
Other credit guarantees(9) | 9,873 | 802 | 16,909 | 40 | 26,782 | 842 | ||||||||||||||||||
Mortgage credit book of business | $ | 2,933,544 | $ | 75,375 | $ | 217,117 | $ | 3,629 | $ | 3,150,661 | $ | 79,004 | ||||||||||||
Guaranty book of business | $ | 2,841,673 | $ | 70,214 | $ | 183,680 | $ | 1,634 | $ | 3,025,353 | $ | 71,848 | ||||||||||||
As of December 31, 2008 | ||||||||||||||||||||||||
Single-Family | Multifamily | Total | ||||||||||||||||||||||
Conventional(1) | Government(2) | Conventional(1) | Government(2) | Conventional(1) | Government(2) | |||||||||||||||||||
(Dollars in millions) | ||||||||||||||||||||||||
Mortgage portfolio:(3) | ||||||||||||||||||||||||
Mortgage loans(4) | $ | 268,253 | $ | 43,799 | $ | 116,742 | $ | 699 | $ | 384,995 | $ | 44,498 | ||||||||||||
Fannie Mae MBS(5) | 226,654 | 1,850 | 376 | 69 | 227,030 | 1,919 | ||||||||||||||||||
Agency mortgage-related securities(5)(6) | 33,320 | 1,559 | — | 22 | 33,320 | 1,581 | ||||||||||||||||||
Mortgage revenue bonds(5) | 2,951 | 2,480 | 7,938 | 2,078 | 10,889 | 4,558 | ||||||||||||||||||
Other mortgage-related securities(5)(7) | 55,597 | 1,960 | 25,825 | 24 | 81,422 | 1,984 | ||||||||||||||||||
Total mortgage portfolio | 586,775 | 51,648 | 150,881 | 2,892 | 737,656 | 54,540 | ||||||||||||||||||
Fannie Mae MBS held by third parties(8) | 2,238,257 | 13,117 | 37,298 | 787 | 2,275,555 | 13,904 | ||||||||||||||||||
Other credit guarantees(9) | 10,464 | — | 17,311 | 34 | 27,775 | 34 | ||||||||||||||||||
Mortgage credit book of business | $ | 2,835,496 | $ | 64,765 | $ | 205,490 | $ | 3,713 | $ | 3,040,986 | $ | 68,478 | ||||||||||||
Guaranty book of business | $ | 2,743,628 | $ | 58,766 | $ | 171,727 | $ | 1,589 | $ | 2,915,355 | $ | 60,355 | ||||||||||||
(1) | Refers to mortgage loans and mortgage-related securities that are not guaranteed or insured by the U.S. government or any of its agencies. | |
(2) | Refers to mortgage loans and mortgage-related securities guaranteed or insured, in whole or in part, by the U.S. government or one of its agencies. | |
(3) | Mortgage portfolio data is reported based on unpaid principal balance. | |
(4) | Includes unpaid principal balance totaling $147.0 billion as of December 31, 2009 and $65.8 billion as of December 31, 2008, related to mortgage-related securities that we held in consolidated VIEs and mortgage-related |
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securities created from securitization transactions that did not meet sale accounting criteria which effectively resulted in these mortgage-related securities being accounted for as loans. | ||
(5) | Includes unpaid principal balance totaling $15.6 billion as of December 31, 2009 and $13.3 billion as of December 31, 2008, related to mortgage-related securities that we were required to consolidate and mortgage-related securities created from securitization transactions that did not meet sale accounting criteria, which effectively resulted in these mortgage-related securities being accounted for as securities. | |
(6) | Consists of mortgage-related securities issued by Freddie Mac and Ginnie Mae. | |
(7) | Includes mortgage-related securities issued by entities other than Fannie Mae, Freddie Mac or Ginnie Mae. | |
(8) | The principal balance of resecuritized Fannie Mae MBS is included only once in the reported amount. | |
(9) | Includes single-family and multifamily credit enhancements that we have provided and that are not otherwise reflected in the table. |
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— | LTV ratio. LTV ratio is a strong predictor of credit performance. The likelihood of default and the gross severity of a loss in the event of default are typically lower as the LTV ratio decreases. This also applies to the estimatedmark-to-market LTV ratios, particularly those over 100%. | |
— | Product type. Certain loan product types have features that may result in increased risk. Intermediate-term, fixed-rate mortgages generally exhibit the lowest default rates, followed by long-term, fixed-rate mortgages. ARMs and balloon/reset mortgages typically exhibit higher default rates than fixed-rate mortgages, partly because the borrower’s future payments may rise, within limits, as interest rates change.Negative-amortizing and interest-only loans also default more often than traditional fixed-rate mortgage loans. | |
— | Number of units. Mortgages onone-unit properties tend to have lower credit risk than mortgages on two-, three- orfour-unit properties. | |
— | Property type.Certain property types have a higher risk of default. For example, condominiums generally are considered to have higher credit risk than single-family detached properties. | |
— | Occupancy type. Mortgages on properties occupied by the borrower as a primary or secondary residence tend to have lower credit risk than mortgages on investment properties. | |
— | Credit score. Credit score is a measure often used by the financial services industry, including our company, to assess borrower credit quality and the likelihood that a borrower will repay future obligations as expected. A higher credit score typically indicates lower credit risk. | |
— | Loan purpose. Loan purpose indicates how the borrower intends to use the funds from a mortgage loan. Cash-out refinancings have a higher risk of default than either mortgage loans used for the purchase of a property or other refinancings that restrict the amount of cash returned to the borrower. | |
— | Geographic concentration. Local economic conditions affect borrowers’ ability to repay loans and the value of collateral underlying loans. Geographic diversification reduces mortgage credit risk. | |
— | Loan age. We monitor year of origination and loan age, which is defined as the number of years since origination. Statistically, the peak ages for default are currently from two to six years after origination. However, we have seen higher early default rates for loans originated in 2006 and 2007, due to a higher number of loans originated during these years with risk layering. Risk layering means permitting a loan to have several features that compound risk, such as loans with reduced documentation and higher risk loan product types. |
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Table 42: | Risk Characteristics of Conventional Single-Family Business Volume and Guaranty Book of Business(1) |
Percent of Conventional | ||||||||||||||||||||||||
Percent of Conventional | Single-Family Guaranty | |||||||||||||||||||||||
Single-Family Business Volume(2) | Book of Business(3) | |||||||||||||||||||||||
For The Year Ended December 31, | As of December 31, | |||||||||||||||||||||||
2009 | 2008 | 2007 | 2009 | 2008 | 2007 | |||||||||||||||||||
Original LTV ratio:(4) | ||||||||||||||||||||||||
<= 60% | 33 | % | 23 | % | 17 | % | 24 | % | 22 | % | 23 | % | ||||||||||||
60.01% to 70% | 17 | 16 | 13 | 16 | 16 | 16 | ||||||||||||||||||
70.01% to 80% | 40 | 39 | 45 | 42 | 43 | 43 | ||||||||||||||||||
80.01% to 90%(5) | 7 | 12 | 9 | 9 | 9 | 8 | ||||||||||||||||||
90.01% to 100%(5) | 3 | 10 | 16 | 9 | 10 | 10 | ||||||||||||||||||
Greater than 100%(5) | * | * | * | * | * | * | ||||||||||||||||||
Total | 100 | % | 100 | % | 100 | % | 100 | % | 100 | % | 100 | % | ||||||||||||
Weighted average | 67 | % | 72 | % | 75 | % | 71 | % | 72 | % | 72 | % | ||||||||||||
Average loan amount | $ | 219,118 | $ | 208,652 | $ | 195,427 | $ | 153,302 | $ | 148,824 | $ | 142,747 | ||||||||||||
Estimatedmark-to-market LTV ratio:(6) | ||||||||||||||||||||||||
<= 60% | 31 | % | 36 | % | 46 | % | ||||||||||||||||||
60.01% to 70% | 13 | 13 | 15 | |||||||||||||||||||||
70.01% to 80% | 19 | 17 | 19 | |||||||||||||||||||||
80.01% to 90% | 14 | 14 | 12 | |||||||||||||||||||||
90.01% to 100% | 9 | 8 | 6 | |||||||||||||||||||||
Greater than 100% | 14 | 12 | 2 | |||||||||||||||||||||
Total | 100 | % | 100 | % | 100 | % | ||||||||||||||||||
Weighted average | 75 | % | 70 | % | 61 | % | ||||||||||||||||||
Product type: | ||||||||||||||||||||||||
Fixed-rate:(7) | ||||||||||||||||||||||||
Long-term | 82 | % | 78 | % | 76 | % | 75 | % | 74 | % | 71 | % | ||||||||||||
Intermediate-term | 15 | 12 | 5 | 13 | 13 | 15 | ||||||||||||||||||
Interest-only | * | 2 | 9 | 3 | 3 | 3 | ||||||||||||||||||
Total fixed-rate | 97 | 92 | 90 | 91 | 90 | 89 | ||||||||||||||||||
Adjustable-rate: | ||||||||||||||||||||||||
Interest-only | 1 | 4 | 7 | 4 | 5 | 5 | ||||||||||||||||||
Negative-amortizing | * | — | — | 1 | 1 | 1 | ||||||||||||||||||
Other ARMs | 2 | 4 | 3 | 4 | 4 | 5 | ||||||||||||||||||
Total adjustable-rate | 3 | 8 | 10 | 9 | 10 | 11 | ||||||||||||||||||
Total | 100 | % | 100 | % | 100 | % | 100 | % | 100 | % | 100 | % | ||||||||||||
Number of property units: | ||||||||||||||||||||||||
1 unit | 98 | % | 97 | % | 96 | % | 96 | % | 96 | % | 96 | % | ||||||||||||
2-4 units | 2 | 3 | 4 | 4 | 4 | 4 | ||||||||||||||||||
Total | 100 | % | 100 | % | 100 | % | 100 | % | 100 | % | 100 | % | ||||||||||||
Property type: | ||||||||||||||||||||||||
Single-family homes | 92 | % | 89 | % | 89 | % | 91 | % | 91 | % | 91 | % | ||||||||||||
Condo/Co-op | 8 | 11 | 11 | 9 | 9 | 9 | ||||||||||||||||||
Total | 100 | % | 100 | % | 100 | % | 100 | % | 100 | % | 100 | % | ||||||||||||
Occupancy type: | ||||||||||||||||||||||||
Primary residence | 93 | % | 89 | % | 89 | % | 90 | % | 90 | % | 90 | % | ||||||||||||
Second/vacation home | 5 | 5 | 5 | 4 | 4 | 4 | ||||||||||||||||||
Investor | 2 | 6 | 6 | 6 | 6 | 6 | ||||||||||||||||||
Total | 100 | % | 100 | % | 100 | % | 100 | % | 100 | % | 100 | % | ||||||||||||
FICO credit score: | ||||||||||||||||||||||||
< 620 | * | % | 3 | % | 6 | % | 4 | % | 5 | % | 5 | % | ||||||||||||
620 to < 660 | 2 | 6 | 12 | 8 | 9 | 10 |
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Percent of Conventional | ||||||||||||||||||||||||
Percent of Conventional | Single-Family Guaranty | |||||||||||||||||||||||
Single-Family Business Volume(2) | Book of Business(3) | |||||||||||||||||||||||
For The Year Ended December 31, | As of December 31, | |||||||||||||||||||||||
2009 | 2008 | 2007 | 2009 | 2008 | 2007 | |||||||||||||||||||
660 to < 700 | 7 | 14 | 19 | 16 | 17 | 18 | ||||||||||||||||||
700 to < 740 | 17 | 22 | 23 | 22 | 23 | 23 | ||||||||||||||||||
>= 740 | 74 | 55 | 40 | 50 | 45 | 43 | ||||||||||||||||||
Not available | * | — | — | * | 1 | 1 | ||||||||||||||||||
Total | 100 | % | 100 | % | 100 | % | 100 | % | 100 | % | 100 | % | ||||||||||||
Weighted average | 761 | 738 | 716 | 730 | 724 | 721 | ||||||||||||||||||
Loan purpose: | ||||||||||||||||||||||||
Purchase | 20 | % | 41 | % | 50 | % | 36 | % | 41 | % | 41 | % | ||||||||||||
Cash-out refinance | 27 | 31 | 32 | 31 | 32 | 32 | ||||||||||||||||||
Other refinance | 53 | 28 | 18 | 33 | 27 | 27 | ||||||||||||||||||
Total | 100 | % | 100 | % | 100 | % | 100 | % | 100 | % | 100 | % | ||||||||||||
Geographic concentration:(8) | ||||||||||||||||||||||||
Midwest | 16 | % | 15 | % | 15 | % | 16 | % | 16 | % | 17 | % | ||||||||||||
Northeast | 19 | 18 | 18 | 19 | 19 | 19 | ||||||||||||||||||
Southeast | 20 | 23 | 26 | 24 | 25 | 25 | ||||||||||||||||||
Southwest | 15 | 16 | 18 | 15 | 16 | 16 | ||||||||||||||||||
West | 30 | 28 | 23 | 26 | 24 | 23 | ||||||||||||||||||
Total | 100 | % | 100 | % | 100 | % | 100 | % | 100 | % | 100 | % | ||||||||||||
Origination year: | ||||||||||||||||||||||||
<=1999 | 2 | % | 2 | % | 3 | % | ||||||||||||||||||
2000 | * | * | * | |||||||||||||||||||||
2001 | 1 | 2 | 2 | |||||||||||||||||||||
2002 | 4 | 5 | 7 | |||||||||||||||||||||
2003 | 14 | 18 | 22 | |||||||||||||||||||||
2004 | 7 | 10 | 12 | |||||||||||||||||||||
2005 | 10 | 13 | 16 | |||||||||||||||||||||
2006 | 11 | 14 | 17 | |||||||||||||||||||||
2007 | 15 | 20 | 21 | |||||||||||||||||||||
2008 | 13 | 16 | — | |||||||||||||||||||||
2009 | 23 | — | — | |||||||||||||||||||||
Total | 100 | % | 100 | % | 100 | % | ||||||||||||||||||
* | Represents less than 0.5% of conventional single-family business volume or book of business. | |
(1) | We reflect second lien loans in the original LTV ratio calculation only when we own both the first and second mortgage liens or we own only the second mortgage lien. Second lien mortgage loans represented less than 0.5% of our conventional single-family business volume for each of the years ended December 31, 2009, 2008 and 2007, and less than 0.5% of our conventional single-family guaranty book of business as of December 31, 2009, 2008 and 2007. Second lien loans held by third parties are not reflected in the original LTV ormark-to-market LTV ratios in this table. | |
(2) | Percentages calculated based on unpaid principal balance of loans at time of acquisition. Single-family business volume refers to both single-family mortgage loans we purchase for our mortgage portfolio and single-family mortgage loans we securitize into Fannie Mae MBS. | |
(3) | Percentages calculated based on unpaid principal balance of loans as of the end of each period. | |
(4) | The original LTV ratio generally is based on the original unpaid principal balance of the loan divided by the appraised property value reported to us at the time of acquisition of the loan. Excludes loans for which this information is not readily available. | |
(5) | We purchase loans with original LTV ratios above 80% to fulfill our mission to serve the primary mortgage market and provide liquidity to the housing system. Except as permitted under HARP, our charter generally requires primary mortgage insurance or other credit enhancement for loans that we acquire that have a LTV ratio over 80%. | |
(6) | The aggregate estimatedmark-to-market LTV ratio is based on the unpaid principal balance of the loan as of the end of each reported period divided by the estimated current value of the property, which we calculate using an internal valuation model that estimates periodic changes in home value. Excludes loans for which this information is not readily available. |
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(7) | Long-term fixed-rate consists of mortgage loans with maturities greater than 15 years, while intermediate-term fixed-rate have maturities equal to or less than 15 years. Loans with interest-only terms are included in the interest-only category regardless of their maturities. | |
(8) | Midwest consists of IL, IN, IA, MI, MN, NE, ND, OH, SD and WI. Northeast includes CT, DE, ME, MA, NH, NJ, NY, PA, PR, RI, VT and VI. Southeast consists of AL, DC, FL, GA, KY, MD, MS, NC, SC, TN, VA and WV. Southwest consists of AZ, AR, CO, KS, LA, MO, NM, OK, TX and UT. West consists of AK, CA, GU, HI, ID, MT, NV, OR, WA and WY. |
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As of December 31, | ||||||||||||
2009 | 2008 | 2007 | ||||||||||
As of period end: | ||||||||||||
Delinquency status: | ||||||||||||
30 to 59 days delinquent | 2.46 | % | 2.52 | % | 2.11 | % | ||||||
60 to 89 days delinquent | 1.07 | 1.00 | 0.58 | |||||||||
Seriously delinquent | 5.38 | 2.42 | 0.98 | |||||||||
Percentage of seriously delinquent loans more than 180 days past due | 57.22 | 40.00 | 32.06 | |||||||||
For the period ended: | ||||||||||||
Average default rate | 1.07 | % | 0.59 | % | 0.32 | % | ||||||
Average loss severity(1) | 37 | 26 | 11 |
(1) | Excludes fair value losses to credit-impaired loans acquired from MBS trusts and HomeSaver Advance loans. |
• | Declines in home prices lengthen the period of time that loans are seriously delinquent because a delinquent borrower may not have sufficient equity in the home to refinance or sell the property and recover enough proceeds to pay off the loan and avoid foreclosure. | |
• | High levels of unemployment are hampering the ability of many delinquent borrowers to cure delinquencies and return their loans to current status. | |
• | Loans in a trial-payment period under HAMP typically remain delinquent until the trial period is successfully completed and a final loan modification has been executed. When the final loan modification is executed, the loan status becomes current, but the loan will likely continue to be classified as a nonperforming loan as most of our recent modifications are TDRs. | |
• | Loan servicers are operating under our directive to delay foreclosure sales until they verify that borrowers are not eligible for HAMP modifications and other home retention and foreclosure-prevention alternatives have been exhausted. | |
• | A number of states have enacted laws to lengthen or impose other requirements that result in slowdowns in the legal processes for completing foreclosures. |
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As of December 31, | ||||||||||||||||||||||||
2009 | 2008 | 2007 | ||||||||||||||||||||||
Percentage of | Serious | Percentage of | Serious | Percentage of | Serious | |||||||||||||||||||
Book | Delinquency | Book | Delinquency | Book | Delinquency | |||||||||||||||||||
Outstanding | Rate | Outstanding | Rate | Outstanding | Rate | |||||||||||||||||||
Conventional single-family delinquency rates by geographic region:(1) | ||||||||||||||||||||||||
Midwest | 16 | % | 4.97 | % | 16 | % | 2.44 | % | 17 | % | 1.35 | % | ||||||||||||
Northeast | 19 | 4.53 | 19 | 1.97 | 19 | 0.94 | ||||||||||||||||||
Southeast | 24 | 7.06 | 25 | 3.27 | 25 | 1.18 | ||||||||||||||||||
Southwest | 15 | 4.19 | 16 | 1.98 | 16 | 0.86 | ||||||||||||||||||
West | 26 | 5.45 | 24 | 2.10 | 23 | 0.50 | ||||||||||||||||||
Total conventional single- family loans | 100 | % | 5.38 | % | 100 | % | 2.42 | % | 100 | % | 0.98 | % | ||||||||||||
Conventional single-family loans: | ||||||||||||||||||||||||
Credit enhanced | 18 | % | 13.51 | % | 21 | % | 6.42 | % | 21 | % | 2.75 | % | ||||||||||||
Non-credit enhanced | 82 | 3.67 | 79 | 1.40 | 79 | 0.53 | ||||||||||||||||||
Total conventional single- family loans | 100 | % | 5.38 | % | 100 | % | 2.42 | % | 100 | % | 0.98 | % | ||||||||||||
(1) | See footnote 8 to Table 42 for states included in each geographic region. |
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Table 45: | Conventional Single-Family Serious Delinquency Rate Concentration Analysis |
As of | ||||||||||||||||||||||||||||||||||||||||||||||||
December 31, 2009 | December 31, 2008 | December 31, 2007 | ||||||||||||||||||||||||||||||||||||||||||||||
Estimated | Estimated | Estimated | ||||||||||||||||||||||||||||||||||||||||||||||
Mark-to- | Mark-to- | Mark-to- | ||||||||||||||||||||||||||||||||||||||||||||||
Unpaid | Percentage | Serious | Market | Unpaid | Percentage | Serious | Market | Unpaid | Percentage | Serious | Market | |||||||||||||||||||||||||||||||||||||
Principal | of Book | Delinquency | LTV | Principal | of Book | Delinquency | LTV | Principal | of Book | Delinquency | LTV | |||||||||||||||||||||||||||||||||||||
Balance | Outstanding | Rate | Ratio(1) | Balance | Outstanding | Rate | Ratio(1) | Balance | Outstanding | Rate | Ratio(1) | |||||||||||||||||||||||||||||||||||||
States: | ||||||||||||||||||||||||||||||||||||||||||||||||
Arizona | $ | 76,073 | 3 | % | 8.80 | % | 100 | % | $ | 77,728 | 3 | % | 3.41 | % | 86 | % | $ | 73,261 | 3 | % | 0.75 | % | 64 | % | ||||||||||||||||||||||||
California | 484,923 | 17 | 5.73 | 77 | 436,117 | 16 | 2.30 | 71 | 383,708 | 15 | 0.50 | 53 | ||||||||||||||||||||||||||||||||||||
Florida | 195,309 | 7 | 12.82 | 100 | 199,871 | 7 | 6.14 | 87 | 189,028 | 8 | 1.59 | 65 | ||||||||||||||||||||||||||||||||||||
Nevada | 34,657 | 1 | 13.00 | 123 | 35,787 | 1 | 4.74 | 98 | 33,995 | 1 | 1.20 | 70 | ||||||||||||||||||||||||||||||||||||
Select Midwest states(2) | 304,147 | 11 | 5.62 | 77 | 308,463 | 11 | 2.70 | 72 | 297,160 | 12 | 1.49 | 67 | ||||||||||||||||||||||||||||||||||||
All other states | 1,701,379 | 61 | 4.11 | 69 | 1,653,426 | 62 | 1.86 | 66 | 1,533,035 | 61 | 0.90 | 61 | ||||||||||||||||||||||||||||||||||||
Product type: | ||||||||||||||||||||||||||||||||||||||||||||||||
Alt-A | 248,311 | 9 | 15.63 | 92 | 290,778 | 11 | 7.03 | 81 | 311,404 | 12 | 2.15 | 69 | ||||||||||||||||||||||||||||||||||||
Subprime | 7,364 | * | 30.68 | 97 | 8,417 | * | 14.29 | 87 | 8,327 | * | 5.76 | 76 | ||||||||||||||||||||||||||||||||||||
Vintages: | ||||||||||||||||||||||||||||||||||||||||||||||||
2006 | 292,184 | 11 | 12.87 | 97 | 372,254 | 14 | 5.11 | 85 | 430,845 | 17 | 1.74 | 74 | ||||||||||||||||||||||||||||||||||||
2007 | 422,956 | 15 | 14.06 | 96 | 536,459 | 20 | 4.70 | 87 | 527,852 | 21 | 0.68 | 77 | ||||||||||||||||||||||||||||||||||||
All other vintages | 2,081,348 | 74 | 3.08 | 67 | 1,802,679 | 66 | 1.51 | 62 | 1,551,490 | 62 | 0.91 | 52 | ||||||||||||||||||||||||||||||||||||
Estimatedmark-to-market LTV ratio: | ||||||||||||||||||||||||||||||||||||||||||||||||
Greater than 100%(1) | 403,443 | 14 | 22.09 | 128 | 314,674 | 12 | 10.98 | 119 | 59,403 | 2 | 4.71 | 105 | ||||||||||||||||||||||||||||||||||||
Select combined risk characteristics | ||||||||||||||||||||||||||||||||||||||||||||||||
Original LTV ratio > 90% and FICO score < 620 | 23,966 | 1 | 27.96 | 104 | 27,159 | 1 | 15.97 | 98 | 29,347 | 1 | 8.64 | 90 |
* | Percentage is less than 0.5%. | |
(1) | Second lien loans held by third parties are not included in the calculation of the estimatedmark-to-market LTV ratios. | |
(2) | Consists of Illinois, Indiana, Michigan and Ohio. |
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For the Year Ended December 31, | ||||||||||||||||||||||||
2009 | 2008 | 2007 | ||||||||||||||||||||||
Unpaid | Unpaid | Unpaid | ||||||||||||||||||||||
Principal | Number | Principal | Number | Principal | Number | |||||||||||||||||||
Balance | of Loans | Balance | of Loans | Balance | of Loans | |||||||||||||||||||
(Dollars in millions) | ||||||||||||||||||||||||
Home retention strategies: | ||||||||||||||||||||||||
Modifications | $ | 18,702 | 98,575 | $ | 5,119 | 33,388 | $ | 3,342 | 26,466 | |||||||||||||||
Repayment plans and forbearances completed(1) | 2,930 | 22,948 | 936 | 7,892 | 904 | 7,955 | ||||||||||||||||||
HomeSaver Advance first-lien loans | 6,057 | 39,199 | 11,196 | 70,967 | — | — | ||||||||||||||||||
$ | 27,689 | 160,722 | $ | 17,251 | 112,247 | $ | 4,246 | 34,421 | ||||||||||||||||
Foreclosure alternatives: | ||||||||||||||||||||||||
Preforeclosure sales | $ | 8,457 | 36,968 | $ | 2,212 | 10,355 | $ | 415 | 2,720 | |||||||||||||||
Deeds-in-lieu of foreclosure | 491 | 2,649 | 252 | 1,341 | 97 | 664 | ||||||||||||||||||
$ | 8,948 | 39,617 | $ | 2,464 | 11,696 | $ | 512 | 3,384 | ||||||||||||||||
Total loan workouts | $ | 36,637 | 200,339 | $ | 19,715 | 123,943 | $ | 4,758 | 37,805 | |||||||||||||||
Loan workouts as a percentage of single-family guaranty book of business(2) | 1.26 | % | 1.10 | % | 0.70 | % | 0.68 | % | 0.18 | % | 0.21 | % | ||||||||||||
(1) | For the year ended December 31, 2009, repayment plans reflected those plans associated with loans that were 60 days or more delinquent. For the years ended December 31, 2008 and 2007, repayment plans reflected those plans associated with loans that were 90 days or more delinquent. If we had included repayment plans associated with loans that were 60 days or more delinquent for the years ended December 31, 2008 and 2007, the unpaid principal balance that had repayment plans and forbearances completed would have been $2.8 billion and $2.1 billion, respectively, and the number of loans that had repayment plans and forbearances completed would have been 22,337 and 17,926, respectively. | |
(2) | Represents total loan workouts during the period as a percentage of our single-family guaranty book of business as of the end of each year. |
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2009 | 2008 | 2007 | ||||||||||
Term extension, interest rate reduction, or combination of both(1) | 93 | % | 57 | % | 52 | % | ||||||
Initial reduction in the monthly payment(2) | 87 | 38 | 9 | |||||||||
Estimated mark-to-market LTV ratio > 100% | 47 | 22 | 8 | |||||||||
Troubled debt restructurings | 92 | 60 | 43 |
(1) | Reported statistics for term extension, interest rate reduction or the combination of both for 2009 and 2008 include subprime adjustable-rate mortgage loans that have been modified to a fixed-rate loan. | |
(2) | These modification statistics do not include subprime adjustable-rate mortgage loans that were modified to a fixed-rate loan and were current at the time of the modification. |
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For the Year Ended December 31, | ||||||||||||
2009 | 2008 | 2007 | ||||||||||
Single-family foreclosed properties (number of properties): | ||||||||||||
Beginning of period inventory of single-family foreclosed properties (REO)(1) | 63,538 | 33,729 | 25,125 | |||||||||
Acquisitions by geographic area:(2) | ||||||||||||
Midwest | 36,072 | 30,026 | 20,303 | |||||||||
Northeast | 7,934 | 5,984 | 3,811 | |||||||||
Southeast | 39,302 | 24,925 | 12,352 | |||||||||
Southwest | 31,197 | 18,340 | 9,942 | |||||||||
West | 31,112 | 15,377 | 2,713 | |||||||||
Total properties acquired through foreclosure | 145,617 | 94,652 | 49,121 | |||||||||
Dispositions of REO | (123,000 | ) | (64,843 | ) | (40,517 | ) | ||||||
End of period inventory of single-family foreclosed properties (REO)(1) | 86,155 | 63,538 | 33,729 | |||||||||
Carrying value of single-family foreclosed properties (dollars in millions)(3) | $ | 8,466 | $ | 6,531 | $ | 3,440 | ||||||
Single-family foreclosure rate(4) | 0.80 | % | 0.52 | % | 0.28 | % | ||||||
(1) | Includes acquisitions throughdeeds-in-lieu of foreclosure. | |
(2) | See footnote 8 to Table 42 for states included in each geographic region. | |
(3) | Excludes foreclosed property claims receivables, which are reported in our consolidated balance sheets as a component of “Acquired property, net.” | |
(4) | Estimated based on the total number of properties acquired through foreclosure as a percentage of the total number of loans in our conventional single-family guaranty book of business as of the end of each respective period. |
As of | For The Year Ended | As of | For The Year Ended | As of | For The Year Ended | |||||||||||||||||||
December 31, 2009 | December 31, 2008 | December 31, 2007 | ||||||||||||||||||||||
Percentage of | Percentage of | Percentage of | ||||||||||||||||||||||
Percentage of | Properties | Percentage of | Properties | Percentage of | Properties | |||||||||||||||||||
Book | Acquired | Book | Acquired | Book | Acquired | |||||||||||||||||||
Outstanding(1) | by Foreclosure(2) | Outstanding(1) | by Foreclosure(2) | Outstanding(1) | by Foreclosure(2) | |||||||||||||||||||
States: | ||||||||||||||||||||||||
Arizona, California, Florida and Nevada | 28 | % | 36 | % | 27 | % | 27 | % | 27 | % | 10 | % | ||||||||||||
Illinois, Indiana, Michigan and Ohio | 11 | 20 | 11 | 25 | 12 | 34 | ||||||||||||||||||
Product Type: | ||||||||||||||||||||||||
Alt-A | 9 | 31 | 11 | 31 | 12 | 22 |
(1) | Percentage calculated based on unpaid principal balance as of the end of each period. |
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(2) | Calculated based on number of properties acquired through foreclosure during the year divided by total number of properties acquired through foreclosure. |
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As of December 31, | ||||||||||||||||||||||||
2009 | 2008 | 2007 | ||||||||||||||||||||||
Percentage of | Serious | Percentage of | Serious | Percentage of | Serious | |||||||||||||||||||
Book | Delinquency | Book | Delinquency | Book | Delinquency | |||||||||||||||||||
Outstanding | Rate | Outstanding | Rate | Outstanding | Rate | |||||||||||||||||||
Multifamily loans: | ||||||||||||||||||||||||
Credit enhanced | 89 | % | 0.54 | % | 86 | % | 0.26 | % | 88 | % | 0.06 | % | ||||||||||||
Non-credit enhanced | 11 | 1.33 | 14 | 0.54 | 12 | 0.22 | ||||||||||||||||||
Total multifamily loans | 100 | % | 0.63 | % | 100 | % | 0.30 | % | 100 | % | 0.08 | % | ||||||||||||
Table 51: | Multifamily Foreclosed Properties |
As of December 31, | ||||||||||||
2009 | 2008 | 2007 | ||||||||||
Number of multifamily foreclosed properties (REO) | 73 | 29 | 9 | |||||||||
Carrying value of multifamily foreclosed properties (dollars in millions) | $ | 265 | $ | 105 | $ | 43 | ||||||
• | mortgage servicers that service the loans we hold in our investment portfolio or that back our Fannie Mae MBS; | |
• | third-party providers of credit enhancement on the mortgage assets that we hold in our investment portfolio or that back our Fannie Mae MBS, including mortgage insurers, financial guarantors and lenders with risk sharing arrangements; |
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• | custodial depository institutions that hold principal and interest payments for Fannie Mae portfolio loans and MBS certificateholders, as well as collateral posted by derivatives counterparties, repurchase transaction counterparties and mortgage originators or servicers; | |
• | issuers of securities held in our cash and other investments portfolio; | |
• | derivatives counterparties; | |
• | mortgage originators and investors; | |
• | debt security and mortgage dealers; and | |
• | document custodians. |
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As of December 31, 2009 | ||||||||||||
Maximum Coverage(2) | ||||||||||||
Counterparty:(1) | Primary | Pool | Total | |||||||||
(Dollars in millions) | ||||||||||||
Mortgage Guaranty Insurance Corporation | $ | 23,580 | $ | 2,230 | $ | 25,810 | ||||||
Radian Guaranty, Inc. | 15,802 | 514 | 16,316 | |||||||||
Genworth Mortgage Insurance Corporation | 15,574 | 377 | 15,951 | |||||||||
United Guaranty Residential Insurance Company | 14,733 | 260 | 14,993 | |||||||||
PMI Mortgage Insurance Co. | 13,375 | 872 | 14,247 | |||||||||
Republic Mortgage Insurance Company | 10,856 | 1,501 | 12,357 | |||||||||
Triad Guaranty Insurance Corporation | 3,520 | 1,108 | 4,628 | |||||||||
CMG Mortgage Insurance Company(3) | 1,967 | — | 1,967 |
(1) | Insurance coverage amounts provided for each counterparty may include coverage provided by consolidated affiliates and subsidiaries of the counterparty. | |
(2) | Maximum coverage refers to the aggregate dollar amount of insurance coverage (i.e., “risk in force”) on single-family loans in our guaranty book of business and represents our maximum potential loss recovery under the applicable mortgage insurance policies. | |
(3) | CMG Mortgage Insurance Company is a joint venture owned by PMI Mortgage Insurance Co. and CUNA Mutual Insurance Society. |
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• | Debt Instruments. We issue a broad range of both callable and non-callable debt instruments to manage the duration and prepayment risk of expected cash flows of the mortgage assets we own. | |
• | Derivative Instruments. We supplement our issuance of debt with derivative instruments to further reduce duration and prepayment risks. | |
• | Monitoring and Active Portfolio Rebalancing. We continually monitor our risk positions and actively rebalance our portfolio of interest rate-sensitive financial instruments to maintain a close match between the duration of our assets and liabilities. |
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• | Interest rate swap contracts. An interest rate swap is a transaction between two parties in which each agrees to exchange, or swap, interest payments. The interest payment amounts are tied to different interest rates or indices for a specified period of time and are 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. A swaption is an option contract that allows us to enter into a pay-fixed or receive-fixed swap at some point in the future. | |
• | Foreign currency swaps. These swaps have the effect of converting 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. |
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Interest Rate | ||||||||||||||||||||||||||||||||||||
Interest Rate Swaps | Swaptions | |||||||||||||||||||||||||||||||||||
Pay- | Receive- | Foreign | Pay- | Receive- | Interest | |||||||||||||||||||||||||||||||
Fixed(2) | Fixed(3) | Basis(4) | Currency(5) | Fixed | Fixed | Rate Caps | Other(6) | Total | ||||||||||||||||||||||||||||
(Dollars in millions) | ||||||||||||||||||||||||||||||||||||
Notional balance as of December 31, 2007 | $ | 377,738 | $ | 285,885 | $ | 7,001 | $ | 2,559 | $ | 85,730 | $ | 124,651 | $ | 2,250 | $ | 650 | $ | 886,464 | ||||||||||||||||||
Additions | 277,735 | 318,698 | 24,335 | 1,141 | 21,272 | 98,061 | 200 | 269 | 741,711 | |||||||||||||||||||||||||||
Terminations(7) | (108,557 | ) | (153,502 | ) | (6,776 | ) | (2,048 | ) | (27,502 | ) | (129,152 | ) | (1,950 | ) | (92 | ) | (429,579 | ) | ||||||||||||||||||
Notional balance as of December 31, 2008 | $ | 546,916 | $ | 451,081 | $ | 24,560 | $ | 1,652 | $ | 79,500 | $ | 93,560 | $ | 500 | $ | 827 | $ | 1,198,596 | ||||||||||||||||||
Additions | 297,379 | 279,854 | 2,765 | 577 | 32,825 | 19,175 | 6,500 | 13 | 639,088 | |||||||||||||||||||||||||||
Terminations(7) | (461,695 | ) | (455,518 | ) | (24,100 | ) | (692 | ) | (13,025 | ) | (37,355 | ) | — | (92 | ) | (992,477 | ) | |||||||||||||||||||
Notional balance as of December 31, 2009 | $ | 382,600 | $ | 275,417 | $ | 3,225 | $ | 1,537 | $ | 99,300 | $ | 75,380 | $ | 7,000 | $ | 748 | $ | 845,207 | ||||||||||||||||||
Future maturities of notional amounts:(8) | ||||||||||||||||||||||||||||||||||||
Less than 1 year | $ | 56,625 | $ | 33,655 | $ | 2,180 | $ | 402 | $ | 2,000 | $ | — | $ | — | $ | 58 | $ | 94,920 | ||||||||||||||||||
1 year to 5 years | 204,121 | 154,344 | 85 | — | 52,950 | — | 7,000 | 593 | 419,093 | |||||||||||||||||||||||||||
5 years to 10 years | 95,343 | 73,736 | — | 449 | 14,000 | 28,945 | — | 97 | 212,570 | |||||||||||||||||||||||||||
Over 10 years | 26,511 | 13,682 | 960 | 686 | 30,350 | 46,435 | — | — | 118,624 | |||||||||||||||||||||||||||
Total | $ | 382,600 | $ | 275,417 | $ | 3,225 | $ | 1,537 | $ | 99,300 | $ | 75,380 | $ | 7,000 | $ | 748 | $ | 845,207 | ||||||||||||||||||
Weighted-average interest rate as of December 31, 2009: | ||||||||||||||||||||||||||||||||||||
Pay rate | 3.46 | % | 0.26 | % | 0.05 | % | — | 5.46 | % | — | — | — | ||||||||||||||||||||||||
Receive rate | 0.26 | % | 3.47 | % | 1.59 | % | — | — | 4.45 | % | 3.58 | % | — | |||||||||||||||||||||||
Weighted-average interest rate as of December 31, 2008: | ||||||||||||||||||||||||||||||||||||
Pay rate | 4.66 | % | 2.54 | % | 2.68 | % | — | 5.88 | % | — | — | — | ||||||||||||||||||||||||
Receive rate | 2.79 | % | 4.24 | % | 0.77 | % | — | — | 4.38 | % | 5.84 | % | — |
(1) | Excludes mortgage commitments accounted for as derivatives. Dollars represent notional amounts that indicate only the amount on which payments are being calculated and do not represent the amount at risk of loss. | |
(2) | There were no swaps callable by Fannie Mae as of December 31, 2009. Notional amounts include swaps callable by Fannie Mae of $1.7 billion and $8.2 billion as of December 31, 2008 and 2007, respectively. | |
(3) | Notional amounts include swaps callable by Fannie Mae of $406 million, $418 million and $432 million as of December 31, 2009, 2008 and 2007, respectively. There were no swaps callable by derivatives counterparties as of December 31, 2009. The notional amounts of swaps callable by derivatives counterparties were $10.4 billion and $7.8 billion as of December 31, 2008 and 2007, respectively. | |
(4) | Notional amounts include swaps callable by derivatives counterparties of $610 million, $925 million and $6.6 billion as of December 31, 2009, 2008 and 2007, respectively. | |
(5) | Terminations include exchange rate adjustments to foreign currency swaps existing at both the beginning and the end of the period. In 2009, exchange rate adjustments for foreign currency swaps that were added or terminated during the period are reflected in the respective categories. In 2008, exchange rate adjustments related to additions and terminations were included in the terminations category. | |
(6) | Includes MBS options, swap credit enhancements and mortgage insurance contracts. | |
(7) | Includes matured, called, exercised, assigned and terminated amounts. | |
(8) | Amounts reported in the table are based on contractual maturities. Some of these amounts represent swaps that are callable by Fannie Mae or by a derivative counterparty, in which case the notional amount would cease to be outstanding prior to maturity if the call option were exercised. See notes (2), (3) and (4) for information on notional amounts that are callable. |
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• | A 50 basis point shift in interest rates. | |
• | A 25 basis point change in the slope of the yield curve. |
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As of December 31, | ||||||||
2009 | 2008(2)(3) | |||||||
(Dollars in billions) | ||||||||
Rate level shock: | ||||||||
-100 basis points | $ | (0.1 | ) | $ | (2.8 | ) | ||
-50 basis points | 0.1 | (1.0 | ) | |||||
+50 basis points | (0.4 | ) | (0.7 | ) | ||||
+100 basis points | (0.9 | ) | (1.6 | ) | ||||
Rate slope shock: | ||||||||
-25 basis points (flattening) | (0.2 | ) | (0.5 | ) | ||||
+25 basis points (steepening) | 0.1 | 0.4 |
(1) | Computed based on changes in LIBOR swap rates. | |
(2) | Amounts include the sensitivities of our preferred stock. | |
(3) | Reflects metrics as of December 31, 2008 adjusted to exclude the sensitivity of changes in interest rates of our Alt-A and subprime private-label mortgage-related investment securities. |
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(1) | We use duration hedges, including longer term debt and interest rate swaps, to reduce the duration of our net portfolio. |
(2) | We use option-based hedges, including callable debt and interest rate swaptions, to reduce the convexity or the duration changes of our net portfolio as interest rates move. |
(3) | We take rebalancing actions to adjust our net portfolio position in response to movements in interest rates. |
(4) | Our mortgage portfolio includes not only30-year fixed rate mortgage assets, but also other mortgage assets that typically have a shorter duration, such as adjustable-rate mortgage loans, and mortgage assets that generally have a somewhat longer duration, such as multifamily loans and CMBS. |
(5) | The models used by Barclays Capital and Fannie Mae to estimate durations are different. |
30-Year Fannie Mae | ||||||||
Fannie Mae | Mortgage Index | |||||||
Effective | Option Adjusted | |||||||
Month | Duration Gap | Duration(1) | ||||||
(In months) | ||||||||
December 2008 | (1 | ) | 21 | |||||
January 2009 | — | 13 | ||||||
February 2009 | 1 | 30 | ||||||
March 2009 | (2 | ) | 26 | |||||
April 2009 | (1 | ) | 23 | |||||
May 2009 | 1 | 30 | ||||||
June 2009 | 1 | 41 | ||||||
July 2009 | (1 | ) | 40 | |||||
August 2009 | — | 41 | ||||||
September 2009 | (2 | ) | 39 | |||||
October 2009 | (1 | ) | 40 | |||||
November 2009 | — | 38 | ||||||
December 2009 | 1 | 40 | ||||||
January 2010 | 1 | 43 |
(1) | Reflects average daily option-adjusted duration, expressed in months, based on the30-year Fannie Mae MBS component of the Barclays Capital U.S. Aggregate index obtained from Barclays Capital Live. |
