Entity information
Entity information (USD $) | |
In Millions, except Share data | 3 Months Ended
Mar. 31, 2010 |
Entity Information | |
Entity registrant name | FEDERAL NATIONAL MORTGAGE ASSOCIATION FANNIE MAE |
Entity central index key | 0000310522 |
Entity current reporting status | Yes |
Entity voluntary filers | No |
Current fiscal year end date | --12-31 |
Entity filer category | Large Accelerated Filer |
Entity well known seasoned issuer | Yes |
Entity common stock shares outstanding | 1,117,363,226 |
Entity public float | $645 |
Document information
Document information | |
3 Months Ended
Mar. 31, 2010 | |
Document Information | |
Document type | 10-Q |
Document period end date | 2010-03-31 |
Amendment flag | false |
Document Fiscal Year Focus | 2,010 |
Document Fiscal Period Focus | Q1 |
Condensed Consolidated Balance
Condensed Consolidated Balance Sheets (Unaudited) (USD $) | ||
In Millions | 3 Months Ended
Mar. 31, 2010 | 12 Months Ended
Dec. 31, 2009 |
ASSETS | ||
Cash and cash equivalents (includes cash of consolidated trust of $446 and $2,092, respectively) | $30,477 | $6,812 |
Restricted cash (includes restricted cash of consolidated trusts of $42,731 and $0, respectively) | 45,479 | 3,070 |
Federal funds sold and securities purchased under agreements to resell or similar arrangements | 62,446 | 53,684 |
Investments in securities: | ||
Trading, at fair value (includes securities of consolidated trusts of $32 and $5,599, respectively) | 72,529 | 111,939 |
Available-for-sale, at fair value (includes securities of consolidated trusts of $624 and $10,513, respectively, and securities pledged as collateral that may be sold or repledged of $0 and $1,148, respectively) | 108,667 | 237,728 |
Total investments in securities | 181,196 | 349,667 |
Mortgage loans: | ||
Loans held for sale, at lower of cost or fair value | 980 | 18,462 |
Loans held for investment, at amortized cost | ||
Loans held for investment, at amortized cost, of Fannie Mae | 309,991 | 256,434 |
Loans held for investment, at amortized cost, of consolidated trusts (includes loans pledged as collateral that may be sold or repledged of $2,895 and $1,947, respectively) | 2,679,336 | 129,590 |
Total loans held for investment | 2,989,327 | 386,024 |
Allowance for loan losses | (60,569) | (9,925) |
Total loans held for investment, net of allowance | 2,928,758 | 376,099 |
Total mortgage loans | 2,929,738 | 394,561 |
Advances to lenders | 4,151 | 5,449 |
Accrued interest receivable | ||
Accrued interest receivable of Fannie Mae | 4,333 | 3,774 |
Accrued interest receivable of consolidated trusts | 13,939 | 519 |
Allowance for accrued interest receivable | (7,611) | (536) |
Total accrued interest receivable, net of allowance | 10,661 | 3,757 |
Acquired property, net | 12,369 | 9,142 |
Derivative assets, at fair value | 435 | 1,474 |
Guaranty assets | 473 | 8,356 |
Deferred tax assets, net | 1,906 | 909 |
Partnership investments | 1,853 | 2,372 |
Servicer and MBS trust receivable | 679 | 18,329 |
Other assets | 11,892 | 11,559 |
Total assets | 3,293,755 | 869,141 |
Accrued interest payable | ||
Accrued interest payable of Fannie Mae | 5,006 | 4,951 |
Accrued interest payable of consolidated trusts | 10,558 | 29 |
Federal funds purchased and securities sold under agreements to repurchase | 180 | 0 |
Short-term debt | ||
Short-term debt of Fannie Mae | 207,822 | 200,437 |
Short-term debt of consolidated trusts | 6,343 | 0 |
Long-term debt | ||
Long-term debt of Fannie Mae (includes debt at fair value of $3,258 and $3,274, respectively) | 576,307 | 567,950 |
Long-term debt of consolidated trusts (includes debt at fair value of $310 and $0, respectively) | 2,472,192 | 6,167 |
Derivative liabilities, at fair value | 957 | 1,029 |
Reserve for guaranty losses (includes $33 and $4,772, respectively, related to Fannie Mae MBS included in Investments in Securities) | 233 | 54,430 |
Guaranty obligations | 827 | 13,996 |
Partnership liabilities | 2,020 | 2,541 |
Servicer and MBS trust payable | 9,799 | 25,872 |
Other liabilities | 9,882 | 7,020 |
Total liabilities | 3,302,126 | 884,422 |
Commitments and contingencies (Note 17) | (nil) - | (nil) - |
Fannie Mae stockholders' equity (deficit): | ||
Senior preferred stock, 1,000,000 shares issued and outstanding | 76,200 | 60,900 |
Preferred stock, 700,000,000 shares are authorized - 578,598,631 and 579,735,457 shares issued and outstanding, respectively | 20,291 | 20,348 |
Common stock, no par value, no maximum authorization - 1,267,426,377 and 1,265,674,761 shares issued, respectively; 1,115,813,353 and 1,113,358,051 shares outstanding, respectively | 665 | 664 |
Additional paid-in capital | 604 | 2,083 |
Accumulated deficit | (95,061) | (90,237) |
Accumulated other comprehensive loss | (3,754) | (1,732) |
Treasury stock, at cost, 151,613,024 and 152,316,710 shares, respectively | (7,396) | (7,398) |
Total Fannie Mae stockholders' deficit | (8,451) | (15,372) |
Noncontrolling interest | 80 | 91 |
Total deficit | (8,371) | (15,281) |
Total liabilities and equity (deficit) | $3,293,755 | $869,141 |
1_Condensed Consolidated Balanc
Condensed Consolidated Balance Sheets (Parenthetical) (Unaudited) (USD $) | ||
In Millions, except Share data | Mar. 31, 2010
| Dec. 31, 2009
|
ASSETS | ||
Cash of consolidated trusts included in cash | $446 | $2,092 |
Restricted cash of consolidated trusts included in restricted cash | 42,731 | |
Investments in securities: | ||
Securities of consolidated trusts at fair value included in trading securities | 32 | 5,599 |
Securities of consolidated trusts at fair value included in available-for-sale securities | 624 | 10,513 |
Securities pledged as collateral that may be sold or repledged included in Available-for-sale Securities | 0 | 1,148 |
Mortgage loans: | ||
Loans pledged as collateral that may be sold or repledged included in loans held for investment of consolidated trusts | 2,895 | 1,947 |
Liabilities: | ||
Long-term debt of Fannie Mae at fair value included in long-term debt of Fannie Mae | 3,258 | 3,274 |
Long-term debt of consolidated trusts at fair value included in long-term debt of consolidated trusts | 310 | |
Reserve for guaranty losses related to Fannie Mae MBS included in investments in securities | $33 | $4,772 |
Fannie Mae stockholders' equity (deficit): | ||
Senior preferred stock issued | 1,000,000 | 1,000,000 |
Senior preferred stock outstanding | 1,000,000 | 1,000,000 |
Preferred stock authorized | 700,000,000 | 700,000,000 |
Preferred stock issued | 578,598,631 | 579,735,457 |
Preferred stock outstanding | 578,598,631 | 579,735,457 |
Common stock par or stated value per share | 0 | 0 |
Common stock authorized | no maximum | no maximum |
Common stock issued | 1,267,426,377 | 1,265,674,761 |
Common stock outstanding | 1,115,813,353 | 1,113,358,051 |
Treasury stock, shares | 151,613,024 | 152,316,710 |
Condensed Consolidated Statemen
Condensed Consolidated Statements of Operations (Unaudited) (USD $) | ||
In Millions, except Per Share data | 3 Months Ended
Mar. 31, 2010 | 3 Months Ended
Mar. 31, 2009 |
Interest income: | ||
Trading securities | $315 | $990 |
Available-for-sale securities | 1,473 | 3,721 |
Mortgage loans : | ||
Mortgage loans of Fannie Mae | 3,298 | 4,707 |
Mortgage loans of consolidated trusts | 34,321 | 891 |
Other | 39 | 127 |
Total interest income | 39,446 | 10,436 |
Short-term debt: | ||
Interest expense, short-term debt of Fannie Mae | 116 | 1,107 |
Interest expense, short-term debt of consolidated trusts | 2 | 0 |
Long-term debt: | ||
Interest expense, long-term debt of Fannie Mae | 5,081 | 5,992 |
Interest expense, long-term debt of consolidated trusts | 31,458 | 89 |
Total interest expense | 36,657 | 7,188 |
Net interest income | 2,789 | 3,248 |
Provision for loan losses | (11,939) | (2,509) |
Net interest income (loss) after provision for loan losses | (9,150) | 739 |
Guaranty fee income (includes imputed interest of $29 and $150 for the three months ended March 31, 2010 and 2009, respectively) | 54 | 1,752 |
Investment gains (losses), net | 166 | 223 |
Other-than-temporary impairments | (186) | (5,653) |
Noncredit portion of other-than-temporary impairments recognized in other comprehensive loss | (50) | 0 |
Net other-than-temporary impairments | (236) | (5,653) |
Fair value losses, net | (1,705) | (1,460) |
Debt extinguishment gains (losses), net (includes debt extinguishment losses related to consolidated trusts of $69 for the three months ended March 31, 2010) | (124) | (79) |
Losses from partnership investments | (58) | (357) |
Fee and other income | 179 | 192 |
Non-interest income (loss) | (1,724) | (5,382) |
Administrative expenses: | ||
Salaries and employee benefits | 324 | 293 |
Professional services | 194 | 143 |
Occupancy expenses | 41 | 48 |
Other administrative expenses | 46 | 39 |
Total administrative expenses | 605 | 523 |
Provision (benefit) for guaranty losses | (36) | 17,825 |
Foreclosed property expense (income) | (19) | 538 |
Other expenses | 172 | 279 |
Total expenses | 722 | 19,165 |
Loss before federal income taxes | (11,596) | (23,808) |
Benefit for federal income taxes | (67) | (623) |
Net income (loss) | (11,529) | (23,185) |
Less: Net loss (income) attributable to the noncontrolling interest | (1) | 17 |
Net loss attributable to Fannie Mae | (11,530) | (23,168) |
Preferred stock dividends | (1,527) | (29) |
Net loss attributable to common stockholders | ($13,057) | ($23,197) |
Loss per share -Basic and Diluted | -2.29 | -4.09 |
Weighted-average common shares outstanding - Basic and Diluted | 5,692 | 5,666 |
2_Condensed Consolidated Statem
Condensed Consolidated Statements of Operations (Parenthetical) (Unaudited) (USD $) | ||
In Millions | 3 Months Ended
Mar. 31, 2010 | 3 Months Ended
Mar. 31, 2009 |
Consolidated Statements of Operations | ||
Imputed interest included in guaranty fee income | $29 | $150 |
Debt extinguishment gains (losses) related to consolidated trusts included in Debt extinguishment gains (losses), net | $69 |
3_Condensed Consolidated Statem
Condensed Consolidated Statements of Cash Flows (Unaudited) (USD $) | ||
In Millions | 3 Months Ended
Mar. 31, 2010 | 3 Months Ended
Mar. 31, 2009 |
Cash flows used in operating activities: | ||
Net income (loss) | ($11,529) | ($23,185) |
Reconciliation of net loss to net cash used in operating activities: | ||
Amortization of debt of Fannie Mae cost basis adjustments | 364 | 1,326 |
Amortization of debt of consolidated trusts cost basis adjustments | (68) | (2) |
Provision for loan and guaranty losses | 11,903 | 20,334 |
Valuation (gains) losses | (990) | 5,403 |
Current and deferred federal income taxes | (67) | (1,713) |
Derivatives fair value adjustments | 891 | (3) |
Purchases of loans held for sale | (17) | (33,332) |
Proceeds from repayments of loans held for sale | 9 | 295 |
Net change in trading securities, excluding non-cash transfers | (31,679) | 1,949 |
Other, net (operating) | (1,720) | (1,417) |
Net cash used in operating activities | (32,903) | (30,345) |
Cash flows provided by investing activities: | ||
Purchases of tradings securities held for investment | (6,695) | 0 |
Proceeds from maturities of trading securities held for investment | 805 | 2,656 |
Proceeds from sales of trading securities held for investment | 15,068 | 38 |
Purchases of available-for-sale securities | (107) | (22,697) |
Proceeds from maturities of available-for-sale securities | 4,120 | 9,731 |
Proceeds from sales of available-for-sale securities | 6,154 | 53,972 |
Purchases of loans held for investment | (19,863) | (9,859) |
Proceeds from repayments of loans held for investment of Fannie Mae | 3,250 | 10,974 |
Proceeds from repayments of loans held for investment of consolidated trusts | 130,226 | 3,020 |
Net changes in restricted cash | 3,174 | 0 |
Advances to lenders (SCF) | (10,338) | (22,877) |
Proceeds from disposition of acquired property | 7,678 | 4,554 |
Reimbursements to servicers for loan advances | (11,748) | (4,434) |
Net change in federal funds sold and securities purchased under agreements to resell or similar arrangements | (9,135) | 13,405 |
Other, net (investing) | (382) | (195) |
Net cash provided by investing activities | 112,207 | 38,288 |
Cash flows used in financing activities: | ||
Proceeds from issuance of short-term debt of Fannie Mae | 192,421 | 360,173 |
Proceeds from issuance of short-term debt of consolidated trusts | 3,332 | 0 |
Payments to redeem short-term debt of Fannie Mae | (185,156) | (417,553) |
Payments to redeem short-term debt of consolidated trusts | (9,513) | 0 |
Proceeds from issuance of long-term debt of Fannie Mae | 100,604 | 105,057 |
Proceeds from issuance of long-term debt of consolidated trusts | 83,692 | 0 |
Payments to redeem long-term debt of Fannie Mae | (92,355) | (65,290) |
Payments to redeem long-term debt of consolidated trusts | (162,617) | (127) |
Proceeds from senior preferred stock purchase agreement with Treasury | 15,300 | 15,200 |
Net change in federal funds purchased and securities sold under agreements to repurchase | 180 | (65) |
Other, net (financing) | (1,527) | (25) |
Net cash used in financing activities | (55,639) | (2,630) |
