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Washington, D.C. 20549
OF THE SECURITIES EXCHANGE ACT OF 1934
Federally chartered corporation | 52-0883107 | |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |
3900 Wisconsin Avenue, NW Washington, DC (Address of principal executive offices) | 20016 (Zip Code) |
(202) 752-7000
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class | Name of Each Exchange on Which Registered | |
None |
Large accelerated filer o | Accelerated filer þ | Non-accelerated filer o (Do not check if a smaller reporting company) | Smaller Reporting company o |
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Table | Description | Page | ||||||
— | Selected Financial Data | 73 | ||||||
1 | Expected Lifetime Profitability of Single-Family Loans Acquired in 1991 through 2010 | 10 | ||||||
2 | Single-Family Serious Delinquency Rates by Year of Acquisition | 12 | ||||||
3 | Credit Profile of Single-Family Conventional Loans Acquired | 13 | ||||||
4 | Credit Statistics, Single-Family Guaranty Book of Business | 17 | ||||||
5 | Level 3 Recurring Financial Assets at Fair Value | 77 | ||||||
6 | Summary of Consolidated Results of Operations | 83 | ||||||
7 | Analysis of Net Interest Income and Yield | 85 | ||||||
8 | Rate/Volume Analysis of Changes in Net Interest Income | 86 | ||||||
9 | Fair Value Losses, Net | 89 | ||||||
10 | Credit-Related Expenses | 92 | ||||||
11 | Total Loss Reserves | 93 | ||||||
12 | Allowance for Loan Losses and Reserve for Guaranty Losses (Combined Loss Reserves) | 94 | ||||||
13 | Nonperforming Single-Family and Multifamily Loans | 98 | ||||||
14 | Credit Loss Performance Metrics | 100 | ||||||
15 | Credit Loss Concentration Analysis | 101 | ||||||
16 | Single-Family Credit Loss Sensitivity | 102 | ||||||
17 | Impairments and Fair Value Losses on Loans in HAMP | 104 | ||||||
18 | Business Segment Summary | 107 | ||||||
19 | Business Segment Results | 108 | ||||||
20 | Single-Family Business Results | 109 | ||||||
21 | Multifamily Business Results | 113 | ||||||
22 | Capital Markets Group Results | 116 | ||||||
23 | Capital Markets Group’s Mortgage Portfolio Activity | 119 | ||||||
24 | Capital Markets Group’s Mortgage Portfolio Composition | 120 | ||||||
25 | Summary of Consolidated Balance Sheets | 122 | ||||||
26 | Analysis of Losses on Alt-A and Subprime Private-Label Mortgage-Related Securities | 123 | ||||||
27 | Credit Statistics of Loans Underlying Alt-A and Subprime Private-Label Mortgage-Related Securities (Including Wraps) | 124 | ||||||
28 | Changes in Risk Management Derivative Assets (Liabilities) at Fair Value, Net | 126 | ||||||
29 | Comparative Measures—GAAP Change in Stockholders’ Deficit and Non-GAAP Change in Fair Value of Net Assets (Net of Tax Effect) | 127 | ||||||
30 | Supplemental Non-GAAP Consolidated Fair Value Balance Sheets | 130 | ||||||
31 | Activity in Debt of Fannie Mae | 133 | ||||||
32 | Outstanding Short-Term Borrowings and Long-Term Debt | 136 | ||||||
33 | Outstanding Short-Term Borrowings | 137 | ||||||
34 | Maturity Profile of Outstanding Debt of Fannie Mae Maturing Within One Year | 139 |
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Table | Description | Page | ||||||
35 | Maturity Profile of Outstanding Debt of Fannie Mae Maturing in More Than One Year | 139 | ||||||
36 | Contractual Obligations | 140 | ||||||
37 | Cash and Other Investments Portfolio | 141 | ||||||
38 | Fannie Mae Credit Ratings | 143 | ||||||
39 | Composition of Mortgage Credit Book of Business | 150 | ||||||
40 | Risk Characteristics of Single-Family Conventional Business Volume and Guaranty Book of Business | 155 | ||||||
41 | Delinquency Status of Single-Family Conventional Loans | 160 | ||||||
42 | Serious Delinquency Rates | 161 | ||||||
43 | Single-Family Conventional Serious Delinquency Rate Concentration Analysis | 162 | ||||||
44 | Statistics on Single-Family Loan Workouts | 164 | ||||||
45 | Loan Modification Profile | 165 | ||||||
46 | Single-Family Foreclosed Properties | 166 | ||||||
47 | Single-Family Acquired Property Concentration Analysis | 167 | ||||||
48 | Multifamily Serious Delinquency Rates | 169 | ||||||
49 | Multifamily Concentration Analysis | 169 | ||||||
50 | Multifamily Foreclosed Properties | 170 | ||||||
51 | Mortgage Insurance Coverage | 174 | ||||||
52 | Activity and Maturity Data for Risk Management Derivatives | 185 | ||||||
53 | Interest Rate Sensitivity of Net Portfolio to Changes in Interest Rate Level and Slope of Yield Curve | 187 | ||||||
54 | Derivative Impact on Interest Rate Risk (50 Basis Points) | 187 | ||||||
55 | Interest Rate Sensitivity of Financial Instruments | 188 |
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Item 1. | Business |
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% Change | ||||||||||||||||||||
2010 | 2009 | 2008 | 2010 | 2009 | ||||||||||||||||
Home sales (units in thousands) | 5,229 | 5,530 | 5,398 | (5.4 | )% | 2.4 | % | |||||||||||||
New home sales | 321 | 374 | 485 | (14.2 | ) | (22.9 | ) | |||||||||||||
Existing home sales | 4,908 | 5,156 | 4,913 | (4.8 | ) | 4.9 | ||||||||||||||
Home price depreciation based on Fannie Mae Home Price Index (“HPI”)(2) | (3.1 | )% | (3.7 | )% | (10.3 | )% | — | — | ||||||||||||
Annual average fixed-rate mortgage interest rate(3) | 4.7 | % | 5.0 | % | 6.0 | % | — | — | ||||||||||||
Single-family mortgage originations (in billions) | $ | 1,530 | $ | 1,917 | $ | 1,580 | (20.2 | ) | 21.3 | |||||||||||
Type of single-family mortgage origination: | ||||||||||||||||||||
Refinance share | 65 | % | 69 | % | 52 | % | — | — | ||||||||||||
Adjustable-rate mortgage share | 5 | % | 4 | % | 7 | % | — | — | ||||||||||||
Total U.S. residential mortgage debt outstanding (in billions)(4) | $ | 11,459 | $ | 11,712 | $ | 11,915 | (2.2 | ) | (1.7 | ) |
(1) | The sources of the housing and mortgage market data in this table are the Federal Reserve Board, the Bureau of the Census, HUD, the National Association of Realtors, the Mortgage Bankers Association and FHFA. Homes sales data are based on information available through January 2011. Single-family mortgage originations, as well as refinance shares, are based on February 2011 estimates from Fannie Mae’s Economics & Mortgage Market Analysis Group. The adjustable-rate mortgage share is based on mortgage applications data reported by the Mortgage Bankers Association. Certain previously reported data may have been changed to reflect revised historical data from any or all of these organizations. | |
(2) | Calculated internally using property data information on loans purchased by Fannie Mae, Freddie Mac and other third-party home sales data. Fannie Mae’s HPI is a weighted repeat transactions index, meaning that it measures average price changes in repeat sales on the same properties. Fannie Mae’s HPI excludes prices on properties sold in foreclosure. The reported home price depreciation reflects the percentage change in Fannie Mae’s HPI from the fourth quarter of the prior year to the fourth quarter of the reported year. | |
(3) | Based on the annual average30-year fixed-rate mortgage interest rate reported by Freddie Mac. | |
(4) | Information for 2010 is through September 30, 2010 and has been obtained from the Federal Reserve’s September 2010 mortgage debt outstanding release. |
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• | minimizing our credit losses from delinquent mortgages; | |
• | providing liquidity, stability and affordability in the mortgage market; | |
• | providing assistance to the mortgage market and to the struggling housing market; | |
• | limiting the amount of the investment Treasury must make under our senior preferred stock purchase agreement; | |
• | returning to long-term profitability; and | |
• | protecting the interests of the taxpayers. |
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• | Our 2010 financial performance; | |
• | Actions we take to provide liquidity to the mortgage market; | |
• | Our expectations regarding profitability, the book of business we have acquired since the beginning of 2009 and credit losses; | |
• | Our strategies and actions to reduce credit losses; | |
• | Our 2009 and 2010 credit performance; | |
• | The servicer foreclosure process deficiencies discovered in 2010 and the related foreclosure pause; | |
• | Our liquidity position; and | |
• | Our outlook. |
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• | a $46.9 billion decrease in credit-related expenses, which consist of the provision for loan losses, the provision for guaranty losses (collectively referred to as the “provision for credit losses”) plus foreclosed property expense, due to the factors described below; | |
• | a $9.1 billion decrease in netother-than-temporary impairments due to slower deterioration of the estimated credit component of the fair value losses of Alt-A and subprime securities. In addition, net-other-than temporary impairment decreased in 2010 compared with 2009 because, effective beginning in the second quarter of 2009,we recognize only the credit portion ofother-than-temporary impairment in our consolidated statements of operations due to the adoption of a new other-than-temporary impairment accounting standard; | |
• | a $6.7 billion decrease in losses from partnership investments resulting primarily from the recognition, in the fourth quarter of 2009, of $5.0 billion inother-than-temporary impairment losses on our federal low-income housing tax credit (“LIHTC”) investments; and | |
• | a $2.3 billion decrease in net fair value losses primarily due to lower fair value losses on risk management derivatives. |
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• | Since the beginning of 2009, we have acquired single-family loans that have a strong overall credit profile and are performing well. We expect these loans will be profitable, by which we mean they will generate more fee income than credit losses and administrative costs, as we discuss in “Expected Profitability of Our Single-Family Acquisitions” below. For further information, see “Table 2: Single-Family Serious Delinquency Rates by Year of Acquisition” and “Table 3: Credit Profile of Single-Family Conventional Loans Acquired.” | |
• | The vast majority of our realized credit losses in 2009 and 2010 on single-family loans are attributable to single-family loans that we purchased or guaranteed from 2005 through 2008. While these loans will give rise to additional credit losses that we have not yet realized, we estimate that we have reserved for the substantial majority of the remaining losses. |
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* | For 2009, the serious delinquency rate as of December 31, 2010 is the same as the serious delinquency rate as of the end of the fourth quarter following the acquisition year. | |
(1) | Based on Fannie Mae’s HPI, which measures average price changes based on repeat sales on the same properties. For 2010, the data show an initial estimate based on purchase transactions in Fannie-Freddie acquisition and public deed data available through the end of January 2011. Previously reported data has been revised to reflect additional available historical data. Including subsequently available data may lead to materially different results. | |
(2) | Based on the average national unemployment rates for each month reported in the labor force statistics current population survey (CPS), Bureau of Labor Statistics. |
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Acquisitions from 2009 | Acquisitions from 2005 | |||||||
through 2010 | through 2008 | |||||||
Weighted averageloan-to-value ratio at origination | 68 | % | 73 | % | ||||
Weighted average FICO credit score at origination | 762 | 722 | ||||||
Fully amortizing, fixed-rate loans | 95 | % | 86 | % | ||||
Alt-A loans(2) | 1 | % | 14 | % | ||||
Interest-only | 1 | % | 12 | % | ||||
Originalloan-to-value ratio > 90 | 5 | % | 11 | % | ||||
FICO credit score < 620 | * | 5 | % |
* | Represent less than 0.5% of the total acquisitions. | |
(1) | Loans that meet more than one category are included in each applicable category. | |
(2) | Newly originated Alt-A loans acquired in 2009 and 2010 consist of the refinance of existing Alt-A loans. |
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• | Established a minimum FICO credit score and reduced maximumdebt-to-income ratio for most loans; | |
• | Limited or eliminated certain loan products with higher-risk characteristics, including discontinuing the acquisition of newly originated Alt-A loans, except for those that represent the refinancing of an existing Alt-A Fannie Mae loan (we may also continue to selectively acquire seasoned Alt-A loans that meet acceptable eligibility and underwriting criteria; however, we expect our acquisitions of Alt-A mortgage loans to continue to be minimal in future periods); | |
• | Updated our comprehensive risk assessment model in Desktop Underwriter®, our proprietary automated underwriting system, and implemented a comprehensive risk assessment worksheet to assist lenders in the manual underwriting of loans; | |
• | Increased our guaranty fee pricing to better align risk and pricing; | |
• | Updated our policies regarding appraisals of properties backing loans; and | |
• | Established a national down payment policy requiring borrowers to have a minimum down payment (or minimum equity, for refinances) of 3%, in most cases. |
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• | Reducing defaults to avoid losses that otherwise would occur; | |
• | Efficiently managing timelines for home retention solutions, foreclosure alternatives, and foreclosures; | |
• | Pursuing foreclosure alternatives to reduce the severity of the losses we incur; | |
• | Managing our REO inventory to reduce costs and maximize sales proceeds; and | |
• | Pursuing contractual remedies from lenders and providers of credit enhancement, including mortgage insurers. |
• | Improved Servicing. Our mortgage servicers are the primary point of contact for borrowers and perform a vital role in our efforts to reduce defaults and pursue foreclosure alternatives. We seek to improve the servicing of our delinquent loans through a variety of means, including increasing our resources for managing the oversight of servicers, increasing our communications with servicers, and holding servicers accountable for following our requirements. We are also working with some of our servicers to test and implement high-touch protocols for servicing our higher risk loans, including lowering the ratio of loans per servicer employee, prescribing borrower outreach strategies to be used at earlier stages of delinquency, and providing distressed borrowers a single point of contact to resolve issues. | |
• | Refinancing Initiatives. Through our Refi Plustm initiative, which provides expanded refinance opportunities for eligible Fannie Mae borrowers, we acquired or guaranteed approximately 659,000 loans in 2010 that helped borrowers obtain more affordable monthly payments now and in the future or a more stable mortgage product (for example, by moving from an adjustable-rate mortgage to a fixed-rate mortgage). These refinancing activities may help prevent future delinquencies and defaults. Loans |
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refinanced through the Refi Plus initiative in 2010 reduced our borrowers’ monthly mortgage payments by an average of $149. |
• | Home Retention Solutions. Our home retention solutions are intended to help borrowers stay in their homes and include loan modifications, repayment plans and forbearances. We provide information on our home retention solutions completed during 2010 in Table 4. Please also see “Risk Management—Credit Risk Management—Single-Family Mortgage Credit Risk Management—Management of Problem Loans and Loan Workout Metrics” for a discussion of our home retention strategies. |
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2010 | 2009 | |||||||||||||||||||||||
Full | Full | |||||||||||||||||||||||
Year | Q4 | Q3 | Q2 | Q1 | Year | |||||||||||||||||||
(Dollars in millions) | ||||||||||||||||||||||||
As of the end of each period: | ||||||||||||||||||||||||
Serious delinquency rate(2) | 4.48 | % | 4.48 | % | 4.56 | % | 4.99 | % | 5.47 | % | 5.38 | % | ||||||||||||
Nonperforming loans(3) | $ | 212,858 | $ | 212,858 | $ | 212,305 | $ | 217,216 | $ | 222,892 | $ | 215,505 | ||||||||||||
Foreclosed property inventory: | ||||||||||||||||||||||||
Number of properties | 162,489 | 162,489 | 166,787 | 129,310 | 109,989 | 86,155 | ||||||||||||||||||
Carrying value | $ | 14,955 | $ | 14,955 | $ | 16,394 | $ | 13,043 | $ | 11,423 | $ | 8,466 | ||||||||||||
Combined loss reserves(4) | $ | 60,163 | $ | 60,163 | $ | 58,451 | $ | 59,087 | $ | 58,900 | $ | 62,312 | ||||||||||||
Total loss reserves(5) | $ | 64,469 | $ | 64,469 | $ | 63,105 | $ | 64,877 | $ | 66,479 | $ | 62,848 | ||||||||||||
During the period: | ||||||||||||||||||||||||
Foreclosed property (number of properties): | ||||||||||||||||||||||||
Acquisitions(6) | 262,078 | 45,962 | 85,349 | 68,838 | 61,929 | 145,617 | ||||||||||||||||||
Dispositions | (185,744 | ) | (50,260 | ) | (47,872 | ) | (49,517 | ) | (38,095 | ) | (123,000 | ) | ||||||||||||
Credit-related expenses(7) | $ | 26,420 | $ | 4,064 | $ | 5,559 | $ | 4,871 | $ | 11,926 | $ | 71,320 | ||||||||||||
Credit losses(8) | $ | 23,133 | $ | 3,111 | $ | 8,037 | $ | 6,923 | $ | 5,062 | $ | 13,362 | ||||||||||||
Loan workout activity (number of loans): | ||||||||||||||||||||||||
Home retention loan workouts(9) | 440,276 | 89,691 | 113,367 | 132,192 | 105,026 | 160,722 | ||||||||||||||||||
Preforeclosure sales anddeeds-in-lieu of foreclosure | 75,391 | 15,632 | 20,918 | 21,515 | 17,326 | 39,617 | ||||||||||||||||||
Total loan workouts | 515,667 | 105,323 | 134,285 | 153,707 | 122,352 | 200,339 | ||||||||||||||||||
Loan workouts as a percentage of our delinquent loans in our guaranty book of business(10) | 37.30 | % | 30.47 | % | 37.86 | % | 41.18 | % | 31.59 | % | 12.24 | % |
(1) | Our single-family guaranty book of business consists of (a) single-family mortgage loans held in our mortgage portfolio, (b) single-family mortgage loans underlying Fannie Mae MBS, and (c) other credit enhancements that we provide on single-family mortgage assets, such as long-term standby commitments. It excludes non-Fannie Mae mortgage-related securities held in our mortgage portfolio for which we do not provide a guaranty. |
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(2) | Calculated based on the number of single-family conventional loans that are three or more months past due and loans that have been referred to foreclosure but not yet foreclosed upon, divided by the number of loans in our single-family conventional guaranty book of business. We include all of the single-family conventional loans that we own and those that back Fannie Mae MBS in the calculation of the single-family serious delinquency rate. | |
(3) | Represents the total amount of nonperforming loans, including troubled debt restructurings and HomeSaver Advance first-lien loans, which are unsecured personal loans in the amount of past due payments used to bring mortgage loans current, that are on accrual status. A troubled debt restructuring is a restructuring of a mortgage loan in which a concession is granted to a borrower experiencing financial difficulty. We generally classify loans as nonperforming when the payment of principal or interest on the loan is two months or more past due. | |
(4) | Consists of the allowance for loan losses for loans recognized in our consolidated balance sheets and the reserve for guaranty losses related to both single-family loans backing Fannie Mae MBS that we do not consolidate in our consolidated balance sheets and single-family loans that we have guaranteed under long-term standby commitments. Prior period amounts have been restated to conform to the current period presentation. The amounts shown as of March 31, 2010, June 30, 2010, September 30, 2010 and December 31, 2010 reflect a decrease from the amount shown as of December 31, 2009 as a result of the adoption of the new accounting standards. For additional information on the change in our loss reserves see “Consolidated Results of Operations—Credit-Related Expenses—Provision for Credit Losses.” | |
(5) | Consists of (a) the combined loss reserves, (b) allowance for accrued interest receivable, and (c) allowance for preforeclosure property taxes and insurance receivables. | |
(6) | Includes acquisitions throughdeeds-in-lieu of foreclosure. | |
(7) | Consists of the provision for loan losses, the provision (benefit) for guaranty losses and foreclosed property expense. | |
(8) | Consists of (a) charge-offs, net of recoveries and (b) foreclosed property expense; adjusted to exclude the impact of fair value losses resulting from credit-impaired loans acquired from MBS trusts and HomeSaver Advance loans. | |
(9) | Consists of (a) modifications, which do not include trial modifications or repayment plans or forbearances that have been initiated but not completed; (b) repayment plans and forbearances completed and (c) HomeSaver Advance first-lien loans. See “Table 44: Statistics on Single-Family Loan Workouts” in “Risk Management—Credit Risk Management” for additional information on our various types of loan workouts. | |
(10) | Calculated based on annualized problem loan workouts during the period as a percentage of delinquent loans in our single-family guaranty book of business as of the end of the period. |
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Business Segment | Primary Business Activities | Primary Revenues | Primary Expenses | ||||||
Single-Family Credit Guaranty, or Single-Family | • Mortgage securitizations: Works with our lender customers to securitize single-family mortgage loans delivered to us by lenders into Fannie Mae MBS, which we refer to as “lender swap” transactions • Mortgage acquisitions: Works with our Capital Markets group to facilitate the purchase of single-family mortgage loans for our mortgage portfolio • Credit risk management:Prices and manages the credit risk on loans in our single-family guaranty book of business • Credit loss management:Works to prevent foreclosures and reduce costs of defaulted loans through foreclosure alternatives, through management of REO we acquire upon foreclosure or through a deed-in-lieu of foreclosure, and through lender repurchases | • Guaranty fees: Compensation for assuming and managing the credit risk on our single-family guaranty book of business • Fee and other income: Compensation received for providing lender services | • Credit-related expenses. Consists of provision for single-family loan losses, provision for single-family guaranty losses and foreclosed property expense on loans underlying our single-family guaranty book of business • Administrative expenses: Consists of salaries and benefits, occupancy costs, professional services, and other expenses associated with the Single-Family business operations | ||||||
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Business Segment | Primary Business Activities | Primary Revenues | Primary Expenses | ||||||
Multifamily | • Mortgage securitizations: Works with our lender customers to securitize multifamily mortgage loans delivered to us by lenders into Fannie Mae MBS in lender swap transactions • Mortgage acquisitions: Works with our Capital Markets group to facilitate the purchase of multifamily mortgage loans for our mortgage portfolio • Affordable housing investments: Provides funding for investments in affordable multifamily rental housing projects • Credit risk management:Prices and manages the credit risk on loans in our multifamily guaranty book of business • Credit loss management:Works to prevent foreclosures and reduce costs of defaulted loans through foreclosure alternatives, through management of REO we acquire upon foreclosure or through a deed-in-lieu of foreclosure, and through lender repurchases | • Guaranty fees: Compensation for assuming and managing the credit risk on our multifamily guaranty book of business • Fee and other income: Compensation received for engaging in multifamily transactions and bond credit enhancements | • Credit-related expenses: Consists of provision for multifamily loan losses, provision for multifamily guaranty losses and foreclosed property expense on loans underlying our multifamily guaranty book of business • Net operating losses: Generated by our affordable housing investments, net of any tax benefits generated by these investments that we are able to utilize • Administrative expenses: Consists of salaries and benefits, occupancy costs, professional services, and other expenses associated with our Multifamily business operations | ||||||
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Business Segment | Primary Business Activities | Primary Revenues | Primary Expenses | ||||||
Capital Markets | • Mortgage and other investments: Purchases mortgage assets and makes investments in other non-mortgage interest-earning assets • Mortgage securitizations:Purchases loans from a large group of lenders, securitizes them, and may sell the securities to dealers and investors • Structured mortgage securitizations and other customer services:Issues structured Fannie Mae MBS for customers in exchange for a transaction fee and provides other fee-related services to our lender customers • Interest rate risk management: Manages the interest rate risk on our portfolio by issuing a variety of debt securities in a wide range of maturities and by using derivatives | • Net interest income: Generated from the difference between the interest income earned on our interest-earning assets and the interest expense associated with the debt funding those assets • Fee and other income: Compensation received for providing structured transactions and other lender services | • Fair value gains and losses: Primarily consists of fair value gains and losses on derivatives and trading securities • Investment gains and losses:Primarily consists of gains and losses on the sale or securitization of mortgage assets • Other-than-temporary impairment: Consists of impairment recognized on our investments • Administrative expenses: Consists of salaries and benefits, occupancy costs, professional services, and other expenses associated with our Capital Markets business operations | ||||||
For the Year Ended December 31, | ||||||||||||
2010(2) | 2009 | 2008 | ||||||||||
Single-Family Credit Guaranty | 12 | % | 39 | % | 54 | % | ||||||
Multifamily(3) | 5 | 3 | 3 | |||||||||
Capital Markets | 77 | 58 | 43 |
(1) | Amounts presented represent the percentage of our total net revenues accounted for by each of our business segments. | |
(2) | Segment results for 2010 are not comparable with prior years’ results. In addition, under our current segment reporting structure, the sum of net revenues for our three business segments does not equal our consolidated total net revenues because we separate the activity related to our consolidated trusts from the results generated by our three segments. | |
(3) | These amounts do not include the net interest income we earn on our multifamily investments in our mortgage portfolio, which is reflected in the revenues of our Capital Markets segment. |
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• | Funding sources: Unlike the single-family residential mortgage market in which the GSEs’ predominance makes us a driver of market standards and rates, the multifamily market is made up of a wide variety of lending sources, including commercial banks, life insurance companies, investment banks, small community banks, FHA, state and local housing finance agencies and the GSEs. | |
• | Number of lenders; lender relationships: In 2010, we executed multifamily transactions with 32 lenders. Of these, 24 lenders delivered loans to us under our Delegated Underwriting and Servicing, or DUS®, product line. In determining whether to do business with a multifamily lender, we consider the lender’s financial strength, multifamily underwriting and servicing experience, portfolio performance and willingness and ability to share in the risk of loss associated with the multifamily loans they originate. | |
• | Loan size: On average, loans in our multifamily guaranty book of business are several million dollars in size. A significant number of our multifamily loans are under $5 million, and some of our multifamily loans are greater than $25 million. | |
• | Collateral: Multifamily loans are collateralized by properties that generate cash flows, such as garden and high-rise apartment complexes, seniors housing communities, cooperatives, dedicated student housing and manufactured housing communities. These rental properties are operated as businesses. | |
• | Borrower profile: Most multifamily borrowers are for-profit corporations, limited liability companies, partnerships, real estate investment trusts and individuals who invest in real estate for cash flow and |
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equity returns in exchange for their original investment in the asset. Multifamily loans are generally non-recourse to the borrower. When considering a multifamily borrower, creditworthiness is evaluated through a combination of quantitative and qualitative data including liquid assets, net worth, number of units owned, experience in a marketand/or property type, multifamily portfolio performance, access to additional liquidity, debt maturities, asset/property management platform, senior management experience, reputation and lender exposure. |
• | Borrower and lender investment: Borrowers are required to contribute cash equity into multifamily properties on which they borrow, while lenders generally share in any losses realized from the loans that we purchase. | |
• | Underwriting process: Some multifamily loans require a detailed underwriting process due to the size of the loan or the complexity of the collateral or transaction. | |
• | Term and lifecycle: In contrast to the standard30-year single-family residential loan, multifamily loans typically have terms of 5, 7 or 10 years, with balloon payments due at maturity. | |
• | Prepayment terms: Multifamily Fannie Mae loans and MBS trade in a market in which investors expect commercial investment terms, particularly limitations on prepayments of loans and the imposition of prepayment premiums. |
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• | To meet the growing need for affordable financing, we have a team that focuses on the purchase and guarantee of multifamily loans under $3 million ($5 million in high income areas), which finance affordable housing. We purchase these loans from DUS lenders as well as small community banks and nonprofits or similar entities. Over the years, we have been an active purchaser of these loans from both DUS and non-DUS lenders and, as of December 31, 2010, they represented 70% of our multifamily guaranty book of business by loan count and 18% based on unpaid principal balance. | |
• | To serve low- and very low-income households, we also have a team that focuses exclusively on relationships with lenders financing privately-owned multifamily properties that receive public subsidies in exchange for maintaining long-term affordable rents. We enable borrowers to leverage housing programs and subsidies provided by local, state and federal agencies. These public subsidy programs are largely targeted to providing housing to families earning less than 60% of area median income (as defined by HUD) and are structured to ensure that the low and very low-income households who benefit from the subsidies pay no more than 30% of their gross monthly income for rent and utilities. As of December 31, 2010, this type of financing represented approximately 14% of our multifamily guaranty book of business, based on unpaid principal balance, including $16.5 billion in bond credit enhancements. |
• | Whole Loan Conduit. Whole loan conduit activities involve our purchase of both single-family and multifamily loans principally for the purpose of securitizing them. We purchase loans from a large group of lenders and then securitize them as Fannie Mae MBS, which may then be sold to dealers and investors. | |
• | Early Funding. Lenders who deliver whole loans or pools of whole loans to us in exchange for MBS typically must wait between 30 and 45 days from the closing and settlement of the loans or pools and the issuance of the MBS. This delay may limit lenders’ ability to originate new loans. Under our early lender funding programs, we purchase whole loans or pools of loans on an accelerated basis, allowing lenders to receive quicker payment for the whole loans and pools, which replenishes their funds and allows them to originate more mortgage loans. |
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• | REMICs and Other Structured Securitizations. We issue structured Fannie Mae MBS (including REMICs), typically for our lender customers or securities dealer customers, in exchange for a transaction fee. | |
• | Dollar Roll Transactions. We engaged in dollar roll activity in 2010, but the transaction volume was lower than in 2009 and 2008 due to lower market demand for short-term financing. A dollar roll transaction is a commitment to purchase a mortgage-related security with a concurrent agreement to re-sell a substantially similar security at a later date or vice versa. |
• | Portfolio securitizations. Our Capital Markets group creates single-class and multi-class Fannie Mae MBS from mortgage-related assets held in our mortgage portfolio. Our Capital Markets group may sell these Fannie Mae MBS into the secondary market or may retain the Fannie Mae MBS in our investment portfolio. | |
• | Structured securitizations: Our Capital Markets group creates single-class and multi-class structured Fannie Mae MBS, typically for our lender customers or securities dealer customers, in exchange for a transaction fee. In these transactions, the customer “swaps” a mortgage-related asset that it owns (typically a mortgage security) in exchange for a structured Fannie Mae MBS we issue. Our Capital Markets group earns transaction fees for creating structured Fannie Mae MBS for third parties. The process for issuing Fannie Mae MBS in a structured securitization is similar to the process involved in our lender swap securitizations. For more information about that process and how it differs from portfolio securitizations, please see “Mortgage Securitizations—Lender Swaps and Portfolio Securitizations.” |
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• | paying dividends or other distributions on or repurchasing our equity securities (other than the senior preferred stock or warrant); | |
• | issuing additional equity securities (except in limited instances); | |
• | selling, transferring, leasing or otherwise disposing of any assets, other than dispositions for fair market value, except in limited circumstances including if the transaction is in the ordinary course of business and consistent with past practice; | |
• | issuing subordinated debt; and | |
• | entering into any new compensation arrangements or increasing amounts or benefits payable under existing compensation arrangements for any of our executive officers (as defined by SEC rules) without the consent of the Director of FHFA, in consultation with the Secretary of the Treasury. |
• | Mortgage Asset Limit. We are restricted in the amount of mortgage assets that we may own. The maximum allowable amount was reduced by $90 billion to $810 billion on December 31, 2010. On each December 31 thereafter, we are required to reduce our mortgage assets to 90% of the maximum allowable amount that we were permitted to own as of December 31 of the immediately preceding calendar year, until the amount of our mortgage assets reaches $250 billion. Accordingly, the maximum allowable amount of mortgage assets we may own on December 31, 2011 is $729 billion. The definition of mortgage asset is based on the unpaid principal balance of such assets and does not reflect market |
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valuation adjustments, allowance for loan losses, impairments, unamortized premiums and discounts and the impact of consolidation of variable interest entities. Under this definition, our mortgage assets on December 31, 2010 were $788.8 billion. We disclose the amount of our mortgage assets on a monthly basis under the caption “Gross Mortgage Portfolio” in our Monthly Summaries, which are available on our Web site and announced in a press release. |
• | Debt Limit. We are subject to a limit on the amount of our indebtedness. Our debt limit in 2010 was $1,080 billion and in 2011 is $972 billion. For every year thereafter, our debt cap will equal 120% of the amount of mortgage assets we are allowed to own on December 31 of the immediately preceding calendar year. The definition of indebtedness is based on the par value of each applicable loan for purposes of our debt cap. Under this definition, our indebtedness as of December 31, 2010 was $793.9 billion. We disclose the amount of our indebtedness on a monthly basis under the caption “Total Debt Outstanding” in our Monthly Summaries, which are available on our Web site and announced in a press release. |
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• | provide stability in the secondary market for residential mortgages; | |
• | respond appropriately to the private capital market; | |
• | provide ongoing assistance to the secondary market for residential mortgages (including activities relating to mortgages on housing for low- and moderate-income families involving a reasonable economic return that may be less than the return earned on other activities) by increasing the liquidity of mortgage investments and improving the distribution of investment capital available for residential mortgage financing; and | |
• | promote access to mortgage credit throughout the nation (including central cities, rural areas and underserved areas) by increasing the liquidity of mortgage investments and improving the distribution of investment capital available for residential mortgage financing. |
• | Principal Balance Limitations. Our charter permits us to purchase and securitize mortgage loans secured by either a single-family or multifamily property. Single-family conventional mortgage loans are subject to maximum original principal balance limits, known as “conforming loan limits.” The conforming loan limits are established each year based on the average prices of one-family residences. |
• | Loan-to-Value and Credit Enhancement Requirements. The Charter Act generally requires credit enhancement on any conventional single-family mortgage loan that we purchase or securitize if it has aloan-to-value ratio over 80% at the time of purchase. We also do not purchase or securitize second lien single-family mortgage loans when the combinedloan-to-value ratio exceeds 80%, unless the second lien mortgage loan has credit enhancement in accordance with the requirements of the Charter Act. The credit enhancement required by our charter may take the form of one or more of the following: (1) insurance or a guaranty by a qualified insurer of the over-80% portion of the unpaid principal balance of the mortgage; (2) a seller’s agreement to repurchase or replace the mortgage in the event of default (for such period and |
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under such circumstances as we may require); or (3) retention by the seller of at least a 10% participation interest in the mortgage. Regardless ofloan-to-value ratio, the Charter Act does not require us to obtain credit enhancement to purchase or securitize loans insured by FHA or guaranteed by the VA. |
• | Issuances of Our Securities. We are authorized, upon the approval of the Secretary of the Treasury, to issue debt obligations and mortgage-related securities. Neither the U.S. government nor any of its agencies guarantees, directly or indirectly, our debt or mortgage-related securities. | |
• | Exemptions for Our Securities. The Charter Act generally provides that our securities are exempt under the federal securities laws administered by the SEC. As a result, we are not required to file registration statements with the SEC under the Securities Act of 1933 with respect to offerings of any of our securities. Our non-equity securities are also exempt securities under the Securities Exchange Act of 1934 (the “Exchange Act”). However, our equity securities are not treated as exempted securities for purposes of Sections 12, 13, 14 or 16 of the Exchange Act. Consequently, we are required to file periodic and current reports with the SEC, including annual reports onForm 10-K, quarterly reports onForm 10-Q and current reports onForm 8-K. | |
• | Exemption from Specified Taxes. We are exempt from taxation by states, territories, counties, municipalities and local taxing authorities, except for taxation by those authorities on our real property. We are not exempt from the payment of federal corporate income taxes. | |
• | Other Limitations and Requirements. We may not originate mortgage loans or advance funds to a mortgage seller on an interim basis, using mortgage loans as collateral, pending the sale of the mortgages in the secondary market. In addition, we may only purchase or securitize mortgages on properties located in the United States and its territories. |
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• | Low-Income Families Home Purchase Benchmark: At least 27% of our acquisitions of single-family owner-occupied mortgage loans financing home purchases must be affordable to low-income families (defined as families with income no higher than 80% of area median income). | |
• | Very Low-Income Families Home Purchase Benchmark: At least 8% of our acquisitions of single-family owner-occupied mortgage loans financing home purchases must be affordable to very low-income families (defined as families with income no higher than 50% of area median income). | |
• | Low-Income Areas Home Purchase Benchmarks: At least 24% of our acquisitions of single-family owner-occupied mortgage loans financing home purchases must be for families in low-income census tracts, for moderate-income families (defined as families with income no higher than 100% of area median income) in designated disaster areas or for moderate-income families in minority census tracts. In addition, at least 13% of our acquisitions of single-family owner-occupied purchase money mortgage loans must be for families in low-income census tracts or for moderate-income families in minority census tracts. | |
• | Low-Income Families Refinancing Benchmark: At least 21% of our acquisitions of single-family owner-occupied refinance mortgage loans must be affordable to low-income families, which may include qualifying permanent modifications of mortgages under HAMP completed during the year. |
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Result(1) | Benchmark(2) | |||||||
Single-family housing goals:(3) | ||||||||
Low-income families home purchases | 25.1 | % | 27.0 | % | ||||
Very low-income families home purchases | 7.2 | 8.0 | ||||||
Low-income areas home purchases | 24.0 | 24.0 | ||||||
Low-income and high-minority areas home purchases | 12.4 | 13.0 | ||||||
Low-income families refinancing | 20.9 | 21.0 |
Result(1) | Goal | |||||||
Multifamily housing goals: | ||||||||
Affordable to families with incomes no higher than 80% of area median income | 212,768 units | 177,750 units | ||||||
Affordable to families with incomes no higher than 50% of area median income | 53,184 units | 42,750 units |
(1) | Our 2010 results have not been validated by FHFA, and after validation they may differ from the results reported above. | |
(2) | Even if our results do not meet the benchmarks, we may still meet our goals. The final rule specifies that our single-family housing goals performance will be measured not only against these benchmarks, but also against the share of goals-qualifying originations in the primary mortgage market. We will be in compliance with the housing goals if we meet either the benchmarks or market share measures. The amount of goals-qualifying originations in the market during 2010 will not be available until the release of data reported by primary market originators under the Home Mortgage Disclosure Act in the fall of 2011. | |
(3) | Our single-family results and benchmarks are expressed as a percentage of the total number of eligible mortgages acquired during the period. |
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• | The loan product assessment factor requires evaluation of our “development of loan products, more flexible underwriting guidelines, and other innovative approaches to providing financing to each” underserved market. | |
• | The outreach assessment factor requires evaluation of “the extent of outreach to qualified loan sellers and other market participants.” We are expected to engage market participants and pursue relationships with qualified sellers that serve each underserved market. | |
• | The loan purchase assessment factor requires FHFA to consider the volume of loans acquired in each underserved market relative to the market opportunities available to us. The 2008 Reform Act prohibits the establishment of specific quantitative targets by FHFA. However, in its evaluation FHFA could consider the volume of loans acquired in past years. | |
• | The investment and grants assessment factor requires evaluation of the amount of investment and grants in projects that assist in meeting the needs of underserved markets. |
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• | Implementing the guidelines and policies of the Treasury program; | |
• | Preparing the requisite forms, tools and training to facilitate efficient loan modifications by servicers; |
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• | Creating, making available and managing the process for servicers to report modification activity and program performance; | |
• | Calculating incentive compensation consistent with program guidelines; | |
• | Acting as record-keeper for executed loan modifications and program administration; | |
• | Coordinating with Treasury and other parties toward achievement of the program’s goals, including assisting with development and implementation of updates to the program and initiatives expanding the program’s reach; and | |
• | Performing other tasks as directed by Treasury from time to time. |
• | dedicated Fannie Mae personnel to work closely with participating servicers; | |
• | established a servicer support call center; | |
• | conducted ongoing conference calls with the leadership of participating servicers; | |
• | provided training through live Web seminars and recorded tutorials; and | |
• | made checklists and job aids available on the program Web site. |
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• | Our expectation that mortgage interest rates will increase in 2011, which will likely reduce the share of refinance loans; | |
• | The size of the declines nationwide in total single-family originations and mortgage debt outstanding that we expect in 2011; | |
• | Our expectation that the unemployment rate will decline modestly throughout 2011; | |
• | Our expectations that our multifamily nonperforming assets will increase in certain geographic areas and that we may continue to experience an increase in delinquencies and credit losses despite improving market fundamentals; | |
• | Our expectation that the multifamily sector will continue to improve modestly in 2011, even though unemployment levels remain elevated; | |
• | Our expectation that we will not earn profits in excess of our annual dividend obligation to Treasury for the indefinite future; | |
• | Our expectation that, if FHA continues to be the lower-cost option for some consumers, and in some cases the only option, for loans with higher LTV ratios, our market share could be adversely impacted if the market shifts away from refinance activity; | |
• | Our expectation that the single-family loans we have acquired since 2009 will be profitable; | |
• | Our estimate that, while single-family loans that we acquired from 2005 through 2008 will give rise to additional credit losses that we have not yet realized, we have reserved for the substantial majority of the remaining losses; | |
• | Our expectation that our draws from Treasury for credit losses will abate and our draws will increasingly be driven by dividend payments; | |
• | Our belief that loans we have acquired since 2009 would become unprofitable if home prices declined by more than 20% from their December 2010 levels over the next five years based on our home price index; | |
• | Our expectations regarding whether loans we acquired in specific years prior to 2009 will be profitable or unprofitable; | |
• | Our expectation that defaults on loans we acquired from 2005 through 2008 and the resulting charge-offs will occur over a period of years; | |
• | Our expectation that it will take years before our REO inventory approaches pre-2008 levels; | |
• | Our expectation that the number of our repurchase requests to seller/servicers will remain high in 2011; |
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• | Our expectation that we will realize as credit losses an estimated two-thirds of the fair value losses on loans purchased out of MBS trusts that are reflected in our consolidated balance sheets, and recover the remaining third through our consolidated statements of operations; | |
• | Our belief 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; | |
• | Our expectation that weakness in the housing and mortgage markets will continue in 2011; | |
• | Our expectation that home sales are unlikely to increase until the unemployment rate improves; | |
• | Our expectation that single-family default and severity rates and the level of single-family foreclosures will remain high in 2011; | |
• | Our expectation that multifamily charge-offs will remain commensurate with 2010 levels throughout 2011; | |
• | Our expectation that our overall business volume in 2011 will be lower than in 2010; | |
• | Our expectation that home prices on a national basis will decline slightly, with greater declines in some geographic areas than others, before stabilizing later in 2011, and that thepeak-to-trough home price decline on a national basis will range between 21% and 26%; | |
• | Our expectation that our credit-related expenses will remain high in 2011 and that our credit losses will increase in 2011 as compared to 2010; | |
• | Our expectation that we will continue to purchase loans from MBS trusts as they become delinquent for four or more consecutive monthly payments subject to market conditions, servicer capacity, and other constraints, including the limit on mortgage assets that we may own pursuant to the senior preferred stock purchase agreement; | |
• | Our expectation that revenues from our mortgage asset portfolio will decrease over time; | |
• | Whether during conservatorship we will be limited to continuing our existing core business activities and taking actions necessary to advance the goals of the conservatorship; | |
• | Our not being a substantial buyer or seller of mortgages for our retained portfolio, except for purchases of delinquent mortgages out of our guaranteed MBS pools; | |
• | Our expectations that FHFA will request additional funds from Treasury on our behalf to ensure we maintain a positive net worth and avoid mandatory receivership, that Treasury will provide such funds, and that the dividends on Treasury’s investments in us will therefore increase; | |
• | Our expectation that the Dodd-Frank Act will significantly change the regulation of the financial services industry, directly affect our business, and may involve a significant operational burden; | |
• | Our expectation that some or all of the conditions that negatively affected our ability to meet our 2010 single-family housing goals are likely to continue in 2011; | |
• | Our expectation that the pause in foreclosures as a result of servicer foreclosure process deficiencies will likely result in higher serious delinquency rates, longer foreclosure timelines and higher foreclosed property expenses; | |
• | Our expectation that we may continue to experience substantial changes in management, employees and our business structure and practices; | |
• | Our intention to maximize the value of nonperforming loans over time, utilizing loan modification, foreclosure, repurchases and other preferable loss mitigation actions; | |
• | Our estimation of the amount that we could realize over the fair value of our nonperforming loans reported in our non-GAAP consolidated fair value balance sheet; |
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• | Our expectation that the current market premium portion of our current estimate of fair value will not impact future Treasury draws, which is based on our intention not to have another party assume the credit risk inherent in our book of business; | |
• | Our expectation that our debt funding needs will decline in future periods as we reduce the size of our mortgage portfolio in compliance with the requirements of the senior preferred stock purchase agreement; | |
• | Our expectation that, due to the large size of our portfolio of mortgage-related securities, current market conditions and the significant amount of distressed assets in our mortgage portfolio, it is unlikely that there would be sufficient market demand for large amounts of these securities over a prolonged period of time, particularly during a liquidity crisis; | |
• | Our expectation that our acquisitions of Alt-A mortgage loans will continue to be minimal in future periods and the percentage of the book of business attributable to Alt-A will decrease over time; | |