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As of December 31, 2009 | ||||||||||||||||||||
Pre-tax Effect on Estimated Fair Value | ||||||||||||||||||||
Change in Interest Rates | ||||||||||||||||||||
Estimated | (in basis points) | |||||||||||||||||||
Fair Value | -100 | -50 | +50 | +100 | ||||||||||||||||
(Dollars in billions) | ||||||||||||||||||||
Trading financial instruments | $ | 111.9 | $ | 2.7 | $ | 1.6 | $ | (1.9 | ) | $ | (4.0 | ) | ||||||||
Guaranty assets and guaranty obligations, net(2) | (149.3 | ) | 11.3 | 5.7 | (6.0 | ) | (4.3 | ) | ||||||||||||
Other financial instruments, net(3) | (72.5 | ) | (2.2 | ) | (1.1 | ) | 1.2 | 2.7 |
As of December 31, 2008 | ||||||||||||||||||||
Pre-tax Effect on Estimated Fair Value | ||||||||||||||||||||
Change in Interest Rates | ||||||||||||||||||||
Estimated | (in basis points) | |||||||||||||||||||
Fair Value | -100 | -50 | +50 | +100 | ||||||||||||||||
(Dollars in billions) | ||||||||||||||||||||
Trading financial instruments | $ | 90.8 | $ | 1.4 | $ | 0.8 | $ | (1.0 | ) | $ | (2.0 | ) | ||||||||
Guaranty assets and guaranty obligations, net(2) | (91.0 | ) | 11.9 | 5.6 | (6.7 | ) | (7.6 | ) | ||||||||||||
Other financial instruments, net(3) | (131.9 | ) | (1.6 | ) | (0.4 | ) | (0.9 | ) | (1.8 | ) |
(1) | Excludes preferred stock. | |
(2) | Consists of the net of “Guaranty assets” and “Guaranty obligations” reported in our consolidated balance sheets. In addition, includes certain amounts that have been reclassified from “Mortgage loans” reported in our consolidated balance sheets to reflect how the risk of the interest rate and credit risk components of these loans are managed by our business segments. | |
(3) | Consists of the net of all other financial instruments reported in “Note 19, Fair Value.” |
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Item 7A. | Quantitative and Qualitative Disclosures About Market Risk |
Item 8. | Financial Statements and Supplementary Data |
Item 9. | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure |
Item 9A. | Controls and Procedures |
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• | Our disclosure controls and procedures did not adequately ensure the accumulation and communication to management of information known to FHFA that is needed to meet our disclosure obligations under the federal securities laws; and | |
• | we had a material weakness in our internal control over financial reporting with respect to our controls over the change management process we apply to applications and models we use in accounting for (1) our provision for credit losses and (2) other-than-temporary impairment on our private-label mortgage-related securities. |
• | pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our assets; |
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• | provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and that our receipts and expenditures are being made only in accordance with authorizations of our management and our Board of Directors; and | |
• | provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on our financial statements. |
• | Disclosure Controls and Procedures. We have been under the conservatorship of FHFA since September 6, 2008. Under the Regulatory Reform Act, FHFA is an independent agency that currently functions as both our conservator and our regulator with respect to our safety, soundness and mission. Because of the nature of the conservatorship under the Regulatory Reform Act, which places us under the “control” of FHFA (as that term is defined by securities laws), some of the information that we may need to meet our disclosure obligations may be solely within the knowledge of FHFA. As our conservator, FHFA has the power to take actions without our knowledge that could be material to our shareholders and other stakeholders, and could significantly affect our financial performance or our continued existence as an ongoing business. Although we and FHFA attempted to design and implement disclosure policies and procedures that would account for the conservatorship and accomplish the same objectives as a disclosure controls and procedures policy of a typical reporting company, there are inherent structural limitations on our ability to design, implement, test or operate effective disclosure controls and procedures. As both our regulator and our conservator under the Regulatory Reform Act, FHFA is limited in its ability to design and implement a complete set of disclosure controls and procedures relating to Fannie Mae, particularly with respect to current reporting pursuant toForm 8-K. Similarly, as a regulated entity, we are limited in our ability to design, implement, operate and test the controls and procedures for which FHFA is responsible. |
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• | Change Management for Applications and Models used in Accounting for Our Provision for Credit Losses and for Other-than-temporary Impairment on Our Private-label Mortgage-related Securities. We did not maintain effective internal control over financial reporting with respect to our controls over the change management process we apply to applications and models we use in accounting for (1) our provision for credit losses and (2) other-than-temporary impairment on our private-label mortgage-related securities. Specifically, requirements definition, and systems and user-acceptance testing were not adequate to prevent or identify errors that affected (a) the identification of loan populations and (b) the estimation of cash flows. As a result, incorrect data and assumptions were used in our accounting for our provision for credit losses and for other-than-temporary impairment on our private-label mortgage-related securities. |
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• | FHFA has established the Office of Conservatorship Operations, which is intended to facilitate operation of the company with the oversight of the conservator. | |
• | We have provided drafts of our SEC filings to FHFA personnel for their review and comment prior to filing. We also have provided drafts of external press releases, statements and speeches to FHFA personnel for their review and comment prior to release. | |
• | FHFA personnel, including senior officials, have reviewed our SEC filings prior to filing, including this annual report onForm 10-K for the year ended December 31, 2009 (“2009 Form10-K”), and engaged in discussions regarding issues associated with the information contained in those filings. Prior to filing our 2009Form 10-K, FHFA provided Fannie Mae management with a written acknowledgement that it had reviewed the 2009Form 10-K, and it was not aware of any material misstatements or omissions in the 2009Form 10-K and had no objection to our filing theForm 10-K. | |
• | The Director of FHFA or, after August 2009, the Acting Director of FHFA, and our Chief Executive Officer have been in frequent communication, typically meeting on a weekly basis. | |
• | FHFA representatives attend meetings frequently with various groups within the company to enhance the flow of information and to provide oversight on a variety of matters, including accounting, credit and market risk management, liquidity, external communications and legal matters. | |
• | Senior officials within FHFA’s Office of the Chief Accountant have met frequently with our senior finance executives regarding our accounting policies, practices and procedures. |
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• | Disclosure Controls and Procedures—The Company’s disclosure controls and procedures did not adequately ensure the accumulation and communication to management of information known to the Federal Housing Finance Agency that is needed to meet its disclosure obligations under the federal securities laws as they relate to financial reporting. | |
• | Change Management for Applications and Models used in Accounting for Provision for Credit Losses and for Other-than-temporary Impairment on Private-label Mortgage-related Securities—The Company did not maintain effective internal control over financial reporting with respect to its controls over the change management process for applications and models used in accounting for (1) the provision for credit losses and (2) other-than-temporary impairment on private-label mortgage-related securities. Specifically, |
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requirements definition, and systems and user-acceptance testing were not adequate to prevent or identify errors that affected (a) the identification of loan populations and (b) the estimation of cash flows. As a result, incorrect data and assumptions were initially used in accounting for the provision for credit losses and for other-than-temporary impairment on private-label mortgage-related securities. |
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Item 9B. | Other Information |
Item 10. | Directors, Executive Officers and Corporate Governance |
• | business; | |
• | finance; | |
• | capital markets; | |
• | accounting; | |
• | risk management; | |
• | public policy; | |
• | mortgage lending, real estate, low-income housingand/or homebuilding; and | |
• | the regulation of financial institutions. |
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(1) | actions involving capital stock, dividends, the senior preferred stock purchase agreement, increases in risk limits, material changes in accounting policy and reasonably foreseeable material increases in operational risk; |
(2) | the creation of any subsidiary or affiliate or any substantial non-ordinary course transactions with any subsidiary or affiliate; |
(3) | matters that relate to conservatorship; |
(4) | actions involving hiring, compensation and termination benefits of directors and officers at the executive vice president level and above and other specified executives; |
(5) | actions involving retention and termination of external auditors and law firms serving as consultants to the Board; |
(6) | settlements of litigation, claims, regulatory proceedings or tax-related matters in excess of a specified threshold; |
(7) | any merger with or acquisition of a business for consideration in excess of $50 million; and |
(8) | any action that in the reasonable business judgment of the Board at the time that the action is taken is likely to cause significant reputational risk. |
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Item 11. | Executive Compensation |
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• | Michael J. Williams, President and Chief Executive Officer (since April 2009) and Executive Vice President and Chief Operating Officer (until April 2009); | |
• | Herbert M. Allison, Jr., President and Chief Executive Officer (until April 2009); | |
• | David M. Johnson, Executive Vice President and Chief Financial Officer; | |
• | Kenneth J. Bacon, Executive Vice President—Housing and Community Development; | |
• | David C. Benson, Executive Vice President—Capital Markets; and | |
• | Timothy J. Mayopoulos, Executive Vice President, General Counsel and Corporate Secretary. |
• | Base Salary. Base salary is paid in cash throughout the year on a bi-weekly basis and provides a minimum, fixed level of cash compensation for the named executives. Base salary reflects the named executive’s level of responsibility and experience, as well as his performance over time. Beginning in |
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2010, base salary will be capped at $500,000 for all of our executive officers, including the named executives, other than our Chief Executive Officer and Chief Financial Officer. |
• | Deferred Pay. Deferred pay is paid to the named executives in cash in quarterly installments in the year following the performance year. Generally, 2009 deferred pay will be paid in four equal quarterly installments in March, June, September and December of 2010. Deferred pay is designed to replicate the “stock salary” element of the compensation program applicable to financial institutions that received TARP assistance and is also intended to serve as a retention incentive for the named executives; however, deferred pay will be paid in cash, not stock. Given the low market value of our common stock since our entry into conservatorship, we and FHFA believe that stock-based compensation would not provide appropriate retention incentives for our named executives. Further, large grants of low-priced stock could provide substantial incentives for the named executives to seek and take large risks. In addition, we are prohibited from paying new stock-based compensation under the senior preferred stock purchase agreement without Treasury’s consent. | |
The amount of deferred pay is the remaining portion of a named executive’s total direct compensation that is not base salary or a long-term incentive award at the target level. Deferred pay for 2009 contains no performance-based component; however, as described below under “Components of 2010 Compensation and Changes from 2009 Compensation Arrangements,” 50% of deferred pay for 2010 will be based on the company’s performance against corporate goals established for 2010 and 50% of deferred pay for 2010 will be service-based. Except in the limited circumstances described under “Compensation Tables—Potential Payments Upon Termination orChange-in-Control” below, we will pay installments of deferred pay only if the named executive is employed by Fannie Mae on the scheduled payment dates. | ||
• | Long-term Incentive Award. A long-term incentive award is a performance-based cash award that is paid in the two calendar years following the performance year. Half of the 2009 long-term incentive award was paid in February 2010 and the remaining half of the award will be paid in the first quarter of 2011. Long-term incentive awards are designed to provide incentives to the named executives to achieve corporate and individual performance goals. In addition, because the final half of the award is not payable until the first quarter of the second year following the performance year, it also serves as a retention incentive for the named executives. Except in the limited circumstances described under “Compensation Tables—Potential Payments Upon Termination orChange-in-Control” below, we will pay installments of a long-term incentive award only if the named executive is employed by Fannie Mae on the scheduled payment dates. | |
We target long-term incentive awards at one-third of total compensation. The actual amount paid to a named executive is based on the company’s and the named executive’s performance against corporate and individual performance goals. For a description of our 2009 corporate performance goals, see “2009 Compensation Process and Decisions—What elements of corporate performance and other factors did the Compensation Committee and the Board consider in making compensation decisions relating to the 2009 long-term incentive awards and 2008 Retention Program awards?” below. Our Board of Directors retains the discretion to pay individual long-term incentive awards that are lower or higher than the target amounts and this discretion is not restricted to a specific range above or below these targets; however, the sum of the individual long-term incentive awards to all executive officers cannot exceed the overall size of the long-term incentive pool for our executive officers, and FHFA has directed that this pool cannot exceed 120% of target. In addition, each long-term incentive award paid to an executive officer must be approved by FHFA. |
• | Retirement Plans. We redesigned our retirement benefits program in late 2007 and further limited certain retirement benefits in 2009. As a result of these changes, the retirement plans in which each of our named executives was eligible to participate in 2009 depended on their date of hire or promotion, as applicable. |
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• | Messrs. Williams and Bacon. Messrs. Williams and Bacon participate in our Executive Pension Plan, tax-qualified defined benefit pension plan and supplemental defined benefit pension plans. As discussed below under “Components of 2010 Compensation and Changes from 2009 Compensation Arrangements,” we have frozen benefit accruals under the Executive Pension Plan. | |
• | Mr. Benson. Mr. Benson participates in our tax-qualified defined benefit pension plan and supplemental defined benefit pension plans. He is not eligible to participate in our Executive Pension Plan because he was promoted to executive vice president after we froze participation in the Executive Pension Plan in November 2007. | |
• | Messrs. Johnson and Mayopoulos. We hired Messrs. Johnson and Mayopoulos after we froze participation in our Executive Pension Plan, tax-qualified defined benefit pension plan and supplemental defined benefit pension plans. Accordingly, they do not participate in any of our defined benefit pension plans. They participate instead in our Supplemental Retirement Savings Plan, which is an unfunded, non-tax-qualified defined contribution plan. |
All of the named executives are also eligible to participate in our Retirement Savings Plan, which is a 401(k) plan that is available to our employee population as a whole. Participants in our Retirement Savings Plan who are not eligible for our tax-qualified defined benefit pension plan receive an enhanced matching contribution under the Retirement Savings Plan. We provide more detail on our retirement plans under “Compensation Tables—Pension Benefits” and “Compensation Tables—Nonqualified Deferred Compensation.” | ||
• | Other Employee Benefits and Plans. In general, the named executives are eligible for employee benefits available to our employee population as a whole, including our medical insurance plans and matching charitable gifts program. The named executives are also eligible to participate in our supplemental long-term disability plan, which is available only to employees above a specified level. Until December 2009, the named executives were also eligible to participate in our executive life insurance program; however, that benefit has been terminated. Beginning in 2010, the named executives are eligible for the life insurance program generally available to our employee population as a whole. | |
• | Perquisites. In 2009, we provided certain named executives with limited perquisites not generally available to our employee population as a whole, consisting primarily of reimbursement of relocation and temporary living expenses. In addition, all named executives were eligible to receive an annual physical at the company’s expense. More information on perquisites provided to our named executives is provided below under “Compensation Tables—Components of ‘All Other Compensation’ for 2009.” As noted below under “Components of 2010 Compensation and Changes from 2009 Compensation Arrangements,” effective January 1, 2010, we have limited perquisites for our named executives to no more than $25,000 per year. Any exceptions to this limit will require the approval of FHFA in consultation with Treasury. | |
• | Severance Benefits. We have not entered into employment agreements with any of our named executives that would entitle the executive to severance benefits. Information on compensation that we may pay to a named executive in certain circumstances in the event the executive’s employment is terminated is provided below in “Compensation Tables—Potential Payments Upon Termination orChange-in-Control.” |
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• | Our directors serve on behalf of FHFA and exercise their authority subject to the direction of FHFA. More information about the role of our directors is described above in “Directors, Executive Officers and Corporate Governance—Corporate Governance—Conservatorship and Delegation of Authority to Board of Directors.” | |
• | FHFA, as our conservator, has directed that our Board consult with and obtain FHFA’s consent before taking any actions involving hiring, compensation or termination benefits of any officer at the executive vice president level and above and including, regardless of title, executives who hold positions with the functions of the chief operating officer, chief financial officer, general counsel, chief business officer, chief investment officer, treasurer, chief compliance officer, chief risk officer and chief/general/internal auditor. | |
• | Under the terms of the senior preferred stock purchase agreement with Treasury, we may not enter into any new compensation arrangements with, or increase amounts or benefits payable under existing compensation arrangements of, any named executives or executive officers without the consent of the Director of FHFA, in consultation with the Secretary of the Treasury. | |
• | Under the terms of the senior preferred stock purchase agreement, we may not sell or issue any equity securities without the prior written consent of Treasury, other than as required by the terms of any binding agreement in effect on the date of the senior preferred stock purchase agreement. This restricts our ability to offer stock-based compensation. |
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• | While we are in conservatorship, FHFA, as our conservator, retains the authority to approve and to modify both the terms and amount of any compensation to any of our executive officers. In addition, until December 31, 2009, the Housing and Economic Recovery Act of 2008 separately provided FHFA, as our regulator, with the power to approve, disapprove and modify executive compensation. | |
• | FHFA, as our regulator, must approve any termination benefits we offer to our named executives and certain other officers identified by FHFA. | |
• | Under the Housing and Economic Recovery Act of 2008 and related regulations issued by FHFA, the Director of FHFA has the authority to prohibit or limit us from making any “golden parachute payment” to specified categories of persons, including our named executives. |
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• Allstate Corporation | • Fifth Third Bancorp | • Principal Financial Group | ||
• American International Group | • Genworth Financial, Inc. | • Prudential Financial, Inc. | ||
• Bank of New York Mellon Corporation | • GMAC LLC | • Regions Financial Corporation | ||
• BB&T Corporation | • Hartford Financial Services Group | • State Street Corporation | ||
• Capital One Financial Corporation | • Lincoln National Corporation | • SunTrust Banks Inc. | ||
• Freddie Mac | • Metlife, Inc. | • US Bancorp. |
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• | Goal 1: Our first 2009 performance goal was to be a recognized leader in the housing recovery by providing liquidity to the mortgage market and helping to prevent foreclosures. Our performance against this goal was to be measured by our achievement of the following four objectives: |
• | Help homeowners. The first objective was to help homeowners avoid foreclosure by completing 387,500 to 460,000 workouts, including modifications, forbearances, foreclosure alternatives and other home retention activities. We exceeded this objective by completing more than 600,000 workouts in 2009. | |
• | Administration of the Home Affordable Modification Program. The second objective was to carry out our role as program administrator of Treasury’s Home Affordable Modification Program, or HAMP. We successfully completed all 2009 milestones associated with this objective, which were: |
• | New Reporting System. We implemented a new reporting system for tracking trial modifications and permanent loans and incentive payments made under HAMP in June. | |
• | Payments to Servicers. We made our first incentive payments to servicers under HAMP in July. | |
• | Second Lien Program and Other Program Initiatives. Working with Treasury, we announced the Second Lien Program in August. In addition, on behalf of Treasury, we released the Home Price Decline Protection Program in July and the Home Affordable Foreclosure Alternatives Program in November. | |
• | Guidance to Servicers. We provided clear guidance to servicers about HAMP. For example, we maintained the HAMP servicer website on Treasury’s behalf, which houses all program-related servicer communications, directives, training modules and frequently asked questions; we held weekly calls with servicers; and we issued multiple communications to servicers to announce program-related enhancements and new directives. | |
• | Servicer and Borrower Outreach. We engaged in many different servicer and borrower outreach activities in 2009, including working with servicers to solicit information from more than three million borrowers to determine HAMP eligibility, working with partners to launch 20 outreach events in cities throughout the country, launching call centers for borrowers and servicers, working with partners to launch a public service announcement campaign for HAMP and deploying Fannie Mae representatives to the major servicers to monitor performance and improve conversions to permanent modifications. |
• | Single-Family Market Served. The third objective was to provide liquidity to the single-family mortgage market. The amount of liquidity we provided to the single-family mortgage market was to be measured by our achievement of a market share of new single-family mortgage-related securities issuances of 37.5%, while balancing the credit risk and expected profitability of this new business. We exceeded this objective for 2009, achieving a market share for new single-family mortgage-related securities issuances of 46.3% for 2009 and actively balancing this market position with prudent lending and pricing. | |
• | Multifamily Market Served. The fourth objective was to provide liquidity to the multifamily mortgage market. The amount of liquidity we provided to the multifamily mortgage market was to be measured by our achievement of a multifamily GSE market share of 50%, while balancing the credit risk and expected profitability of these new acquisitions. Multifamily GSE market share refers to the percentage of multifamily credit guaranty acquisitions by Fannie Mae versus Freddie Mac. We exceeded this objective for 2009, achieving a multifamily GSE market share of 54% for 2009 and actively balancing this market position with prudent lending and pricing. |
The Compensation Committee determined that the targets for all related objectives to this performance goal were either met or exceeded. In connection with this assessment, the Committee recognized the |
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continued weakness in the housing and financial markets and noted that, without the company’s involvement, the housing market would have been significantly worse. The Committee noted that management exceeded the target for the number of homeowners helped and exceeded the targets for single-family and multifamily market share. The Committee determined that the company successfully executed its role as administrator of HAMP, implementing and administering the program in a very difficult operating environment. The Committee also recognized that the company took a variety of steps to help its borrowers who were not eligible under HAMP. The Committee noted that, notwithstanding management’s performance, significant opportunities remain for converting HAMP trial modifications into permanent modifications; however, the Committee concluded that, based on the factors described above, it was not appropriate to reduce the named executives’ long-term incentive awards or 2008 Retention Program awards based on the performance of HAMP in 2009. |
• | Goal 2: Our second 2009 performance goal was to protect taxpayers, achieve our mission and build a more streamlined, high-performing company. Our performance against this goal was to be measured by our achievement of the following seven objectives: |
• | Administrative expenses. The first objective was to (a) limit administrative expenses to $1.8 billion, excluding extraordinary items such as the implementation of new accounting rules on consolidation, certain costs relating to HAMP and other extraordinary expenses, and (b) limit the number of our employees to 5,800. This objective was to be balanced against our other corporate goals and objectives when evaluating our performance against it. We met the first target of this objective by keeping our administrative expenses, excluding extraordinary items, to $1.7 billion. We did not, however, meet the second target of this objective, as our employee headcount of approximately 6,000 employees at year end exceeded our target by approximately 4%. These additional employees were hired to support our credit-related initiatives, including our work as HAMP program administrator, and to replace existing contractors. | |
• | Cumulative Treasury Infusion. The second objective was to protect taxpayers by limiting the amount of the investment Treasury must make under the senior preferred stock purchase agreement. Because this objective might be in conflict with Goal 1, it was to be balanced against Goal 1 when evaluating our performance against it. We met this objective by actively managing our business throughout the year with the goal that our new business activities would be profitable. These efforts mitigated the size of our draws under the senior preferred stock purchase agreement in 2009, which were primarily caused by credit losses relating to business originated prior to 2009. We also focused on a variety of initiatives to help reduce our credit losses from what they otherwise would have been. | |
• | Housing Goals. The third objective was to finalize a framework for our new housing goals with FHFA and meet these housing goals to the extent feasible. FHFA announced our final 2009 housing goals in August. Based on our preliminary determination, which has not yet been validated by FHFA, we believe we met all of the 2009 housing goals and related subgoals, except for the “underserved areas” goal and the increased “multifamily special affordable housing” subgoal. We did not meet this goal and subgoal based on our assessment that they were infeasible given the current market and economic conditions. See “Business—Our Charter and Regulation of Our Activities—Regulation and Oversight of Our Activities—Housing Goals and Subgoals and Duty to Serve Underserved Markets” for more information on our 2009 housing goals and our performance against these goals. | |
• | Return on Capital Framework. The fourth objective was to work to establish a return on capital methodology to ensure that we earn the appropriate return on new business, with a particular focus on economic capital. We met this objective by developing a framework for economic capital and return on capital for the company. | |
• | Information Technology/Operations Redesign. The fifth objective was to begin a two- to three-year plan to reengineerend-to-end business processes, including information technology architecture and operations processes. We successfully completed all 2009 milestones associated with this objective, which consisted of developing a target state architecture and governance framework, making this |
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governance framework operational, developing a plan to lower our operational costs and achieving over $10 million in 2010 run rate savings from transformation work in 2009. |
• | Housing and Economic Recovery Act-Compliant Sourcing. The sixth objective was to design an approach to sourcing that is compliant with the Housing and Economic Recovery Act’s requirement that we implement standards and procedures to ensure the inclusion and utilization of minorities and women, and minority- and women-owned businesses, in all of our business and activities. We met this objective by developing a sourcing framework that is designed to be compliant with the Housing and Economic Recovery Act’s requirement and by finalizing a policy on compliance with the Act. | |
• | Performance-Based Culture. The seventh objective was to move toward a performance-based culture in order to accomplish our goals and position the company for long-term success. We successfully completed all 2009 milestones associated with this objective, which included collecting employee input, selecting areas of focus, implementing action plans and measuring our performance against those plans. We also attained our goals of retaining high-performing employees at a higher rate than lower-performing employees and maintaining a diverse workforce at all levels. |
• | Goal 3: Our third 2009 performance goal was to measure, manage and reduce enterprise risk more effectively. Our performance against this goal was to be measured by our achievement of the following two objectives: |
• | Risk and Controls. The first objective was to achieve and maintain a strong control and risk environment. We met all 2009 milestones associated with this objective, which consisted of implementing an updated enterprise risk framework, remediating the material weakness in our internal control over financial reporting relating to model inputs for assessment ofother-than-temporary impairment for private-label mortgage-related securities, resolving certain significant deficiencies, designing operating metrics, and creating and implementing a new operational risk framework. Although we met all 2009 milestones relating to our risk and controls objective, we experienced a number of operational incidents in 2009 related to inadequately designed or failed execution of internal processes or systems. For example, in July and August 2009, we publicly identified errors in certain information reported about our MBS trusts and published corrected data relating to these errors. | |
• | Credit. The second objective was to develop and implement a new Board reporting framework to measure the performance of our acquisitions for the second half of 2008 and 2009 with regard to actual |
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credit losses as compared with our modeled credit losses. We met this objective by developing this new reporting framework and reporting to the Board under the framework beginning in November 2009. |
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• | Materially Inaccurate Information. If an executive officer has been granted deferred pay or incentive payments (including long-term incentive awards) based on materially inaccurate financial statements or any other materially inaccurate performance metric criteria, he or she will forfeit or must repay amounts granted in excess of the amounts the Board of Directors determines would likely have been granted using accurate metrics. | |
• | Termination for Cause. If we terminate an executive officer’s employment for cause, he or she will immediately forfeit all deferred pay, long-term incentive awards and any other incentive payments that have not yet been paid. We may terminate an executive officer’s employment for cause if we determine that the officer has: (a) materially harmed the company by, in connection with the officer’s performance |
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of his or her duties for the company, engaging in gross misconduct or performing his or her duties in a grossly negligent manner, or (b) been convicted of, or pleadednolo contenderewith respect to, a felony. |
• | Subsequent Determination of Cause. If an executive officer’s employment was not terminated for cause, but the Board of Directors later determines, within a specified period of time, that he or she could have been terminated for cause and that the officer’s actions materially harmed the business or reputation of the company,the officer will forfeit or must repay, as the case may be, deferred pay, long-term incentive awards and any other incentive payments received by the officer to the extent the Board of Directors deems appropriate under the circumstances. The Board of Directors may require the forfeiture or repayment of all deferred pay, long-term incentive awards and any other incentive payments so that the officer is in the same economic position as if he or she had been terminated for cause as of the date of termination of his or her employment. | |
• | Effect of Willful Misconduct. If an executive officer’s employment: (a) is terminated for cause (or the Board of Directors later determines that cause for termination existed) due to either (i) willful misconduct by the officer in connection with his or her performance of his or her duties for the company or (ii) the officer has been convicted of, or pleadednolo contenderewith respect to, a felony consisting of an act of willful misconduct in the performance of his or her duties for the company and (b) in the determination of the Board of Directors, this has materially harmed the business or reputation of the company, then, to the extent the Board of Directors deems it appropriate under the circumstances, in addition to the forfeiture or repayment of deferred pay, long-term incentive awards and any other incentive payments described above, the executive officer will also forfeit or must repay, as the case may be, deferred pay and annual incentives or long-term awards paid to him or her in the two-year period prior to the date of termination of his or her employment or payable to him or her in the future. Misconduct is not considered willful unless it is done or omitted to be done by the officer in bad faith or without reasonable belief that his or her action or omission was in the best interest of the company. |
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• | Deferred Pay. Deferred pay for 2010 will be 50% service-based and 50% performance-based, rather than 100% service-based as in 2009. The performance-based portion of deferred pay for the named executives will be based on the company’s performance against corporate goals established for 2010, as determined by the Board of Directors and as approved by the Director of FHFA. As of February 26, 2010, we have not yet established our 2010 corporate goals. | |
• | Long-term Incentive Award. The first installment payment of the 2010 long-term incentive award will continue to be based on performance against corporate and individual goals established for 2010; however, the second installment payment of the award will be based on performance against corporate goals established for both 2010 and 2011. | |
• | Termination of Executive Life Insurance Program. Effective December 2009, the executive life insurance benefit has been terminated. | |
• | Cap on Perquisites. Effective January 1, 2010, perquisites for named executives will be limited to $25,000 per year, and any exceptions to this limit will require the approval of FHFA in consultation with Treasury. | |