Net (decrease) increase in cash and cash equivalents | 23,665 | 5,313 |
Cash and cash equivalents at beginning of period | 6,812 | 17,933 |
Cash and cash equivalents at end of period | 30,477 | 23,246 |
Cash paid during the period for: | ||
Interest | 40,660 | 7,806 |
Income taxes | 0 | 848 |
Non-cash activities (excluding transition-related impacts - see Note 2): | ||
Mortgage loans acquired by assuming debt | 130,042 | 13 |
Net transfers from mortgage loans held for investment of consolidated trusts to mortgage loans held for investment of Fannie Mae | 55,074 | 0 |
Transfers from advances to lenders to investments in securities | 0 | 13,131 |
Transfers from advances to lenders to loans held for investment of consolidated trusts | 11,012 | 0 |
Net transfers from mortgage loans to acquired property | $2,233 | $916 |
4_Condensed Consolidated Statem
Condensed Consolidated Statements of Changes in Stockholders' Equity (Deficit) (Unaudited) (USD $) | ||||||||||||
In Millions | Senior preferred, stock
| Preferred, stock
| Common, stock
| Senior preferred, value
| Preferred, value
| Common, value
| Additional paid-in capital (Equity)
| Retained earnings (accumulated deficit)
| Accumulated other comprehensive income (loss)
| Treasury stock
| Non controlling interest
| Total
|
Stockholders' equity, shares issued, beginning balance at Dec. 31, 2008 | 1 | 597 | 1,085 | |||||||||
Stockholders' equity, beginning balance at Dec. 31, 2008 | $1,000 | $21,222 | $650 | $3,621 | ($26,790) | ($7,673) | ($7,344) | $157 | ($15,157) | |||
Change in investment in noncontrolling interest | (3) | (3) | ||||||||||
Comprehensive loss: | ||||||||||||
Net income (loss) | (23,168) | (17) | (23,185) | |||||||||
Other comprehensive income (loss), net of tax effect: | ||||||||||||
Changes in net unrealized losses on available-for-sale securities, net of tax | 505 | 505 | ||||||||||
Reclassification adjustment for other-than-temporary impairments recognized in net loss, net of tax | 3,674 | 3,674 | ||||||||||
Reclassification adjustment for gains (losses) included in net loss, net of tax | 32 | 32 | ||||||||||
Unrealized gains on guaranty assets and guaranty fee buy ups | 29 | 29 | ||||||||||
Prior service cost and actuarial gains (losses), net of amortization for defined benefit plans, net of tax | 15 | 15 | ||||||||||
Total comprehensive income (loss) | (18,930) | |||||||||||
Senior preferred stock dividends | (25) | (25) | ||||||||||
Increase to senior preferred liquidation preference | 15,200 | 15,200 | ||||||||||
Conversion of convertible preferred stock into common stock, value | (593) | 10 | 583 | |||||||||
Conversion of convertible preferred stock into common stock, shares | (12) | 19 | ||||||||||
Other, value | 19 | 1 | (34) | (14) | ||||||||
Other, shares | 1 | |||||||||||
Stockholders' equity, ending balance at Mar. 31, 2009 | 16,200 | 20,629 | 660 | 4,198 | (49,957) | (3,418) | (7,378) | 137 | (18,929) | |||
Stockholders' equity, shares issued, ending balance at Mar. 31, 2009 | 1 | 585 | 1,105 | |||||||||
Stockholders' equity, shares issued, beginning balance at Dec. 31, 2009 | 1 | 580 | 1,113 | |||||||||
Stockholders' equity, beginning balance at Dec. 31, 2009 | 60,900 | 20,348 | 664 | 2,083 | (90,237) | (1,732) | (7,398) | 91 | (15,281) | |||
Cumulative effect from the adoption of the accounting standards on transfers of financial assets and consolidation | 6,706 | (3,394) | (14) | 3,298 | ||||||||
Stockholders' equity, beginning balance adjusted | (83,531) | (5,126) | 77 | (11,983) | ||||||||
Change in investment in noncontrolling interest | 2 | 2 | ||||||||||
Comprehensive loss: | ||||||||||||
Net income (loss) | (11,530) | 1 | (11,529) | |||||||||
Other comprehensive income (loss), net of tax effect: | ||||||||||||
Changes in net unrealized losses on available-for-sale securities, net of tax | 1,318 | 1,318 | ||||||||||
Reclassification adjustment for other-than-temporary impairments recognized in net loss, net of tax | 155 | 155 | ||||||||||
Reclassification adjustment for gains (losses) included in net loss, net of tax | (103) | (103) | ||||||||||
Prior service cost and actuarial gains (losses), net of amortization for defined benefit plans, net of tax | 2 | 2 | ||||||||||
Total comprehensive income (loss) | (10,157) | |||||||||||
Senior preferred stock dividends | (1,527) | (1,527) | ||||||||||
Increase to senior preferred liquidation preference | 15,300 | 15,300 | ||||||||||
Conversion of convertible preferred stock into common stock, value | (57) | 1 | 56 | |||||||||
Conversion of convertible preferred stock into common stock, shares | (1) | 2 | ||||||||||
Other, value | (8) | 2 | (6) | |||||||||
Other, shares | 1 | |||||||||||
Stockholders' equity, ending balance at Mar. 31, 2010 | $76,200 | $20,291 | $665 | $604 | ($95,061) | ($3,754) | ($7,396) | $80 | ($8,371) | |||
Stockholders' equity, shares issued, ending balance at Mar. 31, 2010 | 1 | 579 | 1,116 |
5_Condensed Consolidated Statem
Condensed Consolidated Statements of Changes in Stockholders' Equity (Deficit) (Paranthetical) (Unaudited) (USD $) | ||
In Millions | 3 Months Ended
Mar. 31, 2010 | 3 Months Ended
Mar. 31, 2009 |
Consolidated Statement of Changes in Equity (Deficit) | ||
(Tax on unrealized loss on available-for-sale securities) | $710 | $271 |
(Tax on reclassification adjustment for other-than-temporary impairments recognized in net loss) | 81 | 1,979 |
(Tax on reclassification adjustment for gains (losses) included in net loss) | $56 | $17 |
Summary of Significant Accounti
Summary of Significant Accounting Policies | |
3 Months Ended
Mar. 31, 2010 | |
Note to Consolidated Financial Statements | |
Summary of Significant Accounting Policies | 1.Summary of Significant Accounting PoliciesOrganizationWe are a stockholder-owned corporation organized and existing under the Federal National Mortgage Association Charter Act (the Charter Act or our charter). We are a government-sponsored enterprise (GSE), and we are subject to government oversight and regulation. Our regulators include the Federal Housing Finance Agency (FHFA), the U.S.Department of Housing and Urban Development (HUD), the U.S.Securities and Exchange Commission (SEC), and the U.S.Department of the Treasury (Treasury). Through July29, 2008, we were regulated by the Office of Federal Housing Enterprise Oversight (OFHEO), which was replaced on July30, 2008 with FHFA upon the enactment of the Federal Housing Finance Regulatory Reform Act of 2008 (2008 Reform Act). The U.S.government does not guarantee our securities or other obligations.ConservatorshipOn September7, 2008, the Secretary of the Treasury and the Director of FHFA announced several actions taken by Treasury and FHFA regarding Fannie Mae, which included: (1)placing us in conservatorship; (2)the execution of a senior preferred stock purchase agreement by our conservator, on our behalf, and Treasury, pursuant to which we issued to Treasury both senior preferred stock and a warrant to purchase common stock; and (3)Treasurys agreement to establish a temporary secured lending credit facility that was available to us and the other GSEs regulated by FHFA under identical terms until December 31, 2009. Under the Federal Housing Enterprises Financial Safety and Soundness Act of 1992, as amended by the 2008 Reform Act, (together, the GSE Act), the conservator immediately succeeded to all rights, titles, powers and privileges of Fannie Mae, and of any stockholder, officer or director of Fannie Mae with respect to Fannie Mae and its assets, and succeeded to the title to the books, records and assets of any other legal custodian of Fannie Mae. FHFA, in its role as conservator, has overall management authority over our business. The conservator has since delegated specified authorities to our Board of Directors and has delegated to management the authority to conduct our day-to-day operations. The conservator retains the authority to withdraw its delegations at any time.As of May 9, 2010, the conservator has advised us that it has not disaffirmed or repudiated any contracts we entered into prior to its appointment as conservator. The GSE Act requires FHFA to exercise its right to disaffirm or repudiate most contracts within a reasonable period of time after its appointment as conservator. The conservator has the power to transfer or sell any asset or liability of Fannie Mae (subject to limitations and post-transfer notice provisions for transfers of qualified financial contracts) without any approval, assignment of rights or consent of any party. The GSE Act, however, provides that mortgage loans and mortgage-related assets that have been transferred to a Fannie Mae MBS trust must be held by the conservator for the beneficial owners of the Fannie Mae MBS and cannot be used to satisfy the general creditors of the company. As of May 9, 2010, FHFA has not exercised this power.Nei |
Adoption of the New Accounting
Adoption of the New Accounting Standards on the Transfers of Financial Assets and Consolidation of Variable Interest Entities | |
3 Months Ended
Mar. 31, 2010 | |
Note to Consolidated Financial Statements | |
Adoption of the New Accounting Standards on the Transfers of Financial Assets and Consolidation of Variable Interest Entities | 2. Adoption of the New Accounting Standards on the Transfers of Financial Assets and Consolidation of Variable Interest EntitiesEffective January 1, 2010, we prospectively adopted the new accounting standards on the transfer of financial assets and the consolidation of VIEs (the new accounting standards) for all VIEs existing as of January 1, 2010 (transition date). The new accounting standards removed the scope exception for QSPEs and replaced the previous consolidation model with a qualitative model for determining the primary beneficiary of a VIE. Upon adoption of the new accounting standards, we consolidated the substantial majority of our single-class securitization trusts, which had significant impacts on our condensed consolidated financial statements. The key financial statement impacts are summarized below. The mortgage loans and debt reported in our condensed consolidated balance sheet increased significantly at the transition date because we recognized the underlying assets and liabilities of the newly consolidated trusts. We recorded the trusts mortgage loans and the debt held by third parties at their unpaid principal balance at the transition date. Prospectively, we recognized the interest income on the trusts mortgage loans and interest expense on the trusts debt, resulting in an increase in the interest income and interest expense reported in our condensed consolidated statements of operations compared to prior periods.Another significant impact was the elimination of our guaranty accounting for the newly consolidated trusts. We derecognized the previously recorded guaranty-related assets and liabilities associated with the newly consolidated trusts from our condensed consolidated balance sheets. We also eliminated our reserve for guaranty losses and recognized an allowance for loan losses for such trusts. In our condensed consolidated statements of operations, we no longer recognize guaranty fee income for the newly consolidated trusts, as the revenue is now recorded as a component of loan interest income. When we recognized the newly consolidated trusts assets and liabilities at the transition date, we also derecognized our investments in these trusts, resulting in a decrease in our investments in MBS that are classified as trading and AFS securities. Instead of being recorded as an asset, our investments in Fannie Mae MBS reduce the debt reported in our condensed consolidated balance sheets. Accordingly, the purchase and subsequent sale of MBS issued by consolidated trusts are accounted for in our condensed consolidated financial statements as the extinguishment and issuance of the debt of consolidated trusts, respectively. Furthermore, under the new accounting standards, a transfer of mortgage loans from our portfolio to a trust will generally not qualify for sale treatment. The new accounting standards do not change the economic risk to our business, specifically our exposure to liquidity, credit, and interest rate risks. We continue to securitize mortgage loans originated by lenders in the primary mortgage market into Fannie Mae MBS.Refer to the Principles of Consolidation section in Note 1, Summary of Significant Acc |
Consolidations and Transfers of
Consolidations and Transfers of Financial Assets | |
3 Months Ended
Mar. 31, 2010 | |
Note to Consolidated Financial Statements | |