• | Our belief that we have limited exposure to losses on home equity conversion mortgages, a type of reverse mortgage insured by the federal government; | |
• | Our expectation that serious delinquency rates will continue to be affected in the future by home price changes, changes in other macroeconomic conditions and the extent to which borrowers with modified loans again become delinquent in their payments; | |
• | Our expectation that we will increase our use of foreclosure alternatives; | |
• | Our belief that the performance of our workouts will be highly dependent on economic factors, such as unemployment rates, household wealth and home prices; | |
• | Our belief that one or more of our financial guarantor counterparties may not be able to fully meet their obligations to us in the future; | |
• | Our assumption that the guaranty fee income generated from future business activity will largely replace guaranty fee income lost due to mortgage prepayments; and | |
• | Our anticipated 2011 contributions to our benefit plans. |
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Item 1A. | Risk Factors |
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Item 1B. | Unresolved Staff Comments |
Item 2. | Properties |
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Item 3. | Legal Proceedings |
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Item 4. | [Removed and Reserved] |
Item 5. | Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities |
Quarter | High | Low | ||||||
2009 | ||||||||
First Quarter | $ | 1.43 | $ | 0.35 | ||||
Second Quarter | 1.05 | 0.51 | ||||||
Third Quarter | 2.13 | 0.51 | ||||||
Fourth Quarter | 1.55 | 0.88 | ||||||
2010 | ||||||||
First Quarter | $ | 1.23 | $ | 0.91 | ||||
Second Quarter | 1.36 | 0.34 | ||||||
Third Quarter | 0.42 | 0.19 | ||||||
Fourth Quarter | 0.47 | 0.27 |
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Total Number of | Maximum Number of | |||||||||||||||
Total | Shares Purchased as | Shares that | ||||||||||||||
Number of | Average | Part of Publicly | May Yet be | |||||||||||||
Shares | Price Paid | Announced | Purchased Under | |||||||||||||
Purchased(1) | per Share | Program(2) | the Program(2) | |||||||||||||
(Shares in thousands) | ||||||||||||||||
2010 | ||||||||||||||||
October 1-31 | 1 | $ | 0.37 | — | — | |||||||||||
November 1-30 | 1 | 0.38 | — | — | ||||||||||||
December 1-31 | 1 | 0.32 | — | — | ||||||||||||
Total | 3 | |||||||||||||||
(1) | Consists of shares of common stock reacquired from employees to pay an aggregate of approximately $930 in withholding taxes due upon the vesting of previously issued restricted stock. Does not include 337,871 shares of 8.75% Non-Cumulative Mandatory ConvertibleSeries 2008-1 Preferred Stock received from holders upon conversion of those shares into 520,589 shares of common stock. | |
(2) | On January 21, 2003, we publicly announced that the Board of Directors had approved an open market share repurchase program under which we could purchase in open market transactions the sum of (a) up to 5% of the shares of common stock outstanding as of December 31, 2002 (49.4 million shares) and (b) additional shares to offset stock issued or expected to be issued under our employee benefit plans. Since August 2004, no shares have been repurchased pursuant to this program. The Board of Directors terminated this share repurchase program on October 14, 2010. |
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Item 6. | Selected Financial Data |
For the Year Ended December 31, | ||||||||||||||||||||
2010(1) | 2009 | 2008 | 2007 | 2006 | ||||||||||||||||
(Dollars and shares in millions, except per share amounts) | ||||||||||||||||||||
Statement of operations data:(2) | ||||||||||||||||||||
Net interest income | $ | 16,409 | $ | 14,510 | $ | 8,782 | $ | 4,581 | $ | 6,752 | ||||||||||
Guaranty fee income | 202 | 7,211 | 7,621 | 5,071 | 4,250 | |||||||||||||||
Netother-than-temporary impairments | (722 | ) | (9,861 | ) | (6,974 | ) | (814 | ) | (853 | ) | ||||||||||
Investment gains (losses), net | 346 | 1,458 | (246 | ) | (53 | ) | 162 | |||||||||||||
Fair value losses, net(3) | (511 | ) | (2,811 | ) | (20,129 | ) | (4,668 | ) | (1,744 | ) | ||||||||||
Administrative expenses | (2,597 | ) | (2,207 | ) | (1,979 | ) | (2,669 | ) | (3,076 | ) | ||||||||||
Credit-related expenses(4) | (26,614 | ) | (73,536 | ) | (29,809 | ) | (5,012 | ) | (783 | ) | ||||||||||
Other income (expenses), net(5) | 240 | (6,287 | ) | (743 | ) | (923 | ) | (84 | ) | |||||||||||
(Provision) benefit for federal income taxes | 82 | 985 | (13,749 | ) | 3,091 | (166 | ) | |||||||||||||
Net (loss) income attributable to Fannie Mae | (14,014 | ) | (71,969 | ) | (58,707 | ) | (2,050 | ) | 4,059 | |||||||||||
Preferred stock dividends and issuance costs at redemption | (7,704 | ) | (2,474 | ) | (1,069 | ) | (513 | ) | (511 | ) | ||||||||||
Net (loss) income attributable to common stockholders | (21,718 | ) | (74,443 | ) | (59,776 | ) | (2,563 | ) | 3,548 | |||||||||||
Per common share data: | ||||||||||||||||||||
Earnings (loss) per share: | ||||||||||||||||||||
Basic | $ | (3.81 | ) | $ | (13.11 | ) | $ | (24.04 | ) | $ | (2.63 | ) | $ | 3.65 | ||||||
Diluted | (3.81 | ) | (13.11 | ) | (24.04 | ) | (2.63 | ) | 3.65 | |||||||||||
Weighted-average common shares outstanding:(6) | ||||||||||||||||||||
Basic | 5,694 | 5,680 | 2,487 | 973 | 971 | |||||||||||||||
Diluted | 5,694 | 5,680 | 2,487 | 973 | 972 | |||||||||||||||
Cash dividends declared per share | $ | — | $ | — | $ | 0.75 | $ | 1.90 | $ | 1.18 | ||||||||||
New business acquisition data: | ||||||||||||||||||||
Fannie Mae MBS issues acquired by third parties(7) | $ | 497,975 | $ | 496,067 | $ | 434,711 | $ | 563,648 | $ | 417,471 | ||||||||||
Mortgage portfolio purchases(8) | 357,573 | 327,578 | 196,645 | 182,471 | 185,507 | |||||||||||||||
New business acquisitions | $ | 855,548 | $ | 823,645 | $ | 631,356 | $ | 746,119 | $ | 602,978 | ||||||||||
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As of December 31, | ||||||||||||||||||||
2010(1) | 2009 | 2008 | 2007 | 2006 | ||||||||||||||||
(Dollars in millions) | ||||||||||||||||||||
Balance sheet data:(2) | ||||||||||||||||||||
Investments in securities: | ||||||||||||||||||||
Fannie Mae MBS | $ | 30,226 | $ | 229,169 | $ | 234,250 | $ | 179,401 | $ | 196,678 | ||||||||||
Other agency MBS | 19,951 | 43,905 | 35,440 | 32,957 | 31,484 | |||||||||||||||
Mortgage revenue bonds | 11,650 | 13,446 | 13,183 | 16,213 | 17,221 | |||||||||||||||
Other mortgage-related securities | 56,668 | 54,265 | 56,781 | 90,827 | 97,156 | |||||||||||||||
Non-mortgage-related securities | 32,753 | 8,882 | 17,640 | 38,115 | 47,573 | |||||||||||||||
Mortgage loans:(9) | ||||||||||||||||||||
Loans held for sale | 915 | 18,462 | 13,270 | 7,008 | 4,868 | |||||||||||||||
Loans held for investment, net of allowance | 2,922,805 | 376,099 | 412,142 | 396,516 | 378,687 | |||||||||||||||
Total assets | 3,221,972 | 869,141 | 912,404 | 879,389 | 841,469 | |||||||||||||||
Short-term debt | 157,243 | 200,437 | 330,991 | 234,160 | 165,810 | |||||||||||||||
Long-term debt | 3,039,757 | 574,117 | 539,402 | 562,139 | 601,236 | |||||||||||||||
Total liabilities | 3,224,489 | 884,422 | 927,561 | 835,271 | 799,827 | |||||||||||||||
Senior preferred stock | 88,600 | 60,900 | 1,000 | — | — | |||||||||||||||
Preferred stock | 20,204 | 20,348 | 21,222 | 16,913 | 9,108 | |||||||||||||||
Total Fannie Mae stockholders’ equity (deficit) | (2,599 | ) | (15,372 | ) | (15,314 | ) | 44,011 | 41,506 | ||||||||||||
Net worth surplus (deficit)(10) | $ | (2,517 | ) | $ | (15,281 | ) | $ | (15,157 | ) | $ | 44,118 | $ | 41,642 | |||||||
Book of business data: | ||||||||||||||||||||
Total mortgage assets(11) | $ | 3,099,250 | $ | 769,252 | $ | 792,196 | $ | 727,903 | $ | 728,932 | ||||||||||
Unconsolidated Fannie Mae MBS, held by third parties(12) | 21,323 | 2,432,789 | 2,289,459 | 2,118,909 | 1,777,550 | |||||||||||||||
Other guarantees(13) | 35,619 | 27,624 | 27,809 | 41,588 | 19,747 | |||||||||||||||
Mortgage credit book of business | $ | 3,156,192 | $ | 3,229,665 | $ | 3,109,464 | $ | 2,888,400 | $ | 2,526,229 | ||||||||||
Guaranty book of business(14) | $ | 3,054,488 | $ | 3,097,201 | $ | 2,975,710 | $ | 2,744,237 | $ | 2,379,986 | ||||||||||
Credit quality: | ||||||||||||||||||||
Nonperforming loans(15) | $ | 214,752 | $ | 216,455 | $ | 119,232 | $ | 27,156 | $ | 13,846 | ||||||||||
Total loss reserves | 66,251 | 64,891 | 24,753 | 3,391 | 859 | |||||||||||||||
Total loss reserves as a percentage of total guaranty book of business | 2.17 | % | 2.10 | % | 0.83 | % | 0.12 | % | 0.04 | % | ||||||||||
Total loss reserves as a percentage of total nonperforming loans | 30.85 | 29.98 | 20.76 | 12.49 | 6.20 |
For the Year Ended December 31, | ||||||||||||||||||||
2010(1) | 2009 | 2008 | 2007 | 2006 | ||||||||||||||||
Performance ratios: | ||||||||||||||||||||
Net interest yield(16) | 0.51 | % | 1.65 | % | 1.03 | % | 0.57 | % | 0.85 | % | ||||||||||
Average effective guaranty fee rate (in basis points)(17) | N/A | 27.6 | bp | 31.0 | bp | 23.7 | bp | 22.2 | bp | |||||||||||
Credit loss ratio (in basis points)(18) | 77.4 | bp | 44.6 | bp | 22.7 | bp | 5.3 | bp | 2.2 | bp | ||||||||||
Return on assets(19)* | (0.67 | )% | (8.27 | )% | (6.77 | )% | (0.30 | )% | 0.42 | % |
(1) | As discussed in “Business—Executive Summary,” prospectively adopting the new accounting standards had a significant impact on the presentation and comparability of our 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. While some line items in our consolidated statements of operations and balance sheet were not impacted, others were impacted significantly, which reduces the comparability of our results for 2010 with the results for prior years. See “Note 2, Adoption of the New Accounting Standards on the Transfers of Financial Assets and Consolidation of Variable Interest Entities” for a further discussion of the impact of the new accounting standards on our consolidated financial statements. | |
(2) | Certain prior period amounts have been reclassified to conform to the current period presentation. |
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(3) | Consists of the following: (a) derivatives fair value gains (losses), net; (b) trading securities gains (losses), net; (c) hedged mortgage assets gains (losses), net; (d) debt foreign exchange gains (losses), net; (e) debt fair value gains (losses), net; and (f) mortgage loans fair value losses, net. | |
(4) | Consists of provision for loan losses, provision for guaranty losses and foreclosed property expense. | |
(5) | Consists of the following: (a) debt extinguishment gains (losses), net; (b) losses from partnership investments; (c) losses on certain guaranty contracts; and (d) fee and other income. | |
(6) | Includes the weighted-average shares of common stock that would be issuable upon the full exercise of the warrant issued to Treasury from the date of conservatorship through the end of the period for 2008 and for the full year for 2009 and 2010. Because the warrant’s exercise price of $0.00001 per share is considered non-substantive (compared to the market price of our common stock), the warrant was evaluated based on its substance over form. It was determined to have characteristics of non-voting common stock, and thus included in the computation of basic earnings (loss) per share. | |
(7) | Reflects unpaid principal balance of Fannie Mae MBS issued and guaranteed by us during the reporting period less: (a) securitizations of mortgage loans held in our mortgage portfolio during the reporting period and (b) Fannie Mae MBS purchased for our mortgage portfolio during the reporting period. | |
(8) | Reflects unpaid principal balance of mortgage loans and mortgage-related securities we purchased for our mortgage portfolio during the reporting period. Includes acquisition of mortgage-related securities accounted for as the extinguishment of debt because the entity underlying the mortgage-related securities has been consolidated in our consolidated balance sheet. For 2010, includes unpaid principal balance of approximately $217 billion of delinquent loans purchased from our single-family MBS trusts. Under our MBS trust documents, we have the option to purchase from MBS trusts loans that are delinquent as to four or more consecutive monthly payments. | |
(9) | Mortgage loans consist solely of domestic residential real-estate mortgages. | |
(10) | Total assets less total liabilities. | |
(11) | Reflects unpaid principal balance of mortgage loans and mortgage-related securities reported in our consolidated balance sheets. The principal balance of resecuritized Fannie Mae MBS is included only once in the reported amount. As a result of our adoption of the new accounting standards as of January 1, 2010, we reflect a substantial majority of our Fannie Mae MBS as mortgage assets and the balance as unconsolidated Fannie Mae MBS. | |
(12) | Reflects unpaid principal balance of unconsolidated Fannie Mae MBS, held by third-party investors. The principal balance of resecuritized Fannie Mae MBS is included only once in the reported amount. | |
(13) | Primarily includes long-term standby commitments we have issued and single-family and multifamily credit enhancements we have provided and that are not otherwise reflected in the table. | |
(14) | Reflects mortgage credit book of business less non-Fannie Mae mortgage-related securities held in our investment portfolio for which we do not provide a guaranty. | |
(15) | Consists of on-balance sheet nonperforming loans held in our mortgage assets and off-balance sheet nonperforming loans in unconsolidated Fannie Mae MBS trusts held by third parties. Includes all nonaccrual loans, as well as troubled debt restructurings (“TDRs”) and HomeSaver Advance first-lien loans on accrual status. We generally classify single-family and multifamily loans as nonperforming when the payment of principal or interest on the loan is equal to or greater than two and three months past due, respectively. A troubled debt restructuring is a restructuring of a mortgage loan in which a concession is granted to a borrower experiencing financial difficulty. Prior to 2008, the nonperforming loans that we reported consisted of on-balance sheet nonperforming loans held in our mortgage portfolio and did not include off-balance sheet nonperforming loans in Fannie Mae MBS held by third parties. | |
(16) | Calculated based on net interest income for the reporting period divided by the average balance of total interest-earning assets during the period, expressed as a percentage. | |
(17) | Calculated based on guaranty fee income for the reporting period divided by average outstanding Fannie Mae MBS and other guarantees during the period, expressed in basis points. | |
(18) | Consists of (a) charge-offs, net of recoveries and (b) foreclosed property expense for the reporting period (adjusted to exclude the impact of fair value losses resulting from credit-impaired loans acquired from MBS trusts and HomeSaver Advance loans) divided by the average guaranty book of business during the period, expressed in basis points. | |
(19) | Calculated based on net income (loss) available to common stockholders for the reporting period divided by average total assets during the period, expressed as a percentage. |
* | Average balances for purposes of ratio calculations are based on balances at the beginning of the year and at the end of each respective quarter for 2010, 2009, 2008 and 2007. Average balances for purposes of ratio calculations for 2006 are based on beginning and end of year balances. Beginning of the year balance for 2010 is as of January 1, 2010, post transition adjustment. See “Note 2, Adoption of the New Accounting Standards on the Transfers of Financial Assets and Consolidation of Variable Interest Entities” for a further discussion of the impacts of the new accounting standards on our consolidated financial statements. |
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Item 7. | Management’s Discussion and Analysis of Financial Condition and Results of Operations |
• | Fair Value Measurement | |
• | Total Loss Reserves | |
• | Other-Than-Temporary Impairment of Investment Securities |
Level 1: | Quoted prices (unadjusted) in active markets for identical assets or liabilities. |
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Level 2: | Observable market-based inputs, other than quoted prices in active markets for identical assets or liabilities. | |
Level 3: | Unobservable inputs. |
As of December 31, | ||||||||
Balance Sheet Category | 2010 | 2009 | ||||||
(Dollars in millions) | ||||||||
Trading securities | $ | 4,576 | $ | 8,861 | ||||
Available-for-sale securities | 31,934 | 36,154 | ||||||
Mortgage loans | 2,207 | — | ||||||
Other assets | 247 | 2,727 | ||||||
Level 3 recurring assets | $ | 38,964 | $ | 47,742 | ||||
Total assets | $ | 3,221,972 | $ | 869,141 | ||||
Total recurring assets measured at fair value | $ | 161,696 | $ | 353,718 | ||||
Level 3 recurring assets as a percentage of total assets | 1 | % | 5 | % | ||||
Level 3 recurring assets as a percentage of total recurring assets measured at fair value | 24 | % | 13 | % | ||||
Total recurring assets measured at fair value as a percentage of total assets | 5 | % | 41 | % |
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• | Allowance for loan losses; | |
• | Allowance for accrued interest receivable; | |
• | Reserve for guaranty losses; and | |
• | Allowance for preforeclosure property tax and insurance receivable. |
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• | we revised our methodology to take into account trends in management actions taken before cash collections, which resulted in our allowance for loan losses being $1.1 billion higher than it would have been under the previous methodology; and | |
• | agreements with seller/servicers that addressed their loan repurchase and other obligations to us impacted our expectation of future make-whole payments, resulting in a decrease in our allowance for loan losses of approximately $700 million. |
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Item | Consolidation Impact | ||
Net interest income | • We now recognize the underlying assets and liabilities of the substantial majority of our MBS trusts in our consolidated balance sheets, which increases both our interest-earning assets and interest-bearing liabilities and related interest income and interest expense. | ||
• Contractual guaranty fees and the amortization of deferred cash fees received after December 31, 2009 are recognized into interest income. | |||
• We now include nonaccrual loans from the majority of our MBS trusts in our consolidated financial statements, which decreases our net interest income as we do not recognize interest income on these loans while we continue to recognize interest expense for amounts owed to MBS certificateholders. | |||
• Trust management income and certain fee income from consolidated trusts are now recognized as interest income. | |||
Guaranty fee income | • Upon adoption of the new accounting standards, we eliminated substantially all of our guaranty-related assets and liabilities in our consolidated balance sheets. As a result, consolidated trusts’ deferred cash fees and non-cash fees through December 31, 2009 were recognized into our total deficit through the transition adjustment effective January 1, 2010, and we no longer recognize income or loss from amortizing these assets and liabilities nor do we recognize changes in their fair value. As noted above, we now recognize both contractual guaranty fees and the amortization of deferred cash fees received after December 31, 2009 through interest income, thereby reducing guaranty fee income to only those amounts related to unconsolidated trusts and other credit enhancement arrangements, such as our long-term standby commitments. | ||
Credit-related expenses | • As the majority of our trusts are consolidated, we no longer record fair value losses on credit-impaired loans acquired from the substantial majority of our trusts. | ||
• The substantial majority of our combined loss reserves are now recognized in our allowance for loan losses to reflect the loss allowance against the consolidated mortgage loans. We use a different methodology to estimate incurred losses for our allowance for loan losses as compared with our reserve for guaranty losses, which reduces our credit-related expenses. | |||
Investment gains (losses), net | • Our portfolio securitization transactions that reflect transfers of assets to consolidated trusts do not qualify as sales, thereby reducing the amount we recognize as portfolio securitization gains and losses. | ||
• We no longer designate the substantial majority of our loans held for securitization as held-for-sale because the substantial majority of related MBS trusts will be consolidated, thereby reducing lower of cost or fair value adjustments. | |||
• We no longer record gains or losses on the sale from our portfolio of the substantial majority of our available-for-sale MBS because these securities were eliminated in consolidation. | |||
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Item | Consolidation Impact | ||
Fair value gains (losses), net | • We no longer record fair value gains or losses on the majority of our trading MBS, thereby reducing the amount of securities subject to recognition of changes in fair value in our consolidated statement of operations. | ||
Other non- interest expenses | • Upon purchase of MBS securities issued by consolidated trusts where the purchase price of the MBS does not equal the carrying value of the related consolidated debt, we recognize a gain or loss on debt extinguishment. | ||
For the Year Ended December 31, | Variance | |||||||||||||||||||
2010 | 2009 | 2008 | 2010 vs. 2009 | 2009 vs. 2008 | ||||||||||||||||
(Dollars in millions) | ||||||||||||||||||||
Net interest income | $ | 16,409 | $ | 14,510 | $ | 8,782 | $ | 1,899 | $ | 5,728 | ||||||||||
Guaranty fee income | 202 | 7,211 | 7,621 | (7,009 | ) | (410 | ) | |||||||||||||
Fee and other income(1) | 882 | 773 | 1,033 | 109 | (260 | ) | ||||||||||||||
Net revenues | $ | 17,493 | $ | 22,494 | $ | 17,436 | $ | (5,001 | ) | $ | 5,058 | |||||||||
Investment gains (losses), net(2) | 346 | 1,458 | (246 | ) | (1,112 | ) | 1,704 | |||||||||||||
Netother-than-temporary impairments(2) | (722 | ) | (9,861 | ) | (6,974 | ) | 9,139 | (2,887 | ) | |||||||||||
Fair value losses, net | (511 | ) | (2,811 | ) | (20,129 | ) | 2,300 | 17,318 | ||||||||||||
Losses from partnership investments | (74 | ) | (6,735 | ) | (1,554 | ) | 6,661 | (5,181 | ) | |||||||||||
Administrative expenses | (2,597 | ) | (2,207 | ) | (1,979 | ) | (390 | ) | (228 | ) | ||||||||||
Credit-related expenses(3) | (26,614 | ) | (73,536 | ) | (29,809 | ) | 46,922 | (43,727 | ) | |||||||||||
Other non-interest expenses(4) | (1,421 | ) | (1,809 | ) | (1,315 | ) | 388 | (494 | ) | |||||||||||
Loss before federal income taxes and extraordinary losses | (14,100 | ) | (73,007 | ) | (44,570 | ) | 58,907 | (28,437 | ) | |||||||||||
Benefit (provision) for federal income taxes | 82 | 985 | (13,749 | ) | (903 | ) | 14,734 | |||||||||||||
Extraordinary losses, net of tax effect | — | — | (409 | ) | — | 409 | ||||||||||||||
Net loss | (14,018 | ) | (72,022 | ) | (58,728 | ) | 58,004 | (13,294 | ) | |||||||||||
Less: Net loss attributable to the noncontrolling interest | 4 | 53 | 21 | (49 | ) | 32 | ||||||||||||||
Net loss attributable to Fannie Mae | $ | (14,014 | ) | $ | (71,969 | ) | $ | (58,707 | ) | $ | 57,955 | $ | (13,262 | ) | ||||||
(1) | Certain prior period amounts have been reclassified to conform to the current period presentation. Trust management income is included in fee and other income. | |
(2) | Prior to an April 2009 change in accounting for impairments, netother-than-temporary impairments also included the non-credit portion, which in subsequent periods is recorded in other comprehensive income. | |
(3) | Consists of provision for loan losses, provision for guaranty losses and foreclosed property expense. | |
(4) | Consists of debt extinguishment losses, net and other expenses. |
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For the Year Ended December 31, | ||||||||||||||||||||||||||||||||||||
2010 | 2009 | 2008 | ||||||||||||||||||||||||||||||||||
Interest | Average | Interest | Average | Interest | Average | |||||||||||||||||||||||||||||||
Average | Income/ | Rates | Average | Income/ | Rates | Average | Income/ | Rates | ||||||||||||||||||||||||||||
Balance | Expense | Earned/Paid | Balance | Expense | Earned/Paid | Balance | Expense | Earned/Paid | ||||||||||||||||||||||||||||
(Dollars in millions) | ||||||||||||||||||||||||||||||||||||
Interest-earning assets: | ||||||||||||||||||||||||||||||||||||
Mortgage loans of Fannie Mae(1) | $ | 362,785 | $ | 14,992 | 4.13 | % | $ | 321,394 | $ | 15,378 | 4.78 | % | $ | 344,922 | $ | 18,547 | 5.38 | % | ||||||||||||||||||
Mortgage loans of consolidated trusts(1) | 2,619,258 | 132,591 | 5.06 | 104,385 | 6,143 | 5.88 | 71,694 | 4,145 | 5.78 | |||||||||||||||||||||||||||
Total mortgage loans | 2,982,043 | 147,583 | 4.95 | 425,779 | 21,521 | 5.05 | 416,616 | 22,692 | 5.45 | |||||||||||||||||||||||||||
Mortgage-related securities | 387,798 | 19,552 | 5.04 | |||||||||||||||||||||||||||||||||
Elimination of Fannie Mae MBS held in portfolio | (250,748 | ) | (13,232 | ) | 5.28 | |||||||||||||||||||||||||||||||
Total mortgage-related securities, net | 137,050 | 6,320 | 4.61 | 347,467 | 17,230 | 4.96 | 332,442 | 17,344 | 5.22 | |||||||||||||||||||||||||||
Non-mortgage securities(2) | 91,613 | 221 | 0.24 | 53,724 | 247 | 0.46 | 60,230 | 1,748 | 2.90 | |||||||||||||||||||||||||||
Federal funds sold and securities purchased under agreements to resell or similar arrangements | 28,685 | 62 | 0.22 | 46,073 | 260 | 0.56 | 41,991 | 1,158 | 2.76 | |||||||||||||||||||||||||||
Advances to lenders | 3,523 | 84 | 2.38 | 4,580 | 97 | 2.12 | 3,521 | 181 | 5.14 | |||||||||||||||||||||||||||
Total interest-earning assets | $ | 3,242,914 | $ | 154,270 | 4.76 | % | $ | 877,623 | $ | 39,355 | 4.48 | % | $ | 854,800 | $ | 43,123 | 5.04 | % | ||||||||||||||||||
Interest-bearing liabilities: | ||||||||||||||||||||||||||||||||||||
Short-term debt | $ | 212,741 | $ | 619 | 0.29 | % | $ | 280,215 | $ | 2,305 | 0.82 | % | $ | 277,503 | $ | 7,806 | 2.81 | % | ||||||||||||||||||
Long-term debt | 583,369 | 18,857 | 3.23 | 561,907 | 22,195 | 3.95 | 543,358 | 26,145 | 4.81 | |||||||||||||||||||||||||||
Total short-term and long-term funding debt | 796,110 | 19,476 | 2.45 | 842,122 | 24,500 | 2.91 | 820,861 | 33,951 | 4.14 | |||||||||||||||||||||||||||
Federal funds purchased and securities sold under | ||||||||||||||||||||||||||||||||||||
agreements to repurchase | 43 | — | 0.14 | 45 | 1 | 1.44 | 428 | 9 | 2.10 | |||||||||||||||||||||||||||
Debt securities of consolidated trusts | 2,682,434 | 131,617 | 4.91 | |||||||||||||||||||||||||||||||||
Elimination of Fannie Mae MBS held in portfolio | (250,748 | ) | (13,232 | ) | 5.28 | |||||||||||||||||||||||||||||||
Total debt securities of consolidated trusts held by third parties | 2,431,686 | 118,385 | 4.87 | 6,033 | 344 | 5.70 | 6,475 | 381 | 5.88 | |||||||||||||||||||||||||||
Total interest-bearing liabilities | $ | 3,227,839 | $ | 137,861 | 4.27 | % | $ | 848,200 | $ | 24,845 | 2.93 | % | $ | 827,764 | $ | 34,341 | 4.15 | % | ||||||||||||||||||
Impact of net non-interest bearing funding | $ | 15,075 | 0.02 | % | $ | 29,423 | 0.10 | % | $ | 27,036 | 0.14 | % | ||||||||||||||||||||||||
Net interest income/net interest yield | $ | 16,409 | 0.51 | % | $ | 14,510 | 1.65 | % | $ | 8,782 | 1.03 | % | ||||||||||||||||||||||||
Net interest income/net interest yield of consolidated trusts | $ | 974 | 0.04 | % | ||||||||||||||||||||||||||||||||
Selected benchmark interest rates at end of period:(3) | ||||||||||||||||||||||||||||||||||||
3-month LIBOR | 0.30 | % | 0.25 | % | 1.43 | % | ||||||||||||||||||||||||||||||
2-year swap interest rate | 0.80 | 1.42 | 1.47 | |||||||||||||||||||||||||||||||||
5-year swap interest rate | 2.17 | 2.98 | 2.13 | |||||||||||||||||||||||||||||||||
30-year Fannie Mae MBS par coupon rate | 4.13 | 4.56 | 3.89 |
(1) | Interest income includes interest income on acquired credit-impaired loans of $2.2 billion, $619 million and $634 million for 2010, 2009 and 2008, respectively. These amounts include accretion income of $1.0 billion, $405 million and $158 million for 2010, 2009 and 2008, respectively, relating to a portion of the fair value losses recorded upon the acquisition of the loans. Average balance includes loans on nonaccrual status, for which interest income is recognized when collected. | |
(2) | Includes cash equivalents. | |
(3) | Data from British Bankers’ Association, Thomson Reuters Indices and Bloomberg. |
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2010 vs. 2009 | 2009 vs. 2008 | |||||||||||||||||||||||
Total | Variance Due to:(1) | Total | Variance Due to:(1) | |||||||||||||||||||||
Variance | Volume | Rate | Variance | Volume | Rate | |||||||||||||||||||
(Dollars in millions) | ||||||||||||||||||||||||
Interest income: | ||||||||||||||||||||||||
Mortgage loans of Fannie Mae | $ | (386 | ) | $ | 1,849 | $ | (2,235 | ) | $ | (3,169 | ) | $ | (1,212 | ) | $ | (1,957 | ) | |||||||
Mortgage loans of consolidated trusts | 126,448 | 127,426 | (978 | ) | 1,998 | 1,923 | 75 | |||||||||||||||||
Total mortgage loans | 126,062 | 129,275 | (3,213 | ) | (1,171 | ) | 711 | (1,882 | ) | |||||||||||||||
Total mortgage-related securities, net | (10,910 | ) | (9,779 | ) | (1,131 | ) | (114 | ) | 765 | (879 | ) | |||||||||||||
Non-mortgage securities(2) | (26 | ) | 125 | (151 | ) | (1,501 | ) | (171 | ) | (1,330 | ) | |||||||||||||
Federal funds sold and securities purchased under agreements to resell or similar arrangements | (198 | ) | (75 | ) | (123 | ) | (898 | ) | 103 | (1,001 | ) | |||||||||||||
Advances to lenders | (13 | ) | (24 | ) | 11 | (84 | ) | 44 | (128 | ) | ||||||||||||||
Total interest income | 114,915 | 119,522 | (4,607 | ) | (3,768 | ) | 1,452 | (5,220 | ) | |||||||||||||||
Interest expense: | ||||||||||||||||||||||||
Short-term debt | (1,686 | ) | (458 | ) | (1,228 | ) | (5,501 | ) | 76 | (5,577 | ) | |||||||||||||
Long-term debt | (3,338 | ) | 821 | (4,159 | ) | (3,950 | ) | 867 | (4,817 | ) | ||||||||||||||
Total short-term and long-term funding debt | (5,024 | ) | 363 | (5,387 | ) | (9,451 | ) | 943 | (10,394 | ) | ||||||||||||||
Federal funds purchased and securities sold under agreements to repurchase | (1 | ) | — | (1 | ) | (8 | ) | (6 | ) | (2 | ) | |||||||||||||
Total debt securities of consolidated trusts held by third parties | 118,041 | 118,099 | (58 | ) | (37 | ) | (25 | ) | (12 | ) | ||||||||||||||
Total interest expense | 113,016 | 118,462 | (5,446 | ) | (9,496 | ) | 912 | (10,408 | ) | |||||||||||||||
Net interest income | $ | 1,899 | $ | 1,060 | $ | 839 | $ | 5,728 | $ | 540 | $ | 5,188 | ||||||||||||
(1) | Combined rate/volume variances are allocated to both rate and volume based on the relative size of each variance. | |
(2) | Includes cash equivalents. |
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For the Year Ended December 31, | ||||||||||||||||
2010 | 2009 | 2008 | ||||||||||||||
(Dollars in millions) | ||||||||||||||||
Risk management derivatives fair value losses attributable to: | ||||||||||||||||
Net contractual interest expense accruals on interest rate swaps | $ | (2,895 | ) | $ | (3,359 | ) | $ | (1,576 | ) | |||||||
Net change in fair value during the period | 1,088 | (1,337 | ) | (13,387 | ) | |||||||||||
Total risk management derivatives fair value losses, net | (1,807 | ) | (4,696 | ) | (14,963 | ) | ||||||||||
Mortgage commitment derivatives fair value losses, net | (1,193 | ) | (1,654 | ) | (453 | ) | ||||||||||
Total derivatives fair value losses, net | (3,000 | ) | (6,350 | ) | (15,416 | ) | ||||||||||
Trading securities gains (losses), net | 2,692 | 3,744 | (7,040 | ) | ||||||||||||
Hedged mortgage assets gains, net(1) | — | — | 2,154 | |||||||||||||
Debt foreign exchange gains (losses), net | (77 | ) | (173 | ) | 230 | |||||||||||
Debt fair value gains (losses), net | 5 | (32 | ) | (57 | ) | |||||||||||
Mortgage loans fair value losses, net | (131 | ) | — | — | ||||||||||||
Fair value losses, net | $ | (511 | ) | $ | (2,811 | ) | $ | (20,129 | ) | |||||||
2010 | 2009 | 2008 | ||||||||||||||
5-year swap interest rate: | ||||||||||||||||
As of March 31 | 2.73 | % | 2.22 | % | 3.31 | % | ||||||||||
As of June 30 | 2.06 | 2.97 | 4.26 | |||||||||||||
As of September 30 | 1.51 | 2.65 | 4.11 | |||||||||||||
As of December 31 | 2.18 | 2.98 | 2.13 |
(1) | Represents adjustments to the carrying value of mortgage assets designated for hedge accounting that are attributable to changes in interest rates. |
• | Changes in interest rates: Our derivatives, in combination with our issuances of debt securities, are intended to offset changes in the fair value of our mortgage assets, which tend to increase in value when interest rates decrease and, conversely, decrease in value when interest rates rise. Pay-fixed swaps decrease in value and receive-fixed swaps increase in value as swap interest rates decrease (with the opposite being true when swap interest rates increase). Because the composition of our pay-fixed and receive-fixed derivatives varies across the yield curve, the overall fair value gains and losses of our derivatives are sensitive to flattening and steepening of the yield curve. |
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• | Implied interest rate volatility: Our derivatives portfolio includes option-based derivatives, which we use to economically hedge the prepayment option embedded in our mortgage investments. A key variable in estimating the fair value of option-based derivatives is implied volatility, which reflects the market’s expectation of the magnitude of future changes in interest rates. Assuming all other factors are held equal, including interest rates, a decrease in implied volatility would reduce the fair value of our purchased options and an increase in implied volatility would increase the fair value of our purchased options. | |
• | Changes in our derivative activity: As interest rates change, we are likely to take actions to rebalance our portfolio to manage our interest rate exposure. As interest rates decrease, expected mortgage prepayments are likely to increase, which reduces the duration of our mortgage investments. In this scenario, we generally will rebalance our existing portfolio to manage this risk by terminating pay-fixed swaps or adding receive-fixed swaps, which shortens the duration of our liabilities. Conversely, when interest rates increase and the duration of our mortgage assets increases, we are likely to rebalance our existing portfolio by adding pay-fixed swaps that have the effect of extending the duration of our liabilities. We use foreign-currency swaps to manage the foreign exchange impact of our foreign currency denominated debt issuances. We also use derivatives in various interest rate environments to hedge the risk of incremental mortgage purchases that we are not able to accomplish solely through our issuance of debt securities. | |
• | Time value of purchased options: Intrinsic value and time value are the two primary components of an option’s price. The intrinsic value is the amount that can be immediately realized by exercising the option—the amount by which the market rate exceeds or is below the exercise, or strike rate, such that the option isin-the-money. The time value of an option is the amount by which the price of an option exceeds its intrinsic value. Time decay refers to the diminishing value of an option over time as less time remains to exercise the option. We have a significant amount of purchased options where the time value of the upfront premium we pay decreases due to the passage of time. |
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For the Year Ended December 31, | ||||||||||||
2010 | 2009 | 2008 | ||||||||||
(Dollars in millions) | ||||||||||||
Provision for loan losses | $ | 24,702 | $ | 9,569 | $ | 4,022 | ||||||
Provision for guaranty losses | 194 | 63,057 | 23,929 | |||||||||
Total provision for credit losses(1) | 24,896 | 72,626 | 27,951 | |||||||||
Foreclosed property expense | 1,718 | 910 | 1,858 | |||||||||
Credit-related expenses | $ | 26,614 | $ | 73,536 | $ | 29,809 | ||||||
(1) | Includes charge-offs attributable to acquired credit-impaired loans and HomeSaver Advance fair value losses of $180 million, $20.6 billion and $2.4 billion for the years ended December 31, 2010, 2009 and 2008, respectively. |
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As of December 31, | ||||||||
2010 | 2009 | |||||||
(Dollars in millions) | ||||||||
Allowance for loan losses | $ | 61,556 | $ | 9,925 | ||||
Reserve for guaranty losses | 323 | 54,430 | ||||||
Combined loss reserves | 61,879 | 64,355 | ||||||
Allowance for accrued interest receivable | 3,414 | 536 | ||||||
Allowance for preforeclosure property taxes and insurance receivable(1) | 958 | — | ||||||
Total loss reserves | 66,251 | 64,891 | ||||||
Fair value losses previously recognized on acquired credit impaired loans(2) | 19,171 | 22,295 | ||||||
Total loss reserves and fair value losses previously recognized on acquired credit impaired loans | $ | 85,422 | $ | 87,186 | ||||
(1) | Amount included in “Other assets” in our consolidated balance sheets. | |
(2) | Represents the fair value losses on loans purchased out of MBS trusts reflected in our consolidated balance sheets. |
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As of December 31, | ||||||||||||||||||||||||||||
2010 | ||||||||||||||||||||||||||||
Of | Of | |||||||||||||||||||||||||||
Fannie | Consolidated | |||||||||||||||||||||||||||
Mae | Trusts | Total | 2009 | 2008 | 2007 | 2006 | ||||||||||||||||||||||
(Dollars in millions) | ||||||||||||||||||||||||||||
Changes in combined loss reserves: | ||||||||||||||||||||||||||||
Allowance for loan losses: | ||||||||||||||||||||||||||||
Beginning balance(1) | $ | 8,078 | $ | 1,847 | $ | 9,925 | $ | 2,772 | $ | 629 | $ | 284 | $ | 246 | ||||||||||||||
Adoption of new accounting standards | — | 43,576 | 43,576 | — | — | — | — | |||||||||||||||||||||
Provision for loan losses | 13,067 | 11,635 | 24,702 | 9,569 | 4,022 | 658 | 174 | |||||||||||||||||||||
Charge-offs(2) | (15,852 | ) | (7,026 | ) | (22,878 | ) | (2,245 | ) | (1,987 | ) | (407 | ) | (206 | ) | ||||||||||||||
Recoveries | 1,913 | 1,164 | 3,077 | 214 | 190 | 107 | 70 | |||||||||||||||||||||
Transfers(3) | 44,714 | (44,714 | ) | — | — | — | — | — | ||||||||||||||||||||
Net reclassifications(1)(4) | (3,390 | ) | 6,544 | 3,154 | (385 | ) | (82 | ) | (13 | ) | — | |||||||||||||||||
Ending balance(1)(5) | $ | 48,530 | $ | 13,026 | $ | 61,556 | $ | 9,925 | $ | 2,772 | $ | 629 | $ | 284 | ||||||||||||||
Reserve for guaranty losses: | ||||||||||||||||||||||||||||
Beginning balance | $ | 54,430 | $ | — | $ | 54,430 | $ | 21,830 | $ | 2,693 | $ | 519 | $ | 422 | ||||||||||||||
Adoption of new accounting standards | (54,103 | ) | — | (54,103 | ) | — | — | — | — | |||||||||||||||||||
Provision for guaranty losses | 194 | — | 194 | 63,057 | 23,929 | 3,906 | 415 | |||||||||||||||||||||
Charge-offs | (203 | ) | — | (203 | ) | (31,142 | ) | (4,986 | ) | (1,782 | ) | (336 | ) | |||||||||||||||
Recoveries | 5 | — | 5 | 685 | 194 | 50 | 18 | |||||||||||||||||||||
Ending balance | $ | 323 | $ | — | $ | 323 | $ | 54,430 | $ | 21,830 | $ | 2,693 | $ | 519 | ||||||||||||||
Combined loss reserves: | ||||||||||||||||||||||||||||
Beginning balance(1) | $ | 62,508 | $ | 1,847 | $ | 64,355 | $ | 24,602 | $ | 3,322 | $ | 803 | $ | 668 | ||||||||||||||
Adoption of new accounting standards | (54,103 | ) | 43,576 | (10,527 | ) | — | — | — | — | |||||||||||||||||||
Total provision for credit losses | 13,261 | 11,635 | 24,896 | 72,626 | 27,951 | 4,564 | 589 | |||||||||||||||||||||
Charge-offs(2) | (16,055 | ) | (7,026 | ) | (23,081 | ) | (33,387 | ) | (6,973 | ) | (2,189 | ) | (542 | ) | ||||||||||||||
Recoveries | 1,918 | 1,164 | 3,082 | 899 | 384 | 157 | 88 | |||||||||||||||||||||
Transfers(3) | 44,714 | (44,714 | ) | — | — | — | — | — | ||||||||||||||||||||
Net reclassifications(1)(4) | (3,390 | ) | 6,544 | 3,154 | (385 | ) | (82 | ) | (13 | ) | — | |||||||||||||||||
Ending balance(1)(5) | $ | 48,853 | $ | 13,026 | $ | 61,879 | $ | 64,355 | $ | 24,602 | $ | 3,322 | $ | 803 | ||||||||||||||
Attribution of charge-offs: | ||||||||||||||||||||||||||||
Charge-offs attributable to guaranty book of business | $ | (22,901 | ) | $ | (12,832 | ) | $ | (4,544 | ) | $ | (825 | ) | $ | (338 | ) | |||||||||||||
Charge-offs attributable to fair value losses on: | ||||||||||||||||||||||||||||
Acquired credit-impaired loans | (180 | ) | (20,327 | ) | (2,096 | ) | (1,364 | ) | (204 | ) | ||||||||||||||||||
HomeSaver Advance loans | — | (228 | ) | (333 | ) | — | — | |||||||||||||||||||||
Total charge-offs | $ | (23,081 | ) | $ | (33,387 | ) | $ | (6,973 | ) | $ | (2,189 | ) | $ | (542 | ) | |||||||||||||
Allocation of combined loss reserves: | ||||||||||||||||||||||||||||
Balance at end of each period attributable to: | ||||||||||||||||||||||||||||
Single-family(1) | $ | 60,163 | $ | 62,312 | $ | 24,498 | $ | 3,249 | $ | 729 | ||||||||||||||||||
Multifamily | 1,716 | 2,043 | 104 | 73 | 74 | |||||||||||||||||||||||
Total | $ | 61,879 | $ | 64,355 | $ | 24,602 | $ | 3,322 | $ | 803 | ||||||||||||||||||
Single-family and multifamily combined loss reserves as a percentage of applicable guaranty book of business: | ||||||||||||||||||||||||||||
Single-family(1) | 2.10 | % | 2.14 | % | 0.87 | % | 0.13 | % | 0.03 | % | ||||||||||||||||||
Multifamily | 0.91 | 1.10 | 0.06 | 0.05 | 0.06 | |||||||||||||||||||||||
Combined loss reserves as a percentage of: | ||||||||||||||||||||||||||||
Total guaranty book of business(1) | 2.03 | % | 2.08 | % | 0.83 | % | 0.12 | % | 0.03 | % | ||||||||||||||||||
Total nonperforming loans(1) | 28.81 | 29.73 | 20.63 | 12.23 | 5.80 |
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(1) | Prior period amounts have been reclassified and respective percentages have been recalculated to conform to the current period presentation. | |
(2) | Includes accrued interest of $2.4 billion, $1.5 billion, $642 million, $128 million and $39 million for the years ended December 31, 2010, 2009, 2008, 2007 and 2006, respectively. | |
(3) | Includes transfers from trusts for delinquent loan purchases. | |
(4) | Represents reclassification of amounts recorded in provision for loan losses and charge-offs that relate to allowances for accrued interest receivable and preforeclosure property taxes and insurance receivable from borrowers. | |
(5) | Includes $385 million, $726 million, $150 million, $39 million and $28 million as of December 31, 2010, 2009, 2008, 2007 and 2006, respectively, for acquired credit-impaired loans. |
• | Continued stress on a broader segment of borrowers due to continued high levels of unemployment and underemployment and the prolonged decline in home prices has resulted in elevated delinquency rates on loans in our single-family guaranty book of business that do not have characteristics typically associated with higher-risk loans. | |
• | Certain loan categories continued to contribute disproportionately to the increase in our nonperforming loans and credit losses. These categories include: loans on properties in California, Florida, Arizona and Nevada and certain Midwest states; loans originated in 2006 and 2007; and loans related to higher-risk product types, such as Alt-A loans. Although we have identified each year of our 2005 through 2008 vintages as unprofitable, the largest and most disproportionate contributors to credit losses have been the 2006 and 2007 vintages. Accordingly, our concentration statistics throughout the MD&A focus on only these two vintages. | |
• | The prolonged decline in home prices has also resulted in negative home equity for some borrowers, especially when the impact of existing second mortgage liens is taken into account, which has affected their ability to refinance or willingness to make their mortgage payments, and caused loans to remain delinquent for an extended period of time as shown in “Table 41: Delinquency Status of Single-Family Conventional Loans.” | |
• | The number of loans that are seriously delinquent remained high due to delays in foreclosures because: (1) legislation or judicial changes in the foreclosure process in a number of states have lengthened the foreclosure timeline; (2) some jurisdictions are experiencing foreclosure processing backlogs due to high foreclosure case volumes; and (3) as discussed in “Executive Summary—Servicer Foreclosure Process Deficiencies and Foreclosure Pause,” a number of our single-family mortgage servicers temporarily halted foreclosures in some or all states after discovering deficiencies in their processes and the processes of their lawyers and other service providers relating to the execution of affidavits in connection with the foreclosure process, which has lengthened the time to foreclose. However, during 2010, the number of loans that transitioned out of seriously delinquent status exceeded the number of loans that became seriously delinquent, primarily due to an increase in loan modifications and foreclosure alternatives and a higher volume of foreclosures. | |
• | A greater proportion of our total loss reserves is attributable to individual impairment rather than the collective reserve for loan losses. We consider a loan to be individually impaired when, based on current information, it is probable that we will not receive all amounts due, including interest, in accordance with |
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the contractual terms of the loan agreement. Individually impaired loans currently include, among others, those restructured in a TDR, which is a form of restructuring a mortgage loan in which a concession is granted to a borrower experiencing financial difficulty. Any impairment recognized on these loans is part of our provision for loan losses and allowance for loan losses. The higher level of workouts initiated as a result of our home retention and foreclosure prevention efforts during 2010, increased our total number of individually impaired loans, especially those considered to be TDRs, compared with 2009. Individual impairment for TDRs is based on the restructured loan’s expected cash flows over the life of the loan, taking into account the effect of any concessions granted to the borrower, discounted at the loan’s original effective interest rate. The model includes forward-looking assumptions using multiple scenarios of the future economic environment, including interest rates and home prices. Based on the structure of the modifications, in particular the size of the concession granted, and performance of loans modified during 2010 combined with the forward looking assumptions used in our model, the allowance calculated for an individually impaired loan has generally been greater than the allowance that would be calculated under the collective reserve. |
• | We recorded anout-of-period adjustment of $1.1 billion to our provision for loan losses in the second quarter of 2010, related to an additional provision for losses on preforeclosure property taxes and insurance receivables. For additional information about this adjustment, see “Note 5, Allowance for Loan Losses and Reserve for Guaranty Losses.” | |
• | On December 31, 2010, we entered into an agreement with Bank of America, N.A., and its affiliates, to address outstanding repurchase requests for residential mortgage loans. Bank of America agreed, among other things, to a cash payment of $1.3 billion, $930 million of which was recognized as a recovery of charge-offs resulting in a reduction to our provision for loan losses and allowance for loan losses. | |
• | Additionally, as discussed in “Critical Account Policies and Estimates—Total Loss Reserves—Single-Family Loss Reserves,” the impact on our expectations of future payments from servicers due to this collection resulted in a decrease of approximately $700 million in our allowance for loan losses and we revised our methodology for estimating the benefit of payments from servicers, which resulted in our allowance for loan losses being $1.1 billion higher than it would have been under the previous methodology. For additional information on the terms of this agreement, see “Risk Management—Credit Risk Management—Institutional Counterparty Credit Risk Management.” |
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As of December 31, | ||||||||||||||||||||
2010 | 2009 | 2008 | 2007 | 2006 | ||||||||||||||||
(Dollars in millions) | ||||||||||||||||||||
On-balance sheet nonperforming loans including loans in consolidated Fannie Mae MBS trusts: | ||||||||||||||||||||
Nonaccrual loans | $ | 152,756 | $ | 34,079 | $ | 17,634 | $ | 8,343 | $ | 5,961 | ||||||||||
Troubled debt restructurings on accrual status | 58,078 | 6,922 | 1,931 | 1,765 | 1,086 | |||||||||||||||
HomeSaver Advance first-lien loans on accrual status | 3,829 | 866 | 1,121 | — | — | |||||||||||||||
Total on-balance sheet nonperforming loans | 214,663 | 41,867 | 20,686 | 10,108 | 7,047 | |||||||||||||||
Off-balance sheet nonperforming loans in unconsolidated | ||||||||||||||||||||
Fannie Mae MBS trusts: | ||||||||||||||||||||
Nonperforming loans, excluding HomeSaver Advance first-lien loans(1) | 89 | 161,406 | 89,617 | 17,048 | 6,799 | |||||||||||||||
HomeSaver Advance first-lien loans(2) | — | 13,182 | 8,929 | — | — | |||||||||||||||
Total off-balance sheet nonperforming loans | 89 | 174,588 | 98,546 | 17,048 | 6,799 | |||||||||||||||
Total nonperforming loans | $ | 214,752 | $ | 216,455 | $ | 119,232 | $ | 27,156 | $ | 13,846 | ||||||||||
Accruing on-balance sheet loans past due 90 days or more(3) | $ | 896 | $ | 612 | $ | 317 | $ | 204 | $ | 147 | ||||||||||
For the Year Ended December 31, | ||||||||||||||||||||
2010 | 2009 | 2008 | 2007 | 2006 | ||||||||||||||||
(Dollars in millions) | ||||||||||||||||||||
Interest related to on-balance sheet nonperforming loans: | ||||||||||||||||||||
Interest income forgone(4) | $ | 8,185 | $ | 1,341 | $ | 401 | $ | 215 | $ | 163 | ||||||||||
Interest income recognized for the period(5) | 7,995 | 1,206 | 771 | 328 | 295 |
(1) | Represents loans that would meet our criteria for nonaccrual status if the loans had been on-balance sheet. | |
(2) | Represents all off-balance sheet first-lien loans associated with unsecured HomeSaver Advance loans, including first-lien loans that are not seriously delinquent. | |
(3) | Recorded investment in loans as of the end of each period that are 90 days or more past due and continuing to accrue interest, the majority includes loans insured or guaranteed by the U.S. government and loans where we have recourse against the seller in the event of a default. | |
(4) | Represents the amount of interest income that would have been recorded during the period for on-balance sheet nonperforming loans as of the end of each period had the loans performed according to their original contractual terms. | |
(5) | Represents interest income recognized during the period based on stated coupon rate for on-balance sheet loans classified as nonperforming as of the end of each period. Includes primarily amounts accrued while loan was performing and cash payments received on nonaccrual loans. |
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• | We include the impact of any credit losses that ultimately result from foreclosure. | |
• | We exclude the impact of fair value losses recorded upon acquisition. | |
• | We add back to our credit losses the amount of charge-offs and foreclosed property expense that we would have recorded if we had calculated these amounts based on the acquisition cost. Because the fair value amount at acquisition was lower than the acquisition cost, any loss recorded at foreclosure is less than it would have been if we had recorded the loan at its acquisition cost. |
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For the Year Ended December 31, | ||||||||||||||||||||||||
2010 | 2009 | 2008 | ||||||||||||||||||||||
Amount | Ratio(1) | Amount | Ratio(1) | Amount | Ratio(1) | |||||||||||||||||||
(Dollars in millions) | ||||||||||||||||||||||||
Charge-offs, net of recoveries(2)(3) | $ | 19,999 | 65.6 | bp | $ | 32,488 | 106.7 | bp | $ | 6,589 | 22.9 | bp | ||||||||||||
Foreclosed property expense(2)(3) | 1,718 | 5.6 | 910 | 3.0 | 1,858 | 6.5 | ||||||||||||||||||
Credit losses including the effect of fair value losses on acquired credit-impaired loans and HomeSaver Advance loans | 21,717 | 71.2 | 33,398 | 109.7 | 8,447 | 29.4 | ||||||||||||||||||
Less: Fair value losses resulting from acquired credit-impaired loans and HomeSaver Advance loans | (180 | ) | (0.6 | ) | (20,555 | ) | (67.5 | ) | (2,429 | ) | (8.4 | ) | ||||||||||||
Plus: Impact of acquired credit-impaired loans on charge-offs and foreclosed property expense | 2,094 | 6.8 | 739 | 2.4 | 501 | 1.7 | ||||||||||||||||||
Credit losses and credit loss ratio | $ | 23,631 | 77.4 | bp | $ | 13,582 | 44.6 | bp | $ | 6,519 | 22.7 | bp | ||||||||||||
Credit losses attributable to: | ||||||||||||||||||||||||
Single-family | $ | 23,133 | $ | 13,362 | $ | 6,467 | ||||||||||||||||||
Multifamily | 498 | 220 | 52 | |||||||||||||||||||||
Total | $ | 23,631 | $ | 13,582 | $ | 6,519 | ||||||||||||||||||
Average single-family default rate | 1.99 | % | 1.07 | % | 0.59 | % | ||||||||||||||||||
Average single-family initial charge-off severity rate(4) | 34.07 | % | 37.21 | % | 25.65 | % |
(1) | Basis points are based on the amount for each line item presented divided by the average guaranty book of business during the period. | |
(2) | Beginning in the second quarter of 2010, expenses relating to preforeclosure taxes and insurance, previously recorded as foreclosed property expense, were recorded as charge-offs. The impact of including these costs was 4.7 basis points for the year ended December 31, 2010. | |