• | Freeze on Executive Pension Plan Accruals. We have frozen benefit accruals in the Executive Pension Plan for all participants, including Messrs. Williams and Bacon. |
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Change in | ||||||||||||||||||||||||||||||||
Pension | ||||||||||||||||||||||||||||||||
Value and | ||||||||||||||||||||||||||||||||
Non-Equity | Nonqualified | |||||||||||||||||||||||||||||||
Incentive | Deferred | |||||||||||||||||||||||||||||||
Stock | Plan | Compensation | All Other | |||||||||||||||||||||||||||||
Name and | Salary | Bonus | Awards | Compensation | Earnings | Compensation | Total | |||||||||||||||||||||||||
Principal Position | Year | ($)(1) | ($)(2) | ($)(3) | ($)(4) | ($)(5) | ($)(6) | ($)(7) | ||||||||||||||||||||||||
Michael Williams(8) | 2009 | 860,523 | 2,867,200 | — | 2,051,100 | 790,803 | 111,180 | 6,680,806 | ||||||||||||||||||||||||
President and Chief Executive Officer | 2008 | 676,000 | 871,000 | 4,783,993 | — | 724,874 | 43,034 | 7,098,901 | ||||||||||||||||||||||||
2007 | 697,164 | — | 5,247,443 | 1,189,760 | 359,279 | 55,418 | 7,549,064 | |||||||||||||||||||||||||
Herbert Allison(9) | 2009 | — | — | — | — | — | 330,858 | 330,858 | ||||||||||||||||||||||||
President and Chief Executive Officer | 2008 | — | — | — | — | — | 58,260 | 58,260 | ||||||||||||||||||||||||
David Johnson(10) | 2009 | 675,000 | 1,700,000 | — | 1,035,000 | — | 192,365 | 3,602,365 | ||||||||||||||||||||||||
Executive Vice President and Chief Financial Officer | 2008 | 48,077 | — | — | — | — | 962 | 49,039 | ||||||||||||||||||||||||
Kenneth Bacon(11) | 2009 | 550,800 | 1,069,600 | — | 1,017,000 | 288,324 | 56,996 | 2,982,720 | ||||||||||||||||||||||||
Executive Vice President—Housing and Community Development | 2008 | 527,262 | 670,000 | 1,999,998 | — | 271,981 | 58,800 | 3,528,041 | ||||||||||||||||||||||||
David Benson | 2009 | 519,231 | 1,369,667 | — | 1,282,800 | 125,157 | 47,815 | 3,344,670 | ||||||||||||||||||||||||
Executive Vice President—Capital Markets | ||||||||||||||||||||||||||||||||
Timothy Mayopoulos(12) | 2009 | 439,346 | 1,278,610 | — | 842,601 | — | 87,138 | 2,647,695 | ||||||||||||||||||||||||
Executive Vice President, General Counsel and Corporate Secretary |
(1) | Calendar year 2009 contained 27 biweekly pay periods, rather than the usual 26 biweekly pay periods. As a result, salary amounts for 2009 are slightly higher to reflect the additional biweekly pay period. | |
(2) | Amounts shown for 2009 in the “Bonus” column consist of the entire amount of 2009 deferred pay. Except for Messrs. Williams and Mayopoulos, this deferred pay will be paid in four equal installments in March, June, September and December 2010. These amounts generally will be paid only if the named executive remains employed by us on the payment date. More information about deferred pay is presented in “Compensation Discussion and Analysis—Elements of 2009 Compensation—What are the elements of our 2009 executive compensation arrangements?” More information on Mr. Williams’ 2009 compensation is provided in footnote 8 below and more information on Mr. Mayopoulos’ 2009 compensation is provided in footnote 12 below. | |
(3) | Amounts shown in the “Stock Awards” column represent the aggregate grant date fair value of restricted stock granted during the applicable year computed in accordance with the accounting standards for stock compensation. The amounts shown exclude the impact of estimated forfeitures related to service-based vesting conditions. Amounts for 2008 and 2007 in the “Stock Awards” and “Total” columns have been recomputed to reflect the aggregate grant date fair value of the restricted stock granted during each year in accordance with the accounting standards for stock compensation, rather than the amount recognized for financial statement purposes with respect to the restricted stock during each year. The grant date fair value of restricted stock for each year is the average of the high and low trading price of our common stock on the date of grant. | |
(4) | Amounts shown for 2009 in the “Non-Equity Incentive Plan Compensation” column include long-term incentive awards awarded based on 2009 corporate and individual performance. The amount of this award was $1,665,000 for Mr. Williams, $1,035,000 for Mr. Johnson, $720,000 for Mr. Bacon, $837,300 for Mr. Benson and $842,601 for Mr. Mayopoulos. These long-term incentive awards are payable in two equal installments. The first installment was paid in February 2010 and the second installment will be paid in the first quarter of 2011. These amounts generally will be paid only if the named executive remains employed by us on the payment date. More information about these long-term incentive awards is presented in “Compensation Discussion and Analysis— Elements of 2009 Compensation—What are the elements of our 2009 executive compensation arrangements?” | |
Amounts shown for 2009 in the “Non-Equity Incentive Plan Compensation” column for Messrs. Williams, Bacon and Benson also include the performance-based portion of their 2008 Retention Program award, which was based on 2009 corporate performance. The amount of this award was $386,100 for Mr. Williams, $297,000 for Mr. Bacon and $445,500 for Mr. Benson. This portion of the 2008 Retention Program award was paid in February 2010. Messrs. Allison, Johnson and Mayopoulos did not receive 2008 Retention Program awards. |
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The amount shown for Mr. Williams for 2007 in the “Non-Equity Incentive Plan Compensation” column represents the amount he earned under our Annual Incentive Plan in 2007. This amount was paid to Mr. Williams in 2008. | ||
(5) | The reported amounts represent change in pension value. We calculated these amounts using the same assumptions we use for financial reporting under GAAP, using a discount rate of 6.10% at December 31, 2009. None of our named executives received above-market or preferential earnings on nonqualified deferred compensation. | |
(6) | See the table entitled “Components of ‘All Other Compensation’ for 2009” below for more information about the amounts reported for 2009 in the “All Other Compensation” column, which include (1) perquisites and other personal benefits, including relocation and temporary living expenses, if the total amount of the perquisites provided to the named executive was $10,000 or more; (2) company contributions under our Retirement Savings Plan (401(k) Plan); (3) company credits to our Supplemental Retirement Savings Plan; (4) payments of universal life insurance coverage premiums; (5) taxgross-ups; and (6) matching charitable contributions under our matching charitable gifts program. | |
(7) | Amounts for 2008 and 2007 in the “Stock Awards” and “Total” columns have been recomputed to reflect the aggregate grant date fair value of the restricted stock granted during each year in accordance with the accounting standards for stock compensation, rather than the amount recognized for financial statement purposes with respect to the restricted stock during each year. | |
(8) | Mr. Williams became our President and Chief Executive Officer on April 21, 2009. He previously served as Fannie Mae’s Executive Vice President and Chief Operating Officer from November 2005 through April 20, 2009. Rather than receiving his 2009 deferred pay in four equal installments, Mr. Williams’ 2009 deferred pay will be paid in the following four installments: $581,000 in March 2010, $736,200 in June 2010, $775,000 in September 2010 and $775,000 in December 2010. | |
(9) | Mr. Allison was our President and Chief Executive Officer from September 2008 through April 2009. At his request, he did not receive any salary, deferred pay or long-term incentive awards for his 2008 or 2009 service to Fannie Mae. | |
(10) | Mr. Johnson joined Fannie Mae in November 2008. | |
(11) | Mr. Bacon’s 2009 base salary rate was reduced from his 2008 base salary rate, but this change was not implemented until January 1, 2010. Because he was paid at his higher 2008 base salary rate during 2009, the $55,400 difference between his 2008 base salary rate and his 2009 base salary rate will be deducted from his deferred pay received in 2010. Amounts shown for Mr. Bacon in the “Salary” column reflect the amounts paid to him during 2009 at his 2008 base salary rate. Similarly, amounts shown for Mr. Bacon in the “Bonus” column reflect his 2009 deferred pay as reduced by the $55,400 that will be deducted from this pay in 2010. | |
(12) | Mr. Mayopoulos has been an employee of Fannie Mae since April 21, 2009 and was engaged as a consultant for Fannie Mae from February 17, 2009 through April 20, 2009. Amounts shown in the “Salary” column for Mr. Mayopoulos consist of (a) $353,846 in base salary paid to him from April 21, 2009 (the date he became an employee of Fannie Mae) through December 31, 2009; and (b) $85,500 in fees paid to him from February 17, 2009 through April 20, 2009 for his services as a consultant. Rather than receiving his 2009 deferred pay in four equal installments, Mr. Mayopoulos’ 2009 deferred pay included in the “Bonus” column will be paid in the following four installments: $176,360 in March 2010, $367,416 in June 2010, $367,417 in September 2010 and $367,417 in December 2010. |
Company | ||||||||||||||||||||||||
Perquisites | Company | Credits to | Universal Life | |||||||||||||||||||||
and Other | Contributions to | Supplemental | Insurance | Charitable | ||||||||||||||||||||
Personal | Retirement Savings | Retirement Savings | Coverage | Tax | Award | |||||||||||||||||||
Name | Benefits(1) | (401(k)) Plan | Plan | Premiums(2) | Gross-Ups(3) | Programs(4) | ||||||||||||||||||
Michael Williams | — | $7,350 | — | $99,880 | — | $3,950 | ||||||||||||||||||
Herbert Allison | — | — | — | 216,381 | $114,477 | — | ||||||||||||||||||
David Johnson | $128,841 | 19,600 | $34,400 | — | 9,524 | — | ||||||||||||||||||
Kenneth Bacon | — | 7,350 | — | 49,646 | — | — | ||||||||||||||||||
David Benson | — | 12,250 | — | 35,515 | — | 50 | ||||||||||||||||||
Timothy Mayopoulos | 58,831 | 19,600 | 8,708 | — | — | — |
(1) | In accordance with SEC rules, amounts shown under “All Other Compensation” do not include perquisites or personal benefits for a named executive that, in the aggregate, amount to less than $10,000. In addition to the perquisites discussed below, our executives may have used company drivers and vehicles and our corporate dining service for personal purposes, in which case they reimbursed us our incremental cost. |
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In 2009, Mr. Allison used a company car and driver for commuting and certain other personal travel, and used our corporate dining services, for both of which he reimbursed us our incremental cost. Because he reimbursed our incremental costs, no amounts are shown in the “Perquisites and Other Personal Benefits” column for these items. | ||
The amount shown in the “Perquisites and Other Personal Benefits” column for Mr. Johnson consists of (a) relocation expenses, which includes moving costs, storage costs and costs associated with the sale of his home, and (b) 90 days of temporary living expenses, which includes housing expenses and a $1,000 monthly allowance to cover other living expenses such as meals. These relocation and temporary living expenses were paid to Mr. Johnson as part of the relocation benefit we agreed to provide to him in connection with his hire in November 2008. This benefit expired in 2009 in accordance with its terms. | ||
The amount shown in the “Perquisites and Other Personal Benefits” column for Mr. Mayopoulos consists of temporary living expenses, which includes housing expenses, travel and commuting expenses, and a $1,000 monthly allowance to cover other living expenses such as meals. In connection with his hire in April 2009, we agreed to pay Mr. Mayopoulos up to $8,000 per month in temporary living expenses for a period of up to 24 months or until FHFA directed that the payments be discontinued. We discontinued payment of Mr. Mayopoulos’ temporary living expenses in December 2009. | ||
We calculated the incremental cost to us of providing Mr. Johnson’s relocation expenses and temporary living expenses based on actual cost (that is, the total amount of expenses incurred by us in providing the benefit). The incremental cost of Mr. Mayopoulos’ temporary living expenses was also calculated based on actual cost, except for the portion of his commuting expenses relating to the use of a company car and driver. We calculated the incremental cost of Mr. Mayopoulos’ use of a company car and driver based on a mileage cost that incorporates depreciation, fuel, maintenance and repair costs, as well as any overtime hours worked by the driver. | ||
(2) | Amounts shown in the “Universal Life Insurance Coverage Premiums” column consist of the cost of our payment of universal life insurance premiums pursuant to our executive life insurance program for participating named executives in 2009. As noted under “Components of 2010 Compensation and Changes from 2009 Compensation Arrangements,” effective December 2009, we terminated the executive life insurance benefit and therefore we no longer pay for universal life insurance coverage for our current or retired executive officers. | |
(3) | Amounts shown in the “TaxGross-Ups” column for Mr. Allison reflect amounts we paid to cover the withholding tax that resulted from our payment of Mr. Allison’s universal life insurance premium and Mr. Allison’s use of a company car and driver for commuting and certain other personal travel. Amounts shown in the “TaxGross-Ups” column for Mr. Johnson reflect amounts we paid to cover the withholding tax that resulted from our payment of his temporary living expenses and our payment of storage costs relating to his relocation benefit. | |
(4) | Amounts shown in the “Charitable Award Programs” column reflect gifts we made under our matching charitable gifts program, under which gifts made by our employees and directors to Section 501(c)(3) charities are matched, up to an aggregate total of $10,000 in any calendar year. |
Estimated Possible Payouts Under | ||||||||||||
Non-Equity Incentive Plan Awards(1) | ||||||||||||
Threshold | Target | Maximum | ||||||||||
Name | ($) | ($) | ($) | |||||||||
Michael Williams | — | 1,850,000 | — | |||||||||
Herbert Allison | — | — | — | |||||||||
David Johnson | — | 1,150,000 | — | |||||||||
Kenneth Bacon | — | 800,000 | — | |||||||||
David Benson | — | 930,333 | — | |||||||||
Timothy Mayopoulos(2) | — | 852,890 | — |
(1) | The amounts shown in this column are the target amounts established by our Board and approved by FHFA in 2009 for 2009 performance. The amount shown for Mr. Williams has been adjusted to reflect the portion of the year he served as our Chief Executive Officer and the portion of the year he served as our Chief Operating Officer. The amount shown for Mr. Mayopoulos has been prorated to reflect the portion of the year he provided services to Fannie Mae. The actual amount of each named executive’s award was determined in 2010 based on 2009 performance against corporate and individual performance goals. Our Board had discretion to pay awards in amounts below or above these target amounts, subject to the approval of FHFA. See “Compensation Discussion and Analysis—Elements of 2009 |
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Compensation—What are the elements of our 2009 executive compensation arrangements?” for more information about the Board’s discretion to award amounts above or below these target amounts. As discussed above in “Compensation Discussion and Analysis—Individual Compensation Decisions for 2009,” based on corporate and individual performance for 2009, in 2010, the Board awarded and FHFA approved long-term incentive awards that were 90% of these target amounts for each named executive other than Mr. Mayopoulos, as described in footnote 2 below. The actual amounts awarded by the Board and approved by FHFA for 2009 performance are included in the “Non-Equity Incentive Plan Compensation” column of the “Summary Compensation Table for 2009, 2008 and 2007” and explained in footnote 4 to that table. The first installment of this award was paid in February 2010 and the second installment of this award will be paid in the first quarter of 2011. | ||
(2) | In 2010, the Board awarded Mr. Mayopoulos a long-term incentive award equal to 90% of his target long-term incentive award plus an additional $75,000, as described in “Compensation Discussion and Analysis—Individual Compensation Decisions for 2009—What elements of our other named executives’ performance did the Board of Directors consider in determining their 2009 long-term incentive awards?” |
Option Awards(2) | Stock Awards(2) | |||||||||||||||||||||||||
Number of | Number of | Market Value of | ||||||||||||||||||||||||
Securities | Shares or | Shares or | ||||||||||||||||||||||||
Underlying | Units of | Units of | ||||||||||||||||||||||||
Unexercised | Option | Option | Stock That | Stock That | ||||||||||||||||||||||
Award | Grant | Options (#) | Exercise | Expiration | Have Not | Have Not | ||||||||||||||||||||
Name | Type(1) | Date | Exercisable | Price ($) | Date | Vested (#) | Vested ($) | |||||||||||||||||||
Michael Williams | O | 1/18/2000 | 20,027 | (3) | 62.50 | 1/18/2010 | ||||||||||||||||||||
O | 11/21/2000 | 35,610 | 77.10 | 11/21/2010 | ||||||||||||||||||||||
O | 1/16/2001 | 13,087 | (3) | 78.56 | 1/18/2010 | |||||||||||||||||||||
O | 11/20/2001 | 44,735 | 80.95 | 11/20/2011 | ||||||||||||||||||||||
O | 1/21/2003 | 63,836 | 69.43 | 1/21/2013 | ||||||||||||||||||||||
O | 1/23/2004 | 73,880 | 78.32 | 1/23/2014 | ||||||||||||||||||||||
RS | 3/22/2006 | 15,403 | (4) | 18,176 | ||||||||||||||||||||||
RS | 1/25/2007 | 46,311 | 54,647 | |||||||||||||||||||||||
RS | 1/28/2008 | 111,567 | 131,649 | |||||||||||||||||||||||
Herbert Allison | N/A | |||||||||||||||||||||||||
David Johnson | N/A | |||||||||||||||||||||||||
Kenneth Bacon | O | 1/18/2000 | 16,536 | (3) | 62.50 | 1/18/2010 | ||||||||||||||||||||
O | 11/21/2000 | 11,410 | 77.10 | 11/21/2010 | ||||||||||||||||||||||
O | 11/20/2001 | 13,080 | 80.95 | 11/20/2011 | ||||||||||||||||||||||
O | 1/21/2003 | 25,478 | 69.43 | 1/21/2013 | ||||||||||||||||||||||
O | 1/23/2004 | 27,622 | 78.32 | 1/23/2014 | ||||||||||||||||||||||
RS | 3/22/2006 | 6,190 | (4) | 7,304 | ||||||||||||||||||||||
RS | 1/25/2007 | 18,975 | 22,391 | |||||||||||||||||||||||
RS | 1/28/2008 | 46,642 | 55,038 | |||||||||||||||||||||||
David Benson | O | 6/3/2002 | 12,000 | 79.33 | 6/3/2012 | |||||||||||||||||||||
O | 6/3/2002 | 20,080 | (5) | 79.33 | 6/3/2012 | |||||||||||||||||||||
O | 1/21/2003 | 9,624 | 69.43 | 1/21/2013 | ||||||||||||||||||||||
O | 1/21/2003 | 2,408 | (3) | 69.43 | 1/18/2010 | |||||||||||||||||||||
O | 1/23/2004 | 12,223 | 78.32 | 1/23/2014 | ||||||||||||||||||||||
RS | 3/22/2006 | 1,091 | (4) | 1,287 | ||||||||||||||||||||||
RS | 3/22/2006 | 323 | (4) | 381 | ||||||||||||||||||||||
RS | 1/25/2007 | 5,966 | 7,040 | |||||||||||||||||||||||
RS | 1/28/2008 | 17,957 | 21,189 | |||||||||||||||||||||||
Timothy Mayopoulos | N/A |
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(1) | O indicates stock options and RS indicates restricted stock. |
(2) | Except as otherwise indicated, all awards of options and restricted stock listed in this table vest in four equal annual installments beginning on the first anniversary of the date of grant. Amounts reported in this table for restricted stock represent only the unvested portion of awards. Amounts reported in this table for options represent only the unexercised portions of awards. | |
(3) | The stock options vested 100% on January 23, 2004. | |
(4) | The initial award amount vests in four equal annual installments beginning on January 24, 2007. In connection with the stock awards with a grant date of March 22, 2006, some of our named executives also received a cash award payable in four equal annual installments beginning on January 24, 2007. As of December 31, 2009, the unpaid portions of these cash awards were as follows: Mr. Williams, $414,068; Mr. Bacon, $166,403; and Mr. Benson, $77,384. | |
(5) | This option award had special vesting provisions: 3,860 options vested immediately upon grant, 9,080 vested on August 31, 2002, 4,370 vested on January 31, 2003, 1,610 vested on January 31, 2004 and 1,160 vested on January 31, 2005. |
Stock Awards | ||||||||
Number of Shares | Value Realized on | |||||||
Name | Acquired on Vesting (#) | Vesting ($) | ||||||
Michael Williams | 75,747 | 48,864 | ||||||
Herbert Allison | — | — | ||||||
David Johnson | — | — | ||||||
Kenneth Bacon | 31,224 | 20,140 | ||||||
David Benson | 12,294 | 7,998 | ||||||
Timothy Mayopoulos | — | — |
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Number of | ||||||||||
Years | Present Value of | |||||||||
Credited | Accumulated | |||||||||
Name | Plan Name | Service (#)(1) | Benefit ($)(2) | |||||||
Michael Williams | Retirement Plan | 19 | 374,882 | |||||||
Supplemental Pension Plan | ||||||||||
2003 Supplemental Pension Plan | ||||||||||
Executive Pension Plan | 9 | 2,896,593 | ||||||||
Herbert Allison | Not applicable | |||||||||
David Johnson | Not applicable | |||||||||
Kenneth Bacon(3) | Retirement Plan | 17 | 405,404 | |||||||
Supplemental Pension Plan | ||||||||||
2003 Supplemental Pension Plan | ||||||||||
Executive Pension Plan | 5 | 1,127,267 | ||||||||
David Benson | Retirement Plan | 8 | 135,137 | |||||||
Supplemental Pension Plan | 8 | 106,574 | ||||||||
2003 Supplemental Pension Plan | 8 | 128,260 | ||||||||
Timothy Mayopoulos | Not applicable |
(1) | Messrs. Williams and Bacon have fewer years of credited service under the Executive Pension Plan than under the Retirement Plan because they each worked at Fannie Mae prior to becoming a participant in the Executive Pension Plan. |
(2) | The present value for the Executive Pension Plan assumes that the named executives will remain in service until age 60, the normal retirement age under the Executive Pension Plan, and for the Retirement Plan, Supplemental Pension Plan and 2003 Supplemental Pension Plan assumes that the named executives will remain in service until age 65, the normal retirement age under those plans. The values also assume that benefits under the Executive Pension Plan will be paid in the form of a monthly annuity for the life of the named executive and the named executive’s surviving spouse and benefits under the Retirement Plan will be paid in the form of a single life monthly annuity for the life of the named executive. The postretirement mortality assumption is based on the RP 2000 white collar mortality table projected to 2010. The final payments of the 2008 Retention Program award, paid in February 2010, have been taken into account for the purpose of determining present value as of December 31, 2009. For additional information regarding the calculation of present value and the assumptions underlying these amounts, see “Note 14, Employee Retirement Benefits” in this report. | |
(3) | Mr. Bacon is eligible for early retirement under the Retirement Plan and Executive Pension Plan. The terms of early retirement under these plans are described above under “Defined Benefit Pension Plans.” |
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Executive | Registrant | Aggregate | Aggregate | |||||||||||||||||
Contributions | Contributions in | Earnings in | Aggregate | Balance at | ||||||||||||||||
in Last | Last Fiscal | Last Fiscal | Withdrawals/ | Last Fiscal | ||||||||||||||||
Name | Fiscal Year ($) | Year ($)(1) | Year ($)(2) | Distributions ($)(3) | Year-End ($) | |||||||||||||||
Michael Williams 2001 Special Stock Award(4) | — | — | 577 | — | 1,620 | |||||||||||||||
Herbert Allison | — | — | — | — | — | |||||||||||||||
David Johnson Supplemental Retirement Savings Plan | — | 34,400 | 3,442 | — | 37,842 | |||||||||||||||
Kenneth Bacon Elective Deferred Compensation Plan I | — | — | — | (256,489 | ) | — | ||||||||||||||
David Benson | — | — | — | — | — | |||||||||||||||
Timothy Mayopoulos Supplemental Retirement Savings Plan | — | 8,708 | 175 | — | 8,883 |
(1) | Amounts reported in this column for Messrs. Johnson and Mayopoulos as registrant contributions in the last fiscal year pursuant to the Supplemental Retirement Savings Plan are also reported as 2009 compensation in the “All Other Compensation” column of the “Summary Compensation Table for 2009, 2008 and 2007” and the “Company Credits to Supplemental Retirement Savings Plan” column of the related “Components of ‘All Other Compensation’ for 2009” table. |
(2) | None of the earnings reported in this column are reported as 2009 compensation in the “Summary Compensation Table for 2009, 2008 and 2007” because the earnings are neither above-market nor preferential. | |
(3) | As permitted under a transition period for changes in the tax laws relating to deferred compensation, our conservator approved a change to our Elective Deferred Compensation Plan I to permit participants to make an election to receive payment in early 2009 of amounts they deferred under those plans that otherwise may have been paid later. As a result, Mr. Bacon elected to receive early payment of his balance under this plan. Mr. Bacon received the distribution in January 2009. | |
(4) | The Board previously approved a special stock award to officers for 2001 performance. On January 15, 2002, Mr. Williams deferred until retirement 1,142 shares he received in connection with this award. Aggregate earnings on these shares reflect changes in stock price. Mr. Williams’ number of shares has grown through the reinvestment of dividends to 1,373 shares as of December 31, 2009. |
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• | Deferred Pay and Long-Term Incentive Awards. In general, an executive officer, including our named executives, must continue to be employed to receive payments of deferred pay or the long-term incentive award, and will forfeit any unpaid amounts upon termination of his or her employment. Exceptions to this general rule apply in the case of an executive officer’s death or retirement, and may apply in the event an executive officer’s employment is terminated by Fannie Mae other than for cause, as follows: |
• | Death. In the event an executive officer’s employment is terminated due to his or her death, his or her estate will receive the remaining installment payments of deferred pay for the prior year, as well as a pro rata portion of deferred pay for the current year, based on time worked during the year. In addition, his or her estate will receive any remaining installment payment of a long-term incentive award for a completed performance year and a pro rata portion of a long-term incentive award for the current performance year, based on time worked during the year; provided that the executive officer was employed at least one complete calendar quarter during the current performance year. | |
• | Retirement. If an executive officer retires from Fannie Mae at or after age 65 with at least 5 years of service, he or she will receive the remaining installment payments of deferred pay for the prior year. In addition, he or she will receive any remaining installment payment of a long-term incentive award for a completed performance year. | |
• | Termination by Fannie Mae. If Fannie Mae terminates an executive officer’s employment other than for cause, the Board of Directors may determine, subject to the approval of FHFA in consultation with Treasury, that he or she may receive certain unpaid deferred pay or long-term incentive awards. |
• | Stock Compensation Plans and 2005 Performance Year Cash Awards. Under the Fannie Mae Stock Compensation Plan of 1993 and the Fannie Mae Stock Compensation Plan of 2003, stock options, restricted stock and restricted stock units held by our employees, including our named executives, fully vest upon the employee’s death, total disability or retirement. In addition, upon the occurrence of these events, or if an option holder leaves our employment after age 55 with at least 5 years of service, the option holder, or the holder’s estate in the case of death, can exercise any stock options until the initial expiration date of the stock option, which is generally 10 years after the date of grant. For these purposes, “retirement” generally means that the executive retires at or after age 60 with 5 years of service or age 65 (with no service requirement). In early 2006, Messrs. Williams, Bacon and Benson received a portion of their long-term incentive stock awards for the 2005 performance year in the form of cash awards payable in four equal annual installments beginning in 2007. Under their terms, these cash awards are subject to accelerated |
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payment at the same rate as restricted stock or restricted stock units and, accordingly, these named executives would receive accelerated payment of the unpaid portions of this cash in the event of termination of employment by reason of death, total disability or retirement. |
• | Retention Awards under 2008 Retention Program. In 2008, the conservator established our 2008 Retention Program, a broad-based employee retention program, under which Messrs. Williams, Bacon and Benson received cash retention awards. The final portion of these awards was paid in February 2010. Generally, retention award payments were payable only if the named executive remained employed by us on the payment date or was involuntarily terminated for reasons other than for cause or unsatisfactory performance. |
• | Retiree Medical Benefits. We currently make certain retiree medical benefits available to our full-time salaried employees who retire and meet certain age and service requirements. |
Long-Term | ||||||||||||||||||||
Restricted | 2005 Performance | Incentive | ||||||||||||||||||
Name | Stock(2) | Year Cash Award(3) | Deferred Pay | Award(4) | Total | |||||||||||||||
Michael Williams | $ | 204,472 | $ | 414,068 | $ | 2,867,200 | $ | 1,665,000 | $ | 5,150,740 | ||||||||||
Herbert Allison | — | — | — | — | — | |||||||||||||||
David Johnson | — | — | 1,700,000 | 1,035,000 | 2,735,000 | |||||||||||||||
Kenneth Bacon | 84,732 | 166,403 | 1,069,600 | 720,000 | 2,040,735 | |||||||||||||||
David Benson | 29,898 | 77,384 | 1,369,667 | 837,300 | 2,314,249 | |||||||||||||||
Timothy Mayopoulos | �� | — | 1,278,610 | 767,601 | 2,046,211 |
(1) | The named executives would also have received the applicable amounts shown in the “Restricted Stock” and “2005 Performance Year Cash Award” columns of this table in the event of their total disability, but not the amounts shown under any other column. |
(2) | These values are based on a per share price of $1.18, which was the closing price of our common stock on December 31, 2009. | |
(3) | The reported amounts represent accelerated payment of cash awards made in early 2006 in connection with long-term incentive stock awards for the 2005 performance year. | |
(4) | Assumes that each named executive would receive 90% of his target long-term incentive award, which were the amounts of these awards approved by the Board based on corporate and individual performance for 2009 for each named executive except Mr. Mayopoulos. Mr. Mayopoulos’ 2009 long-term incentive award equals 90% of his target long-term incentive award plus an additional amount in recognition of the termination of his temporary living benefit in December 2009; however, Mr. Mayopoulos would not have received the additional amount in the event his employment had terminated on December 31, 2009 as a result of his death. See “Compensation Discussion and Analysis—Individual Compensation Decisions for 2009” for more information regarding the Board’s determination with respect to Mr. Mayopoulos’ 2009 long-term incentive award. |
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Performance-Based | ||||||||||||||||
Portion of 2008 | Long-Term | |||||||||||||||
Retention | Incentive | |||||||||||||||
Name | Award(1) | Deferred Pay(2) | Award(3) | Total | ||||||||||||
Michael Williams | $ | 386,100 | $ | 2,867,200 | $ | 1,665,000 | $ | 4,918,300 | ||||||||
Herbert Allison | — | — | — | — | ||||||||||||
David Johnson | — | 1,700,000 | 1,035,000 | 2,735,000 | ||||||||||||
Kenneth Bacon | 297,000 | 1,069,600 | 720,000 | 2,086,600 | ||||||||||||
David Benson | 445,500 | 1,369,667 | 837,300 | 2,652,467 | ||||||||||||
Timothy Mayopoulos | — | 1,278,610 | 767,601 | 2,046,211 |
(1) | Assumes that each named executive would have received 90% of the target performance-based portion of his 2008 Retention Program award, which were the amounts of these awards ultimately paid out in February 2010 based on 2009 corporate performance, as described in footnote 4 to the “Summary Compensation Table for 2009, 2008 and 2007.” Messrs. Allison, Johnson and Mayopoulos did not receive awards under the 2008 Retention Program. |
(2) | Assumes that each named executive would have received 100% of his 2009 deferred pay. The actual amount of unpaid deferred pay a named executive would receive in the event his employment is terminated would be in the discretion of our Board of Directors and also subject to the approval of FHFA in consultation with Treasury, and could range from 0% to 100% of the amount shown in this column. | |
(3) | Assumes that each named executive would receive 90% of his target long-term incentive award. The amounts of these awards approved by the Board based on corporate and individual performance for 2009 for each named executive except Mr. Mayopoulos were 90% of the target amounts, which therefore represents the maximum amount each named executive could have received in the event his employment was terminated as of December 31, 2009. Mr. Mayopoulos’ 2009 long-term incentive award equals 90% of his target long-term incentive award plus an additional amount in recognition of the termination of his temporary living benefit in December 2009. Mr. Mayopoulos would not have received the additional amount in the event his employment had been terminated on December 31, 2009. See “Compensation Discussion and Analysis—Individual Compensation Decisions for 2009” for more information regarding the Board’s determinations with respect to each named executive’s 2009 long-term incentive award. The actual amount of unpaid long-term incentive award a named executive would receive in the event his employment is terminated would be in the discretion of our Board of Directors and also subject to the approval of FHFA in consultation with Treasury, and could range from 0% to 100% of the amount shown in this column. |
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Fees Earned | ||||||||||||
or Paid | All Other | |||||||||||
in Cash | Compensation | Total | ||||||||||
Name | ($) | ($)(1) | ($) | |||||||||
Current Directors | ||||||||||||
Dennis R. Beresford | 185,000 | — | 185,000 | |||||||||
William Thomas Forrester | 170,000 | — | 170,000 | |||||||||
Brenda J. Gaines | 180,000 | — | 180,000 | |||||||||
Charlynn Goins | 178,889 | — | 178,889 | |||||||||
Frederick B. “Bart” Harvey III | 164,167 | — | 164,167 | |||||||||
Philip A. Laskawy | 290,000 | — | 290,000 | |||||||||
Egbert L. J. Perry | 160,000 | — | 160,000 | |||||||||
Jonathan Plutzik | 19,556 | — | 19,556 | |||||||||
David H. Sidwell | 160,000 | 10,000 | 170,000 | |||||||||
Former Director(2) | ||||||||||||
Diana L. Taylor | 93,333 | — | 93,333 |
(1) | “All Other Compensation” consists of gifts we made or will make under our matching charitable gifts program. Our matching charitable gifts program is discussed in greater detail following this table. |
(2) | Diana Taylor resigned from our Board in July 2009. |
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Item 12. | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters |
As of December 31, 2009 | ||||||||||||
Number of | ||||||||||||
Securities | ||||||||||||
Remaining Available | ||||||||||||
Number of | for Future Issuance | |||||||||||
Securities to be | under Equity | |||||||||||
Issued upon | Weighted-Average | Compensation Plans | ||||||||||
Exercise of | Exercise Price of | (Excluding | ||||||||||
Outstanding | Outstanding | Securities | ||||||||||
Options, Warrants | Options, Warrants | Reflected in First | ||||||||||
Plan Category | and Rights (#) | and Rights | Column) (#) | |||||||||
Equity compensation plans approved by stockholders | 8,989,492 | (1) | $ | 72.39 | (2) | 40,707,853 | (3) | |||||
Equity compensation plans not approved by stockholders | N/A | N/A | N/A | |||||||||
Total | 8,989,492 | $ | 72.39 | 40,707,853 | ||||||||
(1) | This amount includes outstanding stock options; restricted stock units; deferred stock units; and shares issuable upon the payout of deferred stock balances. Outstanding awards, options and rights include grants under the Fannie Mae Stock Compensation Plan of 1993, the Stock Compensation Plan of 2003 and the payout of shares deferred upon the settlement of awards made under the 1993 plan and a prior plan. |
(2) | The weighted average exercise price is calculated for the outstanding options and does not take into account restricted stock units or deferred shares. | |
(3) | This number of shares consists of 11,960,258 shares available under the 1985 Employee Stock Purchase Plan and 28,747,595 shares available under the Stock Compensation Plan of 2003 that may be issued as restricted stock, stock bonuses, stock options or in settlement of restricted stock units, performance share program awards, stock appreciation rights or other stock-based awards. No more than 1,433,784 of the shares issuable under the Stock Compensation Plan of 2003 may be issued as restricted stock or restricted stock units vesting in full in fewer than three years, performance shares with a performance period of less than one year or bonus shares subject to similar vesting provisions or performance periods. |
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Amount and Nature of Beneficial Ownership(1) | ||||||||||||
Stock Options | ||||||||||||
Exercisable or | ||||||||||||
Other Shares | ||||||||||||
Common Stock | Obtainable | Total | ||||||||||
Beneficially | Within 60 Days of | Common Stock | ||||||||||
Owned Excluding | February 15, | Beneficially | ||||||||||
Name and Position | Stock Options | 2010(2) | Owned | |||||||||
Herbert M. Allison | 0 | 0 | 0 | |||||||||
Former President and Chief Executive Officer | ||||||||||||
Kenneth J. Bacon(3) | 63,587 | 77,590 | 141,177 | |||||||||
Executive Vice President, Housing and Community Development | ||||||||||||
David C. Benson(4) | 21,445 | 53,927 | 75,372 | |||||||||
Executive Vice President, Capital Markets | ||||||||||||
Dennis R. Beresford | 4,719 | 0 | 4,719 | |||||||||
Director | ||||||||||||
W. Thomas Forrester | 0 | 0 | 0 | |||||||||
Director | ||||||||||||
Brenda J. Gaines | 487 | 0 | 487 | |||||||||
Director | ||||||||||||
Charlynn Goins | 0 | 0 | 0 | |||||||||
Director | ||||||||||||