Consolidations and Transfers of Financial Assets | 3. Consolidations and Transfers of Financial AssetsWe have interests in various entities that are considered to be VIEs. The primary types of entities are securitization trusts guaranteed by us via lender swap and portfolio securitization transactions, mortgage and asset-backed trusts that were not created by us, as well as housing partnerships that are established to finance the acquisition, construction, development or rehabilitation of affordable multifamily and single-family housing. These interests also include investments in securities issued by VIEs, such as Fannie Mae MBS created pursuant to our securitization transactions and our guaranty to the entity. Our adoption of the new accounting standards on the transfers of financial assets and consolidation of VIEs resulted in the majority of our single-class securitization trusts being consolidated by us.Consolidated VIEsThe following table displays the assets and liabilities of consolidated VIEs in our condensed consolidated balance sheets as of March 31, 2010 and December 31, 2009. The difference between total assets of consolidated VIEs and total liabilities of consolidated VIEs is primarily due to our investment in the debt securities of consolidated VIEs. In general, the investors in the obligations of consolidated VIEs have recourse only to the assets of those VIEs and do not have recourse to us, except where we provide a guaranty to the VIE. As of March 31, December 31, 2010(1) 2009(1) (Dollars in millions) Assets: Cash and cash equivalents $ 446 $ 2,092 Restricted cash 42,731 - Trading securities 32 5,599 Available-for-sale securities 624 10,513 Loans held for sale 799 11,646 Loans held for investment 2,679,336 129,590 Accrued interest receivable 13,939 519 Servicer and MBS trust receivable 512 466 Other assets(2) 38 451 Total assets of consolidated VIEs $ 2,738,457 $ 160,876 Liabilities: Accrued interest payable $ 10,558 $ 29 Short-term debt 6,343 - Long-term debt 2,472,192 6,167 Servicer and MBS trust payable 6,657 850 Other liabilities(3) 46 385 Total liabilities of consolidated VIEs $ 2,495,796 $ 7,431 __________ (1) Includes VIEs created through lender swaps, private label wraps and portfolio securitization transactions. (2) Includes partnership investments of $430 million and cash, cash equivalents and restricted cash of $21 million in limited partnerships as of December 31, 2009. (3) Includes partnership liabilities of $385 million as of December 31, 2009. The adoption of the new accounting standards resulted in significant changes in the consolidation status of VIEs. Refer to Note 2, Adoption of the New Accounting Standards on the Transfers of Financial Assets and Consolidation of Variable Interest Entities for additional information regarding the impact of transition.In addition to the VIEs consolidated as a result of adopting the new accounting standards, we consolidated VIEs as of March 31, 2010 that were not consolidated as of December 31, 2009. These VIEs are Fannie Mae multi-class resecuritization trusts and were consolidated because we now hold in our portf |
Mortgage Loans
Mortgage Loans | |
3 Months Ended
Mar. 31, 2010 | |
Note to Consolidated Financial Statements | |
Mortgage Loans | 4.Mortgage LoansThe following table displays loans in our mortgage portfolio as of March 31, 2010 and December 31, 2009 and reflects the adoption of the new accounting standards. As of March 31, 2010 December 31, 2009(1) Of Of Of Of Fannie Consolidated Fannie Consolidated Mae Trusts Total Mae Trusts Total (Dollars in millions) Single-family(2) $ 215,191 $ 2,619,988 $ 2,835,179 $ 166,657 $ 129,472 $ 296,129 Multifamily 107,725 58,932 166,657 108,513 11,901 120,414 Total unpaid principal balance of mortgage loans 322,916 2,678,920 3,001,836 275,170 141,373 416,543 Unamortized premiums (discounts) and other cost basis adjustments, net (12,727) 1,215 (11,512) (11,196) 28 (11,168) Lower of cost or fair value adjustments on loans held for sale (17) - (17) (729) (160) (889) Allowance for loan losses for loans held for investment (25,675) (34,894) (60,569) (8,078) (1,847) (9,925) Total mortgage loans $ 284,497 $ 2,645,241 $ 2,929,738 $ 255,167 $ 139,394 $ 394,561 ____________ (1) Certain prior period amounts have been reclassified to conform to the current period presentation. (2) As of March 31, 2010, our single-family of Fannie Mae amount of $215.2 billion includes unpaid principal balance of $40.1 billion related to credit-impaired loans that were acquired from MBS trusts in March 2010. Fannie Mae paid this amount, along with accrued interest of $2.5 billion, in April 2010. We acquired credit impaired loans from MBS trusts with an unpaid principal balance totaling $46.4 billion in April 2010. This amount will be paid, along with accrued interest of approximately $2.7 billion, in May 2010. Impaired LoansImpaired loans include performing and nonperforming single-family and multifamily TDRs, acquired credit-impaired loans, and other multifamily loans. The following table displays the recorded investment and corresponding specific loss allowance as of March 31, 2010 and December 31, 2009 for all impaired loans. As of March 31, 2010 As of December 31, 2009 Recorded Net Recorded Net Investment Allowance Investment Investment Allowance Investment (Dollars in millions) Impaired loans:(1) With valuation allowance $ 122,080 $ 30,554 $ 91,526 $ 27,050 $ 5,995 $ 21,055 Without valuation allowance(2) 8,989 - 8,989 8,420 - 8,420 Total $ 131,069 $ 30,554 $ 100,515 $ 35,470 $ 5,995 $ 29,475 __________ (1) Includes single-family loans individually impaired and restructured in a TDR with a recorded investment of $120.2 billion and $23.9 billion as of March 31, 2010 and December 31, 2009, respectively. Includes multifamily loans individually impaired and restructured in a TDR with a recorded investment of $51 million as of March 31, 2010 and December 31, 2009. (2) The discounted cashflows, collateral value or fair value equals or exceeds the carrying value of the loan, and as such, no valuation allowance is required. The average recorded investment in impaired loans was $115.4 billion and $13.2 billion for the three months ended March 31, 2010 and 2009, resp |
Allowance for Loan Losses and R
Allowance for Loan Losses and Reserve for Guaranty Losses | |
3 Months Ended
Mar. 31, 2010 | |
Note to Consolidated Financial Statements | |
Allowance for Loan Losses and Reserve for Guaranty Losses | 5. Allowance for Loan Losses and Reserve for Guaranty LossesWe maintain an allowance for loan losses for loans held for investment in our mortgage portfolio and loans backing Fannie Mae MBS issued from consolidated trusts and a reserve for guaranty losses related to loans backing Fannie Mae MBS issued from unconsolidated trusts and loans that we have guaranteed under long-term standby commitments. We refer to our allowance for loan losses and reserve for guaranty losses collectively as our combined loss reserves. When calculating our guaranty reserve, we consider all contractually past due interest income including payments expected to be missed between the balance sheet date and the point of loan acquisition or foreclosure. When calculating our loan loss allowance, we consider only our net recorded investment in the loan at the balance sheet date, which includes interest income only while the loan was on accrual status. Determining the adequacy of our allowance for loan losses and reserve for guaranty losses is complex and requires judgment about the effect of matters that are inherently uncertain.Upon recognition of the mortgage loans held by newly consolidated trusts at the transition date, we increased our allowance for loan losses and decreased our reserve for guaranty losses. The decrease in our combined loss reserves of $10.5 billion reflects the difference in the methodology used to estimate incurred losses under our allowance for loan losses versus our reserve for guaranty losses and recording the portion of the reserve related to accrued interest to Allowance for accrued interest receivable in our condensed consolidated balance sheets. See Note 2, Adoption of the New Accounting Standards on the Transfers of Financial Assets and Consolidation of Variable Interest Entities for additional information.Although our loss models include extensive historical loan performance data, our loss reserve process is subject to risks and uncertainties particularly in the rapidly changing credit environment. For the Three Months Ended March 31, 2010 2009 Allowance for loan losses: Beginning balance(1)(2) $ 9,925 $ 2,772 Adoption of new accounting standards 43,576 - Provision for loan losses 11,939 2,509 Charge-offs(3) (5,160) (637) Recoveries 374 35 Net reclassification of portion of allowance related to interest(1)(4) (85) (49) Ending balance(1)(5)(8) $ 60,569 $ 4,630 Reserve for guaranty losses: Beginning balance $ 54,430 $ 21,830 Adoption of new accounting standards (54,103) - Provision (benefit) for guaranty losses (36) 17,825 Charge-offs(6)(7) (61) (2,944) Recoveries 3 165 Ending balance $ 233 $ 36,876 ___________ (1) Prior period amounts have been reclassified to conform to current year presentation. (2) Includes $1.8 billion related to loans of consolidated trusts as of December 31, 2009. (3) Includes accrued interest of $579 million and $247 million for the three months ended March 31, 2010 and 2009, respectively. (4) Represents reclassification of amounts recorded in provision for loan losses and charge-offs that relate to allowanc |
Investments in Securities
Investments in Securities | |
3 Months Ended
Mar. 31, 2010 | |
Note to Consolidated Financial Statements | |
Investments in Securities | 6. Investments in SecuritiesTrading SecuritiesTrading securities are recorded at fair value with subsequent changes in fair value recorded as Fair value losses, net in our condensed consolidated statements of operations. The following table displays our investments in trading securities and the cumulative amount of net losses recognized from holding these securities as of March 31, 2010 and December 31, 2009. As of March 31, 2010 December 31, 2009 (Dollars in millions) Mortgage-related securities: Fannie Mae $ 8,239 $ 74,750 Freddie Mac 6,502 15,082 Ginnie Mae 16 1 Alt-A private-label securities 1,405 1,355 Subprime private-label securities 1,683 1,780 CMBS 10,098 9,335 Mortgage revenue bonds 611 600 Other mortgage-related securities 158 154 Total 28,712 103,057 Non-mortgage-related securities: U.S. Treasury securities(1) 35,650 3 Asset-backed securities 7,991 8,515 Corporate debt securities 176 364 Total 43,817 8,882 Total trading securities $ 72,529 $ 111,939 Losses in trading securities held in our portfolio, net $ 3,783 $ 2,685 __________ (1) Certain prior year amounts have been reclassified to conform to our current period presentation. As of March 31, 2010, we held U.S. Treasury securities with fair value of $11.5 billion, which we elected to classify as cash and cash equivalents in our condensed consolidated balance sheets.The following table displays information about our net trading gains and losses for the three months ended March 31, 2010 and 2009. For the Three Months Ended March 31, 2010 2009 (Dollars in millions) Net trading gains (losses): Mortgage-related securities $ 1,006 $ (121) Non-mortgage-related securities 52 288 Total $ 1,058 $ 167 Net trading gains (losses) recorded in the period related to securities still held at period end: Mortgage-related securities $ 900 $ (122) Non-mortgage-related securities 48 424 Total $ 948 $ 302 Available-for-Sale SecuritiesWe measure AFS securities at fair value with unrealized gains and losses recorded as a component of AOCI, net of tax, in our condensed consolidated balance sheets. We record realized gains and losses from the sale of AFS securities in Investment gains, net in our condensed consolidated statements of operations.The following table displays the gross realized gains, losses and proceeds on sales of AFS securities for the three months ended March 31, 2010 and 2009. For the Three Months Ended March 31, 2010 2009 (Dollars in millions) Gross realized gains $ 265 $ 799 Gross realized losses 120 663 Total proceeds(1) 4,598 31,910 __________ (1) Excludes proceeds from the initial sale of securities from new portfolio securitizations included in quot;Note 3, Consolidations and Transfers of Financial Assets.quot; The following tables display the amortized cost, gross unrealized gains and losses and fair value by major security type for AFS securities we held as of March 31, 2010 and December 31, 2009. As of March 31, 2010 Gross Gross Total Gross Unrealized Unrealized Total Amo |
Financial Guarantees and Master
Financial Guarantees and Master Servicing | |
3 Months Ended
Mar. 31, 2010 | |
Note to Consolidated Financial Statements | |