(3) | Includes cash received pursuant to our December 31, 2010 agreement with Bank of America. The impact of this cash receipt was a reduction in charge-offs, net of recoveries, of $930 million or 3.0 basis points and a reduction in foreclosed property expense of $266 million or 0.9 basis points for the year ended December 31, 2010. | |
(4) | Excludes fair value losses on credit-impaired loans acquired from MBS trusts and HomeSaver Advance loans and charge-offs from preforeclosure sales and any costs, gains or losses associated with REO after initial acquisition through final disposition. |
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Percentage of | ||||||||||||||||||||||||
Single-Family Conventional Guaranty Book | Percentage of Single-Family Credit Losses | |||||||||||||||||||||||
of Business Outstanding(1) | For the Year Ended | |||||||||||||||||||||||
As of December 31, | December 31, | |||||||||||||||||||||||
2010 | 2009 | 2008 | 2010 | 2009 | 2008 | |||||||||||||||||||
Geographical distribution: | ||||||||||||||||||||||||
Arizona, California, Florida and Nevada | 28 | % | 28 | % | 27 | % | 56 | % | 57 | % | 49 | % | ||||||||||||
Illinois, Indiana, Michigan and Ohio | 11 | 11 | 11 | 14 | 15 | 21 | ||||||||||||||||||
All other states | 61 | 61 | 62 | 30 | 28 | 30 | ||||||||||||||||||
Select higher-risk product features(2) | 22 | 24 | 28 | 61 | 69 | 75 | ||||||||||||||||||
Vintages: | ||||||||||||||||||||||||
2006 | 8 | 11 | 14 | 29 | 31 | 35 | ||||||||||||||||||
2007 | 12 | 15 | 20 | 36 | 36 | 28 | ||||||||||||||||||
All other vintages | 80 | 74 | 66 | 35 | 33 | 37 |
(1) | Calculated based on the unpaid principal balance of loans, where we have detailed loan-level information, for each category divided by the unpaid principal balance of our single-family conventional guaranty book of business. | |
(2) | Includes Alt-A loans, subprime loans, interest-only loans, loans with original LTV ratios greater than 90% and loans with FICO credit scores less than 620. |
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As of December 31, | ||||||||
2010 | 2009 | |||||||
(Dollars in millions) | ||||||||
Gross single-family credit loss sensitivity | $ | 25,937 | $ | 18,311 | ||||
Less: Projected credit risk sharing proceeds | (2,771 | ) | (2,533 | ) | ||||
Net single-family credit loss sensitivity | $ | 23,166 | $ | 15,778 | ||||
Outstanding single-family whole loans and Fannie Mae MBS(2) | $ | 2,782,512 | $ | 2,830,004 | ||||
Single-family net credit loss sensitivity as a percentage of outstanding single-family whole loans and Fannie Mae MBS | 0.83 | % | 0.56 | % |
(1) | Represents total economic credit losses, which consist of credit losses and forgone interest. Calculations are based on 97% of our total single-family guaranty book of business as of both December 31, 2010 and 2009. The mortgage loans and mortgage-related securities that are included in these estimates consist of: (a) single-family Fannie Mae MBS (whether held in our mortgage portfolio or held by third parties), excluding certain whole loan REMICs and private-label wraps; (b) single-family mortgage loans, excluding mortgages secured only by second liens, subprime mortgages, manufactured housing chattel loans and reverse mortgages; and (c) long-term standby commitments. We expect the inclusion in our estimates of the excluded products may impact the estimated sensitivities set forth in this table. | |
(2) | As a result of our adoption of the new accounting standards, the balance reflects a reduction as of December 31, 2010 from 2009 due to unscheduled principal payments. |
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For the Year | ||||||||
Ended December 31, | ||||||||
2010 | 2009 | |||||||
(Dollars in millions) | ||||||||
Impairments(2) | $ | 14,120 | $ | 15,777 | ||||
Fair value losses on credit-impaired loans acquired from MBS trusts(3) | 6 | 10,637 | ||||||
Total | $ | 14,126 | $ | 26,414 | ||||
Loans entered into a trial modification under the program | 163,000 | 333,300 | ||||||
Credit-impaired loans acquired from MBS trusts in trial modifications under the program(4) | 65 | 83,700 |
(1) | Includes amounts for loans that entered into a trial modification under the program but that have not yet received, or that have been determined to be ineligible for, a permanent modification under the program. Some of these ineligible loans have since been modified outside of the program. | |
(2) | Impairments consist of (a) impairments recognized on loans accounted for as loans restructured in a troubled debt restructuring and (b) credit losses on loans in MBS trusts that have entered into a trial modification and been individually assessed for incurred credit losses. Amount includes impairments recognized subsequent to the date of loan acquisition. | |
(3) | These fair value losses are recorded as charge-offs against the “Reserve for guaranty losses” and have the effect of increasing the provision for guaranty losses in our consolidated statements of operations. | |
(4) | Excludes loans purchased from consolidated trusts for the year ended December 31, 2010, for which no fair value losses were recognized. |
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Single-Family and Multifamily | ||||||
Line Item | Current Segment Reporting | Prior Year Segment Reporting | ||||
Guaranty fee income | • At adoption of the new accounting standards, we eliminated a substantial majority of our guaranty-related assets and liabilities in our consolidated balance sheet. We re-established an asset and a liability related to the deferred cash fees on Single-Family’s balance sheet and we amortize these fees as guaranty fee income with our contractual guaranty fees. | • At the inception of a guaranty to an unconsolidated entity, we established a guaranty asset and guaranty obligation, which included deferred cash fees. These guaranty-related assets and liabilities were then amortized and recognized in guaranty fee income with our contractual guaranty fees over the life of the guaranty. | ||||
• We use a static yield method to amortize deferred cash fees to better align with the recognition of contractual guaranty fee income. | • We used a prospective level yield method to amortize our guaranty-related assets and liabilities, which created significant fluctuations in our guaranty fee income as the interest rate environment shifted. | |||||
• We eliminated substantially all of our guaranty assets that were previously recorded at fair value upon adoption of the new accounting standards. As such, the recognition of fair value adjustments as a component of Single-Family guaranty fee income has been essentially eliminated. | • We recorded fair value adjustments on our buy-up assets and certain guaranty assets as a component of Single-Family guaranty fee income. | |||||
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Single-Family and Multifamily | ||||||
Line Item | Current Segment Reporting | Prior Year Segment Reporting | ||||
Net interest income (expense) | • Because we now recognize loans underlying the substantial majority of our MBS trusts in our consolidated balance sheets, the amount of interest expense Single-Family and Multifamily recognize related to interest not recorded on nonperforming loans underlying MBS trusts has significantly increased. | • Interest payments expected to be delinquent on off-balance sheet nonperforming loans were considered in the reserve for guaranty losses. | ||||
Credit-related expenses | • Because we now recognize loans underlying the substantial majority of our MBS trusts in our consolidated balance sheets, we no longer recognize fair value losses upon acquiring credit-impaired loans from these trusts. | • We recorded a fair value loss on credit-impaired loans acquired from MBS trusts. | ||||
• Upon recognition of mortgage loans held by newly consolidated trusts, we increased our allowance for loan losses and decreased our reserve for guaranty losses. We use a different methodology in estimating incurred losses under our allowance for loan losses versus under our reserve for guaranty losses which will result in lower credit-related expenses. | • The majority of our combined loss reserves were recorded in the reserve for guaranty losses, which used a different methodology for estimating incurred losses versus the methodology used for the allowance for loan losses. | |||||
Multifamily only | ||||||
Line Item | Current Segment Reporting | Prior Year Segment Reporting | ||||
Income (losses) from partnership investments | • We report income or losses from partnership investments on an equity basis in the Multifamily balance sheet. As a result, net income or loss attributable to noncontrolling interests is not included in income (losses) from partnership investments. | • Income (losses) from partnership investments included net income or loss attributable to noncontrolling interests for the Multifamily segment. | ||||
Capital Markets | ||||||
Line Item | Current Segment Reporting | Prior Year Segment Reporting | ||||
Net interest income | • We recognize interest income on interest-earning assets that we own and interest expense on debt that we have issued. | • In addition to the assets we own and the debt we issue, we also included interest income on mortgage-related assets underlying MBS trusts that we consolidated under the prior consolidation accounting standards and the interest expense on the corresponding debt of such trusts. | ||||
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Capital Markets | ||||||
Line Item | Current Segment Reporting | Prior Year Segment Reporting | ||||
Investment gains (losses), net | • We no longer designate the substantial majority of our loans held for securitization as held for sale as the substantial majority of related MBS trusts will be consolidated, thereby reducing lower of cost or fair value adjustments. | • We designated loans held for securitization as held for sale resulting in recognition of lower of cost or fair value adjustments on our held-for-sale loans. | ||||
• We include the securities that we own, regardless of whether the trust has been consolidated, in reporting gains and losses on securitizations and sales of available-for-sale securities. | • We excluded the securities of consolidated trusts that we owned in reporting of gains and losses on securitizations and sales of available-for-sale securities. | |||||
Fair value gains (losses), net | • We include the trading securities that we own, regardless of whether the trust has been consolidated, in recognizing fair value gains and losses on trading securities. | • MBS trusts that were consolidated were reported as loans and thus any securities we owned issued by these trusts did not have fair value adjustments. | ||||
For the Year Ended December 31, | ||||||||||||
2010 | 2009 | 2008 | ||||||||||
(Dollars in millions) | ||||||||||||
Net revenues:(1) | ||||||||||||
Single-Family | $ | 2,126 | $ | 8,784 | $ | 9,434 | ||||||
Multifamily | 940 | 582 | 476 | |||||||||
Capital Markets | 13,400 | 13,128 | 7,526 | |||||||||
Consolidated trusts | 460 | — | — | |||||||||
Eliminations/adjustments | 567 | — | — | |||||||||
Total | $ | 17,493 | $ | 22,494 | $ | 17,436 | ||||||
Net income (loss) attributable to Fannie Mae: | ||||||||||||
Single-Family | $ | (26,680 | ) | $ | (63,798 | ) | $ | (27,101 | ) | |||
Multifamily | 216 | (9,028 | ) | (2,189 | ) | |||||||
Capital Markets | 16,074 | 857 | (29,417 | ) | ||||||||
Consolidated trusts | (224 | ) | — | — | ||||||||
Eliminations/adjustments | (3,400 | ) | — | — | ||||||||
Total | $ | (14,014 | ) | $ | (71,969 | ) | $ | (58,707 | ) | |||
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As of December 31, | ||||||||||||
2010 | 2009 | 2008 | ||||||||||
(Dollars in millions) | ||||||||||||
Total assets: | ||||||||||||
Single-Family(2) | $ | 14,843 | $ | 19,991 | $ | 24,115 | ||||||
Multifamily(2) | 4,881 | 5,698 | 10,994 | |||||||||
Capital Markets | 873,052 | 843,452 | 877,295 | |||||||||
Consolidated trusts | 2,673,937 | — | — | |||||||||
Eliminations/adjustments(2) | (344,741 | ) | — | — | ||||||||
Total | $ | 3,221,972 | $ | 869,141 | $ | 912,404 | ||||||
(1) | Includes net interest income, guaranty fee income, and fee and other income (expense). | |
(2) | Beginning in 2010, the allowance for loan losses, allowance for accrued interest receivable and fair value losses previously recognized on acquired credit impaired loans are not treated as assets for Single-Family and Multifamily segment reporting purposes because these allowances and losses relate to loan assets that are held by the Capital Markets segment and consolidated trusts. |
For the Year Ended December 31, 2010 | ||||||||||||||||||||||||
Business Segments | Other Activity/Reconciling Items | |||||||||||||||||||||||
Single- | Capital | Consolidated | Eliminations/ | Total | ||||||||||||||||||||
Family | Multifamily | Markets | Trusts(1) | Adjustments(2) | Results | |||||||||||||||||||
(Dollars in millions) | ||||||||||||||||||||||||
Net interest income (expense) | $ | (5,386 | ) | $ | 3 | $ | 14,321 | $ | 5,073 | $ | 2,398 | (3) | $ | 16,409 | ||||||||||
Provision for loan losses | (24,503 | ) | (199 | ) | — | — | — | (24,702 | ) | |||||||||||||||
Net interest income (expense) after provision for loan losses | (29,889 | ) | (196 | ) | 14,321 | 5,073 | 2,398 | (8,293 | ) | |||||||||||||||
Guaranty fee income (expense) | 7,206 | 791 | (1,440 | ) | (4,525 | )(4) | (1,830 | )(4) | 202 | |||||||||||||||
Investment gains (losses), net | 9 | 6 | 4,047 | (418 | ) | (3,298 | )(5) | 346 | ||||||||||||||||
Netother-than-temporary impairments | — | — | (720 | ) | (2 | ) | — | (722 | ) | |||||||||||||||
Fair value gains (losses), net | — | — | 239 | (155 | ) | (595 | )(6) | (511 | ) | |||||||||||||||
Debt extinguishment losses, net | — | — | (459 | ) | (109 | ) | — | (568 | ) | |||||||||||||||
Losses from partnership investments | — | (70 | ) | — | — | (4 | ) | (74 | ) | |||||||||||||||
Fee and other income (expense) | 306 | 146 | 519 | (88 | ) | (1 | ) | 882 | ||||||||||||||||
Administrative expenses | (1,628 | ) | (384 | ) | (585 | ) | — | — | (2,597 | ) | ||||||||||||||
Benefit (provision) for guaranty losses | (237 | ) | 43 | — | — | — | (194 | ) | ||||||||||||||||
Foreclosed property expense | (1,680 | ) | (38 | ) | — | — | — | (1,718 | ) | |||||||||||||||
Other income (expenses) | (836 | ) | (68 | ) | 125 | — | (74 | )(7) | (853 | ) | ||||||||||||||
Income (loss) before federal income taxes | (26,749 | ) | 230 | 16,047 | (224 | ) | (3,404 | ) | (14,100 | ) | ||||||||||||||
Benefit (provision) for federal income taxes | 69 | (14 | ) | 27 | — | — | 82 | |||||||||||||||||
Net income (loss) | (26,680 | ) | 216 | 16,074 | (224 | ) | (3,404 | ) | (14,018 | ) | ||||||||||||||
Less: Net income attributable to noncontrolling interests | — | — | — | — | 4 | (8) | 4 | |||||||||||||||||
Net income (loss) attributable to Fannie Mae | $ | (26,680 | ) | $ | 216 | $ | 16,074 | $ | (224 | ) | $ | (3,400 | ) | $ | (14,014 | ) | ||||||||
(1) | Represents activity related to the assets and liabilities of consolidated trusts in our balance sheet under the new accounting standards. |
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(2) | Represents the elimination of intercompany transactions occurring between the three business segments and our consolidated trusts, as well as other adjustments to reconcile to our consolidated results. | |
(3) | Represents the amortization expense of cost basis adjustments on securities that we own in our portfolio that on a GAAP basis are eliminated. | |
(4) | Represents the guaranty fees paid from consolidated trusts to the Single-Family and Multifamily segments. The adjustment to guaranty fee income in the Eliminations/Adjustments column represents the elimination of the amortization of deferred cash fees related to consolidated trusts that were re-established for segment reporting. | |
(5) | Primarily represents the removal of realized gains and losses on sales of Fannie Mae MBS classified asavailable-for-sale securities that are issued by consolidated trusts and retained in the Capital Markets portfolio. The adjustment also includes the removal of securitization gains (losses) recognized in the Capital Markets segment relating to portfolio securitization transactions that do not qualify for sale accounting under GAAP. | |
(6) | Represents the removal of fair value adjustments on consolidated Fannie Mae MBS classified as trading that are retained in the Capital Markets portfolio. | |
(7) | Represents the removal of amortization of deferred revenue on certain credit enhancements from the Single-Family and Multifamily segment balance sheets that are eliminated upon reconciliation to our consolidated balance sheets. | |
(8) | Represents the adjustment from equity method accounting to consolidation accounting for partnership investments that are consolidated in our consolidated balance sheets. |
For the Year Ended December 31, | ||||||||||||
2010 | 2009 | 2008 | ||||||||||
(Dollars in millions) | ||||||||||||
Statement of operations data:(1) | ||||||||||||
Net interest income (expense) | $ | (5,386 | ) | $ | 428 | $ | 461 | |||||
Guaranty fee income(2) | 7,206 | 8,002 | 8,390 | |||||||||
Credit-related expenses(3) | (26,420 | ) | (71,320 | ) | (29,725 | ) | ||||||
Other expenses(4) | (2,149 | ) | (2,283 | ) | (1,439 | ) | ||||||
Loss before federal income taxes | (26,749 | ) | (65,173 | ) | (22,313 | ) | ||||||
Benefit (provision) for federal income taxes | 69 | 1,375 | (4,788 | ) | ||||||||
Net loss attributable to Fannie Mae | $ | (26,680 | ) | $ | (63,798 | ) | $ | (27,101 | ) | |||
Other key performance data: | ||||||||||||
Single-family effective guaranty fee rate (in basis points)(1)(5) | 25.1 | 27.9 | 30.9 | |||||||||
Single-family average charged guaranty fee on new acquisitions (in basis points)(6) | 25.7 | 23.8 | 28.0 | |||||||||
Average single-family guaranty book of business(7) | $ | 2,873,779 | $ | 2,864,759 | $ | 2,715,606 | ||||||
Single-family Fannie Mae MBS issues(8) | $ | 603,247 | $ | 791,418 | $ | 536,951 |
(1) | Segment statement of operations data reported under the current segment reporting basis is not comparable to the segment statement of operations data reported in prior periods. | |
(2) | In 2010, guaranty fee income related to consolidated MBS trusts consisted of contractual guaranty fees and the amortization of deferred cash fees using a static yield method. In 2009 and 2008, guaranty fee income consisted of contractual guaranty fees and amortization of our guaranty-related assets and liabilities using a prospective level yield method and fair value adjustments ofbuys-ups and certain guaranty assets. | |
(3) | Consists of the provision for loan losses, provision for guaranty losses and foreclosed property expense. | |
(4) | Consists of investment gains and losses, fee and other income, other expenses, and administrative expenses. | |
(5) | Calculated based on Single-Family segment guaranty fee income divided by the average single-family guaranty book of business, expressed in basis points. |
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(6) | Calculated based on the average contractual fee rate for our single-family guaranty arrangements entered into during the period plus the recognition of any upfront cash payments ratably over an estimated average life, expressed in basis points. | |
(7) | Consists of single-family mortgage loans held in our mortgage portfolio, single-family mortgage loans held by consolidated trusts, single-family Fannie Mae MBS issued from unconsolidated trusts held by either third parties or within our retained portfolio, and other credit enhancements that we provide on single-family mortgage assets. Excludes non-Fannie Mae mortgage-related securities held in our investment portfolio for which we do not provide a guaranty. | |
(8) | Reflects unpaid principal balance of Fannie Mae MBS issued and guaranteed by the Single-Family segment during the period. 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 program, a new issue bond program and a multifamily credit enhancement program. Includes HFA new issue bond program issuances of $3.1 billion for the year ended December 31, 2010. |
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For the Year Ended December 31, | ||||||||||||
2010 | 2009 | 2008 | ||||||||||
(Dollars in millions) | ||||||||||||
Statement of operations data:(1) | ||||||||||||
Guaranty fee income(2) | $ | 791 | $ | 675 | $ | 633 | ||||||
Fee and other income | 146 | 100 | 186 | |||||||||
Losses from partnership investments(3) | (70 | ) | (6,735 | ) | (1,554 | ) | ||||||
Credit-related expenses(4) | (194 | ) | (2,216 | ) | (84 | ) | ||||||
Other expenses(5) | (443 | ) | (594 | ) | (880 | ) | ||||||
Income (loss) before federal income taxes | 230 | (8,770 | ) | (1,699 | ) | |||||||
Provision for federal income taxes | (14 | ) | (311 | ) | (511 | ) | ||||||
Net income (loss) | 216 | (9,081 | ) | (2,210 | ) | |||||||
Less: Net loss attributable to the noncontrolling interests(3) | — | 53 | 21 | |||||||||
Net income (loss) attributable to Fannie Mae | $ | 216 | $ | (9,028 | ) | $ | (2,189 | ) | ||||
Other key performance data: | ||||||||||||
Multifamily effective guaranty fee rate (in basis | ||||||||||||
points)(1)(6) | 42.3 | 37.6 | 39.1 | |||||||||
Credit loss performance ratio (in basis points)(7) | 26.6 | 12.3 | 3.2 | |||||||||
Average Multifamily guaranty book of business(8) | $ | 186,867 | $ | 179,315 | $ | 161,722 | ||||||
Multifamily new business volumes(9) | $ | 17,919 | $ | 20,183 | $ | 35,025 | ||||||
Multifamily units financed from new business volumes(10) | 306,000 | 372,000 | 577,000 | |||||||||
Fannie Mae Multifamily MBS issuances(11) | $ | 26,499 | $ | 16,435 | $ | 5,862 | ||||||
Fannie Mae Multifamily structured securities issuances (issued by Capital Markets group)(12) | $ | 4,808 | $ | 1,648 | $ | — | ||||||
Additional net interest income earned on Fannie Mae | ||||||||||||
Multifamily mortgage loans and MBS (included in Capital Markets Group’s results)(13) | $ | 865 | $ | 785 | $ | 565 | ||||||
Average Fannie Mae Multifamily mortgage loans and MBS in Capital Markets Group’s portfolio(14) | $ | 115,839 | $ | 117,417 | $ | 102,422 |
As of December 31, | ||||||||
2010 | 2009 | |||||||
(Dollars in millions) | ||||||||
Multifamily serious delinquency rate | 0.71 | % | 0.63 | % | ||||
Percentage of guaranty book of business with credit enhancement | 89 | % | 89 | % | ||||
Fannie Mae percentage of total multifamily mortgage debt outstanding(15) | 20.1 | % | 19.8 | % | ||||
Fannie Mae Multifamily MBS outstanding(16) | $ | 77,251 | $ | 59,852 |
(1) | Segment statement of operations data reported under the current segment reporting basis is not comparable to the segment statement of operations data reported in prior periods. | |
(2) | In 2010, guaranty fee income related to consolidated MBS trusts consisted of contractual guaranty fees. In 2009 and 2008, guaranty fee income also consisted of contractual guaranty fees and amortization of our guaranty-related assets and liabilities using a prospective level yield method. | |
(3) | In 2010, income or losses from partnership investments is reported using the equity method of accounting. As a result, net income or losses attributable to noncontrolling interests from partnership investments is not included in income or losses for the Multifamily segment. In 2009 and 2008, income or losses from partnership investments is reported using either the equity method or consolidation, in accordance with GAAP, with net income or losses attributable to noncontrolling interests included in partnership investments income or losses. | |
(4) | Consists of the provision for loan losses, provision or benefit for guaranty losses and foreclosed property expense. | |
(5) | Consists of net interest income or expense, investment gains, other expenses, and administrative expenses. |
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(6) | Calculated based on Multifamily segment guaranty fee income divided by the average multifamily guaranty book of business, expressed in basis points. | |
(7) | Calculated based on credit losses divided by the average multifamily guaranty book of business, expressed in basis points. | |
(8) | Consists of multifamily mortgage loans held in our mortgage portfolio, multifamily mortgage loans held by consolidated trusts, multifamily Fannie Mae MBS issued from unconsolidated trusts held by either third parties or within our retained portfolio, and other credit enhancements that we provide on multifamily mortgage assets. Excludes non-Fannie Mae mortgage-related securities held in our investment portfolio for which we do not provide a guaranty. | |
(9) | Reflects unpaid principal balance of Fannie Mae MBS issued (excluding portfolio securitizations) and loans purchased during the period. Includes $1.0 billion and $391 million from the HFA new issue bond program for the years ended December 31, 2010 and December 31, 2009, respectively. |
(10) | Excludes HFA new issue bond program. | |
(11) | Reflects unpaid principal balance of Fannie Mae MBS issued during the period. Includes: (a) issuances of new MBS volumes, (b) $8.7 billion of Fannie Mae portfolio securitization transactions for the year ended December 31, 2010 and (c) $389 million of conversion of adjustable rate loans to fixed rate loans and DMBS securities to MBS securities for the year ended December 31, 2010. | |
(12) | Reflects original face value ofout-of-portfolio structured securities issuances by our Capital Markets Group. | |
(13) | Interest expense estimate based on allocated duration matched funding costs. Net interest income was reduced by guaranty fees allocated to Multifamily from the Capital Markets Group on multifamily loans in Fannie Mae’s portfolio. | |
(14) | Based on unpaid principal balance. | |
(15) | Includes mortgage loans and Fannie Mae MBS issued and guaranteed by the Multifamily segment. Information for 2010 is through September 30, 2010 and has been obtained from the Federal Reserve’s September 2010 mortgage debt outstanding release, the latest date for which the Federal Reserve has estimated mortgage debt outstanding for multifamily residences. | |
(16) | Includes $19.9 billion of Fannie Mae multifamily MBS held in the mortgage portfolio, the vast majority of which have been consolidated to loans in our consolidated balance sheet, and $1.4 billion of bonds issued by HFAs as of December 31, 2010. |
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For the Year Ended December 31, | ||||||||||||
2010 | 2009 | 2008 | ||||||||||
(Dollars in millions) | ||||||||||||
Statement of operations data:(1) | ||||||||||||
Net interest income(2) | $ | 14,321 | $ | 14,275 | $ | 8,664 | ||||||
Investment gains (losses), net(3) | 4,047 | 1,460 | (174 | ) | ||||||||
Netother-than-temporary impairments | (720 | ) | (9,861 | ) | (6,974 | ) | ||||||
Fair value gains (losses), net(4) | 239 | (2,811 | ) | (20,129 | ) | |||||||
Fee and other income | 519 | 319 | 264 | |||||||||
Other expenses(5) | (2,359 | ) | (2,446 | ) | (2,209 | ) | ||||||
Income (loss) before federal income taxes | 16,047 | 936 | (20,558 | ) | ||||||||
Benefit (provision) for federal income taxes | 27 | (79 | ) | (8,450 | ) | |||||||
Extraordinary losses, net of tax effect | — | — | (409 | ) | ||||||||
Net income (loss) attributable to Fannie Mae | $ | 16,074 | $ | 857 | $ | (29,417 | ) | |||||
(1) | Segment statement of operations data reported under the current segment reporting basis is not comparable to the segment statement of operations data reported in prior periods. | |
(2) | Includes contractual interest on nonaccrual loans received from Single-Family and Multifamily segments. In 2010, Capital Markets net interest income is reported based on the mortgage-related assets held in the segment’s portfolio and excludes interest income on mortgage-related assets held by consolidated MBS trusts that are owned by third parties and the interest expense on the corresponding debt of such trusts. In 2009 and 2008, the Capital Markets group’s net interest income included interest income on mortgage-related assets underlying MBS trusts that we consolidated under the prior consolidation accounting standards and the interest expense on the corresponding debt of such trusts. | |
(3) | In 2010, we include the securities that we own regardless of whether the trust has been consolidated in reporting of gains and losses on securitizations and sales ofavailable-for-sale securities. In 2009 and 2008, we excluded the securities of consolidated trusts that we own in reporting of gains and losses on securitizations and sales ofavailable-for-sale securities. | |
(4) | In 2010, fair value gains or losses on trading securities include the trading securities that we own, regardless of whether the trust has been consolidated. In 2009 and 2008, MBS trusts that were consolidated were reported as loans and thus any securities we owned issued by these trusts did not have fair value adjustments. | |
(5) | Includes allocated guaranty fee expense, debt extinguishment losses, net, administrative expenses, and other expenses. In 2010, gains or losses related to the extinguishment of debt issued by consolidated trusts are excluded from the Capital Markets group because purchases of securities are recognized as such. In 2009 and 2008, gains or losses related to the extinguishment of debt issued by consolidated trusts were included in the Capital Markets group’s results as debt extinguishment gain or loss. |
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2010 | ||||
(Dollars in millions) | ||||
Total Capital Markets mortgage portfolio, beginning balance as of January 1, 2010 | $ | 772,728 | ||
Mortgage loans: | ||||
Beginning balance as of January 1, 2010 | 281,162 | |||
Purchases | 313,075 | |||
Securitizations(1) | (95,783 | ) | ||
Liquidations(2) | (71,380 | ) | ||
Mortgage loans, ending balance as of December 31, 2010 | 427,074 | |||
Mortgage securities: | ||||
Beginning balance as of January 1, 2010 | $ | 491,566 | ||
Purchases(3) | 44,495 | |||
Securitizations(1) | 95,783 | |||
Sales | (179,620 | ) | ||
Liquidations(2) | (90,527 | ) | ||
Mortgage securities, ending balance as of December 31, 2010 | 361,697 | |||
Total Capital Markets mortgage portfolio, ending balance as of December 31, 2010 | $ | 788,771 | ||
(1) | Includes portfolio securitization transactions that do not qualify for sale treatment under the new accounting standards on the transfers of financial assets. | |
(2) | Includes scheduled repayments, prepayments, foreclosures and lender repurchases. | |
(3) | Includes purchases of Fannie Mae MBS issued by consolidated trusts. |
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As of | ||||||||
December 31, | January 1, | |||||||
2010 | 2010 | |||||||
(Dollars in millions) | ||||||||
Capital Markets Group’s mortgage loans: | ||||||||
Single-family loans | ||||||||
Government insured or guaranteed | $ | 51,783 | $ | 51,395 | ||||
Conventional: | ||||||||
Long-term, fixed-rate | 237,096 | 94,236 | ||||||
Intermediate-term, fixed-rate | 11,446 | 8,418 | ||||||
Adjustable-rate | 31,526 | 18,493 | ||||||
Total single-family conventional | 280,068 | 121,147 | ||||||
Total single-family loans | 331,851 | 172,542 | ||||||
Multifamily loans | ||||||||
Government insured or guaranteed | 431 | 521 | ||||||
Conventional: | ||||||||
Long-term, fixed-rate | 4,413 | 4,941 | ||||||
Intermediate-term, fixed-rate | 71,010 | 81,610 | ||||||
Adjustable-rate | 19,369 | 21,548 | ||||||
Total multifamily conventional | 94,792 | 108,099 | ||||||
Total multifamily loans | 95,223 | 108,620 | ||||||
Total Capital Markets Group’s mortgage loans | 427,074 | 281,162 | ||||||
Capital Markets Group’s mortgage-related securities: | ||||||||
Fannie Mae | 260,429 | 358,495 | ||||||
Freddie Mac | 17,332 | 41,390 | ||||||
Ginnie Mae | 1,425 | 1,255 | ||||||
Alt-A private-label securities | 22,283 | 25,133 | ||||||
Subprime private-label securities | 18,038 | 20,001 | ||||||
CMBS | 25,052 | 25,703 | ||||||
Mortgage revenue bonds | 12,525 | 14,448 | ||||||
Other mortgage-related securities | 4,613 | 5,141 | ||||||
Total Capital Markets Group’s mortgage-related securities(1) | 361,697 | 491,566 | ||||||
Total Capital Markets Group’s mortgage portfolio | $ | 788,771 | $ | 772,728 | ||||
(1) | The fair value of these mortgage-related securities was $365.8 billion as of December 31, 2010. |
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Item | Consolidation Impact | ||
Restricted cash | We recognize unscheduled cash payments that have been either received by the servicer or that are held by consolidated trusts and have not yet been remitted to MBS certificateholders. | ||
Investments in securities | Fannie Mae MBS that we own were consolidated resulting in a decrease in our investments in securities. | ||
Mortgage loans Accrued interest receivable | We now record the underlying assets of the majority of our MBS trusts in our consolidated balance sheets, which significantly increases mortgage loans and related accrued interest receivable. | ||
Allowance for loan losses Reserve for guaranty losses | The substantial majority of our combined loss reserves are now recognized in our allowance for loan losses to reflect the loss allowance against the consolidated mortgage loans. We use a different methodology to estimate incurred losses for our allowance for loan losses as compared with our reserve for guaranty losses. | ||
Guaranty assets Guaranty obligations | We eliminated our guaranty accounting for the newly consolidated trusts, which resulted in derecognizing previously recorded guaranty-related assets and liabilities associated with the newly consolidated trusts from our consolidated balance sheets. We continue to have guaranty assets and obligations on unconsolidated trusts and other credit enhancements arrangements, such as our long-term standby commitments. | ||
Debt Accrued interest payable | We recognize the MBS certificates issued by the consolidated trusts and that are held by third-party certificateholders as debt, which significantly increases our debt outstanding and related accrued interest payable. | ||
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Table 25: | Summary of Consolidated Balance Sheets |
As of | Variance | |||||||||||||||||||
December 31, | January 1, | December 31, | January 1 to | December 31, 2009 to | ||||||||||||||||
2010 | 2010 | 2009 | December 31, 2010 | January 1, 2010 | ||||||||||||||||
(Dollars in millions) | ||||||||||||||||||||
Assets | ||||||||||||||||||||
Cash and cash equivalents and federal funds sold and securities purchased under agreements to resell or similar arrangements | $ | 29,048 | $ | 60,161 | $ | 60,496 | $ | (31,113 | ) | $ | (335 | ) | ||||||||
Restricted cash | 63,678 | 48,653 | 3,070 | 15,025 | 45,583 | |||||||||||||||
Investments in securities(1) | 151,248 | 161,088 | 349,667 | (9,840 | ) | (188,579 | ) | |||||||||||||
Mortgage loans | 2,985,276 | 2,985,445 | 404,486 | (169 | ) | 2,580,959 | ||||||||||||||
Allowance for loan losses | (61,556 | ) | (53,501 | ) | (9,925 | ) | (8,055 | ) | (43,576 | ) | ||||||||||
Mortgage loans, net of allowance for loan losses | 2,923,720 | 2,931,944 | 394,561 | (8,224 | ) | 2,537,383 | ||||||||||||||
Other assets(2) | 54,278 | 44,389 | 61,347 | 9,889 | (16,958 | ) | ||||||||||||||
Total assets | $ | 3,221,972 | $ | 3,246,235 | $ | 869,141 | $ | (24,263 | ) | $ | 2,377,094 | |||||||||
Liabilities and equity (deficit) | ||||||||||||||||||||
Debt(3) | $ | 3,197,052 | $ | 3,223,054 | $ | 774,554 | $ | (26,002 | ) | $ | 2,448,500 | |||||||||
Other liabilities(4) | 27,437 | 35,164 | 109,868 | (7,727 | ) | (74,704 | ) | |||||||||||||
Total liabilities | 3,224,489 | 3,258,218 | 884,422 | (33,729 | ) | 2,373,796 | ||||||||||||||
Senior preferred stock | 88,600 | 60,900 | 60,900 | 27,700 | — | |||||||||||||||
Other equity (deficit)(5) | (91,117 | ) | (72,883 | ) | (76,181 | ) | (18,234 | ) | 3,298 | |||||||||||
Total stockholders’ equity (deficit) | (2,517 | ) | (11,983 | ) | (15,281 | ) | 9,466 | 3,298 | ||||||||||||
Total liabilities and stockholders’ deficit | $ | 3,221,972 | $ | 3,246,235 | $ | 869,141 | $ | (24,263 | ) | $ | 2,377,094 | |||||||||
(1) | Includes $32.8 billion as of December 31, 2010 and $8.9 billion as of both January 1, 2010 and December 31, 2009 of non-mortgage-related securities that are included in our other investments portfolio in “Table 37: Cash and Other Investments Portfolio.” | |
(2) | Consists of: accrued interest receivable, net; acquired property, net; servicer and MBS trust receivable and other assets. | |
(3) | Consists of: federal funds purchased and securities sold under agreements to repurchase; short-term debt; and long-term debt. | |
(4) | Consists of: accrued interest payable; reserve for guaranty losses; servicer and MBS trust payable; and other liabilities. | |
(5) | Consists of: preferred stock; common stock; additional paid-in capital; retained earnings (accumulated deficit); accumulated other comprehensive loss; treasury stock; and noncontrolling interest. |
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As of December 31, 2010 | ||||||||||||||||||||
Unpaid | Total | |||||||||||||||||||
Principal | Fair | Cumulative | Noncredit | Credit | ||||||||||||||||
Balance | Value | Losses(1) | Component(2) | Component(3) | ||||||||||||||||
(Dollars in millions) | ||||||||||||||||||||
Trading securities:(4) | ||||||||||||||||||||
Alt-A private-label securities | $ | 3,082 | $ | 1,683 | $ | (1,351 | ) | $ | (188 | ) | $ | (1,163 | ) | |||||||
Subprime private-label securities | 2,767 | 1,581 | (1,186 | ) | (278 | ) | (908 | ) | ||||||||||||
Total | $ | 5,849 | $ | 3,264 | $ | (2,537 | ) | $ | (466 | ) | $ | (2,071 | ) | |||||||
Available-for-sale securities: | ||||||||||||||||||||
Alt-A private-label securities | $ | 19,201 | $ | 13,890 | $ | (5,410 | ) | $ | (1,899 | ) | $ | (3,511 | ) | |||||||
Subprime private-label securities(5) | 15,643 | 9,932 | (5,751 | ) | (1,391 | ) | (4,360 | ) | ||||||||||||
Total | $ | 34,844 | $ | 23,822 | $ | (11,161 | ) | $ | (3,290 | ) | $ | (7,871 | ) | |||||||
Grand Total | $ | 40,693 | $ | 27,086 | $ | (13,698 | ) | $ | (3,756 | ) | $ | (9,942 | ) | |||||||
(1) | Amounts reflect the difference between the fair value and unpaid principal balance net of unamortized premiums, discounts and certain other cost basis adjustments. | |
(2) | Represents the estimated portion of the total cumulative losses that is noncredit-related. We have calculated the credit component based on the difference between the amortized cost basis of the securities and the present value of expected future cash flows. The remaining difference between the fair value and the present value of expected future cash flows is classified as noncredit-related. | |
(3) | For securities classified as trading, amounts reflect the estimated portion of the total cumulative losses that is credit-related. For securities classified asavailable-for-sale, amounts reflect the portion ofother-than-temporary impairment losses net of accretion that are recognized in earnings in accordance with the accounting standards forother-than-temporary impairments. |
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(4) | Excludes resecuritizations, or wraps, of private-label securities backed by subprime loans that we have guaranteed and hold in our mortgage portfolio as Fannie Mae securities. | |
(5) | Includes a wrap transaction that has been partially consolidated on our balance sheet, which effectively resulted in a portion of the underlying structure of the transaction being accounted for and reported asavailable-for-sale securities. |
Table 27: | Credit Statistics of Loans Underlying Alt-A and Subprime Private-Label Mortgage-Related Securities (Including Wraps) |
As of December 31, 2010 | ||||||||||||||||||||||||||||
Unpaid Principal Balance | Monoline | |||||||||||||||||||||||||||
Available- | Average | Average | Financial | |||||||||||||||||||||||||
for- | ³ 60 Days | Loss | Credit | Guaranteed | ||||||||||||||||||||||||
Trading | Sale | Wraps(1) | Delinquent(2)(3) | Severity(3)(4) | Enhancement(3)(5) | Amount(6) | ||||||||||||||||||||||
(Dollars in millions) | ||||||||||||||||||||||||||||
Private-label mortgage-related securities backed by:(7) | ||||||||||||||||||||||||||||
Alt-A mortgage loans: | ||||||||||||||||||||||||||||
Option ARM Alt-A mortgage loans: | ||||||||||||||||||||||||||||
2004 and prior | $ | — | $ | 521 | $ | — | 33.5 | % | 48.8 | % | 19.5 | % | $ | — | ||||||||||||||
2005 | — | 1,401 | — | 44.3 | 54.1 | 43.8 | 272 | |||||||||||||||||||||
2006 | — | 1,379 | — | 46.6 | 58.9 | 33.9 | 155 | |||||||||||||||||||||
2007 | 2,145 | — | — | 45.8 | 60.0 | 60.2 | 781 | |||||||||||||||||||||
Other Alt-A mortgage loans: | ||||||||||||||||||||||||||||
2004 and prior | — | 6,927 | — | 10.1 | 56.8 | 12.3 | 14 | |||||||||||||||||||||
2005 | 93 | 4,460 | 136 | 24.6 | 54.8 | 7.2 | — | |||||||||||||||||||||
2006 | 68 | 4,384 | — | 30.6 | 56.0 | 2.3 | — | |||||||||||||||||||||
2007 | 776 | — | 200 | 44.8 | 65.2 | 33.3 | 322 | |||||||||||||||||||||
2008(8) | — | 129 | — | — | — | — | — | |||||||||||||||||||||
Total Alt-A mortgage loans: | 3,082 | 19,201 | 336 | 1,544 | ||||||||||||||||||||||||
Subprime mortgage loans: | ||||||||||||||||||||||||||||
2004 and prior(9) | — | 2,216 | 679 | 24.6 | 87.2 | 60.0 | 688 | |||||||||||||||||||||
2005(8) | — | 206 | 1,504 | 45.0 | 78.4 | 58.1 | 229 | |||||||||||||||||||||
2006 | — | 12,565 | — | 50.2 | 76.7 | 20.7 | 52 | |||||||||||||||||||||
2007 | 2,767 | 656 | 5,833 | 49.5 | 73.2 | 24.2 | 183 | |||||||||||||||||||||
Total subprime mortgage loans: | 2,767 | 15,643 | 8,016 | 1,152 | ||||||||||||||||||||||||
Total Alt-A and subprime mortgage loans: | $ | 5,849 | $ | 34,844 | $ | 8,352 | $ | 2,696 | ||||||||||||||||||||
(1) | Represents our exposure to private-label Alt-A and subprime mortgage-related securities that have been resecuritized (or wrapped) to include our guarantee. |
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(2) | Delinquency data provided by Intex, where available, for loans backing Alt-A and subprime private-label mortgage-related securities that we own or guarantee. The reported Intex delinquency data reflects information from December 2010 remittances for November 2010 payments. For consistency purposes, we have adjusted the Intex delinquency data, where appropriate, to include all bankruptcies, foreclosures and REO in the delinquency rates. | |
(3) | The average delinquency, severity and credit enhancement metrics are calculated for each loan pool associated with securities where Fannie Mae has exposure and are weighted based on the unpaid principal balance of those securities. | |
(4) | Severity data obtained from First American CoreLogic, where available, for loans backing Alt-A and subprime private-label mortgage-related securities that we own or guarantee. The First American CoreLogic severity data reflects information from December 2010 remittances for November 2010 payments. For consistency purposes, we have adjusted the severity data, where appropriate. | |
(5) | Average credit enhancement percentage reflects both subordination and financial guarantees. Reflects the ratio of the current amount of the securities that will incur losses in the securitization structure before any losses are allocated to securities that we own or guarantee. Percentage generally calculated based on the quotient of the total unpaid principal balance of all credit enhancements in the form of subordination or financial guarantee of the security divided by the total unpaid principal balance of all of the tranches of collateral pools from which credit support is drawn for the security that we own or guarantee. | |
(6) | Reflects amount of unpaid principal balance supported by financial guarantees from monoline financial guarantors. | |
(7) | Vintages are based on series date and not loan origination date. | |
(8) | The unpaid principal balance includes private-label REMIC securities that have been resecuritized totaling $129 million for the 2008 vintage of other Alt-A loans and $23 million for the 2005 vintage of subprime loans. These securities are excluded from the delinquency, severity and credit enhancement statistics reported in this table. | |
(9) | Includes a wrap transaction that has been partially consolidated on our balance sheet, which effectively resulted in a portion of the underlying structure of the transaction being accounted for and reported asavailable-for-sale securities. |
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Table 28: | Changes in Risk Management Derivative Assets (Liabilities) at Fair Value, Net |
2010 | ||||
(Dollars in millions) | ||||
Net risk management derivative liability as of December 31, 2009 | $ | (340 | ) | |
Effect of cash payments: | ||||
Fair value at inception of contracts entered into during the period(1) | (2,107 | ) | ||
Fair value at date of termination of contracts settled during the period(2) | 2,451 | |||
Net collateral received | (1,595 | ) | ||
Periodic net cash contractual interest payments(3) | 2,609 | |||
Total cash payments | 1,358 | |||
Statement of operations impact of recognized amounts: | ||||
Net contractual interest expense accruals on interest rate swaps | (2,895 | ) | ||
Net change in fair value during the period | 1,088 | |||
Risk management derivatives fair value losses, net | (1,807 | ) | ||
Net risk management derivative liability as of December 31, 2010 | $ | (789 | ) | |
(1) | Cash receipts from sale of derivative option contracts increase the derivative liability recorded in our consolidated balance sheets. Cash payments made to purchase derivative option contracts (purchased option premiums) increase the derivative asset recorded in our consolidated balance sheets. | |
(2) | Cash payments made to terminate derivative contracts reduce the derivative liability recorded in our consolidated balance sheets. Primarily represents cash paid (received) upon termination of derivative contracts. | |
(3) | Interest is accrued on interest rate swap contracts based on the contractual terms. Accrued interest income increases our derivative asset and accrued interest expense increases our derivative liability. The offsetting interest income and expense are included as components of derivatives fair value gains (losses), net in our consolidated statements of operations. Net periodic interest receipts reduce the derivative asset and net periodic interest payments reduce the derivative liability. |
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Table 29: | Comparative Measures—GAAP Change in Stockholders’ Deficit and Non-GAAP Change in Fair Value of Net Assets (Net of Tax Effect) |
2010 | ||||
(Dollars in millions) | ||||
GAAP consolidated balance sheets: | ||||
Fannie Mae stockholders’ deficit as of December 31, 2009 | $ | (15,372 | ) | |
Impact of new accounting standards on Fannie Mae stockholders’ deficit as of January 1, 2010(1) | 3,312 | |||
Fannie Mae stockholders’ deficit as of January 1, 2010(2) | (12,060 | ) | ||
Net loss attributable to Fannie Mae | (14,014 | ) | ||
Changes in net unrealized losses onavailable-for-sale securities, net of tax | 3,054 | |||
Reclassification adjustment forother-than-temporary impairments recognized in net loss, net of tax | 469 | |||
Capital transactions:(3) | ||||
Funds received from Treasury under the senior preferred stock purchase agreement | 27,700 | |||
Senior preferred stock dividends | (7,706 | ) | ||
Capital transactions, net | 19,994 | |||
Other equity transactions | (42 | ) | ||
Fannie Mae stockholders’ deficit as of December 31, 2010(2) | $ | (2,599 | ) | |
Non-GAAP consolidated fair value balance sheets: | ||||
Estimated fair value of net assets as of December 31, 2009 | $ | (98,792 | ) | |
Impact of new accounting standards on Fannie Mae estimated fair value of net assets as of January 1, 2010(1) | (52,302 | ) | ||
Estimated fair value of net assets as of January 1, 2010 | (151,094 | ) | ||
Capital transactions, net | 19,994 | |||
Change in estimated fair value of net assets(4) | 10,806 | |||
Increase in estimated fair value of net assets, net | 30,800 | |||
Estimated fair value of net assets as of December 31, 2010 | $ | (120,294 | ) | |
(1) | Reflects our adoption of the new accounting standards for transfers of financial assets and consolidation of variable interest entities. | |
(2) | Our net worth, as defined under the senior preferred stock purchase agreement, is equivalent to the “Total deficit” amount reported in our consolidated balance sheets. Our net worth, or total deficit, is comprised of “Total Fannie Mae’s stockholders’ equity (deficit)” and “Noncontrolling interests” reported in our consolidated balance sheets. | |
(3) | Represents capital transactions, which are reflected in our consolidated statements of changes in equity (deficit). | |
(4) | Excludes cumulative effect of our adoption of the new accounting standards and capital transactions. |
• | An increase in the fair value of the net portfolio attributable to the positive impact of changes in the spread between mortgage assets and associated debt and derivatives partially offset by, | |
• | A net decrease in the fair value due to credit-related items principally related to declining actual and expected home prices as well as an increase in estimated severity rates based on recent experience, particularly for loans with a highmark-to-market LTV ratio. |
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• | The estimated fair value of our credit exposures significantly exceeds our projected credit losses as fair value takes into account certain assumptions about liquidity and required rates of return that a market participant may demand in assuming a credit obligation. Because we do not intend to have another party assume the credit risk inherent in our book of business, and therefore would not be obligated to pay a market premium for its assumption, we do not expect the current market premium portion of our current estimate of fair value to impact future Treasury draws; | |
• | The fair value balance sheet does not reflect amounts we expect to draw in the future to pay dividends on the senior preferred stock; and |
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• | The fair value of our net assets reflects a point in time estimate of the fair value of our existing assets and liabilities, and does not incorporate the value associated with new business that may be added in the future. |
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Table 30: | Supplemental Non-GAAP Consolidated Fair Value Balance Sheets |
As of December 31, 2010 | As of December 31, 2009(1) | |||||||||||||||||||||||
GAAP | GAAP | |||||||||||||||||||||||
Carrying | Fair Value | Estimated | Carrying | Fair Value | Estimated | |||||||||||||||||||
Value | Adjustment(2) | Fair Value | Value | Adjustment(2) | Fair Value | |||||||||||||||||||
(Dollars in millions) | ||||||||||||||||||||||||
Assets: | ||||||||||||||||||||||||
Cash and cash equivalents | $ | 80,975 | $ | — | �� | $ | 80,975 | $ | 9,882 | $ | — | $ | 9,882 | |||||||||||
Federal funds sold and securities purchased under agreements to resell or similar arrangements | 11,751 | — | 11,751 | 53,684 | (28 | ) | 53,656 | |||||||||||||||||
Trading securities | 56,856 | — | 56,856 | 111,939 | — | 111,939 | ||||||||||||||||||
Available-for-sale securities | 94,392 | — | 94,392 | 237,728 | — | 237,728 | ||||||||||||||||||
Mortgage loans: | ||||||||||||||||||||||||
Mortgage loans held for sale | 915 | — | 915 | 18,462 | 153 | 18,615 | ||||||||||||||||||
Mortgage loans held for investment, net of allowance for loan losses: | ||||||||||||||||||||||||
Of Fannie Mae | 358,698 | (39,331 | ) | 319,367 | 246,509 | (5,209 | ) | 241,300 | ||||||||||||||||
Of consolidated trusts | 2,564,107 | 46,038 | (3) | 2,610,145 | (4) | 129,590 | (45 | ) | 129,545 | (4) | ||||||||||||||
Total mortgage loans | 2,923,720 | 6,707 | 2,930,427 | (5) | 394,561 | (5,101 | ) | 389,460 | (5) | |||||||||||||||
Advances to lenders | 7,215 | (225 | ) | 6,990 | (6)(7) | 5,449 | (305 | ) | 5,144 | (6)(7) | ||||||||||||||
Derivative assets at fair value | 1,137 | — | 1,137 | (6)(7) | 1,474 | — | 1,474 | (6)(7) | ||||||||||||||||
Guaranty assets andbuy-ups, net | 458 | 356 | 814 | (6)(7) | 9,520 | 5,104 | 14,624 | (6)(7) | ||||||||||||||||
Total financial assets | 3,176,504 | 6,838 | 3,183,342 | (8) | 824,237 | (330 | ) | 823,907 | (8) | |||||||||||||||
Master servicing assets and credit enhancements | 479 | 3,286 | 3,765 | (6)(7) | 651 | 5,917 | 6,568 | (6)(7) | ||||||||||||||||
Other assets | 44,989 | (261 | ) | 44,728 | (6)(7) | 44,253 | 373 | 44,626 | (6)(7) | |||||||||||||||
Total assets | $ | 3,221,972 | $ | 9,863 | $ | 3,231,835 | $ | 869,141 | $ | 5,960 | $ | 875,101 | ||||||||||||
Liabilities: | ||||||||||||||||||||||||
Federal funds purchased and securities sold under agreements to repurchase | $ | 52 | $ | (1 | ) | $ | 51 | $ | — | $ | — | $ | — | |||||||||||
Short-term debt: | ||||||||||||||||||||||||
Of Fannie Mae | 151,884 | 90 | 151,974 | 200,437 | 56 | 200,493 | ||||||||||||||||||
Of consolidated trusts | 5,359 | — | 5,359 | — | — | — | ||||||||||||||||||
Long-term debt: | ||||||||||||||||||||||||
Of Fannie Mae | 628,160 | (9) | 21,524 | 649,684 | 567,950 | (9) | 19,473 | 587,423 | ||||||||||||||||
Of consolidated trusts | 2,411,597 | (9) | 103,332 | (3) | 2,514,929 | 6,167 | (9) | 143 | 6,310 | |||||||||||||||
Derivative liabilities at fair value | 1,715 | — | 1,715 | (10)(11) | 1,029 | — | 1,029 | (10)(11) | ||||||||||||||||
Guaranty obligations | 769 | 3,085 | 3,854 | (10)(11) | 13,996 | 124,586 | 138,582 | (10)(11) | ||||||||||||||||
Total financial liabilities | 3,199,536 | 128,030 | 3,327,566 | (8) | 789,579 | 144,258 | 933,837 | (8) | ||||||||||||||||