Frederick Barton Harvey, III | 0 | 0 | 0 | |||||||||
Director | ||||||||||||
David M. Johnson | 0 | 0 | 0 | |||||||||
Executive Vice President and Chief Financial Officer | ||||||||||||
Philip A. Laskawy | 0 | 0 | 0 | |||||||||
Chairman of the Board | ||||||||||||
Timothy J. Mayopoulos | 0 | 0 | 0 | |||||||||
Executive Vice President, General Counsel and Corporate Secretary | ||||||||||||
Egbert L. J. Perry | 0 | 0 | 0 | |||||||||
Director | ||||||||||||
Jonathan Plutzik | 0 | 0 | 0 | |||||||||
Director | ||||||||||||
David H. Sidwell | 0 | 0 | 0 | |||||||||
Director | ||||||||||||
Michael J. Williams(5) | 279,777 | 219,434 | 499,211 | |||||||||
President and Chief Executive Officer | ||||||||||||
All directors and current executive officers as a group (22 persons)(6) | 518,006 | 485,540 | 1,003,546 |
(1) | Beneficial ownership is determined in accordance with the rules of the SEC for computing the number of shares of common stock beneficially owned by each person and the percentage owned. Holders of restricted stock have no investment power but have sole voting power over the shares and, accordingly, these shares are included in this table. Holders of shares through our Employee Stock Ownership Plan, or ESOP, have sole voting power over the shares so these shares are also included in this table. Holders of shares through our ESOP generally have no investment power unless they are at least 55 years of age and have at least 10 years of participation in the ESOP. Additionally, although holders of shares through our ESOP have sole voting power through the power to direct the trustee of the plan to vote their shares, to the extent some holders do not provide any direction as to how to vote their shares, the plan trustee may vote those shares in the same proportion as the trustee votes the shares for which the trustee has received direction. Holders of stock options have no investment or voting power over the shares issuable upon the exercise of |
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the options until the options are exercised. Shares issuable upon the vesting of restricted stock units are not considered to be beneficially owned under applicable SEC rules and, accordingly, restricted stock units are not included in the amounts shown. |
(2) | These shares are issuable upon the exercise of outstanding stock options, except for 1,373 shares of deferred stock held by Mr. Williams, which he could obtain within 60 days in certain circumstances. | |
(3) | Mr. Bacon’s shares include 48 shares held as custodian for family members, 1,101 shares held through our ESOP and 40,583 shares of restricted stock. | |
(4) | Mr. Benson’s shares include 481 shares held through our ESOP and 14,954 shares of restricted stock. | |
(5) | Mr. Williams’ shares include 180,465 shares held jointly with his spouse, 700 shares held by his daughter, 921 shares held through our ESOP and 97,534 shares of restricted stock. | |
(6) | The amount of shares held by all directors and current executive officers as a group includes 201,117 shares of restricted stock held by our directors and current executive officers, 6,054 shares held by them through our ESOP and 748 shares of stock held by their family members. The beneficially owned total includes 1,373 shares of deferred stock. The shares in this table do not include 52,856 shares of restricted stock units over which the holders will not obtain voting rights or investment power until the restrictions lapse. |
Common Stock | ||||||||
5% Holders | Beneficially Owned | Percent of Class | ||||||
Department of the Treasury | Variable(1 | ) | 79.9 | % | ||||
1500 Pennsylvania Avenue, NW., Room 3000 Washington, DC 20220 |
(1) | In September 2008, we issued to Treasury a warrant to purchase, for one one-thousandth of a cent ($0.00001) per share, shares of our common stock equal to 79.9% of the total number of shares of our common stock outstanding on a fully diluted basis at the time the warrant is exercised. The warrant may be exercised in whole or in part at any time until September 7, 2028. As of February 26, 2010, Treasury has not exercised the warrant. The information above assumes Treasury beneficially owns no other shares of our common stock. |
Item 13. | Certain Relationships and Related Transactions, and Director Independence |
• | Code of Conduct and Conflicts of Interest Policy for Members of the Board of Directors; | |
• | Nominating and Corporate Governance Committee Charter; | |
• | Board of Directors’ delegation of authorities and reservation of powers; | |
• | Code of Conduct for employees; | |
• | Conflict of Interest Policy and Conflict of Interest Procedure for employees; and | |
• | Employment of Relatives Practice. |
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• | A director will not be considered independent if, within the preceding five years: |
• | the director was our employee; or | |
• | an immediate family member of the director was employed by us as an executive officer. |
• | A director will not be considered independent if: |
• | the director is a current partner or employee of our external auditor, or within the preceding five years, was (but is no longer) a partner or employee of our external auditor and personally worked on our audit within that time; or | |
• | an immediate family member of the director is a current partner of our external auditor, or is a current employee of our external auditor and personally works on Fannie Mae’s audit, or, within the preceding five years, was (but is no longer) a partner or employee of our external auditor and personally worked on our audit within that time. |
• | A director will not be considered independent if, within the preceding five years: |
• | the director was employed by a company at a time when one of our current executive officers sat on that company’s compensation committee; or | |
• | an immediate family member of the director was employed as an officer by a company at a time when one of our current executive officers sat on that company’s compensation committee. |
• | A director will not be considered independent if, within the preceding five years: |
• | the director received any compensation from us, directly or indirectly, other than fees for service as a director; or | |
• | an immediate family member of the director received any compensation from us, directly or indirectly, other than compensation received for service as our employee (other than an executive officer). |
• | A director will not be considered independent if: |
• | the director is a current executive officer, employee, controlling stockholder or partner of a company or other entity that does or did business with us and to which we made, or from which we received, payments within the preceding five years that, in any single fiscal year, were in excess of $1 million or 2% of the entity’s consolidated gross annual revenues, whichever is greater; or | |
• | an immediate family member of the director is a current executive officer of a company or other entity that does or did business with us and to which we made, or from which we received, payments within the preceding five years that, in any single fiscal year, were in excess of $1 million or 2% of the entity’s consolidated gross annual revenues, whichever is greater. |
• | A director will not be considered independent if the director or the director’s spouse is an executive officer, employee, director or trustee of a nonprofit organization to which we make or have made contributions within the preceding three years (including contributions made by the Fannie Mae Foundation prior to December 31, 2008) that in any year were in excess of 5% of the organization’s consolidated gross annual revenues, or $120,000, whichever is less (amounts contributed under our Matching Gifts Program are not included in the contributions calculated for purposes of this standard). The Nominating and Corporate Governance Committee also will receive periodic reports regarding charitable contributions to organizations otherwise associated with a director or any spouse of a director. |
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• | Certain of these Board members also serve as directors or advisory Board members of other companies that engage in business with Fannie Mae. The payments made by or to Fannie Mae pursuant to these relationships during the past five years fell below our Guidelines’ thresholds of materiality for a Board member that is a current executive officer, employee, controlling shareholder or partner of a company engaged in business with Fannie Mae. In light of this fact, and the fact that these Board members are only directors or advisory Board members of these other companies, the Board of Directors has concluded that these business relationships are not material to the independence of these Board members. | |
• | Certain of these Board members also serve as trustees or board members for charitable organizations that have received donations from Fannie Mae. The amounts of these charitable donations were determined to fall below our Guidelines’ thresholds of materiality for a Board member who is a current trustee or board member of a charitable organization that receives donations from Fannie Mae. In light of this fact, the Board of Directors has concluded that these relationships with charitable organizations are not material to the independence of these Board members. | |
• | Certain of these Board members serve as directors of other companies that hold Fannie Mae fixed income securities or control entities that direct investments in such securities. It is not possible for Fannie Mae to determine the extent of the holdings of these companies in Fannie Mae fixed income securities as all payments to holders are made through the Federal Reserve, and most of these securities are held in turn by financial intermediaries. The Board of Directors noted that transactions by these other companies in Fannie Mae fixed income securities are entered into in the ordinary course of business of these companies, are not entered into at the direction or with specific approval by the directors of these companies and are not material to these other companies. In light of these facts, including that these Board members are directors at these other companies rather than current executive officers, employees, controlling shareholders or partners, the Board of Directors has concluded that these business relationships are not material to the independence of these Board members. | |
• | Mr. Perry is an executive officer and majority shareholder of The Integral Group LLC, which indirectly does business with Fannie Mae. This business includes the following: |
• | Fannie Mae purchased a 50% participation in a mortgage loan made in 2001 to a limited partnership borrower sponsored by Integral. This mortgage loan was paid off in 2006. | |
• | Since 2006, Fannie Mae has held six multifamily mortgage loans made to six borrowing entities sponsored by Integral. In each case, Integral participates in the borrowing entity as a general partner of |
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the limited partnership, or as a managing member of the limited liability company, as the case may be, and holds a 0.01% economic interest in such entity. The total amount of Integral’s pro rata share of the interest payments made to Fannie Mae on the loans since 2006 is less than $1 million. |
• | Fannie Mae has invested as a limited partner or member in certain LIHTC funds that in turn have invested directly or indirectly as a limited partner or member in various Integral Property Partnerships, which are lower-tier project partnerships or limited liability companies that own LIHTC properties. Integral participates indirectly as a member or the general partner of the Integral Property Partnerships (each a “Project General Partner”). The Integral Property Partnerships construct, develop and manage affordable housing projects. Each Project General Partner and its affiliates earn certain fees each year in connection with those project activities, and such fees are paid from income generated by the project (other than certain developer fees paid from development sources). Fannie Mae’s indirect investments in the Integral Property Partnerships, through the LIHTC funds, have not resulted in any direct payments by Fannie Mae to any Project General Partner or its affiliates, including Integral. Fannie Mae’s indirect equity investment in the Integral Property Partnerships is approximately $32 million, which represents less than 4% of the total capitalization and less than 11% of the total equity in all of the Integral Property Partnerships. |
• | Mr. Plutzik’s wife, Lesley Goldwasser, currently serves as a director of Flagstar Bancorp, Inc. Fannie Mae has conducted business with Flagstar Bancorp, Inc. and its subsidiaries (referred to collectively as “Flagstar”) during the past five years. Transactions between Fannie Mae and Flagstar include guaranty transactions and Flagstar’s servicing of Fannie Mae mortgage loans. We estimate that the servicing fees we paid to Flagstar represented almost 10% of its consolidated gross revenues in 2008, and that the guaranty income and technology fees we received from Flagstar in 2008 represented less than one-half of 1% of Fannie Mae’s consolidated gross revenues in 2008. In determining whether Mr. Plutzik has a material relationship with Fannie Mae based on Ms. Goldwasser’s service as a director of Flagstar Bancorp, Inc., the Board considered the following: Mr. Plutzik’s wife, and not Mr. Plutzik himself, serves as a director of Flagstar Bancorp, Inc.; Ms. Goldwasser is only a director, and not an executive officer, of Flagstar Bancorp, Inc.; while the business relationship between Fannie Mae and Flagstar may be material to Flagstar, it is not material to Fannie Mae; and the relationship between Fannie Mae and Flagstar is neither of the type or magnitude that would typically rise to the level of consideration by the Board. The Board also considered Flagstar’s current performance as a counterparty of Fannie Mae. Based on the foregoing, the Board of Directors has concluded that this business relationship is not material to Mr. Plutzik’s independence. Further, Mr. Plutzik has agreed to recuse himself from discussion and voting on any matters relating to Flagstar to be considered by the Board. |
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Item 14. | Principal Accountant Fees and Services |
For The Year Ended | ||||||||
December 31, | ||||||||
Description of Fees | 2009 | 2008 | ||||||
Audit fees(1) | $ | 42,600,000 | $ | 39,000,000 | ||||
Audit-related fees(2) | 2,800,000 | 2,800,000 | ||||||
Total fees | $ | 45,400,000 | $ | 41,800,000 | ||||
(1) | For 2009, includes costs associated with the audit of our adoption of new consolidation standards. |
(2) | For 2009 and 2008, consists of: (1) fees billed for attest-related services on securitization transactions and (2) reimbursement of costs associated with responding to subpoenas relating to Fannie Mae’s securities litigation. |
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Item 15. | Exhibits and Financial Statement Schedules |
(a) | Documents filed as part of this report |
1. | Consolidated Financial Statements |
Report of Independent Registered Public Accounting Firm | F-2 | |||
Financial Statements | F-3 | |||
Consolidated Balance Sheets as of December 31, 2009 and 2008 | F-3 | |||
Consolidated Statements of Operations for the years ended December 31, 2009, 2008 and 2007 | F-4 | |||
Consolidated Statements of Cash Flows for the years ended December 31, 2009, 2008 and 2007 | F-5 | |||
Consolidated Statements of Changes in Equity (Deficit) for the years ended December 31, 2009, 2008 and 2007 | F-6 | |||
Notes to Consolidated Financial Statements | F-8 | |||
Note 1— Summary of Significant Accounting Policies | F-8 | |||
Note 2— Consolidations | F-40 | |||
Note 3— Mortgage Loans | F-44 | |||
Note 4— Allowance for Loan Losses and Reserve for Guaranty Losses | F-49 | |||
Note 5— Investments in Securities | F-51 | |||
Note 6— Portfolio Securitizations | F-57 | |||
Note 7— Financial Guarantees and Master Servicing | F-62 | |||
Note 8— Acquired Property, Net | F-67 | |||
Note 9— Short-term Borrowings and Long-term Debt | F-68 | |||
Note 10— Derivative Instruments and Hedging Activities | F-72 | |||
Note 11— Income Taxes | F-79 | |||
Note 12— Loss Per Share | F-82 | |||
Note 13— Stock-Based Compensation | F-83 | |||
Note 14— Employee Retirement Benefits | F-85 | |||
Note 15— Segment Reporting | F-94 | |||
Note 16— Equity (Deficit) | F-99 | |||
Note 17— Regulatory Capital Requirements | F-106 | |||
Note 18— Concentrations of Credit Risk | F-108 | |||
Note 19— Fair Value | F-113 | |||
Note 20— Commitments and Contingencies | F-125 | |||
Note 21— Selected Quarterly Financial Information (Unaudited) | F-129 | |||
Note 22— Subsequent Event | F-132 |
2. | Financial Statement Schedules |
3. | Exhibits |
246
Table of Contents
Signature | Title | Date | ||||
/s/ Philip A. Laskawy Philip A. Laskawy | Chairman of the Board of Directors | February 26, 2010 | ||||
/s/ Michael J. Williams Michael J. Williams | President and Chief Executive Officer and Director | February 26, 2010 | ||||
/s/ David M. Johnson David M. Johnson | Executive Vice President and Chief Financial Officer | February 26, 2010 | ||||
/s/ David C. Hisey David C. Hisey | Executive Vice President and Deputy Chief Financial Officer | February 26, 2010 | ||||
/s/ Dennis R. Beresford Dennis R. Beresford | Director | February 26, 2010 | ||||
/s/ William Thomas Forrester William Thomas Forrester | Director | February 26, 2010 | ||||
/s/ Brenda J. Gaines Brenda J. Gaines | Director | February 26, 2010 | ||||
/s/ Charlynn Goins Charlynn Goins | Director | February 26, 2010 |
247
Table of Contents
Signature | Title | Date | ||||
/s/ Frederick B. Harvey III Frederick B. Harvey III | Director | February 26, 2010 | ||||
/s/ Egbert L. J. Perry Egbert L. J. Perry | Director | February 26, 2010 | ||||
/s/ Jonathan Plutzik Jonathan Plutzik | Director | February 26, 2010 | ||||
/s/ David H. Sidwell David H. Sidwell | Director | February 26, 2010 |
248
Table of Contents
Item | Description | |||
3 | .1 | Fannie Mae Charter Act (12 U.S.C. § 1716 et seq.) as amended through July 30, 2008 (Incorporated by reference to Exhibit 3.1 to Fannie Mae’s Quarterly Report on Form 10-Q, filed August 8, 2008.) | ||
3 | .2 | Fannie Mae Bylaws, as amended through January 30, 2009 (Incorporated by reference to Exhibit 3.2 to Fannie Mae’s Annual Report on Form 10-K for the year ended December 31, 2008, filed February 26, 2009.) | ||
4 | .1 | Certificate of Designation of Terms of Fannie Mae Preferred Stock, Series D (Incorporated by reference to Exhibit 4.1 to Fannie Mae’s registration statement on Form 10, filed March 31, 2003.) | ||
4 | .2 | Certificate of Designation of Terms of Fannie Mae Preferred Stock, Series E (Incorporated by reference to Exhibit 4.2 to Fannie Mae’s registration statement on Form 10, filed March 31, 2003.) | ||
4 | .3 | Certificate of Designation of Terms of Fannie Mae Preferred Stock, Series F (Incorporated by reference to Exhibit 4.3 to Fannie Mae’s registration statement on Form 10, filed March 31, 2003.) | ||
4 | .4 | Certificate of Designation of Terms of Fannie Mae Preferred Stock, Series G (Incorporated by reference to Exhibit 4.4 to Fannie Mae’s registration statement on Form 10, filed March 31, 2003.) | ||
4 | .5 | Certificate of Designation of Terms of Fannie Mae Preferred Stock, Series H (Incorporated by reference to Exhibit 4.5 to Fannie Mae’s registration statement on Form 10, filed March 31, 2003.) | ||
4 | .6 | Certificate of Designation of Terms of Fannie Mae Preferred Stock, Series I (Incorporated by reference to Exhibit 4.6 to Fannie Mae’s registration statement on Form 10, filed March 31, 2003.) | ||
4 | .7 | Certificate of Designation of Terms of Fannie Mae Preferred Stock, Series L (Incorporated by reference to Exhibit 4.7 to Fannie Mae’s Quarterly Report on Form 10-Q, filed August 8, 2008.) | ||
4 | .8 | Certificate of Designation of Terms of Fannie Mae Preferred Stock, Series M (Incorporated by reference to Exhibit 4.8 to Fannie Mae’s Quarterly Report on Form 10-Q, filed August 8, 2008.) | ||
4 | .9 | Certificate of Designation of Terms of Fannie Mae Preferred Stock, Series N (Incorporated by reference to Exhibit 4.9 to Fannie Mae’s Quarterly Report on Form 10-Q, filed August 8, 2008.) | ||
4 | .10 | Certificate of Designation of Terms of Fannie Mae Non-Cumulative Convertible Preferred Stock, Series 2004-1 | ||
4 | .11 | Certificate of Designation of Terms of Fannie Mae Preferred Stock, Series O | ||
4 | .12 | Certificate of Designation of Terms of Fannie Mae Preferred Stock, Series P (Incorporated by reference to Exhibit 4.1 to Fannie Mae’s Current Report on Form 8-K, filed September 28, 2007.) | ||
4 | .13 | Certificate of Designation of Terms of Fannie Mae Preferred Stock, Series Q (Incorporated by reference to Exhibit 4.1 to Fannie Mae’s Current Report on Form 8-K, filed October 5, 2007.) | ||
4 | .14 | Certificate of Designation of Terms of Fannie Mae Preferred Stock, Series R (Incorporated by reference to Exhibit 4.1 to Fannie Mae’s Current Report on Form 8-K, filed November 21, 2007.) | ||
4 | .15 | Certificate of Designation of Terms of Fannie Mae Preferred Stock, Series S (Incorporated by reference to Exhibit 4.1 to Fannie Mae’s Current Report on Form 8-K, filed December 11, 2007.) | ||
4 | .16 | Certificate of Designation of Terms of Fannie Mae Non-Cumulative Mandatory Convertible Preferred Stock, Series 2008-1 (Incorporated by reference to Exhibit 4.1 to Fannie Mae’s Current Report on Form 8-K, filed May 14, 2008.) | ||
4 | .17 | Certificate of Designation of Terms of Fannie Mae Preferred Stock, Series T (Incorporated by reference to Exhibit 4.1 to Fannie Mae’s Current Report on Form 8-K, filed May 19, 2008.) | ||
4 | .18 | Certificate of Designation of Terms of Variable Liquidation Preference Senior Preferred Stock, Series 2008-2 (Incorporated by reference to Exhibit 4.2 to Fannie Mae’s Current Report on Form 8-K, filed September 11, 2008.) | ||
4 | .19 | Warrant to Purchase Common Stock, dated September 7, 2008 conservator (Incorporated by reference to Exhibit 4.3 to Fannie Mae’s Current Report on Form 8-K, filed September 11, 2008.) |
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Table of Contents
Item | Description | |||
4 | .20 | Amended and Restated Senior Preferred Stock Purchase Agreement, dated as of September 26, 2008, between the United States Department of the Treasury and Federal National Mortgage Association, acting through the Federal Housing Finance Agency as its duly appointed conservator (Incorporated by reference to Exhibit 4.1 to Fannie Mae’s Current Report on Form 8-K, filed October 2, 2008.) | ||
4 | .21 | Amendment to Amended and Restated Senior Preferred Stock Purchase Agreement, dated as of May 6, 2009, between the United States Department of the Treasury and Federal National Mortgage Association, acting through the Federal Housing Finance Agency as its duly appointed conservator (Incorporated by reference to Exhibit 4.21 to Fannie Mae’s Quarterly Report on Form 10-Q, filed May 8, 2009.) | ||
4 | .22 | Second Amendment to Amended and Restated Senior Preferred Stock Purchase Agreement, dated as of December 24, 2009, between the United States Department of the Treasury and Federal National Mortgage Association, acting through the Federal Housing Finance Agency as its duly appointed conservator (Incorporated by reference to Exhibit 4.1 to Fannie Mae’s Current Report on Form 8-K, filed December 30, 2009.) | ||
10 | .1 | Fannie Mae’s Elective Deferred Compensation Plan, as amended effective November 15, 2004† (Incorporated by reference to Exhibit 10.21 to Fannie Mae’s Annual Report on Form 10-K for the year ended December 31, 2007, filed February 27, 2008.) | ||
10 | .2 | Amendment to Fannie Mae Elective Deferred Compensation Plan I, effective October 27, 2008† (Incorporated by reference to Exhibit 10.7 to Fannie Mae’s Annual Report on Form 10-K for the year ended December 31, 2008, filed February 26, 2009.) | ||
10 | .3 | Fannie Mae Elective Deferred Compensation Plan II† (Incorporated by reference to Exhibit 10.7 to Fannie Mae’s Annual Report on Form 10-K for the year ended December 31, 2007, filed February 27, 2008.) | ||
10 | .4 | Amendment to Fannie Mae Elective Deferred Compensation Plan II, effective April 29, 2008† (Incorporated by reference to Exhibit 10.1 to Fannie Mae’s Quarterly Report on Form 10-Q, filed August 8, 2008.) | ||
10 | .5 | Amendment to Fannie Mae Elective Deferred Compensation Plan II, effective October 27, 2008† (Incorporated by reference to Exhibit 10.10 to Fannie Mae’s Annual Report on Form 10-K for the year ended December 31, 2008, filed February 26, 2009.) | ||
10 | .6 | Fannie Mae Executive Life Insurance Program, as amended April 9, 2008† (Incorporated by reference Exhibit 10.3 to Fannie Mae’s Quarterly Report on Form 10-Q, filed August 8, 2008.) | ||
10 | .7 | Description of 2009 compensation and components of 2010 compensation† (Incorporated by reference to “Compensation Discussion and Analysis—Elements of 2009 Compensation” and “—Components of 2010 Compensation and Changes from 2009 Compensation Arrangements” in Item 11 of Fannie Mae’s Annual Report on Form 10-K for the year ended December 31, 2009.) | ||
10 | .8 | Compensation Repayment Provisions† (Incorporated by reference to Exhibit 99.1 to Fannie Mae’s Current Report on Form 8-K, filed December 24, 2009.) | ||
10 | .9 | Long-Term Incentive Plan, effective December 16, 2009† | ||
10 | .10 | Deferred Pay Plan, effective December 16, 2009† | ||
10 | .11 | Description of Fannie Mae’s compensatory arrangements with its non-employee directors for the year ended December 31, 2009† (Incorporated by reference to information under the heading “Director Compensation” in Item 11 of Fannie Mae’s Annual Report on Form 10-K, for the year ended December 31, 2009.) | ||
10 | .12 | Fannie Mae Form of Indemnification Agreement for directors and officers of Fannie Mae (Incorporated by reference to Exhibit 10.15 to Fannie Mae’s Annual Report on Form 10-K for the year ended December 31, 2008, filed February 26, 2009.) | ||
10 | .13 | Federal National Mortgage Association Supplemental Pension Plan, as amended November 20, 2007† (Incorporated by reference to Exhibit 10.10 to Fannie Mae’s Annual Report on Form 10-K for the year ended December 31, 2007, filed February 27, 2008.) |
E-2
Table of Contents
Item | Description | |||
10 | .14 | Amendment to Fannie Mae Supplemental Pension Plan for Internal Revenue Code Section 409A, effective January 1, 2009† (Incorporated by reference to Exhibit 10.11 to Fannie Mae’s Annual Report on Form 10-K for the year ended December 31, 2007, filed February 27, 2008.) | ||
10 | .15 | Amendment to Fannie Mae Supplemental Pension Plan, executed December 22, 2008† (Incorporated by reference to Exhibit 10.18 to Fannie Mae’s Annual Report on Form 10-K for the year ended December 31, 2008, filed February 26, 2009.) | ||
10 | .16 | Fannie Mae Supplemental Pension Plan of 2003, as amended November 20, 2007† (Incorporated by reference to Exhibit 10.12 to Fannie Mae’s Annual Report on Form 10-K for the year ended December 31, 2007, filed February 27, 2008.) | ||
10 | .17 | Amendment to Fannie Mae Supplemental Pension Plan of 2003 for Internal Revenue Code Section 409A, effective January 1, 2009† (Incorporated by reference to Exhibit 10.13 to Fannie Mae’s Annual Report on Form 10-K for the year ended December 31, 2007, filed February 27, 2008.) | ||
10 | .18 | Amendment to Fannie Mae Supplemental Pension Plan of 2003 for Internal Revenue Code Section 409A, adopted December 22, 2008† (Incorporated by reference to Exhibit 10.21 to Fannie Mae’s Annual Report on Form 10-K for the year ended December 31, 2008, filed February 26, 2009.) | ||
10 | .19 | Executive Pension Plan of the Federal National Mortgage Association as amended and restated† (Incorporated by reference to Exhibit 10.10 to Fannie Mae’s registration statement on form 10, filed March 31, 2003) | ||
10 | .20 | Amendment to the Executive Pension Plan of the Federal National Mortgage Association, as amended and restated, effective March 1, 2007† (Incorporated by reference to Exhibit 10.20 to Fannie Mae’s Annual Report on Form 10-K for the year ended December 31, 2005, filed May 2, 2007.) | ||
10 | .21 | Amendment to Fannie Mae Executive Pension Plan, effective November 20, 2007† (Incorporated by reference to Exhibit 10.16 to Fannie Mae’s Annual Report on Form 10-K for the year ended December 31, 2007, filed February 27, 2008.) | ||
10 | .22 | Amendment to the Executive Pension Plan of the Federal National Mortgage Association, effective January 1, 2008† (Incorporated by reference to Exhibit 10.25 to Fannie Mae’s Annual Report on Form 10-K for the year ended December 31, 2008, filed February 26, 2009.) | ||
10 | .23 | Amendment to the Executive Pension Plan of the Federal National Mortgage Association, effective December 16, 2009† | ||
10 | .24 | Fannie Mae Annual Incentive Plan, as amended December 10, 2007† (Incorporated by reference to Exhibit 10.17 to Fannie Mae’s Annual Report on Form 10-K for the year ended December 31, 2007, filed February 27, 2008.) | ||
10 | .25 | Fannie Mae Stock Compensation Plan of 2003, as amended through December 14, 2007† (Incorporated by reference to Exhibit 10.18 to Fannie Mae’s Annual Report on Form 10-K for the year ended December 31, 2007, filed February 27, 2008.) | ||
10 | .26 | Amendment to Fannie Mae Stock Compensation Plan of 2003, as amended, for Internal Revenue Code Section 409A, adopted December 22, 2008† (Incorporated by reference to Exhibit 10.28 to Fannie Mae’s Annual Report on Form 10-K for the year ended December 31, 2008, filed February 26, 2009.) | ||
10 | .27 | Fannie Mae Stock Compensation Plan of 1993† (Incorporated by reference to Exhibit 10.18 to Fannie Mae’s Annual Report on Form 10-K for the year ended December 31, 2004, filed December 6, 2006.) | ||
10 | .28 | 2009 Amendment to Fannie Mae Stock Compensation Plans of 1993 and 2003† (Incorporated by reference to Exhibit 10.1 to Fannie Mae’s Quarterly Report on Form 10-Q, filed November 5, 2009.) | ||
10 | .29 | Fannie Mae Procedures for Deferral and Diversification of Awards, as amended effective December 10, 2007† (Incorporated by reference to Exhibit 10.30 to Fannie Mae’s Annual Report on Form 10-K for the year ended December 31, 2008, filed February 26, 2009.) | ||
10 | .30 | Fannie Mae Supplemental Retirement Savings Plan, as amended through April 29, 2008† (Incorporated by reference to Exhibit 10.2 to Fannie Mae’s Quarterly Report on Form 10-Q, filed August 8, 2008.) |
E-3
Table of Contents
Item | Description | |||
10 | .31 | Amendment to Fannie Mae Supplemental Retirement Savings Plan, effective October 8, 2008† (Incorporated by reference to Exhibit 10.32 to Fannie Mae’s Annual Report on Form 10-K for the year ended December 31, 2008, filed February 26, 2009.) | ||
10 | .32 | Director’s Charitable Award Program† (Incorporated by reference to Exhibit 10.17 to Fannie Mae’s registration statement on Form 10, filed March 31, 2003.) | ||
10 | .33 | Form of Nonqualified Stock Option Grant Award Document† | ||
10 | .34 | Form of Restricted Stock Award Document† (Incorporated by reference to Exhibit 99.1 to Fannie Mae’s Current Report on Form 8-K, filed January 26, 2007.) | ||
10 | .35 | Form of Restricted Stock Units Award Document adopted January 23, 2008† (Incorporated by reference to Exhibit 10.27 to Fannie Mae’s Annual Report on Form 10-K for the year ended December 31, 2007, filed February 27, 2008.) | ||
10 | .36 | Form of Restricted Stock Units Award Document† (Incorporated by reference to Exhibit 99.2 to Fannie Mae’s Current Report on Form 8-K, filed January 26, 2007.) | ||
10 | .37 | Form of Nonqualified Stock Option Grant Award Document for Non-Management Directors† | ||
10 | .38 | Lending Agreement, dated September 19, 2008, between the U.S. Treasury and Fannie Mae† (Incorporated by reference to Exhibit 10.4 to Fannie Mae’s Quarterly Report on Form 10-Q, filed November 10, 2008.) | ||
10 | .39 | Senior Preferred Stock Purchase Agreement dated as of September 7, 2008, as amended and restated on September 26, 2008, between the United States Department of the Treasury and Federal National Mortgage Association (Incorporated by reference Exhibit 4.20 to Fannie Mae’s Quarterly Report on Form 10-Q for the quarter ended September 30, 3008.) | ||
10 | .40 | Amendment to Amended and Restated Senior Preferred Stock Purchase Agreement, dated as of May 6, 2009, between the United States Department of the Treasury and Federal National Mortgage Association, acting through the Federal Housing Finance Agency as its duly appointed conservator (Incorporated by reference to Exhibit 4.21 to Fannie Mae’s Quarterly Report on Form 10-Q, filed May 8, 2009.) | ||
10 | .41 | Second Amendment to Amended and Restated Senior Preferred Stock Purchase Agreement, dated as of December 24, 2009, between the United States Department of the Treasury and Federal National Mortgage Association, acting through the Federal Housing Finance Agency as its duly appointed conservator (Incorporated by reference to Exhibit 4.1 to Fannie Mae’s Current Report on Form 8-K, filed December 30, 2009.) | ||
10 | .42 | Letters, dated September 1, 2005, setting forth an agreement between Fannie Mae and OFHEO (Incorporated by reference to Exhibit 10.1 to Fannie Mae’s Current Report on Form 8-K, filed September 8, 2005.) | ||
10 | .43 | Consent of Defendant Fannie Mae with Securities and Exchange Commission, dated May 23, 2006 (Incorporated by reference to Exhibit 10.2 to Fannie Mae’s Current Report on Form 8-K, filed May 30, 2006.) | ||
10 | .44 | Letter Agreement between Fannie Mae and Timothy J. Mayopoulos, dated March 9, 2009† | ||
10 | .45 | Memorandum of Understanding among the Department of the Treasury, the Federal Housing Finance Agency, the Federal National Mortgage Association, and the Federal Home Loan Mortgage Corporation, dated October 19, 2009 (Incorporated by reference to Exhibit 99.1 to Fannie Mae’s Current Report on Form 8-K, filed October 23, 2009.) | ||
12 | .1 | Statement re: computation of ratios to earnings to fixed charges | ||
12 | .2 | Statement re: computation of ratios of earnings to combined fixed charges and preferred stock dividends | ||
31 | .1 | Certification of Chief Executive Officer pursuant to Securities Exchange Act Rule 13a-14(a) | ||
31 | .2 | Certification of Chief Financial Officer pursuant to Securities Exchange Act Rule 13a-14(a) | ||
32 | .1 | Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350 | ||
32 | .2 | Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350 |
E-4
Table of Contents
Item | Description | |||
99 | .1 | New Issue Bond Program Agreement by and among United States Department of the Treasury, Federal National Mortgage Association and Federal Home Loan Mortgage Corporation, dated as of December 9, 2009 | ||
99 | .2 | New Issue Bond Program Agreement by and among United States Department of the Treasury, Federal National Mortgage Association and Federal Home Loan Mortgage Corporation, dated as of December 18, 2009± | ||
99 | .3 | Form of Settlement Agreement among Federal National Mortgage Association, Federal Home Loan Mortgage Corporation, United States Department of the Treasury, the participating Housing Finance Agency and U.S. Bank National Association, dated as of December 9, 2009 | ||
99 | .4 | Form of Settlement Agreement among Federal National Mortgage Association, Federal Home Loan Mortgage Corporation, United States Department of the Treasury, the participating Housing Finance Agency and U.S. Bank National Association, dated as of December 18, 2009± | ||
99 | .5 | Form of Agreement to Purchase Participation by and among U.S. Department of the Treasury, Fannie Mae and Federal Home Loan Mortgage Corporation, dated as of December 4, 2009 | ||
101 | .INS | XBRL Instance Document* | ||
101 | .SCH | XBRL Taxonomy Extension Schema* | ||
101 | .CAL | XBRL Taxonomy Extension Calculation* | ||
101 | .LAB | XBRL Taxonomy Extension Labels* | ||
101 | .PRE | XBRL Taxonomy Extension Presentation* | ||
101 | .DEF | XBRL Taxonomy Extension Definition* |
* | The financial information contained in these XBRL documents is unaudited. The information in these exhibits shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, or otherwise subject to the liabilities of Section 18, nor shall they be deemed incorporated by reference into any disclosure document relating to Fannie Mae, except to the extent, if any, expressly set forth by specific reference in such filing. |
† | This exhibit is a management contract or compensatory plan or arrangement. | |
± | Exhibit 99.2 and Exhibit 99.4 are not filed because they are substantially identical in all material respects to Exhibit 99.1 and Exhibit 99.3, respectively, except as to the date of execution, the settlement date and deemed closing date. |
E-5
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F-3 | ||||
F-4 | ||||
F-5 | ||||
F-6 | ||||
F-8 | ||||
F-8 | ||||
F-40 | ||||
F-44 | ||||
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F-51 | ||||
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F-67 | ||||
F-68 | ||||
F-72 | ||||
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F-83 | ||||
F-85 | ||||
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F-106 | ||||
F-108 | ||||
F-113 | ||||
F-125 | ||||
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F-132 |
F-1
Table of Contents
F-2
Table of Contents
(In conservatorship)
Consolidated Balance Sheets
(Dollars in millions, except share amounts)
As of December 31, | ||||||||
2009 | 2008 | |||||||
ASSETS | ||||||||
Cash and cash equivalents | $ | 6,812 | $ | 17,933 | ||||
Restricted cash | 3,070 | 529 | ||||||
Federal funds sold and securities purchased under agreements to resell | 53,684 | 57,418 | ||||||
Investments in securities: | ||||||||
Trading, at fair value (includes Fannie Mae MBS of $74,750 and $58,006, respectively) | 111,939 | 90,806 | ||||||
Available-for-sale, at fair value (includes Fannie Mae MBS of $154,419 and $176,244, respectively, and securities pledged as collateral that may be sold or repledged of $1,148 and $720, respectively) | 237,728 | 266,488 | ||||||
Total investments in securities | 349,667 | 357,294 | ||||||
Mortgage loans: | ||||||||
Loans held for sale, at lower of cost or fair value | 18,462 | 13,270 | ||||||
Loans held for investment, at amortized cost (includes loans pledged as collateral that may be sold or repledged of $1,947 as of December 31, 2009) | 386,024 | 415,065 | ||||||
Allowance for loan losses | (10,461 | ) | (2,923 | ) | ||||
Total loans held for investment, net of allowance | 375,563 | 412,142 | ||||||