Financial Guarantees and Master Servicing | 7.Financial GuaranteesAs a result of adopting the new accounting standards, we derecognized the previously recognized guaranty assets, guaranty obligations, master servicing assets, and master servicing liabilities associated with the newly consolidated trusts from our condensed consolidated balance sheets.For our guarantees to unconsolidated trusts and other guaranty arrangements, we recognize a guaranty obligation for our obligation to stand ready to perform on these guarantees. For those guarantees recognized in our condensed consolidated balance sheets, our maximum potential exposure under these guarantees is primarily comprised of the unpaid principal balance of the underlying mortgage loans, which totaled $48.4 billion as of March 31, 2010. The maximum amount we could recover through available credit enhancements and recourse with third parties on guarantees recognized in our condensed consolidated balance sheets was $13.7billion as of March 31, 2010. In addition, we had exposure of $10.8billion for other guarantees not recognized in our condensed consolidated balance sheets as of March 31, 2010, which primarily represents the unpaid principal balance of loans underlying guarantees issued prior to the effective date of the current accounting standards on guaranty accounting. The maximum amount we could recoverthrough available credit enhancements and recourse with third parties on guarantees not recognized in ourcondensed consolidatedbalance sheets was $4.1 billion as of March 31, 2010. Recoverability of such credit enhancements and recourse is subject to, among other factors, our mortgage insurers and financial guarantors ability to meet their obligations to us.As of December 31, 2009, our maximum potential exposure for guarantees recognized in our condensed consolidated balance sheets was primarily comprised of the unpaid principal balance of the underlying mortgage loans, which totaled $2.5 trillion. The maximum amount we could recover through available credit enhancements and recourse with third parties for these guarantees was $113.4 billion. In addition, we had exposure of $135.7 billion for other guarantees not recognized in our condensed consolidated balance sheets as of December 31, 2009. The maximum amount we could recover through available credit enhancements and recourse with third parties on guarantees not recognized in our condensed consolidated balance sheets was $13.6 billion as of December 31, 2009. Risk Characteristics of our Book of BusinessWe gauge our performance risk under our guaranty based on the delinquency status of the mortgage loans we hold in portfolio, or in the case of mortgage-backed securities, the underlying mortgage loans of the related securities. Management also monitors the serious delinquency rate, which is the percentage of single-family loans three or more months past due and the percentage of multifamily loans two or more months past due, of loans with certain risk characteristics, such as mark-to-market loan-to-value and operating debt service coverage ratios. We use this information, in conjunction with housing market and economic conditions, to structure our pricing and our eligibility and |
Acquired Property Net
Acquired Property Net | |
3 Months Ended
Mar. 31, 2010 | |
Note to Consolidated Financial Statements | |
Acquired Propery Net | 8.Acquired Property, NetAcquired property, net consists of held-for-sale foreclosed property received in full satisfaction of a loan net of a valuation allowance for declines in the fair value of foreclosed properties after initial acquisition. We classify as held for sale those properties that we intend to sell and are actively marketed for sale. The following table displays the activity in acquired property and the related valuation allowance for the three months ended March 31, 2010 and 2009. For the Three Months Ended For the Three Months Ended March 31, 2010 March 31, 2009 Acquired Valuation Acquired Acquired Valuation Acquired Property Allowance (1) Property, Net Property Allowance (1) Property, Net (Dollars in millions) Beginning balance, January 1 $ 9,716 $ (574) $ 9,142 $ 8,040 $ (1,122) $ 6,918 Additions 6,762 (52) 6,710 2,542 (16) 2,526 Disposals (3,425) 206 (3,219) (2,823) 373 (2,450) Write-downs, net of recoveries - (264) (264) - (364) (364) Ending balance, March 31 $ 13,053 $ (684) $ 12,369 $ 7,759 $ (1,129) $ 6,630 __________ (1) Reflects activities in the valuation allowance for acquired properties held primarily by our single-family segment. |
Short-term Borrowings and Long-
Short-term Borrowings and Long-term Debt | |
3 Months Ended
Mar. 31, 2010 | |
Note to Consolidated Financial Statements | |
Short-term Borrowings and Long-term Debt | 9.Short-Term Borrowings and Long-Term DebtOur short-term borrowings and long-term debt increased significantly due to our adoption of the new accounting standards on the transfers of financial assets and the consolidation of VIEs.Short-Term BorrowingsOur short-term borrowings (borrowings with an original contractual maturity of one year or less) consist of both Federal funds purchased and securities sold under agreements to repurchase and Short-term debt in our condensed consolidated balance sheets. The following table displays our outstanding short-term borrowings and weighted-average interest rates as of March 31, 2010 and December 31, 2009. As of March 31, 2010 December 31, 2009 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 $ 180 0.01 % $ - - % Fixed-rate short-term debt: Discount notes $ 207,517 0.26 % $ 199,987 0.27 % Foreign exchange discount notes 305 1.64 300 1.50 Other short-term debt - - 100 0.53 Total fixed-rate short-term debt 207,822 0.26 200,387 0.27 Floating-rate short-term debt(2) - - 50 0.02 Total short-term debt of Fannie Mae 207,822 0.26 % 200,437 0.27 % Debt of consolidated trusts 6,343 0.11 - - Total short-term debt $ 214,165 0.25 % $ 200,437 0.27 % __________ (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. Our federal funds purchased and securities sold under agreements to repurchase represent agreements to repurchase securities from banks with excess reserves on a particular day for a specified price, with repayment generally occurring on the following day. Our short-term debt includes discount notes and foreign exchange discount notes, as well as other short-term debt. Our discount notes are unsecured general obligations and have maturities ranging from overnight to 360days from the date of issuance. Additionally, we issue foreign exchange discount notes in the Euro money market enabling investors to hold short-term investments in different currencies. We have the ability to issue foreign exchange discount notes in maturities ranging from 5to 360days.Long-Term DebtLong-term debt represents borrowings with an original contractual maturity of greater than one year. The following table displays our outstanding long-term debt as of March 31, 2010 and December 31, 2009. As of March 31, 2010 December 31, 2009 Weighted- Weighted- Average Average Interest Interest Maturities Outstanding Rate(1) Maturities Outstanding Rate(1) (Dollars in millions) Senior fixed: Benchmark notes and bonds 2010-2030 $ 276,322 3.88 % 2010-2030 $ 279,945 4.10 % Medium-term notes 2010-2020 182,431 2.92 2010-2019 171,207 2.97 Foreign exchange notes and bonds 2017-2028 1,107 6.09 2010-2028 1,239 5.64 Other long-term debt(2) 2010-2040 60,397 5.83 2010-2039 62,783 5.80 Total senior fixed 52 |
Derivative Instruments and Hedg
Derivative Instruments and Hedging Activities | |
3 Months Ended
Mar. 31, 2010 | |
Note to Consolidated Financial Statements | |
Derivative Instruments and Hedging Activities | 10.Derivative InstrumentsDerivative instruments are an integral part of our strategy in managing interest rate risk. Derivative instruments may be privately negotiated contracts, which are often referred to as over-the-counter (OTC) derivatives, or they may be listed and traded on an exchange. When deciding whether to use derivatives, we consider a number of factors, such as cost, efficiency, the effect on our liquidity, results of operations, and our overall interest rate risk management strategy. We choose to use derivatives when we believe they will provide greater relative value or more efficient execution of our strategy than debt securities. We typically do not settle the notional amount of our risk management derivatives; rather, notional amounts provide the basis for calculating actual payments or settlement amounts. The derivatives we use for interest rate risk management purposes consist primarily of OTC contracts that fall into three broad categories:Interest rate swap contracts.An interest rate swap is a transaction between two parties in which each party agrees to exchange payments tied to different interest rates or indices for a specified period of time, generally based on a notional amount of principal. The types of interest rate swaps we use include pay-fixed swaps, receive-fixed swaps and basis swaps.Interest rate option contracts.These contracts primarily include pay-fixed swaptions, receive-fixed swaptions, 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 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.We enter into forward purchase and sale commitments that lock in the future delivery of mortgage loans and mortgage-related securities at a fixed price or yield. Certain commitments to purchase mortgage loans and purchase or sell mortgage-related securities meet the criteria of a derivative. We typically settle the notional amount of our mortgage commitments that are accounted for as derivatives. We account for our derivatives pursuant to the accounting standards on derivative instruments, and recognize all derivatives as either assets or liabilities in our condensed consolidated balance sheets at their fair value on a trade date basis. Fair value amounts, which are netted at the counterparty level and are inclusive of cash collateral posted or received, are recorded in Derivative assets, at fair value or Derivative liabilities, at fair value in our condensed consolidated balance sheets. We record all derivative gains and losses, includingaccrued interest, in Fair value losses, netin our condensed consolidated statements of operations.Notional and Fair Value Position of our DerivativesThe following table displays the notional amount and estimated fair value of our asset and liability derivative instruments on a gross basis, before the application of master netting agreements, as of March 31, 2010 and December 31, 2009. As of March 31, 2010 As of Dec |
Income Taxes
Income Taxes | |
3 Months Ended
Mar. 31, 2010 | |
Note to Consolidated Financial Statements | |
Income Taxes | 11.Income TaxesAs of March 31, 2010, there has been no change to our conclusion that it is more likely than not that we will not generate sufficient taxable income in the foreseeable future to realize our net deferred tax assets. For the three months ended March 31, 2010 and 2009, we recognized a tax benefit of $67 million and $623 million, which represented an effective tax rate of 1% and 3%, respectively. Our effective tax rates were different from the statutory rate of 35% primarily due to the recognition of an increase in our valuation allowance for our net deferred tax assets. The differences in rates were also due to the reversal of a portion of the valuation allowance for deferred tax assetsresulting from a settlement agreement reached with the IRS in the first quarter of 2010 for our unrecognized tax benefits for the tax years 1999 through 2004,and to our ability in the first quarter of 2009 to carryback our net operating loss to prior years. In 2010, our tax benefit does not include a carryback of our net operating loss to prior years as we are now in a net operating loss carryforward position. |
Employee Retirement Benefits
Employee Retirement Benefits | |
3 Months Ended
Mar. 31, 2010 | |
Note to Consolidated Financial Statements | |
Employee Retirement Benefits | 12.Employee Retirement BenefitsThe following table displays the components of our net periodic benefit cost for our pension plans and other postretirement benefit plan for the three months ended March 31, 2010 and 2009. The net periodic benefit cost for each period is calculated based on assumptions at the end of the prior year. For the Three Months Ended March 31, 2010 2009 Other Post- Other Post- Pension Retirement Pension Retirement Plans Plan Plans Plan (Dollars in millions) Service cost $ 9 $ 1 $ 10 $ 1 Interest cost 16 3 15 2 Other (12) (1) (3) - Net periodic benefit cost $ 13 $ 3 $ 22 $ 3 Contributions during period $ 12 $ 2 $ 2 $ 2 During the remaining period of 2010, we anticipate contributing $37 million to our pension plans and $7 million to our other postretirement benefit plan. |
Segment Reporting
Segment Reporting | |
3 Months Ended
Mar. 31, 2010 | |
Note to Consolidated Financial Statements | |