Other liabilities | 24,953 | (472 | ) | 24,481 | (10)(11) | 94,843 | (54,878 | ) | 39,965 | (10)(11) | ||||||||||||||
Total liabilities | 3,224,489 | 127,558 | 3,352,047 | 884,422 | 89,380 | 973,802 | ||||||||||||||||||
Equity (deficit): | ||||||||||||||||||||||||
Fannie Mae stockholders’ equity (deficit): | ||||||||||||||||||||||||
Senior preferred(12) | 88,600 | — | 88,600 | 60,900 | — | 60,900 | ||||||||||||||||||
Preferred | 20,204 | (19,829 | ) | 375 | 20,348 | (19,629 | ) | 719 | ||||||||||||||||
Common | (111,403 | ) | (97,866 | ) | (209,269 | ) | (96,620 | ) | (63,791 | ) | (160,411 | ) | ||||||||||||
Total Fannie Mae stockholders’ deficit/non-GAAP fair value of net assets | $ | (2,599 | ) | $ | (117,695 | ) | $ | (120,294 | ) | $ | (15,372 | ) | $ | (83,420 | ) | $ | (98,792 | ) | ||||||
Noncontrolling interests | 82 | — | 82 | 91 | — | 91 | ||||||||||||||||||
Total deficit | (2,517 | ) | (117,695 | ) | (120,212 | ) | (15,281 | ) | (83,420 | ) | (98,701 | ) | ||||||||||||
Total liabilities and equity (deficit) | $ | 3,221,972 | $ | 9,863 | $ | 3,231,835 | $ | 869,141 | $ | 5,960 | $ | 875,101 | ||||||||||||
(1) | Certain prior period amounts have been reclassified to conform to the current period presentation. | |
(2) | Each of the amounts listed as a “fair value adjustment” represents the difference between the carrying value included in our GAAP consolidated balance sheets and our best judgment of the estimated fair value of the listed item. | |
(3) | Fair value exceeds the carrying value of consolidated loans and debt of consolidated trusts due to the fact that the loans and debt were consolidated in our GAAP consolidated balance sheet at unpaid principal balance at transition. Also impacting the difference |
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between fair value and carrying value of the consolidated loans is the credit component of the loan. This credit component is reflected in the net guaranty obligation, which is included in the consolidated loan fair value, but was presented as a separate line item in our fair value balance sheet in prior periods. | ||
(4) | Includes certain mortgage loans that we elected to report at fair value in our GAAP consolidated balance sheet of $3.0 billion as of December 31, 2010. We did not elect to report any mortgage loans at fair value in our consolidated balance sheet as of December 31, 2009. | |
(5) | Performing loans had a fair value of $2.8 trillion and an unpaid principal balance of $2.7 trillion as of December 31, 2010 compared to a fair value of $345.5 billion and an unpaid principal balance of $348.2 billion as of December 31, 2009. Nonperforming loans, which include loans that are delinquent by one or more payments, had a fair value of $168.5 billion and an unpaid principal balance of $287.4 billion as of December 31, 2010 compared to a fair value of $43.9 billion and an unpaid principal balance of $79.8 billion as of December 31, 2009. See “Note 19, Fair Value” for additional information on valuation techniques for performing and nonperforming loans. | |
(6) | The following line items: (a) Advances to lenders; (b) Derivative assets at fair value; (c) Guaranty assets andbuy-ups, net; (d) Master servicing assets and credit enhancements and (e) Other assets, together consist of the following assets presented in our GAAP consolidated balance sheets: (a) Total accrued interest receivable, net of allowance; (b) Acquired property, net; (c) Servicer and MBS trust receivable; and (d) Other assets. | |
(7) | “Other assets” include the following GAAP consolidated balance sheets line items: (a) Total accrued interest receivable, net of allowance; (b) Acquired property, net; and (c) Servicer and MBS trust receivable. The carrying value of these items in our GAAP consolidated balance sheets totaled $28.4 billion and $31.2 billion as of December 31, 2010 and 2009, respectively. “Other assets” in our GAAP consolidated balance sheets includes the following: (a) Advances to Lenders; (b) Derivative assets at fair value; (c) Guaranty assets andbuy-ups, net; and (d) Master servicing assets and credit enhancements. The carrying value of these items totaled $9.3 billion and $17.1 billion as of December 31, 2010 and 2009, respectively. | |
(8) | We determined the estimated fair value of these financial instruments in accordance with the fair value accounting standard as described in “Note 19, Fair Value.” | |
(9) | Includes certain long-term debt instruments that we elected to report at fair value in our GAAP consolidated balance sheets of $3.2 billion and $3.3 billion as of December 31, 2010 and 2009, respectively. | |
(10) | The following line items: (a) Derivative liabilities at fair value; (b) Guaranty obligations; and (c) Other liabilities, consist of the following liabilities presented in our GAAP consolidated balance sheets: (a) Accrued interest payable of Fannie Mae; (b) Accrued interest payable of consolidated trusts; (c) Reserve for guaranty losses; (d) Servicer and MBS trust payable; and (e) Other liabilities. | |
(11) | “Other liabilities” include the following GAAP consolidated balance sheets line items: (a) Accrued interest payable of Fannie Mae; (b) Accrued interest payable of consolidated trusts; (c) Reserve for guaranty losses; and (d) Servicer and MBS trust payable. The carrying value of these items in our GAAP consolidated balance sheets totaled $17.0 billion and $85.3 billion as of December 31, 2010 and 2009, respectively. We assume that certain other liabilities, such as deferred revenues, have no fair value. Although we report the “Reserve for guaranty losses” as a separate line item in our consolidated balance sheets, it is incorporated into and reported as part of the fair value of our guaranty obligations in our non-GAAP supplemental consolidated fair value balance sheets. “Other liabilities” in our GAAP consolidated balance sheets include the following: (a) Derivative liabilities at fair value and (b) Guaranty obligations. The carrying value of these items totaled $2.5 billion and $15.0 billion as of December 31, 2010 and 2009, respectively. | |
(12) | The amount included in “estimated fair value” of the senior preferred stock is the liquidation preference, which is the same as the GAAP carrying value, and does not reflect fair value. |
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• | principal and interest payments received on mortgage loans, mortgage-related securities and non-mortgage investments we own; | |
• | proceeds from the sale of mortgage-related securities, mortgage loans and non-mortgage assets, including proceeds from the sales of foreclosed real estate assets; | |
• | funds from Treasury pursuant to the senior preferred stock purchase agreement; | |
• | borrowings under secured and unsecured intraday funding lines of credit we have established with several large financial institutions; | |
• | guaranty fees received on Fannie Mae MBS; | |
• | borrowings against mortgage-related securities and other investment securities we hold pursuant to repurchase agreements and loan agreements; | |
• | payments received from mortgage insurance counterparties; and | |
• | net receipts on derivative instruments. |
• | the repayment of matured, redeemed and repurchased debt; | |
• | the purchase of mortgage loans (including delinquent loans from MBS trusts), mortgage-related securities and other investments; | |
• | interest payments on outstanding debt; | |
• | dividend payments made to Treasury pursuant to the senior preferred stock purchase agreement; | |
• | net payments on derivative instruments; | |
• | the pledging of collateral under derivative instruments; | |
• | administrative expenses; and | |
• | losses incurred in connection with our Fannie Mae MBS guaranty obligations. |
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Table 31: | Activity in Debt of Fannie Mae |
For the Year Ended December 31, | ||||||||||||
2010 | 2009(3) | 2008 | ||||||||||
(Dollars in millions) | ||||||||||||
Issued during the period: | ||||||||||||
Short-term:(1) | ||||||||||||
Amount | $ | 451,289 | $ | 1,381,640 | $ | 1,624,868 | ||||||
Weighted-average interest rate | 0.25 | % | 0.18 | % | 2.11 | % | ||||||
Long-term: | ||||||||||||
Amount | $ | 463,157 | $ | 295,147 | $ | 248,168 | ||||||
Weighted-average interest rate | 1.88 | % | 2.52 | % | 3.76 | % | ||||||
Total issued: | ||||||||||||
Amount | $ | 914,446 | $ | 1,676,787 | $ | 1,873,036 | ||||||
Weighted-average interest rate | 1.08 | % | 0.59 | % | 2.33 | % | ||||||
Paid off during the period:(2) | ||||||||||||
Short-term:(1) | ||||||||||||
Amount | $ | 499,828 | $ | 1,513,683 | $ | 1,529,368 | ||||||
Weighted-average interest rate | 0.23 | % | 0.51 | % | 2.54 | % | ||||||
Long-term: | ||||||||||||
Amount | $ | 406,267 | $ | 260,578 | $ | 266,764 | ||||||
Weighted-average interest rate | 3.16 | % | 4.09 | % | 4.89 | % | ||||||
Total paid off: | ||||||||||||
Amount | $ | 906,095 | $ | 1,774,261 | $ | 1,796,132 | ||||||
Weighted-average interest rate | 1.54 | % | 1.04 | % | 2.89 | % |
(1) | The amount of short-term debt issued and paid off included $766.8 billion and $482.5 billion for the years ended December 31, 2009 and 2008, respectively, of debt issued and repaid to Fannie Mae MBS trusts. |
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(2) | Consists of all payments on debt, including regularly scheduled principal payments, payments at maturity, payments resulting from calls and payments for any other repurchases. | |
(3) | For the year ended December 31, 2009, we revised the weighted-average interest rate on short-term issued, total issued, short-term paid-off and total paid-off debt primarily to reflect weighting based on transaction level data. |
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Table 32: | Outstanding Short-Term Borrowings and Long-Term Debt(1) |
As of December 31, | ||||||||||||||||||||||||
2010 | 2009 | |||||||||||||||||||||||
Weighted- | Weighted- | |||||||||||||||||||||||
Average | Average | |||||||||||||||||||||||
Interest | Interest | |||||||||||||||||||||||
Maturities | Outstanding | Rate | Maturities | Outstanding | Rate | |||||||||||||||||||
(Dollars in millions) | ||||||||||||||||||||||||
Federal funds purchased and securities sold under agreements to repurchase | — | $ | 52 | 2.20 | % | — | $ | — | — | % | ||||||||||||||
Short-term debt: | ||||||||||||||||||||||||
Fixed-rate: | ||||||||||||||||||||||||
Discount notes | — | $ | 151,500 | 0.32 | % | — | $ | 199,987 | 0.27 | % | ||||||||||||||
Foreign exchange discount notes | — | 384 | 2.43 | — | 300 | 1.50 | ||||||||||||||||||
Other short-term debt | — | — | — | — | 100 | 0.53 | ||||||||||||||||||
Total fixed-rate | 151,884 | 0.32 | 200,387 | 0.27 | ||||||||||||||||||||
Floating-rate(2) | — | — | — | — | 50 | 0.02 | ||||||||||||||||||
Total short-term debt of Fannie Mae(3) | 151,884 | 0.32 | 200,437 | 0.27 | ||||||||||||||||||||
Debt of consolidated trusts | — | 5,359 | 0.23 | — | — | — | ||||||||||||||||||
Total short-term debt | $ | 157,243 | 0.32 | % | $ | 200,437 | 0.27 | % | ||||||||||||||||
Long-term debt: | ||||||||||||||||||||||||
Senior fixed: | ||||||||||||||||||||||||
Benchmark notes and bonds | 2011 - 2030 | $ | 300,344 | 3.20 | % | 2010 - 2030 | $ | 279,945 | 4.10 | % | ||||||||||||||
Medium-term notes | 2011 - 2020 | 199,266 | 2.13 | 2010 - 2019 | 171,207 | 2.97 | ||||||||||||||||||
Foreign exchange notes and bonds | 2017 - 2028 | 1,177 | 6.21 | 2010 - 2028 | 1,239 | 5.64 | ||||||||||||||||||
Other long-term debt(2) | 2011 - 2040 | 44,893 | 5.64 | 2010 - 2039 | 62,783 | 5.80 | ||||||||||||||||||
Total senior fixed | 545,680 | 3.02 | 515,174 | 3.94 | ||||||||||||||||||||
Senior floating: | ||||||||||||||||||||||||
Medium-term notes | 2011 - 2015 | 72,039 | 0.31 | 2010 - 2014 | 41,911 | 0.26 | ||||||||||||||||||
Other long-term debt(2) | 2020 - 2037 | 386 | 4.92 | 2020 - 2037 | 1,041 | 4.12 | ||||||||||||||||||
Total senior floating | 72,425 | 0.34 | 42,952 | 0.34 | ||||||||||||||||||||
Subordinated fixed-rate: | ||||||||||||||||||||||||
Qualifying subordinated(4) | 2011 - 2014 | 7,392 | 5.47 | 2011 - 2014 | 7,391 | 5.47 | ||||||||||||||||||
Subordinated debentures | 2019 | 2,663 | 9.91 | 2019 | 2,433 | 9.89 | ||||||||||||||||||
Total subordinated fixed-rate | 10,055 | 6.65 | 9,824 | 6.57 | ||||||||||||||||||||
Total long-term debt of Fannie Mae(5) | 628,160 | 2.77 | 567,950 | 3.71 | ||||||||||||||||||||
Debt of consolidated trusts(2) | 2011 - 2051 | 2,411,597 | 4.59 | 2010 - 2039 | 6,167 | 5.63 | ||||||||||||||||||
Total long-term debt | $ | 3,039,757 | 4.22 | % | $ | 574,117 | 3.73 | % | ||||||||||||||||
Outstanding callable debt of Fannie Mae(6) | $ | 219,804 | 2.53 | % | $ | 210,181 | 3.48 | % |
(1) | Outstanding debt amounts and weighted-average interest rates reported in this table include the effect of unamortized discounts, premiums and other cost basis adjustments. Reported amounts include fair value gains and losses associated with debt that we elected to carry at fair value. The unpaid principal balance of outstanding debt, which excludes unamortized discounts, premiums and other cost basis adjustments and debt of consolidated trusts, totaled $792.6 billion and $784.0 billion as of December 31, 2010 and 2009, respectively. | |
(2) | Includes a portion of structured debt instruments that is reported at fair value. | |
(3) | Short-term debt of Fannie Mae consists of borrowings with an original contractual maturity of one year or less and, therefore, does not include the current portion of long-term debt. Reported amounts include a net discount and other cost basis adjustments of $128 million and $129 million as of December 31, 2010 and 2009, respectively. | |
(4) | Consists of subordinated debt with an interest deferral feature. |
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(5) | Long-term debt of Fannie Mae consists of borrowings with an original contractual maturity of greater than one year. Reported amounts include the current portion of long-term debt that is due within one year, which totaled $95.4 billion and $106.5 billion as of December 31, 2010 and 2009, respectively. Reported amounts also include unamortized discounts, premiums and other cost basis adjustments of $12.4 billion and $15.6 billion as of December 31, 2010 and 2009, respectively. The unpaid principal balance of long-term debt of Fannie Mae, which excludes unamortized discounts, premiums, fair value adjustments and other cost basis adjustments and amounts related to debt of consolidated trusts, totaled $640.5 billion and $583.4 billion as of December 31, 2010 and 2009, respectively. | |
(6) | Consists of long-term callable debt of Fannie Mae that can be paid off in whole or in part at our option at any time on or after a specified date. Includes the unpaid principal balance, and excludes unamortized discounts, premiums and other cost basis adjustments. |
Table 33: | Outstanding Short-Term Borrowings(1) |
2010 | ||||||||||||||||||||
As of December 31 | Average During the Year | |||||||||||||||||||
Weighted | Weighted | |||||||||||||||||||
Average | Average | |||||||||||||||||||
Interest | Interest | Maximum | ||||||||||||||||||
Outstanding | Rate | Outstanding(2) | Rate | Outstanding(3) | ||||||||||||||||
(Dollars in millions) | ||||||||||||||||||||
Federal funds purchased and securities sold under agreements to repurchase | $ | 52 | 2.20 | % | $ | 72 | 0.16 | % | $ | 200 | ||||||||||
Fixed-rate short-term debt: | ||||||||||||||||||||
Discount notes | $ | 151,500 | 0.32 | % | $ | 210,986 | 0.29 | % | $ | 260,377 | ||||||||||
Foreign exchange discount notes | 384 | 2.43 | 299 | 1.86 | 384 | |||||||||||||||
Other fixed-rate short-term debt | — | — | 15 | 0.53 | 100 | |||||||||||||||
Floating-rate short-term debt | — | — | 8 | 0.02 | 50 | |||||||||||||||
Total short-term debt | $ | 151,884 | 0.32 | % | ||||||||||||||||
�� |
2009 | ||||||||||||||||||||
As of December 31 | Average During the Year | |||||||||||||||||||
Weighted | Weighted | |||||||||||||||||||
Average | Average | |||||||||||||||||||
Interest | Interest | Maximum | ||||||||||||||||||
Outstanding | Rate | Outstanding(2) | Rate | Outstanding(3) | ||||||||||||||||
(Dollars in millions) | ||||||||||||||||||||
Federal funds purchased and securities sold under agreements to repurchase | $ | — | — | % | $ | 42 | 1.55 | % | $ | 189 | ||||||||||
Fixed-rate short-term debt: | ||||||||||||||||||||
Discount notes | $ | 199,987 | 0.27 | % | $ | 253,884 | 0.92 | % | $ | 325,239 | ||||||||||
Foreign exchange discount notes | 300 | 1.50 | 222 | 1.41 | 300 | |||||||||||||||
Other fixed-rate short-term debt | 100 | 0.53 | 199 | 1.30 | 334 | |||||||||||||||
Floating-rate short-term debt | 50 | 0.02 | 2,744 | 1.20 | 3,136 | |||||||||||||||
Total short-term debt | $ | 200,437 | 0.27 | % | ||||||||||||||||
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2008 | ||||||||||||||||||||
As of December 31 | Average During the Year | |||||||||||||||||||
Weighted | Weighted | |||||||||||||||||||
Average | Average | |||||||||||||||||||
Interest | Interest | Maximum | ||||||||||||||||||
Outstanding | Rate | Outstanding(2) | Rate | Outstanding(3) | ||||||||||||||||
(Dollars in millions) | ||||||||||||||||||||
Federal funds purchased and securities sold under agreements to repurchase | $ | 77 | 0.01 | % | $ | 294 | 1.93 | % | $ | 725 | ||||||||||
Fixed-rate short-term debt: | ||||||||||||||||||||
Discount notes | $ | 322,932 | 1.75 | % | $ | 257,845 | 2.51 | % | $ | 326,374 | ||||||||||
Foreign exchange discount notes | 141 | 2.50 | 276 | 3.73 | 363 | |||||||||||||||
Other fixed-rate short-term debt | 333 | 2.80 | 714 | 2.83 | 1,886 | |||||||||||||||
Floating-rate short-term debt(4) | 7,585 | 1.66 | 4,858 | 2.26 | 7,586 | |||||||||||||||
Total short-term debt | $ | 330,991 | 1.75 | % | ||||||||||||||||
(1) | Includes unamortized discounts, premiums and other cost basis adjustments. | |
(2) | Average amount outstanding during the year has been calculated using month-end balances. | |
(3) | Maximum outstanding represents the highest month-end outstanding balance during the year. | |
(4) | Includes a portion of structured debt instruments that is reported at fair value. |
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![](https://capedge.com/proxy/10-K/0000950123-11-017972/w81665w8166507.gif)
(1) | Includes unamortized discounts, premiums and other cost basis adjustments of $176 million as of December 31, 2010. Excludes debt of consolidated trusts maturing within one year of $9.8 billion and federal funds purchased and securities sold under agreements to repurchase of $52 million as of December 31, 2010. |
![](https://capedge.com/proxy/10-K/0000950123-11-017972/w81665w8166508.gif)
(1) | Includes unamortized discounts, premiums and other cost basis adjustments of $12.4 billion as of December 31, 2010. Excludes debt of consolidated trusts of $2.4 trillion as of December 31, 2010. |
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Table 36: | Contractual Obligations |
Payment Due by Period as of December 31, 2010 | ||||||||||||||||||||
Less than | 1 to < 3 | 3 to 5 | More than | |||||||||||||||||
Total | 1 Year | Years | Years | 5 Years | ||||||||||||||||
(Dollars in millions) | ||||||||||||||||||||
Long-term debt obligations(1) | $ | 628,160 | $ | 97,245 | $ | 273,191 | $ | 138,446 | $ | 119,278 | ||||||||||
Contractual interest on long-term debt obligations(2) | 95,358 | 14,718 | 23,769 | 15,622 | 41,249 | |||||||||||||||
Operating lease obligations(3) | 158 | 40 | 61 | 31 | 26 | |||||||||||||||
Purchase obligations: | ||||||||||||||||||||
Mortgage commitments(4) | 54,858 | 54,837 | 21 | — | — | |||||||||||||||
Other purchase obligations(5) | 274 | 106 | 163 | 5 | — | |||||||||||||||
Other long-term liabilities reflected in the consolidated balance sheet(6) | 1,087 | 862 | 156 | 37 | 32 | |||||||||||||||
Total contractual obligations | $ | 779,895 | $ | 167,808 | $ | 297,361 | $ | 154,141 | $ | 160,585 | ||||||||||
(1) | Represents the carrying amount of our long-term debt assuming payments are made in full at maturity. Amounts exclude $2.4 trillion in long-term debt from consolidations. Amounts include unamortized net discount and other cost basis adjustments of $12.4 billion. | |
(2) | Excludes contractual interest on long-term debt from consolidations. | |
(3) | Includes certain premises and equipment leases. | |
(4) | Includes on- and off-balance sheet commitments to purchase mortgage loans and mortgage-related securities. | |
(5) | Includes only unconditional purchase obligations that are subject to a cancellation penalty for certain telecom services, software and computer services, and other agreements. Excludes arrangements that may be cancelled without penalty. Amounts also include off-balance sheet commitments for the unutilized portion of lending agreements entered into with multifamily borrowers. | |
(6) | Excludes risk management derivative transactions that may require cash settlement in future periods and our obligations to stand ready to perform under our guarantees relating to Fannie Mae MBS and other financial guarantees, because the amount and timing of payments under these arrangements are generally contingent upon the occurrence of future events. For a description of the amount of our on- and off-balance sheet Fannie Mae MBS and other financial guarantees as of December 31, 2010, see “Off-Balance Sheet Arrangements.” Includes future cash payments due under our contractual obligations to fund LIHTC and other partnerships that are unconditional and legally binding and cash received as collateral from derivative counterparties, which are included in our consolidated balance sheets under “Other liabilities.” |
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• | maintain a portfolio of highly liquid securities to cover 30 calendar days of net cash needs, assuming no access to the short- and long-term unsecured debt markets and other assumptions required by FHFA; | |
• | maintain within our cash and other investments portfolio a daily balance of U.S. Treasury securities that has a redemption amount greater than or equal to 50% of the average of the previous three month-end balances of our cash and other investments portfolio (as adjusted in agreement with FHFA); and | |
• | maintain a portfolio of unencumbered agency mortgage securities and U.S. Treasury securities with more than one year remaining to maturity with a market value (less a discount and expected prepayments during the year) that meets or exceeds our projected365-day net cash needs. |
Table 37: | Cash and Other Investments Portfolio |
As of December 31, | ||||||||||||
2010 | 2009 | 2008 | ||||||||||
(Dollars in millions) | ||||||||||||
Cash and cash equivalents(1) | $ | 17,297 | $ | 6,812 | $ | 17,933 | ||||||
Federal funds sold and securities purchased under agreements to resell or similar arrangements | 11,751 | 53,684 | 57,418 | |||||||||
Non-mortgage-related securities: | ||||||||||||
U.S. Treasury securities | 27,432 | — | — | |||||||||
Asset-backed securities(2) | 5,321 | 8,515 | 10,598 | |||||||||
Corporate debt securities | — | 364 | 6,037 | |||||||||
Other | — | 3 | 1,005 | |||||||||
Total non-mortgage-related securities | 32,753 | 8,882 | 17,640 | |||||||||
Total cash and other investments | $ | 61,801 | $ | 69,378 | $ | 92,991 | ||||||
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(1) | Includes $4.0 billion of U.S. Treasury securities and $2.3 billion of money market fund as of December 31, 2010, with a maturity at the date of acquisition of three months or less. | |
(2) | Includes securities primarily backed by credit cards loans, student loans and automobile loans. |
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Table 38: | Fannie Mae Credit Ratings |
As of February 21, 2011 | ||||||
Standard & Poor’s | Moody’s | Fitch | ||||
Long-term senior debt | AAA | Aaa | AAA | |||
Short-term senior debt | A-1+ | P-1 | F1+ | |||
Qualifying subordinated debt | A | Aa2 | AA- | |||
Preferred stock | C | Ca | C/RR6 | |||
Bank financial strength rating | — | E+ | — | |||
Outlook | Stable | Stable | Stable | |||
(for Long Term Senior Debt | (for all ratings) | (for AAA rated Long Term | ||||
and Qualifying Subordinated Debt) | Issuer Default Rating) |
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• | our guaranty of mortgage loan securitization and resecuritization transactions over which we do not have control; | |
• | other guaranty transactions; | |
• | liquidity support transactions; and | |
• | partnership interests. |
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• | Credit Risk. Credit risk is the potential for financial loss resulting from the failure of a borrower or institutional counterparty to honor its financial or contractual obligations, resulting in a potential loss of |
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earnings or cash flows. In regards to financial securities or instruments, credit risk is the risk of not receiving principal, interest or any other financial obligation on a timely basis, for any reason. Credit risk exists primarily in our mortgage credit book of business and derivatives portfolio. |
• | Market Risk. Market risk is the exposure generated by adverse changes in the value of financial instruments caused by a change in market prices or interest rates. Two significant market risks we face and actively manage are interest rate risk and liquidity risk. Interest rate risk is the risk of changes in our long-term earnings or in the value of our net assets due to fluctuations in interest rates. Liquidity risk is our potential inability to meet our funding obligations in a timely manner. | |
• | Operational Risk. Operational risk is the loss resulting from inadequate or failed internal processes, people, systems, or from external events. |
• | Risk Identification. Risk identification is the process of finding, recognizing and describing risk. The identification of risk facilitates effective risk management by achieving awareness of the sources, impact and magnitude of risk. | |
• | Risk Assessment. We assess risk using a variety of methodologies, such as calculation of potential losses from loans and stress tests relating to interest rate sensitivity. When we assess risk we look at metrics such as frequency, severity, concentration, correlation, volatility and loss. Information obtained from these assessments is reviewed on a regular basis to ensure that our risk assumptions are reasonable and reflect our current positions. | |
• | Risk Mitigation & Control. We proactively develop appropriate mitigation strategies to prevent excessive risk exposure, address risks that exceed established tolerances, and address risks that create unanticipated business impact. Mitigation strategies and controls can be in the form of reduction, transference, acceptance or avoidance of the identified risk. We also manage risk through four control elements that are designed to work in conjunction with each other: (1) risk policies; (2) risk limits; (3) delegations of authority; and (4) risk committees. | |
• | Risk Reporting & Monitoring. Our business units actively monitor emerging and identified risks that are taken when executing our strategies. Risks and concerns are reported to the appropriate level of management to ensure that the necessary action is taken to mitigate the risk. |
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As of December 31, 2010 | ||||||||||||||||||||||||
Single-Family | Multifamily | Total | ||||||||||||||||||||||
Conventional(2) | Government(3) | Conventional(2) | Government(3) | Conventional(2) | Government(3) | |||||||||||||||||||
(Dollars in millions) | ||||||||||||||||||||||||
Mortgage assets: | ||||||||||||||||||||||||
Mortgage loans(4) | $ | 2,766,870 | $ | 52,577 | $ | 170,074 | $ | 476 | $ | 2,936,944 | $ | 53,053 | ||||||||||||
Fannie Mae MBS(5)(7) | 5,961 | 1,586 | — | 2 | 5,961 | 1,588 | ||||||||||||||||||
Agency mortgage-related securities(5)(6) | 17,291 | 1,506 | — | 24 | 17,291 | 1,530 | ||||||||||||||||||
Mortgage revenue bonds(5) | 2,197 | 1,190 | 7,449 | 1,689 | 9,646 | 2,879 | ||||||||||||||||||
Other mortgage-related securities(5) | 43,634 | 1,657 | 25,052 | 15 | 68,686 | 1,672 | ||||||||||||||||||
Total mortgage assets | 2,835,953 | 58,516 | 202,575 | 2,206 | 3,038,528 | 60,722 | ||||||||||||||||||
Unconsolidated Fannie Mae MBS(5)(7) | 2,230 | 17,238 | 37 | 1,818 | 2,267 | 19,056 | ||||||||||||||||||
Other credit guarantees(8) | 15,529 | 3,096 | 16,601 | 393 | 32,130 | 3,489 | ||||||||||||||||||
Mortgage credit book of business | $ | 2,853,712 | $ | 78,850 | $ | 219,213 | $ | 4,417 | $ | 3,072,925 | $ | 83,267 | ||||||||||||
Guaranty book of business | $ | 2,790,590 | $ | 74,497 | $ | 186,712 | $ | 2,689 | $ | 2,977,302 | $ | 77,186 | ||||||||||||
As of December 31, 2009 | ||||||||||||||||||||||||
Single-Family | Multifamily | Total | ||||||||||||||||||||||
Conventional(2) | Government(3) | Conventional(2) | Government(3) | Conventional(2) | Government(3) | |||||||||||||||||||
(Dollars in millions) | ||||||||||||||||||||||||
Mortgage portfolio: | ||||||||||||||||||||||||
Mortgage loans(4) | $ | 243,730 | $ | 52,399 | $ | 119,829 | $ | 585 | $ | 363,559 | $ | 52,984 | ||||||||||||
Fannie Mae MBS(5) | 218,033 | 1,816 | 314 | 82 | 218,347 | 1,898 | ||||||||||||||||||
Agency mortgage-related securities(5)(6) | 41,337 | 1,309 | — | 21 | 41,337 | 1,330 | ||||||||||||||||||
Mortgage revenue bonds(5) | 2,709 | 2,056 | 7,734 | 1,954 | 10,443 | 4,010 | ||||||||||||||||||
Other mortgage-related securities(5) | 47,825 | 1,796 | 25,703 | 20 | 73,528 | 1,816 | ||||||||||||||||||
Total mortgage portfolio | 553,634 | 59,376 | 153,580 | 2,662 | 707,214 | 62,038 | ||||||||||||||||||
Fannie Mae MBS held by third parties(5)(7) | 2,370,037 | 15,197 | 46,628 | 927 | 2,416,665 | 16,124 | ||||||||||||||||||
Other credit guarantees(8) | 9,873 | 802 | 16,909 | 40 | 26,782 | 842 | ||||||||||||||||||
Mortgage credit book of business | $ | 2,933,544 | $ | 75,375 | $ | 217,117 | $ | 3,629 | $ | 3,150,661 | $ | 79,004 | ||||||||||||
Guaranty book of business | $ | 2,841,673 | $ | 70,214 | $ | 183,680 | $ | 1,634 | $ | 3,025,353 | $ | 71,848 | ||||||||||||
(1) | Based on unpaid principal balance. | |
(2) | Refers to mortgage loans and mortgage-related securities that are not guaranteed or insured by the U.S. government or any of its agencies. | |
(3) | Refers to mortgage loans and mortgage-related securities guaranteed or insured, in whole or in part, by the U.S. government or one of its agencies. | |
(4) | Includes unscheduled borrower principal payments. |
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(5) | Excludes unscheduled borrower principal payments. | |
(6) | Consists of mortgage-related securities issued by Freddie Mac and Ginnie Mae. | |
(7) | The principal balance of resecuritized Fannie Mae MBS is included only once in the reported amount. | |
(8) | Includes single-family and multifamily credit enhancements that we have provided and that are not otherwise reflected in the table. |
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• | Implementation of a Loan Quality Initiative (“LQI”) which is a longer-term strategy that will help mortgage loans meet our credit, eligibility, and pricing standards by capturing critical loan data earlier in the loan delivery process. This initiative is intended to reduce lender repurchase requests in the future through improved data integrity and early feedback on some aspects of policy compliance, thereby |
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reducing investor and lender risks. As part of the LQI, we have implemented or announced certain initiatives designed to validate certain borrower and property information and collect additional property and appraisal data prior to or at the time of delivery of the mortgage loan: |
• | Implementation of FHFA’s Uniform Mortgage Data Program that provides a common approach to collection of the appraisal and loan delivery data required on the loans that lenders sell to Fannie Mae; | |
• | Development of the Uniform Loan Delivery Dataset definition of single-family loan delivery data requirements for all mortgages delivered to either GSE on or after March 19, 2012; | |
• | Launch of EarlyChecktm, a new service that provides lenders access to loan delivery data checks that are designed to help them identify potential data problems at any point prior to loan delivery; |
• | Adjustments to pricing of flow business for mortgage loans with certain risk characteristics to ensure that Fannie Mae is positioned to provide a stable source of liquidity to its lender partners; | |
• | On October 18, 2010, the Federal Reserve Board released an interim final rule on appraiser independence. Under the Dodd-Frank Act, promulgation of the interim final rule resulted in the termination of the Home Valuation Code of Conduct (“HVCC”). In October 2010, we announced the Appraiser Independence Requirements that we, FHFA and key industry participants developed to replace the HVCC. The Appraiser Independence Requirements maintain the spirit and intent of the HVCC and continue to provide important protections for mortgage investors, home buyers, and the housing market; | |
• | Updating of our existing quality control standards to require that lenders follow our revised requirements for their quality control plans, reviews and processes, as well as updated requirements for the approval and management of third-party originators. We have also increased our enforcement and monitoring resources to increase lender compliance with these revised standards; | |
• | Changes to interest-only mortgage loans, including minimum reserve and FICO credit score requirements, lower LTV ratios, and the elimination of interest-only eligibility for certain products, including cash-out refinances, 2- to 4-unit properties and investment properties; | |
• | Adjustments to the qualifying interest rate requirements for adjustable-rate mortgage loans with an initial term of five years or less to help increase the probability that borrowers are able to absorb future payment increases; | |
• | Elimination of balloon mortgage loans as an eligible product under our standard business; | |
• | Continuation of our providing guidance to assist servicers in implementing the eligibility, underwriting and servicing requirements of HAMP. For example, we implemented changes to require full verification of borrower eligibility prior to offering a trial period plan and issued guidance around income verification options; | |
• | Enhancements to loss mitigation options to provide payment relief for homeowners who have lost their jobs by offering eligible unemployed borrowers a forbearance plan to temporarily reduce or suspend their mortgage payments; | |
• | Introduction of the Home Affordable Foreclosure Alternatives program which is designed to mitigate the impact of foreclosures on borrowers who were eligible for a loan modification under HAMP but ultimately were unsuccessful in obtaining one; | |
• | Introduction of servicer requirements for staffing, training and performance monitoring of default-related activities as well as enhanced guidance for call coverage and borrower contact; | |
• | Adjustment to the minimum waiting period that must elapse after a foreclosure before a borrower without extenuating circumstances is eligible for a new mortgage loan. The adjustment is designed to increase disincentives for borrowers to walk away from their mortgages without working with servicers to pursue alternatives to foreclosure. Borrowers with extenuating circumstances or those who agree to foreclosure alternatives may qualify for new mortgage loans eligible for sale to Fannie Mae in as little as two to three years; |
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• | Addition of new requirements for financial information verification before borrowers can be offered a loan modification outside of HAMP; | |
• | Introduction of a Unique Hardship policy to allow servicers to grant forbearance, and a provision for credit bureau reporting relief, to borrowers who face difficulty maintaining timely payments due to an event or temporary financial hardship that has been classified by us as a unique hardship; | |
• | Adjustments to foreclosure time frames and notice of compensatory fees for breach of servicing obligations, which are designed to hold servicers accountable for their servicing requirements and aim to improve servicer performance and costly delays in foreclosure proceedings; and | |
• | Introduction of the Second Lien Modification Program (2MP), which is designed to work in tandem with HAMP for first liens to create a comprehensive solution to help borrowers achieve greater affordability by lowering payments on both first and second lien mortgage loans for borrowers whose second lien loan is owned by Fannie Mae. |
— | LTV ratio. LTV ratio is a strong predictor of credit performance. The likelihood of default and the gross severity of a loss in the event of default are typically lower as the LTV ratio decreases. This also applies to the estimatedmark-to-market LTV ratios, particularly those over 100%, as this indicates that the borrower’s mortgage balance exceeds the property value. | |
— | Product type. Certain loan product types have features that may result in increased risk. Generally, intermediate-term, fixed-rate mortgages exhibit the lowest default rates, followed by long-term, fixed-rate mortgages. ARMs and balloon/reset mortgages typically exhibit higher default rates than fixed-rate mortgages, partly because the borrower’s future payments may rise, within limits, as interest rates change.Negative-amortizing and interest-only loans also default more often than traditional fixed-rate mortgage loans. | |
— | Number of units. Mortgages onone-unit properties tend to have lower credit risk than mortgages on two-, three- orfour-unit properties. | |
— | Property type. Certain property types have a higher risk of default. For example, condominiums generally are considered to have higher credit risk than single-family detached properties. | |
— | Occupancy type. Mortgages on properties occupied by the borrower as a primary or secondary residence tend to have lower credit risk than mortgages on investment properties. | |
— | Credit score. Credit score is a measure often used by the financial services industry, including our company, to assess borrower credit quality and the likelihood that a borrower will repay future obligations as expected. A higher credit score typically indicates lower credit risk. | |
— | Loan purpose. Loan purpose indicates how the borrower intends to use the funds from a mortgage loan. Cash-out refinancings have a higher risk of default than either mortgage loans used for the purchase of a property or other refinancings that restrict the amount of cash returned to the borrower. | |
— | Geographic concentration. Local economic conditions affect borrowers’ ability to repay loans and the value of collateral underlying loans. Geographic diversification reduces mortgage credit risk. |
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— | Loan age. We monitor year of origination and loan age, which is defined as the number of years since origination. Statistically, the peak ages for default are currently from two to six years after origination. However, we have seen higher early default rates for loans originated in 2006 and 2007, due to a higher number of loans originated during these years with risk layering. Risk layering means permitting a loan to have several features that compound risk, such as loans with reduced documentation and higher risk loan product types. |
Percent of Single-Family | ||||||||||||||||||||||||
Percent of Single-Family | Conventional Guaranty | |||||||||||||||||||||||
Conventional Business Volume(2) | Book of Business(3)(4) | |||||||||||||||||||||||
For the Year Ended December 31, | As of December 31, | |||||||||||||||||||||||
2010 | 2009 | 2008 | 2010 | 2009 | 2008 | |||||||||||||||||||
(Dollars in millions) | ||||||||||||||||||||||||
Original LTV ratio:(5) | ||||||||||||||||||||||||
<= 60% | 30 | % | 33 | % | 23 | % | 24 | % | 24 | % | 22 | % | ||||||||||||
60.01% to 70% | 16 | 17 | 16 | 16 | 16 | 16 | ||||||||||||||||||
70.01% to 80% | 38 | 40 | 39 | 41 | 42 | 43 | ||||||||||||||||||
80.01% to 90%(6) | 9 | 7 | 12 | 9 | 9 | 9 | ||||||||||||||||||
90.01% to 100%(6) | 5 | 3 | 10 | 9 | 9 | 10 | ||||||||||||||||||
Greater than 100%(6) | 2 | * | * | 1 | * | * | ||||||||||||||||||
Total | 100 | % | 100 | % | 100 | % | 100 | % | 100 | % | 100 | % | ||||||||||||
Weighted average | 68 | % | 67 | % | 72 | % | 71 | % | 71 | % | 72 | % | ||||||||||||
Average loan amount | $ | 219,431 | $ | 219,118 | $ | 208,652 | $ | 155,531 | $ | 153,302 | $ | 148,824 | ||||||||||||
Estimatedmark-to-market LTV ratio:(7) | ||||||||||||||||||||||||
<= 60% | 28 | % | 31 | % | 36 | % | ||||||||||||||||||
60.01% to 70% | 13 | 13 | 13 | |||||||||||||||||||||
70.01% to 80% | 19 | 19 | 17 | |||||||||||||||||||||
80.01% to 90% | 15 | 14 | 14 | |||||||||||||||||||||
90.01% to 100% | 9 | 9 | 8 | |||||||||||||||||||||
Greater than 100% | 16 | 14 | 12 | |||||||||||||||||||||
Total | 100 | % | 100 | % | 100 | % | ||||||||||||||||||
Weighted average | 77 | % | 75 | % | 70 | % | ||||||||||||||||||
Product type: | ||||||||||||||||||||||||
Fixed-rate:(8) | ||||||||||||||||||||||||
Long-term | 72 | % | 82 | % | 78 | % | 74 | % | 75 | % | 74 | % | ||||||||||||
Intermediate-term | 22 | 15 | 12 | 14 | 13 | 13 | ||||||||||||||||||
Interest-only | * | * | 2 | 2 | 3 | 3 | ||||||||||||||||||
Total fixed-rate | 94 | 97 | 92 | 90 | 91 | 90 | ||||||||||||||||||
Adjustable-rate: | ||||||||||||||||||||||||
Interest-only | 1 | 1 | 4 | 4 | 4 | 5 | ||||||||||||||||||
Negative-amortizing | — | * | — | * | 1 | 1 | ||||||||||||||||||
Other ARMs | 5 | 2 | 4 | 6 | 4 | 4 | ||||||||||||||||||
Total adjustable-rate | 6 | 3 | 8 | 10 | 9 | 10 | ||||||||||||||||||
Total | 100 | % | 100 | % | 100 | % | 100 | % | 100 | % | 100 | % | ||||||||||||
Number of property units: | ||||||||||||||||||||||||
1 unit | 98 | % | 98 | % | 97 | % | 97 | % | 96 | % | 96 | % | ||||||||||||
2-4 units | 2 | 2 | 3 | 3 | 4 | 4 | ||||||||||||||||||
Total | 100 | % | 100 | % | 100 | % | 100 | % | 100 | % | 100 | % | ||||||||||||
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Percent of Single-Family | ||||||||||||||||||||||||
Percent of Single-Family | Conventional Guaranty | |||||||||||||||||||||||
Conventional Business Volume(2) | Book of Business(3)(4) | |||||||||||||||||||||||
For the Year Ended December 31, | As of December 31, | |||||||||||||||||||||||
2010 | 2009 | 2008 | 2010 | 2009 | 2008 | |||||||||||||||||||
(Dollars in millions) | ||||||||||||||||||||||||
Property type: | ||||||||||||||||||||||||
Single-family homes | 91 | % | 92 | % | 89 | % | 91 | % | 91 | % | 91 | % | ||||||||||||
Condo/Co-op | 9 | 8 | 11 | 9 | 9 | 9 | ||||||||||||||||||
Total | 100 | % | 100 | % | 100 | % | 100 | % | 100 | % | 100 | % | ||||||||||||
Occupancy type: | ||||||||||||||||||||||||
Primary residence | 91 | % | 93 | % | 89 | % | 90 | % | 90 | % | 90 | % | ||||||||||||
Second/vacation home | 4 | 5 | 5 | 4 | 4 | 4 | ||||||||||||||||||
Investor | 5 | 2 | 6 | 6 | 6 | 6 | ||||||||||||||||||
Total | 100 | % | 100 | % | 100 | % | 100 | % | 100 | % | 100 | % | ||||||||||||
FICO credit score: | ||||||||||||||||||||||||
< 620 | * | % | * | % | 3 | % | 4 | % | 4 | % | 5 | % | ||||||||||||
620 to < 660 | 2 | 2 | 6 | 7 | 8 | 9 | ||||||||||||||||||
660 to < 700 | 7 | 7 | 14 | 15 | 16 | 17 | ||||||||||||||||||
700 to < 740 | 16 | 17 | 22 | 21 | 22 | 23 | ||||||||||||||||||
>= 740 | 75 | 74 | 55 | 53 | 50 | 45 | ||||||||||||||||||
Not available | * | * | — | — | * | 1 | ||||||||||||||||||
Total | 100 | % | 100 | % | 100 | % | 100 | % | 100 | % | 100 | % | ||||||||||||
Weighted average | 762 | 761 | 738 | 735 | 730 | 724 | ||||||||||||||||||
Loan purpose: | ||||||||||||||||||||||||
Purchase | 22 | % | 20 | % | 41 | % | 33 | % | 36 | % | 41 | % | ||||||||||||
Cash-out refinance | 20 | 27 | 31 | 29 | 31 | 32 | ||||||||||||||||||
Other refinance | 58 | 53 | 28 | 38 | 33 | 27 | ||||||||||||||||||
Total | 100 | % | 100 | % | 100 | % | 100 | % | 100 | % | 100 | % | ||||||||||||
Geographic concentration:(9) | ||||||||||||||||||||||||
Midwest | 16 | % | 16 | % | 15 | % | 15 | % | 16 | % | 16 | % | ||||||||||||
Northeast | 20 | 19 | 18 | 19 | 19 | 19 | ||||||||||||||||||
Southeast | 18 | 20 | 23 | 24 | 24 | 25 | ||||||||||||||||||
Southwest | 15 | 15 | 16 | 15 | 15 | 16 | ||||||||||||||||||
West | 31 | 30 | 28 | 27 | 26 | 24 | ||||||||||||||||||
Total | 100 | % | 100 | % | 100 | % | 100 | % | 100 | % | 100 | % | ||||||||||||
Origination year: | ||||||||||||||||||||||||
<=2000 | 1 | % | 2 | % | 2 | % | ||||||||||||||||||
2001 | 1 | 1 | 2 | |||||||||||||||||||||
2002 | 3 | 4 | 5 | |||||||||||||||||||||
2003 | 11 | 14 | 18 | |||||||||||||||||||||
2004 | 7 | 7 | 10 | |||||||||||||||||||||
2005 | 9 | 10 | 13 | |||||||||||||||||||||
2006 | 8 | 11 | 14 | |||||||||||||||||||||
2007 | 12 | 15 | 20 | |||||||||||||||||||||
2008 | 9 | 13 | 16 | |||||||||||||||||||||
2009 | 21 | 23 | — | |||||||||||||||||||||
2010 | 18 | — | — | |||||||||||||||||||||
Total | 100 | % | 100 | % | 100 | % | ||||||||||||||||||
* | Represents less than 0.5% of single-family conventional business volume or book of business. | |
(1) | We reflect second lien mortgage loans in the original LTV ratio calculation only when we own both the first and second lien mortgage loans or we own only the second lien mortgage loan. Second lien mortgage loans represented less than 0.6% of our single- |
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family conventional guaranty book of business as of December 31, 2010, 2009 and 2008. Second lien mortgage loans held by third parties are not reflected in the original LTV ormark-to-market LTV ratios in this table. | ||
(2) | Percentages calculated based on unpaid principal balance of loans at time of acquisition. Single-family business volume refers to both single-family mortgage loans we purchase for our mortgage portfolio and single-family mortgage loans we securitize into Fannie Mae MBS. | |
(3) | Percentages calculated based on unpaid principal balance of loans as of the end of each period. | |
(4) | Our single-family conventional guaranty book of business includes jumbo-conforming and high-balance loans that represented approximately 3.9% of our single-family conventional guaranty book of business as of December 31, 2010 and 2.4% as of December 31, 2009. See “Business—Our Charter and Regulation of Our Activities—Charter Act-Loan Standards” for additional information on loan limits. | |
(5) | The original LTV ratio generally is based on the original unpaid principal balance of the loan divided by the appraised property value reported to us at the time of acquisition of the loan. Excludes loans for which this information is not readily available. | |
(6) | We purchase loans with original LTV ratios above 80% to fulfill our mission to serve the primary mortgage market and provide liquidity to the housing system. Except as permitted under Refi Plus, our charter generally requires primary mortgage insurance or other credit enhancement for loans that we acquire that have a LTV ratio over 80%. | |
(7) | The aggregate estimatedmark-to-market LTV ratio is based on the unpaid principal balance of the loan as of the end of each reported period divided by the estimated current value of the property, which we calculate using an internal valuation model that estimates periodic changes in home value. Excludes loans for which this information is not readily available. | |
(8) | Long-term fixed-rate consists of mortgage loans with maturities greater than 15 years, while intermediate-term fixed-rate has maturities equal to or less than 15 years. Loans with interest-only terms are included in the interest-only category regardless of their maturities. | |
(9) | Midwest consists of IL, IN, IA, MI, MN, NE, ND, OH, SD and WI. Northeast includes CT, DE, ME, MA, NH, NJ, NY, PA, PR, RI, VT and VI. Southeast consists of AL, DC, FL, GA, KY, MD, MS, NC, SC, TN, VA and WV. Southwest consists of AZ, AR, CO, KS, LA, MO, NM, OK, TX and UT. West consists of AK, CA, GU, HI, ID, MT, NV, OR, WA and WY. |
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As of December 31, | ||||||||||||
2010 | 2009 | 2008 | ||||||||||
As of period end: | ||||||||||||
Delinquency status: | ||||||||||||
30 to 59 days delinquent | 2.32 | % | 2.46 | % | 2.52 | % | ||||||
60 to 89 days delinquent | 0.87 | 1.07 | 1.00 | |||||||||
Seriously delinquent | 4.48 | 5.38 | 2.42 | |||||||||
Percentage of seriously delinquent loans that have been delinquent for more than 180 days | 67.30 | % | 57.22 | % | 40.00 | % |
• | Home retention workouts and foreclosure alternatives we completed. | |
• | Higher volume of foreclosures during 2010. | |
• | Higher percentage of our single-family guaranty book of business from 2009 and later vintages, which have strong credit characteristics. |
• | Declines in home prices lengthen the period of time that loans are seriously delinquent because a delinquent borrower may not have sufficient equity in the home to refinance or sell the property and recover enough proceeds to pay off the loan and avoid foreclosure. | |
• | High levels of unemployment are hampering the ability of many delinquent borrowers to cure delinquencies and return their loans to current status. |
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• | Loans in a trial-payment period under HAMP typically remain delinquent until the trial period is successfully completed and a final loan modification has been executed. | |
• | Loan servicers are operating under our directive to delay foreclosure sales until they verify that borrowers are not eligible for HAMP modifications and other home retention and foreclosure-prevention alternatives have been exhausted. | |
• | A number of states have enacted laws to lengthen or impose other requirements that result in slowdowns in the legal processes for completing foreclosures. |
As of December 31, | ||||||||||||||||||||||||
2010 | 2009 | 2008 | ||||||||||||||||||||||
Percentage of | Serious | Percentage of | Serious | Percentage of | Serious | |||||||||||||||||||
Book | Delinquency | Book | Delinquency | Book | Delinquency | |||||||||||||||||||
Outstanding | Rate | Outstanding | Rate | Outstanding | Rate | |||||||||||||||||||
Single-family conventional delinquency rates by geographic region:(1) | ||||||||||||||||||||||||
Midwest | 15 | % | 4.16 | % | 16 | % | 4.97 | % | 16 | % | 2.44 | % | ||||||||||||
Northeast | 19 | 4.38 | 19 | 4.53 | 19 | 1.97 | ||||||||||||||||||
Southeast | 24 | 6.15 | 24 | 7.06 | 25 | 3.27 | ||||||||||||||||||
Southwest | 15 | 3.05 | 15 | 4.19 | 16 | 1.98 | ||||||||||||||||||
West | 27 | 4.06 | 26 | 5.45 | 24 | 2.10 | ||||||||||||||||||
Total single-family conventional loans | 100 | % | 4.48 | % | 100 | % | 5.38 | % | 100 | % | 2.42 | % | ||||||||||||
Single-family conventional loans: | ||||||||||||||||||||||||
Credit enhanced | 15 | % | 10.60 | % | 18 | % | 13.51 | % | 21 | % | 6.42 | % | ||||||||||||
Non-credit enhanced | 85 | 3.40 | 82 | 3.67 | 79 | 1.40 | ||||||||||||||||||
Total single-family conventional loans | 100 | % | 4.48 | % | 100 | % | 5.38 | % | 100 | % | 2.42 | % | ||||||||||||
(1) | See footnote 9 to “Table 40: Risk Characteristics of Single-Family Conventional Business Volume and Guaranty Book of Business” for states included in each geographic region. |
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As of | ||||||||||||||||||||||||||||||||||||||||||||||||
December 31, 2010 | December 31, 2009 | December 31, 2008 | ||||||||||||||||||||||||||||||||||||||||||||||
Estimated | Estimated | Estimated | ||||||||||||||||||||||||||||||||||||||||||||||
Mark-to- | Mark-to- | Mark-to- | ||||||||||||||||||||||||||||||||||||||||||||||
Unpaid | Percentage | Serious | Market | Unpaid | Percentage | Serious | Market | Unpaid | Percentage | Serious | Market | |||||||||||||||||||||||||||||||||||||
Principal | of Book | Delinquency | LTV | Principal | of Book | Delinquency | LTV | Principal | of Book | Delinquency | LTV | |||||||||||||||||||||||||||||||||||||
Balance | Outstanding | Rate | Ratio(1) | Balance | Outstanding | Rate | Ratio(1) | Balance | Outstanding | Rate | Ratio(1) | |||||||||||||||||||||||||||||||||||||
(Dollars in millions) | ||||||||||||||||||||||||||||||||||||||||||||||||
States: | ||||||||||||||||||||||||||||||||||||||||||||||||
Arizona | $ | 71,052 | 2 | % | 6.23 | % | 105 | % | $ | 76,073 | 3 | % | 8.80 | % | 100 | % | $ | 77,728 | 3 | % | 3.41 | % | 86 | % | ||||||||||||||||||||||||
California | 507,598 | 18 | 3.89 | 76 | 484,923 | 17 | 5.73 | 77 | 436,117 | 16 | 2.30 | 71 | ||||||||||||||||||||||||||||||||||||
Florida | 184,101 | 7 | 12.31 | 107 | 195,309 | 7 | 12.82 | 100 | 199,871 | 7 | 6.14 | 87 | ||||||||||||||||||||||||||||||||||||
Nevada | 31,661 | 1 | 10.66 | 128 | 34,657 | 1 | 13.00 | 123 | 35,787 | 1 | 4.74 | 98 | ||||||||||||||||||||||||||||||||||||
Select Midwest states(2) | 292,734 | 11 | 4.80 | 80 | 304,147 | 11 | 5.62 | 77 | 308,463 | 11 | 2.70 | 72 | ||||||||||||||||||||||||||||||||||||
All other states | 1,695,615 | 61 | 3.46 | 71 | 1,701,379 | 61 | 4.11 | 69 | 1,653,426 | 62 | 1.86 | 66 | ||||||||||||||||||||||||||||||||||||
Product type: | ||||||||||||||||||||||||||||||||||||||||||||||||
Alt-A(3) | 211,770 | 8 | 13.87 | 96 | 248,311 | 9 | 15.63 | 92 | 290,778 | 11 | 7.03 | 81 | ||||||||||||||||||||||||||||||||||||
Subprime | 6,499 | * | 28.20 | 103 | 7,364 | * | 30.68 | 97 | 8,417 | * | 14.29 | 87 | ||||||||||||||||||||||||||||||||||||
Vintages: | ||||||||||||||||||||||||||||||||||||||||||||||||
2006 | 232,009 | 8 | 12.19 | 104 | 292,184 | 11 | 12.87 | 97 | 372,254 | 14 | 5.11 | 85 | ||||||||||||||||||||||||||||||||||||
2007 | 334,110 | 12 | 13.24 | 104 | 422,956 | 15 | 14.06 | 96 | 536,459 | 20 | 4.70 | 87 | ||||||||||||||||||||||||||||||||||||
All other vintages | 2,216,642 | 80 | 2.62 | 70 | 2,081,348 | 74 | 3.08 | 67 | 1,802,679 | 66 | 1.51 | 62 | ||||||||||||||||||||||||||||||||||||