Total mortgage loans | 394,025 | 425,412 | ||||||
Advances to lenders | 5,449 | 5,766 | ||||||
Accrued interest receivable | 4,293 | 3,816 | ||||||
Acquired property, net | 9,142 | 6,918 | ||||||
Derivative assets, at fair value | 1,474 | 869 | ||||||
Guaranty assets | 8,356 | 7,043 | ||||||
Deferred tax assets, net | 909 | 3,926 | ||||||
Partnership investments | 2,372 | 9,314 | ||||||
Servicer and MBS trust receivable | 18,329 | 6,482 | ||||||
Other assets | 11,559 | 9,684 | ||||||
Total assets | 869,141 | $ | 912,404 | |||||
LIABILITIES AND EQUITY (DEFICIT) | ||||||||
Liabilities: | ||||||||
Accrued interest payable | 4,980 | 5,947 | ||||||
Federal funds purchased and securities sold under agreements to repurchase | — | 77 | ||||||
Short-term debt (includes debt at fair value of $- and $4,500, respectively) | 200,437 | 330,991 | ||||||
Long-term debt (includes debt at fair value of $3,274 and $21,565, respectively) | 574,117 | 539,402 | ||||||
Derivative liabilities, at fair value | 1,029 | 2,715 | ||||||
Reserve for guaranty losses (includes $4,772 and $1,946, respectively, related to Fannie Mae MBS included in Investments in securities) | 54,430 | 21,830 | ||||||
Guaranty obligations (includes $595 and $755, respectively, related to Fannie Mae MBS included in Investments in securities) | 13,996 | 12,147 | ||||||
Partnership liabilities | 2,541 | 3,243 | ||||||
Servicer and MBS trust payable | 25,872 | 6,350 | ||||||
Other liabilities | 7,020 | 4,859 | ||||||
Total liabilities | 884,422 | 927,561 | ||||||
Commitments and contingencies (Note 20) | — | — | ||||||
Equity (Deficit): | ||||||||
Fannie Mae stockholders’ equity (deficit): | ||||||||
Senior preferred stock, 1,000,000 shares issued and outstanding | 60,900 | 1,000 | ||||||
Preferred stock, 700,000,000 shares are authorized—579,735,457 and 597,071,401 shares issued | ||||||||
and outstanding, respectively | 20,348 | 21,222 | ||||||
Common stock, no par value, no maximum authorization—1,265,674,761 and 1,238,880,988 shares | ||||||||
issued, respectively; 1,113,358,051 and 1,085,424,213 shares outstanding, respectively | 664 | 650 | ||||||
Additional paid-in capital | 2,083 | 3,621 | ||||||
Accumulated deficit | (90,237 | ) | (26,790 | ) | ||||
Accumulated other comprehensive loss | (1,732 | ) | (7,673 | ) | ||||
Treasury stock, at cost, 152,316,710 and 153,456,775 shares, respectively | (7,398 | ) | (7,344 | ) | ||||
Total Fannie Mae stockholders’ deficit | (15,372 | ) | (15,314 | ) | ||||
Noncontrolling interest | 91 | 157 | ||||||
Total deficit | (15,281 | ) | (15,157 | ) | ||||
Total liabilities and equity (deficit) | 869,141 | $ | 912,404 | |||||
F-3
Table of Contents
(In conservatorship)
Consolidated Statements of Operations
(Dollars and shares in millions, except per share amounts)
For the Year Ended | ||||||||||||
December 31, | ||||||||||||
2009 | 2008 | 2007 | ||||||||||
Interest income: | ||||||||||||
Trading securities | $ | 3,859 | $ | 5,878 | $ | 2,051 | ||||||
Available-for-sale securities | 13,618 | 13,214 | 19,442 | |||||||||
Mortgage loans | 21,521 | 22,692 | 22,218 | |||||||||
Other | 357 | 1,339 | 1,055 | |||||||||
Total interest income | 39,355 | 43,123 | 44,766 | |||||||||
Interest expense: | ||||||||||||
Short-term debt | 2,306 | 7,815 | 8,999 | |||||||||
Long-term debt | 22,539 | 26,526 | 31,186 | |||||||||
Total interest expense | 24,845 | 34,341 | 40,185 | |||||||||
Net interest income | 14,510 | 8,782 | 4,581 | |||||||||
Guaranty fee income (includes imputed interest of $1,333, $1,423 and $1,278, respectively) | 7,211 | 7,621 | 5,071 | |||||||||
Losses on certain guaranty contracts | — | — | (1,424 | ) | ||||||||
Trust management income | 40 | 261 | 588 | |||||||||
Investment gains (losses), net | 1,458 | (246 | ) | (53 | ) | |||||||
Other-than-temporary impairments | (9,057 | ) | (6,974 | ) | (814 | ) | ||||||
Less: Noncredit portion ofother-than-temporary impairments recognized in | ||||||||||||
other comprehensive loss | (804 | ) | — | — | ||||||||
Netother-than-temporary impairments | (9,861 | ) | (6,974 | ) | (814 | ) | ||||||
Fair value losses, net | (2,811 | ) | (20,129 | ) | (4,668 | ) | ||||||
Debt extinguishment losses, net | (325 | ) | (222 | ) | (47 | ) | ||||||
Losses from partnership investments | (6,735 | ) | (1,554 | ) | (1,005 | ) | ||||||
Fee and other income | 733 | 772 | 965 | |||||||||
Non-interest loss | (10,290 | ) | (20,471 | ) | (1,387 | ) | ||||||
Administrative expenses: | ||||||||||||
Salaries and employee benefits | 1,133 | 1,032 | 1,370 | |||||||||
Professional services | 684 | 529 | 851 | |||||||||
Occupancy expenses | 205 | 227 | 263 | |||||||||
Other administrative expenses | 185 | 191 | 185 | |||||||||
Total administrative expenses | 2,207 | 1,979 | 2,669 | |||||||||
Provision for credit losses | 72,626 | 27,951 | 4,564 | |||||||||
Foreclosed property expense | 910 | 1,858 | 448 | |||||||||
Other expenses | 1,484 | 1,093 | 660 | |||||||||
Total expenses | 77,227 | 32,881 | 8,341 | |||||||||
Loss before federal income taxes and extraordinary losses | (73,007 | ) | (44,570 | ) | (5,147 | ) | ||||||
Provision (benefit) for federal income taxes | (985 | ) | 13,749 | (3,091 | ) | |||||||
Loss before extraordinary losses | (72,022 | ) | (58,319 | ) | (2,056 | ) | ||||||
Extraordinary losses, net of tax effect | — | (409 | ) | (15 | ) | |||||||
Net loss | (72,022 | ) | (58,728 | ) | (2,071 | ) | ||||||
Less: Net loss attributable to the noncontrolling interest | 53 | 21 | 21 | |||||||||
Net loss attributable to Fannie Mae | (71,969 | ) | (58,707 | ) | (2,050 | ) | ||||||
Preferred stock dividends and issuance costs at redemption | (2,474 | ) | (1,069 | ) | (513 | ) | ||||||
Net loss attributable to common stockholders | $ | (74,443 | ) | $ | (59,776 | ) | $ | (2,563 | ) | |||
Loss per share—Basic and Diluted | $ | (13.11 | ) | $ | (24.04 | ) | $ | (2.63 | ) | |||
Cash dividends per common share | $ | — | $ | 0.75 | $ | 1.90 | ||||||
Weighted-average common shares outstanding—Basic and Diluted | 5,680 | 2,487 | 973 |
F-4
Table of Contents
For the Year Ended December 31, | ||||||||||||
2009 | 2008 | 2007 | ||||||||||
Cash flows (used in) provided by operating activities: | ||||||||||||
Net loss | $ | (72,022 | ) | $ | (58,728 | ) | $ | (2,071 | ) | |||
Reconciliation of net loss to net cash provided by operating activities: | ||||||||||||
Amortization of investment cost basis adjustments | (687 | ) | (400 | ) | (391 | ) | ||||||
Amortization of debt cost basis adjustments | 3,255 | 8,589 | 9,775 | |||||||||
Provision for credit losses | 72,626 | 27,951 | 4,564 | |||||||||
Valuation losses | 4,530 | 13,964 | 612 | |||||||||
Debt extinguishment losses, net | 325 | 222 | 47 | |||||||||
Debt foreign currency transaction (gains) losses, net | 173 | (230 | ) | 190 | ||||||||
Losses on certain guaranty contracts | — | — | 1,424 | |||||||||
Losses from partnership investments | 6,735 | 1,554 | 1,005 | |||||||||
Current and deferred federal income taxes | (1,919 | ) | 12,904 | (3,465 | ) | |||||||
Extraordinary losses, net of tax effect | — | 409 | 15 | |||||||||
Derivatives fair value adjustments | (1,105 | ) | (1,239 | ) | 4,289 | |||||||
Purchases of loans held for sale | (109,684 | ) | (56,768 | ) | (34,047 | ) | ||||||
Proceeds from repayments of loans held for sale | 2,413 | 617 | 594 | |||||||||
Net decrease in trading securities, excluding non-cash transfers | 11,976 | 72,689 | 62,699 | |||||||||
Net change in: | ||||||||||||
Guaranty assets | (1,072 | ) | 2,089 | (5 | ) | |||||||
Guaranty obligations | (903 | ) | (5,312 | ) | (630 | ) | ||||||
Other, net | (550 | ) | (2,458 | ) | (1,656 | ) | ||||||
Net cash (used in) provided by operating activities | (85,909 | ) | 15,853 | 42,949 | ||||||||
Cash flows provided by (used in) investing activities: | ||||||||||||
Purchases of trading securities held for investment | (48,659 | ) | (7,635 | ) | — | |||||||
Proceeds from maturities of trading securities held for investment | 12,918 | 9,530 | — | |||||||||
Proceeds from sales of trading securities held for investment | 39,261 | 2,823 | — | |||||||||
Purchases ofavailable-for-sale securities | (165,103 | ) | (147,337 | ) | (126,200 | ) | ||||||
Proceeds from maturities ofavailable-for-sale securities | 48,096 | 33,369 | 123,462 | |||||||||
Proceeds from sales ofavailable-for-sale securities | 306,598 | 146,630 | 76,055 | |||||||||
Purchases of loans held for investment | (52,148 | ) | (63,097 | ) | (76,549 | ) | ||||||
Proceeds from repayments of loans held for investment | 57,142 | 49,328 | 56,617 | |||||||||
Advances to lenders | (79,163 | ) | (81,483 | ) | (79,186 | ) | ||||||
Proceeds from disposition of acquired property | 22,667 | 10,905 | 5,714 | |||||||||
Reimbursements to servicers for loan advances | (27,503 | ) | (15,282 | ) | (4,585 | ) | ||||||
Contributions to partnership investments | (688 | ) | (1,507 | ) | (3,059 | ) | ||||||
Proceeds from partnership investments | 87 | 1,042 | 1,043 | |||||||||
Net change in federal funds sold and securities purchased under agreements to resell | 4,230 | (9,793 | ) | (38,926 | ) | |||||||
Net cash provided by (used in) investing activities | 117,735 | (72,507 | ) | (65,614 | ) | |||||||
Cash flows (used in) provided by financing activities: | ||||||||||||
Proceeds from issuance of short-term debt | 1,641,119 | 1,913,685 | 1,743,852 | |||||||||
Payments to redeem short-term debt | (1,773,977 | ) | (1,824,511 | ) | (1,687,570 | ) | ||||||
Proceeds from issuance of long-term debt | 289,864 | 243,557 | 193,238 | |||||||||
Payments to redeem long-term debt | (257,329 | ) | (267,225 | ) | (232,978 | ) | ||||||
Repurchase of common and preferred stock | — | — | (1,105 | ) | ||||||||
Proceeds from issuance of common and preferred stock | — | 7,211 | 8,846 | |||||||||
Payments of cash dividends on senior preferred stock to Treasury | (2,470 | ) | (31 | ) | — | |||||||
Payments of cash dividends on common and preferred stock | — | (1,774 | ) | (2,483 | ) | |||||||
Proceeds from senior preferred stock purchase agreement with Treasury | 59,900 | — | — | |||||||||
Net change in federal funds purchased and securities sold under agreements to repurchase | (54 | ) | (266 | ) | 1,561 | |||||||
Excess tax benefits from stock-based compensation | — | — | 6 | |||||||||
Net cash (used in) provided by financing activities | (42,947 | ) | 70,646 | 23,367 | ||||||||
Net (decrease) increase in cash and cash equivalents | (11,121 | ) | 13,992 | 702 | ||||||||
Cash and cash equivalents at beginning of period | 17,933 | 3,941 | 3,239 | |||||||||
Cash and cash equivalents at end of period | $ | 6,812 | $ | 17,933 | $ | 3,941 | ||||||
Cash paid during the period for: | ||||||||||||
Interest | $ | 26,344 | $ | 35,959 | $ | 40,645 | ||||||
Income taxes | 876 | 845 | 1,888 | |||||||||
Non-cash activities: | ||||||||||||
Securitization-related transfers from mortgage loans held for sale to investments in securities | $ | 119,151 | $ | 40,079 | $ | 27,707 | ||||||
Net transfers of loans held for investment to loans held for sale | 7,334 | (13,523 | ) | (4,271 | ) | |||||||
Net consolidation transfers from investments in securities to mortgage loans held for sale | 9,335 | (1,429 | ) | (260 | ) | |||||||
Net transfers fromavailable-for-sale securities to mortgage loans held for sale | 1,918 | 2,904 | 514 | |||||||||
Transfers from advances to lenders to investments in securities (including transfers to trading securities | ||||||||||||
of $10,012, $40,660 and $70,156 for 2009, 2008, and 2007, respectively) | 77,191 | 83,534 | 71,801 | |||||||||
Net consolidation-related transfers from investments in securities to mortgage loans held for investment | 3,929 | (7,983 | ) | (7,365 | ) | |||||||
Net mortgage loans acquired by assuming debt | — | 167 | 2,756 | |||||||||
Net transfers from mortgage loans to acquired property | 5,707 | 4,272 | 3,025 | |||||||||
Transfers to trading securities from the effect of adopting the FASB guidance on the fair value option for | ||||||||||||
financial instruments | — | 56,217 | — | |||||||||
Issuance of senior preferred stock and warrant to purchase common stock to Treasury | — | 4,518 | — |
F-5
Table of Contents
Fannie Mae Stockholders’ Equity | ||||||||||||||||||||||||||||||||||||||||||||||||
Retained | Accumulated | |||||||||||||||||||||||||||||||||||||||||||||||
Shares Outstanding | Additional | Earnings | Other | Non | Total | |||||||||||||||||||||||||||||||||||||||||||
Senior | Senior | Preferred | Common | Paid-In | (Accumulated | Comprehensive | Treasury | Controlling | Equity | |||||||||||||||||||||||||||||||||||||||
Preferred | Preferred | Common | Preferred | Stock | Stock | Capital | Deficit) | Loss | Stock | Interest | (Deficit) | |||||||||||||||||||||||||||||||||||||
Balance as of December 31, 2006 | — | 132 | 972 | $ | — | $ | 9,108 | $ | 593 | $ | 1,942 | $ | 37,955 | $ | (445 | ) | $ | (7,647 | ) | $ | 136 | $ | 41,642 | |||||||||||||||||||||||||
Cumulative effect from the adoption of FASB guidance on the uncertainty in income taxes, net of tax | — | — | — | — | — | — | — | 4 | — | — | — | 4 | ||||||||||||||||||||||||||||||||||||
Balance as of January 1, 2007, adjusted | — | 132 | 972 | — | 9,108 | 593 | 1,942 | 37,959 | (445 | ) | (7,647 | ) | 136 | 41,646 | ||||||||||||||||||||||||||||||||||
Change in investment in noncontrolling interest | — | — | — | — | — | — | — | — | — | — | (8 | ) | (8 | ) | ||||||||||||||||||||||||||||||||||
Comprehensive loss: | ||||||||||||||||||||||||||||||||||||||||||||||||
Net loss | — | — | — | — | — | — | — | (2,050 | ) | — | — | (21 | ) | (2,071 | ) | |||||||||||||||||||||||||||||||||
Other comprehensive income, net of tax effect: | ||||||||||||||||||||||||||||||||||||||||||||||||
Changes in net unrealized losses on | ||||||||||||||||||||||||||||||||||||||||||||||||
available-for sale securities (net of tax of $578) | — | — | — | — | — | — | — | — | (1,073 | ) | — | — | (1,073 | ) | ||||||||||||||||||||||||||||||||||
Reclassification adjustment for other-than- temporary impairments recognized | ||||||||||||||||||||||||||||||||||||||||||||||||
in net loss (net of tax of $285) | — | — | — | — | — | — | — | — | 529 | 529 | ||||||||||||||||||||||||||||||||||||||
Reclassification adjustment for gains included in net loss (net of tax of $282) | — | — | — | — | — | — | — | — | (523 | ) | — | — | (523 | ) | ||||||||||||||||||||||||||||||||||
Unrealized gains on guaranty assets and guaranty feebuy-ups (net of tax of $13) | — | — | — | — | — | — | — | — | 25 | — | — | 25 | ||||||||||||||||||||||||||||||||||||
Amortization of net cash flow hedging losses (net of tax of $2) | — | — | — | — | — | — | — | — | (3 | ) | — | — | (3 | ) | ||||||||||||||||||||||||||||||||||
Prior service cost and actuarial gains, net of amortization for defined benefit plans (net of tax of $73) | — | — | — | — | — | — | — | — | 128 | — | — | 128 | ||||||||||||||||||||||||||||||||||||
Total comprehensive loss | (2,988 | ) | ||||||||||||||||||||||||||||||||||||||||||||||
Common stock dividends ($1.90 per share) | — | — | — | — | — | — | — | (1,858 | ) | — | — | — | (1,858 | ) | ||||||||||||||||||||||||||||||||||
Preferred stock dividends | — | — | — | — | — | — | — | (503 | ) | — | — | — | (503 | ) | ||||||||||||||||||||||||||||||||||
Preferred stock issued | — | 356 | — | — | 8,905 | — | (94 | ) | — | — | — | — | 8,811 | |||||||||||||||||||||||||||||||||||
Preferred stock redeemed | — | (22 | ) | — | — | (1,100 | ) | — | — | — | — | — | — | (1,100 | ) | |||||||||||||||||||||||||||||||||
Other | — | — | 2 | — | — | — | (17 | ) | — | — | 135 | — | 118 | |||||||||||||||||||||||||||||||||||
Balance as of December 31, 2007 | — | 466 | 974 | — | 16,913 | 593 | 1,831 | 33,548 | (1,362 | ) | (7,512 | ) | 107 | 44,118 | ||||||||||||||||||||||||||||||||||
Cumulative effect from the adoption of the FASB guidance on the fair value option for financial instruments and the FASB guidance on fair value measurement, net of tax | — | — | — | — | — | — | — | 148 | (93 | ) | — | — | 55 | |||||||||||||||||||||||||||||||||||
Balance as of January 1, 2008, adjusted | — | 466 | 974 | — | 16,913 | 593 | 1,831 | 33,696 | (1,455 | ) | (7,512 | ) | 107 | 44,173 | ||||||||||||||||||||||||||||||||||
Change in investment in noncontrolling interest | — | — | — | — | — | — | — | — | — | — | 71 | 71 | ||||||||||||||||||||||||||||||||||||
Comprehensive loss: | ||||||||||||||||||||||||||||||||||||||||||||||||
Net loss | — | — | — | — | — | — | — | (58,707 | ) | — | — | (21 | ) | (58,728 | ) | |||||||||||||||||||||||||||||||||
Other comprehensive loss, net of tax effect: | ||||||||||||||||||||||||||||||||||||||||||||||||
Changes in net unrealized losses on | ||||||||||||||||||||||||||||||||||||||||||||||||
available-for sale securities (net of tax of $5,395) | — | — | — | — | — | — | — | — | (10,020 | ) | — | — | (10,020 | ) | ||||||||||||||||||||||||||||||||||
Reclassification adjustment for other-than temporary impairments recognized | ||||||||||||||||||||||||||||||||||||||||||||||||
in net loss (net of tax of $2,441) | — | — | — | — | — | — | — | — | 4,533 | 4,533 | ||||||||||||||||||||||||||||||||||||||
Reclassification adjustment for gains included in net loss (net of tax of $36) | — | — | — | — | — | — | — | — | (67 | ) | — | — | (67 | ) | ||||||||||||||||||||||||||||||||||
Unrealized losses on guaranty assets and guaranty feebuy-ups | — | — | — | — | — | — | — | — | (342 | ) | — | — | (342 | ) | ||||||||||||||||||||||||||||||||||
Amortization of net cash flow hedging gains | — | — | — | — | — | — | — | — | 1 | �� | — | — | 1 | |||||||||||||||||||||||||||||||||||
Prior service cost and actuarial loss, net of amortization for defined benefit plans | — | — | — | — | — | — | — | — | (323 | ) | — | — | (323 | ) | ||||||||||||||||||||||||||||||||||
Total comprehensive loss | (64,946 | ) | ||||||||||||||||||||||||||||||||||||||||||||||
Common stock dividends ($0.75 per share) | — | — | — | — | — | — | — | (741 | ) | — | — | — | (741 | ) | ||||||||||||||||||||||||||||||||||
Senior preferred stock dividends | — | — | — | — | — | — | (31 | ) | — | — | — | — | (31 | ) | ||||||||||||||||||||||||||||||||||
Common stock issued | — | — | 94 | — | — | 49 | 2,477 | — | — | — | — | 2,526 | ||||||||||||||||||||||||||||||||||||
Common stock warrant issued | — | — | — | — | — | — | 3,518 | — | — | — | — | 3,518 | ||||||||||||||||||||||||||||||||||||
Preferred stock dividends declared | — | — | — | — | — | — | — | (1,038 | ) | — | — | — | (1,038 | ) | ||||||||||||||||||||||||||||||||||
Senior preferred stock issued | 1 | — | — | 1,000 | — | — | — | — | — | — | — | 1,000 | ||||||||||||||||||||||||||||||||||||
Preferred stock issued | — | 141 | — | — | 4,812 | — | (127 | ) | — | — | — | — | 4,685 | |||||||||||||||||||||||||||||||||||
Conversion of convertible preferred stock into common stock | — | (10 | ) | 16 | — | (503 | ) | 8 | 495 | — | — | — | — | — | ||||||||||||||||||||||||||||||||||
Treasury commitment | — | — | — | — | — | — | (4,518 | ) | — | — | — | — | (4,518 | ) | ||||||||||||||||||||||||||||||||||
Other | — | — | 1 | — | — | — | (24 | ) | — | — | 168 | — | 144 | |||||||||||||||||||||||||||||||||||
F-6
Table of Contents
Fannie Mae Stockholders’ Equity | ||||||||||||||||||||||||||||||||||||||||||||||||
Retained | Accumulated | |||||||||||||||||||||||||||||||||||||||||||||||
Shares Outstanding | Additional | Earnings | Other | Non | Total | |||||||||||||||||||||||||||||||||||||||||||
Senior | Senior | Preferred | Common | Paid-In | (Accumulated | Comprehensive | Treasury | Controlling | Equity | |||||||||||||||||||||||||||||||||||||||
Preferred | Preferred | Common | Preferred | Stock | Stock | Capital | Deficit) | Loss | Stock | Interest | (Deficit) | |||||||||||||||||||||||||||||||||||||
Balance as of December 31, 2008 | 1 | 597 | 1,085 | 1,000 | 21,222 | 650 | 3,621 | (26,790 | ) | (7,673 | ) | (7,344 | ) | 157 | (15,157 | ) | ||||||||||||||||||||||||||||||||
Cumulative effect from the adoption of the FASB guidance on other-than-temporary impairments, net of tax | — | — | — | — | — | — | — | 8,520 | (5,556 | ) | — | — | 2,964 | |||||||||||||||||||||||||||||||||||
Change in investment in noncontrolling interest | — | — | — | — | — | — | — | — | — | — | (13 | ) | (13 | ) | ||||||||||||||||||||||||||||||||||
Comprehensive loss: | ||||||||||||||||||||||||||||||||||||||||||||||||
Net loss | — | — | — | — | — | — | — | (71,969 | ) | — | — | (53 | ) | (72,022 | ) | |||||||||||||||||||||||||||||||||
Other comprehensive loss, net of tax effect: | ||||||||||||||||||||||||||||||||||||||||||||||||
Changes in net unrealized losses on | ||||||||||||||||||||||||||||||||||||||||||||||||
available-for sale securities, (net of tax of $2,658) | — | — | — | — | — | — | — | — | 4,936 | — | — | 4,936 | ||||||||||||||||||||||||||||||||||||
Reclassification adjustment for other-than- temporary impairments recognized in net loss (net of tax of $3,441) | — | — | — | — | — | — | — | — | 6,420 | — | — | 6,420 | ||||||||||||||||||||||||||||||||||||
Reclassification adjustment for gains included in net loss (net of tax of $119) | — | — | — | — | — | — | — | — | (220 | ) | — | — | (220 | ) | ||||||||||||||||||||||||||||||||||
Unrealized gains on guaranty assets and guaranty feebuy-ups | — | — | — | — | — | — | — | — | 245 | — | — | 245 | ||||||||||||||||||||||||||||||||||||
Amortization of net cash flow hedging gains | — | — | — | — | — | — | — | — | 9 | — | — | 9 | ||||||||||||||||||||||||||||||||||||
Prior service cost and actuarial gains, net of amortization for defined benefit plans | — | — | — | — | — | — | — | — | 107 | — | — | 107 | ||||||||||||||||||||||||||||||||||||
Total comprehensive loss | (60,525 | ) | ||||||||||||||||||||||||||||||||||||||||||||||
Senior preferred stock dividends | — | — | — | — | — | — | (2,470 | ) | — | — | — | — | (2,470 | ) | ||||||||||||||||||||||||||||||||||
Increase to senior preferred liquidation preference | — | — | — | 59,900 | — | — | — | — | — | — | — | 59,900 | ||||||||||||||||||||||||||||||||||||
Conversion of convertible preferred stock into common stock | — | (17 | ) | 27 | — | (874 | ) | 14 | 860 | — | — | — | — | — | ||||||||||||||||||||||||||||||||||
Other | — | — | 1 | — | — | — | 72 | 2 | — | (54 | ) | — | 20 | |||||||||||||||||||||||||||||||||||
Balance as of December 31, 2009 | 1 | 580 | 1,113 | $ | 60,900 | $ | 20,348 | $ | 664 | $ | 2,083 | $ | (90,237 | ) | $ | (1,732 | ) | $ | (7,398 | ) | $ | 91 | $ | (15,281 | ) | |||||||||||||||||||||||
F-7
Table of Contents
1. | Summary of Significant Accounting Policies |
F-8
Table of Contents
(In conservatorship)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
F-9
Table of Contents
(In conservatorship)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
• | Treasury’s funding commitment to us under the senior preferred stock purchase agreement; | |
• | Treasury’s credit facility that was available to us; | |
• | Federal Reserve’s active program to purchase debt securities of Fannie Mae, the Federal Home Loan Mortgage Corporation (“Freddie Mac”), and the Federal Home Loan Banks, as well as up to $1.25 trillion in Fannie Mae, Freddie Mac and Ginnie Mae mortgage-backed securities; |
F-10
Table of Contents
(In conservatorship)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
• | Treasury’s agency MBS purchase program; and | |
• | Federal Reserve and Treasury’s programs to support the liquidity of the financial markets overall, including several asset purchase programs and several asset financing programs. |
• | Ending the Treasury purchase program of MBS guaranteed by the GSEs on December 31, 2009. | |
• | Terminating the Treasury credit facility established for Fannie Mae, Freddie Mac and the Federal Home Loan Banks on December 31, 2009. | |
• | Amending the senior preferred stock purchase agreement to allow the cap on Treasury’s purchase commitment to increase as necessary to accommodate any cumulative reduction in our net worth in calendar years 2010, 2011 and 2012. | |
• | Modifying the senior preferred stock purchase agreement to provide us with additional flexibility to meet the requirement to reduce our investment portfolio. The portfolio reduction requirement for 2010 and after will be applied to the maximum allowable size of the portfolios—or $900 billion—rather than the actual size of the portfolios at the end of 2009. We are also required to limit the amount of indebtedness that we can incur to 120% of the amount of mortgage assets we are allowed to own. | |
• | Amending the senior preferred stock purchase agreement to delay the date on which we are required to begin paying the Periodic Commitment Fee by one year from March 31, 2010 to March 31, 2011 and |
F-11
Table of Contents
(In conservatorship)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
make technical changes to the definitions of mortgage assets and indebtedness to make compliance with the covenants of the senior preferred stock purchase agreement less burdensome and more transparent in light of impending accounting changes. |
F-12
Table of Contents
(In conservatorship)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
F-13
Table of Contents
(In conservatorship)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
F-14
Table of Contents
(In conservatorship)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
F-15
Table of Contents
(In conservatorship)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
F-16
Table of Contents
(In conservatorship)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
F-17
Table of Contents
(In conservatorship)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
F-18
Table of Contents
(In conservatorship)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
F-19
Table of Contents
(In conservatorship)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
F-20
Table of Contents
(In conservatorship)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
F-21
Table of Contents
(In conservatorship)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
F-22
Table of Contents
(In conservatorship)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
F-23
Table of Contents
(In conservatorship)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
F-24
Table of Contents
(In conservatorship)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
F-25
Table of Contents
(In conservatorship)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
F-26
Table of Contents
(In conservatorship)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
F-27
Table of Contents
(In conservatorship)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
As of December 31, | ||||||||
2009 | 2008 | |||||||
(Dollars in millions) | ||||||||
Investments in securities: | ||||||||
Unamortized premiums (discounts) and other cost basis adjustments, net(1) | $ | 1,185 | $ | 290 | ||||
Other-than-temporary impairments(2) | (821 | ) | (6,457 | ) | ||||
Mortgage loans held-for-investment: | ||||||||
Unamortized premiums (discounts) and other cost basis adjustments of loans in portfolio, excluding acquired credit-impaired loans and hedged mortgage assets(3) | (10,332 | ) | (1,341 | ) | ||||
Unamortized discount on acquired credit-impaired loans(4) | (11,467 | ) | (1,320 | ) | ||||
Unamortized premium on hedged mortgage assets(5) | 806 | 921 | ||||||
Other assets(6) | (254 | ) | (333 | ) | ||||
Total | $ | (20,883 | ) | $ | (8,240 | ) | ||
(1) | Includes the impact of other-than-temporary impairment of cost basis adjustments. | |
(2) | Accretable portion of impairments recorded as a result of previous other-than-temporary impairments. | |
(3) | Includes the unamortized balance of the fair value discounts that were recorded upon acquisition of credit-impaired loans that have been subsequently modified as TDRs, which accretes into interest income for TDRs that are placed on accrual status. | |
(4) | Represents the unamortized balance of the fair value discounts that were recorded upon acquisition and consolidation that may accrete into interest income for acquired credit-impaired loans that are placed on accrual status. | |
(5) | Represents the net premium on mortgage assets designated for hedge accounting that are attributable to changes in interest rates and will be amortized through interest income over the life of the hedged assets. | |
(6) | Represents the fair value discount related to unsecured HomeSaver Advance loans that will accrete into interest income based on the contractual terms of the loans for loans on accrual status. |
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
F-34
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
For the Year Ended December 31, | ||||||||||||
2009 | 2008 | 2007 | ||||||||||
(Dollars in millions) | ||||||||||||
Derivatives fair value losses, net(1) | $ | (6,350 | ) | $ | (15,416 | ) | $ | (4,113 | ) | |||
Trading securities gains (losses), net(2) | 3,744 | (7,040 | ) | (365 | ) | |||||||
Hedged mortgage asset gains, net(3) | — | 2,154 | — | |||||||||
Debt foreign exchange gains (losses), net | (173 | ) | 230 | (190 | ) | |||||||
Debt fair value losses, net | (32 | ) | (57 | ) | — | |||||||
Fair value losses, net | $ | (2,811 | ) | $ | (20,129 | ) | $ | (4,668 | ) | |||
(1) | Includes losses of approximately $104 million in 2008 that resulted from the termination of our derivative contracts with a subsidiary of Lehman Brothers. | |
(2) | Includes trading losses of $608 million in 2008 that resulted from the write-down to fair value of our investment in corporate debt securities issued by Lehman Brothers. | |
(3) | Represents adjustments to the carrying value of mortgage assets designated for hedge accounting that are attributable to changes in interest rates. |
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Financial Statement | Accounting and Presentation Changes | |||
Balance Sheet | • | Significant increase in loans and debt and significant decrease in trading and available-for-sale securities | ||
• | Separate presentation of the elements of the consolidated MBS trusts (such as mortgage loans, debt, accrued interest receivable and payable) on the face of the balance sheet | |||
• | Reclassification of substantially all of the previously recorded reserve for guaranty losses to allowance for loan losses | |||
• | Elimination of substantially all previously recorded guaranty assets and guaranty obligations | |||
Statement of Operations | • | Significant increase in interest income and interest expense attributable to the consolidated assets and liabilities of the consolidated MBS trusts | ||
• | Decrease to provision for credit losses and corresponding decrease in net interest income due to recording interest expense on consolidated MBS trusts when we are not accruing interest on underlying nonperforming consolidated loans | |||
• | Separate presentation of the elements of the consolidated MBS trusts (interest income and interest expense) on the face of the statement of operations | |||
• | Reclassification of the substantial majority of guaranty fee income and trust management income to interest income | |||
• | Elimination of fair value losses on credit-impaired loans acquired from the MBS trusts we have consolidated, as the underlying loans in our MBS trusts will be recorded in our consolidated balance sheet | |||
Statement of Cash Flows | • | Significant change in the amounts of cash flows from investing and financing activities |
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
2. | Consolidations |
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
As of December 31, | ||||||||
2009 | 2008 | |||||||
(Dollars in millions) | ||||||||
Assets: | ||||||||
MBS trusts: | ||||||||
Loans held for investment | $ | 49,939 | $ | 59,126 | ||||
Available-for-sale securities | 2,337 | 2,208 | ||||||
Loans held for sale | 3,173 | 1,429 | ||||||
Trading securities | 5,100 | 993 | ||||||
Total MBS trusts(1) | 60,549 | 63,756 | ||||||
Limited partnerships: | ||||||||
Partnership investments | 430 | 5,697 | ||||||
Cash, cash equivalents and restricted cash | 21 | 146 | ||||||
Total limited partnership investments | 451 | 5,843 | ||||||
Total assets of consolidated VIEs | $ | 61,000 | $ | 69,599 | ||||
Liabilities: | ||||||||
Long-term debt | $ | 5,218 | $ | 5,094 | ||||
Partnership liabilities | 385 | 2,585 | ||||||
Total liabilities of consolidated VIEs | $ | 5,603 | $ | 7,679 | ||||
(1) | The assets of consolidated MBS trusts are restricted solely for the purpose of servicing the related MBS. |
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
As of December 31, | ||||||||
2009 | 2008 | |||||||
(Dollars in millions) | ||||||||
Mortgage-backed trusts(1) | $ | 3,044,516 | $ | 3,017,030 | ||||
Asset-backed trusts | 484,703 | 563,633 | ||||||
Limited partnership investments | 13,085 | 12,884 | ||||||
Mortgage revenue bonds and other credit enhanced bonds | 8,061 | 5,701 | ||||||
Total assets of non-consolidated VIEs and QSPEs | $ | 3,550,365 | $ | 3,599,248 | ||||
(1) | Includes $555.4 billion and $604.4 billion of assets of non-QSPE securitization trusts as of December 31, 2009 and 2008, respectively. |
As of December 31, | ||||||||
2009 | 2008(1) | |||||||
(Dollars in millions) | ||||||||
Assets: | ||||||||
Available-for-sale securities | $ | 161,495 | $ | 180,694 | ||||
Trading securities | 64,183 | 63,265 | ||||||
Guaranty assets | 6,783 | 6,431 | ||||||
Partnership investments | 144 | 3,405 | ||||||
Servicer and MBS trust receivable | 15,903 | 6,111 | ||||||
Other assets | 1,305 | 1,326 | ||||||
Total carrying amount of assets related to our interests in non-consolidated VIEs and QSPEs | $ | 249,813 | $ | 261,232 | ||||
Liabilities: | ||||||||
Reserve for guaranty losses | $ | 52,703 | $ | 21,614 | ||||
Guaranty obligations | 12,282 | 10,823 | ||||||
Partnership liabilities | 325 | 617 | ||||||
Servicer and MBS trust payable | 20,371 | 4,259 | ||||||
Other liabilities | 781 | 767 | ||||||
Total carrying amount of liabilities related to our interests in non-consolidated VIEs and QSPEs | $ | 86,462 | $ | 38,080 | ||||
(1) | Prior period amounts include additional categories to conform to the current period presentation. |
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Maximum | ||||||||
Exposure | Recognized | |||||||
to Loss(1) | Liabilities(2) | |||||||
(Dollars in millions) | ||||||||
As of December 31, 2009 | $ | 2,611,823 | $ | 86,137 | ||||
As of December 31, 2008(3) | 2,536,469 | 37,463 |
(1) | Represents the greater of our recorded investment in the entity or the unpaid principal balance of the assets covered by our guaranty. Includes $89.8 billion and $95.9 billion related to non-QSPE securitization trusts as of December 31, 2009 and 2008, respectively. | |
(2) | Amounts consist of guaranty obligations, reserve for guaranty losses, servicer and MBS trust payable, and other liabilities recognized for the respective periods. Excludes deferred contributions to limited partnership entities in which we have recognized an equity method investment. | |
(3) | Prior period amounts include additional categories to conform to the current period presentation. |
3. | Mortgage Loans |
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
As of December 31, | ||||||||
2009 | 2008 | |||||||
(Dollars in millions) | ||||||||
Single-family:(1) | ||||||||
Government insured or guaranteed | $ | 52,399 | $ | 43,799 | ||||
Conventional: | ||||||||
Long-term fixed rate | 179,654 | 186,550 | ||||||
Intermediate-term fixed-rate(2) | 29,474 | 37,546 | ||||||
Adjustable-rate | 34,602 | 44,157 | ||||||
Total conventional single-family | 243,730 | 268,253 | ||||||
Total single-family | 296,129 | 312,052 | ||||||
Multifamily:(1) | ||||||||
Government insured or guaranteed | 585 | 699 | ||||||
Conventional: | ||||||||
Long-term fixed-rate | 5,727 | 5,636 | ||||||
Intermediate-term fixed-rate(2) | 91,760 | 90,837 | ||||||
Adjustable-rate | 22,342 | 20,269 | ||||||
Total conventional multifamily | 119,829 | 116,742 | ||||||
Total multifamily | 120,414 | 117,441 | ||||||
Unamortized premiums (discounts) and other cost basis adjustments, net(3) | (11,168 | ) | (894 | ) | ||||
Lower of cost or market adjustments on loans held for sale | (889 | ) | (264 | ) | ||||
Allowance for loan losses for loans held for investment | (10,461 | ) | (2,923 | ) | ||||
Total mortgage loans | $ | 394,025 | $ | 425,412 | ||||
(1) | Includes unpaid principal balance totaling $147.0 billion and $65.8 billion as of December 31, 2009 and 2008, respectively, of 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 those mortgage-related securities being accounted for as loans. | |
(2) | Intermediate-term fixed-rate consists of mortgage loans with contractual maturities at purchase equal to or less than 15 years. | |
(3) | Includes a net premium of $806 million and $921 million as of December 31, 2009 and 2008, respectively, for hedged mortgage loans that will be amortized through interest income over the life of the loans. |
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
As of December 31, | ||||||||
2009 | 2008 | |||||||
(Dollars in millions) | ||||||||
Outstanding contractual balance | $ | 24,106 | $ | 7,206 | ||||
Carrying amount: | ||||||||
Loans on accrual status | 2,560 | 2,902 | ||||||
Loans on nonaccrual status | 8,952 | 2,708 | ||||||
Total carrying amount of loans | $ | 11,512 | $ | 5,610 | ||||
For the Year Ended | ||||||||||||
December 31, | ||||||||||||
2009 | 2008 | 2007 | ||||||||||
(Dollars in millions) | ||||||||||||
Contractually required principal and interest payments at acquisition(1) | $ | 39,197 | $ | 5,034 | $ | 7,098 | ||||||
Nonaccretable difference | 9,234 | 783 | 571 | |||||||||
Cash flows expected to be collected at acquisition(1) | 29,963 | 4,251 | 6,527 | |||||||||
Accretable yield | 13,852 | 1,805 | 1,772 | |||||||||
Initial investment in acquired loans at acquisition | $ | 16,111 | $ | 2,446 | $ | 4,755 | ||||||
(1) | Contractually required principal and interest payments at acquisition and cash flows expected to be collected at acquisition are adjusted for the estimated timing and amount of prepayments. |
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
For the Year Ended December 31, | ||||||||||||
2009 | 2008 | 2007 | ||||||||||
(Dollars in millions) | ||||||||||||
Beginning balance, January 1 | $ | 1,559 | $ | 2,252 | $ | 1,511 | ||||||
Additions | 13,852 | 1,805 | 1,772 | |||||||||
Accretion | (215 | ) | (279 | ) | (273 | ) | ||||||
Reductions(1) | (13,693 | ) | (2,294 | ) | (1,206 | ) | ||||||
Change in estimated cash flows(2) | 8,729 | 420 | 797 | |||||||||
Reclassifications to nonaccretable difference(3) | (115 | ) | (345 | ) | (349 | ) | ||||||
Ending balance, December 31 | $ | 10,117 | $ | 1,559 | $ | 2,252 | ||||||
(1) | Reductions result from liquidations and loan modifications due to troubled debt restructurings (“TDRs”). | |
(2) | Represents changes in expected cash flows due to changes in prepayment assumptions. | |
(3) | Represents changes in expected cash flows due to changes in credit quality or credit assumptions. |
For the Year Ended | ||||||||||||
December 31, | ||||||||||||