Segment Reporting | 13. Segment ReportingOur three reportable segments are: Single-Family, HCD, and Capital Markets. We use these three segments to generate revenue and manage business risk, and each segment is based on the type of business activities it performs. Segment Reporting for 2010Our prospective adoption of the new accounting standards had a significant impact on the presentation and comparability of our condensed consolidated financial statements due to the consolidation of the substantial majority of our single-class securitization trusts and the elimination of previously recorded deferred revenue from our guaranty arrangements. We continue to manage Fannie Mae based on the same three business segments. However, effective in 2010, we changed the presentation of segment financial information that is currently evaluated by management. Under the current segment reporting, the sum of the results for our three business segments does not equal our condensed consolidated statements of operations, as we separate the activity related to our consolidated trusts from the results generated by our three segments. In addition, we include an eliminations/adjustments category to reconcile our business segment results and the activity related to our consolidated trusts to our condensed consolidated statements of operations. While some line items in our segment results were not impacted by either the change from the new accounting standards or changes to our segment presentation, others were impacted materially, which reduces the comparability of our segment results with prior periods. We have neither restated prior period results nor presented current year results under the old presentation as we determined that it was impracticable to do so; therefore, our segment results reported in the current period are not comparable with prior periods.The section below provides a discussion of the three business segments and how each segments financial information reconciles to our condensed consolidated financial statements for those line items that were impacted significantly as a result of changes to our segment presentation.Single-FamilyRevenue drivers for Single-Family did not change under our current method of segment reporting. Revenue for our Single-Family business is from the guaranty fees the segment receives as compensation for assuming the credit risk on the mortgage loans underlying single-family Fannie Mae MBS, most of which are held within consolidated trusts, and on the single-family mortgage loans held in our mortgage portfolio. The primary source of profit for the Single-Family segment is the difference between the guaranty fees earned and the costs of providing the guaranty, including credit-related losses.Our current segment reporting presentation differs from our condensed consolidated balance sheets and statements of operations in order to reflect the activities and results of the Single-Family segment. The significant differences from the condensed consolidated statements of operations are as follows: Guaranty fee income - Guaranty fee income reflects (1) the cash guaranty fees paid by MBS trusts to Single-Family, (2) the amortization of deferred cash |
Regulatory Capital Requirements
Regulatory Capital Requirements | |
3 Months Ended
Mar. 31, 2010 | |
Note to Consolidated Financial Statements | |
Regulatory Capital Requirements | 14.Regulatory Capital RequirementsIn 2008, FHFA announced that our existing statutory and FHFA-directed regulatory capital requirements will not be binding during the conservatorship, and that FHFA will not issue quarterly capital classifications during the conservatorship. We continue to submit capital reports to FHFA during the conservatorship and FHFA continues to closely monitor our capital levels. FHFA has stated that it does not intend to report our critical capital, risk-based capital or subordinated debt levels during the conservatorship. As of March 31, 2010 and December 31, 2009, we had a minimum capital deficiency of $115.3billion and $107.6billion, respectively. Our minimum capital deficiency as of March 31, 2010 was determined based on guidance from FHFA, in which FHFA (1) directed us, for loans backing Fannie Mae MBS held by third parties, to continue reporting our minimum capital requirements based on 0.45% of the unpaid principal balance and critical capital based on 0.25% of the unpaid principal balance, notwithstanding our transition date adoption of the new accounting standards, and (2) issued a regulatory interpretation stating that our minimum capital requirements are not automatically affected by the new accounting standards. Additionally, our minimum capital deficiency excludes the funds provided to us by Treasury pursuant to the senior preferred stock purchase agreement, as the senior preferred stock does not qualify as core capital due to its cumulative dividend provisions.Pursuant to the GSE Act, if our total assets are less than our total obligations (a net worth deficit) for a period of 60days, FHFA is mandated by law to appoint a receiver for Fannie Mae. Treasurys funding commitment under the senior preferred stock purchase agreement is intended to ensure that we avoid a net worth deficit, in order to avoid this mandatory trigger of receivership. In order to avoid a net worth deficit, our conservator may request funds on our behalf from Treasury under the senior preferred stock purchase agreement. FHFA has directed us, during the time we are under conservatorship, to focus on managing to a positive net worth. As of March 31, 2010 and December 31, 2009, we had a net worth deficit of $8.4billion and $15.3billion, respectively.The following table displays our regulatory capital classification measures as of March 31, 2010 and December 31, 2009. As of March 31, 2010(1) December 31, 2009(1) (Dollars in millions) Core capital(2) $ (80,898) $ (74,540) Statutory minimum capital requirement(3) 34,426 33,057 Deficit of core capital over statutory minimum capital requirement $ (115,323) $ (107,597) Deficit of core capital percentage over statutory minimum capital requirement (335.0) % (325.5) % ___________ (1) Amounts as of March 31, 2010 and December 31, 2009 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; |
Concentrations of Credit Risk
Concentrations of Credit Risk | |
3 Months Ended
Mar. 31, 2010 | |
Note to Consolidated Financial Statements | |
Concentrations of Credit Risk | 15. Concentration of Credit RiskMortgage Servicers.Mortgage servicers collect mortgage and escrow payments from borrowers, pay taxes and insurance costs from escrow accounts, monitor and report delinquencies, and perform other required activities on our behalf. Our business with mortgage servicers is concentrated. Our ten largest single-family mortgage servicers, including their affiliates, serviced 80% of our single-family guaranty book of business as of March 31, 2010 and December 31, 2009. Our ten largest multifamily mortgage servicers including their affiliates serviced 75% of our multifamily guaranty book of business as of both March 31, 2010 and December 31, 2009.If one of our principal mortgage servicers fails to meet its obligations to us, it could increase our credit-related expenses and credit losses, result in financial losses to us and have a material adverse effect on our earnings, liquidity, financial condition and net worth.Mortgage Insurers.Mortgage insurance risk in force represents our maximum potential loss recovery under the applicable mortgage insurance policies. We had total mortgage insurance coverage risk in force of $103.2 billion on the single-family mortgage loans in our guaranty book of business as of March 31, 2010, which represented approximately 4% of our single-family guaranty book of business. Our primary and pool mortgage insurance coverage risk in force on single-family mortgage loans in our guaranty book of business of $97.3billion and $5.9billion, respectively, as of March 31, 2010, compared with $99.6billion and $6.9billion, respectively, as of December 31, 2009. Eight mortgage insurance companies provided over 99% of our mortgage insurance as of March 31, 2010 and December 31, 2009.Increases in mortgage insurance claims due to higher defaults and credit losses in recent periods have adversely affected the financial results and financial condition of many mortgage insurers. The current weakened financial condition of our mortgage insurer counterparties creates an increased risk that these counterparties will fail to fulfill their obligations to reimburse us for claims under insurance policies. If we determine that it is probable that we will not collect all of our claims from one or more of these mortgage insurer counterparties, it could result in an increase in our loss reserves, which could adversely affect our earnings, liquidity, financial condition and net worth. As of March 31, 2010, our allowance for loan losses of $60.6 billion, allowance for accrued interest receivable of $7.6 billion and reserve for guaranty losses of $233 million incorporated an estimated recovery amount of approximately $16.5 billion from mortgage insurance related both to loans that are individually measured for impairment and those that are measured collectively for impairment. This amount is comprised of the contractual recovery of approximately $19.5 billion as of March 31, 2010 and an adjustment of approximately $3.0 billion which reduces the contractual recovery for our assessment of our mortgage insurer counterparties inability to fully pay those claims. We had outstanding receivables from mortgage insurers of $3.1 b |
Fair Value
Fair Value | |
3 Months Ended
Mar. 31, 2010 | |
Note to Consolidated Financial Statements | |
Fair Value | 16.Fair Value We use fair value measurements for the initial recording of certain assets and liabilities and periodic remeasurement of certain assets and liabilities on a recurring or nonrecurring basis. Fair Value MeasurementFair value measurement guidance defines fair value, establishes a framework for measuring fair value and expands disclosures around fair value measurements. This guidance applies whenever other accounting standards require or permit assets or liabilities to be measured at fair value. The guidance establishes a three level fair value hierarchy that prioritizes the inputs into the valuation techniques used to measure fair value. The fair value hierarchy gives the highest priority, Level 1, to measurements based on unadjusted quoted prices in active markets for identical assets or liabilities and lowest priority, Level 3, to measurements based on unobservable inputs and classifies assets and liabilities with limited observable inputs or observable inputs for similar assets or liabilities as Level 2 measurements. For the period ending March 31, 2010, we adopted the new accounting standard that requires enhanced disclosures about fair value measurements. Recurring Changes in Fair ValueThe following tables display our assets and liabilities measured in our condensed consolidated balance sheets at fair value on a recurring basis subsequent to initial recognition, including instruments for which we have elected the fair value option as of March 31, 2010 and December 31, 2009. Specifically, total assets measured at fair value on a recurring basis and classified as Level3 were $42.7 billion, or 1% of Total assets, and $47.7billion, or 5% of Total assets, in our condensed consolidated balance sheets as of March 31, 2010 and December 31, 2009, respectively. Fair Value Measurements as of March 31, 2010 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: Cash equivalents (Treasury bills) $ 11,498 $ - $ - $ - $ 11,498 Trading securities: Mortgage-related securities: Fannie Mae - 4,163 4,076 - 8,239 Freddie Mac - 6,502 - - 6,502 Ginnie Mae - 16 - - 16 Alt-A private-label securities - 1,252 153 - 1,405 Subprime private-label securities - - 1,683 - 1,683 CMBS - 10,098 - - 10,098 Mortgage revenue bonds - - 611 - 611 Other - - 158 - 158 Non-mortgage-related securities: Asset-backed securities - 7,948 43 - 7,991 Corporate debt securities - 176 - - 176 U.S. Treasury securities 35,650 - - - 35,650 Total trading securities 35,650 30,155 6,724 - 72,529 Available-for-sale securities: Mortgage-related securities: Fannie Mae - 29,798 217 - 30,015 Freddie Mac - 21,905 30 - 21,935 Ginnie Mae - 1,164 123 - 1,287 Alt-A private-label securities - 5,941 8,517 - 14,458 Subprime private-la |
Commitments and Contingencies
Commitments and Contingencies | |
3 Months Ended
Mar. 31, 2010 | |
Note to Consolidated Financial Statements | |