Estimatedmark-to-market LTV ratio: | ||||||||||||||||||||||||||||||||||||||||||||||||
Greater than 100%(1) | 435,991 | 16 | 17.70 | 130 | 403,443 | 14 | 22.09 | 128 | 314,674 | 12 | 10.98 | 119 | ||||||||||||||||||||||||||||||||||||
Select combined risk characteristics: | ||||||||||||||||||||||||||||||||||||||||||||||||
Original LTV ratio > 90% and FICO score < 620 | 21,205 | 1 | 21.41 | 109 | 23,966 | 1 | 27.96 | 104 | 27,159 | 1 | 15.97 | 98 |
* | Percentage is less than 0.5%. | |
(1) | Second lien mortgage loans held by third parties are not included in the calculation of the estimatedmark-to-market LTV ratios. | |
(2) | Consists of Illinois, Indiana, Michigan and Ohio. | |
(3) | For 2009, data for Alt-A loans does not reflect loans we acquired in 2009 upon the refinance of existing Alt-A loans. |
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For the Year Ended | ||||||||||||||||||||||||
2010 | 2009 | 2008 | ||||||||||||||||||||||
Unpaid | Unpaid | Unpaid | ||||||||||||||||||||||
Principal | Number | Principal | Number | Principal | Number | |||||||||||||||||||
Balance | of Loans | Balance | of Loans | Balance | of Loans | |||||||||||||||||||
(Dollars in millions) | ||||||||||||||||||||||||
Home retention strategies: | ||||||||||||||||||||||||
Modifications | $ | 82,826 | 403,506 | $ | 18,702 | 98,575 | $ | 5,119 | 33,388 | |||||||||||||||
Repayment plans and forbearances completed(1) | 4,385 | 31,579 | 2,930 | 22,948 | 936 | 7,892 | ||||||||||||||||||
HomeSaver Advance first-lien loans | 688 | 5,191 | 6,057 | 39,199 | 11,196 | 70,967 | ||||||||||||||||||
$ | 87,899 | 440,276 | $ | 27,689 | 160,722 | $ | 17,251 | 112,247 | ||||||||||||||||
Foreclosure alternatives: | ||||||||||||||||||||||||
Preforeclosure sales | $ | 15,899 | 69,634 | $ | 8,457 | 36,968 | $ | 2,212 | 10,355 | |||||||||||||||
Deeds-in-lieu of foreclosure | 1,053 | 5,757 | 491 | 2,649 | 252 | 1,341 | ||||||||||||||||||
$ | 16,952 | 75,391 | $ | 8,948 | 39,617 | $ | 2,464 | 11,696 | ||||||||||||||||
Total loan workouts | $ | 104,851 | 515,667 | $ | 36,637 | 200,339 | $ | 19,715 | 123,943 | |||||||||||||||
Loan workouts as a percentage of single-family guaranty book of business(2) | 3.66 | % | 2.87 | % | 1.26 | % | 1.10 | % | 0.70 | % | 0.68 | % | ||||||||||||
(1) | For the years ended December 31, 2010 and 2009, repayment plans reflected those plans associated with loans that were 60 days or more delinquent. For the year ended December 31, 2008, repayment plans reflected those plans associated with loans that were 90 days or more delinquent. If we had included repayment plans associated with loans that were 60 days or more delinquent for the year ended December 31, 2008, the unpaid principal balance that had repayment plans and forbearances completed would have been $2.8 billion and the number of loans that had repayment plans and forbearances completed would have been 22,337. | |
(2) | Represents total loan workouts during the period as a percentage of our single-family guaranty book of business as of the end of each year. |
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2010 | 2009 | 2008 | ||||||||||
Term extension, interest rate reduction, or combination of both(1) | 93 | % | 93 | % | 57 | % | ||||||
Initial reduction in monthly payment(2) | 91 | 87 | 38 | |||||||||
Estimatedmark-to-market LTV ratio > 100% | 53 | 47 | 22 | |||||||||
Troubled debt restructurings | 94 | 92 | 60 |
(1) | Reported statistics for term extension, interest rate reduction or the combination include subprime adjustable-rate mortgage loans that have been modified to a fixed-rate loan. | |
(2) | These modification statistics do not include subprime adjustable-rate mortgage loans that were modified to a fixed-rate loan and were current at the time of the modification. |
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For the Year Ended December 31, | ||||||||||||
2010 | 2009 | 2008 | ||||||||||
Single-family foreclosed properties (number of properties): | ||||||||||||
Beginning of period inventory of single-family foreclosed properties (REO)(1) | 86,155 | 63,538 | 33,729 | |||||||||
Acquisitions by geographic area:(2) | ||||||||||||
Midwest | 57,761 | 36,072 | 30,026 | |||||||||
Northeast | 14,049 | 7,934 | 5,984 | |||||||||
Southeast | 79,453 | 39,302 | 24,925 | |||||||||
Southwest | 55,276 | 31,197 | 18,340 | |||||||||
West | 55,539 | 31,112 | 15,377 | |||||||||
Total properties acquired through foreclosure | 262,078 | 145,617 | 94,652 | |||||||||
Dispositions of REO | (185,744 | ) | (123,000 | ) | (64,843 | ) | ||||||
End of period inventory of single-family foreclosed properties (REO)(1) | 162,489 | 86,155 | 63,538 | |||||||||
Carrying value of single-family foreclosed properties (dollars in millions)(3) | $ | 14,955 | $ | 8,466 | $ | 6,531 | ||||||
Single-family foreclosure rate(4) | 1.46 | % | 0.80 | % | 0.52 | % | ||||||
(1) | Includes acquisitions throughdeeds-in-lieu of foreclosure. | |
(2) | See footnote 9 to “Table 40: Risk Characteristics of Single-Family Conventional Business Volume and Guaranty Book of Business” for states included in each geographic region. | |
(3) | Excludes foreclosed property claims receivables, which are reported in our consolidated balance sheets as a component of “Acquired property, net.” | |
(4) | Estimated based on the total number of properties acquired through foreclosure as a percentage of the total number of loans in our single-family conventional guaranty book of business as of the end of each respective period. |
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As of | For The Year Ended | As of | For The Year Ended | As of | For The Year Ended | |||||||||||||||||||
December 31, 2010 | December 31, 2009 | December 31, 2008 | ||||||||||||||||||||||
Percentage of | Percentage of | Percentage of | ||||||||||||||||||||||
Percentage of | Properties | Percentage of | Properties | Percentage of | Properties | |||||||||||||||||||
Book | Acquired | Book | Acquired | Book | Acquired | |||||||||||||||||||
Outstanding(1) | by Foreclosure(2) | Outstanding(1) | by Foreclosure(2) | Outstanding(1) | by Foreclosure(2) | |||||||||||||||||||
States: | ||||||||||||||||||||||||
Arizona, California, Florida and Nevada | 28 | % | 36 | % | 28 | % | 36 | % | 27 | % | 27 | % | ||||||||||||
Illinois, Indiana, Michigan and Ohio | 11 | 17 | 11 | 20 | 11 | 25 |
(1) | Calculated based on the unpaid principal balance of loans, where we have detailed loan-level information, for each category divided by the unpaid principal balance of our single-family conventional guaranty book of business. | |
(2) | Calculated based on the number of properties acquired through foreclosure during the period divided by the total number of properties acquired through foreclosure. |
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As of December 31, | ||||||||||||||||||||||||
2010 | 2009 | 2008 | ||||||||||||||||||||||
Percentage of | Serious | Percentage of | Serious | Percentage of | Serious | |||||||||||||||||||
Book | Delinquency | Book | Delinquency | Book | Delinquency | |||||||||||||||||||
Outstanding | Rate | Outstanding | Rate | Outstanding | Rate | |||||||||||||||||||
Multifamily loans: | ||||||||||||||||||||||||
Credit enhanced | 89 | % | 0.67 | % | 89 | % | 0.54 | % | 86 | % | 0.26 | % | ||||||||||||
Non-credit enhanced | 11 | 1.01 | 11 | 1.33 | 14 | 0.54 | ||||||||||||||||||
Total multifamily loans | 100 | % | 0.71 | % | 100 | % | 0.63 | % | 100 | % | 0.30 | % | ||||||||||||
As of December 31, | Percentage of | |||||||||||||||||||||||||||||||||||
2010 | 2009 | 2008 | Multifamily Credit | |||||||||||||||||||||||||||||||||
Percentage of | Serious | Percentage of | Serious | Percentage of | Serious | Losses For the | ||||||||||||||||||||||||||||||
Book | Delinquency | Book | Delinquency | Book | Delinquency | Year Ended December 31, | ||||||||||||||||||||||||||||||
Outstanding | Rate | Outstanding | Rate | Outstanding | Rate | 2010 | 2009 | 2008 | ||||||||||||||||||||||||||||
DUS small balance loans(1) | 8 | % | 0.55 | % | 7 | % | 0.47 | % | 7 | % | 0.24 | % | 7 | % | 9 | % | 15 | % | ||||||||||||||||||
DUS non small balance loans(2) | 70 | 0.56 | 69 | 0.38 | 66 | 0.24 | 61 | 77 | 66 | |||||||||||||||||||||||||||
Non-DUS small balance loans(1) | 10 | 1.47 | 11 | 1.16 | 13 | 0.52 | 10 | 11 | 10 | |||||||||||||||||||||||||||
Non-DUS non small balance loans(2) | 12 | 0.97 | 13 | 1.54 | 14 | 0.37 | 22 | 3 | 9 |
(1) | Loans with unpaid principal balances less than or equal to $3 million except in high cost markets where they are loans with unpaid principal balances less than or equal to $5 million. | |
(2) | Loans with unpaid principal balances greater than $3 million except in high cost markets where they are loans with unpaid principal balances greater than $5 million. |
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As of December 31, | ||||||||||||
2010 | 2009 | 2008 | ||||||||||
Multifamily foreclosed properties (number of properties): | ||||||||||||
Beginning of period inventory of multifamily foreclosed properties (REO) | 73 | 29 | 9 | |||||||||
Total properties acquired through foreclosure | 232 | 105 | 33 | |||||||||
Disposition of REO | (83 | ) | (61 | ) | (13 | ) | ||||||
End of period inventory of multifamily foreclosed properties (REO) | 222 | 73 | 29 | |||||||||
Carrying value of multifamily foreclosed properties (dollars in millions) | $ | 596 | $ | 265 | $ | 105 | ||||||
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• | mortgage seller/servicers that service the loans we hold in our investment portfolio or that back our Fannie Mae MBS; | |
• | third-party providers of credit enhancement on the mortgage assets that we hold in our investment portfolio or that back our Fannie Mae MBS, including mortgage insurers, financial guarantors and lenders with risk sharing arrangements; | |
• | custodial depository institutions that hold principal and interest payments for Fannie Mae portfolio loans and MBS certificateholders, as well as collateral posted by derivatives counterparties, repurchase transaction counterparties and mortgage originators or servicers; | |
• | issuers of securities held in our cash and other investments portfolio; | |
• | derivatives counterparties; | |
• | mortgage originators and investors; | |
• | debt security and mortgage dealers; and | |
• | document custodians. |
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As of December 31, 2010 | ||||||||||||
Maximum Coverage(2) | ||||||||||||
Counterparty:(1) | Primary | Pool | Total | |||||||||
(Dollars in millions) | ||||||||||||
Mortgage Guaranty Insurance Corporation | $ | 21,334 | $ | 1,943 | $ | 23,277 | ||||||
Radian Guaranty, Inc. | 15,002 | 368 | 15,370 | |||||||||
Genworth Mortgage Insurance Corporation | 14,250 | 81 | 14,331 | |||||||||
United Guaranty Residential Insurance Company | 13,831 | 213 | 14,044 | |||||||||
PMI Mortgage Insurance Co. | 12,065 | 294 | 12,359 | |||||||||
Republic Mortgage Insurance Company | 9,573 | 993 | 10,566 | |||||||||
Triad Guaranty Insurance Corporation | 2,986 | 823 | 3,809 | |||||||||
CMG Mortgage Insurance Company(3) | 1,938 | — | 1,938 |
(1) | Insurance coverage amounts provided for each counterparty may include coverage provided by consolidated affiliates and subsidiaries of the counterparty. | |
(2) | Maximum coverage refers to the aggregate dollar amount of insurance coverage (i.e., “risk in force”) on single-family loans in our guaranty book of business and represents our maximum potential loss recovery under the applicable mortgage insurance policies. | |
(3) | CMG Mortgage Insurance Company is a joint venture owned by PMI Mortgage Insurance Co. and CUNA Mutual Insurance Society. |
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• | Debt Instruments. We issue a broad range of both callable and non-callable debt instruments to manage the duration and prepayment risk of expected cash flows of the mortgage assets we own. | |
• | Derivative Instruments. We supplement our issuance of debt with derivative instruments to further reduce duration and prepayment risks. | |
• | Monitoring and Active Portfolio Rebalancing. We continually monitor our risk positions and actively rebalance our portfolio of interest rate-sensitive financial instruments to maintain a close match between the duration of our assets and liabilities. |
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• | Interest rate swap contracts. An interest rate swap is a transaction between two parties in which each agrees to exchange, or swap, interest payments. The interest payment amounts are tied to different interest rates or indices for a specified period of time and are generally based on a notional amount of principal. The types of interest rate swaps we use include pay-fixed swaps, receive-fixed swaps and basis swaps. | |
• | Interest rate option contracts. These contracts primarily include pay-fixed swaptions, receive-fixed swaptions, cancelable swaps and interest rate caps. A swaption is an option contract that allows us or a counterparty 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. | |
• | Futures. These are standardized exchange-traded contracts that either obligate a buyer to buy an asset at a predetermined date and price or a seller to sell an asset at a predetermined date and price. The types of futures contracts we enter into include Eurodollar, U.S. Treasury and swaps. |
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Interest Rate | ||||||||||||||||||||||||||||||||||||||||
Interest Rate Swaps | Swaptions | |||||||||||||||||||||||||||||||||||||||
Pay- | Receive- | Foreign | Pay- | Receive- | Interest | |||||||||||||||||||||||||||||||||||
Fixed | Fixed(2) | Basis(3) | Currency(4) | Fixed | Fixed | Rate Caps | Futures | Other(5) | Total | |||||||||||||||||||||||||||||||
(Dollars in millions) | ||||||||||||||||||||||||||||||||||||||||
Notional balance as of December 31, 2008 | $ | 546,916 | $ | 451,081 | $ | 24,560 | $ | 1,652 | $ | 79,500 | $ | 93,560 | $ | 500 | $ | — | $ | 827 | $ | 1,198,596 | ||||||||||||||||||||
Additions | 297,379 | 279,854 | 2,765 | 577 | 32,825 | 19,175 | 6,500 | — | 13 | 639,088 | ||||||||||||||||||||||||||||||
Terminations(6) | (461,695 | ) | (455,518 | ) | (24,100 | ) | (692 | ) | (13,025 | ) | (37,355 | ) | — | — | (92 | ) | (992,477 | ) | ||||||||||||||||||||||
Notional balance as of December 31, 2009 | $ | 382,600 | $ | 275,417 | $ | 3,225 | $ | 1,537 | $ | 99,300 | $ | 75,380 | $ | 7,000 | $ | — | $ | 748 | $ | 845,207 | ||||||||||||||||||||
Additions | 212,214 | 250,417 | 55 | 636 | 51,700 | 51,025 | — | 598 | — | 566,645 | ||||||||||||||||||||||||||||||
Terminations(6) | (317,587 | ) | (301,657 | ) | (2,795 | ) | (613 | ) | (53,850 | ) | (47,790 | ) | — | (353 | ) | (59 | ) | (724,704 | ) | |||||||||||||||||||||
Notional balance as of December 31, 2010 | $ | 277,227 | $ | 224,177 | $ | 485 | $ | 1,560 | $ | 97,150 | $ | 78,615 | $ | 7,000 | $ | 245 | $ | 689 | $ | 687,148 | ||||||||||||||||||||
Future maturities of notional amounts:(7) | ||||||||||||||||||||||||||||||||||||||||
Less than 1 year | $ | 70,656 | $ | 14,200 | $ | 50 | $ | 386 | $ | 20,750 | $ | — | $ | — | $ | 125 | $ | 75 | $ | 106,242 | ||||||||||||||||||||
1 to less than 5 years | 90,788 | 168,000 | 35 | — | 35,300 | 4,500 | 7,000 | 120 | 593 | 306,336 | ||||||||||||||||||||||||||||||
5 to less than 10 years | 96,400 | 29,632 | 100 | 511 | 10,200 | 20,970 | — | — | 21 | 157,834 | ||||||||||||||||||||||||||||||
10 years and over | 19,383 | 12,345 | 300 | 663 | 30,900 | 53,145 | — | — | — | 116,736 | ||||||||||||||||||||||||||||||
Total | $ | 277,227 | $ | 224,177 | $ | 485 | $ | 1,560 | $ | 97,150 | $ | 78,615 | $ | 7,000 | $ | 245 | $ | 689 | $ | 687,148 | ||||||||||||||||||||
Weighted-average interest rate as of December 31, 2010: | ||||||||||||||||||||||||||||||||||||||||
Pay rate | 2.84 | % | 0.29 | % | 0.09 | % | — | 5.14 | % | — | — | — | — | |||||||||||||||||||||||||||
Receive rate | 0.28 | % | 2.27 | % | 4.61 | % | — | — | 4.15 | % | 3.58 | % | — | — | ||||||||||||||||||||||||||
Weighted-average interest rate as of December 31, 2009: | ||||||||||||||||||||||||||||||||||||||||
Pay rate | 3.46 | % | 0.26 | % | 0.05 | % | — | 5.46 | % | — | — | — | — | |||||||||||||||||||||||||||
Receive rate | 0.26 | % | 3.47 | % | 1.59 | % | — | — | 4.45 | % | 3.58 | % | — | — |
(1) | Dollars represent notional amounts that indicate only the amount on which payments are being calculated and do not represent the amount at risk of loss. | |
(2) | Notional amounts include swaps callable by Fannie Mae of $394 million, $406 million and $418 million as of December 31, 2010, 2009 and 2008, respectively. The notional amounts of swaps callable by derivatives counterparties were $3.2 billion and $10.4 billion as of December 31, 2010 and 2008, respectively. There were no swaps callable by derivatives counterparties as of December 31, 2009. | |
(3) | Notional amounts include swaps callable by derivatives counterparties of $50 million, $610 million and $925 million as of December 31, 2010, 2009 and 2008, respectively. | |
(4) | Exchange rate adjustments to foreign currency swaps existing at both the beginning and the end of the period are included in terminations. Exchange rate adjustments to foreign currency swaps that are added or terminated during the period are reflected in the respective categories. | |
(5) | Includes swap credit enhancements and mortgage insurance contracts. | |
(6) | Includes matured, called, exercised, assigned and terminated amounts. | |
(7) | Amounts reported are based on contractual maturities. Some of these amounts represent swaps that are callable by Fannie Mae or by a derivative counterparty, in which case the notional amount would cease to be outstanding prior to maturity if the call option were exercised. See notes (2) and (3) for information on notional amounts that are callable. |
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• | A 50 basis point shift in interest rates. | |
• | A 25 basis point change in the slope of the yield curve. |
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As of December 31, | ||||||||
2010 | 2009 | |||||||
(Dollars in billions) | ||||||||
Rate level shock: | ||||||||
-100 basis points | $ | (0.8 | ) | $ | (0.1 | ) | ||
-50 basis points | (0.2 | ) | 0.1 | |||||
+50 basis points | (0.2 | ) | (0.4 | ) | ||||
+100 basis points | (0.5 | ) | (0.9 | ) | ||||
Rate slope shock: | ||||||||
-25 basis points (flattening) | (0.1 | ) | (0.2 | ) | ||||
+25 basis points (steepening) | 0.1 | 0.1 |
For the Three Months Ended December 31, 2010 | ||||||||||||
Duration | Rate Slope Shock | Rate Level Shock | ||||||||||
Gap | 25 Bps | 50 Bps | ||||||||||
Exposure | ||||||||||||
(In months) | (Dollars in billions) | |||||||||||
Average | 0.3 | $ | 0.1 | $ | 0.3 | |||||||
Minimum | (0.7 | ) | — | — | ||||||||
Maximum | 0.9 | 0.1 | 0.4 | |||||||||
Standard deviation | 0.3 | — | 0.1 |
(1) | Computed based on changes in LIBOR swap rates. |
Before | After | Effect of | ||||||||||
Derivatives | Derivatives | Derivatives | ||||||||||
(Dollars in billions) | ||||||||||||
As of December 31, 2010 | $ | (0.9 | ) | $ | (0.2 | ) | $ | 0.7 | ||||
As of December 31, 2009 | $ | (2.1 | ) | $ | (0.4 | ) | $ | 1.7 |
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As of December 31, 2010 | ||||||||||||||||||||
Pre-tax Effect on Estimated Fair | ||||||||||||||||||||
Value | ||||||||||||||||||||
Change in Interest Rates | ||||||||||||||||||||
Estimated | (in basis points) | |||||||||||||||||||
Fair Value | -100 | -50 | +50 | +100 | ||||||||||||||||
(Dollars in billions) | ||||||||||||||||||||
Trading financial instruments | $ | 56.9 | $ | 0.9 | $ | 0.4 | $ | (0.4 | ) | $ | (0.8 | ) | ||||||||
Other financial instruments, net(1)(2) | (201.1 | ) | 10.8 | 4.1 | (3.9 | ) | (6.1 | ) |
As of December 31, 2009 | ||||||||||||||||||||
Pre-tax Effect on Estimated Fair | ||||||||||||||||||||
Value | ||||||||||||||||||||
Change in Interest Rates | ||||||||||||||||||||
Estimated | (in basis points) | |||||||||||||||||||
Fair Value | -100 | -50 | +50 | +100 | ||||||||||||||||
(Dollars in billions) | ||||||||||||||||||||
Trading financial instruments | $ | 111.9 | $ | 2.7 | $ | 1.6 | $ | (1.9 | ) | $ | (4.0 | ) | ||||||||
Guaranty assets and guaranty obligations, net(1) | (149.3 | ) | 11.3 | 5.7 | (6.0 | ) | (4.3 | ) | ||||||||||||
Other financial instruments, net(2) | (72.5 | ) | (2.2 | ) | (1.1 | ) | 1.2 | 2.7 |
(1) | Consists of the net of “Guaranty assets” and “Guaranty obligations” reported in our consolidated balance sheets. In addition, includes certain amounts that have been reclassified from “Mortgage loans held for investment, net of allowance for loan losses” reported in our consolidated balance sheets to reflect how the risk of the interest rate and credit risk components of these loans are managed by our business segments. | |
(2) | Also consists of the net of all other financial instruments reported in “Note 19, Fair Value.” |
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Item 7A. | Quantitative and Qualitative Disclosures About Market Risk |
Item 8. | Financial Statements and Supplementary Data |
Item 9. | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure |
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Item 9A. | Controls and Procedures |
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• | pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our assets; | |
• | provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and that our receipts and expenditures are being made only in accordance with authorizations of our management and our Board of Directors; and | |
• | provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on our financial statements. |
• | Disclosure Controls and Procedures. We have been under the conservatorship of FHFA since September 6, 2008. Under the Regulatory Reform Act, FHFA is an independent agency that currently functions as both our conservator and our regulator with respect to our safety, soundness and mission. Because of the nature of the conservatorship under the Regulatory Reform Act, which places us under the “control” of FHFA (as that term is defined by securities laws), some of the information that we may need to meet our disclosure obligations may be solely within the knowledge of FHFA. As our conservator, FHFA has the power to take actions without our knowledge that could be material to our shareholders and other stakeholders, and could significantly affect our financial performance or our continued existence as an ongoing business. Although we and FHFA attempted to design and implement disclosure policies and procedures that would account for the conservatorship and accomplish the same objectives as a disclosure controls and procedures policy of a typical reporting company, there are inherent structural limitations on our ability to design, implement, test or operate effective disclosure controls and procedures. As both our regulator and our conservator under the Regulatory Reform Act, FHFA is limited in its ability to design and implement a complete set of disclosure controls and procedures relating to Fannie Mae, particularly |
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with respect to current reporting pursuant toForm 8-K. Similarly, as a regulated entity, we are limited in our ability to design, implement, operate and test the controls and procedures for which FHFA is responsible. |
• | FHFA has established the Office of Conservatorship Operations, which is intended to facilitate operation of the company with the oversight of the conservator. | |
• | We have provided drafts of our SEC filings to FHFA personnel for their review and comment prior to filing. We also have provided drafts of external press releases, statements and speeches to FHFA personnel for their review and comment prior to release. | |
• | FHFA personnel, including senior officials, have reviewed our SEC filings prior to filing, including this annual report onForm 10-K for the year ended December 31, 2010 (“2010Form 10-K”), and engaged in discussions regarding issues associated with the information contained in those filings. Prior to filing our 2010Form 10-K, FHFA provided Fannie Mae management with a written acknowledgement that it had reviewed the 2010 Form10-K, and it was not aware of any material misstatements or omissions in the 2010Form 10-K and had no objection to our filing theForm 10-K. | |
• | The Director of FHFA or, after August 2009, the Acting Director of FHFA, and our Chief Executive Officer have been in frequent communication, typically meeting on a weekly basis. | |
• | FHFA representatives attend meetings frequently with various groups within the company to enhance the flow of information and to provide oversight on a variety of matters, including accounting, credit and market risk management, liquidity, external communications and legal matters. | |
• | Senior officials within FHFA’s Office of the Chief Accountant have met frequently with our senior finance executives regarding our accounting policies, practices and procedures. |
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• | Change in Management. During the fourth quarter of 2010, our Chief Financial Officer resigned from the company and our Deputy Chief Financial Officer assumed his responsibilities as chief financial officer. | |
• | Model Change. In the fourth quarter of 2010, we transitioned from using an internal model to a third-party vendor as the source for determining cash flows used to assessother-than-temporary impairment on Alt-A and subprime private-label securities. The implementation of the third-party vendor model required operational and system changes to enable the processing of the cash flows and analytical data that include certain internal controls. Accordingly, the implementation has required revisions to our internal control over financial reporting. We reviewed the implementation of the third-party vendor model, as well as the controls impacted, and made appropriate changes to affected internal controls. |
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• | Disclosure Controls and Procedures—The Company’s disclosure controls and procedures did not adequately ensure the accumulation and communication to management of information known to the Federal Housing Finance Agency that is needed to meet its disclosure obligations under the federal securities laws as they relate to financial reporting. |
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Item 9B. | Other Information |
Item 10. | Directors, Executive Officers and Corporate Governance |
• | business; | |
• | finance; | |
• | capital markets; | |
• | accounting; | |
• | risk management; | |
• | public policy; | |
• | mortgage lending, real estate, low-income housingand/or homebuilding; and | |
• | the regulation of financial institutions. |
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(1) | actions involving capital stock, dividends, the senior preferred stock purchase agreement, increases in risk limits, material changes in accounting policy and reasonably foreseeable material increases in operational risk; |
(2) | the creation of any subsidiary or affiliate or any substantial non-ordinary course transactions with any subsidiary or affiliate; |
(3) | matters that relate to conservatorship; |
(4) | actions involving hiring, compensation and termination benefits of directors and officers at the executive vice president level and above and other specified executives; |
(5) | actions involving retention and termination of external auditors and law firms serving as consultants to the Board; |
(6) | settlements of litigation, claims, regulatory proceedings or tax-related matters in excess of a specified threshold; |
(7) | any merger with or acquisition of a business for consideration in excess of $50 million; and |
(8) | any action that in the reasonable business judgment of the Board at the time that the action is taken is likely to cause significant reputational risk. |
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• | a director’s contribution to the effective functioning of the corporation; | |
• | any change in the director’s principal area of responsibility with his or her company or his or her retirement from the company; | |
• | whether the director continues to bring relevant experience to the Board; | |
• | whether the director has the ability to attend meetings and fully participate in the activities of the Board; | |
• | whether the director has developed any relationships with Fannie Mae or another organization, or other circumstances have arisen, that might make it inappropriate for the director to continue serving on the Board; | |
• | the director’s age and length of service on the Board; and | |
• | the director’s particular experience, qualifications, attributes and skills. |
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Item 11. | Executive Compensation |
• | We increased the amount of the named executives’ pay that is subject to performance: half of deferred pay is now based on corporate performance, whereas in 2009 all of deferred pay was service-based; | |
• | We lengthened the performance period for the second installment of the 2010 long-term incentive award to two years, whereas the performance period for the 2009 long-term incentive award was only one year; |
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• | We implemented a policy to limit perquisites for our named executives to no more than $25,000 per person per year (with any exceptions to this limit requiring FHFA approval), and perquisites made available to our named executives in 2010 were substantially lower than this limit. We also eliminated tax reimbursements on perquisites for the named executives, as well as our executive life insurance program; and | |
• | We froze benefit accruals in the Executive Pension Plan for all participants, including our Chief Executive Officer, for compensation years after 2009. |
• | Michael J. Williams, President and Chief Executive Officer; | |
• | David C. Hisey, Executive Vice President and Deputy Chief Financial Officer (assumed responsibilities of the former Chief Financial Officer on December 30, 2010); | |
• | David M. Johnson, Executive Vice President and Chief Financial Officer (through December 29, 2010); | |
• | David C. Benson, Executive Vice President—Capital Markets; | |
• | Terence W. Edwards, Executive Vice President—Credit Portfolio Management; and | |
• | Timothy J. Mayopoulos, Executive Vice President, Chief Administrative Officer, General Counsel and Corporate Secretary. |
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• | Our directors serve on behalf of FHFA and exercise their authority subject to the direction of FHFA. More information about the role of our directors is described above in “Directors, Executive Officers and Corporate Governance—Corporate Governance—Conservatorship and Delegation of Authority to Board of Directors.” | |
• | While we are in conservatorship, FHFA, as our conservator, retains the authority to approve and to modify both the terms and amount of any compensation to any of our executive officers. FHFA, as our conservator, has directed that our Board consult with and obtain FHFA’s consent before taking any actions involving hiring, compensation or termination benefits of any officer at the executive vice president level and above and including, regardless of title, executives who hold positions with the functions of the chief operating officer, chief financial officer, general counsel, chief business officer, chief investment officer, treasurer, chief compliance officer, chief risk officer and chief/general/internal auditor. | |
• | FHFA, as our regulator, must approve any termination benefits we offer to our named executives and certain other officers identified by FHFA. | |
• | Under the terms of the senior preferred stock purchase agreement with Treasury, we may not enter into any new compensation arrangements with, or increase amounts or benefits payable under existing compensation arrangements of, any named executives or executive officers without the consent of the Director of FHFA, in consultation with the Secretary of the Treasury. | |
• | Under the terms of the senior preferred stock purchase agreement, we may not sell or issue any equity securities without the prior written consent of Treasury, other than as required by the terms of any binding agreement in effect on the date of the senior preferred stock purchase agreement. This effectively eliminates our ability to offer stock-based compensation. | |
• | Under the Housing and Economic Recovery Act of 2008 and related regulations issued by FHFA, the Director of FHFA has the authority to prohibit or limit us from making any “golden parachute payment” to specified categories of persons, including our named executives. |
• | Pay for Performance. Our executive compensation program is intended to drive a pay for performance environment through the use of performance-based long-term incentive awards and deferred pay. | |
• | Attract and Retain Executive Talent. Our executive compensation program is also intended to attract and retain the executive talent needed to continue to fulfill the company’s important role in providing liquidity to the mortgage market and supporting the housing market, as well as to prudently manage our book of business and be an effective steward of the government’s support. |
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• | Base Salary. Base salary is paid in cash throughout the year on a bi-weekly basis and provides a minimum, fixed level of cash compensation for the named executives. Base salary reflects the named executive’s level of responsibility and experience, as well as individual performance over time. Base salary is capped at $500,000 for all of our executive officers, including the named executives, other than our Chief Executive Officer and Chief Financial Officer. | |
• | Deferred Pay. Deferred pay is paid to the named executives in cash in quarterly installments in the year following the performance year. We will pay 2010 deferred pay to the named executives in four equal quarterly installments in March, June, September and December of 2011. Deferred pay is designed to replicate the “stock salary” element of the compensation program applicable to financial institutions that received exceptional TARP assistance and is also intended to serve as a retention incentive for the named executives; however, deferred pay is paid in cash, not stock. Given the low market value of our common stock since our entry into conservatorship, we and FHFA believe that stock-based compensation would not provide appropriate retention incentives for our named executives. Further, large grants of low-priced stock could provide substantial incentives for the named executives to seek and take large risks. In addition, we are prohibited from paying new stock-based compensation under the senior preferred stock purchase agreement without Treasury’s consent. Except in the limited circumstances described under “Compensation Tables—Potential Payments Upon Termination orChange-in-Control” below, we will pay installments of deferred pay only if the named executive is employed by Fannie Mae on the scheduled payment dates. | |
Half of 2010 deferred pay is based on the Board of Directors’ determination of corporate performance in 2010, as approved by FHFA; the remaining half of 2010 deferred pay is service based. Accordingly, the performance-based portion of deferred pay that a named executive actually receives may be more or less than the named executive’s target. | ||
• | Long-term Incentive Award. A long-term incentive award is a performance-based cash award that is paid over two calendar years. Long-term incentive awards are designed to provide incentives to the named executives to achieve corporate and individual performance goals, and to serve as a retention incentive. A named executive’s target for a long-term incentive award is one-third of the executive’s target total direct compensation. Except in the limited circumstances described under “Compensation Tables—Potential Payments Upon Termination or Change-in-Control” below, we will pay installments of a long-term incentive award only if the named executive is employed by Fannie Mae on the scheduled payment dates. | |
Half of the 2010 long-term incentive award is based on corporate and individual performance for 2010, and is paid in February 2011. The remaining half of the award will be determined and paid in early 2012 based on corporate and individual performance for both 2010 and 2011. Because the award is |
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performance based, the long-term incentive award that a named executive actually receives may be more or less than the named executive’s target; however, the sum of the individual long-term incentive awards to all executive officers cannot exceed the overall amount of the long-term incentive pool for our executive officers. In addition, each long-term incentive award paid to an executive officer must be approved by FHFA. |
• | Retirement Plans. Eligibility for our retirement plans is dependent on the named executive’s date of hire, as we have made significant changes to our retirement programs over the last several years. |
• | Mr. Williams. Mr. Williams has a frozen benefit under the Executive Pension Plan. Mr. Williams also participates in our tax-qualified defined benefit pension plan and supplemental defined benefit pension plans. See “Compensation Tables—Pension Benefits—Defined Benefit Pension Plans” for more information about Mr. Williams’ retirement benefits and changes made to those benefits during 2010. | |
• | Messrs. Hisey and Benson. Messrs. Hisey and Benson participate in our tax-qualified defined benefit pension plan and supplemental defined benefit pension plans. | |
• | Messrs. Johnson, Edwards and Mayopoulos. Messrs. Johnson, Edwards and Mayopoulos do not participate in any of our defined benefit pension plans because they were hired after we froze participation in these plans. They participate instead in our Supplemental Retirement Savings Plan, which is an unfunded, non-tax-qualified defined contribution plan. |
• | Other Employee Benefits and Plans. In general, the named executives are eligible for employee benefits available to our employee population as a whole, including our medical insurance plans, life insurance program and matching charitable gifts program. The named executives are also eligible to participate in our voluntary supplemental long-term disability plan, which is available to many of our employees. | |
• | Perquisites. Our policy is to limit perquisites for our named executives to no more than $25,000 per person per year. Any exceptions to this limit would require the approval of FHFA in consultation with Treasury. No named executive received more than $2,400 in perquisites in 2010. | |
• | Severance Benefits. We have not entered into employment agreements with any of our named executives that would entitle the executive to severance benefits. Information on compensation that we may pay to a named executive in certain circumstances in the event the executive’s employment is terminated is provided below in “Compensation Tables—Potential Payments Upon Termination orChange-in-Control.” FHFA must approve any termination benefits we offer our named executives. |
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2010 Long-Term Incentive Award | ||||||||||||||||||||||||
2010 Deferred Pay | (First Installment Only)(2) | |||||||||||||||||||||||
Actual Amount | Actual Amount | |||||||||||||||||||||||
2010 Base | Approved to be | Approved to be | Percentage | |||||||||||||||||||||
Named Executive | Salary Rate | Target | Paid in 2011(1) | Target | Paid in 2011 | of Target | ||||||||||||||||||
Michael Williams | $ | 900,000 | $ | 3,100,000 | $ | 2,945,000 | $ | 1,000,000 | $ | 900,000 | 90 | % | ||||||||||||
David Hisey | 425,000 | 1,045,000 | 992,750 | 365,000 | 325,000 | 89 | ||||||||||||||||||
David Johnson(3) | 650,000 | 1,700,000 | — | 575,000 | — | — | ||||||||||||||||||
David Benson | 500,000 | 1,369,667 | 1,301,184 | 465,167 | 440,000 | 95 | ||||||||||||||||||
Terence Edwards | 500,000 | 1,369,667 | 1,301,184 | 465,167 | 420,000 | 90 | ||||||||||||||||||
Timothy Mayopoulos | 500,000 | 1,469,667 | 1,396,184 | 490,167 | 485,000 | 99 |
(1) | Target 2010 deferred pay is 50% service-based and 50% corporate performance-based. The Compensation Committee determined that the corporate performance-based portion of 2010 deferred pay would be paid at 90% of target. | |
(2) | Amounts do not include the second installment of each named executive’s 2010 long-term incentive award. For each named executive, the target amount for the second installment of the award is the same as the target for the first installment of the award. The amount of the second installment that will actually be paid to each named executive will be determined and paid in 2012 based on an assessment of 2010 and 2011 corporate and individual performance. | |
(3) | Mr. Johnson left the company in December 2010 and therefore will not receive 2010 deferred pay or payment of a 2010 long-term incentive award. |
• | Goal 1: Our first 2010 performance goal was to achieve our mission of providing liquidity, stability and affordability to the U.S. housing and mortgage markets. Our subgoals under this goal consisted of: providing liquidity to the market while maintaining the credit quality and expected economic returns of our new business; managing our credit book of business; administering Treasury’s Making Home Affordable Program; and addressing our duty to serve and housing goals. Key achievements during 2010 pursuant to this goal were as follows: |
• | Our Single-Family business provided liquidity to the market by achieving a market share of new single-family mortgage-related securities issuances of 44.0% for 2010, significantly exceeding its target of 33% while actively balancing this market position with prudent lending and pricing. | |
• | Our Multifamily business provided liquidity to the market by achieving a multifamily GSE market share of 53% for 2010, exceeding its target of 50% while actively balancing this market position with prudent lending and pricing. Multifamily GSE market share refers to the percentage of multifamily credit guaranty acquisitions by Fannie Mae versus Freddie Mac. | |
• | Our Capital Markets business provided liquidity to the market through securities structuring, early funding, whole loan conduit and related activities that generated revenues well in excess of its target of $320 million. |
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• | We incurred single-family credit-related expenses of $26.4 billion for 2010, significantly lower than our target of $45.4 billion. | |
• | We significantly increased our default prevention and loss mitigation activities in 2010 as compared to 2009, completing over 400,000 modifications, disposing of more than 185,000 REO properties and providing over 75,000 foreclosure alternatives in 2010. In addition, our serious delinquency rate declined by more than 100 basis points from its peak in February 2010. | |
• | We made improvements to the HAMP system of record, supported Treasury-hosted borrower outreach events and conducted training of industry stakeholders and participating servicers. | |
• | We made significant progress in meeting our new 2010 housing goals despite difficult market conditions. We also prepared for implementation of the final duty to serve rule. |
The Compensation Committee concluded that the company had substantially met this goal. The Compensation Committee recognized the company’s 2010 achievements described above, particularly the company’s strong performance with respect to its liquidity subgoal. The company provided substantial liquidity to the market in 2010, while also acquiring new business with a high credit quality that is expected to be profitable. The Compensation Committee concluded, however, that the company only partially met its subgoal relating to the management of its credit book of business. While the company’s credit losses were lower than expected in 2010, it was partially due to the temporary halt to foreclosures by some of our servicers during the fourth quarter of 2010. In addition, the Committee took into account the foreclosure process deficiencies of servicers, lawyers and other service providers that were discovered in 2010. | ||
• | Goal 2: Our second 2010 performance goal was to build a more streamlined, higher-performing company. Our subgoals under this goal consisted of: enhancing our financial metrics; improving our business processes and technology infrastructure; developing and retaining employees; and achieving and maintaining a strong risk and control environment. Key achievements during 2010 pursuant to this goal were as follows: |
• | We operated within our 2010 corporate forecast of revenues and expenses, developed a three-year cost reduction plan and developed new reporting and tracking methodologies for key business metrics. | |
• | We implemented a corporate project quality office, documented the current state architecture, created a baseline future state and made a number of organizational changes to optimize the technology and operations areas. | |
• | We enhanced our talent development and review processes, and retained high-performing employees at a higher rate than lower performers. | |
• | We resolved specified risk and control matters identified by internal audit and FHFA, and remediated our material weakness in internal control over financial reporting relating to change management by September 30, 2010. | |
• | We conducted risk control self-assessments for all high risk and a majority of medium risk processes and developed remediation plans for identified high exposure items. |
• | Goal 3: Our third 2010 performance goal was to build a stronger service and delivery model. The Compensation Committee concluded that we met this goal for 2010 by successfully developing a three-year operating plan to improve organizational efficiency and reduce costs. |
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• | Materially Inaccurate Information. If an executive officer has been granted deferred pay or incentive payments (including long-term incentive awards) based on materially inaccurate financial statements or any other materially inaccurate performance metric criteria, he or she will forfeit or must repay amounts granted in excess of the amounts the Board of Directors determines would likely have been granted using accurate metrics. | |
• | Termination for Cause. If we terminate an executive officer’s employment for cause, he or she will immediately forfeit all deferred pay, long-term incentive awards and any other incentive payments that have not yet been paid. We may terminate an executive officer’s employment for cause if we determine that the officer has: (a) materially harmed the company by, in connection with the officer’s performance of his or her duties for the company, engaging in gross misconduct or performing his or her duties in a grossly negligent manner, or (b) been convicted of, or pleadednolo contenderewith respect to, a felony. | |
• | Subsequent Determination of Cause. If an executive officer’s employment was not terminated for cause, but the Board of Directors later determines, within a specified period of time, that he or she could have |
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been terminated for cause and that the officer’s actions materially harmed the business or reputation of the company, the officer will forfeit or must repay, as the case may be, deferred pay, long-term incentive awards and any other incentive payments received by the officer to the extent the Board of Directors deems appropriate under the circumstances. The Board of Directors may require the forfeiture or repayment of all deferred pay, long-term incentive awards and any other incentive payments so that the officer is in the same economic position as if he or she had been terminated for cause as of the date of termination of his or her employment. |
• | Effect of Willful Misconduct. If an executive officer’s employment: (a) is terminated for cause (or the Board of Directors later determines that cause for termination existed) due to either (i) willful misconduct by the officer in connection with his or her performance of his or her duties for the company or (ii) the officer has been convicted of, or pleadednolo contenderewith respect to, a felony consisting of an act of willful misconduct in the performance of his or her duties for the company and (b) in the determination of the Board of Directors, this has materially harmed the business or reputation of the company, then, to the extent the Board of Directors deems it appropriate under the circumstances, in addition to the forfeiture or repayment of deferred pay, long-term incentive awards and any other incentive payments described above, the executive officer will also forfeit or must repay, as the case may be, deferred pay and annual incentives or long-term awards paid to him or her in the two-year period prior to the date of termination of his or her employment or payable to him or her in the future. Misconduct is not considered willful unless it is done or omitted to be done by the officer in bad faith or without reasonable belief that his or her action or omission was in the best interest of the company. |
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• | Payment of incentive compensation is based on the achievement of performance metrics that we have concluded do not encourage unnecessary or excessive risk-taking. Our mix of multiple qualitative and quantitative performance metrics without undue emphasis on any one metric provides an appropriate balance of incentives. | |
• | Our extensive performance appraisal process ensures achievement of goals without encouraging executives or employees to take inappropriate risks. | |
• | Although we have an all cash compensation program while under conservatorship, FHFA approval of our executive compensation arrangements and our payment of most incentive payments over time, with a portion based on future performance, encourages appropriate decision-making. |
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• | Our Board and Compensation Committee have an active and significant oversight role in compensation-related decisions, including approving the company’s overall compensation structure, determining whether corporate goals have been achieved and determining the overall funding level of the pool for incentive awards, with final approval from FHFA. The Compensation Committee regularly reviews compensation data and consults with its independent compensation consultant on compensation matters. | |
• | Deferred pay and incentive compensation for our senior executive officers is subject to the terms of a clawback policy. | |
• | We have no severance arrangements for our executive officers that would pay additional compensation when an executive leaves and there is no guarantee that an executive would receive payments of previously awarded deferred pay or long-term incentive compensation if an executive’s employment were terminated. |
Change in | ||||||||||||||||||||||||||||||||
Pension | ||||||||||||||||||||||||||||||||
Value and | ||||||||||||||||||||||||||||||||
Non-Equity | Nonqualified | |||||||||||||||||||||||||||||||
Incentive | Deferred | |||||||||||||||||||||||||||||||
Stock | Plan | Compensation | All Other | |||||||||||||||||||||||||||||
Name and | Salary | Bonus | Awards | Compensation | Earnings | Compensation | Total | |||||||||||||||||||||||||
Principal Position | Year | ($)(1) | ($)(2) | ($)(3) | ($)(4) | ($)(5) | ($)(6) | ($) | ||||||||||||||||||||||||
Michael Williams(7) | 2010 | 900,000 | 1,550,000 | — | 2,295,000 | 833,156 | 16,300 | 5,594,456 | ||||||||||||||||||||||||
President and Chief Executive | 2009 | 860,523 | 2,867,200 | — | 2,051,100 | 790,803 | 111,180 | 6,680,806 | ||||||||||||||||||||||||
Officer | 2008 | 676,000 | 871,000 | 4,783,993 | — | 724,874 | 43,034 | 7,098,901 | ||||||||||||||||||||||||
David Hisey(8) | 2010 | 408,654 | 522,500 | — | 795,250 | 130,600 | 15,950 | 1,872,954 | ||||||||||||||||||||||||
Executive Vice President and | 2009 | 441,347 | 1,045,000 | — | 983,700 | 70,894 | 44,600 | 2,585,541 | ||||||||||||||||||||||||
Deputy Chief Financial Officer | 2008 | 382,904 | 737,000 | 940,487 | 160,000 | 62,450 | 43,209 | 2,326,050 | ||||||||||||||||||||||||
David Johnson(9) | 2010 | 645,000 | — | — | — | — | 79,200 | 724,200 | ||||||||||||||||||||||||
Executive Vice President and | 2009 | 675,000 | 1,275,000 | — | 517,500 | — | 178,865 | 2,646,365 | ||||||||||||||||||||||||
Chief Financial Officer | 2008 | 48,077 | — | — | — | — | — | 48,077 | ||||||||||||||||||||||||
David Benson | 2010 | 500,000 | 684,834 | — | 1,056,350 | 218,844 | 22,250 | 2,482,278 | ||||||||||||||||||||||||
Executive Vice President—Capital | 2009 | 519,231 | 1,369,667 | — | 1,282,800 | 125,157 | 47,815 | 3,344,670 | ||||||||||||||||||||||||
Markets | ||||||||||||||||||||||||||||||||
Terence Edwards | 2010 | 500,000 | 684,834 | — | 1,036,350 | — | 54,439 | 2,275,623 | ||||||||||||||||||||||||
Executive Vice President—Credit Portfolio Management | ||||||||||||||||||||||||||||||||
Timothy Mayopoulos(10) | 2010 | 500,000 | 734,834 | — | 1,146,350 | — | 88,308 | 2,469,492 | ||||||||||||||||||||||||
Executive Vice President, | 2009 | 439,346 | 1,278,610 | — | 842,601 | — | 87,138 | 2,647,695 | ||||||||||||||||||||||||
Chief Administrative Officer, General Counsel and Corporate Secretary |
(1) | Calendar year 2009 contained 27 biweekly pay periods, rather than the usual 26 biweekly pay periods. As a result, salary amounts for 2009 reflect an additional biweekly pay period. | |