2009 | 2008 | 2007 | ||||||||||
(Dollars in millions) | ||||||||||||
Accretion of fair value discount(1) | $ | 405 | $ | 158 | $ | 80 | ||||||
Interest income on loans returned to accrual status or subsequently modified as TDRs | 214 | 476 | 416 | |||||||||
Total interest income recognized on acquired credit-impaired loans | $ | 619 | $ | 634 | $ | 496 | ||||||
Increase in “Provision for credit losses” subsequent to the acquisition of credit-impaired loans | $ | 691 | $ | 185 | $ | 76 |
(1) | Represents accretion of the fair value discount that was recorded on acquired credit-impaired loans. |
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
As of December 31, | ||||||||
2009 | 2008 | |||||||
(Dollars in millions) | ||||||||
Nonaccrual loans(1) | $ | 34,079 | $ | 17,634 | ||||
Accrued interest recorded on nonaccrual loans(2) | 1,366 | 436 | ||||||
Accruing loans past due 90 days or more | 612 | 317 | ||||||
Nonaccrual loans in portfolio (number of loans) | 292,468 | 141,329 |
(1) | Includes the carrying value of all nonaccrual loans, including TDRs and on-balance sheet HomeSaver Advance first-lien loans on nonaccrual status. Forgone interest on nonaccrual loans, which represents the amount of income contractually due that we would have reported had the loans performed according to their contractual terms, was $1.1 billion, $359 million and $200 million for the years ended December 31, 2009, 2008 and 2007, respectively. | |
(2) | Reflects accrued interest on nonaccrual loans that was recorded prior to their placement on nonaccrual status. |
As of December 31, | ||||||||
2009 | 2008 | |||||||
(Dollars in millions) | ||||||||
Impaired nonaccrual loans without an allowance | $ | 3,970 | $ | 1,074 | ||||
Average recorded investment in nonaccrual loans | 2,088 | 1,378 |
As of December 31, | ||||||||
2009 | 2008 | |||||||
(Dollars in millions) | ||||||||
Impaired loans with an allowance(1) | $ | 21,055 | $ | 5,044 | ||||
Impaired loans without an allowance(2) | 4,450 | 1,649 | ||||||
Total other impaired loans(3) | $ | 25,505 | $ | 6,693 | ||||
Allowance for other impaired loans | $ | 5,995 | $ | 878 |
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(1) | Includes $5.0 billion and $1.1 billion of acquired credit-impaired mortgage loans for which we recorded a loss allowance subsequent to acquisition as of December 31, 2009 and 2008, respectively. | |
(2) | The discounted cash flows, collateral value or fair value equals or exceeds the carrying value of the loan, and as such, no allowance is required. | |
(3) | Includes single-family loans individually impaired and restructured in a TDR of $19.0 billion and $5.2 billion as of December 31, 2009 and 2008, respectively. Includes multifamily loans that were both individually impaired and restructured in a TDR of $51 million as of December 31, 2009. We had no multifamily loans individually impaired and restructured in a TDR as of December 31, 2008. Includes a carrying value of $156 million and $164 million for delinquent loans held in MBS trusts consolidated in our balance sheet related to our HomeSaver Advance initiative as of December 31, 2009 and 2008, respectively. |
For the Year Ended December 31, | ||||||||||||
2009 | 2008 | 2007 | ||||||||||
(Dollars in millions) | ||||||||||||
Interest income recognized | $ | 532 | $ | 251 | $ | 92 | ||||||
Average recorded investment | 13,339 | 4,782 | 2,635 |
As of December 31, | ||||||||
2009 | 2008 | |||||||
(Dollars in millions) | ||||||||
Unpaid principal balance | $ | 324 | $ | 461 | ||||
Carrying value | 1 | 8 |
4. | Allowance for Loan Losses and Reserve for Guaranty Losses |
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
For The Year Ended | ||||||||||||
December 31, | ||||||||||||
2009 | 2008 | 2007 | ||||||||||
(Dollars in millions) | ||||||||||||
Allowance for loan losses: | ||||||||||||
Beginning balance, January 1 | $ | 2,923 | $ | 698 | $ | 340 | ||||||
Provision | 9,569 | 4,022 | 658 | |||||||||
Charge-offs(1) | (2,245 | ) | (1,987 | ) | (407 | ) | ||||||
Recoveries | 214 | 190 | 107 | |||||||||
Ending balance, December 31(2) | $ | 10,461 | $ | 2,923 | $ | 698 | ||||||
Reserve for guaranty losses: | ||||||||||||
Beginning balance, January 1 | $ | 21,830 | $ | 2,693 | $ | 519 | ||||||
Provision | 63,057 | 23,929 | 3,906 | |||||||||
Charge-offs(3)(4) | (31,142 | ) | (4,986 | ) | (1,782 | ) | ||||||
Recoveries | 685 | 194 | 50 | |||||||||
Ending balance, December 31 | $ | 54,430 | $ | 21,830 | $ | 2,693 | ||||||
(1) | Includes accrued interest of $1.5 billion, $642 million and $128 million for the years ended December 31, 2009, 2008 and 2007, respectively. | |
(2) | Includes $726 million, $150 million and $39 million as of December 31, 2009, 2008 and 2007, respectively, associated with acquired credit-impaired loans. | |
(3) | Includes charges of $228 million and $333 million for the years ended December 31, 2009 and 2008, respectively, related to unsecured HomeSaver Advance loans. | |
(4) | Includes charges recorded at the date of acquisition of $20.3 billion, $2.1 billion and $1.4 billion for the years ended December 31, 2009, 2008 and 2007, respectively, for acquired credit-impaired loans where the acquisition cost exceeded the fair value of the acquired loan. |
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
5. | Investments in Securities |
As of December 31, | ||||||||
2009 | 2008(1) | |||||||
(Dollars in millions) | ||||||||
Mortgage-related securities: | ||||||||
Fannie Mae | $ | 74,750 | $ | 58,006 | ||||
Freddie Mac | 15,082 | 2,299 | ||||||
Ginnie Mae | 1 | 1 | ||||||
Alt-A | 1,355 | 1,476 | ||||||
Subprime | 1,780 | 2,318 | ||||||
CMBS | 9,335 | 8,205 | ||||||
Mortgage revenue bonds | 600 | 695 | ||||||
Other mortgage-related securities | 154 | 166 | ||||||
Total | 103,057 | 73,166 | ||||||
Non-mortgage-related securities: | ||||||||
Asset-backed securities | 8,515 | 10,598 | ||||||
Corporate debt securities | 364 | 6,037 | ||||||
Other | 3 | 1,005 | ||||||
Total | 8,882 | 17,640 | ||||||
Total trading securities | $ | 111,939 | $ | 90,806 | ||||
Losses in trading securities held in our portfolio, net | $ | 2,685 | $ | 7,195 | ||||
(1) | Certain prior year amounts have been reclassified to conform to the current period presentation. |
For the Year Ended December 31, | ||||||||||||
2009 | 2008 | 2007 | ||||||||||
(Dollars in millions) | ||||||||||||
Net trading gains (losses): | ||||||||||||
Mortgage-related securities | $ | 2,457 | $ | (4,297 | ) | $ | (365 | ) | ||||
Non-mortgage-related securities | 1,287 | (2,743 | ) | — | ||||||||
Total | $ | 3,744 | $ | (7,040 | ) | $ | (365 | ) | ||||
Net trading gains (losses) recorded in the year related to securities still held at year end: | ||||||||||||
Mortgage-related securities | $ | 1,974 | $ | (4,464 | ) | $ | (536 | ) | ||||
Non-mortgage-related securities | 1,146 | (2,418 | ) | — | ||||||||
Total | $ | 3,120 | $ | (6,882 | ) | $ | (536 | ) | ||||
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
For the Year Ended December 31, | ||||||||||||
2009 | 2008 | 2007 | ||||||||||
(Dollars in millions) | ||||||||||||
Gross realized gains | $ | 4,521 | $ | 4,022 | $ | 1,929 | ||||||
Gross realized losses | 3,080 | 3,635 | 1,226 | |||||||||
Total proceeds(1) | 226,664 | 130,991 | 71,960 |
(1) | Excluding proceeds from the initial sale of securities from new portfolio securitizations as defined in “Note 6, Portfolio Securitizations.” |
As of December 31, 2009 | ||||||||||||||||||||
Gross | Gross | |||||||||||||||||||
Total | Gross | Unrealized | Unrealized | Total | ||||||||||||||||
Amortized | Unrealized | Losses - | Losses - | Fair | ||||||||||||||||
Cost(1) | Gains | OTTI(2) | Other(3) | Value | ||||||||||||||||
(Dollars in millions) | ||||||||||||||||||||
Fannie Mae | $ | 148,074 | $ | 6,413 | $ | (23 | ) | $ | (45 | ) | $ | 154,419 | ||||||||
Freddie Mac | 26,281 | 1,192 | — | (4 | ) | 27,469 | ||||||||||||||
Ginnie Mae | 1,253 | 102 | — | (2 | ) | 1,353 | ||||||||||||||
Alt-A | 17,836 | 41 | (2,738 | ) | (989 | ) | 14,150 | |||||||||||||
Subprime | 13,232 | 33 | (1,774 | ) | (745 | ) | 10,746 | |||||||||||||
CMBS | 15,797 | — | — | (2,604 | ) | 13,193 | ||||||||||||||
Mortgage revenue bonds | 13,679 | 71 | (44 | ) | (860 | ) | 12,846 | |||||||||||||
Other mortgage-related securities | 4,225 | 29 | (235 | ) | (467 | ) | 3,552 | |||||||||||||
Total | $ | 240,377 | $ | 7,881 | $ | (4,814 | ) | $ | (5,716 | ) | $ | 237,728 | ||||||||
As of December 31, 2008(4) | ||||||||||||||||
Total | Gross | Gross | Total | |||||||||||||
Amortized | Unrealized | Unrealized | Fair | |||||||||||||
Cost(1) | Gains | Losses | Value | |||||||||||||
(Dollars in millions) | ||||||||||||||||
Fannie Mae | $ | 171,945 | $ | 4,564 | $ | (265 | ) | $ | 176,244 | |||||||
Freddie Mac | 30,855 | 758 | (43 | ) | 31,570 | |||||||||||
Ginnie Mae | 1,493 | 78 | (1 | ) | 1,570 | |||||||||||
Alt-A | 19,576 | 7 | (4,307 | ) | 15,276 | |||||||||||
Subprime | 18,740 | 11 | (4,433 | ) | 14,318 | |||||||||||
CMBS | 16,036 | — | (4,550 | ) | 11,486 | |||||||||||
Mortgage revenue bonds | 14,636 | 29 | (2,177 | ) | 12,488 | |||||||||||
Other mortgage-related securities | 4,425 | 35 | (924 | ) | 3,536 | |||||||||||
Total | $ | 277,706 | $ | 5,482 | $ | (16,700 | ) | $ | 266,488 | |||||||
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(1) | Amortized cost includes unamortized premiums, discounts and other cost basis adjustments as well as other-than-temporary impairments. As of December 31, 2009, amortized cost includes only the credit component of other-than-temporary impairments recognized in our consolidated statements of operations. | |
(2) | Represents the noncredit component of other-than-temporary impairment losses recorded in other comprehensive loss as well as cumulative changes in fair value for securities for which we previously recognized an other-than-temporary impairment. | |
(3) | Represents the gross unrealized losses on securities for which we have not recognized other-than-temporary impairment. | |
(4) | Certain amounts have been reclassified to conform to the current period presentation. |
As of December 31, 2009 | ||||||||||||||||
Less Than 12 | 12 Consecutive | |||||||||||||||
Consecutive Months | Months or Longer | |||||||||||||||
Gross | Gross | |||||||||||||||
Unrealized | Fair | Unrealized | Fair | |||||||||||||
Losses | Value | Losses | Value | |||||||||||||
(Dollars in millions) | ||||||||||||||||
Fannie Mae | $ | (36 | ) | $ | 1,461 | $ | (32 | ) | $ | 544 | ||||||
Freddie Mac | (2 | ) | 85 | (2 | ) | 164 | ||||||||||
Ginnie Mae | (2 | ) | 139 | — | 26 | |||||||||||
Alt-A | (2,439 | ) | 7,018 | (1,288 | ) | 6,929 | ||||||||||
Subprime | (998 | ) | 4,595 | (1,521 | ) | 5,860 | ||||||||||
CMBS | — | — | (2,604 | ) | 13,193 | |||||||||||
Mortgage revenue bonds | (54 | ) | 2,392 | (850 | ) | 5,664 | ||||||||||
Other mortgage-related securities | (96 | ) | 536 | (606 | ) | 2,739 | ||||||||||
Total | $ | (3,627 | ) | $ | 16,226 | $ | (6,903 | ) | $ | 35,119 | ||||||
As of December 31, 2008(1) | ||||||||||||||||
Less Than 12 | 12 Consecutive | |||||||||||||||
Consecutive Months | Months or Longer | |||||||||||||||
Gross | Gross | |||||||||||||||
Unrealized | Fair | Unrealized | Fair | |||||||||||||
Losses | Value | Losses | Value | |||||||||||||
(Dollars in millions) | ||||||||||||||||
Fannie Mae | $ | (169 | ) | $ | 7,313 | $ | (96 | ) | $ | 2,844 | ||||||
Freddie Mac | (38 | ) | 2,290 | (5 | ) | 693 | ||||||||||
Ginnie Mae | — | 20 | (1 | ) | 42 | |||||||||||
Alt-A | (516 | ) | 1,401 | (3,791 | ) | 7,651 | ||||||||||
Subprime | (422 | ) | 1,827 | (4,011 | ) | 9,666 | ||||||||||
CMBS | (2,533 | ) | 6,821 | (2,017 | ) | 4,666 | ||||||||||
Mortgage revenue bonds | (854 | ) | 6,230 | (1,323 | ) | 4,890 | ||||||||||
Other mortgage-related securities | (694 | ) | 2,117 | (230 | ) | 838 | ||||||||||
Total temporarily-impaired available-for-sale | $ | (5,226 | ) | $ | 28,019 | $ | (11,474 | ) | $ | 31,290 | ||||||
(1) | Certain amounts have been reclassified to conform to the current presentation. |
F-53
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(In conservatorship)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
For the Year Ended December 31, | ||||||||||||
2009 | 2008 | 2007 | ||||||||||
(Dollars in millions) | ||||||||||||
Fannie Mae | $ | (117 | ) | $ | (7 | ) | $ | (203 | ) | |||
Freddie Mac | (1 | ) | — | — | ||||||||
Alt-A | (3,956 | ) | (4,820 | ) | — | |||||||
Subprime | (5,660 | ) | (1,932 | ) | (160 | ) | ||||||
Mortgage revenue bonds | (22 | ) | (21 | ) | (4 | ) | ||||||
Other | (105 | ) | (194 | ) | (447 | ) | ||||||
Net other-than-temporary impairments | $ | (9,861 | ) | $ | (6,974 | ) | $ | (814 | ) | |||
• | model refinements; | |
• | interest rates; and | |
• | net projected home price impact. |
F-54
Table of Contents
(In conservatorship)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
For the Year Ended | ||||
December 31, 2009 | ||||
(Dollars in millions) | ||||
Balance, January 1 | $ | — | ||
Credit component of other-than-temporary impairment not reclassified to AOCI in conjunction with the cumulative effect transition adjustment at April 1, 2009 | 4,265 | |||
Additions for the credit component on debt securities for which OTTI was not previously recognized | 1,090 | |||
Additions for credit losses on debt securities for which OTTI was previously recognized | 3,118 | |||
Reductions for increases in cash flows expected to be collected over the remaining life of the security | (282 | ) | ||
Balance, December 31 | $ | 8,191 | ||
F-55
Table of Contents
(In conservatorship)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Prepayment Rates | Default Rates | Loss Severity | ||||||||||||||||||||||
Weighted | Weighted | Weighted | ||||||||||||||||||||||
Average | Range | Average | Range | Average | Range | |||||||||||||||||||
Alt-A | ||||||||||||||||||||||||
2004 and prior | 7.4 | 4.5 - 10.2 | 55.4 | 34.2 - 72.1 | 41.2 | 29.7 - 55.5 | ||||||||||||||||||
2005 | 5.3 | 2.4 - 8.9 | 59.8 | 15.6 - 86.0 | 57.1 | 40.2 - 69.0 | ||||||||||||||||||
2006 | 4.8 | 2.3 - 8.2 | 68.2 | 18.4 - 87.0 | 59.7 | 42.6 - 74.7 | ||||||||||||||||||
Subprime | ||||||||||||||||||||||||
2005 | 2.0 | 1.9 - 2.2 | 80.3 | 78.4 - 81.9 | 76.7 | 75.5 - 78.2 | ||||||||||||||||||
2006 | 2.0 | 0.5 - 2.6 | 80.2 | 69.3 - 91.6 | 76.9 | 73.7 - 85.1 | ||||||||||||||||||
2007 | 2.8 | 2.3 - 3.0 | 73.7 | 71.5 - 80.4 | 72.3 | 66.5 - 77.2 | ||||||||||||||||||
Manufactured Housing 2004 and prior | 2.7 | 1.7 - 4.0 | 36.1 | 23.7 - 54.1 | 82.0 | 75.6 - 106.9 |
F-56
Table of Contents
(In conservatorship)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
As of December 31, 2009 | ||||||||||||||||||||||||||||||||||||||||
After One Year | After Five Years | |||||||||||||||||||||||||||||||||||||||
Total | Total | One Year or Less | Through Five Years | Through Ten Years | After Ten Years | |||||||||||||||||||||||||||||||||||
Amortized | Fair | Amortized | Fair | Amortized | Fair | Amortized | Fair | Amortized | Fair | |||||||||||||||||||||||||||||||
Cost | Value | Cost | Value | Cost | Value | Cost | Value | Cost | Value | |||||||||||||||||||||||||||||||
(Dollars in millions) | ||||||||||||||||||||||||||||||||||||||||
Fannie Mae | $ | 148,074 | $ | 154,419 | $ | 20 | $ | 21 | $ | 681 | $ | 718 | $ | 21,743 | $ | 22,719 | $ | 125,630 | $ | 130,961 | ||||||||||||||||||||
Freddie Mac | 26,281 | 27,469 | 25 | 25 | 62 | 64 | 1,738 | 1,822 | 24,456 | 25,558 | ||||||||||||||||||||||||||||||
Ginnie Mae | 1,253 | 1,353 | — | — | — | — | 5 | 5 | 1,248 | 1,348 | ||||||||||||||||||||||||||||||
Alt-A | 17,836 | 14,150 | — | — | — | — | 351 | 332 | 17,485 | 13,818 | ||||||||||||||||||||||||||||||
Subprime | 13,232 | 10,746 | — | — | — | — | — | — | 13,232 | 10,746 | ||||||||||||||||||||||||||||||
CMBS | 15,797 | 13,193 | — | — | 375 | 366 | 15,057 | 12,584 | 365 | 243 | ||||||||||||||||||||||||||||||
Mortgage revenue bonds | 13,679 | 12,846 | 29 | 29 | 377 | 388 | 822 | 823 | 12,451 | 11,606 | ||||||||||||||||||||||||||||||
Other mortgage-related securities | 4,225 | 3,552 | — | — | — | — | — | 21 | 4,225 | 3,531 | ||||||||||||||||||||||||||||||
Total | $ | 240,377 | $ | 237,728 | $ | 74 | $ | 75 | $ | 1,495 | $ | 1,536 | $ | 39,716 | $ | 38,306 | $ | 199,092 | $ | 197,811 | ||||||||||||||||||||
As of December 31, | ||||||||||||
2009 | 2008 | 2007 | ||||||||||
(Dollars in millions) | ||||||||||||
Net unrealized gains (losses) on available-for-sale securities for which we have not recorded other-than-temporary impairment | $ | 1,337 | $ | (7,291 | ) | $ | (1,644 | ) | ||||
Net unrealized losses on available-for-sale securities for which we have recorded other-than-temporary impairment | (3,059 | ) | — | — | ||||||||
Other | (10 | ) | (382 | ) | 282 | |||||||
Accumulated other comprehensive loss | $ | (1,732 | ) | $ | (7,673 | ) | $ | (1,362 | ) | |||
6. | Portfolio Securitizations |
F-57
Table of Contents
(In conservatorship)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
As of December 31, | ||||||||
2009 | 2008 | |||||||
(Dollars in millions) | ||||||||
Fannie Mae MBS | $ | 55,679 | $ | 45,705 | ||||
Guaranty asset | 1,412 | 438 | ||||||
MSA | 15 | 10 | ||||||
Guaranty obligation (excluding deferred profit) | (1,222 | ) | (769 | ) | ||||
MSL | (37 | ) | (27 | ) |
F-58
Table of Contents
(In conservatorship)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Fannie Mae | ||||||||
Single-class | ||||||||
MBS & Fannie | REMICS & | |||||||
Mae Megas | SMBS | |||||||
(Dollars in millions) | ||||||||
As of December 31, 2009 | ||||||||
Unpaid principal balance | $ | 34,260 | $ | 19,472 | ||||
Fair value | 35,455 | 20,224 | ||||||
Impact on value from a 10% adverse change | (3,546 | ) | (2,022 | ) | ||||
Impact on value from a 20% adverse change | (7,091 | ) | (4,045 | ) | ||||
Weighted-average coupon | 5.62 | % | 6.82 | % | ||||
Weighted-average loan age | 2.9 years | 4.6 years | ||||||
Weighted-average maturity | 24.2 years | 26.1 years | ||||||
As of December 31, 2008 | ||||||||
Unpaid principal balance | $ | 17,872 | $ | 27,117 | ||||
Fair value | 18,360 | 27,345 | ||||||
Impact on value from a 10% adverse change | (1,836 | ) | (2,735 | ) | ||||
Impact on value from a 20% adverse change | (3,672 | ) | (5,469 | ) | ||||
Weighted-average coupon | 5.92 | % | 7.03 | % | ||||
Weighted-average loan age | 2.9 years | 4.2 years | ||||||
Weighted-average maturity | 24.5 years | 27.0 years |
Guaranty | ||||
Assets(1) | ||||
For the year ended December 31, 2009 | ||||
Weighted-average life(2) | 5.1 years | |||
Average12-month CPR(3) | 27.4 | % | ||
Average discount rate assumption(4) | 4.3 | % | ||
For the year ended December 31, 2008 | ||||
Weighted-average life(2) | 7.5 years | |||
Average12-month CPR(3) | 11.5 | % | ||
Average discount rate assumption(4) | 6.7 | % |
(1) | The weighted-average life and average12-month CPR assumptions for our guaranty assets approximate the assumptions used for our guaranty obligation at time of securitization. | |
(2) | The average number of years for which each dollar of unpaid principal on a loan or mortgage-related security remains outstanding. | |
(3) | Represents the expected12-month average prepayment rate, which is based on the constant annualized prepayment rate for mortgage loans. | |
(4) | The interest rate used in determining the present value of future cash flows, derived from the forward curve based on interest rate swaps, excluding the option adjusted spreads. |
F-59
Table of Contents
(In conservatorship)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
As of December 31, | ||||||||
2009 | 2008 | |||||||
(Dollars in millions) | ||||||||
Guaranty Assets | ||||||||
Valuation at period end: | ||||||||
Fair value | $ | 1,414 | $ | 440 | ||||
Weighted-average life(1) | 5.6 years | 2.2 years | ||||||
Prepayment speed assumptions: | ||||||||
Average12-month CPR prepayment speed assumption(2) | 22.7 | % | 59.3 | % | ||||
Impact on value from a 10% adverse change | $ | (68 | ) | $ | (38 | ) | ||
Impact on value from a 20% adverse change | (128 | ) | (71 | ) | ||||
Discount rate assumptions: | ||||||||
Average discount rate assumption(3) | 3.7 | % | 5.7 | % | ||||
Impact on value from a 10% adverse change | $ | (26 | ) | $ | (10 | ) | ||
Impact on value from a 20% adverse change | (52 | ) | (19 | ) | ||||
Guaranty Obligations | ||||||||
Valuation at period end: | ||||||||
Fair value | $ | 5,202 | $ | 2,703 | ||||
Anticipated credit losses(4) | 3,317 | 2,246 | ||||||
Weighted-average life(1) | 5.6 years | 2.2 years | ||||||
Home price assumptions: | ||||||||
24 month average home price assumption | (1.3 | )% | (5.0 | )% | ||||
Impact on credit losses due to a 2.5% decline in home prices | $ | 273 | $ | 454 | ||||
Impact on credit losses due to a 5% decline in home prices | 668 | 723 | ||||||
Loan-to-value assumptions: | ||||||||
Average estimated current loan-to-value ratio | 71.9 | % | 72.3 | % | ||||
Impact on credit losses due to a 2.5% increase in loan-to-value | $ | 327 | $ | 585 | ||||
Impact on credit losses due to a 5% increase in loan-to-value | 672 | 905 |
(1) | The estimated average number of years for which each dollar of unpaid principal on a loan or mortgage-related security will remain outstanding. | |
(2) | Represents the12-month average prepayment rate, which is based on the constant annualized prepayment rate for mortgage loans. | |
(3) | The interest rate used in determining the present value of future cash flows, derived from the forward curve based on interest rate swaps, excluding the option adjusted spreads. | |
(4) | The present value of anticipated credit losses is calculated as the average across a distribution of possible outcomes and may not be indicative of actual future losses. Actual results may vary materially from these amounts. |
F-60
Table of Contents
(In conservatorship)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
For the Year Ended December 31, | ||||||||||||
2009 | 2008 | 2007 | ||||||||||
(Dollars in millions) | ||||||||||||
Proceeds from the initial sale of securities (new securitizations) | $ | 85,719 | $ | 30,084 | $ | 31,271 | ||||||
Guaranty and other income | 269 | 176 | 143 | |||||||||
Principal and interest received on retained interests | 9,714 | 7,898 | 6,859 | |||||||||
Purchases of previously transferred financial assets | (1,501 | ) | (152 | ) | (292 | ) |
Unpaid Principal | Principal Amount of | |||||||
Balance | Delinquent Loans(1) | |||||||
(Dollars in millions) | ||||||||
As of December 31, 2009 | ||||||||
Loans held for investment | $ | 395,551 | $ | 51,051 | ||||
Loans held for sale | 20,992 | 140 | ||||||
Securitized loans | 187,922 | 5,161 | ||||||
Total loans managed | $ | 604,465 | $ | 56,352 | ||||
As of December 31, 2008 | ||||||||
Loans held for investment | $ | 415,485 | $ | 19,363 | ||||
Loans held for sale | 14,008 | 79 | ||||||
Securitized loans | 114,163 | 2,560 | ||||||
Total loans managed | $ | 543,656 | $ | 22,002 | ||||
(1) | Represents the unpaid principal balance of loans held for investment and loans held for sale for which we are no longer accruing interest. We discontinue accruing interest when payment of principal and interest in full is not reasonably assured. |
F-61
Table of Contents
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
As of December 31, | ||||||||
2009 | 2008 | |||||||
(Dollars in millions) | ||||||||
Assets: | ||||||||
Loans held for investment | $ | 79,651 | $ | 83 | ||||
Available-for-sale securities | 8,176 | 9,660 | ||||||
Loans held for sale | 8,473 | 2,383 | ||||||
Trading securities | 499 | 593 | ||||||
Total | $ | 96,799 | $ | 12,719 | ||||
Liabilities—Long-term debt | $ | 949 | $ | 1,168 | ||||
7. | Financial Guarantees and Master Servicing |
F-62
Table of Contents
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
As of December 31, 2009(1) | As of December 31, 2008(1) | |||||||||||||||||||||||
30 days | 60 days | Seriously | 30 days | 60 days | Seriously | |||||||||||||||||||
Delinquent | Delinquent | Delinquent(2) | Delinquent | Delinquent | Delinquent(2) | |||||||||||||||||||
Percentage of conventional single-family guaranty book of business(3) | 2.38 | % | 1.15 | % | 6.68 | % | 2.53 | % | 1.10 | % | 2.96 | % | ||||||||||||
Percentage of conventional single-family loans(4) | 2.46 | 1.07 | 5.38 | 2.52 | 1.00 | 2.42 |
F-63
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
As of December 31, 2009(1) | As of December 31, 2008(1) | |||||||||||||||
Percentage of | Percentage of | |||||||||||||||
Single-family | Percentage | Single-family | Percentage | |||||||||||||
Guaranty Book | Seriously | Guaranty Book | Seriously | |||||||||||||
of Business(3) | Delinquent(2)(4) | of Business(3) | Delinquent(2)(4) | |||||||||||||
Estimated mark-to-market loan-to-value ratio: | ||||||||||||||||
100.01% to 110% | 5 | % | 14.79 | % | 5 | % | 7.12 | % | ||||||||
110.01% to 120% | 3 | 18.55 | 3 | 9.91 | ||||||||||||
120.01% to 125% | 1 | 21.39 | 1 | 11.79 | ||||||||||||
Greater than 125% | 5 | 31.05 | 3 | 18.43 | ||||||||||||
Geographical Distribution: | ||||||||||||||||
Arizona | 3 | 8.80 | 3 | 3.41 | ||||||||||||
California | 17 | 5.73 | 16 | 2.30 | ||||||||||||
Florida | 7 | 12.82 | 7 | 6.14 | ||||||||||||
Nevada | 1 | 13.00 | 1 | 4.74 | ||||||||||||
Select Midwest states(5) | 11 | 5.62 | 11 | 2.70 | ||||||||||||
All other states | 61 | 4.11 | 62 | 1.86 | ||||||||||||
Product Distribution (not mutually exclusive):(6) | ||||||||||||||||
Alt-A | 9 | 15.63 | 11 | 7.03 | ||||||||||||
Subprime | * | 30.68 | * | 14.29 | ||||||||||||
Negatively amortizing adjustable rate | 1 | 10.29 | 1 | 5.61 | ||||||||||||
Interest only | 7 | 20.17 | 8 | 8.42 | ||||||||||||
Investor property | 6 | 5.54 | 6 | 2.95 | ||||||||||||
Condo/Coop | 9 | 5.99 | 9 | 2.73 | ||||||||||||
Original loan-to-value ratio >90%(7) | 9 | 13.05 | 10 | 6.33 | ||||||||||||
FICO score <620(7) | 4 | 18.20 | 5 | 9.03 | ||||||||||||
Original loan-to-value ratio >90% and FICO score <620(7) | 1 | 27.96 | 1 | 15.97 | ||||||||||||
Vintages: | ||||||||||||||||
2005 | 10 | 7.27 | 13 | 2.99 | ||||||||||||
2006 | 11 | 12.87 | 14 | 5.11 | ||||||||||||
2007 | 15 | 14.06 | 20 | 4.70 | ||||||||||||
2008 | 13 | 3.98 | 16 | 0.67 | ||||||||||||
All other vintages | 51 | 2.19 | 37 | 1.35 |
* | Represents less than 0.5% of the single-family conventional guaranty book of business. | |
(1) | Consists of the portion of our conventional single-family guaranty book of business for which we have detailed loan level information, which constituted over 98% and 99% of our total conventional single-family guaranty book of business as of December 31, 2009 and 2008, respectively. | |
(2) | Includes conventional single-family loans that were three months or more past due or in foreclosure as December 31, 2009 and 2008. | |
(3) | Calculated based on the aggregate unpaid principal balance of delinquent conventional single-family loans divided by the aggregate unpaid principal balance of loans in our conventional single-family guaranty book of business. | |
(4) | Calculated based on the number of conventional single-family loans that were delinquent divided by the total number of loans in our conventional single-family guaranty book of business. | |
(5) | Consists of Illinois, Indiana, Michigan, and Ohio. | |
(6) | Categories are not mutually exclusive. Loans with multiple product features are included in all applicable categories. | |
(7) | Includes housing goals-oriented products such as MyCommunityMortgage® and Expanded Approval®. |
2009(1)(2) | 2008(1)(2) | |||||||||||||||
30 days | Seriously | 30 days | Seriously | |||||||||||||
Delinquent | Delinquent(3) | Delinquent | Delinquent(3) | |||||||||||||
Percentage of multifamily guaranty book of business | 0.28 | % | 0.63 | % | 0.12 | % | 0.30 | % |
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
As of December 31, 2009(1)(2) | As of December 31, 2008(1)(2) | |||||||||||||||
Percentage of | Percentage of | |||||||||||||||
Multifamily | Percentage | Multifamily | Percentage | |||||||||||||
Guaranty | Seriously | Guaranty | Seriously | |||||||||||||
Book of Business | Delinquent | Book of Business | Delinquent | |||||||||||||
Originatingloan-to-value ratio: | ||||||||||||||||
Greater than 80% | 5 | % | 0.50 | % | 5 | % | 0.92 | % | ||||||||
Less than or equal to 80% | 95 | 0.63 | 95 | 0.27 | ||||||||||||
Originating debt service coverage ratio: | ||||||||||||||||
Less than or equal to 1.10 | 10 | 0.17 | 11 | — | ||||||||||||
Greater than 1.10 | 90 | 0.68 | 89 | 0.33 | ||||||||||||
Acquisition loan size distribution: | ||||||||||||||||
Less than or equal to $750,000 | 3 | 1.27 | 3 | 0.55 | ||||||||||||
Greater than $750,000 and less than or equal to $3 million | 13 | 1.01 | 13 | 0.52 | ||||||||||||
Greater than $3 million and less than or equal to $5 million | 9 | 1.08 | 10 | 0.39 | ||||||||||||
Greater than $5 million and less than or equal to $25 million | 41 | 0.60 | 41 | 0.43 | ||||||||||||
Greater than $25 million | 34 | 0.34 | 33 | — | ||||||||||||
Maturing dates: | �� | |||||||||||||||
Maturing in 2010 | 2 | 1.55 | 3 | 0.32 | ||||||||||||
Maturing in 2011 | 5 | 0.64 | 5 | 0.37 | ||||||||||||
Maturing in 2012 | 10 | 1.13 | 10 | 0.16 | ||||||||||||
Maturing in 2013 | 12 | 0.22 | ||||||||||||||
Maturing in 2014 | 9 | 0.62 |
(1) | Consists of the portion of our multifamily guaranty book of business for which we have detailed loan level information, which constituted over 98% and 99% of our total multifamily guaranty book of business as of December 31, 2009 and 2008, respectively. | |
(2) | Calculated based on the aggregate unpaid principal balance of delinquent multifamily loans divided by the aggregate unpaid principal balance of loans in our multifamily guaranty book of business. | |
(3) | Includes multifamily loans that were two months or more past due as of December 31, 2009 and 2008. |
For the Year Ended December 31, | ||||||||||||
2009 | 2008 | 2007 | ||||||||||
(Dollars in millions) | ||||||||||||
Balance as of beginning, January 1 | $ | 12,147 | $ | 15,393 | $ | 11,145 | ||||||
Additions to guaranty obligations(1) | 7,577 | 7,279 | 8,460 | |||||||||
Amortization of guaranty obligation into guaranty fee income | (5,260 | ) | (9,585 | ) | (3,560 | ) | ||||||
Impact of consolidation activity(2) | (468 | ) | (940 | ) | (652 | ) | ||||||
Ending balance, December 31 | $ | 13,996 | $ | 12,147 | $ | 15,393 | ||||||
(1) | Represents the fair value of the contractual obligation and deferred profit at issuance of new guarantees. | |
(2) | Upon consolidation of MBS trusts, we derecognize our guaranty obligation to the respective trusts. |
F-65
Table of Contents
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
For the Year Ended December 31, | ||||||||||||
2009 | 2008 | 2007 | ||||||||||
(Dollars in millions) | ||||||||||||
Beginning balance, January 1 | $ | 7,043 | $ | 9,666 | $ | 7,692 | ||||||
Fair Value of expected cash flows at issuance for new guaranteed Fannie Mae MBS issuance | 4,135 | 3,938 | 4,658 | |||||||||
Net change in fair value of guaranty assets from portfolio securitizations | 511 | (136 | ) | 29 | ||||||||
Impact of amortization on guaranty contracts | (2,719 | ) | (2,767 | ) | (1,898 | ) | ||||||
Other-than-temporary impairments | (347 | ) | (3,270 | ) | (425 | ) | ||||||
Impact of consolidation of MBS trusts(1) | (267 | ) | (388 | ) | (390 | ) | ||||||
Ending balance, December 31 | $ | 8,356 | $ | 7,043 | $ | 9,666 | ||||||
(1) | When we consolidate Fannie Mae MBS trusts, we derecognize the guaranty assets and guaranty obligation associated with the respective trust. |
F-66
Table of Contents
(In conservatorship)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
For the Year Ended December 31, | ||||||||||||
2009 | 2008 | 2007 | ||||||||||
(Dollars in millions) | ||||||||||||
Cost basis: | ||||||||||||
Beginning balance | $ | 764 | $ | 1,171 | $ | 1,017 | ||||||
Additions | 56 | 302 | 459 | |||||||||
Amortization | (44 | ) | (190 | ) | (267 | ) | ||||||
Other-than-temporary impairments | (579 | ) | (491 | ) | (4 | ) | ||||||
Reductions for MBS trusts paid-off and impact of consolidation activity | (1 | ) | (28 | ) | (34 | ) | ||||||
Ending balance | 196 | 764 | 1,171 | |||||||||
Valuation allowance | 40 | 73 | 10 | |||||||||
Carrying value | $ | 156 | $ | 691 | $ | 1,161 | ||||||
Fair value, beginning of period | $ | 855 | $ | 1,808 | $ | 1,690 | ||||||
Fair value, end of period | $ | 179 | $ | 855 | $ | 1,808 | ||||||
8. | Acquired Property, Net |
F-67
Table of Contents
(In conservatorship)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Acquired | Valuation | Acquired | ||||||||||
Property | Allowance(1) | Property, Net | ||||||||||
(Dollars in millions) | ||||||||||||
Balance, January 1, 2007 | $ | 2,257 | $ | (116 | ) | $ | 2,141 | |||||
Additions | 5,131 | (18 | ) | 5,113 | ||||||||
Disposals | (3,535 | ) | 291 | (3,244 | ) | |||||||
Write-downs, net of recoveries | — | (408 | ) | (408 | ) | |||||||
Balance, December 31, 2007 | 3,853 | (251 | ) | 3,602 | ||||||||
Additions | 10,853 | (75 | ) | 10,778 | ||||||||
Disposals | (6,666 | ) | 664 | (6,002 | ) | |||||||
Write-downs, net of recoveries | — | (1,460 | ) | (1,460 | ) | |||||||
Balance, December 31, 2008 | 8,040 | (1,122 | ) | 6,918 | ||||||||
Additions | 14,165 | (79 | ) | 14,086 | ||||||||
Disposals | (12,489 | ) | 1,379 | (11,110 | ) | |||||||
Write-downs, net of recoveries | — | (752 | ) | (752 | ) | |||||||
Balance, December 31, 2009 | $ | 9,716 | $ | (574 | ) | $ | 9,142 | |||||
(1) | Reflects activities in the valuation allowance for acquired properties held primarily by our single-family segment. |
For the Year Ended December 31, | ||||||||||||
2009 | 2008 | 2007 | ||||||||||
(Dollars in millions) | ||||||||||||
Beginning balance, January 1 | $ | 11 | $ | 107 | $ | 224 | ||||||
Transfers in from held for sale, net | 45 | 1 | 4 | |||||||||
Transfers to held for sale, net | (11 | ) | (93 | ) | (113 | ) | ||||||
Depreciation and asset write-downs | (1 | ) | (4 | ) | (8 | ) | ||||||
Ending balance, December 31 | $ | 44 | $ | 11 | $ | 107 | ||||||
9. | Short-term Borrowings and Long-term Debt |
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As of December 31, | ||||||||||||||||
2009 | 2008 | |||||||||||||||
Weighted- | Weighted- | |||||||||||||||
Average | Average | |||||||||||||||
Interest | Interest | |||||||||||||||
Outstanding | Rate(1) | Outstanding | Rate(1) | |||||||||||||
(Dollars in millions) | ||||||||||||||||
Federal funds purchased and securities sold under agreements to repurchase | $ | — | — | % | $ | 77 | 0.01 | % | ||||||||
Fixed-rate short-term debt: | ||||||||||||||||
Discount notes | $ | 199,987 | 0.27 | % | $ | 322,932 | 1.75 | % | ||||||||
Foreign exchange discount notes | 300 | 1.50 | 141 | 2.50 | ||||||||||||
Other short-term debt | 100 | 0.53 | 333 | 2.80 | ||||||||||||
Total fixed-rate short-term debt | 200,387 | 0.27 | 323,406 | 1.75 | ||||||||||||
Floating-rate short-term debt(2) | 50 | 0.02 | 7,585 | 1.66 | ||||||||||||
Total short-term debt | $ | 200,437 | 0.27 | % | $ | 330,991 | 1.75 | % | ||||||||
(1) | Includes the effects of 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. |
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As of December 31, | ||||||||||||||||||||||||
2009 | 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 | 2010 - 2030 | $ | 279,945 | 4.10 | % | 2009-2030 | $ | 251,063 | 4.92 | % | ||||||||||||||
Medium-term notes | 2010 - 2019 | 171,207 | 2.97 | 2009-2018 | 151,277 | 4.20 | ||||||||||||||||||
Foreign exchange notes and bonds | 2010 - 2028 | 1,239 | 5.64 | 2009-2028 | 1,513 | 4.70 | ||||||||||||||||||
Other long-term debt(3) | 2010 - 2039 | 62,783 | 5.80 | 2009-2038 | 73,061 | 5.95 | ||||||||||||||||||
Total senior fixed | 515,174 | 3.94 | 476,914 | 4.85 | ||||||||||||||||||||
Senior floating: | ||||||||||||||||||||||||
Medium-term notes | 2010 - 2014 | 41,911 | 0.26 | 2009-2017 | 45,737 | 2.21 | ||||||||||||||||||
Other long-term debt(3) | 2020 - 2037 | 1,041 | 4.12 | 2020-2037 | 874 | 7.22 | ||||||||||||||||||
Total senior floating | 42,952 | 0.34 | 46,611 | 2.30 | ||||||||||||||||||||
Subordinated fixed: | ||||||||||||||||||||||||
Qualifying subordinated(4) | 2011 - 2014 | 7,391 | 5.47 | 2011-2014 | 7,391 | 5.47 | ||||||||||||||||||
Subordinated debentures | 2019 | 2,433 | 9.89 | 2019 | 2,225 | 9.90 | ||||||||||||||||||
Total subordinated fixed | 9,824 | 6.57 | 9,616 | 6.50 | ||||||||||||||||||||
Debt from consolidations | 2010 - 2039 | 6,167 | 5.63 | 2009-2039 | 6,261 | 5.87 | ||||||||||||||||||
Total long-term debt(5) | $ | 574,117 | 3.73 | % | $ | 539,402 | 4.67 | % | ||||||||||||||||
(1) | We have reclassified certain prior year amounts to conform to the current period presentation. | |
(2) | Includes the effects of discounts, premiums and other cost basis adjustments. | |
(3) | Includes a portion of structured debt instruments that is reported at fair value. | |
(4) | Consists of subordinated debt issued with an interest deferral feature. | |
(5) | Reported amounts include a net discount and other cost basis adjustments of $15.6 billion and $15.5 billion as of December 31, 2009 and 2008, respectively. |
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Assuming Callable Debt | ||||||||
Long-Term Debt by | Redeemed at Next | |||||||
Year of Maturity | Available Call Date | |||||||
(Dollars in millions) | ||||||||
2010 | $ | 115,095 | $ | 296,629 | ||||
2011 | 116,642 | 89,486 | ||||||
2012 | 79,532 | 46,906 | ||||||
2013 | 40,708 | 28,426 | ||||||
2014 | 75,564 | 44,345 | ||||||
Thereafter | 140,409 | 62,158 | ||||||
Debt from consolidations(1) | 6,167 | 6,167 | ||||||
Total(2)(3) | $ | 574,117 | $ | 574,117 | ||||
(1) | Contractual maturity of debt from consolidations is not a reliable indicator of expected maturity because borrowers of the underlying mortgage loans generally have the right to prepay their obligations at any time. | |
(2) | Reported amount includes a net discount and other cost basis adjustments of $15.6 billion. | |
(3) | Includes a portion of structured debt instruments that is reported at fair value. |
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For the Year Ended December 31, | ||||||||||||
2009 | 2008 | 2007 | ||||||||||
(Dollars in millions) | ||||||||||||
Debt called | $ | 166,777 | $ | 158,988 | $ | 86,321 | ||||||
Weighted-average interest rate of debt called | 4.2 | % | 5.3 | % | 5.6 | % | ||||||
Debt repurchased | $ | 6,919 | $ | 13,214 | $ | 15,217 | ||||||
Weighted-average interest rate of debt repurchased | 4.3 | % | 4.8 | % | 5.6 | % |
10. | Derivative Instruments and Hedging Activities |
• | Interest rate swap contracts. An interest rate swap is a transaction between two parties in which each party agrees to exchange payments tied to different interest rates or indices for a specified period of time, generally based on a notional amount of principal. The types of interest rate swaps we use include pay-fixed swaps, receive-fixed swaps and basis swaps. |