Commitments and Contingencies | 17.Commitments and ContingenciesWe are party to various types of legal actions and proceedings, including actions brought on behalf of various classes of claimants. We also are subject to regulatory examinations, inquiries and investigations and other information gathering requests. Litigation claims and proceedings of all types are subject to many uncertain factors that generally cannot be predicted with assurance. The following describes our material legal proceedings, investigations and other matters. In view of the inherent difficulty of predicting the outcome of these proceedings, we cannot determine the ultimate resolution of the matters described below. We establish reserves for litigation and regulatory matters when losses associated with the claims become probable and the amounts can reasonably be estimated. The actual costs of resolving legal matters may be substantially higher or lower than the amounts reserved for those matters. For matters where the likelihood or extent of a loss is not probable or cannot be reasonably estimated, we have not recorded a loss reserve. If certain of these matters are determined against us, it could have a material adverse effect on our earnings, liquidity and financial condition, including our net worth. Based on our current knowledge with respect to the lawsuits described below, we believe we have valid defenses to the claims in these lawsuits and intend to defend these lawsuits vigorously regardless of whether or not we have recorded a loss reserve. In addition to the matters specifically described below, we are involved in a number of legal and regulatory proceedings that arise in the ordinary course of business that we do not expect will have a material impact on our business. We have advanced fees and expenses of certain current and former officers and directors in connection with various legal proceedings pursuant to indemnification agreements.2004 ClassAction LawsuitsFannie Mae is a defendant in two consolidated class action suits filed in 2004 and currently pending in the U.S.District Court for the District of Columbia In re Fannie Mae Securities Litigation and In re Fannie Mae ERISA Litigation. Both cases rely on factual allegations that Fannie Maes accounting statements were inconsistent with the GAAP requirements relating to hedge accounting and the amortization of premiums and discounts. Based largely on the overlapping factual allegations, the Judicial Panel on Multidistrict Litigation ordered that the cases be coordinated for pretrial proceedings on May 17, 2005. On October17, 2008, FHFA, as conservator for Fannie Mae, intervened in both of these cases.In re Fannie Mae Securities LitigationIn a consolidated complaint filed on March 4, 2005, lead plaintiffs Ohio Public Employees Retirement System (OPERS) and the State Teachers Retirement System of Ohio (STRS) allege that we and certain former officers, as well as our former outside auditor, made materially false and misleading statements in violation of Sections10(b) and 20(a) of the Securities Exchange Act of 1934, and SEC Rule10b-5 promulgated thereunder, and contend that the alleged fraud resulted in artificially inflated prices |
6_Summary of Significant Accoun
Summary of Significant Accounting Policies (Policies) | |
3 Months Ended
Mar. 31, 2010 | |
Note to Consolidated Financial Statements | |
Organization | OrganizationWe are a stockholder-owned corporation organized and existing under the Federal National Mortgage Association Charter Act (the Charter Act or our charter). We are a government-sponsored enterprise (GSE), and we are subject to government oversight and regulation. Our regulators include the Federal Housing Finance Agency (FHFA), the U.S.Department of Housing and Urban Development (HUD), the U.S.Securities and Exchange Commission (SEC), and the U.S.Department of the Treasury (Treasury). Through July29, 2008, we were regulated by the Office of Federal Housing Enterprise Oversight (OFHEO), which was replaced on July30, 2008 with FHFA upon the enactment of the Federal Housing Finance Regulatory Reform Act of 2008 (2008 Reform Act). The U.S.government does not guarantee our securities or other obligations. |
Conservatorship | ConservatorshipOn September7, 2008, the Secretary of the Treasury and the Director of FHFA announced several actions taken by Treasury and FHFA regarding Fannie Mae, which included: (1)placing us in conservatorship; (2)the execution of a senior preferred stock purchase agreement by our conservator, on our behalf, and Treasury, pursuant to which we issued to Treasury both senior preferred stock and a warrant to purchase common stock; and (3)Treasurys agreement to establish a temporary secured lending credit facility that was available to us and the other GSEs regulated by FHFA under identical terms until December 31, 2009. Under the Federal Housing Enterprises Financial Safety and Soundness Act of 1992, as amended by the 2008 Reform Act, (together, the GSE Act), the conservator immediately succeeded to all rights, titles, powers and privileges of Fannie Mae, and of any stockholder, officer or director of Fannie Mae with respect to Fannie Mae and its assets, and succeeded to the title to the books, records and assets of any other legal custodian of Fannie Mae. FHFA, in its role as conservator, has overall management authority over our business. The conservator has since delegated specified authorities to our Board of Directors and has delegated to management the authority to conduct our day-to-day operations. The conservator retains the authority to withdraw its delegations at any time.As of May 9, 2010, the conservator has advised us that it has not disaffirmed or repudiated any contracts we entered into prior to its appointment as conservator. The GSE Act requires FHFA to exercise its right to disaffirm or repudiate most contracts within a reasonable period of time after its appointment as conservator. The conservator has the power to transfer or sell any asset or liability of Fannie Mae (subject to limitations and post-transfer notice provisions for transfers of qualified financial contracts) without any approval, assignment of rights or consent of any party. The GSE Act, however, provides that mortgage loans and mortgage-related assets that have been transferred to a Fannie Mae MBS trust must be held by the conservator for the beneficial owners of the Fannie Mae MBS and cannot be used to satisfy the general creditors of the company. As of May 9, 2010, FHFA has not exercised this power.Neither the conservatorship nor the terms of our agreements with Treasury changes our obligation to make required payments on our debt securities or perform under our mortgage guaranty obligations.The conservatorship has no specified termination date and the future structure of our business following termination of the conservatorship is uncertain. We do not know when or how the conservatorship will be terminated or what changes to our business structure will be made during or following the termination of the conservatorship. We do not know whether we will exist in the same or a similar form or continue to conduct our business as we did before the conservatorship, or whether the conservatorship will end in receivership. Under the GSE Act, FHFA must place us into receivership if the Director of FHFA makes a written determination that our assets are less than |
Impact of US Government Support | Impact of U.S. Government SupportWe are dependent upon the continued support of Treasury to eliminate our net worth deficit, which avoids our being placed into receivership. Based on consideration of all the relevant conditions and events affecting our operations, including our dependence on the U.S.Government, we continue to operate as a going concern and in accordance with our delegation of authority from FHFA.Pursuant to the amended senior preferred stock purchase agreement, Treasury has committed to provide us with funding as needed to help us maintain a positive net worth thereby avoiding the mandatory receivership trigger described above. We have received a total of $75.2 billion to date under Treasurys funding commitment and the Acting Director of FHFA has submitted a request for an additional $8.4billion from Treasury to eliminate our net worth deficit as of March 31, 2010. The aggregate liquidation preference of the senior preferred stock was $76.2 billion as of March 31, 2010 and will increase to $84.6 billion as a result of FHFAs request on our behalf for funds to eliminate our net worth deficit as of March 31, 2010.We fund our business primarily through the issuance of short-term and long-term debt securities in the domestic and international capital markets. Because debt issuance is our primary funding source, we are subject to roll-over, or refinancing, risk on our outstanding debt. Our roll-over risk increases when our outstanding short-term debt increases as a percentage of our total outstanding debt. Our ability to issue long-term debt has been strong in recent quarters primarily due to actions taken by the federal government, to support us and the financial markets. Many of these programs initiated by the federal government, however, have expired in the last five months. The Treasury credit facility and Treasury MBS purchase program terminated on December 31, 2009. The Federal Reserves agency debt and MBS purchase programs expired on March 31, 2010. Despite the expiration of these programs, as of the date of this filing, demand for our long-term debt securities continues to be strong. We believe that continued federal government support of our business and the financial markets, as well as our status as a GSE, are essential to maintaining our access to debt funding. Changes or perceived changes in the governments support could increase our roll-over risk and materially adversely affect our ability to refinance our debt as it becomes due, which could have a material adverse impact on our liquidity, financial condition and results of operations. In addition, future changes or disruptions in the financial markets could significantly change the amount, mix and cost of funds we obtain, which also could increase our liquidity and roll-over risk and have a material adverse impact on our liquidity, financial condition and results of operations. In February 2010, the Obama Administration stated in its fiscal year 2011 budget proposal that it was continuing to monitor the situation of Fannie Mae, Freddie Mac and the Federal Home Loan Bank System and would continue to provide updates on considerations for longer-term reform of Fann |
Basis of Presentation | Basis of Presentation The accompanying unaudited interim condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP) for interim financial information and with the SECs instructions to Form10-Q and Article10 of Regulation S-X. Accordingly, they do not include all of the information and note disclosures required by GAAP for complete consolidated financial statements. In the opinion of management, all adjustments of a normal recurring nature considered necessary for a fair presentation have been included. Results for the three months ended March 31, 2010 may not necessarily be indicative of the results for the year ending December31, 2010. The unaudited interim condensed consolidated financial statements as of March 31, 2010 and our consolidated financial statements as of December31, 2009 should be read in conjunction with our audited consolidated financial statements and related notes included in our Annual Report on Form10-K for the year ended December31, 2009 (2009 Form 10-K), filed with the SEC on February26, 2010. |
Related Parties | Related Parties As a result of our issuance to Treasury of the warrant to purchase shares of Fannie Mae common stock equal to 79.9% of the total number of shares of Fannie Mae common stock, we and the Treasury are deemed related parties. As of March 31, 2010, Treasury held an investment in our senior preferred stock with a liquidation preference of $76.2 billion. During 2009, Treasury engaged us to serve as program administrator for the Home Affordable Modification Program. In addition, in 2009, we entered into a memorandum of understanding with Treasury, FHFA and Freddie Mac in which we agreed to provide assistance to state and local housing finance agencies (HFAs) through three separate assistance programs: a temporary credit and liquidity facilities (TCLF) program, a new issue bond (NIB) program and a multifamily credit enhancement program. Under the TCLF program, we have$4.1 billion and $870 million outstanding, which includes principal and interest, of three-year standby credit and liquidity supportas of March 31, 2010 and December 31, 2009, respectively. Treasury has purchased participating interests in these temporary credit and liquidity facilities. Under the NIB program, we have $7.6 billion and $3.5 billion outstanding of partially guaranteed pass-through securities backed bysingle-family andmultifamily housing bonds issued by HFAsas of March 31, 2010 and December 31, 2009, respectively. Treasury bears the initial loss of principal under the TCLF program and the NIB program up to 35% of the total principal on a combined program-wide basis. We are not participating in the multifamily credit enhancement program. FHFAs control of both us and Freddie Mac has caused us and Freddie Mac to be related parties. No transactions outside of normal business activities have occurred between us and Freddie Mac. As of March 31, 2010 and December 31, 2009, we held Freddie Mac mortgage-related securities with a fair value of $28.4 billion and $42.6 billion, respectively, and accrued interest receivable of $151 million and $230 million, respectively. We recognized interest income on Freddie Mac mortgage-related securities held by us of $335 million and $407 million for the three months ended March 31, 2010 and 2009, respectively. |
Use of Estimates | Use of Estimates Preparing condensed consolidated financial statements in accordance with GAAP requires management to make estimates and assumptions that affect our reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities as of the dates of our condensed consolidated financial statements, as well as our reported amounts of revenues and expenses during the reporting periods. Management has made significant estimates in a variety of areas including, but not limited to, valuation of certain financial instruments and other assets and liabilities, the allowance for loan losses and reserve for guaranty losses, and other-than-temporary impairment of investment securities. Actual results could be different from these estimates. |