(2) | Amounts shown for 2010 in the “Bonus” column consist of the service-based portion of 2010 deferred pay, which is 50% of the total 2010 deferred pay target. As described in footnote 4 below, the performance-based portion of 2010 deferred pay is included in the “Non-Equity Incentive Plan Compensation” column. Deferred pay for 2010 will be paid in four equal installments in March, June, September and December 2011. These amounts generally will be paid only if the named executive remains employed by us on the payment date. More information about deferred pay is presented in “Compensation Discussion and Analysis—2010 Executive Compensation Program—Elements of 2010 Compensation Program.” | |
Amounts shown for 2009 in the “Bonus” column consist of the entire amount of 2009 deferred pay, all of which was service-based. As noted in footnote 9 below, the amount of 2009 deferred pay originally awarded to Mr. Johnson was $1,700,000; however, Mr. Johnson did not receive the fourth $425,000 installment of this award because he left the company prior to the payment date for the installment. Accordingly, the 2009 amount shown in this column for Mr. Johnson consists of only the $1,275,000 in 2009 deferred pay actually paid to him. |
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(3) | Amounts shown in the “Stock Awards” column represent the aggregate grant date fair value of restricted stock granted during the applicable year computed in accordance with the accounting standards for stock compensation. The amounts shown exclude the impact of estimated forfeitures related to service-based vesting conditions. The grant date fair value of restricted stock for each year is the average of the high and low trading price of our common stock on the date of grant. | |
(4) | Amounts shown for 2010 in the “Non-Equity Incentive Plan Compensation” column include the first installment of the 2010 long-term incentive award, which was based on corporate and individual performance for 2010. The amount of the first installment of the 2010 long-term incentive award awarded to each named executive was as follows: $900,000 for Mr. Williams, $325,000 for Mr. Hisey, $440,000 for Mr. Benson, $420,000 for Mr. Edwards and $485,000 for Mr. Mayopoulos. This first installment of the 2010 long-term incentive award is paid in February 2011. The second installment of the 2010 long-term incentive award will be determined and paid in the first quarter of 2012 based on corporate and individual performance for both 2010 and 2011, and therefore is not included as 2010 compensation in this table. As noted in footnote 9 below, Mr. Johnson will not receive payment of a 2010 long-term incentive award because he left the company prior to the payment dates for the award. | |
Amounts shown for 2010 in the “Non-Equity Incentive Plan Compensation” column also include the performance-based portion of 2010 deferred pay, which was based on corporate performance for 2010. The amount of the performance-based portion of 2010 deferred pay awarded to each named executive was as follows: $1,395,000 for Mr. Williams, $470,250 for Mr. Hisey, $616,350 for Mr. Benson, $616,350 for Mr. Edwards and $661,350 for Mr. Mayopoulos. These amounts represent 90% of the target amount of the performance-based portion of 2010 deferred pay for each named executive. As noted in footnote 2, 2010 deferred pay will be paid in four equal installments in March, June, September and December 2011. These amounts generally will be paid only if the named executive remains employed by us on the payment date. As noted in footnote 9 below, Mr. Johnson will not receive payment of 2010 deferred pay because he left the company prior to the payment dates. | ||
More information about deferred pay and long-term incentive awards is presented in “Compensation Discussion and Analysis—2010 Executive Compensation Program—Elements of 2010 Compensation Program.” | ||
Amounts shown for 2009 in the “Non-Equity Incentive Plan Compensation” column include long-term incentive awards awarded based on 2009 corporate and individual performance. The amount of this award was $1,665,000 for Mr. Williams, $657,000 for Mr. Hisey, $837,300 for Mr. Benson and $842,601 for Mr. Mayopoulos. These long-term incentive awards were payable in two equal installments. The first installment was paid in February 2010 and the second installment is paid in February 2011. As described in footnote 9 below, the amount of the 2009 long-term incentive award originally awarded to Mr. Johnson was $1,035,000; however, Mr. Johnson did not receive the second $517,500 installment of this award because he left the company prior to the payment date for the installment. Accordingly, the 2009 amount shown in this column for Mr. Johnson consists of only the first $517,500 installment paid to him in February 2010. | ||
Amounts shown for 2009 in the “Non-Equity Incentive Plan Compensation” column for Messrs. Williams, Hisey and Benson also include the performance-based portion of their 2008 Retention Program award, which was based on 2009 corporate performance. The amount of this award was $386,100 for Mr. Williams, $326,700 for Mr. Hisey and $445,500 for Mr. Benson. This portion of the 2008 Retention Program award was paid in February 2010. Messrs. Johnson and Mayopoulos did not receive 2008 Retention Program awards. | ||
(5) | The reported amounts represent change in pension value. We calculated these amounts using the same assumptions we use for financial reporting under GAAP, using a discount rate of 5.65% at December 31, 2010. None of our named executives received above-market or preferential earnings on nonqualified deferred compensation. | |
(6) | The table below shows more information about the amounts reported for 2010 in the “All Other Compensation” column, which include (1) company contributions under our Retirement Savings Plan (401(k) Plan); (2) company credits to our Supplemental Retirement Savings Plan; and (3) matching charitable contributions under our matching charitable gifts program. |
Company | ||||||||||||
Company | Credits to | |||||||||||
Contributions to | Supplemental | Charitable | ||||||||||
Retirement Savings | Retirement Savings | Award | ||||||||||
Name | (401(k)) Plan | Plan | Programs | |||||||||
Michael Williams | $ | 7,350 | — | $ | 8,950 | |||||||
David Hisey | 12,250 | — | 3,700 | |||||||||
David Johnson | 14,700 | $ | 64,500 | — | ||||||||
David Benson | 12,250 | — | 10,000 | |||||||||
Terence Edwards | 19,600 | 30,339 | 4,500 | |||||||||
Timothy Mayopoulos | 19,600 | 48,708 | 20,000 |
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In accordance with SEC rules, amounts shown under “All Other Compensation” for 2010 do not include perquisites or personal benefits for any named executives, because aggregate perquisites for each named executive in 2010 were substantially less than $10,000. | ||
Amounts shown in the “Charitable Award Programs” column reflect gifts we made under our matching charitable gifts program, under which gifts made by our employees and directors to Section 501(c)(3) charities are matched, up to an aggregate total of $10,000 in any calendar year. Effective January 1, 2011, we changed our matching charitable gifts program to reduce the maximum amount of matching gifts to $5,000 in any calendar year. Amounts included in this column for Mr. Mayopoulos consist of a $10,000 matching contribution submitted in March 2010 relating to charitable contributions he made in 2009 and a $10,000 matching contribution submitted in January 2011 relating to charitable contributions he made in 2010. | ||
Mr. Johnson left the company before completing the three-year vesting period for the company’s 2% contribution to the Retirement Savings Plan for 2010 and 2% credit to the Supplemental Retirement Savings Plan for 2010. Accordingly, he forfeited the 2% company contribution to the Retirement Savings Plan for 2010 and the 2% company credit to the Supplemental Retirement Savings Plan for 2010. Amounts included in this table for Mr. Johnson include only the 6% company contribution to the Retirement Savings Plan for 2010 and the 6% company credit to the Supplemental Retirement Savings Plan for 2010 that immediately vested, and do not include these forfeited amounts. | ||
(7) | Mr. Williams became our President and Chief Executive Officer on April 21, 2009. He previously served as Fannie Mae’s Executive Vice President and Chief Operating Officer from November 2005 through April 20, 2009. | |
(8) | Mr. Hisey joined Fannie Mae in January 2005. He has been Executive Vice President and Deputy Chief Financial Officer since November 2008 and also assumed the responsibilities of Chief Financial Officer on December 30, 2010, following the departure of Mr. Johnson. Mr. Hisey previously served as Executive Vice President and Chief Financial Officer from August to November 2008, and as Senior Vice President and Controller from February 2005 to August 2008. | |
(9) | Mr. Johnson joined Fannie Mae in November 2008 and left the company on December 29, 2010. Mr. Johnson was not eligible to receive 2010 deferred pay or payment of his 2010 long-term incentive award because he left the company prior to the payment dates for the awards. In addition, he did not receive the fourth installment of his 2009 deferred pay ($425,000) or the second installment of his 2009 long-term incentive award ($517,500) because he was not employed by Fannie Mae on the respective payment dates for these installments. Mr. Johnson also forfeited the 2% company contributions to the Retirement Savings Plan and the 2% company credits to the Supplemental Retirement Savings Plan for 2008, 2009 and 2010, which have a three-year vesting period. The amounts reported as Mr. Johnson’s 2008, 2009 and 2010 compensation in this table exclude these forfeited payments and represent the amounts he actually received, rather than the original amounts awarded to him. | |
(10) | Mr. Mayopoulos has been an employee of Fannie Mae since April 21, 2009 and was engaged as a consultant for Fannie Mae from February 17, 2009 through April 20, 2009. Amounts reported as Mr. Mayopoulos’ 2009 compensation in the “Salary” column consist of (a) $353,846 in base salary paid to him from April 21, 2009 (the date he became an employee of Fannie Mae) through December 31, 2009; and (b) $85,500 in fees paid to him from February 17, 2009 through April 20, 2009 for his services as a consultant. |
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Estimated Future Payouts Under | ||||||||||||||||
Non-Equity Incentive Plan Awards(2) | ||||||||||||||||
Award | Threshold | Target | Maximum | |||||||||||||
Name | Type(1) | ($) | ($) | ($) | ||||||||||||
Michael Williams | LTI | — | 2,000,000 | — | ||||||||||||
DP | — | 1,550,000 | — | |||||||||||||
David Hisey | LTI | — | 730,000 | — | ||||||||||||
DP | — | 522,500 | — | |||||||||||||
David Johnson(3) | LTI | — | 1,150,000 | — | ||||||||||||
DP | — | 850,000 | — | |||||||||||||
David Benson | LTI | — | 930,333 | — | ||||||||||||
DP | — | 684,834 | — | |||||||||||||
Terence Edwards | LTI | — | 930,333 | — | ||||||||||||
DP | — | 684,834 | — | |||||||||||||
Timothy Mayopoulos | LTI | — | 980,333 | — | ||||||||||||
DP | — | 734,834 | — |
(1) | LTI indicates an award under our long-term incentive plan. DP indicates the corporate performance-based portion (50%) of the named executives’ 2010 deferred pay award. | |
(2) | For awards under our long-term incentive plan, the amounts shown are the target amounts of the named executives’ 2010 long-term incentive awards established by our Board in 2010. Except for Mr. Johnson, the actual amount of the first installment (50%) of each named executive’s 2010 long-term incentive award was determined in 2011 based on 2010 performance against pre-established corporate and individual performance goals. The second installment (50%) of each named executive’s 2010 long-term incentive award will be determined in 2012 based on performance in 2010 and 2011 against pre-established corporate and individual performance goals. No amounts are shown in the “Threshold” and “Maximum” columns because our long-term incentive plan does not specify threshold or maximum payout amounts. Our Board has the discretion to pay awards in amounts below or above these target amounts, subject to the approval of FHFA. The actual amounts of the first installment of the 2010 long-term incentive award awarded by the Board and approved by FHFA for 2010 performance are included in the “Non-Equity Incentive Plan Compensation” column of the “Summary Compensation Table for 2010, 2009 and 2008” and explained in footnote 4 to that table. The first installment of the long-term incentive award is paid to the named executives in February 2011. The second installment of the long-term incentive award will be determined and paid in 2012. | |
For deferred pay awards, the amounts shown are the target amounts of the performance-based portion (50%) of the named executives’ 2010 deferred pay award. Except for Mr. Johnson, the actual amount of the performance-based portion of 2010 deferred pay was determined in 2011 based on 2010 performance against pre-established corporate performance goals. No amounts are shown in the “Threshold” and “Maximum” columns because our deferred pay plan does not specify threshold or maximum payout amounts. Our Board has the discretion to pay awards in amounts below or above these target amounts, subject to the approval of FHFA. The actual amounts of the performance-based portion of 2010 deferred pay awarded by the Board and approved by FHFA for 2010 performance are included in the “Non-Equity Incentive Plan Compensation” column of the “Summary Compensation Table for 2010, 2009 and 2008” and explained in footnote 4 to that table. The performance-based portion of 2010 deferred pay will paid to the named executives in four equal quarterly installments in March, June, September and December 2011. | ||
(3) | Because Mr. Johnson left the company before the payment dates for the awards, he did not receive any payment of his 2010 long-term incentive award or 2010 deferred pay. See “Compensation Discussion and Analysis—Determination of 2010 Compensation—Assessment of 2010 Individual Performance” for further information. |
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Option Awards(2) | Stock Awards(2) | |||||||||||||||||||||||||
Number of | Number of | Market Value of | ||||||||||||||||||||||||
Securities | Shares or | Shares or | ||||||||||||||||||||||||
Underlying | Units of | Units of | ||||||||||||||||||||||||
Unexercised | Option | Option | Stock That | Stock That | ||||||||||||||||||||||
Award | Grant | Options (#) | Exercise | Expiration | Have Not | Have Not | ||||||||||||||||||||
Name | Type(1) | Date | Exercisable | Price ($) | Date | Vested (#) | Vested ($) | |||||||||||||||||||
Michael Williams | O | 11/20/2001 | 44,735 | 80.95 | 11/20/2011 | |||||||||||||||||||||
O | 1/21/2003 | 63,836 | 69.43 | 1/21/2013 | ||||||||||||||||||||||
O | 1/23/2004 | 73,880 | 78.32 | 1/23/2014 | ||||||||||||||||||||||
RS | 1/25/2007 | 23,156 | 6,947 | |||||||||||||||||||||||
RS | 1/28/2008 | 74,378 | 22,313 | |||||||||||||||||||||||
David Hisey | O | 1/3/2005 | 10,000 | 71.31 | 1/3/2015 | |||||||||||||||||||||
RS | 1/25/2007 | 4,022 | 1,207 | |||||||||||||||||||||||
RS | 1/28/2008 | 14,622 | 4,387 | |||||||||||||||||||||||
David Johnson | N/A | |||||||||||||||||||||||||
David Benson | O | 6/3/2002 | 12,000 | 79.33 | 6/3/2012 | |||||||||||||||||||||
O | 6/3/2002 | 20,080 | (3) | 79.33 | 6/3/2012 | |||||||||||||||||||||
O | 1/21/2003 | 9,624 | 69.43 | 1/21/2013 | ||||||||||||||||||||||
O | 1/23/2004 | 12,223 | 78.32 | 1/23/2014 | ||||||||||||||||||||||
RS | 1/25/2007 | 2,983 | 895 | |||||||||||||||||||||||
RS | 1/28/2008 | 11,971 | 3,591 | |||||||||||||||||||||||
Terence Edwards | N/A | |||||||||||||||||||||||||
Timothy Mayopoulos | N/A |
(1) | O indicates stock options and RS indicates restricted stock. |
(2) | Except as otherwise indicated, all awards of options and restricted stock listed in this table vest in four equal annual installments beginning on the first anniversary of the date of grant. Amounts reported in this table for restricted stock represent only the unvested portion of awards. Amounts reported in this table for options represent only the unexercised portions of awards. | |
(3) | This option award had special vesting provisions: 3,860 options vested immediately upon grant, 9,080 vested on August 31, 2002, 4,370 vested on January 31, 2003, 1,610 vested on January 31, 2004 and 1,160 vested on January 31, 2005. |
Stock Awards | ||||||||
Number of Shares | Value Realized on | |||||||
Name | Acquired on Vesting (#) | Vesting ($) | ||||||
Michael Williams | 75,747 | 74,698 | ||||||
David Hisey | 18,246 | 19,403 | ||||||
David Johnson | — | — | ||||||
David Benson | 10,383 | 10,261 | ||||||
Terence Edwards | — | — | ||||||
Timothy Mayopoulos | — | — |
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• | 11/2% multiplied by final average annual earnings, plus | |
• | 1/2% multiplied by final average annual earnings over Social Security-covered compensation multiplied by years of credited service. |
Number of | ||||||||||
Years | Present Value of | |||||||||
Credited | Accumulated | |||||||||
Name | Plan Name | Service (#)(1) | Benefit ($)(2) | |||||||
Michael Williams | Retirement Plan | 20 | 496,799 | |||||||
Supplemental Pension Plan(3) | 20 | 212,562 | ||||||||
2003 Supplemental Pension Plan(3) | 20 | 127,318 | ||||||||
Executive Pension Plan | 9 | 3,267,952 | ||||||||
David Hisey | Retirement Plan | 6 | 134,035 | |||||||
Supplemental Pension Plan | 6 | 106,003 | ||||||||
2003 Supplemental Pension Plan | 6 | 127,263 | ||||||||
David Johnson | Not applicable | |||||||||
David Benson | Retirement Plan | 9 | 194,507 | |||||||
Supplemental Pension Plan | 9 | 191,149 | ||||||||
2003 Supplemental Pension Plan | 9 | 203,159 | ||||||||
Terence Edwards | Not applicable | |||||||||
Timothy Mayopoulos | Not applicable |
(1) | Mr. Williams has fewer years of credited service under the Executive Pension Plan than under the Retirement Plan because he worked at Fannie Mae prior to becoming a participant in the Executive Pension Plan. In addition, because benefit accruals under the Executive Pension Plan for years after 2009 were frozen, Mr. Williams’ credited service under the Executive Pension Plan was frozen in 2009 at 9 years. |
(2) | The present value for the Executive Pension Plan assumes that Mr. Williams will remain in service until age 60, the normal retirement age under the Executive Pension Plan. The present value for the Retirement Plan, Supplemental Pension Plan and 2003 Supplemental Pension Plan assumes that the named executives will remain in service until age 65, the normal retirement age under those plans. The values also assume that benefits under the Executive Pension Plan will be paid in the form of a monthly annuity for Mr. Williams’ life and that Mr. Williams’ surviving spouse and benefits under the Retirement Plan will be paid in the form of a single life monthly annuity for Mr. Williams’ life. The postretirement mortality assumption is based on the IRS prescribed mortality table for 2011 funding purposes. Under the terms of the 2003 Supplemental Pension Plan, the deferred pay award for 2010 has been taken into account for the purpose of determining present value as of December 31, 2010. For additional information regarding the calculation of present value and the assumptions underlying these amounts, see “Note 14, Employee Retirement Benefits” in this report. |
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(3) | The present value of accumulated benefit for Mr. Williams for the Supplemental Pension Plan and 2003 Supplemental Pension Plan shown in this table reflects only the amounts accrued under these plans in 2010. Although Mr. Williams has 20 years of credited service under the Supplemental Pension Plan and 2003 Supplemental Pension Plan, as of December 31, 2010, his benefit for years prior to 2010 under these plans is offset by the benefit that he would receive upon his retirement under the Executive Pension Plan. |
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Executive | Company | Aggregate | Aggregate | |||||||||||||||||
Contributions | Contributions in | Earnings in | Aggregate | Balance at | ||||||||||||||||
in Last | Last Fiscal | Last Fiscal | Withdrawals/ | Last Fiscal | ||||||||||||||||
Name | Fiscal Year ($) | Year ($)(1) | Year ($)(2) | Distributions ($) | Year-End ($)(3) | |||||||||||||||
Michael Williams 2001 Special Stock Award(4) | — | — | (1,208 | ) | — | 412 | ||||||||||||||
David Hisey | — | — | — | — | — | |||||||||||||||
David Johnson Supplemental Retirement Savings Plan | — | 64,500 | 14,027 | — | 106,909 | |||||||||||||||
David Benson | — | — | — | — | — | |||||||||||||||
Terence Edwards Supplemental Retirement Savings Plan | — | 30,339 | 1,409 | — | 31,748 | |||||||||||||||
Timothy Mayopoulos Supplemental Retirement Savings Plan | — | 48,708 | 7,118 | — | 64,708 |
(1) | All amounts reported in this column for Messrs. Johnson, Edwards and Mayopoulos as company contributions in the last fiscal year pursuant to the Supplemental Retirement Savings Plan are also reported as 2010 compensation in the “All Other Compensation” column of the “Summary Compensation Table for 2010, 2009 and 2008.” Company contributions for Mr. Johnson in this column do not include $21,500 in company credits made under the Supplemental Retirement Savings Plan in 2010 that he forfeited by leaving the company before completing the three-year vesting period. |
(2) | None of the earnings reported in this column are reported as 2010 compensation in the “Summary Compensation Table for 2010, 2009 and 2008” because the earnings are neither above-market nor preferential. | |
(3) | Amounts reported in this column for Mr. Johnson include company contributions in 2009 to the Supplemental Retirement Savings Plan of $25,800 that are also reported as 2009 compensation in the “All Other Compensation” column of the “Summary Compensation Table for 2010, 2009 and 2008.” Amounts reported in this column for Mr. Mayopoulos include company contributions in 2009 to the Supplemental Retirement Savings Plan of $8,708 that are also reported as 2009 compensation in the “All Other Compensation” column of the “Summary Compensation Table for 2010, 2009 and 2008.” | |
(4) | The Board previously approved a special stock award to officers for 2001 performance. On January 15, 2002, Mr. Williams deferred until retirement 1,142 shares he received in connection with this award. Aggregate earnings on these shares reflect changes in stock price. Mr. Williams’ number of shares has grown through the reinvestment of dividends to 1,373 shares as of December 31, 2010. |
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• | Deferred Pay and Long-Term Incentive Awards. In general, an executive officer, including our named executives, must continue to be employed to receive payments of deferred pay or the long-term incentive award, and will forfeit any unpaid amounts upon termination of his or her employment. Exceptions to this general rule apply in the case of an executive officer’s death or retirement, and may apply in the event an executive officer’s employment is terminated by Fannie Mae other than for cause, as follows: |
• | Death. In the event an executive officer’s employment is terminated due to his or her death, his or her estate will receive the remaining installment payments of deferred pay for the prior year, as well as a pro rata portion of deferred pay for the current year, based on time worked during the year. In addition, his or her estate will receive any remaining installment payment of a long-term incentive award for a completed performance year and a pro rata portion of a long-term incentive award for the current performance year, based on time worked during the year; provided that the executive officer was employed at least one complete calendar quarter during the current performance year. | |
• | Retirement. If an executive officer retires from Fannie Mae at or after age 65 with at least 5 years of service, he or she will receive the remaining installment payments of deferred pay for the prior year. In addition, he or she will receive any remaining installment payment of a long-term incentive award for a completed performance year. | |
• | Termination by Fannie Mae. If Fannie Mae terminates an executive officer’s employment other than for cause, the Board of Directors may determine, subject to the approval of FHFA in consultation with Treasury, that he or she may receive certain unpaid deferred pay or long-term incentive awards. The determination to pay amounts of unpaid deferred pay or long-term incentive awards is in the discretion of the Board of Directors and FHFA; the named executives do not have any contractual right or right under the terms of the deferred pay plan or the long-term incentive plan to receive any unpaid deferred pay or long-term incentive awards in the event of a termination by Fannie Mae. |
• | Stock Compensation Plans. Under the Fannie Mae Stock Compensation Plan of 2003, stock options, restricted stock and restricted stock units held by our employees, including our named executives, fully vest upon the employee’s death, total disability or retirement. Under both the Fannie Mae Stock Compensation Plan of 2003 and the Fannie Mae Stock Compensation Plan of 1993, upon the occurrence of these events, or if an option holder leaves our employment after age 55 with at least 5 years of service, the option holder, or the holder’s estate in the case of death, can exercise any stock options until the initial expiration date of the stock option, which is generally 10 years after the date of grant. For these purposes, “retirement” generally |
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means that the executive retires at or after age 60 with 5 years of service or age 65 (with no service requirement). |
• | Retiree Medical Benefits. We currently make certain retiree medical benefits available to our full-time employees who retire and meet certain age and service requirements. |
2009 | 2010 | |||||||||||||||||||
Long-Term | Long-Term | |||||||||||||||||||
Restricted | 2010 | Incentive | Incentive | |||||||||||||||||
Name | Stock(2) | Deferred Pay(3) | Award(4) | Award(5) | Total | |||||||||||||||
Michael Williams | $ | 29,260 | $ | 2,945,000 | $ | 832,500 | $ | 900,000 | $ | 4,706,760 | ||||||||||
David Hisey | 5,594 | 992,750 | 328,500 | 325,000 | 1,651,844 | |||||||||||||||
David Johnson(6) | — | — | — | — | — | |||||||||||||||
David Benson | 4,486 | 1,301,184 | 418,650 | 440,000 | 2,164,320 | |||||||||||||||
Terence Edwards | — | 1,301,184 | 163,095 | 420,000 | 1,884,279 | |||||||||||||||
Timothy Mayopoulos | — | 1,396,184 | 421,301 | 485,000 | 2,302,485 |
(1) | The named executives would also have received the applicable amounts shown in the “Restricted Stock” column of this table in the event of their total disability, but not the amounts shown under any other column. |
(2) | These values are based on a per share price of $0.30, which was the closing price of our common stock on December 31, 2010. | |
(3) | Assumes that each named executive (other than Mr. Johnson) would have received the 2010 deferred pay awarded to him, which is payable in March, June, September and December 2011. Each named executive was awarded 95% of his target 2010 deferred pay (50% of deferred pay was based on corporate performance, which the Compensation Committee determined would be paid at 90% of target, and the remaining 50% of deferred pay was service based and therefore the named executives will receive 100% of this portion of the award). | |
(4) | Assumes that each named executive (other than Mr. Johnson) would have received the second installment of his 2009 long-term incentive award, which was determined in February 2010 and is paid in February 2011. | |
(5) | Assumes that each named executive (other than Mr. Johnson) would have received the first installment of his 2010 long-term incentive award, which was determined in January 2011 and is paid in February 2011. The named executives would not have received the second installment of the 2010 long-term incentive award in the event of their death on December 31, 2010, because that installment will be determined in the first quarter of 2012 based on corporate and individual performance for both 2010 and 2011. | |
(6) | Mr. Johnson left the company on December 29, 2010 and therefore would not be entitled to any payments upon death as of December 31, 2010. |
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2009 | 2010 | |||||||||||||||
Long-Term | Long-Term | |||||||||||||||
2010 | Incentive | Incentive | ||||||||||||||
Name | Deferred Pay(1) | Award(2) | Award(3) | Total | ||||||||||||
Michael Williams | $ | 2,945,000 | $ | 832,500 | $ | 900,000 | $ | 4,677,500 | ||||||||
David Hisey | 992,750 | 328,500 | 325,000 | 1,646,250 | ||||||||||||
David Johnson(4) | — | — | — | — | ||||||||||||
David Benson | 1,301,184 | 418,650 | 440,000 | 2,159,834 | ||||||||||||
Terence Edwards | 1,301,184 | 163,095 | 420,000 | 1,884,279 | ||||||||||||
Timothy Mayopoulos | 1,396,184 | 421,301 | 485,000 | 2,302,485 |
(1) | Assumes that each named executive (other than Mr. Johnson) would have received 100% of the 2010 deferred pay awarded to him, which is payable in March, June, September and December 2011. Each named executive was awarded 95% of his target 2010 deferred pay (50% of deferred pay was based on corporate performance, which the Compensation Committee determined would be paid at 90% of target, and the remaining 50% of deferred pay was service based and therefore the named executives will receive 100% of this portion of the award). The actual amount of unpaid deferred pay a named executive would receive in the event his employment is terminated would be in the discretion of our Board of Directors and also subject to the approval of FHFA in consultation with Treasury, and could range from 0% to 100% of the amount shown in this column. |
(2) | Assumes that each named executive (other than Mr. Johnson) would have received 100% of the second installment of his 2009 long-term incentive award, which was determined in February 2010 and is paid in February 2011. The actual amount of the unpaid 2009 long-term incentive award a named executive would receive in the event his employment is terminated would be in the discretion of our Board of Directors and also subject to the approval of FHFA in consultation with Treasury, and could range from 0% to 100% of the amount shown in this column. | |
(3) | Assumes that each named executive (other than Mr. Johnson) would have received 100% of the first installment of his 2010 long-term incentive award, which was determined in January 2011 and is paid in February 2011. We have not included the second installment of the 2010 long-term incentive award because that installment will not be determined until the first quarter of 2012 based on corporate and individual performance for both 2010 and 2011. The actual amount of the unpaid 2010 long-term incentive award a named executive would receive in the event his employment is terminated would be in the discretion of our Board of Directors and also subject to the approval of FHFA in consultation with Treasury, and could range from 0% to 100% of the amount shown in this column. | |
(4) | Mr. Johnson left the company on December 29, 2010 and therefore would not be entitled to any payments upon termination as of December 31, 2010. |
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Fees Earned | ||||||||||||
or Paid | All Other | |||||||||||
in Cash | Compensation | Total | ||||||||||
Name | ($) | ($)(1) | ($) | |||||||||
Dennis R. Beresford | 185,000 | — | 185,000 | |||||||||
William Thomas Forrester | 170,000 | — | 170,000 | |||||||||
Brenda J. Gaines | 180,000 | — | 180,000 | |||||||||
Charlynn Goins | 170,000 | — | 170,000 | |||||||||
Frederick B. “Bart” Harvey III | 170,000 | 10,000 | 180,000 | |||||||||
Philip A. Laskawy | 290,000 | 10,000 | 300,000 | |||||||||
Egbert L. J. Perry | 160,000 | — | 160,000 | |||||||||
Jonathan Plutzik | 160,000 | 10,000 | 170,000 | |||||||||
David H. Sidwell | 160,000 | 10,000 | 170,000 |
(1) | “All Other Compensation” consists of gifts we made or will make under our matching charitable gifts program. Our matching charitable gifts program is discussed in greater detail following this table. |
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Item 12. | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters |
As of December 31, 2010 | ||||||||||||
Number of | ||||||||||||
Securities | ||||||||||||
Remaining Available | ||||||||||||
Number of | for Future Issuance | |||||||||||
Securities to be | under Equity | |||||||||||
Issued upon | Weighted-Average | Compensation Plans | ||||||||||
Exercise of | Exercise Price of | (Excluding | ||||||||||
Outstanding | Outstanding | Securities | ||||||||||
Options, Warrants | Options, Warrants | Reflected in First | ||||||||||
Plan Category | and Rights (#) | and Rights | Column) (#) | |||||||||
Equity compensation plans approved by stockholders | 4,942,332 | (1) | $ | 75.07 | (2) | 40,989,913 | (3) | |||||
Equity compensation plans not approved by stockholders | N/A | N/A | N/A | |||||||||
Total | 4,942,332 | $ | 75.07 | 40,989,913 | ||||||||
(1) | This amount includes outstanding stock options; restricted stock units; deferred stock units; and shares issuable upon the payout of deferred stock balances. Outstanding awards, options and rights include grants under the Fannie Mae Stock Compensation Plan of 1993, the Stock Compensation Plan of 2003 and the payout of shares deferred upon the settlement of awards made under the 1993 plan and a prior plan. |
(2) | The weighted average exercise price is calculated for the outstanding options and does not take into account restricted stock units or deferred shares. | |
(3) | This number of shares consists of 11,960,258 shares available under the 1985 Employee Stock Purchase Plan and 29,029,655 shares available under the Stock Compensation Plan of 2003 that may be issued as restricted stock, stock bonuses, stock options or in settlement of restricted stock units, performance share program awards, stock appreciation rights or other stock-based awards. No more than 1,433,784 of the shares issuable under the Stock Compensation Plan of 2003 may be issued as restricted stock or restricted stock units vesting in full in fewer than three years, performance shares with a performance period of less than one year or bonus shares subject to similar vesting provisions or performance periods. |
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Amount and Nature of Beneficial Ownership(1) | ||||||||||||
Stock Options | ||||||||||||
Exercisable or | ||||||||||||
Other Shares | ||||||||||||
Common Stock | Obtainable | Total | ||||||||||
Beneficially | Within 60 Days of | Common Stock | ||||||||||
Owned Excluding | February 15, | Beneficially | ||||||||||
Name and Position | Stock Options | 2011(2) | Owned | |||||||||
David C. Benson(3) | 17,367 | 53,927 | 71,294 | |||||||||
Executive Vice President—Capital Markets | ||||||||||||
Dennis R. Beresford | 4,719 | 0 | 4,719 | |||||||||
Director | ||||||||||||
Terence W. Edwards | 0 | 0 | 0 | |||||||||
Executive Vice President—Credit Portfolio Management | ||||||||||||
W. Thomas Forrester | 0 | 0 | 0 | |||||||||
Director | ||||||||||||
Brenda J. Gaines | 487 | 0 | 487 | |||||||||
Director | ||||||||||||
Charlynn Goins | 0 | 0 | 0 | |||||||||
Director | ||||||||||||
Frederick Barton Harvey, III | 0 | 0 | 0 | |||||||||
Director | ||||||||||||
David C. Hisey(4) | 14,517 | 10,000 | 24,517 | |||||||||
Executive Vice President and Deputy Chief Financial Officer | ||||||||||||
David M. Johnson | 0 | 0 | 0 | |||||||||
Executive Vice President and Chief Financial Officer | ||||||||||||
Philip A. Laskawy | 0 | 0 | 0 | |||||||||
Chairman of the Board | ||||||||||||
Timothy J. Mayopoulos | 0 | 0 | 0 | |||||||||
Executive Vice President, Chief Administrative Officer, General Counsel and Corporate Secretary | ||||||||||||
Egbert L. J. Perry | 0 | 0 | 0 | |||||||||
Director | ||||||||||||
Jonathan Plutzik | 0 | 0 | 0 | |||||||||
Director | ||||||||||||
David H. Sidwell | 0 | 0 | 0 | |||||||||
Director | ||||||||||||
Michael J. Williams(5) | 254,657 | 183,824 | 438,481 | |||||||||
President and Chief Executive Officer | ||||||||||||
All directors and current executive officers as a group (20 persons)(6) | 457,286 | 403,965 | 861,251 |
(1) | Beneficial ownership is determined in accordance with the rules of the SEC for computing the number of shares of common stock beneficially owned by each person and the percentage owned. Holders of restricted stock have no investment power but have sole voting power over the shares and, accordingly, these shares are included in this table. Holders of stock options have no investment or voting power over the shares issuable upon the exercise of the options until the options are exercised. Shares issuable upon the vesting of restricted stock units are not considered to be beneficially owned under applicable SEC rules and, accordingly, restricted stock units are not included in the amounts shown. |
(2) | These shares are issuable upon the exercise of outstanding stock options, except for 1,373 shares of deferred stock held by Mr. Williams, which he could obtain within 60 days in certain circumstances. | |
(3) | Mr. Benson’s shares include 5,986 shares of restricted stock. |
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(4) | Mr. Hisey’s shares include 7,311 shares of restricted stock. | |
(5) | Mr. Williams’ shares include 81,541 shares held jointly with his spouse, 700 shares held by his daughter, and 37,189 shares of restricted stock. | |
(6) | The amount of shares held by all directors and current executive officers as a group includes 70,073 shares of restricted stock held by our directors and current executive officers and 748 shares of stock held by their family members. The beneficially owned total includes 1,373 shares of deferred stock. The shares in this table do not include 21,184 shares of restricted stock units over which the holders will not obtain voting rights or investment power until the restrictions lapse. |
Common Stock | ||||||||
5% Holders | Beneficially Owned | Percent of Class | ||||||
Department of the Treasury | Variable(1 | ) | 79.9 | % | ||||
1500 Pennsylvania Avenue, NW., Room 3000 Washington, DC 20220 |
(1) | In September 2008, we issued to Treasury a warrant to purchase, for one one-thousandth of a cent ($0.00001) per share, shares of our common stock equal to 79.9% of the total number of shares of our common stock outstanding on a fully diluted basis at the time the warrant is exercised. The warrant may be exercised in whole or in part at any time until September 7, 2028. As of February 24, 2011, Treasury has not exercised the warrant. The information above assumes Treasury beneficially owns no other shares of our common stock. |
Item 13. | Certain Relationships and Related Transactions, and Director Independence |
• | Code of Conduct and Conflicts of Interest Policy for Members of the Board of Directors; | |
• | Nominating and Corporate Governance Committee Charter; | |
• | Board of Directors’ delegation of authorities and reservation of powers; | |
• | Code of Conduct for employees; | |
• | Conflict of Interest Policy and Conflict of Interest Procedure for employees; and | |
• | Employment of Relatives Practice. |
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• | A director will not be considered independent if, within the preceding five years: |
• | the director was our employee; or | |
• | an immediate family member of the director was employed by us as an executive officer. |
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• | A director will not be considered independent if: |
• | the director is a current partner or employee of our external auditor, or within the preceding five years, was (but is no longer) a partner or employee of our external auditor and personally worked on our audit within that time; or | |
• | an immediate family member of the director is a current partner of our external auditor, or is a current employee of our external auditor and personally works on Fannie Mae’s audit, or, within the preceding five years, was (but is no longer) a partner or employee of our external auditor and personally worked on our audit within that time. |
• | A director will not be considered independent if, within the preceding five years: |
• | the director was employed by a company at a time when one of our current executive officers sat on that company’s compensation committee; or | |
• | an immediate family member of the director was employed as an officer by a company at a time when one of our current executive officers sat on that company’s compensation committee. |
• | A director will not be considered independent if, within the preceding five years: |
• | the director received any compensation from us, directly or indirectly, other than fees for service as a director; or | |
• | an immediate family member of the director received any compensation from us, directly or indirectly, other than compensation received for service as our employee (other than an executive officer). |
• | A director will not be considered independent if: |
• | the director is a current executive officer, employee, controlling stockholder or partner of a company or other entity that does or did business with us and to which we made, or from which we received, payments within the preceding five years that, in any single fiscal year, were in excess of $1 million or 2% of the entity’s consolidated gross annual revenues, whichever is greater; or | |
• | an immediate family member of the director is a current executive officer of a company or other entity that does or did business with us and to which we made, or from which we received, payments within the preceding five years that, in any single fiscal year, were in excess of $1 million or 2% of the entity’s consolidated gross annual revenues, whichever is greater. |
• | A director will not be considered independent if the director or the director’s spouse is an executive officer, employee, director or trustee of a nonprofit organization to which we make or have made contributions within the preceding three years (including contributions made by the Fannie Mae Foundation prior to December 31, 2008) that in any year were in excess of 5% of the organization’s consolidated gross annual revenues, or $120,000, whichever is less (amounts contributed under our Matching Gifts Program are not included in the contributions calculated for purposes of this standard). The Nominating and Corporate Governance Committee also will receive periodic reports regarding charitable contributions to organizations otherwise associated with a director or any spouse of a director. |
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• | Certain of these Board members also serve as directors or advisory Board members of other companies that engage in business with Fannie Mae. In each of these cases, the Board members are only directors or advisory Board members of these other companies. In addition, in most instances, the payments made by or to Fannie Mae pursuant to these relationships during the past five years fell below our Guidelines’ thresholds of materiality for a Board member that is a current executive officer, employee, controlling shareholder or partner of a company engaged in business with Fannie Mae. In light of these facts, the Board of Directors has concluded that these business relationships are not material to the independence of these Board members. | |
• | Certain of these Board members also serve as trustees or board members for charitable organizations that have received donations from Fannie Mae. In each case, the amounts of these charitable donations fell substantially below our Guidelines’ thresholds of materiality for a Board member who is a current trustee or board member of a charitable organization that receives donations from Fannie Mae. In light of this fact, the Board of Directors has concluded that these relationships with charitable organizations are not material to the independence of these Board members. | |
• | Certain of these Board members serve as directors of other companies that hold Fannie Mae fixed income securities or control entities that direct investments in such securities. It is not possible for Fannie Mae to determine the extent of the holdings of these companies in Fannie Mae fixed income securities as all payments to holders are made through the Federal Reserve, and most of these securities are held in turn by financial intermediaries. Each director has confirmed that the transactions by these other companies in Fannie Mae fixed income securities are entered into in the ordinary course of business of these companies and are not entered into at the direction of, or upon approval by, him or her in his or her capacity as a director of these companies. In light of these facts, the Board of Directors has concluded that these business relationships are not material to the independence of these Board members. | |
• | Mr. Perry is an executive officer and majority shareholder of The Integral Group LLC, which indirectly does business with Fannie Mae. This business includes the following: |
• | Fannie Mae purchased a 50% participation in a mortgage loan made in 2001 to a limited partnership borrower sponsored by Integral. This mortgage loan was paid off in 2006. | |
• | Since 2006, Fannie Mae has held six multifamily mortgage loans made to six borrowing entities sponsored by Integral. In each case, Integral participates in the borrowing entity as a general partner of the limited partnership, or as a managing member of the limited liability company, as the case may be, and holds a 0.01% economic interest in such entity. The aggregate unpaid principal balance of these loans as of December 31, 2010 constituted approximately 5% of Integral’s total debt outstanding. The borrowing entities have made interest payments on these loans. The total amount of Integral’s pro rata share of the interest payments made to Fannie Mae on these loans since 2006 is less than $1 million. | |
• | Fannie Mae has invested as a limited partner or member in certain LIHTC funds that in turn have invested indirectly as a limited partner or member in various Integral Property Partnerships, which are lower-tier project partnerships or limited liability companies that own LIHTC properties. Integral participates indirectly as a member or the general partner of the Integral Property Partnerships (each a “Project General Partner”). The Integral Property Partnerships construct, develop and manage housing |
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projects, a portion of which includes affordable housing units. Each Project General Partner and its affiliates earn certain fees each year in connection with those project activities, and such fees are paid from income generated by the project (other than certain developer fees paid from development sources). Fannie Mae’s indirect investments in the Integral Property Partnerships, through the LIHTC funds, have not resulted in any direct payments by Fannie Mae to any Project General Partner or its affiliates, including Integral. Fannie Mae’s indirect equity investment in the Integral Property Partnerships as of December 31, 2010 constituted approximately 3% of the total capitalization and approximately 10% of the total equity in all of the Integral Property Partnerships. |
• | Mr. Plutzik’s wife, Leslie Goldwasser, is a Managing Director with Credit Suisse. She is not an executive officer of Credit Suisse. Fannie Mae has multiple business relationships with Credit Suisse in the ordinary course of its business. We believe that payments made by or to Fannie Mae pursuant to its relationships with Credit Suisse during the past five years likely fell below our Guidelines’ thresholds of materiality for when an immediate family member of a director is a current executive officer, employee, controlling shareholder or partner of a company engaged in business with Fannie Mae. Ms. Goldwasser has confirmed that she has no direct or indirect interest or involvement in any transactions between Fannie Mae and Credit Suisse and that her compensation is not affected directly or indirectly by any such transactions. In light of these facts, the Board of Directors has concluded that these business relationships are not material to Mr. Plutzik’s independence. |
Item 14. | Principal Accounting Fees and Services |
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For the Year Ended | ||||||||
December 31, | ||||||||
Description of Fees | 2010 | 2009 | ||||||
Audit fees(1) | $ | 37,000,000 | $ | 42,600,000 | ||||
Audit-related fees(2) | 2,500,000 | 2,800,000 | ||||||
Total fees | $ | 39,500,000 | $ | 45,400,000 | ||||
(1) | 2009 amounts include costs associated with the audit of our adoption of the new accounting standard on consolidation. |
(2) | Mainly consists of: (1) fees billed for attest-related services on securitization transactions and (2) in 2009, reimbursement of costs associated with responding to subpoenas relating to Fannie Mae’s securities litigation. |
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Item 15. | Exhibits, Financial Statement Schedules |
(a) | Documents filed as part of this report |
1. | Consolidated Financial Statements |
F-2 | ||||||||
Financial Statements | F-3 | |||||||
F-3 | ||||||||
F-4 | ||||||||
F-5 | ||||||||
F-6 | ||||||||
F-8 | ||||||||
F-8 | ||||||||
F-36 | ||||||||
F-45 | ||||||||
F-50 | ||||||||
F-55 | ||||||||
F-60 | ||||||||
F-68 | ||||||||
F-73 | ||||||||
F-74 | ||||||||
F-77 | ||||||||
F-83 | ||||||||
F-86 | ||||||||
F-87 | ||||||||
F-89 | ||||||||
F-96 | ||||||||
F-103 | ||||||||
F-110 | ||||||||
F-112 | ||||||||
F-117 | ||||||||
F-134 | ||||||||
F-138 | ||||||||
Ex-3.1 | ||||||||
Ex-10.22 | ||||||||
Ex-12.1 | ||||||||
Ex-12.2 | ||||||||
Ex-31.1 | ||||||||
Ex-31.2 | ||||||||
Ex-32.1 | ||||||||
Ex-32.2 | ||||||||
EX-101 INSTANCE DOCUMENT | ||||||||
EX-101 SCHEMA DOCUMENT | ||||||||
EX-101 CALCULATION LINKBASE DOCUMENT | ||||||||
EX-101 LABELS LINKBASE DOCUMENT | ||||||||
EX-101 PRESENTATION LINKBASE DOCUMENT | ||||||||
EX-101 DEFINITION LINKBASE DOCUMENT |
2. | Financial Statement Schedules |
3. | Exhibits |
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Signature | Title | Date | ||||
/s/ Philip A. Laskawy Philip A. Laskawy | Chairman of the Board of Directors | February 24, 2011 | ||||
/s/ Michael J. Williams Michael J. Williams | President and Chief Executive Officer and Director | February 24, 2011 | ||||
/s/ David C. Hisey David C. Hisey | Executive Vice President and Deputy Chief Financial Officer | February 24, 2011 | ||||
/s/ Dennis R. Beresford Dennis R. Beresford | Director | February 24, 2011 | ||||
/s/ William Thomas Forrester William Thomas Forrester | Director | February 24, 2011 |
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Signature | Title | Date | ||||
/s/ Brenda J. Gaines Brenda J. Gaines | Director | February 24, 2011 | ||||
/s/ Charlynn Goins Charlynn Goins | Director | February 24, 2011 | ||||
/s/ Frederick B. Harvey III Frederick B. Harvey III | Director | February 24, 2011 | ||||
/s/ Egbert L. J. Perry Egbert L. J. Perry | Director | February 24, 2011 | ||||
/s/ Jonathan Plutzik Jonathan Plutzik | Director | February 24, 2011 | ||||
/s/ David H. Sidwell David H. Sidwell | Director | February 24, 2011 |
248
Table of Contents
Item | Description | |||
3 | .1 | Fannie Mae Charter Act (12 U.S.C. § 1716 et seq.) as amended through July 30, 2008 | ||
3 | .2 | Fannie Mae Bylaws, as amended through January 30, 2009 (Incorporated by reference to Exhibit 3.2 to Fannie Mae’s Annual Report onForm 10-K for the year ended December 31, 2008, filed February 26, 2009.) | ||
4 | .1 | Certificate of Designation of Terms of Fannie Mae Preferred Stock, Series D (Incorporated by reference to Exhibit 4.1 to Fannie Mae’s registration statement on Form 10, filed March 31, 2003.) | ||
4 | .2 | Certificate of Designation of Terms of Fannie Mae Preferred Stock, Series E (Incorporated by reference to Exhibit 4.2 to Fannie Mae’s registration statement on Form 10, filed March 31, 2003.) | ||
4 | .3 | Certificate of Designation of Terms of Fannie Mae Preferred Stock, Series F (Incorporated by reference to Exhibit 4.3 to Fannie Mae’s registration statement on Form 10, filed March 31, 2003.) | ||
4 | .4 | Certificate of Designation of Terms of Fannie Mae Preferred Stock, Series G (Incorporated by reference to Exhibit 4.4 to Fannie Mae’s registration statement on Form 10, filed March 31, 2003.) | ||
4 | .5 | Certificate of Designation of Terms of Fannie Mae Preferred Stock, Series H (Incorporated by reference to Exhibit 4.5 to Fannie Mae’s registration statement on Form 10, filed March 31, 2003.) | ||
4 | .6 | Certificate of Designation of Terms of Fannie Mae Preferred Stock, Series I (Incorporated by reference to Exhibit 4.6 to Fannie Mae’s registration statement on Form 10, filed March 31, 2003.) | ||
4 | .7 | Certificate of Designation of Terms of Fannie Mae Preferred Stock, Series L (Incorporated by reference to Exhibit 4.7 to Fannie Mae’s Quarterly Report onForm 10-Q, filed August 8, 2008.) | ||
4 | .8 | Certificate of Designation of Terms of Fannie Mae Preferred Stock, Series M (Incorporated by reference to Exhibit 4.8 to Fannie Mae’s Quarterly Report onForm 10-Q, filed August 8, 2008.) | ||
4 | .9 | Certificate of Designation of Terms of Fannie Mae Preferred Stock, Series N (Incorporated by reference to Exhibit 4.9 to Fannie Mae’s Quarterly Report onForm 10-Q, filed August 8, 2008.) | ||
4 | .10 | Certificate of Designation of Terms of Fannie Mae Non-Cumulative Convertible Preferred Stock,Series 2004-1(Incorporated by reference to Exhibit 4.10 to Fannie Mae’s Annual Report onForm 10-K for the year ended December 31, 2009, filed February 26, 2010.) | ||