• | Interest rate option contracts. These contracts primarily include pay-fixed swaptions, receive-fixed swaptions, cancelable swaps and interest rate caps. A swaption is an option contract that allows us to enter into a pay-fixed or receive-fixed swap at some point in the future. |
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• | 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. |
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As of December 31, 2009 | ||||||||||||||||
Asset Derivatives | Liability Derivatives | |||||||||||||||
Notional | Estimated | Notional | Estimated | |||||||||||||
Amount | Fair Value | Amount | Fair Value | |||||||||||||
(Dollars in millions) | ||||||||||||||||
Risk management derivatives: | ||||||||||||||||
Swaps: | ||||||||||||||||
Pay-fixed | $ | 68,099 | $ | 1,422 | $ | 314,501 | $ | (17,758 | ) | |||||||
Receive-fixed | 160,384 | 8,250 | 115,033 | (2,832 | ) | |||||||||||
Basis | 2,715 | 61 | 510 | (4 | ) | |||||||||||
Foreign currency | 727 | 107 | 810 | (49 | ) | |||||||||||
Swaptions: | ||||||||||||||||
Pay-fixed | 97,100 | 2,012 | 2,200 | (1 | ) | |||||||||||
Receive-fixed | 75,380 | 4,043 | — | — | ||||||||||||
Interest rate caps | 7,000 | 128 | — | — | ||||||||||||
Other(1) | 740 | 84 | 8 | — | ||||||||||||
Total gross risk management derivatives | 412,145 | 16,107 | 433,062 | (20,644 | ) | |||||||||||
Collateral receivable (payable)(2) | — | 5,437 | — | (1,023 | ) | |||||||||||
Accrued interest receivable (payable) | — | 2,596 | — | (2,813 | ) | |||||||||||
Total net risk management derivatives | $ | 412,145 | $ | 24,140 | $ | 433,062 | $ | (24,480 | ) | |||||||
Mortgage commitment derivatives: | ||||||||||||||||
Mortgage commitments to purchase whole loans | $ | 273 | $ | — | $ | 4,453 | $ | (66 | ) | |||||||
Forward contracts to purchase mortgage-related securities | 3,403 | 7 | 23,287 | (283 | ) | |||||||||||
Forward contracts to sell mortgage-related securities | 83,299 | 1,141 | 7,232 | (14 | ) | |||||||||||
Total mortgage commitment derivatives | $ | 86,975 | $ | 1,148 | $ | 34,972 | $ | (363 | ) | |||||||
Derivatives at fair value | $ | 499,120 | $ | 25,288 | $ | 468,034 | $ | (24,843 | ) | |||||||
(1) | Includes swap credit enhancements and mortgage insurance contracts that we account for as derivatives. The mortgage insurance contracts have payment provisions that are not based on a notional amount. | |
(2) | Collateral receivable represents cash collateral posted by us for derivatives in a loss position. Collateral payable represents cash collateral posted by counterparties to reduce our exposure for derivatives in a gain position. |
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As of December 31, 2008 | ||||||||
Notional | Estimated | |||||||
Amount | Fair Value | |||||||
(Dollars in millions) | ||||||||
Risk management derivatives: | ||||||||
Swaps: | ||||||||
Pay-fixed | $ | 546,916 | $ | (68,379 | ) | |||
Receive-fixed | 451,081 | 42,246 | ||||||
Basis | 24,560 | (57 | ) | |||||
Foreign currency | 1,652 | (12 | ) | |||||
Swaptions: | ||||||||
Pay-fixed | 79,500 | 506 | ||||||
Receive-fixed | 93,560 | 13,039 | ||||||
Interest rate caps | 500 | 1 | ||||||
Other(1) | 827 | 100 | ||||||
Net collateral receivable | — | 11,286 | ||||||
Accrued interest payable, net | — | (491 | ) | |||||
Total risk management derivatives | $ | 1,198,596 | $ | (1,761 | ) | |||
Mortgage commitment derivatives: | ||||||||
Mortgage commitments to purchase whole loans | $ | 9,256 | $ | 27 | ||||
Forward contracts to purchase mortgage-related securities | 25,748 | 239 | ||||||
Forward contracts to sell mortgage-related securities | 36,232 | (351 | ) | |||||
Total mortgage commitment derivatives | $ | 71,236 | $ | (85 | ) | |||
(1) | Includes swap credit enhancements and mortgage insurance contracts that we account for as derivatives. The mortgage insurance contracts have payment provisions that are not based on a notional amount. |
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For the Year Ended December 31, | ||||||||||||
2009 | 2008 | 2007 | ||||||||||
(Dollars in millions) | ||||||||||||
Risk management derivatives: | ||||||||||||
Swaps: | ||||||||||||
Pay-fixed | $ | 15,012 | $ | (64,764 | ) | $ | (12,065 | ) | ||||
Receive-fixed | (11,737 | ) | 44,553 | 5,928 | ||||||||
Basis | 96 | (102 | ) | 91 | ||||||||
Foreign currency(1) | 166 | (130 | ) | 111 | ||||||||
Swaptions: | ||||||||||||
Pay-fixed | 453 | (666 | ) | (196 | ) | |||||||
Receive-fixed | (8,706 | ) | 6,153 | 1,956 | ||||||||
Interest rate caps | 11 | (1 | ) | 5 | ||||||||
Other(2)(3) | 9 | (6 | ) | 12 | ||||||||
Total risk management derivatives fair value losses, net | (4,696 | ) | (14,963 | ) | (4,158 | ) | ||||||
Mortgage commitment derivatives fair value gains (losses), net | (1,654 | ) | (453 | ) | 45 | |||||||
Total derivatives fair value losses, net | $ | (6,350 | ) | $ | (15,416 | ) | $ | (4,113 | ) | |||
(1) | Includes the effect of net contractual interest income of approximately $38 million and $9 million for 2009 and 2008, respectively, and net contractual interest expense of approximately $59 million for 2007. | |
(2) | Includes MBS options, swap credit enhancements and mortgage insurance contracts. | |
(3) | Includes losses of approximately $104 million for 2008, which resulted from the termination of our derivative contracts with a subsidiary of Lehman Brothers. |
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For the Year Ended December 31, 2009 | ||||||||||||||||||||||||||||||||||||
Interest Rate Swaps | Interest Rate Swaptions | |||||||||||||||||||||||||||||||||||
Pay- | Receive- | Foreign | Pay- | Receive- | Interest | |||||||||||||||||||||||||||||||
Fixed | Fixed | Basis | Currency(1) | Fixed | Fixed | Rate Caps | Other(2) | Total | ||||||||||||||||||||||||||||
(Dollars in millions) | ||||||||||||||||||||||||||||||||||||
Notional balance as of January 1, 2009 | $ | 546,916 | $ | 451,081 | $ | 24,560 | $ | 1,652 | $ | 79,500 | $ | 93,560 | $ | 500 | $ | 827 | $ | 1,198,596 | ||||||||||||||||||
Additions | 297,379 | 279,854 | 2,765 | 577 | 32,825 | 19,175 | 6,500 | 13 | 639,088 | |||||||||||||||||||||||||||
Terminations(3) | (461,695 | ) | (455,518 | ) | (24,100 | ) | (692 | ) | (13,025 | ) | (37,355 | ) | — | (92 | ) | (992,477 | ) | |||||||||||||||||||
Notional balance as of December 31, 2009 | $ | 382,600 | $ | 275,417 | $ | 3,225 | $ | 1,537 | $ | 99,300 | $ | 75,380 | $ | 7,000 | $ | 748 | $ | 845,207 | ||||||||||||||||||
(1) | Terminations include exchange rate adjustments to foreign currency swaps existing at both the beginning and the end of the period. | |
(2) | Includes swap credit enhancements and mortgage insurance contracts. | |
(3) | Includes matured, called, exercised, assigned and terminated amounts. |
For the Year Ended | ||||||||
December 31, 2009 | ||||||||
Purchase | Sale | |||||||
Commitments | Commitments | |||||||
(Dollars in millions) | ||||||||
Notional balance as of the beginning of the period(1) | $ | 35,004 | $ | 36,232 | ||||
Mortgage related securities: | ||||||||
Open commitments(2) | 833,221 | 1,089,500 | ||||||
Settled commitments(3) | (832,279 | ) | (1,035,201 | ) | ||||
Loans: | ||||||||
Open commitments(2) | 114,054 | — | ||||||
Settled commitments(3) | (118,584 | ) | — | |||||
Notional balance as of the end of the period(1) | $ | 31,416 | $ | 90,531 | ||||
(1) | Represents the balance of open mortgage commitment derivatives. | |
(2) | Represents open mortgage commitment derivatives traded in 2009. | |
(3) | Represents mortgage commitment derivatives settled in 2009. |
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As of December 31, 2009 | ||||||||||||||||||||||||
Credit Rating(1) | ||||||||||||||||||||||||
AAA | AA+/AA/AA- | A+/A/A- | Subtotal | Other(2) | Total | |||||||||||||||||||
(Dollars in millions) | ||||||||||||||||||||||||
Credit loss exposure(3) | $ | — | $ | 658 | $ | 583 | $ | 1,241 | $ | 84 | $ | 1,325 | ||||||||||||
Less: Collateral held(4) | — | 580 | 507 | 1,087 | — | 1,087 | ||||||||||||||||||
Exposure net of collateral | $ | — | $ | 78 | $ | 76 | $ | 154 | $ | 84 | $ | 238 | ||||||||||||
Additional information: | ||||||||||||||||||||||||
Notional amount(5) | $ | — | $ | 220,791 | $ | 623,668 | $ | 844,459 | $ | 748 | $ | 845,207 | ||||||||||||
Number of counterparties(5) | — | 7 | 9 | 16 |
As of December 31, 2008 | ||||||||||||||||||||||||
Credit Rating(1) | ||||||||||||||||||||||||
AAA | AA+/AA/AA- | A+/A/A- | Subtotal | Other(2) | Total | |||||||||||||||||||
(Dollars in millions) | ||||||||||||||||||||||||
Credit loss exposure(3) | $ | — | $ | 3,044 | $ | 686 | $ | 3,730 | $ | 101 | $ | 3,831 | ||||||||||||
Less: Collateral held(4) | — | 2,951 | 673 | 3,624 | — | 3,624 | ||||||||||||||||||
Exposure net of collateral | $ | — | $ | 93 | $ | 13 | $ | 106 | $ | 101 | $ | 207 | ||||||||||||
Additional information: | ||||||||||||||||||||||||
Notional amount(5) | $ | 250 | $ | 533,317 | $ | 664,155 | $ | 1,197,722 | $ | 874 | $ | 1,198,596 | ||||||||||||
Number of counterparties(5) | 1 | 8 | 10 | 19 |
(1) | We manage collateral requirements based on the lower credit rating of the legal entity, as issued by Standard & Poor’s and Moody’s. The credit rating reflects the equivalent Standard & Poor’s rating for any ratings based on Moody’s scale. | |
(2) | Includes defined benefit mortgage insurance contracts and swap credit enhancements as of December 31, 2009 and 2008, and guaranteed grantor trust swaps as of December 31, 2008, accounted for as derivatives where the right of legal offset does not exist. |
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(3) | Represents the exposure to credit loss on derivative instruments, which we estimate using the fair value of all outstanding derivative contracts in a gain position. We net derivative gains and losses with the same counterparty where a legal right of offset exists under an enforceable master netting agreement. This table excludes mortgage commitments accounted for as derivatives. | |
(4) | Represents both cash and non-cash collateral posted by our counterparties to us. We reduce the value of non-cash collateral in accordance with the counterparty agreements to help ensure recovery of any loss through the disposition of the collateral. We posted cash collateral of $5.4 billion and $15.0 billion related to our counterparties’ credit exposure to us as of December 31, 2009 and 2008, respectively. | |
(5) | Interest rate and foreign currency derivatives in a net gain position had a total notional amount of $310 billion and $103.1 billion as of December 31, 2009 and 2008, respectively. The total number of interest rate and foreign currency counterparties in a net gain position was 6 and 2 as of December 31, 2009 and 2008, respectively. |
11. | Income Taxes |
For the Year Ended December 31, | ||||||||||||
2009 | 2008 | 2007 | ||||||||||
(Dollars in millions) | ||||||||||||
Current income tax expense (benefit)(1) | $ | (999 | ) | $ | 403 | $ | 757 | |||||
Deferred income tax expense (benefit)(2) | 14 | 13,346 | (3,809 | ) | ||||||||
Other, non-current tax benefit | — | — | (39 | ) | ||||||||
Provision (benefit) for federal income taxes | $ | (985 | ) | $ | 13,749 | $ | (3,091 | ) | ||||
(1) | Does not reflect the tax impact of extraordinary losses as this amount is recorded in our consolidated statements of operations, net of tax effect. We recorded a tax benefit of $8 million related to extraordinary losses recognized in 2007. We recorded no tax benefit for extraordinary losses recognized in 2008. | |
(2) | Amount excludes the income tax effect of items recognized directly in “Fannie Mae stockholders’ equity (deficit)” where we did not establish a valuation allowance. |
For the Year Ended December 31, | ||||||||||||
2009 | 2008 | 2007 | ||||||||||
Statutory corporate tax rate | 35.0 | % | 35.0 | % | 35.0 | % | ||||||
Tax-exempt interest and dividends-received deductions | 0.3 | 0.5 | 4.6 | |||||||||
Equity investments in affordable housing projects | 1.3 | 2.1 | 20.1 | |||||||||
Other | — | — | 0.6 | |||||||||
Valuation allowance | (35.2 | ) | (68.2 | ) | — | |||||||
Effective tax rate | 1.4 | % | (30.6 | )% | 60.3 | % | ||||||
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As of December 31, | ||||||||
2009 | 2008 | |||||||
(Dollars in millions) | ||||||||
Deferred tax assets:(1) | ||||||||
Allowance for loan losses and basis in acquired property, net | $ | 23,615 | $ | 10,762 | ||||
Mortgage and mortgage-related assets, including acquired credit-impaired loans | 10,547 | 6,365 | ||||||
Debt and derivative instruments | 8,255 | 8,604 | ||||||
Partnership credits | 3,587 | 2,157 | ||||||
Partnership and other equity investments | 2,411 | 257 | ||||||
Cash fees and other upfront payments | 1,532 | 1,540 | ||||||
Unrealized losses on AFS securities | 927 | 3,926 | ||||||
Net guaranty assets and obligations and related credits | 1,113 | 858 | ||||||
Net operating loss and alternative minimum tax credit carryforwards | 688 | — | ||||||
Employee compensation and benefits | 206 | 289 | ||||||
Other, net | 810 | — | ||||||
Total deferred tax assets | 53,691 | 34,758 | ||||||
Deferred tax liabilities: | ||||||||
Other, net | 45 | 7 | ||||||
Total deferred tax liabilities | 45 | 7 | ||||||
Valuation allowance | (52,737 | ) | (30,825 | ) | ||||
Net deferred tax assets | $ | 909 | $ | 3,926 | ||||
(1) | Certain prior year amounts have been reclassified to conform to the current period presentation. |
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For the Year Ended | ||||||||||||
December 31, | ||||||||||||
2009 | 2008 | 2007 | ||||||||||
(Dollars in millions) | ||||||||||||
Unrecognized tax benefits as of January 1 | $ | 1,745 | $ | 124 | $ | 163 | ||||||
Gross increases—tax positions in prior years | 38 | 49 | — | |||||||||
Gross decreases—tax positions in prior years | (1 | ) | (6 | ) | (48 | ) | ||||||
Gross increases—tax positions in current year | 761 | — | 9 | |||||||||
Settlements | (1,632 | ) | 1,578 | — | ||||||||
Unrecognized tax benefits as of December 31(1) | $ | 911 | $ | 1,745 | $ | 124 | ||||||
(1) | Amounts exclude tax credits of $716 million, $456 million and $50 million as of December 31, 2009, 2008 and 2007, respectively. |
12. | Loss Per Share |
For the Year Ended | ||||||||||||
December 31, | ||||||||||||
2009 | 2008 | 2007 | ||||||||||
(Dollars and shares in millions, except per share amounts) | ||||||||||||
Loss before extraordinary losses | $ | (72,022 | ) | $ | (58,319 | ) | $ | (2,056 | ) | |||
Extraordinary losses, net of tax effect | — | (409 | ) | (15 | ) | |||||||
Net loss | (72,022 | ) | (58,728 | ) | (2,071 | ) | ||||||
Less: Net loss attributable to the noncontrolling interest | 53 | 21 | 21 | |||||||||
Net loss attributable to Fannie Mae | (71,969 | ) | (58,707 | ) | (2,050 | ) | ||||||
Preferred stock dividends and issuance costs at redemption(1) | (2,474 | ) | (1,069 | ) | (513 | ) | ||||||
Net loss attributable to common stockholders-basic and diluted | $ | (74,443 | ) | $ | (59,776 | ) | $ | (2,563 | ) | |||
Weighted-average common shares outstanding-basic and diluted(2) | 5,680 | 2,487 | 973 | |||||||||
Basic and diluted loss per share: | ||||||||||||
Loss before extraordinary losses | $ | (13.11 | ) | $ | (23.88 | ) | $ | (2.62 | ) | |||
Extraordinary losses, net of tax effect | — | (0.16 | ) | (0.01 | ) | |||||||
Basic and diluted loss per share | $ | (13.11 | ) | $ | (24.04 | ) | $ | (2.63 | ) | |||
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(1) | Amounts include $2.5 billion and $31 million of dividends declared and paid on our outstanding cumulative senior preferred stock as of December 31, 2009 and 2008, respectively. Amount for 2009 also includes $4 million of dividends accumulated, but undeclared, on our outstanding cumulative senior preferred stock as of December 31, 2009. | |
(2) | Amounts include 4.6 billion and 1.4 billion weighted-average shares of common stock for the year ended December 31, 2009 and 2008, respectively, that would be issued upon the full exercise of the warrant issued to Treasury from the date the warrant was issued through December 31, 2009 and 2008, respectively. |
13. | Stock-Based Compensation |
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For the Year Ended December 31, | ||||||||||||||||||||||||
2009 | 2008 | 2007 | ||||||||||||||||||||||
Weighted | Weighted | Weighted | ||||||||||||||||||||||
Average | Average | Average | ||||||||||||||||||||||
Fair | Fair | Fair | ||||||||||||||||||||||
Number of | Value at | Number of | Value at | Number of | Value at | |||||||||||||||||||
Shares | Grant Date | Shares | Grant Date | Shares | Grant Date | |||||||||||||||||||
(Shares in thousands) | ||||||||||||||||||||||||
Nonvested as of January 1 | 5,934 | $ | 41.19 | 4,375 | $ | 57.67 | 3,399 | $ | 60.15 | |||||||||||||||
Granted | — | — | 4,518 | 31.96 | 2,886 | 56.95 | ||||||||||||||||||
Vested | (1,858 | ) | 44.78 | (1,768 | ) | 58.25 | (1,457 | ) | 62.25 | |||||||||||||||
Forfeited | (1,203 | ) | 39.61 | (1,191 | ) | 41.58 | (453 | ) | 57.84 | |||||||||||||||
Nonvested as of December 31 | 2,873 | $ | 39.53 | 5,934 | $ | 41.19 | 4,375 | $ | 57.67 | |||||||||||||||
For the Year Ended December 31, | ||||||||||||
2009 | 2008 | 2007 | ||||||||||
(Dollars in millions) | ||||||||||||
Unrecognized compensation cost | $ | 56 | $ | 148 | $ | 148 | ||||||
Expected weighted-average life of unvested restricted stock | 1.6 years | 2.4 years | 2.4 years |
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For the Year Ended December 31, | ||||||||||||||||||||||||||||||||||||
2009 | 2008 | 2007 | ||||||||||||||||||||||||||||||||||
Weighted- | Weighted- | Weighted- | ||||||||||||||||||||||||||||||||||
Weighted- | Average | Weighted- | Average | Weighted- | Average | |||||||||||||||||||||||||||||||
Average | Fair | Average | Fair | Average | Fair | |||||||||||||||||||||||||||||||
Exercise | Value at | Exercise | Value at | Exercise | Value at | |||||||||||||||||||||||||||||||
Options | Price | Grant Date | Options | Price | Grant Date | Options | Price | Grant Date | ||||||||||||||||||||||||||||
(Shares in thousands) | ||||||||||||||||||||||||||||||||||||
Beginning balance, January 1 | 12,293 | $ | 72.12 | $ | 23.62 | 17,031 | $ | 71.90 | $ | 23.49 | 19,749 | $ | 70.44 | $ | 22.97 | |||||||||||||||||||||
Granted | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||
Exercised | — | — | — | — | — | — | (999 | ) | 51.17 | 15.95 | ||||||||||||||||||||||||||
Forfeited and/or expired | (3,534 | ) | 71.45 | 23.66 | (4,738 | ) | 71.19 | 23.13 | (1,719 | ) | 67.27 | 21.79 | ||||||||||||||||||||||||
Ending balance, December 31 | 8,759 | $ | 72.39 | $ | 23.60 | 12,293 | $ | 72.12 | $ | 23.62 | 17,031 | $ | 71.90 | $ | 23.49 | |||||||||||||||||||||
Options exercisable, December 31 | 8,759 | $ | 72.39 | $ | 23.60 | 12,291 | $ | 72.12 | $ | 23.62 | 16,726 | $ | 71.79 | $ | 23.54 | |||||||||||||||||||||
Options vested or expected to vest as of December 31(1) | 8,759 | $ | 72.39 | $ | 23.60 | 12,293 | $ | 72.12 | $ | 23.62 | 17,030 | $ | 71.90 | $ | 23.50 | |||||||||||||||||||||
(1) | Includes vested and unvested shares after applying an estimated forfeiture rate. |
14. | Employee Retirement Benefits |
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For the Year Ended December 31, | ||||||||||||||||||||||||||||||||||||
2009 | 2008 | 2007 | ||||||||||||||||||||||||||||||||||
Pension Plans | Other Post- | Pension Plans | Other Post- | Pension Plans | Other Post- | |||||||||||||||||||||||||||||||
Non- | Retirement | Non- | Retirement | Non- | Retirement | |||||||||||||||||||||||||||||||
Qualified | Qualified | Plan | Qualified | Qualified | Plan | Qualified | Qualified | Plan | ||||||||||||||||||||||||||||
(Dollars in millions) | ||||||||||||||||||||||||||||||||||||
Service cost | $ | 36 | $ | 1 | $ | 5 | $ | 38 | $ | 8 | $ | 5 | $ | 58 | $ | 11 | $ | 14 | ||||||||||||||||||
Interest cost | 53 | 9 | 9 | 48 | 10 | 9 | 48 | 10 | 11 | |||||||||||||||||||||||||||
Expected return on plan assets | (44 | ) | — | — | (58 | ) | — | — | (57 | ) | — | — | ||||||||||||||||||||||||
Amortization of net actuarial (gain) loss | 23 | (2 | ) | 1 | — | (1 | ) | 1 | — | 2 | 1 | |||||||||||||||||||||||||
Amortization of net prior service cost (credit) | 1 | 1 | (5 | ) | 1 | 2 | (5 | ) | 1 | 2 | (1 | ) | ||||||||||||||||||||||||
Amortization of initial transition obligation | — | — | 2 | — | — | 2 | — | — | 2 | |||||||||||||||||||||||||||
Curtailment (gain) loss | — | (1 | ) | — | — | (3 | ) | — | 5 | (3 | ) | 9 | ||||||||||||||||||||||||
Special termination benefit charge | — | — | — | — | — | 3 | — | — | — | |||||||||||||||||||||||||||
Net periodic benefit cost | $ | 69 | $ | 8 | $ | 12 | $ | 29 | $ | 16 | $ | 15 | $ | 55 | $ | 22 | $ | 36 | ||||||||||||||||||
As of December 31, | ||||||||||||||||||||||||
2009 | 2008 | |||||||||||||||||||||||
Pension Plans | Other Post- | Pension Plans | Other Post- | |||||||||||||||||||||
Non- | Retirement | Non- | Retirement | |||||||||||||||||||||
Qualified | Qualified | Plan | Qualified | Qualified | Plan | |||||||||||||||||||
(Dollars in millions) | ||||||||||||||||||||||||
Net actuarial (gain) loss | $ | 171 | $ | (9 | ) | $ | 39 | $ | 279 | $ | (3 | ) | $ | 32 | ||||||||||
Net prior service cost (credit) | 5 | 2 | (61 | ) | 6 | 4 | (66 | ) | ||||||||||||||||
Net transition obligation | — | — | 5 | — | — | 7 | ||||||||||||||||||
Pre-tax amount recorded in AOCI | $ | 176 | $ | (7 | ) | $ | (17 | ) | $ | 285 | $ | 1 | $ | (27 | ) | |||||||||
After-tax amount recorded in AOCI(1) | $ | 176 | $ | (7 | ) | $ | (17 | ) | $ | 285 | $ | 1 | $ | (27 | ) | |||||||||
(1) | During 2008, we established a valuation allowance for our deferred tax assets, which has resulted in the reversal of the tax benefit amounts recorded in AOCI for our pension and other postretirement plans. Refer to “Note 11, Income Taxes” for additional information. |
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For the Year Ended December 31, | ||||||||||||||||||||||||
2009 | 2008 | |||||||||||||||||||||||
Pension Plans | Other Post- | Pension Plans | Other Post- | |||||||||||||||||||||
Non- | Retirement | Non- | Retirement | |||||||||||||||||||||
Qualified | Qualified | Plan | Qualified | Qualified | Plan | |||||||||||||||||||
(Dollars in millions) | ||||||||||||||||||||||||
Actuarial (Gain) Loss | ||||||||||||||||||||||||
Beginning balance, January 1 | $ | 279 | $ | (3 | ) | $ | 32 | $ | (38 | ) | $ | (5 | ) | $ | 28 | |||||||||
Current year actuarial (gain) loss | (85 | ) | (7 | ) | 8 | 317 | 1 | 5 | ||||||||||||||||
Actuarial gain due to curtailments | — | (1 | ) | — | — | — | — | |||||||||||||||||
Amortization | (23 | ) | 2 | (1 | ) | — | 1 | (1 | ) | |||||||||||||||
Ending balance, December 31 | $ | 171 | $ | (9 | ) | $ | 39 | $ | 279 | $ | (3 | ) | $ | 32 | ||||||||||
Prior Service Cost (Credit) | ||||||||||||||||||||||||
Beginning balance, January 1 | $ | 6 | $ | 4 | $ | (66 | ) | $ | 7 | $ | 7 | $ | (71 | ) | ||||||||||
Prior service cost (credit) due to curtailments | — | (1 | ) | — | — | (1 | ) | — | ||||||||||||||||
Amortization | (1 | ) | (1 | ) | 5 | (1 | ) | (2 | ) | 5 | ||||||||||||||
Ending balance, December 31 | $ | 5 | $ | 2 | $ | (61 | ) | $ | 6 | $ | 4 | $ | (66 | ) | ||||||||||
As of December 31, 2009 | ||||||||||||
Other Post- | ||||||||||||
Pension Plans | Retirement | |||||||||||
Qualified | Non-Qualified | Plan | ||||||||||
(Dollars in millions) | ||||||||||||
Net actuarial (gain) loss | $ | 8 | $ | (1 | ) | $ | 1 | |||||
Net prior service cost (credit) | 1 | 1 | (5 | ) | ||||||||
Net transition obligation | — | — | 2 | |||||||||
Total | $ | 9 | $ | — | $ | (2 | ) | |||||
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As of December 31, | ||||||||||||||||||||||||
2009 | 2008 | |||||||||||||||||||||||
Pension Plans | Other Post- | Pension Plans | Other Post- | |||||||||||||||||||||
Non- | Retirement | Non- | Retirement | |||||||||||||||||||||
Qualified | Qualified | Plan | Qualified | Qualified | Plan | |||||||||||||||||||
(Dollars in millions) | ||||||||||||||||||||||||
Change in Benefit Obligation | ||||||||||||||||||||||||
Benefit obligation at beginning of year | $ | 801 | $ | 158 | $ | 151 | $ | 744 | $ | 148 | $ | 134 | ||||||||||||
Service cost | 36 | 1 | 5 | 38 | 8 | 5 | ||||||||||||||||||
Interest cost | 53 | 9 | 9 | 48 | 10 | 9 | ||||||||||||||||||
Plan participants’ contributions | — | — | 2 | — | — | 2 | ||||||||||||||||||
Net actuarial (gain) loss | 36 | (7 | ) | 8 | (10 | ) | 1 | 5 | ||||||||||||||||
Curtailment (gain) loss | — | (4 | ) | — | — | (3 | ) | — | ||||||||||||||||
Special termination benefits | — | — | — | — | — | 3 | ||||||||||||||||||
Benefits paid | (22 | ) | (6 | ) | (9 | ) | (19 | ) | (6 | ) | (7 | ) | ||||||||||||
Benefit obligation at end of year | 904 | 151 | 166 | 801 | 158 | 151 | ||||||||||||||||||
Change in Plan Assets | ||||||||||||||||||||||||
Fair value of plan assets at beginning of year | 579 | — | — | 788 | — | — | ||||||||||||||||||
Actual return on plan assets | 166 | — | — | (270 | ) | — | — | |||||||||||||||||
Employer contributions | 76 | 6 | 8 | 80 | 6 | 6 | ||||||||||||||||||
Plan participants’ contributions | — | — | 2 | — | — | 2 | ||||||||||||||||||
Benefits paid | (22 | ) | (6 | ) | (10 | ) | (19 | ) | (6 | ) | (8 | ) | ||||||||||||
Fair value of plan assets at end of year | 799 | — | — | 579 | — | — | ||||||||||||||||||
Funded status at end of year | $ | (105 | ) | $ | (151 | ) | $ | (166 | ) | $ | (222 | ) | $ | (158 | ) | $ | (151 | ) | ||||||
Amounts Recognized in our Consolidated Balance Sheets | ||||||||||||||||||||||||
Accrued benefit cost | $ | (105 | ) | $ | (151 | ) | $ | (166 | ) | $ | (222 | ) | $ | (158 | ) | $ | (151 | ) | ||||||
Accumulated other comprehensive | ||||||||||||||||||||||||
(income) loss | 176 | (7 | ) | (17 | ) | 285 | 1 | (27 | ) | |||||||||||||||
Net amount recognized | $ | 71 | $ | (158 | ) | $ | (183 | ) | $ | 63 | $ | (157 | ) | $ | (178 | ) | ||||||||
As of December 31, | ||||||||||||||||
2009 | 2008 | |||||||||||||||
Pension Plans | Pension Plans | |||||||||||||||
Non- | Non- | |||||||||||||||
Qualified | Qualified | Qualified | Qualified | |||||||||||||
(Dollars in millions) | ||||||||||||||||
Projected benefit obligation | $ | 904 | $ | 151 | $ | 801 | $ | 158 | ||||||||
Accumulated benefit obligation | 785 | 141 | 695 | 141 | ||||||||||||
Fair value of plan assets | 799 | — | 579 | — |
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As of December 31, | ||||||||||||||||||||||||
Pension Benefits | Postretirement Benefits | |||||||||||||||||||||||
2009 | 2008 | 2007 | 2009 | 2008 | 2007 | |||||||||||||||||||
Weighted-average assumptions used to determine net periodic benefit costs: | ||||||||||||||||||||||||
Discount rate | 6.15 | % | 6.40 | % | 6.20 | %(1) | 6.15 | % | 6.40 | % | 6.20 | %(1) | ||||||||||||
Average rate of increase in future compensation | 4.00 | 5.00 | 5.75 | |||||||||||||||||||||
Expected long-term weighted-average rate of return on plan assets | 7.50 | 7.50 | 7.50 | |||||||||||||||||||||
Weighted-average assumptions used to determine benefit obligation at year-end: | ||||||||||||||||||||||||
Discount rate | 6.10 | % | 6.15 | % | 6.40 | % | 5.75 | % | 6.15 | % | 6.40 | % | ||||||||||||
Average rate of increase in future compensation | 4.00 | 4.00 | 5.00 | |||||||||||||||||||||
Health care cost trend rate assumed for next year: | ||||||||||||||||||||||||
Pre-65 | 8.00 | % | 8.00 | % | 8.00 | % | ||||||||||||||||||
Post-65 | 8.00 | 8.00 | 8.00 | |||||||||||||||||||||
Rate that cost trend rate gradually declines to and remains at: | 5.00 | 5.00 | 5.00 | |||||||||||||||||||||
Year that rate reaches the ultimate trend rate | 2018 | 2015 | 2014 |
(1) | The pension and other postretirement benefit plans were remeasured as of August 31, 2007 and November 30, 2007. As a result, a discount rate of 6.00% was used for the period January 1 through August 31, a discount rate of 6.35% was used for the period September 1 through November 30, and a discount rate of 6.20% was used for the period December 1 through December 31. |
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Fair Value Measurements as of December 31, 2009 | ||||||||||||
Quoted | ||||||||||||
Prices in | ||||||||||||
Active | Significant | |||||||||||
Markets for | Other | |||||||||||
Identical | Observable | |||||||||||
Assets | Inputs | |||||||||||
(Level 1) | (Level 2) | Total | ||||||||||
(Dollars in millions) | ||||||||||||
Cash equivalents | $ | — | $ | 14 | $ | 14 | ||||||
Equity securities: | ||||||||||||
U.S. large-cap(1) | 408 | — | 408 | |||||||||
U.S. mid/small blend(2) | 116 | — | 116 | |||||||||
International large/mid blend(3) | — | 115 | 115 | |||||||||
Fixed income securities: | ||||||||||||
Corporate bonds(4) | — | 146 | 146 | |||||||||
Total plan assets at fair value | $ | 524 | $ | 275 | $ | 799 | ||||||
(1) | Consists of a publicly traded low-cost equity index fund that tracks to the S&P 500. | |
(2) | Consists of a publicly traded low-cost equity index fund that tracks to all regularly traded U.S. stocks except those in the S&P 500. | |
(3) | Consists of a single equity fund that tracks to an index that consists of approximately 4,000 securities across over 40 countries with not more than 15% in any single country. | |
(4) | Consists of a single bond fund that tracks to an index that consists of approximately 2,400 issuances of investment grade bonds from diverse industries within international markets representing approximately 19%. |
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Expected Retirement Plan Benefit Payments | ||||||||||||||||
Other Postretirement Benefits | ||||||||||||||||
Pension Benefits | Before Medicare | Medicare | ||||||||||||||
Qualified | Nonqualified | Part D Subsidy | Part D Subsidy | |||||||||||||
(Dollars in millions) | ||||||||||||||||
2010 | $ | 23 | $ | 6 | $ | 9 | $ | — | ||||||||
2011 | 24 | 7 | 9 | 1 | ||||||||||||
2012 | 27 | 7 | 10 | 1 | ||||||||||||
2013 | 29 | 8 | 11 | 1 | ||||||||||||
2014 | 33 | 8 | 12 | 1 | ||||||||||||
2015—2019 | 244 | 47 | 75 | 7 |
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For the Year Ended December 31, | ||||||||||||
2009 | 2008 | 2007 | ||||||||||
(Shares in thousands) | ||||||||||||
Common shares allocated to employees | 1,229 | 1,702 | 1,840 | |||||||||
Common shares committed to be released to employees | — | — | 349 | |||||||||
Unallocated common shares | — | — | 11 |
15. | Segment Reporting |
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For the Year Ended December 31, 2009 | ||||||||||||||||
Capital | ||||||||||||||||
Single-Family | HCD | Markets | Total | |||||||||||||
(Dollars in millions) | ||||||||||||||||
Net interest income (expense)(1) | $ | 428 | $ | (193 | ) | $ | 14,275 | $ | 14,510 | |||||||
Guaranty fee income (expense)(2) | 8,002 | 675 | (1,466 | ) | 7,211 | |||||||||||
Trust management income | 39 | 1 | — | 40 | ||||||||||||
Investment gains (losses), net | (2 | ) | — | 1,460 | 1,458 | |||||||||||
Netother-than-temporary impairments | — | — | (9,861 | ) | (9,861 | ) | ||||||||||
Fair value losses, net | — | — | (2,811 | ) | (2,811 | ) | ||||||||||
Debt extinguishment losses, net | — | — | (325 | ) | (325 | ) | ||||||||||
Losses from partnership investments | — | (6,735 | ) | — | (6,735 | ) | ||||||||||
Fee and other income | 315 | 99 | 319 | 733 | ||||||||||||
Administrative expenses | (1,419 | ) | (363 | ) | (425 | ) | (2,207 | ) | ||||||||
Provision for credit losses | (70,463 | ) | (2,163 | ) | — | (72,626 | ) | |||||||||
Foreclosed property expense | (857 | ) | (53 | ) | — | (910 | ) | |||||||||
Other expenses | (1,216 | ) | (38 | ) | (230 | ) | (1,484 | ) | ||||||||
Income (loss) before federal income taxes | (65,173 | ) | (8,770 | ) | 936 | (73,007 | ) | |||||||||
Provision (benefit) for federal income taxes | (1,375 | ) | 311 | 79 | (985 | ) | ||||||||||
Net income (loss) | (63,798 | ) | (9,081 | ) | 857 | (72,022 | ) | |||||||||
Less: Net loss attributable to noncontrolling interest | — | 53 | — | 53 | ||||||||||||
Net income (loss) attributable to Fannie Mae | $ | (63,798 | ) | $ | (9,028 | ) | $ | 857 | $ | (71,969 | ) | |||||
(1) | Includes cost of capital charge. | |
(2) | The charge to Capital Markets represents an intercompany guaranty fee expense allocated to Capital Markets from Single-Family and HCD for absorbing the credit risk on mortgage loans held in our portfolio. |
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For the Year Ended December 31, 2008 | ||||||||||||||||
Capital | ||||||||||||||||
Single-Family | HCD | Markets | Total | |||||||||||||
(Dollars in millions) | ||||||||||||||||
Net interest income (expense)(1) | $ | 461 | $ | (343 | ) | $ | 8,664 | $ | 8,782 | |||||||
Guaranty fee income (expense)(2) | 8,390 | 633 | (1,402 | ) | 7,621 | |||||||||||
Trust management income | 256 | 5 | — | 261 | ||||||||||||
Investment losses, net(3) | (72 | ) | — | (174 | ) | (246 | ) | |||||||||
Netother-than-temporary impairments(3) | — | — | (6,974 | ) | (6,974 | ) | ||||||||||
Fair value losses, net | — | — | (20,129 | ) | (20,129 | ) | ||||||||||
Debt extinguishment losses, net | — | — | (222 | ) | (222 | ) | ||||||||||
Losses from partnership investments | — | (1,554 | ) | — | (1,554 | ) | ||||||||||
Fee and other income | 327 | 181 | 264 | 772 | ||||||||||||
Administrative expenses | (1,127 | ) | (404 | ) | (448 | ) | (1,979 | ) | ||||||||
Provision for credit losses | (27,881 | ) | (70 | ) | — | (27,951 | ) | |||||||||
Foreclosed property expense(3) | (1,844 | ) | (14 | ) | — | (1,858 | ) | |||||||||
Other expenses(3) | (823 | ) | (133 | ) | (137 | ) | (1,093 | ) | ||||||||
Loss before federal income taxes and extraordinary losses | (22,313 | ) | (1,699 | ) | (20,558 | ) | (44,570 | ) | ||||||||
Provision for federal income taxes | 4,788 | 511 | 8,450 | 13,749 | ||||||||||||
Loss before extraordinary losses | (27,101 | ) | (2,210 | ) | (29,008 | ) | (58,319 | ) | ||||||||
Extraordinary losses, net of tax effect | — | — | (409 | ) | (409 | ) | ||||||||||
Net loss | (27,101 | ) | (2,210 | ) | (29,417 | ) | (58,728 | ) | ||||||||
Less: Net loss attributable to the noncontrolling interest(3) | — | 21 | — | 21 | ||||||||||||
Net loss attributable to Fannie Mae | $ | (27,101 | ) | $ | (2,189 | ) | $ | (29,417 | ) | $ | (58,707 | ) | ||||
(1) | Includes cost of capital charge. | |
(2) | The charge to Capital Markets represents an intercompany guaranty fee expense allocated to Capital Markets from Single-Family and HCD for absorbing the credit risk on mortgage loans held in our portfolio. | |
(3) | Certain prior period amounts have been reclassified to conform to the current period presentation. |
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For the Year Ended December 31, 2007 | ||||||||||||||||
Single- | Capital | |||||||||||||||
Family | HCD | Markets | Total | |||||||||||||
(Dollars in millions) | ||||||||||||||||
Net interest income (expense)(1) | $ | 365 | $ | (404 | ) | $ | 4,620 | $ | 4,581 | |||||||
Guaranty fee income (expense)(2) | 5,816 | 470 | (1,215 | ) | 5,071 | |||||||||||
Losses on certain guaranty contracts | (1,387 | ) | (37 | ) | — | (1,424 | ) | |||||||||
Trust management income | 553 | 35 | — | 588 | ||||||||||||
Investment gains (losses), net(3) | (64 | ) | — | 11 | (53 | ) | ||||||||||
Netother-than-temporary impairments(3) | — | — | (814 | ) | (814 | ) | ||||||||||
Fair value losses, net | — | — | (4,668 | ) | (4,668 | ) | ||||||||||
Debt extinguishment losses, net | — | — | (47 | ) | (47 | ) | ||||||||||
Losses from partnership investments | — | (1,005 | ) | — | (1,005 | ) | ||||||||||
Fee and other income(3) | 328 | 324 | 313 | 965 | ||||||||||||
Administrative expenses | (1,478 | ) | (548 | ) | (643 | ) | (2,669 | ) | ||||||||
Provision for credit losses | (4,559 | ) | (5 | ) | — | (4,564 | ) | |||||||||
Foreclosed property expense(3) | (444 | ) | (4 | ) | — | (448 | ) | |||||||||
Other expenses(3) | (450 | ) | (199 | ) | (11 | ) | (660 | ) | ||||||||
Loss before federal income taxes and extraordinary events | (1,320 | ) | (1,373 | ) | (2,454 | ) | (5,147 | ) | ||||||||
Benefit for federal income taxes | (462 | ) | (1,509 | ) | (1,120 | ) | (3,091 | ) | ||||||||
Income (loss) before extraordinary losses | (858 | ) | 136 | (1,334 | ) | (2,056 | ) | |||||||||
Extraordinary losses, net of tax effect | — | — | (15 | ) | (15 | ) | ||||||||||
Net income (loss) | (858 | ) | 136 | (1,349 | ) | (2,071 | ) | |||||||||
Less: Net loss attributable to the noncontrolling interest(3) | — | 21 | — | 21 | ||||||||||||
Net income (loss) attributable to Fannie Mae | $ | (858 | ) | $ | 157 | $ | (1,349 | ) | $ | (2,050 | ) | |||||
(1) | Includes cost of capital charge. | |
(2) | The charge to Capital Markets represents an intercompany guaranty fee expense allocated to Capital Markets from Single-Family and HCD for absorbing the credit risk on mortgage loans held in our portfolio. | |
(3) | Certain prior period amounts have been reclassified to conform to the current period presentation. |
As of December 31, | ||||||||
2009 | 2008 | |||||||
(Dollars in millions) | ||||||||
Single-Family | $ | 19,991 | $ | 24,115 | ||||
HCD | 5,698 | 10,994 | ||||||
Capital Markets | 843,452 | 877,295 | ||||||
Total assets | $ | 869,141 | $ | 912,404 | ||||
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16. | Equity (Deficit) |
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Annual | ||||||||||||||||||||||||||||||||
Dividend | ||||||||||||||||||||||||||||||||
Issued and Outstanding as of | Rate | |||||||||||||||||||||||||||||||
December 31, | Stated | as of | ||||||||||||||||||||||||||||||
Issue | 2009 | 2008 | Value | December 31, | Redeemable on | |||||||||||||||||||||||||||
Title | Date | Shares | Amount | Shares | Amount | per share | 2009 | or After | ||||||||||||||||||||||||
(Dollars and shares in millions except per share amounts) | ||||||||||||||||||||||||||||||||
Senior Preferred Stock | ||||||||||||||||||||||||||||||||
Series 2008-2 | September 8, 2008 | 1 | $ | 60,900 | 1 | $ | 1,000 | $ | 60,900 | (3) | 10.000 | %(2) | (1 | ) | ||||||||||||||||||
�� | ||||||||||||||||||||||||||||||||
Total | 1 | $ | 60,900 | 1 | $ | 1,000 | ||||||||||||||||||||||||||
Preferred Stock | ||||||||||||||||||||||||||||||||
Series D | September 30, 1998 | 3 | $ | 150 | 3 | $ | 150 | $ | 50 | 5.250 | % | September 30, 1999 | ||||||||||||||||||||
Series E | April 15, 1999 | 3 | 150 | 3 | 150 | 50 | 5.100 | April 15, 2004 | ||||||||||||||||||||||||
Series F | March 20, 2000 | 14 | 690 | 14 | 690 | 50 | 1.360 | (4) | March 31, 2002 | (9) | ||||||||||||||||||||||
Series G | August 8, 2000 | 6 | 288 | 6 | 288 | 50 | 1.670 | (5) | September 30, 2002 | (9) | ||||||||||||||||||||||
Series H | April 6, 2001 | 8 | 400 | 8 | 400 | 50 | 5.810 | April 6, 2006 | ||||||||||||||||||||||||
Series I | October 28, 2002 | 6 | 300 | 6 | 300 | 50 | 5.375 | October 28, 2007 | ||||||||||||||||||||||||
Series L | April 29, 2003 | 7 | 345 | 7 | 345 | 50 | 5.125 | April 29, 2008 | ||||||||||||||||||||||||
Series M | June 10, 2003 | 9 | 460 | 9 | 460 | 50 | 4.750 | June 10, 2008 | ||||||||||||||||||||||||