Principles of consolidation | Principles of ConsolidationOur condensed consolidated financial statements include our accounts as well as the accounts of other entities in which we have a controlling financial interest. All significant intercompany balances and transactions have been eliminated.The typical condition for a controlling financial interest is ownership of a majority of the voting interests of an entity. A controlling financial interest may also exist in entities through arrangements that do not involve voting interests, such as a variable interest entity (VIE). VIE AssessmentA VIE is an entity (1) that has total equity at risk that is not sufficient to finance its activities without additional subordinated financial support from other entities, (2) where the group of equity holders does not have the power to direct the activities of the entity that most significantly impact the entity's economic performance, or the obligation to absorb the entitys expected losses or the right to receive the entitys expected residual returns, or both, or (3) where the voting rights of some investors are not proportional to their obligations to absorb the expected losses of the entity, their rights to receive the expected residual returns of the entity, or both, and substantially all of the entity's activities either involve or are conducted on behalf of an investor that has disproportionately few voting rights. In order to determine if an entity is considered a VIE, we first perform a qualitative analysis, which requires certain subjective decisions regarding our assessments, including, but not limited to, the design of the entity, the variability that the entity was designed to create and pass along to its interest holders, the rights of the parties, and the purpose of the arrangement. If we cannot conclude after a qualitative analysis whether an entity is a VIE, we perform a quantitative analysis. We have interests in various entities that are considered VIEs. The primary types of entities are securitization trusts guaranteed by us via lender swap and portfolio securitization transactions, limited partnership investments in low-income housing tax credit (LIHTC) and other housing partnerships, as well as mortgage and asset-backed trusts that were not created by us. In June 2009, the FASB revised the accounting standard on the consolidation of VIEs (the new accounting standard), which was effective for consolidated financial statements issued for reporting periods beginning after November 15, 2009. We adopted the new accounting standard prospectively for all existing VIEs effective January 1, 2010. Prior to the adoption of the new accounting standard on January 1, 2010, we were exempt from evaluating certain securitization entities for consolidation if the entities met the criteria of a qualifying special purpose entity (QSPE), and if we did not have the unilateral ability to cause the entity to liquidate or change the entity's QSPE status. The QSPE requirements significantly limited the activities in which a QSPE could engage and the types of assets and liabilities it could hold. To the extent any entity failed to meet those criteria, we were required to consolidate its ass |
Portfolio Securitizations Policy | Portfolio Securitizations We evaluate a transfer of financial assets from a portfolio securitization transaction to an entity that is not consolidated to determine whether the transfer qualifies as a sale. Transfers of financial assets for which we surrender control of the transferred assets are recorded as sales. When a transfer that qualifies as a sale is completed, we derecognize all assets transferred and recognize all assets obtained and liabilities incurred at fair value. Prior to the adoption of the new accounting standard on the transfers of financial assets, we allocated the previous carrying amount of the transferred assets between the assets sold and the retained interests, if any, in proportion to their relative fair values at the date of transfer. We record a gain or loss as a component of Investment gains, net in our condensed consolidated statements of operations, which now represents the difference between the carrying basis of the assets transferred and the fair value of the proceeds from the sale. Prior to the adoption of the new accounting standard on the transfers of financial assets, the gain or loss represented the difference between the allocated carrying amount of the assets sold and the proceeds from the sale, net of any transaction costs and liabilities incurred, which may have included a recourse obligation for our financial guaranty. Retained interests are primarily in the form of Fannie Mae MBS, REMIC certificates, guaranty assets and master servicing assets (MSAs). If a portfolio securitization does not meet the criteria for sale treatment, the transferred assets remain in our condensed consolidated balance sheets and we record a liability to the extent of any proceeds received in connection with such a transfer. |
Cash and Cash Equivalents and Statements of Cash Flows | Cash and Cash Equivalents and Statements of Cash Flows Short-term investments that have a maturity at the date of acquisition of three months or less and are readily convertible to known amounts of cash are generally considered cash equivalents. We may pledge as collateral certain short-term investments classified as cash equivalents. In the presentation of our condensed consolidated statements of cash flows, we present cash flows from mortgage loans held for sale as operating activities. We present cash flows from federal funds sold and securities purchased under agreements to resell or similar arrangements as investing activities and cash flows from federal funds purchased and securities sold under agreements to repurchase as financing activities. We classify cash flows related to dollar roll transactions that do not meet the requirements to be accounted for as secured borrowings as purchases and sales of securities in investing activities. We classify cash flows from trading securities based on their nature and purpose. We classify cash flows from trading securities that we intend to hold for investment (the majority of our mortgage-related trading securities) as investing activities and cash flows from trading securities that we do not intend to hold for investment (primarily our non-mortgage-related securities) as operating activities. Prior to the adoption of the new accounting standards on the transfers of financial assets and the consolidation of VIEs, we reflected the creation of Fannie Mae MBS through either the securitization of loans held for sale or advances to lenders as a non-cash activity in our condensed consolidated statements of cash flows in the line items Securitization-related transfers from mortgage loans held for sale to investments in securities or Transfers from advances to lenders to investments in securities, respectively. Cash inflows from the sale of a Fannie Mae MBS created through the securitization of loans held for sale were reflected in the condensed consolidated statements of cash flows based on the balance sheet classification of the associated Fannie Mae MBS as either Net decrease in trading securities, excluding non-cash transfers, or Proceeds from sales of available-for-sale securities. Subsequent to the adoption of these new accounting standards, we continue to apply this presentation to unconsolidated trusts. For consolidated trusts, we classify cash flows related to mortgage loans held by our consolidated trusts as either investing activities (for principal repayments) or operating activities (for interest received from borrowers included as a component of our net loss). Cash flows related to debt securities issued by consolidated trusts are classified as either financing activities (for repayments of principal to certificateholders) or operating activities (for interest payments to certificateholders included as a component of our net loss). We distinguish between the payments and proceeds related to the debt of Fannie Mae and the debt of consolidated trusts, as applicable. |
Restricted Cash | Restricted Cash We and our servicers advance payments on delinquent loans to consolidated Fannie Mae MBS trusts. We recognize the cash advanced as Restricted cash in our condensed consolidated balance sheets to the extent such amounts are due to, but have not yet been remitted to, the MBS certificateholders. In addition, when we or our servicers collect and hold cash that is due to certain Fannie Mae MBS trusts in advance of our requirement to remit these amounts to the trusts, we recognize the collected cash amounts as Restricted cash. We also recognize Restricted cash as a result of restrictions related to certain consolidated partnership funds as well as for certain collateral arrangements. |
Mortgage Loans Policy | Mortgage Loans Loans Held for Investment When we acquire mortgage loans that we have the ability and the intent to hold for the foreseeable future or until maturity, we classify the loans as held for investment (HFI). When we consolidate a trust, we recognize the loans underlying the trust in our condensed consolidated balance sheet. The trusts do not have the ability to sell mortgage loans and the use of such loans is limited exclusively to the settlement of obligations of the trusts. Therefore, mortgages acquired when we have the intent to securitize via trusts that are consolidated will generally be classified as HFI in our condensed consolidated balance sheets both prior to and subsequent to their securitization. This is consistent with our intent and ability to hold the loans for the foreseeable future or until maturity. We report HFI loans at their outstanding unpaid principal balance adjusted for any deferred and unamortized cost basis adjustments, including purchase premiums, discounts and other cost basis adjustments. We recognize interest income on HFI loans on an accrual basis using the interest method, unless we determine that the ultimate collection of contractual principal or interest payments in full is not reasonably assured. When the collection of principal or interest payments in full is not reasonably assured, we discontinue the accrual of interest income. Historically, mortgage loans held both by us and by consolidated trusts were reported collectively as Mortgage loans held for investment. We now report loans held by consolidated trusts as Mortgage loans held for investment of consolidated trusts and those held directly by us as Mortgage loans held for investment of Fannie Maein our condensed consolidated balance sheets. Loans Held for Sale When we acquire mortgage loans that we intend to sell or securitize via trusts that are not consolidated, we classify the loans as held for sale (HFS). Prior to the adoption of the new accounting standards, we initially classified loans as HFS if they were product types that we actively securitized from our portfolio because we had the intent, at acquisition, to securitize the loans (either during the month in which the acquisition occurred or during the following month) via a trust that we did not consolidate and for which we sold all or a portion of the resulting securities. At month-end, we reclassified the loans acquired during the month from HFS to HFI, if we had not securitized or were not in the process of securitizing them because we had the intent to hold the loans for the foreseeable future or until maturity. We report HFS loans at the lower of cost or fair value (LOCOM). Any excess of an HFS loans cost over its fair value is recognized as a valuation allowance, with changes in the valuation allowance recognized as Investment gains, net in our condensed consolidated statements of operations. We recognize interest income on HFS loans on an accrual basis, unless we determine that the ultimate collection of contractual principal or interest payments in full is not reasonably assured. When the collection of principal or interest payments in full is not reasonably assured, we di |