4 | .11 | Certificate of Designation of Terms of Fannie Mae Preferred Stock, Series O (Incorporated by reference to Exhibit 4.11 to Fannie Mae’s Annual Report onForm 10-K for the year ended December 31, 2009, filed February 26, 2010.) | ||
4 | .12 | Certificate of Designation of Terms of Fannie Mae Preferred Stock, Series P (Incorporated by reference to Exhibit 4.1 to Fannie Mae’s Current Report onForm 8-K, filed September 28, 2007.) | ||
4 | .13 | Certificate of Designation of Terms of Fannie Mae Preferred Stock, Series Q (Incorporated by reference to Exhibit 4.1 to Fannie Mae’s Current Report onForm 8-K, filed October 5, 2007.) | ||
4 | .14 | Certificate of Designation of Terms of Fannie Mae Preferred Stock, Series R (Incorporated by reference to Exhibit 4.1 to Fannie Mae’s Current Report onForm 8-K, filed November 21, 2007.) | ||
4 | .15 | Certificate of Designation of Terms of Fannie Mae Preferred Stock, Series S (Incorporated by reference to Exhibit 4.1 to Fannie Mae’s Current Report onForm 8-K, filed December 11, 2007.) | ||
4 | .16 | Certificate of Designation of Terms of Fannie Mae Non-Cumulative Mandatory Convertible Preferred Stock,Series 2008-1 (Incorporated by reference to Exhibit 4.1 to Fannie Mae’s Current Report onForm 8-K, filed May 14, 2008.) | ||
4 | .17 | Certificate of Designation of Terms of Fannie Mae Preferred Stock, Series T (Incorporated by reference to Exhibit 4.1 to Fannie Mae’s Current Report onForm 8-K, filed May 19, 2008.) | ||
4 | .18 | Certificate of Designation of Terms of Variable Liquidation Preference Senior Preferred Stock,Series 2008-2 (Incorporated by reference to Exhibit 4.2 to Fannie Mae’s Current Report onForm 8-K, filed September 11, 2008.) |
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Table of Contents
Item | Description | |||
4 | .19 | Warrant to Purchase Common Stock, dated September 7, 2008 conservator (Incorporated by reference to Exhibit 4.3 to Fannie Mae’s Current Report onForm 8-K, filed September 11, 2008.) | ||
4 | .20 | Amended and Restated Senior Preferred Stock Purchase Agreement, dated as of September 26, 2008, between the United States Department of the Treasury and Federal National Mortgage Association, acting through the Federal Housing Finance Agency as its duly appointed conservator (Incorporated by reference to Exhibit 4.1 to Fannie Mae’s Current Report onForm 8-K, filed October 2, 2008.) | ||
4 | .21 | Amendment to Amended and Restated Senior Preferred Stock Purchase Agreement, dated as of May 6, 2009, between the United States Department of the Treasury and Federal National Mortgage Association, acting through the Federal Housing Finance Agency as its duly appointed conservator (Incorporated by reference to Exhibit 4.21 to Fannie Mae’s Quarterly Report onForm 10-Q, filed May 8, 2009.) | ||
4 | .22 | Second Amendment to Amended and Restated Senior Preferred Stock Purchase Agreement, dated as of December 24, 2009, between the United States Department of the Treasury and Federal National Mortgage Association, acting through the Federal Housing Finance Agency as its duly appointed conservator (Incorporated by reference to Exhibit 4.1 to Fannie Mae’s Current Report onForm 8-K, filed December 30, 2009.) | ||
10 | .1 | Fannie Mae’s Elective Deferred Compensation Plan, as amended effective November 15, 2004† (Incorporated by reference to Exhibit 10.21 to Fannie Mae’s Annual Report onForm 10-K for the year ended December 31, 2007, filed February 27, 2008.) | ||
10 | .2 | Amendment to Fannie Mae Elective Deferred Compensation Plan I, effective October 27, 2008† (Incorporated by reference to Exhibit 10.7 to Fannie Mae’s Annual Report onForm 10-K for the year ended December 31, 2008, filed February 26, 2009.) | ||
10 | .3 | Fannie Mae Elective Deferred Compensation Plan II† (Incorporated by reference to Exhibit 10.7 to Fannie Mae’s Annual Report onForm 10-K for the year ended December 31, 2007, filed February 27, 2008.) | ||
10 | .4 | Amendment to Fannie Mae Elective Deferred Compensation Plan II, effective April 29, 2008† (Incorporated by reference to Exhibit 10.1 to Fannie Mae’s Quarterly Report onForm 10-Q, filed August 8, 2008.) | ||
10 | .5 | Amendment to Fannie Mae Elective Deferred Compensation Plan II, effective October 27, 2008† (Incorporated by reference to Exhibit 10.10 to Fannie Mae’s Annual Report onForm 10-K for the year ended December 31, 2008, filed February 26, 2009.) | ||
10 | .6 | Compensation Repayment Provisions† (Incorporated by reference to Exhibit 99.1 to Fannie Mae’s Current Report onForm 8-K, filed December 24, 2009.) | ||
10 | .7 | Long-Term Incentive Plan, effective December 16, 2009† (Incorporated by reference to Exhibit 10.9 to Fannie Mae’s Annual Report onForm 10-K for the year ended December 31, 2009, filed February 26, 2010.) | ||
10 | .8 | Deferred Pay Plan, effective December 16, 2009† (Incorporated by reference to Exhibit 10.10 to Fannie Mae’s Annual Report onForm 10-K for the year ended December 31, 2009, filed February 26, 2010.) | ||
10 | .9 | Fannie Mae Form of Indemnification Agreement for directors and officers of Fannie Mae (Incorporated by reference to Exhibit 10.15 to Fannie Mae’s Annual Report onForm 10-K for the year ended December 31, 2008, filed February 26, 2009.) | ||
10 | .10 | Federal National Mortgage Association Supplemental Pension Plan, as amended November 20, 2007† (Incorporated by reference to Exhibit 10.10 to Fannie Mae’s Annual Report onForm 10-K for the year ended December 31, 2007, filed February 27, 2008.) | ||
10 | .11 | Amendment to Fannie Mae Supplemental Pension Plan for Internal Revenue Code Section 409A, effective January 1, 2009† (Incorporated by reference to Exhibit 10.11 to Fannie Mae’s Annual Report onForm 10-K for the year ended December 31, 2007, filed February 27, 2008.) | ||
10 | .12 | Amendment to Fannie Mae Supplemental Pension Plan, executed December 22, 2008† (Incorporated by reference to Exhibit 10.18 to Fannie Mae’s Annual Report onForm 10-K for the year ended December 31, 2008, filed February 26, 2009.) |
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Table of Contents
Item | Description | |||
10 | .13 | Fannie Mae Supplemental Pension Plan of 2003, as amended November 20, 2007† (Incorporated by reference to Exhibit 10.12 to Fannie Mae’s Annual Report onForm 10-K for the year ended December 31, 2007, filed February 27, 2008.) | ||
10 | .14 | Amendment to Fannie Mae Supplemental Pension Plan of 2003 for Internal Revenue Code Section 409A, effective January 1, 2009† (Incorporated by reference to Exhibit 10.13 to Fannie Mae’s Annual Report onForm 10-K for the year ended December 31, 2007, filed February 27, 2008.) | ||
10 | .15 | Amendment to Fannie Mae Supplemental Pension Plan of 2003 for Internal Revenue Code Section 409A, adopted December 22, 2008† (Incorporated by reference to Exhibit 10.21 to Fannie Mae’s Annual Report onForm 10-K for the year ended December 31, 2008, filed February 26, 2009.) | ||
10 | .16 | Amendment to Fannie Mae Supplement Pension Plan of 2003, effective May 14, 2010† (Incorporated by reference to Exhibit 10.1 to Fannie Mae’s Quarterly Report onForm 10-Q, filed August 5, 2010.) | ||
10 | .17 | Executive Pension Plan of the Federal National Mortgage Association as amended and restated† (Incorporated by reference to Exhibit 10.10 to Fannie Mae’s registration statement on Form 10, filed March 31, 2003) | ||
10 | .18 | Amendment to the Executive Pension Plan of the Federal National Mortgage Association, as amended and restated, effective March 1, 2007† (Incorporated by reference to Exhibit 10.20 to Fannie Mae’s Annual Report onForm 10-K for the year ended December 31, 2005, filed May 2, 2007.) | ||
10 | .19 | Amendment to Fannie Mae Executive Pension Plan, effective November 20, 2007† (Incorporated by reference to Exhibit 10.16 to Fannie Mae’s Annual Report onForm 10-K for the year ended December 31, 2007, filed February 27, 2008.) | ||
10 | .20 | Amendment to the Executive Pension Plan of the Federal National Mortgage Association, effective January 1, 2008† (Incorporated by reference to Exhibit 10.25 to Fannie Mae’s Annual Report onForm 10-K for the year ended December 31, 2008, filed February 26, 2009.) | ||
10 | .21 | Amendment to the Executive Pension Plan of the Federal National Mortgage Association, effective December 16, 2009† (Incorporated by reference to Exhibit 10.23 to Fannie Mae’s Annual Report onForm 10-K for the year ended December 31, 2009, filed February 26, 2010.) | ||
10 | .22 | Amendment to the Executive Pension Plan of the Federal National Mortgage Association, effective January 1, 2010† | ||
10 | .23 | Fannie Mae Annual Incentive Plan, as amended December 10, 2007† (Incorporated by reference to Exhibit 10.17 to Fannie Mae’s Annual Report onForm 10-K for the year ended December 31, 2007, filed February 27, 2008.) | ||
10 | .24 | Fannie Mae Stock Compensation Plan of 2003, as amended through December 14, 2007† (Incorporated by reference to Exhibit 10.18 to Fannie Mae’s Annual Report onForm 10-K for the year ended December 31, 2007, filed February 27, 2008.) | ||
10 | .25 | Amendment to Fannie Mae Stock Compensation Plan of 2003, as amended, for Internal Revenue Code Section 409A, adopted December 22, 2008† (Incorporated by reference to Exhibit 10.28 to Fannie Mae’s Annual Report onForm 10-K for the year ended December 31, 2008, filed February 26, 2009.) | ||
10 | .26 | Fannie Mae Stock Compensation Plan of 1993† (Incorporated by reference to Exhibit 10.18 to Fannie Mae’s Annual Report onForm 10-K for the year ended December 31, 2004, filed December 6, 2006.) | ||
10 | .27 | 2009 Amendment to Fannie Mae Stock Compensation Plans of 1993 and 2003† (Incorporated by reference to Exhibit 10.1 to Fannie Mae’s Quarterly Report onForm 10-Q, filed November 5, 2009.) | ||
10 | .28 | Fannie Mae Procedures for Deferral and Diversification of Awards, as amended effective December 10, 2007† (Incorporated by reference to Exhibit 10.30 to Fannie Mae’s Annual Report onForm 10-K for the year ended December 31, 2008, filed February 26, 2009.) |
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Table of Contents
Item | Description | |||
10 | .29 | Fannie Mae Supplemental Retirement Savings Plan, as amended through April 29, 2008† (Incorporated by reference to Exhibit 10.2 to Fannie Mae’s Quarterly Report onForm 10-Q, filed August 8, 2008.) | ||
10 | .30 | Amendment to Fannie Mae Supplemental Retirement Savings Plan, effective October 8, 2008† (Incorporated by reference to Exhibit 10.32 to Fannie Mae’s Annual Report onForm 10-K for the year ended December 31, 2008, filed February 26, 2009.) | ||
10 | .31 | Amendment to Fannie Mae Supplemental Retirement Savings Plan, effective May 14, 2010† (Incorporated by reference to Exhibit 10.2 to Fannie Mae’s Quarterly Report onForm 10-Q, filed August 5, 2010.) | ||
10 | .32 | Form of Nonqualified Stock Option Grant Award Document† (Incorporated by reference to Exhibit 10.33 to Fannie Mae’s Annual Report onForm 10-K for the year ended December 31, 2009, filed February 26, 2010.) | ||
10 | .33 | Form of Restricted Stock Award Document† (Incorporated by reference to Exhibit 99.1 to Fannie Mae’s Current Report onForm 8-K, filed January 26, 2007.) | ||
10 | .34 | Form of Restricted Stock Units Award Document adopted January 23, 2008† (Incorporated by reference to Exhibit 10.27 to Fannie Mae’s Annual Report onForm 10-K for the year ended December 31, 2007, filed February 27, 2008.) | ||
10 | .35 | Form of Restricted Stock Units Award Document† (Incorporated by reference to Exhibit 99.2 to Fannie Mae’s Current Report onForm 8-K, filed January 26, 2007.) | ||
10 | .36 | Lending Agreement, dated September 19, 2008, between the U.S. Treasury and Fannie Mae† (Incorporated by reference to Exhibit 10.4 to Fannie Mae’s Quarterly Report onForm 10-Q, filed November 10, 2008.) | ||
10 | .37 | Senior Preferred Stock Purchase Agreement dated as of September 7, 2008, as amended and restated on September 26, 2008, between the United States Department of the Treasury and Federal National Mortgage Association (Incorporated by reference Exhibit 4.1 to Fannie Mae’s Current Report onForm 8-K, filed October 2, 3008.) | ||
10 | .38 | Amendment to Amended and Restated Senior Preferred Stock Purchase Agreement, dated as of May 6, 2009, between the United States Department of the Treasury and Federal National Mortgage Association, acting through the Federal Housing Finance Agency as its duly appointed conservator (Incorporated by reference to Exhibit 4.21 to Fannie Mae’s Quarterly Report onForm 10-Q, filed May 8, 2009.) | ||
10 | .39 | Second Amendment to Amended and Restated Senior Preferred Stock Purchase Agreement, dated as of December 24, 2009, between the United States Department of the Treasury and Federal National Mortgage Association, acting through the Federal Housing Finance Agency as its duly appointed conservator (Incorporated by reference to Exhibit 4.1 to Fannie Mae’s Current Report onForm 8-K, filed December 30, 2009.) | ||
10 | .40 | Letters, dated September 1, 2005, setting forth an agreement between Fannie Mae and OFHEO (Incorporated by reference to Exhibit 10.1 to Fannie Mae’s Current Report onForm 8-K, filed September 8, 2005.) | ||
10 | .41 | Consent of Defendant Fannie Mae with Securities and Exchange Commission, dated May 23, 2006 (Incorporated by reference to Exhibit 10.2 to Fannie Mae’s Current Report onForm 8-K, filed May 30, 2006.) | ||
10 | .42 | Letter Agreement between Fannie Mae and Timothy J. Mayopoulos, dated March 9, 2009† (Incorporated by reference to Exhibit 10.44 to Fannie Mae’s Annual Report onForm 10-K for the year ended December 31, 2009, filed February 26, 2010.) | ||
10 | .43 | Memorandum of Understanding among the Department of the Treasury, the Federal Housing Finance Agency, the Federal National Mortgage Association, and the Federal Home Loan Mortgage Corporation, dated October 19, 2009 (Incorporated by reference to Exhibit 99.1 to Fannie Mae’s Current Report onForm 8-K, filed October 23, 2009.) | ||
12 | .1 | Statement re: computation of ratios to earnings to fixed charges | ||
12 | .2 | Statement re: computation of ratios of earnings to combined fixed charges and preferred stock dividends |
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Item | Description | |||
31 | .1 | Certification of Deputy Chief Executive Officer pursuant to Securities Exchange ActRule 13a-14(a) | ||
31 | .2 | Certification of Chief Financial Officer pursuant to Securities Exchange ActRule 13a-14(a) | ||
32 | .1 | Certification of Deputy Chief Executive Officer pursuant to 18 U.S.C. Section 1350 | ||
32 | .2 | Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350 | ||
101 | . INS | XBRL Instance Document* | ||
101 | . SCH | XBRL Taxonomy Extension Schema* | ||
101 | . CAL | XBRL Taxonomy Extension Calculation* | ||
101 | . LAB | XBRL Taxonomy Extension Labels* | ||
101 | . PRE | XBRL Taxonomy Extension Presentation* | ||
101 | . DEF | XBRL Taxonomy Extension Definition* |
* | The financial information contained in these XBRL documents is unaudited. The information in these exhibits shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, or otherwise subject to the liabilities of Section 18, nor shall they be deemed incorporated by reference into any disclosure document relating to Fannie Mae, except to the extent, if any, expressly set forth by specific reference in such filing. |
† | This Exhibit is a management contract or compensatory plan or arrangement. |
E-5
F-2 | ||||
Financial Statements | F-3 | |||
F-3 | ||||
F-4 | ||||
F-5 | ||||
F-6 | ||||
F-8 | ||||
F-8 | ||||
F-36 | ||||
F-45 | ||||
F-50 | ||||
F-55 | ||||
F-60 | ||||
F-68 | ||||
F-73 | ||||
F-74 | ||||
F-77 | ||||
F-83 | ||||
F-86 | ||||
F-87 | ||||
F-89 | ||||
F-96 | ||||
F-103 | ||||
F-110 | ||||
F-112 | ||||
F-117 | ||||
F-134 | ||||
F-138 |
F-1
Table of Contents
F-2
Table of Contents
(In conservatorship)
Consolidated Balance Sheets
(Dollars in millions, except share amounts)
As of December 31, | ||||||||
2010 | 2009 | |||||||
ASSETS | ||||||||
Cash and cash equivalents (includes cash of consolidated trusts of $348 and $2,092, respectively) | $ | 17,297 | $ | 6,812 | ||||
Restricted cash (includes restricted cash of consolidated trusts of $59,619 and $-, respectively) | 63,678 | 3,070 | ||||||
Federal funds sold and securities purchased under agreements to resell or similar arrangements | 11,751 | 53,684 | ||||||
Investments in securities: | ||||||||
Trading, at fair value (includes securities of consolidated trusts of $21 and $5,599, respectively) | 56,856 | 111,939 | ||||||
Available-for-sale, at fair value (includes securities of consolidated trusts of $1,055 and $10,513, respectively, and securities pledged as collateral that may be sold or repledged of $- and $1,148, respectively) | 94,392 | 237,728 | ||||||
Total investments in securities | 151,248 | 349,667 | ||||||
Mortgage loans: | ||||||||
Loans held for sale, at lower of cost or fair value | 915 | 18,462 | ||||||
Loans held for investment, at amortized cost: | ||||||||
Of Fannie Mae | 407,228 | 256,434 | ||||||
Of consolidated trusts (includes loans at fair value of $2,962 and $-, respectively, and loans pledged as collateral that may be sold or repledged of $2,522 and $1,947, respectively) | 2,577,133 | 129,590 | ||||||
Total loans held for investment | 2,984,361 | 386,024 | ||||||
Allowance for loan losses | (61,556 | ) | (9,925 | ) | ||||
Total loans held for investment, net of allowance | 2,922,805 | 376,099 | ||||||
Total mortgage loans | 2,923,720 | 394,561 | ||||||
Accrued interest receivable: | ||||||||
Of Fannie Mae | 5,344 | 3,774 | ||||||
Of consolidated trusts | 9,349 | 519 | ||||||
Allowance for accrued interest receivable | (3,414 | ) | (536 | ) | ||||
Total accrued interest receivable, net of allowance | 11,279 | 3,757 | ||||||
Acquired property, net | 16,173 | 9,142 | ||||||
Servicer and MBS trust receivable | 951 | 18,329 | ||||||
Other assets | 25,875 | 30,119 | ||||||
Total assets | $ | 3,221,972 | $ | 869,141 | ||||
LIABILITIES AND EQUITY (DEFICIT) | ||||||||
Liabilities: | ||||||||
Accrued interest payable: | ||||||||
Of Fannie Mae | $ | 4,052 | $ | 4,951 | ||||
Of consolidated trusts | 9,712 | 29 | ||||||
Federal funds purchased and securities sold under agreements to repurchase | 52 | — | ||||||
Short-term debt: | ||||||||
Of Fannie Mae | 151,884 | 200,437 | ||||||
Of consolidated trusts | 5,359 | — | ||||||
Long-term debt: | ||||||||
Of Fannie Mae (includes debt at fair value of $893 and $3,274, respectively) | 628,160 | 567,950 | ||||||
Of consolidated trusts (includes debt at fair value of $2,271 and $-, respectively) | 2,411,597 | 6,167 | ||||||
Reserve for guaranty losses (includes $54 and $4,772, respectively, related to Fannie Mae MBS included in Investments in securities) | 323 | 54,430 | ||||||
Servicer and MBS trust payable | 2,950 | 25,872 | ||||||
Other liabilities | 10,400 | 24,586 | ||||||
Total liabilities | 3,224,489 | 884,422 | ||||||
Commitments and contingencies (Note 20) | — | — | ||||||
Fannie Mae stockholders’ equity (deficit): | ||||||||
Senior preferred stock, 1,000,000 shares issued and outstanding | 88,600 | 60,900 | ||||||
Preferred stock, 700,000,000 shares are authorized—576,868,139 and 579,735,457 shares issued and outstanding, respectively | 20,204 | 20,348 | ||||||
Common stock, no par value, no maximum authorization—1,270,092,708 and 1,265,674,761 shares issued, respectively; 1,118,504,194 and 1,113,358,051 shares outstanding, respectively | 667 | 664 | ||||||
Additional paid-in capital | — | 2,083 | ||||||
Accumulated deficit | (102,986 | ) | (90,237 | ) | ||||
Accumulated other comprehensive loss | (1,682 | ) | (1,732 | ) | ||||
Treasury stock, at cost, 151,588,514 and 152,316,710 shares, respectively | (7,402 | ) | (7,398 | ) | ||||
Total Fannie Mae stockholders’ deficit | (2,599 | ) | (15,372 | ) | ||||
Noncontrolling interest | 82 | 91 | ||||||
Total deficit | (2,517 | ) | (15,281 | ) | ||||
Total liabilities and equity (deficit) | $ | 3,221,972 | $ | 869,141 | ||||
F-3
Table of Contents
(In conservatorship)
Consolidated Statements of Operations
(Dollars and shares in millions, except per share amounts)
For the Year Ended | ||||||||||||
December 31, | ||||||||||||
2010 | 2009 | 2008 | ||||||||||
Interest income: | ||||||||||||
Trading securities | $ | 1,251 | $ | 3,859 | $ | 5,878 | ||||||
Available-for-sale securities | 5,290 | 13,618 | 13,214 | |||||||||
Mortgage loans: | ||||||||||||
Of Fannie Mae | 14,992 | 15,378 | 18,547 | |||||||||
Of consolidated trusts | 132,591 | 6,143 | 4,145 | |||||||||
Other | 146 | 357 | 1,339 | |||||||||
Total interest income | 154,270 | 39,355 | 43,123 | |||||||||
Interest expense: | ||||||||||||
Short-term debt: | ||||||||||||
Of Fannie Mae | 619 | 2,306 | 7,815 | |||||||||
Of consolidated trusts | 12 | — | — | |||||||||
Long-term debt: | ||||||||||||
Of Fannie Mae | 18,857 | 22,195 | 26,145 | |||||||||
Of consolidated trusts | 118,373 | 344 | 381 | |||||||||
Total interest expense | 137,861 | 24,845 | 34,341 | |||||||||
Net interest income | 16,409 | 14,510 | 8,782 | |||||||||
Provision for loan losses | (24,702 | ) | (9,569 | ) | (4,022 | ) | ||||||
Net interest income (loss) after provision for loan losses | (8,293 | ) | 4,941 | 4,760 | ||||||||
Guaranty fee income (includes imputed interest of $111, $1,333 and $1,423, respectively) | 202 | 7,211 | 7,621 | |||||||||
Investment gains (losses), net | 346 | 1,458 | (246 | ) | ||||||||
Other-than-temporary impairments | (694 | ) | (9,057 | ) | (6,974 | ) | ||||||
Noncredit portion ofother-than-temporary impairments recognized in other comprehensive loss | (28 | ) | (804 | ) | — | |||||||
Netother-than-temporary impairments | (722 | ) | (9,861 | ) | (6,974 | ) | ||||||
Fair value losses, net | (511 | ) | (2,811 | ) | (20,129 | ) | ||||||
Debt extinguishment losses, net (includes debt extinguishment losses related to consolidated trusts of $109, $- and $-, respectively) | (568 | ) | (325 | ) | (222 | ) | ||||||
Losses from partnership investments | (74 | ) | (6,735 | ) | (1,554 | ) | ||||||
Fee and other income | 882 | 773 | 1,033 | |||||||||
Non-interest loss | (445 | ) | (10,290 | ) | (20,471 | ) | ||||||
Administrative expenses: | ||||||||||||
Salaries and employee benefits | 1,277 | 1,133 | 1,032 | |||||||||
Professional services | 942 | 684 | 529 | |||||||||
Occupancy expenses | 170 | 205 | 227 | |||||||||
Other administrative expenses | 208 | 185 | 191 | |||||||||
Total administrative expenses | 2,597 | 2,207 | 1,979 | |||||||||
Provision for guaranty losses | 194 | 63,057 | 23,929 | |||||||||
Foreclosed property expense | 1,718 | 910 | 1,858 | |||||||||
Other expenses | 853 | 1,484 | 1,093 | |||||||||
Total expenses | 5,362 | 67,658 | 28,859 | |||||||||
Loss before federal income taxes and extraordinary losses | (14,100 | ) | (73,007 | ) | (44,570 | ) | ||||||
Provision (benefit) for federal income taxes | (82 | ) | (985 | ) | 13,749 | |||||||
Loss before extraordinary losses | (14,018 | ) | (72,022 | ) | (58,319 | ) | ||||||
Extraordinary losses, net of tax effect | — | — | (409 | ) | ||||||||
Net loss | (14,018 | ) | (72,022 | ) | (58,728 | ) | ||||||
Less: Net loss attributable to the noncontrolling interest | 4 | 53 | 21 | |||||||||
Net loss attributable to Fannie Mae | (14,014 | ) | (71,969 | ) | (58,707 | ) | ||||||
Preferred stock dividends | (7,704 | ) | (2,474 | ) | (1,069 | ) | ||||||
Net loss attributable to common stockholders | $ | (21,718 | ) | $ | (74,443 | ) | $ | (59,776 | ) | |||
Loss per share — Basic and Diluted | $ | (3.81 | ) | $ | (13.11 | ) | $ | (24.04 | ) | |||
Cash dividends per common share | $ | — | $ | — | $ | 0.75 | ||||||
Weighted-average common shares outstanding — Basic and Diluted | 5,694 | 5,680 | 2,487 |
F-4
Table of Contents
For the Year Ended December 31, | ||||||||||||
2010 | 2009 | 2008 | ||||||||||
Cash flows (used in) provided by operating activities: | ||||||||||||
Net loss | $ | (14,018 | ) | $ | (72,022 | ) | $ | (58,728 | ) | |||
Reconciliation of net loss to net cash (used in) provided by operating activities: | ||||||||||||
Amortization of cost basis adjustments | 126 | 2,568 | 8,189 | |||||||||
Provisions for loan and guaranty losses | 24,896 | 72,626 | 27,951 | |||||||||
Valuation (gains) losses | (1,289 | ) | 3,425 | 12,725 | ||||||||
Losses from partnership investments | 74 | 6,735 | 1,554 | |||||||||
Current and deferred federal income taxes | 258 | (1,919 | ) | 12,904 | ||||||||
Extraordinary losses, net of tax effect | — | — | 409 | |||||||||
Purchases of loans held for sale | (81 | ) | (109,684 | ) | (56,768 | ) | ||||||
Proceeds from repayments of loans held for sale | 88 | 2,413 | 617 | |||||||||
Net change in trading securities, excluding non-cash transfers | (23,612 | ) | 11,976 | 72,689 | ||||||||
Other, net | (13,837 | ) | (2,027 | ) | (5,689 | ) | ||||||
Net cash (used in) provided by operating activities | (27,395 | ) | (85,909 | ) | 15,853 | |||||||
Cash flows provided by (used in) investing activities: | ||||||||||||
Purchases of trading securities held for investment | (8,547 | ) | (48,659 | ) | (7,635 | ) | ||||||
Proceeds from maturities of trading securities held for investment | 2,638 | 12,918 | 9,530 | |||||||||
Proceeds from sales of trading securities held for investment | 21,556 | 39,261 | 2,823 | |||||||||
Purchases ofavailable-for-sale securities | (413 | ) | (165,103 | ) | (147,337 | ) | ||||||
Proceeds from maturities ofavailable-for-sale securities | 17,102 | 48,096 | 33,369 | |||||||||
Proceeds from sales ofavailable-for-sale securities | 7,867 | 306,598 | 146,630 | |||||||||
Purchases of loans held for investment | (86,724 | ) | (52,148 | ) | (63,097 | ) | ||||||
Proceeds from repayments of loans held for investment of Fannie Mae | 20,715 | 30,958 | 39,098 | |||||||||
Proceeds from repayments of loans held for investment of consolidated trusts | 574,740 | 26,184 | 10,230 | |||||||||
Net change in restricted cash | (15,025 | ) | — | — | ||||||||
Advances to lenders | (74,130 | ) | (79,163 | ) | (81,483 | ) | ||||||
Proceeds from disposition of acquired property and preforeclosure sales | 39,682 | 22,667 | 10,905 | |||||||||
Contributions to partnership investments | (351 | ) | (688 | ) | (1,507 | ) | ||||||
Proceeds from partnership investments | 129 | 87 | 1,042 | |||||||||
Net change in federal funds sold and securities purchased under agreements to resell or similar agreements | 41,471 | 4,230 | (9,793 | ) | ||||||||
Other, net | (531 | ) | (27,503 | ) | (15,282 | ) | ||||||
Net cash provided by (used in) investing activities | 540,179 | 117,735 | (72,507 | ) | ||||||||
Cash flows (used in) provided by financing activities: | ||||||||||||
Proceeds from issuance of short-term debt of Fannie Mae | 699,346 | 1,641,119 | 1,913,685 | |||||||||
Payments to redeem short-term debt of Fannie Mae | (748,550 | ) | (1,773,977 | ) | (1,824,511 | ) | ||||||
Proceeds from issuance of long-term debt of Fannie Mae | 456,602 | 289,806 | 243,180 | |||||||||
Payments to redeem long-term debt of Fannie Mae | (397,813 | ) | (256,728 | ) | (266,758 | ) | ||||||
Proceeds from issuance of short-term debt of consolidated trusts | 12,613 | — | — | |||||||||
Payments to redeem short-term debt of consolidated trusts | (37,210 | ) | — | — | ||||||||
Proceeds from issuance of long-term debt of consolidated trusts | 263,962 | 58 | 377 | |||||||||
Payments to redeem long-term debt of consolidated trusts | (771,292 | ) | (601 | ) | (467 | ) | ||||||
Payments of cash dividends on senior preferred stock to Treasury | (7,706 | ) | (2,470 | ) | (31 | ) | ||||||
Payments of cash dividends on common and preferred stock | — | — | (1,774 | ) | ||||||||
Proceeds from issuance of common and preferred stock | — | — | 7,211 | |||||||||
Proceeds from senior preferred stock purchase agreement with Treasury | 27,700 | 59,900 | — | |||||||||
Net change in federal funds purchased and securities sold under agreements to repurchase | 49 | (54 | ) | (266 | ) | |||||||
Net cash (used in) provided by financing activities | (502,299 | ) | (42,947 | ) | 70,646 | |||||||
Net increase (decrease) in cash and cash equivalents | 10,485 | (11,121 | ) | 13,992 | ||||||||
Cash and cash equivalents at beginning of period | 6,812 | 17,933 | 3,941 | |||||||||
Cash and cash equivalents at end of period | $ | 17,297 | $ | 6,812 | $ | 17,933 | ||||||
Cash paid during the period for: | ||||||||||||
Interest | $ | 140,651 | $ | 26,344 | $ | 35,959 | ||||||
Income taxes | — | 876 | 845 | |||||||||
Non-cash activities (excluding transition-related impacts — see Note 2): | ||||||||||||
Mortgage loans acquired by assuming debt | $ | 484,699 | $ | — | $ | 167 | ||||||
Net transfers from mortgage loans held for investment of consolidated trusts to mortgage loans held for investment of Fannie Mae | 121,852 | — | — | |||||||||
Transfers from advances to lenders to investments in securities | — | 77,191 | 83,534 | |||||||||
Transfers from advances to lenders to loans held for investment of consolidated trusts | 68,385 | — | — | |||||||||
Net transfers from mortgage loans to acquired property | 66,081 | 5,707 | 4,272 |
F-5
Table of Contents
Fannie Mae Stockholders’ Equity (Deficit) | ||||||||||||||||||||||||||||||||||||||||||||||||
Retained | Accumulated | |||||||||||||||||||||||||||||||||||||||||||||||
Shares Outstanding | Additional | Earnings | Other | Non | Total | |||||||||||||||||||||||||||||||||||||||||||
Senior | Senior | Preferred | Common | Paid-In | (Accumulated | Comprehensive | Treasury | Controlling | Equity | |||||||||||||||||||||||||||||||||||||||
Preferred | Preferred | Common | Preferred | Stock | Stock | Capital | Deficit) | Loss | Stock | Interest | (Deficit) | |||||||||||||||||||||||||||||||||||||
Balance as of December 31, 2007 | — | 466 | 974 | $ | — | $ | 16,913 | $ | 593 | $ | 1,831 | $ | 33,548 | $ | (1,362 | ) | $ | (7,512 | ) | $ | 107 | $ | 44,118 | |||||||||||||||||||||||||
Cumulative effect from the adoption of the accounting standards on the fair value option for financial instruments and fair value measurement, net of tax | — | — | — | — | — | — | — | 148 | (93 | ) | — | — | 55 | |||||||||||||||||||||||||||||||||||
Balances of January 1, 2008 adjusted | — | 466 | 974 | — | 16,913 | 593 | 1,831 | 33,696 | (1,455 | ) | (7,512 | ) | 107 | 44,173 | ||||||||||||||||||||||||||||||||||
Change in investment in noncontrolling interest | — | — | — | — | — | — | — | — | — | — | 71 | 71 | ||||||||||||||||||||||||||||||||||||
Comprehensive loss: | ||||||||||||||||||||||||||||||||||||||||||||||||
Net loss | — | — | — | — | — | — | — | (58,707 | ) | — | — | (21 | ) | (58,728 | ) | |||||||||||||||||||||||||||||||||
Other comprehensive loss, net of tax effect: | ||||||||||||||||||||||||||||||||||||||||||||||||
Changes in net unrealized losses onavailable-for-sale securities (net of tax of $5,395) | — | — | — | — | — | — | — | — | (10,020 | ) | — | — | (10,020 | ) | ||||||||||||||||||||||||||||||||||
Reclassification adjustment forother-than- temporary impairments recognized in net loss (net of tax of $2,441) | — | — | — | — | — | — | — | — | 4,533 | — | — | 4,533 | ||||||||||||||||||||||||||||||||||||
Reclassification adjustment for gains included in net loss (net of tax of $36) | — | — | — | — | — | — | — | — | (67 | ) | — | — | (67 | ) | ||||||||||||||||||||||||||||||||||
Unrealized losses on guaranty assets and guaranty feebuy-ups | — | — | — | — | — | — | — | — | (342 | ) | — | — | (342 | ) | ||||||||||||||||||||||||||||||||||
Amortization of net cash flow hedging gains | — | — | — | — | — | — | — | — | 1 | — | — | 1 | ||||||||||||||||||||||||||||||||||||
Prior service cost and actuarial gains, net of amortization for defined benefit plans | — | — | — | — | — | — | — | — | (323 | ) | — | — | (323 | ) | ||||||||||||||||||||||||||||||||||
Total comprehensive loss | (64,946 | ) | ||||||||||||||||||||||||||||||||||||||||||||||
Common stock dividends ($0.75 per share) | — | — | — | — | — | — | — | (741 | ) | — | — | — | (741 | ) | ||||||||||||||||||||||||||||||||||
Senior preferred stock dividends | — | — | — | — | — | — | (31 | ) | — | — | — | — | (31 | ) | ||||||||||||||||||||||||||||||||||
Common stock issued | — | — | 94 | — | — | 49 | 2,477 | — | — | — | — | 2,526 | ||||||||||||||||||||||||||||||||||||
Common stock warrant issued | — | — | — | — | — | — | 3,518 | — | — | — | — | 3,518 | ||||||||||||||||||||||||||||||||||||
Preferred stock dividends declared | — | — | — | — | — | — | — | (1,038 | ) | — | — | — | (1,038 | ) | ||||||||||||||||||||||||||||||||||
Senior preferred stock issued | 1 | — | — | 1,000 | — | — | — | — | — | — | — | 1,000 | ||||||||||||||||||||||||||||||||||||
Preferred stock issued | — | 141 | — | — | 4,812 | — | (127 | ) | — | — | — | — | 4,685 | |||||||||||||||||||||||||||||||||||
Conversion of convertible preferred stock into common stock | — | (10 | ) | 16 | — | (503 | ) | 8 | 495 | — | — | — | — | — | ||||||||||||||||||||||||||||||||||
Treasury commitment | — | — | — | — | — | — | (4,518 | ) | — | — | — | — | (4,518 | ) | ||||||||||||||||||||||||||||||||||
Other | — | — | 1 | — | — | — | (24 | ) | — | — | 168 | — | 144 | |||||||||||||||||||||||||||||||||||
Balance as of December 31, 2008 | 1 | 597 | 1,085 | 1,000 | 21,222 | 650 | 3,621 | (26,790 | ) | (7,673 | ) | (7,344 | ) | 157 | (15,157 | ) | ||||||||||||||||||||||||||||||||
Cumulative effect from the adoption of a new accounting standard onother-than- temporary impairments, net of tax | — | — | — | — | — | — | — | 8,520 | (5,556 | ) | — | — | 2,964 | |||||||||||||||||||||||||||||||||||
Change in investment in noncontrolling interest | — | — | — | — | — | — | — | — | — | — | (13 | ) | (13 | ) | ||||||||||||||||||||||||||||||||||
Comprehensive loss: | ||||||||||||||||||||||||||||||||||||||||||||||||
Net loss | — | — | — | — | — | — | — | (71,969 | ) | — | — | (53 | ) | (72,022 | ) | |||||||||||||||||||||||||||||||||
Other comprehensive loss, net of tax effect: | ||||||||||||||||||||||||||||||||||||||||||||||||
Changes in net unrealized losses onavailable-for-sale securities (net of tax of $2,658) | — | — | — | — | — | — | — | — | 4,936 | — | — | 4,936 | ||||||||||||||||||||||||||||||||||||
Reclassification adjustment forother-than- temporary impairments recognized in net loss (net of tax of $3,441) | — | — | — | — | — | — | — | — | 6,420 | — | — | 6,420 | ||||||||||||||||||||||||||||||||||||
Reclassification adjustment for gains included in net loss (net of tax of $119) | — | — | — | — | — | — | — | — | (220 | ) | — | — | (220 | ) | ||||||||||||||||||||||||||||||||||
Unrealized gains on guaranty assets and guaranty feebuy-ups | — | — | — | — | — | — | — | — | 245 | — | — | 245 | ||||||||||||||||||||||||||||||||||||
Amortization of net cash flow hedging gains | — | — | — | — | — | — | — | — | 9 | — | — | 9 | ||||||||||||||||||||||||||||||||||||
Prior service cost and actuarial gains, net of amortization for defined benefit plans | — | — | — | — | — | — | — | — | 107 | — | — | 107 | ||||||||||||||||||||||||||||||||||||
Total comprehensive loss | (60,525 | ) | ||||||||||||||||||||||||||||||||||||||||||||||
Senior preferred stock dividends | — | — | — | — | — | — | (2,470 | ) | — | — | — | — | (2,470 | ) | ||||||||||||||||||||||||||||||||||
Increase to senior preferred liquidation preference | — | — | — | 59,900 | — | — | — | — | — | — | — | 59,900 | ||||||||||||||||||||||||||||||||||||
Conversion of convertible preferred stock into common stock | — | (17 | ) | 27 | — | (874 | ) | 14 | 860 | — | — | — | — | — | ||||||||||||||||||||||||||||||||||
Other | — | — | 1 | — | — | — | 72 | 2 | — | (54 | ) | — | 20 | |||||||||||||||||||||||||||||||||||
F-6
Table of Contents
Fannie Mae Stockholders’ Equity (Deficit) | ||||||||||||||||||||||||||||||||||||||||||||||||
Retained | Accumulated | |||||||||||||||||||||||||||||||||||||||||||||||
Shares Outstanding | Additional | Earnings | Other | Non | Total | |||||||||||||||||||||||||||||||||||||||||||
Senior | Senior | Preferred | Common | Paid-In | (Accumulated | Comprehensive | Treasury | Controlling | Equity | |||||||||||||||||||||||||||||||||||||||
Preferred | Preferred | Common | Preferred | Stock | Stock | Capital | Deficit) | Loss | Stock | Interest | (Deficit) | |||||||||||||||||||||||||||||||||||||
Balance as of December 31, 2009 | 1 | 580 | 1,113 | $ | 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 | ||||||||||||||||||||||||||||||||||
Balance as of January 1, 2010, adjusted | 1 | 580 | 1,113 | 60,900 | 20,348 | 664 | 2,083 | (83,531 | ) | (5,126 | ) | (7,398 | ) | 77 | (11,983 | ) | ||||||||||||||||||||||||||||||||
Change in investment in noncontrolling interest | — | — | — | — | — | — | — | — | — | — | 9 | 9 | ||||||||||||||||||||||||||||||||||||
Comprehensive loss: | ||||||||||||||||||||||||||||||||||||||||||||||||
Net loss | — | — | — | — | — | — | — | (14,014 | ) | — | — | (4 | ) | (14,018 | ) | |||||||||||||||||||||||||||||||||
Other comprehensive loss, net of tax effect: | ||||||||||||||||||||||||||||||||||||||||||||||||
Changes in net unrealized losses onavailable-for-sale securities, (net of tax of $1,644) | — | — | — | — | — | — | — | — | 3,054 | — | — | 3,054 | ||||||||||||||||||||||||||||||||||||
Reclassification adjustment forother-than- temporary impairments recognized in net loss (net of tax of $253) | — | — | — | — | — | — | — | — | 469 | — | — | 469 | ||||||||||||||||||||||||||||||||||||
Reclassification adjustment for gains included in net loss (net of tax of $10) | — | — | — | — | — | — | — | — | (19 | ) | — | — | (19 | ) | ||||||||||||||||||||||||||||||||||
Unrealized gains on guaranty assets and guaranty feebuy-ups | — | — | — | — | — | — | — | — | 1 | — | — | 1 | ||||||||||||||||||||||||||||||||||||
Prior service cost and actuarial gains, net of amortization for defined benefit plans | — | — | — | — | — | — | — | — | (61 | ) | — | — | (61 | ) | ||||||||||||||||||||||||||||||||||
Total comprehensive loss | (10,574 | ) | ||||||||||||||||||||||||||||||||||||||||||||||
Senior preferred stock dividends | — | — | — | — | — | — | (2,265 | ) | (5,441 | ) | — | — | — | (7,706 | ) | |||||||||||||||||||||||||||||||||
Increase to senior preferred liquidation preference | — | — | — | 27,700 | — | — | — | — | — | — | — | 27,700 | ||||||||||||||||||||||||||||||||||||
Conversion of convertible preferred stock into common stock | — | (3 | ) | 5 | — | (144 | ) | 3 | 141 | — | — | — | — | — | ||||||||||||||||||||||||||||||||||
Other | — | — | 1 | — | — | — | 41 | — | — | (4 | ) | — | 37 | |||||||||||||||||||||||||||||||||||
Balance as of December 31, 2010 | 1 | 577 | 1,119 | $ | 88,600 | $ | 20,204 | $ | 667 | $ | — | $ | (102,986 | ) | $ | (1,682 | ) | $ | (7,402 | ) | $ | 82 | $ | (2,517 | ) | |||||||||||||||||||||||
F-7
Table of Contents
1. | Summary of Significant Accounting Policies |
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
• | we revised our methodology to take into account trends in management actions taken before cash collections, which resulted in our allowance for loan losses being $1.1 billion higher than it would have been under the previous methodology; and | |
• | agreements with seller/servicers that addressed their loan repurchase and other obligations to us impacted our expectation of future make-whole payments, resulting in a decrease in our allowance for loan losses of approximately $700 million. |
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
As of December 31, | ||||||||
2010 | 2009 | |||||||
(Dollars in millions) | ||||||||
Of Fannie Mae: | ||||||||
Investments in securities: | ||||||||
Unamortized premiums and other cost basis adjustments, net | $ | 938 | $ | 1,185 | ||||
Other-than-temporary impairments(1) | (3,057 | ) | (821 | ) | ||||
Mortgage loansheld-for-investment: | ||||||||
Unamortized discounts and other cost basis adjustments of loans in portfolio, net, excluding acquired credit-impaired loans and hedged mortgage assets(2) | (17,056 | ) | (10,332 | ) | ||||
Unamortized discount on acquired credit-impaired loans(3) | (3,240 | ) | (11,467 | ) | ||||
Unamortized premium on hedged mortgage assets(4) | 598 | 806 | ||||||
Other assets(5) | (88 | ) | (254 | ) | ||||
Total | $ | (21,905 | ) | $ | (20,883 | ) | ||
Of consolidated trusts: | ||||||||
Unamortized premiums, net in loans of consolidated trusts | $ | 11,785 | ||||||
Unamortized premiums, net in debt of consolidated trusts | (16,803 | ) | ||||||
Net unamortized premiums from consolidations | $ | (5,018 | ) | |||||
(1) | Represents the increase in expected cash flows since original impairment that we currently expect will be recorded as interest income in future periods. This amount is calculated as the excess of expected cash flows, discounted at the internal rate of return at acquisition, over the amortized cost basis of the security. To reduce costs associated with maintaining our internal model and decrease the operational risk, in the fourth quarter of 2010, we ceased to use our internally developed model and began using a third-party model as the source for cash flows used to assessother-than-temporary impairments on Alt-A and subprime private-label securities. This model change resulted in more favorable cash flow estimates that, based on estimates as of December 31, 2010, increased the amount that we will recognize prospectively as interest income over the remaining life of the securities by $2.5 billion. | |
(2) | Includes the unamortized balance of the fair value discounts that were recorded upon acquisition of credit-impaired loans that have been subsequently modified as TDRs, which accretes into interest income for TDRs that are placed on accrual status. | |
(3) | Represents the unamortized balance of the fair value discounts that were recorded upon acquisition and consolidation that may accrete into interest income for acquired credit-impaired loans that are placed on accrual status. | |
(4) | Represents the net premium on mortgage assets designated for hedge accounting that are attributable to changes in interest rates and will be amortized through interest income over the life of the hedged assets. | |
(5) | Represents the fair value discount related to unsecured HomeSaver Advance loans that will accrete into interest income based on the contractual terms of the loans for loans on accrual status. |
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
As of December 31, | ||||||||
2010 | 2009 | |||||||
(Dollars in millions) | ||||||||
Cash collateral accepted(1) | $ | 3,101 | $ | 4,052 | ||||
Cash collateral pledged | $ | 5,884 | $ | 5,434 | ||||
Cash collateral pledged related to derivatives activities | 3,453 | 5,437 | ||||||
Total cash collateral pledged | $ | 9,337 | $ | 10,871 | ||||
(1) | Includes restricted cash of $2.5 billion and $3.0 billion as of December 31, 2010 and 2009, respectively. |
As of December 31, | ||||||||
2010 | 2009 | |||||||
(Dollars in millions) | ||||||||
Non-cash collateral pledged where the secured party has the right to sell or repledge: | ||||||||
Available-for-sale securities | $ | — | $ | 1,148 | ||||
Held-for-investment loans of consolidated trusts | 2,522 | 1,947 | ||||||
Non-cash collateral accepted with the right to sell or repledge(1) | $ | 7,500 | $ | 67 | ||||
Non-cash collateral accepted without the right to sell or repledge | 6,744 | 6,285 |
(1) | None of this collateral was sold or repledged as of December 31, 2010 and 2009. |
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
For the Year Ended December 31, | ||||||||||||
2010 | 2009 | 2008 | ||||||||||
(Dollars in millions) | ||||||||||||
Derivatives fair value losses, net | $ | (3,000 | ) | $ | (6,350 | ) | $ | (15,416 | ) | |||
Trading securities gains (losses), net | 2,692 | 3,744 | (7,040 | ) | ||||||||
Hedged mortgage asset gains, net(1) | — | — | 2,154 | |||||||||
Debt foreign exchange gains (losses), net | (77 | ) | (173 | ) | 230 | |||||||
Debt fair value gain (losses), net | 5 | (32 | ) | (57 | ) | |||||||
Mortgage loans fair value losses, net | (131 | ) | — | — | ||||||||
Fair value losses, net | $ | (511 | ) | $ | (2,811 | ) | $ | (20,129 | ) | |||
(1) | Represents adjustments to the carrying value of mortgage assets designated for hedge accounting that are attributable to changes in interest rates. |
As of December 31, 2009 | ||||||||
Before | After | |||||||
Reclassification | Reclassification | |||||||
(Dollars in millions) | ||||||||
Reclassified lines to: | ||||||||
Other assets: | ||||||||
Advances to lenders | $ | 5,449 | $ | |||||
Derivative assets, at fair value | 1,474 | |||||||
Guaranty assets | 8,356 | |||||||
Deferred tax assets, net | 909 | |||||||
Partnership investments | 2,372 | |||||||
Other assets | 11,559 | 30,119 | ||||||
Total other assets | $ | 30,119 | $ | 30,119 | ||||
Other liabilities: | ||||||||
Derivatives liabilities, at fair value | $ | 1,029 | $ | |||||
Guaranty obligations | 13,996 | |||||||
Partnership liabilities | 2,541 | |||||||
Other liabilities | 7,020 | 24,586 | ||||||
Total other liabilities | $ | 24,586 | $ | 24,586 | ||||
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
For the Year Ended December 31, | ||||||||||||||||
2009 | 2008 | |||||||||||||||
Before | After | Before | After | |||||||||||||
Reclassification | Reclassification | Reclassification | Reclassification | |||||||||||||
(Dollars in millions) | ||||||||||||||||
Reclassified lines to: | ||||||||||||||||
Amortization of cost basis adjustments: | ||||||||||||||||
Amortization of investment cost basis adjustments | $ | (687 | ) | $ | $ | (400 | ) | $ | ||||||||
Amortization of debt cost basis adjustments | 3,255 | 8,589 | ||||||||||||||
Amortization of cost basis adjustments | $ | 2,568 | $ | 2,568 | $ | 8,189 | $ | 8,189 | ||||||||
Valuation (gains) losses: | ||||||||||||||||
Derivatives fair value adjustments | $ | (1,105 | ) | $ | $ | (1,239 | ) | $ | ||||||||
Valuation losses | 4,530 | 3,425 | 13,964 | 12,725 | ||||||||||||
Total valuation (gains) losses | $ | 3,425 | $ | 3,425 | $ | 12,725 | $ | 12,725 | ||||||||
Other, net: | ||||||||||||||||
Debt extinguishment losses, net | $ | 325 | $ | $ | 222 | $ | ||||||||||
Debt foreign currency transaction (gains) losses, net | 173 | (230 | ) | |||||||||||||
Net change in: | ||||||||||||||||
Guaranty assets | (1,072 | ) | 2,089 | |||||||||||||
Guaranty obligations | (903 | ) | (5,312 | ) | ||||||||||||
Other, net | (550 | ) | (2,027 | ) | (2,458 | ) | (5,689 | ) | ||||||||
Total other, net | $ | (2,027 | ) | $ | (2,027 | ) | $ | (5,689 | ) | $ | (5,689 | ) | ||||
2. | Adoption of the New Accounting Standards on the Transfers of Financial Assets and Consolidation of Variable Interest Entities |
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
• | A net decrease in our accumulated deficit of $6.7 billion, primarily driven by the reversal of the guaranty assets and guaranty obligations related to the newly consolidated trusts; and | |
• | A net increase in our accumulated other comprehensive loss of $3.4 billion primarily driven by the reversal of net unrealized gains related to our investments in Fannie Mae MBS classified as AFS. |
• | Net recognition of assets and liabilities of newly consolidated entities. At the transition date, trust assets and liabilities required to be consolidated were recognized in our consolidated balance sheet at their unpaid principal balance plus any accrued interest. An allowance for loan losses was established for the newly consolidated mortgage loans. The reserve for guaranty losses previously established for such loans was eliminated. Our investments in Fannie Mae MBS issued by the newly consolidated trusts were eliminated along with the related accrued interest receivable and unrealized gains or losses at the transition date. | |
• | Accounting for portfolio securitizations. At the transition date, we reclassified the majority of our HFS loans to HFI. Under the new accounting standards, the transfer of mortgage loans to a trust and the sale of the related securities in a portfolio securitization transaction will generally not qualify for sale treatment. As such, mortgage loans acquired with the intent to securitize will generally be classified as held for investment in our consolidated balance sheets both prior to and subsequent to their securitization. | |
• | Elimination of accounting for guarantees. At the transition date, a significant portion of our guaranty-related assets and liabilities were derecognized from our consolidated balance sheet. Upon consolidation |
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
As of | As of | |||||||||||
December 31, | Transition | January 1, | ||||||||||
2009 | Impact | 2010 | ||||||||||
(Dollars in millions) | ||||||||||||
Assets | ||||||||||||
Cash and cash equivalents | $ | 6,812 | $ | (19 | ) | $ | 6,793 | |||||
Restricted cash | 3,070 | 45,583 | 48,653 | |||||||||
Federal funds sold and securities purchased under agreements to resell or similar arrangements | 53,684 | (316 | ) | 53,368 | ||||||||
Investments in securities: | ||||||||||||
Trading, at fair value | 111,939 | (66,251 | ) | 45,688 | ||||||||
Available-for-sale, at fair value | 237,728 | (122,328 | ) | 115,400 | ||||||||
Total investments in securities | 349,667 | (188,579 | ) | 161,088 | ||||||||
Mortgage loans: | ||||||||||||
Loans held for sale, at lower of cost or fair value | 18,462 | (18,115 | ) | 347 | ||||||||
Loans held for investment, at amortized cost: | ||||||||||||
Of Fannie Mae | 256,434 | 3,753 | 260,187 | |||||||||
Of consolidated trusts | 129,590 | 2,595,321 | 2,724,911 | |||||||||
Total loans held for investment | 386,024 | 2,599,074 | 2,985,098 | |||||||||
Allowance for loan losses | (9,925 | ) | (43,576 | ) | (53,501 | ) | ||||||
Total loans held for investment, net of allowance | 376,099 | 2,555,498 | 2,931,597 | |||||||||
Total mortgage loans | 394,561 | 2,537,383 | 2,931,944 | |||||||||
Accrued interest receivable: | ||||||||||||
Of Fannie Mae | 3,774 | (659 | ) | 3,115 | ||||||||
Of consolidated trusts | 519 | 16,329 | 16,848 | |||||||||
Allowance for accrued interest receivable | (536 | ) | (6,989 | ) | (7,525 | ) | ||||||
Total accrued interest receivable, net of allowance | 3,757 | 8,681 | 12,438 | |||||||||
Acquired property, net | 9,142 | — | 9,142 | |||||||||
Servicer and MBS trust receivable | 18,329 | (17,143 | ) | 1,186 | ||||||||
Other assets | 30,119 | (8,496 | ) | 21,623 | ||||||||
Total assets | $ | 869,141 | $ | 2,377,094 | $ | 3,246,235 | ||||||
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
As of | As of | |||||||||||
December 31, | Transition | January 1, | ||||||||||
2009 | Impact | 2010 | ||||||||||
(Dollars in millions) | ||||||||||||
Liabilities and Equity (Deficit) | ||||||||||||
Liabilities: | ||||||||||||
Accrued interest payable: | ||||||||||||
Of Fannie Mae | $ | 4,951 | $ | 8 | $ | 4,959 | ||||||
Of consolidated trusts | 29 | 10,564 | 10,593 | |||||||||
Federal funds purchased and securities sold under agreements to repurchase | — | — | — | |||||||||
Short-term debt: | ||||||||||||
Of Fannie Mae | 200,437 | — | 200,437 | |||||||||
Of consolidated trusts | — | 6,425 | 6,425 | |||||||||
Long-term debt: | ||||||||||||
Of Fannie Mae | 567,950 | (205 | ) | 567,745 | ||||||||
Of consolidated trusts | 6,167 | 2,442,280 | 2,448,447 | |||||||||
Reserve for guaranty losses | 54,430 | (54,103 | ) | 327 | ||||||||
Servicer and MBS trust payable | 25,872 | (16,600 | ) | 9,272 | ||||||||
Other liabilities | 24,586 | (14,573 | ) | 10,013 | ||||||||
Total liabilities | 884,422 | 2,373,796 | 3,258,218 | |||||||||
Fannie Mae’s stockholders’ equity (deficit): | ||||||||||||
Senior preferred stock | 60,900 | — | 60,900 | |||||||||
Preferred stock | 20,348 | — | 20,348 | |||||||||
Common stock | 664 | — | 664 | |||||||||
Additional paid-in capital | 2,083 | — | 2,083 | |||||||||
Accumulated deficit | (90,237 | ) | 6,706 | (83,531 | ) | |||||||
Accumulated other comprehensive loss | (1,732 | ) | (3,394 | ) | (5,126 | ) | ||||||
Treasury stock | (7,398 | ) | — | (7,398 | ) | |||||||
Total Fannie Mae stockholders’ deficit | (15,372 | ) | 3,312 | (12,060 | ) | |||||||
Noncontrolling interest | 91 | (14 | ) | 77 | ||||||||
Total equity (deficit) | (15,281 | ) | 3,298 | (11,983 | ) | |||||||
Total liabilities and equity (deficit) | $ | 869,141 | $ | 2,377,094 | $ | 3,246,235 | ||||||
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
As of December 31, | Transition | As of January 1, | ||||||||||
2009 | Impact | 2010 | ||||||||||
(Dollars in millions) | ||||||||||||
Mortgage-related securities: | ||||||||||||
Fannie Mae | $ | 229,169 | $ | (189,360 | ) | $ | 39,809 | |||||
Freddie Mac | 42,551 | — | 42,551 | |||||||||
Ginnie Mae | 1,354 | (21 | ) | 1,333 | ||||||||
Alt-A private-label securities | 15,505 | 533 | 16,038 | |||||||||
Subprime private-label securities | 12,526 | (118 | ) | 12,408 | ||||||||
CMBS | 22,528 | — | 22,528 | |||||||||
Mortgage revenue bonds | 13,446 | 21 | 13,467 | |||||||||
Other mortgage-related securities | 3,706 | 366 | 4,072 | |||||||||
Total mortgage-related securities | 340,785 | (188,579 | ) | 152,206 | ||||||||
Total non-mortgage-related securities | 8,882 | — | 8,882 | |||||||||
Total investments in securities | $ | 349,667 | $ | (188,579 | ) | $ | 161,088 | |||||
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
As of December 31, 2009 | Transition Impact | As of January 1, 2010 | ||||||||||||||||||||||
Of Fannie | Of Consolidated | Of Fannie | Of Consolidated | Of Fannie | Of Consolidated | |||||||||||||||||||
Mae | Trusts | Mae | Trusts | Mae | Trusts | |||||||||||||||||||
(Dollars in millions) | ||||||||||||||||||||||||
Single-family: | ||||||||||||||||||||||||
Government insured or guaranteed | $ | 51,454 | $ | 945 | $ | — | $ | 1 | $ | 51,454 | $ | 946 | ||||||||||||
Conventional: | ||||||||||||||||||||||||
Long-term fixed-rate | 90,245 | 89,409 | (5,272 | ) | 2,029,932 | 84,973 | 2,119,341 | |||||||||||||||||
Intermediate-term fixed-rate | 8,069 | 21,405 | (178 | ) | 318,329 | 7,891 | 339,734 | |||||||||||||||||
Adjustable-rate | 16,889 | 17,713 | (2 | ) | 190,706 | 16,887 | 208,419 | |||||||||||||||||