Series N | September 25, 2003 | 5 | 225 | 5 | 225 | 50 | 5.500 | September 25, 2008 | ||||||||||||||||||||||||
Series O | December 30, 2004 | 50 | 2,500 | 50 | 2,500 | 50 | 7.000 | (6) | December 31, 2007 | |||||||||||||||||||||||
Convertible | ||||||||||||||||||||||||||||||||
Series 2004-1(11) | December 30, 2004 | — | 2,492 | — | 2,500 | 100,000 | 5.375 | January 5, 2008 | ||||||||||||||||||||||||
Series P | September 28, 2007 | 40 | 1,000 | 40 | 1,000 | 25 | 4.500 | (7) | September 30, 2012 | |||||||||||||||||||||||
Series Q | October 4, 2007 | 15 | 375 | 15 | 375 | 25 | 6.750 | September 30, 2010 | ||||||||||||||||||||||||
Series R(12) | November 21, 2007 | 21 | 530 | 21 | 530 | 25 | 7.625 | November 21, 2012 | ||||||||||||||||||||||||
Series S | December 11, 2007 | 280 | 7,000 | 280 | 7,000 | 25 | 8.250 | (8) | December 31, 2010 | (10) | ||||||||||||||||||||||
Mandatory | ||||||||||||||||||||||||||||||||
Convertible | ||||||||||||||||||||||||||||||||
Series 2008-1 | May 14, 2008 | 24 | 1,218 | 41 | 2,084 | 50 | 8.750 | N/A | ||||||||||||||||||||||||
Series T(13) | May 19, 2008 | 89 | 2,225 | 89 | 2,225 | 25 | 8.250 | May 20, 2013 | ||||||||||||||||||||||||
Total | 580 | $ | 20,348 | 597 | $ | 21,222 | ||||||||||||||||||||||||||
(1) | Any liquidation preference of our senior preferred stock in excess of $1.0 billion may be repaid through an issuance of common or preferred stock. The initial $1.0 billion investment may be repaid only in conjunction with termination of the senior preferred stock purchase agreement. The provisions for termination under the senior preferred stock purchase agreement are very restrictive and cannot occur while we are in conservatorship. | |
(2) | Rate effective September 9, 2008. If at any time we fail to pay cash dividends in a timely manner, then immediately following such failure and for all dividend periods thereafter until the dividend period following the date on which we have paid in cash full cumulative dividends (including any unpaid dividends added to the liquidation preference), the dividend rate will be 12% per year. | |
(3) | Initial Stated Value per share was $1,000. Based on our draws of funds under the Senior Preferred Stock Variable Liquidation Preference agreement with Treasury, the Stated Value per share on December 31, 2009 was $60,900. | |
(4) | Rate effective March 31, 2008. Variable dividend rate resets every two years at a per annum rate equal to the two-year Maturity U.S. Treasury Rate (“CMT”) minus 0.16% with a cap of 11% per year. As of December 31, 2008, the annual dividend rate was 1.36%. |
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(5) | Rate effective September, 30 2008. Variable dividend rate resets every two years at a per annum rate equal to the two-year CMT rate minus 0.18% with a cap of 11% per year. As of December 31, 2008, the annual dividend rate was 1.67%. | |
(6) | Rate effective December 31, 2009. Variable dividend rate resets quarterly thereafter at a per annum rate equal to the greater of 7.00% and10-year CMT rate plus 2.375%. As of December 31, 2008, the annual dividend rate was 7.00%. | |
(7) | Rate effective December 31, 2009. Variable dividend rate resets quarterly thereafter at a per annum rate equal to the greater of 4.50% and3-Month LIBOR plus 0.75%. As of December 31, 2008, the annual dividend rate was 4.50%. | |
(8) | Rate effective December 11, 2007 to but excluding December 31, 2010. Variable dividend rate resets quarterly thereafter at a per annum rate equal to at the greater of 7.75% and3-Month LIBOR plus 4.23%. As of December 31, 2008, the annual dividend rate was 8.25%. | |
(9) | Represents initial call date. Redeemable every two years thereafter. | |
(10) | Represents initial call date. Redeemable every five years thereafter. | |
(11) | Issued and outstanding shares were 24,922 and 25,000 as of December 31, 2009 and 2008, respectively. | |
(12) | On November 21, 2007, we issued 20 million shares of preferred stock in the amount of $500 million. Subsequent to the initial issuance, we issued an additional 1.2 million shares in the amount of $30 million on December 14, 2007 under the same terms as the initial issuance. | |
(13) | On May 19, 2008, we issued 80 million shares of preferred stock with an aggregate stated value of $2.0 billion. Subsequent to the initial issuance, we issued an additional 8 million shares with an aggregate stated value of $200 million on May 22, 2008 and one million shares with an aggregate stated value of $25 million on June 4, 2008 under the same terms as the initial issuance. |
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• | Declare or pay any dividend (preferred or otherwise) or make any other distribution with respect to any Fannie Mae equity securities (other than with respect to the senior preferred stock or warrant); | |
• | Redeem, purchase, retire or otherwise acquire any Fannie Mae equity securities (other than the senior preferred stock or warrant); | |
• | Sell or issue any Fannie Mae equity securities (other than the senior preferred stock, the warrant and the common stock issuable upon exercise of the warrant and other than as required by the terms of any binding agreement in effect on the date of the senior preferred stock purchase agreement); | |
• | Terminate the conservatorship (other than in connection with a receivership); | |
• | Sell, transfer, lease or otherwise dispose of any assets, other than dispositions for fair market value: (a) to a limited life regulated entity (in the context of receivership); (b) of assets and properties in the ordinary course of business, consistent with past practice; (c) in connection with a liquidation of Fannie Mae by a receiver; (d) of cash or cash equivalents for cash or cash equivalents; or (e) to the extent necessary to comply with the covenant described below relating to the reduction of our mortgage assets beginning in 2010; | |
• | Incur indebtedness that would result in our aggregate indebtedness exceeding $1,080 billion through December 31, 2010. Beginning December 31, 2010 and on December 31 of each year thereafter, our debt cap that will apply through December 31 of the following year will equal 120% of the amount of mortgage assets we are allowed to hold on December 31 of the immediately preceding calendar year; | |
• | Issue any subordinated debt; | |
• | Enter into a corporate reorganization, recapitalization, merger, acquisition or similar event; or | |
• | Engage in transactions with affiliates unless the transaction is (a) pursuant to the senior preferred stock purchase agreement, the senior preferred stock or the warrant, (b) upon arm’s-length terms or (c) a transaction undertaken in the ordinary course or pursuant to a contractual obligation or customary employment arrangement in existence on the date of the senior preferred stock purchase agreement. |
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17. | Regulatory Capital Requirements |
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As of December 31 | ||||||||
2009(1) | 2008(1) | |||||||
(Dollars in millions) | ||||||||
Core capital(2) | $ | (74,540 | ) | $ | (8,641 | ) | ||
Statutory minimum capital requirement(3) | 33,057 | 33,552 | ||||||
Deficit of core capital over statutory minimum capital requirement | $ | (107,597 | ) | $ | (42,193 | ) | ||
Deficit of core capital percentage over statutory minimum capital requirement | (325.5 | )% | (125.8 | )% |
(1) | Amounts as of December 31, 2009 and 2008 represent estimates that have been submitted to FHFA. As noted above, FHFA is not issuing capital classifications during conservatorship. | |
(2) | The sum of (a) the stated value of our outstanding common stock (common stock less treasury stock); (b) the stated value of our outstanding non-cumulative perpetual preferred stock; (c) our paid-in capital; and (d) our retained earnings (accumulated deficit). Core capital does not include: (a) accumulated other comprehensive income (loss) or (b) senior preferred stock. | |
(3) | Generally, the sum of (a) 2.50% of on-balance sheet assets; (b) 0.45% of the unpaid principal balance of outstanding Fannie Mae MBS held by third parties; and (c) up to 0.45% of other off-balance sheet obligations, which may be adjusted by the Director of FHFA under certain circumstances (See 12 CFR 1750.4 for existing adjustments made by the Director). |
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18. | Concentrations of Credit Risk |
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Geographic Concentration(1) | ||||||||||||||||
Percentage of | Percentage of | |||||||||||||||
Single-Family Guaranty | Multifamily Guaranty | |||||||||||||||
Book of Business(2) | Book of Business(3) | |||||||||||||||
As of December 31, | As of December 31, | |||||||||||||||
2009 | 2008 | 2009 | 2008 | |||||||||||||
Midwest | 16 | % | 16 | % | 9 | % | 9 | % | ||||||||
Northeast | 19 | 19 | 23 | 23 | ||||||||||||
Southeast | 24 | 25 | 19 | 19 | ||||||||||||
Southwest | 15 | 16 | 15 | 15 | ||||||||||||
West | 26 | 24 | 34 | 34 | ||||||||||||
Total | 100 | % | 100 | % | 100 | % | 100 | % | ||||||||
(1) | Midwest includes IL, IN, IA, MI, MN, NE, ND, OH, SD, WI; Northeast includes CT, DE ME, MA, NH, NJ, NY, PA, PR, RI, VT, VI; Southeast includes AL, DC, FL, GA, KY, MD, NC, MS, SC, TN, VA, WV; Southwest includes AZ, AR, CO, KS, LA, MO, NM, OK, TX, UT; West include AK,CA,GU,HI,ID,MT,NV,OR,WA and WY. | |
(2) | Consists of the portion of our single-family conventional guaranty book of business for which we have detailed loan level information, which constituted over 98% and 99% of our total single-family conventional guaranty book of business as of December 31, 2009 and 2008, respectively. | |
(3) | Consists of the portion of our multifamily guaranty book of business for which we have detailed loan level information, which constituted over 98% and 99% of our total multifamily guaranty book of business as of December 31, 2009 and 2008, respectively. |
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Percentage of Conventional Single- | ||||||||
Family Guaranty | ||||||||
Book of Business | ||||||||
As of December 31, | ||||||||
2009 | 2008 | |||||||
Interest-only loans | 7 | % | 8 | % | ||||
Negative-amortizing ARMs | 1 | 1 | ||||||
80%+ LTV loans | 37 | 34 |
As of December 31, | ||||||||||||||||
2009 | 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) | $ | 251,111 | 8 | % | $ | 295,622 | 10 | % | ||||||||
Subprime(3) | 16,268 | 1 | 19,086 | 1 | ||||||||||||
Total | $ | 267,379 | 9 | % | $ | 314,708 | 11 | % | ||||||||
Private-label securities: | ||||||||||||||||
Alt-A(4) | $ | 24,505 | 1 | % | $ | 27,858 | 1 | % | ||||||||
Subprime(5) | 20,527 | 1 | 24,551 | 1 | ||||||||||||
Total | $ | 45,032 | 2 | % | $ | 52,409 | 2 | % | ||||||||
(1) | Calculated based on total unpaid principal balance of our single-family mortgage credit book of business. | |
(2) | Represents Alt-A mortgage loans held in our portfolio and Fannie Mae MBS backed by Alt-A mortgage loans. | |
(3) | Represents subprime mortgage loans held in our portfolio and Fannie Mae MBS backed by subprime mortgage loans. | |
(4) | Represents private-label mortgage-related securities backed by Alt-A mortgage loans. | |
(5) | Represents private-label mortgage-related securities backed by subprime mortgage loans. |
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As of December 31, | ||||||||
2009 | 2008 | |||||||
(Dollars in millions) | ||||||||
Fannie Mae MBS and other guarantees(1) | $ | 135,697 | $ | 172,188 | ||||
Loan purchase commitments | 486 | 4,951 |
(1) | Represents maximum exposure on guarantees not reflected in our consolidated balance sheets. |
19. | Fair Value |
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Fair Value Measurements as of December 31, 2009 | ||||||||||||||||||||
Quoted | ||||||||||||||||||||
Prices in | ||||||||||||||||||||
Active | Significant | |||||||||||||||||||
Markets for | Other | Significant | ||||||||||||||||||
Identical | Observable | Unobservable | ||||||||||||||||||
Assets | Inputs | Inputs | Netting | Estimated | ||||||||||||||||
(Level 1) | (Level 2) | (Level 3) | Adjustment(1) | Fair Value | ||||||||||||||||
(Dollars in millions) | ||||||||||||||||||||
Assets: | ||||||||||||||||||||
Trading securities: | ||||||||||||||||||||
Mortgage-related securities: | ||||||||||||||||||||
Fannie Mae | $ | — | $ | 69,094 | $ | 5,656 | $ | — | $ | 74,750 | ||||||||||
Freddie Mac | — | 15,082 | — | — | 15,082 | |||||||||||||||
Ginnie Mae | — | 1 | — | — | 1 | |||||||||||||||
Alt-A | — | 791 | 564 | — | 1,355 | |||||||||||||||
Subprime | — | — | 1,780 | — | 1,780 | |||||||||||||||
Commercial mortgage-backed securities | — | 9,335 | — | — | 9,335 | |||||||||||||||
Mortgage revenue bonds | — | — | 600 | — | 600 | |||||||||||||||
Other | — | — | 154 | — | 154 | |||||||||||||||
Non-mortgage-related securities: | ||||||||||||||||||||
Asset-backed securities | — | 8,408 | 107 | — | 8,515 | |||||||||||||||
Corporate debt securities | — | 364 | — | — | 364 | |||||||||||||||
Other | 3 | — | — | — | 3 | |||||||||||||||
Total trading securities | 3 | 103,075 | 8,861 | — | 111,939 | |||||||||||||||
Available-for-sale securities: | ||||||||||||||||||||
Mortgage-related securities: | ||||||||||||||||||||
Fannie Mae | — | 153,823 | 596 | — | 154,419 | |||||||||||||||
Freddie Mac | — | 27,442 | 27 | — | 27,469 | |||||||||||||||
Ginnie Mae | — | 1,230 | 123 | — | 1,353 | |||||||||||||||
Alt-A | — | 5,838 | 8,312 | — | 14,150 | |||||||||||||||
Subprime | — | — | 10,746 | — | 10,746 | |||||||||||||||
Commercial mortgage-backed securities | — | 13,193 | — | — | 13,193 | |||||||||||||||
Mortgage revenue bonds | — | 26 | 12,820 | — | 12,846 | |||||||||||||||
Other | — | 22 | 3,530 | — | 3,552 | |||||||||||||||
Totalavailable-for-sale securities | — | 201,574 | 36,154 | — | 237,728 | |||||||||||||||
Derivative assets | — | 19,724 | 150 | (18,400 | ) | 1,474 | ||||||||||||||
Guaranty assets andbuy-ups | — | — | 2,577 | — | 2,577 | |||||||||||||||
Total assets at fair value | $ | 3 | $ | 324,373 | $ | 47,742 | $ | (18,400 | ) | $ | 353,718 | |||||||||
Liabilities: | ||||||||||||||||||||
Long-term debt | $ | — | $ | 2,673 | $ | 601 | $ | — | $ | 3,274 | ||||||||||
Derivative liabilities | — | 23,815 | 27 | (22,813 | ) | 1,029 | ||||||||||||||
Other liabilities | — | 270 | — | — | 270 | |||||||||||||||
Total liabilities at fair value | $ | — | $ | 26,758 | $ | 628 | $ | (22,813 | ) | $ | 4,573 | |||||||||
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Fair Value Measurements as of December 31, 2008 | ||||||||||||||||||||
Quoted | ||||||||||||||||||||
Prices in | ||||||||||||||||||||
Active | Significant | |||||||||||||||||||
Markets for | Other | Significant | ||||||||||||||||||
Identical | Observable | Unobservable | ||||||||||||||||||
Assets | Inputs | Inputs | Netting | Estimated | ||||||||||||||||
(Level 1) | (Level 2) | (Level 3) | Adjustment(1) | Fair Value | ||||||||||||||||
(Dollars in millions) | ||||||||||||||||||||
Assets: | ||||||||||||||||||||
Trading securities | $ | 6 | $ | 78,035 | $ | 12,765 | $ | — | $ | 90,806 | ||||||||||
Available-for-sale securities | — | 218,651 | 47,837 | — | 266,488 | |||||||||||||||
Derivative assets(2) | — | 62,969 | 362 | (62,462 | ) | 869 | ||||||||||||||
Guaranty assets andbuy-ups | — | — | 1,083 | — | 1,083 | |||||||||||||||
Total assets at fair value | $ | 6 | $ | 359,655 | $ | 62,047 | $ | (62,462 | ) | $ | 359,246 | |||||||||
Liabilities: | ||||||||||||||||||||
Short-term debt | $ | — | $ | 4,500 | $ | — | $ | — | $ | 4,500 | ||||||||||
Long-term debt | — | 18,667 | 2,898 | — | 21,565 | |||||||||||||||
Derivative liabilities(2) | — | 76,412 | 52 | (73,749 | ) | 2,715 | ||||||||||||||
Other liabilities | — | 62 | — | — | 62 | |||||||||||||||
Total liabilities at fair value | $ | — | $ | 99,641 | $ | 2,950 | $ | (73,749 | ) | $ | 28,842 | |||||||||
(1) | Derivative contracts are reported on a gross basis by level. The netting adjustment represents the effect of the legal right to offset under legally enforceable master netting agreements to settle with the same counterparty on a net basis, as well as cash collateral. | |
(2) | Excludes accrued fees related to the termination of derivative contracts. |
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Fair Value Measurements Using Significant Unobservable Inputs (Level 3) | ||||||||||||||||||||||||||||
For the Year Ended December 31, 2009 | ||||||||||||||||||||||||||||
Total Gains or (Losses) | ||||||||||||||||||||||||||||
(Realized/Unrealized) | ||||||||||||||||||||||||||||
Net Unrealized | ||||||||||||||||||||||||||||
Purchases, | Gains (Losses) | |||||||||||||||||||||||||||
Sales, | Included in Net Loss | |||||||||||||||||||||||||||
Included in | Issuances, | Related to Assets | ||||||||||||||||||||||||||
Balance, | Other | and | Transfers | Balance, | and Liabilities Still | |||||||||||||||||||||||
January 1, | Included in | Comprehensive | Settlements, | in/out of | December 31, | Held as of | ||||||||||||||||||||||
2009 | Net Loss | Loss | Net | Level 3, Net(1) | 2009 | December 31, 2009(2) | ||||||||||||||||||||||
(Dollars in millions) | ||||||||||||||||||||||||||||
Trading securities: | ||||||||||||||||||||||||||||
Mortgage-related: | ||||||||||||||||||||||||||||
Fannie Mae | $ | 6,935 | $ | 278 | $ | — | $ | (1,277 | ) | $ | (280 | ) | $ | 5,656 | $ | 274 | ||||||||||||
Alt-A | 1,118 | 57 | — | (154 | ) | (457 | ) | 564 | (25 | ) | ||||||||||||||||||
Subprime | 2,318 | (83 | ) | — | (455 | ) | — | 1,780 | (74 | ) | ||||||||||||||||||
Mortgage revenue bonds | 695 | (75 | ) | — | (20 | ) | — | 600 | (75 | ) | ||||||||||||||||||
Other | 167 | (1 | ) | — | (12 | ) | — | 154 | (1 | ) | ||||||||||||||||||
Non-mortgage-related: | ||||||||||||||||||||||||||||
Asset-backed securities | 1,475 | (38 | ) | — | (108 | ) | (1,222 | ) | 107 | 2 | ||||||||||||||||||
Corporate debt securities | 57 | 3 | — | (116 | ) | 56 | — | — | ||||||||||||||||||||
Total trading securities | $ | 12,765 | $ | 141 | $ | — | $ | (2,142 | ) | $ | (1,903 | ) | $ | 8,861 | $ | 101 | ||||||||||||
Available-for-sale securities: | ||||||||||||||||||||||||||||
Mortgage-related: | ||||||||||||||||||||||||||||
Fannie Mae | $ | 5,609 | $ | (47 | ) | $ | 191 | $ | (569 | ) | $ | (4,588 | ) | $ | 596 | $ | — | |||||||||||
Freddie Mac | 80 | 3 | (6 | ) | (21 | ) | (29 | ) | 27 | — | ||||||||||||||||||
Ginnie Mae | 190 | — | 1 | (7 | ) | (61 | ) | 123 | — | |||||||||||||||||||
Alt-A | 11,675 | (1,717 | ) | 2,192 | (1,554 | ) | (2,284 | ) | 8,312 | — | ||||||||||||||||||
Subprime | 14,318 | (5,290 | ) | 4,862 | (3,144 | ) | — | 10,746 | — | |||||||||||||||||||
Mortgage revenue bonds | 12,456 | (16 | ) | 1,349 | (969 | ) | — | 12,820 | — | |||||||||||||||||||
Other | 3,509 | (81 | ) | 651 | (549 | ) | — | 3,530 | — | |||||||||||||||||||
Totalavailable-for-sale securities | $ | 47,837 | $ | (7,148 | ) | $ | 9,240 | $ | (6,813 | ) | $ | (6,962 | ) | $ | 36,154 | $ | — | |||||||||||
Net derivatives | 310 | (42 | ) | — | (48 | ) | (97 | ) | 123 | 3 | ||||||||||||||||||
Guaranty assets andbuy-ups | 1,083 | 466 | 243 | 785 | — | 2,577 | 783 | |||||||||||||||||||||
Long-term debt | (2,898 | ) | (18 | ) | — | 1,791 | 524 | (601 | ) | (49 | ) |
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Fair Value Measurements Using Significant | ||||||||||||||||||||
Unobservable Inputs (Level 3) | ||||||||||||||||||||
For the Year Ended December 31, 2008 | ||||||||||||||||||||
Guaranty | ||||||||||||||||||||
Assets | ||||||||||||||||||||
Trading | Available-for-Sale | Net | and | Long-Term | ||||||||||||||||
Securities | Securities | Derivatives | Buy-ups | Debt | ||||||||||||||||
(Dollars in millions) | ||||||||||||||||||||
Beginning balance as of January 1, 2008 | $ | 18,508 | $ | 20,920 | $ | 161 | $ | 1,568 | $ | (7,888 | ) | |||||||||
Realized/unrealized gains (losses) included in net loss | (1,881 | ) | (3,152 | ) | 282 | (512 | ) | (73 | ) | |||||||||||
Unrealized losses included in other comprehensive loss | — | (4,136 | ) | — | (342 | ) | — | |||||||||||||
Purchases, sales, issuances, and settlements, net | (4,337 | ) | (3,640 | ) | (227 | ) | 369 | 5,396 | ||||||||||||
Transfers in/out of Level 3, net(3) | 475 | 37,845 | 94 | — | (333 | ) | ||||||||||||||
Ending balance as of December 31, 2008 | $ | 12,765 | $ | 47,837 | $ | 310 | $ | 1,083 | $ | (2,898 | ) | |||||||||
Net unrealized gains (losses) included in net loss related to assets and liabilities still held as of December 31, 2008(2) | $ | (1,293 | ) | $ | — | $ | 159 | $ | (26 | ) | $ | (18 | ) | |||||||
(1) | The net transfers to Level 2 from Level 3 consisted primarily of Fannie Mae guaranteed mortgage-related securities, which include securities backed by jumbo conforming loans, and private-label mortgage-related securities backed by non-fixed rate Alt-A loans. Price transparency improved as a result of increased market activity, and we noted some convergence in prices obtained from third-party vendors. As a result, we determined that our fair value estimates for these securities did not rely on significant unobservable inputs. | |
(2) | Amount represents temporary changes in fair value. Amortization, accretion andother-than-temporary impairments are not considered unrealized and are not included in this amount. | |
(3) | During the year ended December 31, 2008, transfers into Level 3 consisted primarily of private-label mortgage-related securities backed by Alt-A and subprime mortgage loans. |
Fair Value Measurements Using Significant | ||||||||||||||||
Unobservable Inputs (Level 3) | ||||||||||||||||
For the Year Ended December 31, 2009 | ||||||||||||||||
Trading | Available-for-Sale | Net | Long-Term | |||||||||||||
Securities | Securities | Derivatives | Debt | |||||||||||||
(Dollars in millions) | ||||||||||||||||
Realized and unrealized gains (losses) included in net loss | $ | (6 | ) | $ | 62 | $ | (2 | ) | $ | — | ||||||
Unrealized gains included in other comprehensive loss | — | 174 | — | — | ||||||||||||
Total gains (losses) | $ | (6 | ) | $ | 236 | $ | (2 | ) | $ | — | ||||||
Amount of Level 3 transfers in | $ | 1,136 | $ | 7,877 | $ | 107 | $ | — | ||||||||
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Fair Value Measurements Using Significant | ||||||||||||||||
Unobservable Inputs (Level 3) | ||||||||||||||||
For the Year Ended December 31, 2008 | ||||||||||||||||
Trading | Available-for-Sale | Net | Long-term | |||||||||||||
Securities | Securities | Derivatives | Debt | |||||||||||||
(Dollars in millions) | ||||||||||||||||
Realized and unrealized gains (losses) included in net loss | $ | (679 | ) | $ | (2,014 | ) | $ | 18 | $ | (35 | ) | |||||
Unrealized losses included in other comprehensive loss | — | (2,261 | ) | — | — | |||||||||||
Total gains (losses) | $ | (679 | ) | $ | (4,275 | ) | $ | 18 | $ | (35 | ) | |||||
Amount of Level 3 transfers in | $ | 10,189 | $ | 55,621 | $ | 18 | $ | (531 | ) | |||||||
For the Year Ended December 31, 2009 | ||||||||||||||||||||||||
Interest | Other than | |||||||||||||||||||||||
Income | Guaranty | Investment | Fair Value | Temporary | ||||||||||||||||||||
Investment in | Fee | Gains | Gains | Impairments, | ||||||||||||||||||||
Securities | Income | (Losses), net | (Losses), net | net | Total | |||||||||||||||||||
(Dollars in millions) | ||||||||||||||||||||||||
Total realized and unrealized gains (losses) included in net loss | $ | 545 | $ | 466 | $ | — | $ | 94 | $ | (7,706 | ) | $ | (6,601 | ) | ||||||||||
Net unrealized gains (losses) related to Level 3 assets and liabilities still held as of December 31, 2009 | — | 783 | — | 55 | — | 838 |
For the Year Ended December 31, 2008 | ||||||||||||||||||||||||||||
Interest | Fair | Other than | ||||||||||||||||||||||||||
Income | Guaranty | Investment | Value Gains | Temporary | ||||||||||||||||||||||||
Investment | Fee | Gains | (Losses), | Impairments, | Extraordinary | |||||||||||||||||||||||
in Securities | Income | (Losses), Net | net | net | Losses | Total | ||||||||||||||||||||||
(Dollars in millions) | ||||||||||||||||||||||||||||
Total realized and unrealized gains (losses) included in net loss | $ | 90 | $ | (915 | ) | $ | 448 | $ | (1,640 | ) | $ | (3,260 | ) | $ | (59 | ) | $ | (5,336 | ) | |||||||||
Net unrealized gains (losses) related to level 3 assets and liabilities still held as of December 31, 2008 | — | (26 | ) | — | (1,152 | ) | — | — | (1,178 | ) |
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
For the Year | ||||||||||||||||||||
Fair Value Measurements | Ended | |||||||||||||||||||
For the Year Ended December 31, 2009 | December 31, 2009 | |||||||||||||||||||
Quoted | ||||||||||||||||||||
Prices in | ||||||||||||||||||||
Active | Significant | |||||||||||||||||||
Markets for | Other | Significant | ||||||||||||||||||
Identical | Observable | Unobservable | Estimated | |||||||||||||||||
Assets | Inputs | Inputs | Fair | |||||||||||||||||
(Level 1) | (Level 2) | (Level 3) | Value | Total Losses | ||||||||||||||||
(Dollars in millions) | ||||||||||||||||||||
Assets: | ||||||||||||||||||||
Mortgage loans held for sale, at lower of cost or fair value | $ | — | $ | 22,238 | $ | 3,557 | $ | 25,795 | (1) | $ | (1,210 | ) | ||||||||
Mortgage loans held for investment, at amortized cost | — | 330 | 4,820 | 5,150 | (2) | (1,173 | ) | |||||||||||||
Acquired property, net | — | — | 10,132 | 10,132 | (3) | (503 | ) | |||||||||||||
Guaranty assets | — | — | 2,327 | 2,327 | (231 | ) | ||||||||||||||
Master servicing assets | — | — | 147 | 147 | (546 | ) | ||||||||||||||
Partnership investments | — | — | 212 | 212 | (5,943 | )(4) | ||||||||||||||
Total assets at fair value | $ | — | $ | 22,568 | $ | 21,195 | $ | 43,763 | $ | (9,606 | ) | |||||||||
Liabilities: | ||||||||||||||||||||
Master servicing liabilities | $ | — | $ | — | $ | 254 | $ | 254 | $ | (200 | ) | |||||||||
Total liabilities at fair value | $ | — | $ | — | $ | 254 | $ | 254 | $ | (200 | ) | |||||||||
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
For the Year | ||||||||||||||||||||
Fair Value Measurements | Ended | |||||||||||||||||||
For the Year Ended December 31, 2008 | December 31, 2008 | |||||||||||||||||||
Quoted | ||||||||||||||||||||
Prices in | ||||||||||||||||||||
Active | Significant | |||||||||||||||||||
Markets for | Other | Significant | ||||||||||||||||||
Identical | Observable | Unobservable | Estimated | |||||||||||||||||
Assets | Inputs | Inputs | Fair | |||||||||||||||||
(Level 1) | (Level 2) | (Level 3) | Value | Total Losses | ||||||||||||||||
(Dollars in millions) | ||||||||||||||||||||
Assets: | ||||||||||||||||||||
Mortgage loans held for sale, at lower of cost or fair value | $ | — | $ | 26,303 | $ | 1,294 | $ | 27,597 | (1) | $ | (433 | ) | ||||||||
Mortgage loans held for investment, at amortized cost | — | — | 1,838 | 1,838 | (2) | (107 | ) | |||||||||||||
Acquired property, net | — | — | 9,624 | 9,624 | (3) | (1,533 | ) | |||||||||||||
Guaranty assets | — | — | 5,473 | 5,473 | (2,967 | ) | ||||||||||||||
Master servicing assets | — | — | 547 | 547 | (553 | ) | ||||||||||||||
Partnership investments | — | — | 4,877 | 4,877 | (764 | )(4) | ||||||||||||||
Total assets at fair value | $ | — | $ | 26,303 | $ | 23,653 | $ | 49,956 | $ | (6,357 | ) | |||||||||
Liabilities: | ||||||||||||||||||||
Master servicing liabilities | $ | — | $ | — | $ | 22 | $ | 22 | $ | (12 | ) | |||||||||
Total liabilities at fair value | $ | — | $ | — | $ | 22 | $ | 22 | $ | (12 | ) | |||||||||
(1) | Includes $15.1 billion and $25.2 billion of mortgage loans held for sale that were sold, retained as a mortgage-related security or redesignated to mortgage loans held for investment as of December 31, 2009 and 2008, respectively. | |
(2) | Includes $1.1 billion and $157 million of mortgage loans held for investment that were redesignated to mortgage loans held for sale, liquidated or transferred to foreclosed properties as of December 31, 2009 and 2008, respectively. | |
(3) | Includes $7.1 billion and $4.0 billion of foreclosed properties that were sold as of December 31, 2009 and 2008, respectively. | |
(4) | Represents impairment charges related to LIHTC partnerships and other equity investments in multifamily properties as of December 31, 2009 and 2008, respectively. We recognized other-than-temporary impairment losses of $5.5 billion and $506 million related to LIHTC partnerships for the years ended December 31, 2009 and 2008, respectively. |
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As of December 31, | ||||||||||||||||
2009 | 2008 | |||||||||||||||
Carrying | Estimated | Carrying | Estimated | |||||||||||||
Value | Fair Value | Value | Fair Value | |||||||||||||
(Dollars in millions) | ||||||||||||||||
Financial assets: | ||||||||||||||||
Cash and cash equivalents(1) | $ | 9,882 | $ | 9,882 | $ | 18,462 | $ | 18,462 | ||||||||
Federal funds sold and securities purchased under agreements to resell | 53,684 | 53,656 | 57,418 | 57,420 | ||||||||||||
Trading securities | 111,939 | 111,939 | 90,806 | 90,806 | ||||||||||||
Available-for-sale securities | 237,728 | 237,728 | 266,488 | 266,488 | ||||||||||||
Mortgage loans held for sale | 18,462 | 18,615 | 13,270 | 13,458 | ||||||||||||
Mortgage loans held for investment, net of allowance for loan losses | 375,563 | 370,845 | 412,142 | 406,233 | ||||||||||||
Advances to lenders | 5,449 | 5,144 | 5,766 | 5,412 | ||||||||||||
Derivative assets | 1,474 | 1,474 | 869 | 869 | ||||||||||||
Guaranty assets andbuy-ups | 9,520 | 14,624 | 7,688 | 9,024 | ||||||||||||
Total financial assets | $ | 823,701 | $ | 823,907 | $ | 872,909 | $ | 868,172 | ||||||||
Financial liabilities: | ||||||||||||||||
Federal funds purchased and securities sold under agreements to repurchase | $ | — | $ | — | $ | 77 | $ | 77 | ||||||||
Short-term debt | 200,437 | 200,493 | 330,991 | 332,290 | ||||||||||||
Long-term debt | 574,117 | 593,733 | 539,402 | 574,281 | ||||||||||||
Derivative liabilities | 1,029 | 1,029 | 2,715 | 2,715 | ||||||||||||
Guaranty obligations | 13,996 | 138,582 | 12,147 | 90,875 | ||||||||||||
Total financial liabilities | $ | 789,579 | $ | 933,837 | $ | 885,332 | $ | 1,000,238 | ||||||||
(1) | Includes restricted cash of $3.1 billion and $529 million as of December 31, 2009 and 2008, respectively. |
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For the Year Ended December 31, | ||||||||||||||||||||||||
2009 | 2008 | |||||||||||||||||||||||
Short-Term | Long-Term | Total Gains | Short-Term | Long-Term | Total Gains | |||||||||||||||||||
Debt | Debt | (Losses) | Debt | Debt | (Losses) | |||||||||||||||||||
(Dollars in millions) | ||||||||||||||||||||||||
Changes in instrument-specific credit risk | $ | — | $ | 33 | $ | 33 | $ | 6 | $ | 94 | $ | 100 | ||||||||||||
Other changes in fair value | — | (64 | ) | (64 | ) | (6 | ) | (151 | ) | (157 | ) | |||||||||||||
Debt fair value losses, net | $ | — | $ | (31 | ) | $ | (31 | ) | $ | — | $ | (57 | ) | $ | (57 | ) | ||||||||
20. | Commitments and Contingencies |
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As of December 31, 2009 | ||||||||||||||||
Loans and Mortgage- | ||||||||||||||||
Related Securities(1) | Unfunded Lending | Operating Leases | Other(2) | |||||||||||||
(Dollars in millions) | ||||||||||||||||
2010 | $ | 31,870 | $ | 194 | $ | 41 | $ | 112 | ||||||||
2011 | 31 | 207 | 39 | 22 | ||||||||||||
2012 | 1 | 247 | 34 | 14 | ||||||||||||
2013 | — | 44 | 22 | 8 | ||||||||||||
2014 | — | — | 14 | — | ||||||||||||
Thereafter | — | 1 | 38 | — | ||||||||||||
Total | $ | 31,902 | $ | 693 | $ | 188 | $ | 156 | ||||||||
(1) | Includes $31.4 billion, which have been accounted for as mortgage commitment derivatives. | |
(2) | Includes purchase commitments for certain telecom services, computer software and services, and other agreements. |
21. | Selected Quarterly Financial Information (Unaudited) |
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For the 2009 Quarter Ended | ||||||||||||||||
March 31 | June 30 | September 30 | December 31 | |||||||||||||
(Dollars and shares in millions, except per share amounts) | ||||||||||||||||
Interest income: | ||||||||||||||||
Trading securities | $ | 990 | $ | 923 | $ | 862 | $ | 1,084 | ||||||||
Available-for-sale securities | 3,721 | 3,307 | 3,475 | 3,115 | ||||||||||||
Mortgage loans | 5,598 | 5,611 | 5,290 | 5,022 | ||||||||||||
Other | 127 | 139 | 48 | 43 | ||||||||||||
Total interest income | 10,436 | 9,980 | 9,675 | 9,264 | ||||||||||||
Interest expense: | ||||||||||||||||
Short-term debt | 1,107 | 600 | 390 | 209 | ||||||||||||
Long-term debt | 6,081 | 5,645 | 5,455 | 5,358 | ||||||||||||
Total interest expense | 7,188 | 6,245 | 5,845 | 5,567 | ||||||||||||
Net interest income | 3,248 | 3,735 | 3,830 | 3,697 | ||||||||||||
Guaranty fee income | 1,752 | 1,659 | 1,923 | 1,877 | ||||||||||||
Trust management income | 11 | 13 | 12 | 4 | ||||||||||||
Investment gains (losses), net | 223 | (45 | ) | 785 | 495 | |||||||||||
Other-than-temporary impairments | (5,653 | ) | (1,097 | ) | (1,018 | ) | (1,289 | ) | ||||||||
Less: Noncredit portion of other-than-temporary impairments recognized in other comprehensive loss | — | 344 | 79 | (1,227 | ) | |||||||||||
Net other-than-temporary impairments | (5,653 | ) | (753 | ) | (939 | ) | (2,516 | ) | ||||||||
Fair value gains (losses), net | (1,460 | ) | 823 | (1,536 | ) | (638 | ) | |||||||||
Debt extinguishment losses, net | (79 | ) | (190 | ) | (11 | ) | (45 | ) | ||||||||
Losses from partnership investments | (357 | ) | (571 | ) | (520 | ) | (5,287 | ) | ||||||||
Fee and other income | 181 | 184 | 182 | 186 | ||||||||||||
Non-interest income (loss) | (5,382 | ) | 1,120 | (104 | ) | (5,924 | ) | |||||||||
Administrative expenses: | ||||||||||||||||
Salaries and employee benefits | 293 | 245 | 293 | 302 | ||||||||||||
Professional services | 143 | 180 | 178 | 183 | ||||||||||||
Occupancy expenses | 48 | 46 | 47 | 64 | ||||||||||||
Other administrative expenses | 39 | 39 | 44 | 63 | ||||||||||||
Total administrative expenses | 523 | 510 | 562 | 612 | ||||||||||||
Provision for credit losses | 20,334 | 18,225 | 21,896 | 12,171 | ||||||||||||
Foreclosed property expense (income) | 538 | 559 | 64 | (251 | ) | |||||||||||
Other expenses | 279 | 318 | 231 | 656 | ||||||||||||
Total expenses | 21,674 | 19,612 | 22,753 | 13,188 | ||||||||||||
Loss before federal income taxes | (23,808 | ) | (14,757 | ) | (19,027 | ) | (15,415 | ) | ||||||||
Provision (benefit) for federal income taxes | (623 | ) | 23 | (143 | ) | (242 | ) | |||||||||
Net loss | (23,185 | ) | (14,780 | ) | (18,884 | ) | (15,173 | ) | ||||||||
Less: Net (income) loss attributable to the noncontrolling interest | 17 | 26 | 12 | (2 | ) | |||||||||||
Net loss attributable to Fannie Mae | (23,168 | ) | (14,754 | ) | (18,872 | ) | (15,175 | ) | ||||||||
Preferred stock dividends | (29 | ) | (411 | ) | (883 | ) | (1,151 | ) | ||||||||
Net loss attributable to common stockholders | $ | (23,197 | ) | $ | (15,165 | ) | $ | (19,755 | ) | $ | (16,326 | ) | ||||
Loss per share—Basic and Diluted | $ | (4.09 | ) | $ | (2.67 | ) | $ | (3.47 | ) | $ | (2.87 | ) | ||||
Weighted-average common shares outstanding—Basic and Diluted | 5,666 | 5,681 | 5,685 | 5,687 |
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For the 2008 Quarter Ended | ||||||||||||||||
March 31 | June 30 | September 30 | December 31 | |||||||||||||
(Dollars and shares in millions, except per share amounts) | ||||||||||||||||
Interest income: | ||||||||||||||||
Trading securities | $ | 1,737 | $ | 1,376 | $ | 1,416 | $ | 1,349 | ||||||||
Available-for-sale securities | 3,085 | 3,087 | 3,295 | 3,747 | ||||||||||||
Mortgage loans | 5,662 | 5,769 | 5,742 | 5,519 | ||||||||||||
Other | 458 | 232 | 310 | 339 | ||||||||||||
Total interest income | 10,942 | 10,464 | 10,763 | 10,954 | ||||||||||||
Interest expense: | ||||||||||||||||
Short-term debt | 2,561 | 1,687 | 1,680 | 1,887 | ||||||||||||
Long-term debt | 6,691 | 6,720 | 6,728 | 6,387 | ||||||||||||
Total interest expense | 9,252 | 8,407 | 8,408 | 8,274 | ||||||||||||
Net interest income | 1,690 | 2,057 | 2,355 | 2,680 | ||||||||||||
Guaranty fee income | 1,752 | 1,608 | 1,475 | 2,786 | ||||||||||||
Trust management income | 107 | 75 | 65 | 14 | ||||||||||||
Investment gains (losses), net | (56 | ) | (376 | ) | 219 | (33 | ) | |||||||||
Net other-than-temporary impairments | (55 | ) | (507 | ) | (1,843 | ) | (4,569 | ) | ||||||||
Fair value gains (losses), net | (4,377 | ) | 517 | (3,947 | ) | (12,322 | ) | |||||||||
Debt extinguishment gains (losses), net | (145 | ) | (36 | ) | 23 | (64 | ) | |||||||||
Losses from partnership investments | (141 | ) | (195 | ) | (587 | ) | (631 | ) | ||||||||
Fee and other income | 227 | 225 | 164 | 156 | ||||||||||||
Non-interest income (loss) | (2,688 | ) | 1,311 | (4,431 | ) | (14,663 | ) | |||||||||
Administrative expenses: | ||||||||||||||||
Salaries and employee benefits | 286 | 304 | 167 | 275 | ||||||||||||
Professional services | 136 | 114 | 139 | 140 | ||||||||||||
Occupancy expenses | 54 | 55 | 52 | 66 | ||||||||||||
Other administrative expenses | 36 | 39 | 43 | 73 | ||||||||||||
Total administrative expenses | 512 | 512 | 401 | 554 | ||||||||||||
Provision for credit losses | 3,073 | 5,085 | 8,763 | 11,030 | ||||||||||||
Foreclosed property expense | 170 | 264 | 478 | 946 | ||||||||||||
Other expenses | 360 | 247 | 195 | 291 | ||||||||||||
Total expenses | 4,115 | 6,108 | 9,837 | 12,821 | ||||||||||||
Loss before federal income taxes and extraordinary losses | (5,113 | ) | (2,740 | ) | (11,913 | ) | (24,804 | ) | ||||||||
Provision (benefit) for federal income taxes | (2,928 | ) | (476 | ) | 17,011 | 142 | ||||||||||
Loss before extraordinary losses | (2,185 | ) | (2,264 | ) | (28,924 | ) | (24,946 | ) | ||||||||
Extraordinary losses, net of tax effect | (1 | ) | (33 | ) | (95 | ) | (280 | ) | ||||||||
Net loss | (2,186 | ) | (2,297 | ) | (29,019 | ) | (25,226 | ) | ||||||||
Less: Net (income) loss attributable to the noncontrolling interest | — | (3 | ) | 25 | (1 | ) | ||||||||||
Net loss attributable to Fannie Mae | (2,186 | ) | (2,300 | ) | (28,994 | ) | (25,227 | ) | ||||||||
Preferred stock dividends | (322 | ) | (303 | ) | (419 | ) | (25 | ) | ||||||||
Net loss attributable to common stockholders | $ | (2,508 | ) | $ | (2,603 | ) | $ | (29,413 | ) | $ | (25,252 | ) | ||||
Basic and Diluted loss per share: | ||||||||||||||||
Loss before extraordinary losses | $ | (2.57 | ) | $ | (2.51 | ) | $ | (12.96 | ) | $ | (4.42 | ) | ||||
Extraordinary loss, net of tax effect | — | (0.03 | ) | (0.04 | ) | (0.05 | ) | |||||||||
Basic and Diluted loss per share | $ | (2.57 | ) | $ | (2.54 | ) | $ | (13.00 | ) | $ | (4.47 | ) | ||||
Cash dividends per common share | $ | 0.35 | $ | 0.35 | $ | 0.05 | $ | — | ||||||||
Weighted-average common shares outstanding—Basic and Diluted | 975 | 1,025 | 2,262 | 5,652 |
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22. | Subsequent Event |
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