Allowance for Loan Losses and Reserve for Guaranty Losses Policy | Allowance for Loan Losses and Reserve for Guaranty LossesThe allowance for loan losses is a valuation allowance that reflects an estimate of incurred credit losses related to our recorded investment in HFI loans. This population includes both HFI loans held by Fannie Mae and by consolidated Fannie Mae MBS trusts. The reserve for guaranty losses is a liability account in our condensed consolidated balance sheets that reflects an estimate of incurred credit losses related to our guaranty to each unconsolidated Fannie Mae MBS trust that we will supplement amounts received by the Fannie Mae MBS trust as required to permit timely payments of principal and interest on the related Fannie Mae MBS. As a result, the guaranty reserve considers not only the principal and interest due on the loan at the current balance sheet date, but also any additional interest payments due to the trust from the current balance sheet date until the point of loan acquisition or foreclosure. We recognize incurred losses by recording a charge to the Provision for loan losses or the Provision (benefit) for guaranty losses in our condensed consolidated statements of operations. Credit losses related to groups of similar single-family and multifamily HFI loans that are not individually impaired are recognized when (1) available information as of each balance sheet date indicates that it is probable a loss has occurred and (2) the amount of the loss can be reasonably estimated in accordance with the accounting standard for contingencies. Single-family and multifamily loans that we evaluate for individual impairment are measured in accordance with the accounting standard on measuring individual impairment of a loan. When making an assessment as to whether a loan is individually impaired, we also consider whether a delay in payment is insignificant. Determination of whether a delay in payment or shortfall in amount is insignificant requires managements judgment as to the facts and circumstances surrounding the loan. We record charge-offs as a reduction to the allowance for loan losses or reserve for guaranty losses when losses are confirmed through the receipt of assets, such as cash in a preforeclosure sale or the underlying collateral in full satisfaction of the mortgage loan upon foreclosure.Single-Family Loans We aggregate single-family loans (except for those that are deemed to be individually impaired), based on similar risk characteristics for purposes of estimating incurred credit losses and establish a collective single-family loss reserve using an econometric model that derives an overall loss reserve estimate given multiple factors which include but are not limited to: origination year; loan product type; mark-to-market loan-to-value (LTV) ratio; and delinquency status. Once loans are aggregated, there typically is not a single, distinct event that would result in an individual loan or pool of loans being impaired. Accordingly, to determine an estimate of incurred credit losses, we base our allowance and reserve methodology on historical events and trends, such as loss severity, default rates, and recoveries from mortgage insurance contracts and other credit enhanc |
Amortization of Cost Basis Adjustments | Amortization of Cost Basis Adjustments We amortize cost basis adjustments, including premiums and discounts on mortgage loans and securities, as a yield adjustment using the interest method over the contractual or estimated life of the loan or security. We amortize these cost basis adjustments into interest income for mortgage securities and loans we classify as HFI. We do not amortize cost basis adjustments for loans that we classify as HFS but include them in the calculation of the gain or loss on the sale of those loans. We have elected to use the contractual payment terms to determine the amortization of cost basis adjustments on mortgage loans and mortgage securities initially recognized on or after January 1, 2010 in our condensed consolidated balance sheets. For substantially all mortgage loans and mortgage securities initially recorded on or before December31,2009, we use prepayment estimates in determining the periodic amortization of cost basis adjustments under the interest method using a constant effective yield. For those mortgage loans and mortgage securities for which we did not estimate prepayments, we used the contractual payment terms of the loan or security to apply the interest method. When we anticipate prepayments for the application of the interest method to mortgage loans initially recognized before January 1, 2010, we aggregate individual mortgage loans based upon coupon rate, product type and origination year and consider Fannie Mae MBS to be aggregations of similar loans for the purpose of estimating prepayments. We also recalculate the constant effective yield each reporting period to reflect the actual payments and prepayments we have received to date and our new estimate of future prepayments. We then adjust our net investment in the mortgage loans and mortgage securities to the amount the investment would have been had we applied the recalculated constant effective yield since their acquisition, with a corresponding charge or credit to interest income. We cease amortization of cost basis adjustments during periods in which we are not recognizing interest income on a loan because the collection of the principal and interest payments is not reasonably assured (that is, when the loan is placed on nonaccrual status). |
Collateral | Collateral We enter into various transactions where we pledge and accept collateral, the most common of which are our derivative transactions. Required collateral levels vary depending on the credit rating and type of counterparty. We also pledge and receive collateral under our repurchase and reverse repurchase agreements. In order to reduce potential exposure to repurchase counterparties, a third-party custodian typically maintains the collateral and any margin. We monitor the fair value of the collateral received from our counterparties, and we may require additional collateral from those counterparties, as we deem appropriate. Collateral received under early funding agreements with lenders, whereby we advance funds to lenders prior to the settlement of a security commitment, must meet our standard underwriting guidelines for the purchase or guarantee of mortgage loans. Cash Collateral We pledged $6.0 billion and $5.4 billion in cash collateral as of March 31, 2010 and December 31, 2009, respectively, related to our derivative activities. For derivative positions with the same counterparty under master netting arrangements where we pledge cash collateral, we remove it from Cash and cash equivalents and net the right to receive it against Derivative liabilities at fair value in our condensed consolidated balance sheets as a part of our counterparty netting calculation. Additionally, we pledged $5.7 billion and $5.4 billion in cash collateral as of March 31, 2010 and December 31, 2009, respectively, related to operating activities and recorded this amount as Other assets or Federal funds sold and securities purchased under agreements to resell or similar arrangements in our condensed consolidated balance sheets. We record cash collateral accepted from a counterparty that we have the right to use as Cash and cash equivalents and cash collateral accepted from a counterparty that we do not have the right to use as Restricted cash in our condensed consolidated balance sheets. We net our obligation to return cash collateral pledged to us against Derivative assets at fair value in our condensed consolidated balance sheets as part of our counterparty netting calculation. We accepted cash collateral of $2.9 billion and $4.1billion as of March 31, 2010 and December 31, 2009, respectively, of which $2.7 billion and $3.0billion, respectively, was restricted. Non-Cash Collateral We classify securities pledged to counterparties as either Investments in securities or Cash and cash equivalents in our condensed consolidated balance sheets. Securities pledged to counterparties that have been consolidated with the underlying assets recognized as loans are included as Mortgage loans in our condensed consolidated balance sheets. We pledged $1.1 billion of available-for-sale (AFS) securities that the counterparty had the right to resell or repledge as of December 31, 2009. We did not pledge any AFS securities as of March 31, 2010. We pledged $2.9 billion and $1.9 billion in HFI loans that the counterparty had the right to sell or repledge as of March 31, 2010 and December 31, 2009, respectively. The fair value of non-cash collateral accepted that we were permitt |
Debt | Debt Our condensed consolidated balance sheets contain debt of Fannie Mae as well as debt of consolidated trusts. We classify our outstanding debt as either short-term or long-term based on the initial contractual maturity. Prior to January 1, 2010, we reported debt issued both by us and by consolidated trusts collectively as either Short-term debt or Long-term debt in our condensed consolidated balance sheets. Effective January 1, 2010, the debt of consolidated trusts is reported as either Short-term debt of consolidated trusts or Long-term debt of consolidated trusts, and represents the amount of Fannie Mae MBS issued from such trusts and held by third-party certificateholders. Debt issued by us is reported as either Short-term debt of Fannie Mae or Long-term debt of Fannie Mae, and represents debt that we issue to third parties to fund our general business activities. The debt of consolidated trusts is prepayable without penalty at any time. We report deferred items, including premiums, discounts and other cost basis adjustments, as adjustments to the related debt balances in our condensed consolidated balance sheets. We remeasure the carrying amount, accrued interest and basis adjustments of debt denominated in a foreign currency into U.S.dollars using foreign exchange spot rates as of the balance sheet dates and report any associated gains or losses as a component of Fair value losses, net in our condensed consolidated statements of operations. We classify interest expense as either short-term or long-term based on the contractual maturity of the related debt. We recognize the amortization of premiums, discounts and other cost basis adjustments through interest expense using the effective interest method usually over the contractual term of the debt. Amortization of premiums, discounts and other cost basis adjustments begins at the time of debt issuance. We remeasure interest expense for debt denominated in a foreign currency into U.S.dollars using the monthly weighted-average spot rate since the interest expense is incurred over the reporting period. The difference in rates arising from the month-end spot exchange rate used to calculate the interest accruals and the weighted-average exchange rate used to record the interest expense is a foreign currency transaction gain or loss for the period and is recognized as either Short-term debt interest expense or Long-term debt interest expense in our condensed consolidated statements of operations. When we purchase a Fannie Mae MBS issued from a consolidated single-class securitization trust, we extinguish the related debt of the consolidated trust as the MBS debt is no longer owed to a third party. We record debt extinguishment gains or losses related to debt of consolidated trusts to the extent that the purchase price of the MBS does not equal the carrying value of the related consolidated MBS debt reported on our balance sheets (including unamortized premiums, discounts and other cost basis adjustments) at the time of purchase. |
Servicer and MBS Trust Receivable and Payable | Servicer and MBS Trust Receivable and PayableWhen a servicer advances payments to a consolidated MBS trust for delinquent loans, we record restricted cash and a corresponding liability to reimburse the servicer. When a delinquency advance is made to an unconsolidated trust, we record a receivable from the MBS trust, net of a valuation allowance, and a corresponding liability to reimburse the servicer. Servicers are reimbursed for amounts that they do not collect from the borrower at the earlier of the exercise of our default call option or foreclosure.For unconsolidated MBS trusts where we are considered the transferor, when the contingency on our option to purchase loans from the trust has been met and we regain effective control over the transferred loan, we recognize the loan in our condensed consolidated balance sheets at fair value and record a corresponding liability to the unconsolidated MBS trust. |
Fair Value Losses, Net | Fair Value Losses, Net Fair value losses, net, consists of fair value gains and losses on derivatives, trading securities, debt carried at fair value and foreign currency debt. |
Reclassifications | Reclassifications To conform to our current period presentation, we have reclassified amounts reported in our condensed consolidated financial statements. In our condensed consolidated balance sheet as of December 31, 2009, we reclassified $536 million from Allowance for loan losses to Allowance for accrued interest receivable. In our condensed consolidated statement of operations for the three months ended March 31, 2009, we reclassified $17.8 billion and $2.5 billion from Provision for credit losses, which is no longer presented, to Provision for guaranty losses and Provision for loan losses, respectively, and $5.7 billion from Investment gains, net to Net other-than-temporary impairments. In our condensed consolidated statement of changes in equity (deficit) for the three months ended March 31, 2009, we reclassified $3.7 billion, net of tax of $2.0 billion, from Changes in net unrealized losses on available-for-sale securities to Reclassification adjustment for other-than-temporary impairments recognized in net loss. |