Total single-family conventional | 115,203 | 128,527 | (5,452 | ) | 2,538,967 | 109,751 | 2,667,494 | |||||||||||||||||
Total single-family | $ | 166,657 | $ | 129,472 | $ | (5,452 | ) | $ | 2,538,968 | $ | 161,205 | $ | 2,668,440 | |||||||||||
Multifamily: | ||||||||||||||||||||||||
Government insured or guaranteed | $ | 585 | $ | — | $ | — | $ | — | $ | 585 | $ | — | ||||||||||||
Conventional: | ||||||||||||||||||||||||
Long-term fixed-rate | 4,937 | 790 | — | 3,752 | 4,937 | 4,542 | ||||||||||||||||||
Intermediate-term fixed-rate | 81,456 | 10,304 | — | 35,672 | 81,456 | 45,976 | ||||||||||||||||||
Adjustable-rate | 21,535 | 807 | — | 5,603 | 21,535 | 6,410 | ||||||||||||||||||
Total multifamily conventional | 107,928 | 11,901 | — | 45,027 | 107,928 | 56,928 | ||||||||||||||||||
Total multifamily | $ | 108,513 | $ | 11,901 | $ | — | $ | 45,027 | $ | 108,513 | $ | 56,928 | ||||||||||||
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
F-42
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
F-43
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
F-44
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
3. | Consolidations and Transfers of Financial Assets |
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
F-46
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
As of December 31, | ||||||||
2010(1) | 2009(1) | |||||||
(Dollars in millions) | ||||||||
Assets: | ||||||||
Cash and cash equivalents | $ | 348 | $ | 2,092 | ||||
Restricted cash | 59,619 | — | ||||||
Trading securities | 21 | 5,599 | ||||||
Available-for-sale securities | 1,055 | 10,513 | ||||||
Loans held for sale | 661 | 11,646 | ||||||
Loans held for investment | 2,577,133 | 129,590 | ||||||
Accrued interest receivable | 9,349 | 519 | ||||||
Servicer and MBS trust receivable | 593 | 466 | ||||||
Other assets(2) | — | 451 | ||||||
Total assets of consolidated VIEs | $ | 2,648,779 | $ | 160,876 | ||||
Liabilities: | ||||||||
Accrued interest payable | $ | 9,712 | $ | 29 | ||||
Short-term debt | 5,359 | — | ||||||
Long-term debt | 2,411,597 | 6,167 | ||||||
Servicer and MBS trust payable | 562 | 850 | ||||||
Other liabilities(3) | 331 | 385 | ||||||
Total liabilities of consolidated VIEs | $ | 2,427,561 | $ | 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. |
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
As of December 31, | ||||||||
2010 | 2009 | |||||||
(Dollars in millions) | ||||||||
Mortgage-backed trusts | $ | 732,368 | $ | 3,044,516 | ||||
Asset-backed trusts | 363,721 | 484,703 | ||||||
Limited partnership investments | 13,102 | 13,085 | ||||||
Mortgage revenue bonds and other credit-enhanced bonds | 8,019 | 8,061 | ||||||
Total assets of unconsolidated VIEs | $ | 1,117,210 | $ | 3,550,365 | ||||
As of December 31, | ||||||||||||
2010 | 2009 | |||||||||||
Carrying | Maximum | Carrying | ||||||||||
Amount | Exposure to Loss | Amount(1) | ||||||||||
(Dollars in millions) | ||||||||||||
Assets: | ||||||||||||
Available-for-sale securities(2) | $ | 84,770 | $ | 67,367 | $ | 190,135 | ||||||
Trading securities(2) | 29,342 | 27,627 | 91,222 | |||||||||
Guaranty assets | 246 | — | 8,195 | |||||||||
Partnership investments | 94 | 319 | 144 | |||||||||
Servicer and MBS trust receivable | 11 | 11 | 15,903 | |||||||||
Other assets | — | — | 1,320 | |||||||||
Total assets related to our interests in unconsolidated VIEs | $ | 114,463 | $ | 95,324 | $ | 306,919 | ||||||
Liabilities: | ||||||||||||
Reserve for guaranty losses | $ | 291 | $ | — | $ | 52,703 | ||||||
Guaranty obligations | 469 | 21,318 | 13,504 | |||||||||
Partnership liabilities | 170 | — | 325 | |||||||||
Servicer and MBS trust payable | 13 | 2 | 20,371 | |||||||||
Other liabilities | — | — | 818 | |||||||||
Total liabilities related to our interest in unconsolidated VIEs | $ | 943 | $ | 21,320 | $ | 87,721 | ||||||
(1) | Includes VIEs created through lender swaps and portfolio securitization transactions. Our total maximum exposure to loss relating to unconsolidated VIEs was $2.6 trillion as of December 31, 2009. | |
(2) | Contains securities exposed through consolidation which may also represent an interest in other unconsolidated VIEs. |
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Fannie Mae | ||||||||
Single-class | ||||||||
MBS & Fannie | REMICS & | |||||||
Mae Megas | SMBS | |||||||
(Dollars in millions) | ||||||||
As of December 31, 2010 | ||||||||
Unpaid principal balance | $ | 63 | $ | 15,771 | ||||
Fair value | 68 | 16,745 | ||||||
Weighted-average coupon | 6.58 | % | 6.28 | % | ||||
Weighted-average loan age | 4.2 years | 4.4 years | ||||||
Weighted-average maturity | 25.6 years | 22.0 years | ||||||
As of December 31, 2009 | ||||||||
Unpaid principal balance | $ | 34,260 | $ | 19,472 | ||||
Fair value | 35,455 | 20,224 | ||||||
Weighted-average coupon | 5.62 | % | 6.82 | % | ||||
Weighted-average loan age | 2.9 years | 4.6 years | ||||||
Weighted-average maturity | 24.2 years | 26.1 years |
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Unpaid | Principal Amount of | |||||||
Principal Balance | Delinquent Loans | |||||||
(Dollars in millions) | ||||||||
As of December 31, 2010 | ||||||||
Loans held for investment | ||||||||
Of Fannie Mae | $ | 423,686 | $ | 141,342 | ||||
Of consolidated trusts | 2,565,347 | 34,080 | ||||||
Loans held for sale | 964 | 127 | ||||||
Securitized loans | 2,147 | 78 | ||||||
Total loans managed | $ | 2,992,144 | $ | 175,627 | ||||
As of December 31, 2009 | ||||||||
Loans held for investment | $ | 395,551 | $ | 51,051 | ||||
Loans held for sale | 20,992 | 140 | ||||||
Securitized loans | 187,922 | 5,161 | ||||||
Total loans managed | $ | 604,465 | $ | 56,352 | ||||
4. | Mortgage Loans |
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
As of | ||||||||||||||||||||||||
December 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 | $ | 328,824 | $ | 2,490,623 | $ | 2,819,447 | $ | 166,657 | $ | 129,472 | $ | 296,129 | ||||||||||||
Multifamily | 95,157 | 75,393 | 170,550 | 108,513 | 11,901 | 120,414 | ||||||||||||||||||
Total unpaid principal balance of mortgage loans | 423,981 | 2,566,016 | 2,989,997 | 275,170 | 141,373 | 416,543 | ||||||||||||||||||
Unamortized premiums (discounts) and other cost basis adjustments, net | (16,470 | ) | 11,786 | (4,684 | ) | (11,196 | ) | 28 | (11,168 | ) | ||||||||||||||
Lower of cost or fair value adjustments on loans held for sale | (28 | ) | (9 | ) | (37 | ) | (729 | ) | (160 | ) | (889 | ) | ||||||||||||
Allowance for loan losses for loans held for investment | (48,530 | ) | (13,026 | ) | (61,556 | ) | (8,078 | ) | (1,847 | ) | (9,925 | ) | ||||||||||||
Total mortgage loans | $ | 358,953 | $ | 2,564,767 | $ | 2,923,720 | $ | 255,167 | $ | 139,394 | $ | 394,561 | ||||||||||||
(1) | Certain prior period amounts have been reclassified to conform to the current period presentation. |
As of December 31, 2010(1) | ||||||||||||||||||||||||||||||||
Recorded | ||||||||||||||||||||||||||||||||
Investment in | ||||||||||||||||||||||||||||||||
Loans Over | Recorded | |||||||||||||||||||||||||||||||
90 Days | Investment | |||||||||||||||||||||||||||||||
Delinquent | in | |||||||||||||||||||||||||||||||
30 - 59 Days | 60 - 89 Days | Seriously | Total | and Accruing | Nonaccrual | |||||||||||||||||||||||||||
Delinquent | Delinquent | Delinquent(2) | Delinquent | Current | Total | Interest | Loans | |||||||||||||||||||||||||
(Dollars in millions) | ||||||||||||||||||||||||||||||||
Single-Family: | ||||||||||||||||||||||||||||||||
Primary(3) | $ | 47,048 | $ | 18,055 | $ | 93,302 | $ | 158,405 | $ | 2,299,080 | $ | 2,457,485 | $ | 139 | $ | 110,758 | ||||||||||||||||
Government(4) | 125 | 58 | 371 | 554 | 51,930 | 52,484 | 354 | — | ||||||||||||||||||||||||
Alt-A | 8,547 | 4,097 | 37,557 | 50,201 | 156,951 | 207,152 | 21 | 41,566 | ||||||||||||||||||||||||
Other(5) | 3,785 | 1,831 | 15,290 | 20,906 | 84,473 | 105,379 | 80 | 17,022 | ||||||||||||||||||||||||
Total Single-Family | 59,505 | 24,041 | 146,520 | 230,066 | 2,592,434 | 2,822,500 | 594 | 169,346 | ||||||||||||||||||||||||
Multifamily(6) | 382 | NA | 1,132 | 1,514 | 171,000 | 172,514 | — | 1,012 | ||||||||||||||||||||||||
Total | $ | 59,887 | $ | 24,041 | $ | 147,652 | $ | 231,580 | $ | 2,763,434 | $ | 2,995,014 | $ | 594 | $ | 170,358 | ||||||||||||||||
(1) | Recorded investment consists of unpaid principal balance, net of unamortized premiums and discounts, other cost basis and fair value adjustments and accrued interest receivable on HFI loans, excluding loans for which we have elected the fair value option. | |
(2) | Single-family seriously delinquent loans are loans that are 90 days or more past due or in the foreclosure process. Multifamily seriously delinquent loans are loans that are 60 days or more past due. |
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(3) | Consists of mortgage loans that are not included in other loan classes. | |
(4) | Consists of mortgage loans guaranteed or insured, in whole or in part, by the U.S. government or one of its agencies that are not Alt-A. Primarily consists of reverse mortgages which due to their nature are not aged and included in the current column. | |
(5) | Includes loans with higher-risk loan characteristics, such as interest-only loans andnegative-amortizing loans that are neither government nor Alt-A. | |
(6) | Multifamily loans60-89 days delinquent are included in the seriously delinquent column. |
As of December 31, 2010 | For the Year Ended December 31, 2010 | |||||||||||||||||||||||||||
Related | ||||||||||||||||||||||||||||
Allowance for | Interest | |||||||||||||||||||||||||||
Unpaid | Total | Related | Accrued | Average | Total Interest | Income | ||||||||||||||||||||||
Principal | Recorded | Allowance for | Interest | Recorded | Income | Recognized on | ||||||||||||||||||||||
Balance | Investment(1) | Loan Losses | Receivable | Investment | Recognized(2) | a Cash Basis | ||||||||||||||||||||||
(Dollars in millions) | ||||||||||||||||||||||||||||
Individually impaired loans: | ||||||||||||||||||||||||||||
With related allowance recorded | ||||||||||||||||||||||||||||
Single-family | ||||||||||||||||||||||||||||
Primary(3) | $ | 99,838 | $ | 93,024 | $ | 23,565 | $ | 772 | $ | 81,258 | $ | 3,314 | $ | 1,470 | ||||||||||||||
Government(4) | 240 | 248 | 38 | 7 | 141 | 9 | — | |||||||||||||||||||||
Alt-A | 30,932 | 28,253 | 9,592 | 368 | 25,361 | 897 | 407 | |||||||||||||||||||||
Other(5) | 14,429 | 13,689 | 4,479 | 137 | 12,094 | 384 | 204 | |||||||||||||||||||||
Total single-family | 145,439 | 135,214 | 37,674 | 1,284 | 118,854 | 4,604 | 2,081 | |||||||||||||||||||||
Multifamily | 2,372 | 2,371 | 556 | 23 | 1,496 | 202 | 10 | |||||||||||||||||||||
Total individually impaired loans with related allowance recorded | 147,811 | 137,585 | 38,230 | 1,307 | 120,350 | 4,806 | 2,091 | |||||||||||||||||||||
With no related allowance recorded(6) | ||||||||||||||||||||||||||||
Single-family | ||||||||||||||||||||||||||||
Primary(3) | 10,586 | 7,237 | — | — | 7,860 | 336 | 55 | |||||||||||||||||||||
Government(4) | 19 | 13 | — | — | 11 | 8 | — | |||||||||||||||||||||
Alt-A | 3,600 | 1,884 | — | — | 2,091 | 121 | 20 | |||||||||||||||||||||
Other(5) | 879 | 512 | — | — | 589 | 36 | 7 | |||||||||||||||||||||
Total single-family | 15,084 | 9,646 | — | — | �� | 10,551 | 501 | 82 | ||||||||||||||||||||
Multifamily | 789 | 811 | — | — | 642 | 71 | 5 | |||||||||||||||||||||
Total individually impaired loans with no related allowance recorded | 15,873 | 10,457 | — | — | 11,193 | 572 | 87 | |||||||||||||||||||||
Total individually impaired loans(7) | $ | 163,684 | $ | 148,042 | $ | 38,230 | $ | 1,307 | $ | 131,543 | $ | 5,378 | $ | 2,178 | ||||||||||||||
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(1) | Consists of unpaid principal balance, net of unamortized premiums and discounts, other cost basis and fair value adjustments and accrued interest receivable on HFI loans, excluding loans for which we have elected the fair value option. | |
(2) | Total single-family interest income recognized of $5.1 billion consists of $3.9 billion of contractual interest and $1.3 billion of effective yield adjustments. | |
(3) | Consists of mortgage loans that are not included in other loan classes. | |
(4) | Consists of mortgage loans guaranteed or insured, in whole or in part, by the U.S. government or one of its agencies that are not Alt-A. | |
(5) | Includes loans with higher-risk characteristics, such as interest-only loans andnegative-amortizing loans that are neither government nor Alt-A. | |
(6) | The discounted cash flows, collateral value or fair value equals or exceeds the carrying value of the loan and, as such, no valuation allowance is required. | |
(7) | Includes single-family loans restructured in a TDR with a recorded investment of $140.1 billion as of December 31, 2010. Includes multifamily loans restructured in a TDR with a recorded investment of $939 million as of December 31, 2010. |
As of December 31, 2009 | ||||||||||||
Recorded | ||||||||||||
Investment | Allowance | Net Investment | ||||||||||
(Dollars in millions) | ||||||||||||
Impaired loans:(1) | ||||||||||||
With valuation allowance | $ | 27,050 | $ | 5,995 | $ | 21,055 | ||||||
Without valuation allowance(2) | 8,420 | — | 8,420 | |||||||||
Total | $ | 35,470 | $ | 5,995 | $ | 29,475 | ||||||
(1) | Includes single-family loans restructured in a TDR with a recorded investment of $23.9 billion as of December 31, 2009. Includes multifamily loans restructured in a TDR with a recorded investment of $51 million as of December 31, 2009. | |
(2) | The discounted cash flows, collateral value or fair value equals or exceeds the carrying value of the loan and, as such, no valuation allowance is required. |
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
As of December 31, | ||||||||
2010 | 2009 | |||||||
(Dollars in millions) | ||||||||
Outstanding contractual balance | $ | 8,519 | $ | 24,106 | ||||
Carrying amount: | ||||||||
Loans on accrual status | 2,029 | 2,560 | ||||||
Loans on nonaccrual status | 2,449 | 8,952 | ||||||
Total carrying amount of loans | $ | 4,478 | $ | 11,512 | ||||
For the Year Ended December 31, | ||||||||||||
2010 | 2009 | 2008 | ||||||||||
(Dollars in millions) | ||||||||||||
Contractually required principal and interest payments at acquisition(1) | $ | 321 | $ | 39,197 | $ | 5,034 | ||||||
Nonaccretable difference | 154 | 9,234 | 783 | |||||||||
Cash flows expected to be collected at acquisition(1) | 167 | 29,963 | 4,251 | |||||||||
Accretable yield | 76 | 13,852 | 1,805 | |||||||||
Initial investment in acquired credit-impaired loans at acquisition | $ | 91 | $ | 16,111 | $ | 2,446 | ||||||
(1) | Contractually required principal and interest payments at acquisition and cash flows expected to be collected at acquisition are adjusted for the estimated timing and amount of prepayments. |
For the Year Ended December 31, | ||||||||||||
2010 | 2009 | 2008 | ||||||||||
(Dollars in millions) | ||||||||||||
Beginning balance, January 1 | $ | 10,117 | $ | 1,559 | $ | 2,252 | ||||||
Additions | 76 | 13,852 | 1,805 | |||||||||
Accretion | (314 | ) | (215 | ) | (279 | ) | ||||||
Reductions(1) | (6,067 | ) | (13,693 | ) | (2,294 | ) | ||||||
Changes in estimated cash flows(2) | (1,163 | ) | 8,729 | 420 | ||||||||
Reclassifications to nonaccretable difference(3) | (237 | ) | (115 | ) | (345 | ) | ||||||
Ending balance, December 31 | $ | 2,412 | $ | 10,117 | $ | 1,559 | ||||||
(1) | Reductions are the result of liquidations and loan modifications due to TDRs. | |
(2) | Represents changes in expected cash flows due to changes in prepayment and other assumptions. | |
(3) | Represents changes in expected cash flows due to changes in credit quality or credit assumptions. |
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
For the Year Ended December 31, | ||||||||||||
2010 | 2009 | 2008 | ||||||||||
(Dollars in millions) | ||||||||||||
Accretion of fair value discount(1) | $ | 1,024 | $ | 405 | $ | 158 | ||||||
Interest income on loans returned to accrual status or subsequently modified as TDRs | 1,148 | 214 | 476 | |||||||||
Total interest income recognized on acquired credit-impaired loans | $ | 2,172 | $ | 619 | $ | 634 | ||||||
Increase in “Provision for loan losses” subsequent to the acquisition of credit-impaired loans | $ | 963 | $ | 691 | $ | 185 |
(1) | Represents accretion of the fair value discount that was recorded on acquired credit-impaired loans. |
5. | Allowance for Loan Losses and Reserve for Guaranty Losses |
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
For the Year Ended December 31, | ||||||||||||||||||||
2010 | 2009 | 2008 | ||||||||||||||||||
Of | Of | |||||||||||||||||||
Fannie | Consolidated | |||||||||||||||||||
Mae | Trusts | Total | ||||||||||||||||||
(Dollars in millions) | ||||||||||||||||||||
Single-family allowance for loan losses: | ||||||||||||||||||||
Beginning balance, January 1(1) | $ | 6,721 | $ | 1,749 | $ | 8,470 | ||||||||||||||
Adoption of new accounting standards | — | 43,170 | 43,170 | |||||||||||||||||
Provision for loan losses | 12,923 | 11,592 | 24,515 | |||||||||||||||||
Charge-offs(2) | (15,438 | ) | (7,026 | ) | (22,464 | ) | ||||||||||||||
Recoveries | 1,913 | 1,164 | 3,077 | |||||||||||||||||
Transfers(3) | 44,599 | (44,599 | ) | — | ||||||||||||||||
Net reclassifications(4) | (3,341 | ) | 6,553 | 3,212 | ||||||||||||||||
Ending balance, December 31 | $ | 47,377 | $ | 12,603 | $ | 59,980 | ||||||||||||||
Multifamily allowance for loan losses: | ||||||||||||||||||||
Beginning balance, January 1(1) | $ | 1,357 | $ | 98 | $ | 1,455 | ||||||||||||||
Adoption of new accounting standards | — | 406 | 406 | |||||||||||||||||
Provision for loan losses | 144 | 43 | 187 | |||||||||||||||||
Charge-offs(2) | (414 | ) | — | (414 | ) | |||||||||||||||
Transfers(3) | 115 | (115 | ) | — | ||||||||||||||||
Net reclassifications(4) | (49 | ) | (9 | ) | (58 | ) | ||||||||||||||
Ending balance, December 31 | $ | 1,153 | $ | 423 | $ | 1,576 | ||||||||||||||
Total allowance for loan losses: | ||||||||||||||||||||
Beginning balance, January 1(1) | $ | 8,078 | $ | 1,847 | $ | 9,925 | $ | 2,772 | $ | 629 | ||||||||||
Adoption of new accounting standards | — | 43,576 | 43,576 | — | — | |||||||||||||||
Provision for loan losses | 13,067 | 11,635 | 24,702 | 9,569 | 4,022 | |||||||||||||||
Charge-offs(2) | (15,852 | ) | (7,026 | ) | (22,878 | ) | (2,245 | ) | (1,987 | ) | ||||||||||
Recoveries | 1,913 | 1,164 | 3,077 | 214 | 190 | |||||||||||||||
Transfers(3) | 44,714 | (44,714 | ) | — | — | — | ||||||||||||||
Net reclassifications(1)(4) | �� | (3,390 | ) | 6,544 | 3,154 | (385 | ) | (82 | ) | |||||||||||
Ending balance, December 31(1)(5)(6) | $ | 48,530 | $ | 13,026 | $ | 61,556 | $ | 9,925 | $ | 2,772 | ||||||||||
(1) | Prior period amounts have been reclassified to conform to current year presentation. Current presentation excludes the allowance for accrued interest receivable from the beginning and ending balances. | |
(2) | Total charge-offs includes accrued interest of $2.4 billion, $1.5 billion and $642 million for the years ended December 31, 2010, 2009 and 2008, respectively. Single-family charge-offs includes accrued interest of $2.3 billion for the year ended December 31, 2010. Multifamily charge-offs includes accrued interest of $64 million for the year ended December 31, 2010. | |
(3) | Includes transfers from trusts for delinquent loan purchases. |
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(4) | Represents reclassification of amounts recorded in provision for loan losses and charge-offs that relate to allowance for accrued interest receivable and preforeclosure property taxes and insurance receivable from borrowers. | |
(5) | Total allowance for loan losses includes $385 million, $726 million and $150 million as of December 31, 2010, 2009 and 2008, respectively, for acquired credit-impaired loans. | |
(6) | Total single-family allowance for loan losses was $8.5 billion and $2.7 billion as of December 31, 2009 and 2008, respectively. Total multifamily allowance for loan losses was $1.4 billion and $74 million as of December 31, 2009 and 2008, respectively. |
As of December 31, 2010 | ||||||||||||
Single-Family | Multifamily | Total | ||||||||||
(Dollars in millions) | ||||||||||||
Allowance for loan losses by segment: | ||||||||||||
Individually impaired loans | $ | 37,296 | $ | 549 | $ | 37,845 | ||||||
Collectively reserved loans | 22,306 | 1,020 | 23,326 | |||||||||
Acquired credit impaired loans | 378 | 7 | 385 | |||||||||
Recorded investment in loans by segment:(1) | ||||||||||||
Total loans | $ | 2,822,500 | $ | 172,514 | $ | 2,995,014 | ||||||
Individually impaired loans | 140,062 | 3,074 | 143,136 | |||||||||
Collectively reserved loans | 2,677,640 | 169,332 | 2,846,972 | |||||||||
Acquired credit impaired loans | 4,798 | 108 | 4,906 |
(1) | Consists of unpaid principal balance, net of unamortized premiums and discounts, other cost basis and fair value adjustments and accrued interest receivable on HFI loans, excluding loans for which we have elected the fair value option. |
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
• | we revised our methodology to take into account trends in management actions taken before cash collections, which resulted in our allowance for loan losses being $1.1 billion higher than it would have been under the previous methodology; and | |
• | agreements with seller/servicers that addressed their loan repurchase and other obligations to us impacted our expectation of future make-whole payments, resulting in a decrease in our allowance for loan losses of approximately $700 million. |
For the Year Ended December 31, | ||||||||||||||||
2010 | 2009 | 2008 | ||||||||||||||
(Dollars in millions) | ||||||||||||||||
Reserve for guaranty losses: | ||||||||||||||||
Beginning balance, January 1 | $ | 54,430 | $ | 21,830 | $ | 2,693 | ||||||||||
Adoption of new accounting standards | (54,103 | ) | — | — | ||||||||||||
Provision for guaranty losses | 194 | 63,057 | 23,929 | |||||||||||||
Charge-offs(1)(2) | (203 | ) | (31,142 | ) | (4,986 | ) | ||||||||||
Recoveries | 5 | 685 | 194 | |||||||||||||
Ending balance, December 31 | $ | 323 | $ | 54,430 | $ | 21,830 | ||||||||||
(1) | Includes charges of $228 million and $333 million for the years ended December 31, 2009 and 2008, respectively, related to unsecured HomeSaver Advance loans. There were no charges related to unsecured HomeSaver Advance loans for the year ended December 31, 2010. | |
(2) | Includes charges recorded at the date of acquisition of $180 million, $20.3 billion and $2.1 billion for the years ended December 31, 2010, 2009 and 2008, respectively, for acquired credit-impaired loans where the acquisition cost exceeded the fair value of the acquired loan. |
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
As of December 31, 2010(1)(2) | ||||||||||||
Primary(3) | Alt-A | Other(4) | ||||||||||
(Dollars in millions) | ||||||||||||
Single-family | ||||||||||||
Estimatedmark-to-market LTV ratio:(5) | ||||||||||||
Less than or equal to 80% | $ | 1,561,202 | $ | 79,305 | $ | 29,854 | ||||||
80.01% to 90% | 376,414 | 27,472 | 13,394 | |||||||||
90.01% to 100% | 217,193 | 24,392 | 12,935 | |||||||||
100.01% to 110% | 112,376 | 18,022 | 11,400 | |||||||||
110.01% to 120% | 62,283 | 12,718 | 8,967 | |||||||||
120.01% to 125% | 21,729 | 5,083 | 3,733 | |||||||||
Greater than 125% | 106,288 | 40,160 | 25,096 | |||||||||
Total | $ | 2,457,485 | $ | 207,152 | $ | 105,379 | ||||||
As of December 31, 2010(1) | ||||
(Dollars in millions) | ||||
Multifamily | ||||
Originating LTV ratio: | ||||
Less than or equal to 70% | $ | 96,844 | ||
70.01% to 80% | 71,560 | |||
Greater than 80% | 4,110 | |||
Total | $ | 172,514 | ||
Originating debt service coverage ratio: | ||||
Less than or equal to 1.10% | $ | 15,034 | ||
1.11% to 1.25% | 50,745 | |||
Greater than 1.25% | 106,735 | |||
Total | $ | 172,514 | ||
(1) | Recorded investment consists of unpaid principal balance, net of unamortized premiums and discounts, other cost basis and fair value adjustments and accrued interest receivable on HFI loans, excluding loans for which we have elected the fair value option. | |
(2) | Excludes $52.5 billion of mortgage loans guaranteed or insured, in whole or in part, by the U.S. government or one of its agencies that are not Alt-A loans. The segment class is primarily reverse mortgages for which we do not calculate an estimatedmark-to-market LTV. | |
(3) | Consists of mortgage loans that are not included in other loan classes. | |
(4) | Includes loans with higher-risk loan characteristics, such as interest-only loans andnegative-amortizing loans that are neither government nor Alt-A. | |
(5) | The aggregate estimatedmark-to-market LTV ratio is based on the unpaid principal balance of the loan as of the end of each reported period divided by the estimated current value of the property, which we calculate using an internal valuation model that estimates periodic changes in home value. |
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
6. | Investments in Securities |
As of December 31, | ||||||||
2010 | 2009 | |||||||
(Dollars in millions) | ||||||||
Mortgage-related securities: | ||||||||
Fannie Mae | $ | 7,398 | $ | 74,750 | ||||
Freddie Mac | 1,326 | 15,082 | ||||||
Ginnie Mae | 590 | 1 | ||||||
Alt-A private-label securities | 1,683 | 1,355 | ||||||
Subprime private-label securities | 1,581 | 1,780 | ||||||
CMBS | 10,764 | 9,335 | ||||||
Mortgage revenue bonds | 609 | 600 | ||||||
Other mortgage-related securities | 152 | 154 | ||||||
Total | 24,103 | 103,057 | ||||||
Non-mortgage-related securities: | ||||||||
U.S. Treasury securities | 27,432 | 3 | ||||||
Asset-backed securities | 5,321 | 8,515 | ||||||
Corporate debt securities | — | 364 | ||||||
Total | 32,753 | 8,882 | ||||||
Total trading securities | $ | 56,856 | $ | 111,939 | ||||
Losses in trading securities held in our portfolio, net | $ | 2,149 | $ | 2,685 | ||||
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
For the Year Ended | ||||||||||||
December 31, | ||||||||||||
2010 | 2009 | 2008 | ||||||||||
(Dollars in millions) | ||||||||||||
Net trading gains (losses): | ||||||||||||
Mortgage-related securities | $ | 2,607 | $ | 2,457 | $ | (4,297 | ) | |||||
Non-mortgage-related securities | 85 | 1,287 | (2,743 | ) | ||||||||
Total | $ | 2,692 | $ | 3,744 | $ | (7,040 | ) | |||||
Net trading gains (losses) recorded in the year related to securities still held at year end: | ||||||||||||
Mortgage-related securities | $ | 2,485 | $ | 1,974 | $ | (4,464 | ) | |||||
Non-mortgage-related securities | 56 | 1,146 | (2,418 | ) | ||||||||
Total | $ | 2,541 | $ | 3,120 | $ | (6,882 | ) | |||||
For the Year Ended December 31, | ||||||||||||
2010 | 2009 | 2008 | ||||||||||
(Dollars in millions) | ||||||||||||
Gross realized gains | $ | 566 | $ | 4,521 | $ | 4,022 | ||||||
Gross realized losses | 293 | 3,080 | 3,635 | |||||||||
Total proceeds(1) | 7,207 | 226,664 | 130,991 |
(1) | Excludes proceeds from the initial sale of securities from new portfolio securitizations included in “Note 3, Consolidations and Transfers of Financial Assets.” |
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
As of December 31, 2010 | ||||||||||||||||||||
Gross | Gross | |||||||||||||||||||
Total | Gross | Unrealized | Unrealized | Total | ||||||||||||||||
Amortized | Unrealized | Losses - | Losses - | Fair | ||||||||||||||||
Cost(1) | Gains | OTTI(2) | Other(3) | Value | ||||||||||||||||
(Dollars in millions) | ||||||||||||||||||||
Fannie Mae | $ | 21,428 | $ | 1,453 | $ | (9 | ) | $ | (44 | ) | $ | 22,828 | ||||||||
Freddie Mac | 15,986 | 1,010 | — | — | 16,996 | |||||||||||||||
Ginnie Mae | 909 | 130 | — | — | 1,039 | |||||||||||||||
Alt-A private-label securities | 15,789 | 177 | (1,791 | ) | (285 | ) | 13,890 | |||||||||||||
Subprime private-label securities | 11,323 | 54 | (997 | ) | (448 | ) | 9,932 | |||||||||||||
CMBS(4) | 15,273 | 25 | — | (454 | ) | 14,844 | ||||||||||||||
Mortgage revenue bonds | 11,792 | 47 | (64 | ) | (734 | ) | 11,041 | |||||||||||||
Other mortgage-related securities | 4,098 | 106 | (44 | ) | (338 | ) | 3,822 | |||||||||||||
Total | $ | 96,598 | $ | 3,002 | $ | (2,905 | ) | $ | (2,303 | ) | $ | 94,392 | ||||||||
As of December 31, 2009 | ||||||||||||||||||||
Gross | Gross | |||||||||||||||||||
Total | Gross | Unrealized | Unrealized | Total | ||||||||||||||||
Amortized | Unrealized | Losses - | Losses - | Fair | ||||||||||||||||
Cost(1) | Gains | OTTI(2) | Other(3) | Value | ||||||||||||||||
(Dollars in millions) | ||||||||||||||||||||
Fannie Mae | $ | 148,074 | $ | 6,413 | $ | (23 | ) | $ | (45 | ) | $ | 154,419 | ||||||||
Freddie Mac | 26,281 | 1,192 | — | (4 | ) | 27,469 | ||||||||||||||
Ginnie Mae | 1,253 | 102 | — | (2 | ) | 1,353 | ||||||||||||||
Alt-A private-label securities | 17,836 | 41 | (2,738 | ) | (989 | ) | 14,150 | |||||||||||||
Subprime private-label securities | 13,232 | 33 | (1,774 | ) | (745 | ) | 10,746 | |||||||||||||
CMBS(4) | 15,797 | — | — | (2,604 | ) | 13,193 | ||||||||||||||
Mortgage revenue bonds | 13,679 | 71 | (44 | ) | (860 | ) | 12,846 | |||||||||||||
Other mortgage-related securities | 4,225 | 29 | (235 | ) | (467 | ) | 3,552 | |||||||||||||
Total | $ | 240,377 | $ | 7,881 | $ | (4,814 | ) | $ | (5,716 | ) | $ | 237,728 | ||||||||
(1) | Amortized cost includes unamortized premiums, discounts and other cost basis adjustments as well as the credit component ofother-than-temporary impairments recognized in our consolidated statements of operations. | |
(2) | Represents the noncredit component ofother-than-temporary impairment losses recorded in other comprehensive loss as well as cumulative changes in fair value for securities for which we previously recognized the credit component of another-than-temporary impairment. | |
(3) | Represents the gross unrealized losses on securities for which we have not recognized another-than-temporary impairment. | |
(4) | Amortized cost includes $848 million and $1.0 billion as of December 31, 2010 and 2009, respectively, of increase to the carrying amount from fair value hedge accounting in 2008. |
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
As of December 31, 2010 | ||||||||||||||||
Less Than 12 | 12 Consecutive | |||||||||||||||
Consecutive Months | Months or Longer | |||||||||||||||
Gross | Gross | |||||||||||||||
Unrealized | Fair | Unrealized | Fair | |||||||||||||
Losses | Value | Losses | Value | |||||||||||||
(Dollars in millions) | ||||||||||||||||
Fannie Mae | $ | (35 | ) | $ | 1,461 | $ | (18 | ) | $ | 211 | ||||||
Freddie Mac | — | 11 | — | 7 | ||||||||||||
Ginnie Mae | — | 1 | — | — | ||||||||||||
Alt-A private-label securities | (104 | ) | 1,915 | (1,972 | ) | 9,388 | ||||||||||
Subprime private-label securities | (47 | ) | 627 | (1,398 | ) | 8,493 | ||||||||||
CMBS | (15 | ) | 1,774 | (439 | ) | 10,396 | ||||||||||
Mortgage revenue bonds | (206 | ) | 5,009 | (592 | ) | 3,129 | ||||||||||
Other mortgage-related securities | (2 | ) | 250 | (380 | ) | 2,007 | ||||||||||
Total | $ | (409 | ) | $ | 11,048 | $ | (4,799 | ) | $ | 33,631 | ||||||
As of December 31, 2009 | ||||||||||||||||
Less Than 12 | 12 Consecutive | |||||||||||||||
Consecutive Months | Months or Longer | |||||||||||||||
Gross | Gross | |||||||||||||||
Unrealized | Fair | Unrealized | Fair | |||||||||||||
Losses | Value | Losses | Value | |||||||||||||
(Dollars in millions) | ||||||||||||||||
Fannie Mae | $ | (36 | ) | $ | 1,461 | $ | (32 | ) | $ | 544 | ||||||
Freddie Mac | (2 | ) | 85 | (2 | ) | 164 | ||||||||||
Ginnie Mae | (2 | ) | 139 | — | 26 | |||||||||||
Alt-A private-label securities | (2,439 | ) | 7,018 | (1,288 | ) | 6,929 | ||||||||||
Subprime private-label securities | (998 | ) | 4,595 | (1,521 | ) | 5,860 | ||||||||||
CMBS | — | — | (2,604 | ) | 13,193 | |||||||||||
Mortgage revenue bonds | (54 | ) | 2,392 | (850 | ) | 5,664 | ||||||||||
Other mortgage-related securities | (96 | ) | 536 | (606 | ) | 2,739 | ||||||||||
Total | $ | (3,627 | ) | $ | 16,226 | $ | (6,903 | ) | $ | 35,119 | ||||||
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
For the Year Ended December 31, | ||||||||||||
2010 | 2009 | 2008 | ||||||||||
(Dollars in millions) | ||||||||||||
Fannie Mae | $ | (3 | ) | $ | (117 | ) | $ | (7 | ) | |||
Alt-A private-label securities | (327 | ) | (3,956 | ) | (4,820 | ) | ||||||
Subprime private-label securities | (368 | ) | (5,660 | ) | (1,932 | ) | ||||||
Mortgage revenue bonds | (2 | ) | (22 | ) | (21 | ) | ||||||
Other | (22 | ) | (106 | ) | (194 | ) | ||||||
Netother-than-temporary impairments | $ | (722 | ) | $ | (9,861 | ) | $ | (6,974 | ) | |||
For the Year Ended | ||||||||
December 31, | ||||||||
2010 | 2009 | |||||||
(Dollars in millions) | ||||||||
Balance, January 1 | $ | 8,191 | $ | — | ||||
Credit component ofother-than-temporary impairment not reclassified to AOCI in conjunction with the cumulative effect transition adjustment | — | 4,265 | ||||||
Additions for the credit component on debt securities for which OTTI was not previously recognized | 29 | 1,090 | ||||||
Additions for credit losses on debt securities for which OTTI was previously recognized | 693 | 3,118 | ||||||
Reductions for securities no longer in portfolio at period end(1) | (154 | ) | — | |||||
Reductions for amortization resulting from increases in cash flows expected to be collected over the remaining life of the security | (544 | ) | (282 | ) | ||||
Balance, December 31 | $ | 8,215 | $ | 8,191 | ||||
(1) | Includes securities sold, matured, called or consolidated to loans. |
F-64
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
As of December 31, 2010 | ||||||||||||||||||||
Alt-A | ||||||||||||||||||||
Subprime | Option ARM | Fixed Rate | Variable Rate | Hybrid Rate | ||||||||||||||||
(Dollars in millions) | ||||||||||||||||||||
Vintage Year | ||||||||||||||||||||
2004 & Prior: | ||||||||||||||||||||
Unpaid principal balance | $ | 2,216 | $ | 521 | $ | 3,862 | $ | 544 | $ | 2,521 | ||||||||||
Weighted average collateral default(1) | 40.5 | % | 38.8 | % | 11.2 | % | 34.9 | % | 19.5 | % | ||||||||||
Weighted average collateral severities(2) | 61.9 | % | 46.6 | % | 43.4 | % | 45.0 | % | 38.0 | % | ||||||||||
Weighted average voluntary prepayment rates(3) | 4.0 | % | 6.1 | % | 8.5 | % | 8.3 | % | 10.6 | % | ||||||||||
Average credit enhancement(4) | 51.1 | % | 19.5 | % | 11.9 | % | 21.6 | % | 10.7 | % | ||||||||||
2005 | ||||||||||||||||||||
Unpaid principal balance | $ | 206 | $ | 1,401 | $ | 1,297 | $ | 585 | $ | 2,578 | ||||||||||
Weighted average collateral default(1) | 76.2 | % | 59.8 | % | 41.9 | % | 57.9 | % | 42.0 | % | ||||||||||
Weighted average collateral severities(2) | 73.9 | % | 55.5 | % | 59.3 | % | 60.2 | % | 52.6 | % | ||||||||||
Weighted average voluntary prepayment rates(3) | 1.6 | % | 3.9 | % | 6.4 | % | 7.0 | % | 7.9 | % | ||||||||||
Average credit enhancement(4) | 63.5 | % | 30.0 | % | 2.4 | % | 19.5 | % | 7.1 | % | ||||||||||
2006 | ||||||||||||||||||||
Unpaid principal balance | $ | 12,565 | $ | 1,379 | $ | 626 | $ | 1,793 | $ | 1,965 | ||||||||||
Weighted average collateral default(1) | 78.9 | % | 73.8 | % | 45.9 | % | 61.8 | % | 34.4 | % | ||||||||||
Weighted average collateral severities(2) | 74.1 | % | 62.0 | % | 64.1 | % | 64.6 | % | 49.5 | % | ||||||||||
Weighted average voluntary prepayment rates(3) | 1.7 | % | 3.2 | % | 5.8 | % | 6.2 | % | 9.3 | % | ||||||||||
Average credit enhancement(4) | 20.4 | % | 22.8 | % | 3.2 | % | 2.2 | % | 2.1 | % |
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
As of December 31, 2010 | ||||||||||||||||||||
Alt-A | ||||||||||||||||||||
Subprime | Option ARM | Fixed Rate | Variable Rate | Hybrid Rate | ||||||||||||||||
(Dollars in millions) | ||||||||||||||||||||
2007 & After: | ||||||||||||||||||||
Unpaid principal balance | $ | 656 | $ | — | $ | — | $ | — | $ | 129 | ||||||||||
Weighted average collateral default(1) | 72.8 | % | N/A | N/A | N/A | 43.7 | % | |||||||||||||
Weighted average collateral severities(2) | 70.2 | % | N/A | N/A | N/A | 54.8 | % | |||||||||||||
Weighted average voluntary prepayment rates(3) | 1.6 | % | N/A | N/A | N/A | 6.7 | % | |||||||||||||
Average credit enhancement(4) | 34.5 | % | N/A | N/A | N/A | 25.3 | % | |||||||||||||
Total | ||||||||||||||||||||
Unpaid principal balance | $ | 15,643 | $ | 3,301 | $ | 5,785 | $ | 2,922 | $ | 7,193 | ||||||||||
Weighted average collateral default(1) | 73.2 | % | 62.4 | % | 21.9 | % | 56.0 | % | 32.1 | % | ||||||||||
Weighted average collateral severities(2) | 72.2 | % | 56.8 | % | 49.2 | % | 60.1 | % | 46.7 | % | ||||||||||
Weighted average voluntary prepayment rates(3) | 2.0 | % | 3.9 | % | 7.7 | % | 6.8 | % | 9.2 | % | ||||||||||
Average credit enhancement(4) | 25.9 | % | 25.3 | % | 8.9 | % | 9.3 | % | 7.4 | % |
(1) | The expected remaining cumulative default rate of the collateral pool backing the securities, as a percentage of the current collateral unpaid principal balance, weighted by security unpaid principal balance. | |
(2) | The expected remaining loss given default of the collateral pool backing the securities, calculated as the ratio of remaining cumulative loss divided by cumulative defaults, weighted by security unpaid principal balance. | |
(3) | The average monthly voluntary prepayment rate, weighted by security unpaid principal balance. | |
(4) | The average percent current credit enhancement provided by subordination of other securities. Excludes excess interest projections and monoline bond insurance. |
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
As of December 31, 2010 | ||||||||||||||||||||||||||||||||||||||||
After One Year | After Five Years | |||||||||||||||||||||||||||||||||||||||
Total | Total | One Year or Less | Through Five Years | Through Ten Years | After Ten Years | |||||||||||||||||||||||||||||||||||
Amortized | Fair | Amortized | Fair | Amortized | Fair | Amortized | Fair | Amortized | Fair | |||||||||||||||||||||||||||||||
Cost | Value | Cost | Value | Cost | Value | Cost | Value | Cost | Value | |||||||||||||||||||||||||||||||
(Dollars in millions) | ||||||||||||||||||||||||||||||||||||||||
Fannie Mae | $ | 21,428 | $ | 22,828 | $ | — | $ | — | $ | 2 | $ | 2 | $ | 3,876 | $ | 4,103 | $ | 17,550 | $ | 18,723 | ||||||||||||||||||||
Freddie Mac | 15,986 | 16,996 | 5 | 5 | 37 | 39 | 1,571 | 1,683 | 14,373 | 15,269 | ||||||||||||||||||||||||||||||
Ginnie Mae | 909 | 1,039 | — | — | — | — | 5 | 5 | 904 | 1,034 | ||||||||||||||||||||||||||||||
Alt-A private-label securities | 15,789 | 13,890 | — | — | 1 | 1 | 294 | 296 | 15,494 | 13,593 | ||||||||||||||||||||||||||||||
Subprime private-label securities | 11,323 | 9,932 | — | — | — | — | — | — | 11,323 | 9,932 | ||||||||||||||||||||||||||||||
CMBS | 15,273 | 14,844 | 308 | 308 | 275 | 276 | 14,342 | 13,953 | 348 | 307 | ||||||||||||||||||||||||||||||
Mortgage revenue bonds | 11,792 | 11,041 | 61 | 62 | 374 | 385 | 818 | 819 | 10,539 | 9,775 | ||||||||||||||||||||||||||||||
Other mortgage-related securities | 4,098 | 3,822 | — | — | — | — | — | 16 | 4,098 | 3,806 | ||||||||||||||||||||||||||||||
Total | $ | 96,598 | $ | 94,392 | $ | 374 | $ | 375 | $ | 689 | $ | 703 | $ | 20,906 | $ | 20,875 | $ | 74,629 | $ | 72,439 | ||||||||||||||||||||
Weighted average yield(1) | 4.32 | % | 5.52 | % | 5.55 | % | 4.25 | % | 4.32 | % |
(1) | Yields are determined by dividing interest income (including the amortization and accretion of premiums, discounts and other cost basis adjustments) by amortized cost balances as of year-end. Yields on tax exempt obligations have been computed on a tax equivalent basis. |
As of December 31, | ||||||||||||
2010(1) | 2009 | 2008 | ||||||||||
(Dollars in millions) | ||||||||||||
Net unrealized gains (losses) onavailable-for-sale securities for which we have not recordedother-than-temporary impairment | $ | 304 | $ | 1,337 | $ | (7,291 | ) | |||||
Net unrealized losses onavailable-for-sale securities for which we have recordedother-than-temporary impairment | (1,736 | ) | (3,059 | ) | — | |||||||
Other | (250 | ) | (10 | ) | (382 | ) | ||||||
Accumulated other comprehensive loss | $ | (1,682 | ) | $ | (1,732 | ) | $ | (7,673 | ) | |||
(1) | Includes a net increase of $3.4 billion from the adoption of the new accounting standards. |
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
7. | Financial Guarantees and Master Servicing |
F-68
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(In conservatorship)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
As of December 31, 2010(1) | As of December 31, 2009(1) | |||||||||||||||||||||||
30 days | 60 days | Seriously | 30 days | 60 days | Seriously | |||||||||||||||||||
Delinquent | Delinquent | Delinquent(2) | Delinquent | Delinquent | Delinquent(2) | |||||||||||||||||||
Percentage of single-family conventional guaranty book of business(3) | 2.19 | % | 0.89 | % | 5.37 | % | 2.38 | % | 1.15 | % | 6.68 | % | ||||||||||||
Percentage of single-family conventional loans(4) | 2.32 | 0.87 | 4.48 | 2.46 | 1.07 | 5.38 |
As of December 31, 2010(1) | As of December 31, 2009(1) | |||||||||||||||
Percentage of | Percentage of | |||||||||||||||
Single-Family | Single-Family | |||||||||||||||
Conventional | Percentage | Conventional | Percentage | |||||||||||||
Guaranty Book | Seriously | Guaranty Book | Seriously | |||||||||||||
of Business(3) | Delinquent(2)(4) | of Business(3) | Delinquent(2)(4) | |||||||||||||
Estimatedmark-to-marketloan-to-value ratio: | ||||||||||||||||
Less than 100% | 84 | % | 2.62 | % | 86 | % | 3.36 | % | ||||||||
100.01% to 110% | 5 | 11.60 | 5 | 14.79 | ||||||||||||
110.01% to 120% | 3 | 14.74 | 3 | 18.55 | ||||||||||||
120.01% to 125% | 1 | 16.86 | 1 | 21.39 | ||||||||||||
Greater than 125% | 7 | 24.71 | 5 | 31.05 | ||||||||||||
Geographical distribution: | ||||||||||||||||
Arizona | 2 | 6.23 | 3 | 8.80 | ||||||||||||
California | 18 | 3.89 | 17 | 5.73 | ||||||||||||
Florida | 7 | 12.31 | 7 | 12.82 | ||||||||||||
Nevada | 1 | 10.66 | 1 | 13.00 | ||||||||||||
Select Midwest states(5) | 11 | 4.80 | 11 | 5.62 | ||||||||||||
All other states | 61 | 3.46 | 61 | 4.11 | ||||||||||||
Product distribution (not mutually | ||||||||||||||||
exclusive):(6) | ||||||||||||||||
Alt-A | 8 | 13.87 | 9 | 15.63 | ||||||||||||
Subprime | * | 28.20 | * | 30.68 | ||||||||||||
Negatively amortizing adjustable rate | * | 9.02 | 1 | 10.29 | ||||||||||||
Interest only | 6 | 17.85 | 7 | 20.17 | ||||||||||||
Investor property | 6 | 4.79 | 6 | 5.54 | ||||||||||||
Condo/Coop | 9 | 5.37 | 9 | 5.99 | ||||||||||||
Originalloan-to-value ratio >90%(7) | 10 | 10.04 | 9 | 13.05 | ||||||||||||
FICO credit score <620(7) | 4 | 14.63 | 4 | 18.20 | ||||||||||||
Originalloan-to-value ratio >90% and FICO credit score <620(7) | 1 | 21.41 | 1 | 27.96 | ||||||||||||
Vintages: | ||||||||||||||||
2005 | 9 | 7.20 | 10 | 7.27 | ||||||||||||
2006 | 8 | 12.19 | 11 | 12.87 | ||||||||||||
2007 | 12 | 13.24 | 15 | 14.06 | ||||||||||||
2008 | 9 | 4.88 | 13 | 3.98 | ||||||||||||
All other vintages | 62 | 1.73 | 51 | 2.19 |
* | Represents less than 0.5% of the single-family conventional guaranty book of business. | |
(1) | Consists of the portion of our single-family conventional guaranty book of business for which we have detailed loan level information, which constituted over 99% and 98% of our total single-family conventional guaranty book of business as of December 31, 2010 and 2009, respectively. |
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(2) | Consists of single-family conventional loans that were three months or more past due or in foreclosure as of December 31, 2010 and 2009. | |
(3) | Calculated based on the aggregate unpaid principal balance of delinquent single-family conventional loans divided by the aggregate unpaid principal balance of loans in our single-family conventional guaranty book of business. | |
(4) | Calculated based on the number of single-family conventional loans that were delinquent divided by the total number of loans in our single-family conventional guaranty book of business. | |
(5) | Consists of Illinois, Indiana, Michigan, and Ohio. | |
(6) | Categories are not mutually exclusive. Loans with multiple product features are included in all applicable categories. | |
(7) | Includes housing goals-oriented products such as MyCommunityMortgage® and Expanded Approval®. |
As of December 31, 2010(1)(2) | As of December 31, 2009(1)(2) | |||||||||||||||
30 Days | Seriously | 30 Days | Seriously | |||||||||||||
Delinquent | Delinquent(3) | Delinquent | Delinquent(3) | |||||||||||||
Percentage of multifamily guaranty book of business | 0.21 | % | 0.71 | % | 0.28 | % | 0.63 | % |
As of December 31, 2010(1)(2) | As of December 31, 2009(1)(2) | |||||||||||||||
Percentage of | Percentage of | |||||||||||||||
Multifamily | Percentage | Multifamily | Percentage | |||||||||||||
Guaranty | Seriously | Guaranty | Seriously | |||||||||||||
Book of Business | Delinquent | Book of Business | Delinquent | |||||||||||||
Originatingloan-to-value ratio: | ||||||||||||||||
Greater than 80% | 5 | % | 0.59 | % | 5 | % | 0.50 | % | ||||||||
Less than or equal to 80% | 95 | 0.71 | 95 | 0.63 | ||||||||||||
Originating debt service coverage ratio: | ||||||||||||||||
Less than or equal to 1.10 | 9 | 0.27 | 10 | 0.17 | ||||||||||||
Greater than 1.10 | 91 | 0.75 | 90 | 0.68 | ||||||||||||
Acquisition loan size distribution: | ||||||||||||||||
Less than or equal to $750,000 | 2 | 1.61 | 3 | 1.27 | ||||||||||||
Greater than $750,000 and less than or equal to $3 million | 12 | 1.17 | 13 | 1.01 | ||||||||||||
Greater than $3 million and less than or equal to $5 million | 9 | 0.88 | 9 | 1.08 | ||||||||||||
Greater than $5 million and less than or equal to $25 million | 42 | 0.88 | 41 | 0.60 | ||||||||||||
Greater than $25 million | 35 | 0.24 | 34 | 0.34 | ||||||||||||
Maturing dates: | ||||||||||||||||
Maturing in 2011 | 3 | 0.68 | 5 | 0.64 | ||||||||||||
Maturing in 2012 | 7 | 0.42 | 10 | 1.13 | ||||||||||||
Maturing in 2013 | 11 | 0.54 | 12 | 0.22 | ||||||||||||
Maturing in 2014 | 8 | 0.67 | 9 | 0.62 | ||||||||||||
Maturing in 2015 | 9 | 0.57 |
(1) | Consists of the portion of our multifamily guaranty book of business for which we have detailed loan level information, which constituted 99% our total multifamily guaranty book of business as of both December 31, 2010 and 2009, excluding loans that have been defeased. Defeasance is a pre-payment of a loan through substitution of collateral. | |
(2) | Calculated based on the aggregate unpaid principal balance of delinquent multifamily loans divided by the aggregate unpaid principal balance of loans in our multifamily guaranty book of business. | |
(3) | Consists of multifamily loans that were 60 days or more past due as of December 31, 2010 and 2009. |
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
For the Year Ended December 31, | ||||||||||||
2010 | 2009 | 2008 | ||||||||||
(Dollars in millions) | ||||||||||||
Beginning balance, January 1 | $ | 13,996 | $ | 12,147 | $ | 15,393 | ||||||
Adoption of new accounting standards | (13,320 | ) | — | — | ||||||||
Additions to guaranty obligations(1) | 225 | 7,577 | 7,279 | |||||||||
Amortization of guaranty obligations into guaranty fee income | (132 | ) | (5,260 | ) | (9,585 | ) | ||||||
Impact of consolidation activity(2) | — | (468 | ) | (940 | ) | |||||||
Ending balance, December 31 | $ | 769 | $ | 13,996 | $ | 12,147 | ||||||
(1) | Represents the fair value of our contractual obligation at issuance of new guarantees. | |
(2) | Represents the derecognition of guaranty obligations during the period due to consolidations excluding the impact of adopting the new accounting standards. |
For the Year Ended December 31, | ||||||||||||
2010 | 2009 | 2008 | ||||||||||
(Dollars in millions) | ||||||||||||
Beginning balance, January 1 | $ | 8,356 | $ | 7,043 | $ | 9,666 | ||||||
Adoption of new accounting standards | (8,014 | ) | — | — | ||||||||
Fair value of expected cash flows at issuance for new guaranteed Fannie Mae MBS issuance | 182 | 4,135 | 3,938 | |||||||||
Net change in fair value of guaranty assets from portfolio securitizations | (1 | ) | 511 | (136 | ) | |||||||
Impact of amortization on guaranty contracts | (59 | ) | (2,719 | ) | (2,767 | ) | ||||||
Other-than-temporary impairments | (7 | ) | (347 | ) | (3,270 | ) | ||||||
Impact of consolidation of MBS trusts(1) | — | (267 | ) | (388 | ) | |||||||
Ending balance, December 31 | $ | 457 | $ | 8,356 | $ | 7,043 | ||||||
(1) | Represents the derecognition of guaranty assets during the period due to consolidations excluding the impact of adopting the new accounting standards. |
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
For the Year Ended December 31, | ||||||||||||
2010 | 2009 | 2008 | ||||||||||
(Dollars in millions) | ||||||||||||
Cost basis: | ||||||||||||
Beginning balance, January 1 | $ | 196 | $ | 764 | $ | 1,171 | ||||||
Adoption of new accounting standards | (195 | ) | — | — | ||||||||
Additions | — | 56 | 302 | |||||||||
Amortization | — | (44 | ) | (190 | ) | |||||||
Other-than-temporary impairments | — | (579 | ) | (491 | ) | |||||||
Reductions for MBS trusts paid-off and impact of consolidation activity(1) | — | (1 | ) | (28 | ) | |||||||
Ending balance, December 31 | 1 | 196 | 764 | |||||||||
Valuation allowance | 1 | 40 | 73 | |||||||||
Carrying value | $ | — | $ | 156 | $ | 691 | ||||||
Fair value, beginning of period | $ | 179 | $ | 855 | $ | 1,808 | ||||||
Fair value, end of period | $ | — | $ | 179 | $ | 855 | ||||||
(1) | Excluding impact of adopting the new accounting standards. |
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
8. | Acquired Property, Net |
Acquired | Valuation | Acquired | ||||||||||
Property | Allowance(1) | Property, Net | ||||||||||
(Dollars in millions) | ||||||||||||
Balance, January 1, 2008 | $ | 3,853 | $ | (251 | ) | $ | 3,602 | |||||
Additions | 10,853 | (75 | ) | 10,778 | ||||||||
Disposals | (6,666 | ) | 664 | (6,002 | ) | |||||||
Write-downs, net of recoveries | — | (1,460 | ) | (1,460 | ) | |||||||
Balance, December 31, 2008 | 8,040 | (1,122 | ) | 6,918 | ||||||||
Additions | 14,165 | (79 | ) | 14,086 | ||||||||
Disposals | (12,489 | ) | 1,379 | (11,110 | ) | |||||||
Write-downs, net of recoveries | — | (752 | ) | (752 | ) | |||||||
Balance, December 31, 2009 | 9,716 | (574 | ) | 9,142 | ||||||||
Additions | 25,982 | (783 | ) | 25,199 | ||||||||
Disposals | (17,644 | ) | 1,407 | (16,237 | ) | |||||||
Write-downs, net of recoveries | — | (1,931 | ) | (1,931 | ) | |||||||
Balance, December 31, 2010 | $ | 18,054 | $ | (1,881 | ) | $ | 16,173 | |||||
(1) | Reflects activities in the valuation allowance for acquired properties held primarily by our single-family segment. |
For the Year Ended December 31, | ||||||||||||
2010 | 2009 | 2008 | ||||||||||
(Dollars in millions) | ||||||||||||
Beginning balance, January 1 | $ | 44 | $ | 11 | $ | 107 | ||||||
Transfers in from held for sale, net and additions | 977 | 45 | 1 | |||||||||
Transfers to held for sale, net | (64 | ) | (11 | ) | (93 | ) | ||||||
Depreciation and asset write-downs | (68 | ) | (1 | ) | (4 | ) | ||||||
Ending balance, December 31 | $ | 889 | $ | 44 | $ | 11 | ||||||
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Table of Contents
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
9. | Short-Term Borrowings and Long-Term Debt |
As of December 31, | ||||||||||||||||
2010 | 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 | $ | 52 | 2.20 | % | $ | — | — | % | ||||||||
Fixed-rate short-term debt: | ||||||||||||||||
Discount notes | $ | 151,500 | 0.32 | % | $ | 199,987 | 0.27 | % | ||||||||
Foreign exchange discount notes | 384 | 2.43 | 300 | 1.50 | ||||||||||||
Other short-term debt | — | — | 100 | 0.53 | ||||||||||||
Total fixed-rate short-term debt | 151,884 | 0.32 | 200,387 | 0.27 | ||||||||||||
Floating-rate short-term debt(2) | — | — | 50 | 0.02 | ||||||||||||
Total short-term debt of Fannie Mae | 151,884 | 0.32 | 200,437 | 0.27 | ||||||||||||
Debt of consolidated trusts | 5,359 | 0.23 | — | — | ||||||||||||
Total short-term debt | $ | 157,243 | 0.32 | % | $ | 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. |
F-74
Table of Contents
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
As of December 31, | ||||||||||||||||||||
2010 | 2009 | |||||||||||||||||||
Weighted- | Weighted- | |||||||||||||||||||
Average | Average | |||||||||||||||||||
Interest | Interest | |||||||||||||||||||
Maturities | Outstanding | Rate(1) | Maturities | Outstanding | Rate(1) | |||||||||||||||
(Dollars in millions) | ||||||||||||||||||||
Senior fixed: | ||||||||||||||||||||
Benchmark notes and bonds | 2011 - 2030 | $ | 300,344 | 3.20 | % | 2010 - 2030 | $ | 279,945 | 4.10 | % | ||||||||||
Medium-term notes | 2011 - 2020 | 199,266 | 2.13 | 2010 - 2019 | 171,207 | 2.97 | ||||||||||||||
Foreign exchange notes and bonds | 2017 - 2028 | 1,177 | 6.21 | 2010 - 2028 | 1,239 | 5.64 | ||||||||||||||
Other long-term debt(2) | 2011 - 2040 | 44,893 | 5.64 | 2010 - 2039 | 62,783 | 5.80 | ||||||||||||||
Total senior fixed | 545,680 | 3.02 | 515,174 | 3.94 | ||||||||||||||||
Senior floating: | ||||||||||||||||||||
Medium-term notes | 2011 - 2015 | 72,039 | 0.31 | 2010 - 2014 | 41,911 | 0.26 | ||||||||||||||
Other long-term debt(2) | 2020 - 2037 | 386 | 4.92 | 2020 - 2037 | 1,041 | 4.12 | ||||||||||||||
Total senior floating | 72,425 | 0.34 | 42,952 | 0.34 | ||||||||||||||||
Subordinated fixed: | ||||||||||||||||||||
Qualifying subordinated(3) | 2011 - 2014 | 7,392 | 5.47 | 2011 - 2014 | 7,391 | 5.47 | ||||||||||||||
Subordinated debentures | 2019 | 2,663 | 9.91 | 2019 | 2,433 | 9.89 | ||||||||||||||
Total subordinated fixed | 10,055 | 6.65 | 9,824 | 6.57 | ||||||||||||||||
Total long-term debt of Fannie Mae(4) | 628,160 | 2.77 | 567,950 | 3.71 | ||||||||||||||||
Debt of consolidated trusts(2) | 2011 - 2051 | 2,411,597 | 4.59 | 2010 - 2039 | 6,167 | 5.63 | ||||||||||||||
Total long-term debt | $ | 3,039,757 | 4.22 | % | $ | 574,117 | 3.73 | % | ||||||||||||
(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. | |
(3) | Consists of subordinated debt issued with an interest deferral feature. | |
(4) | Reported amounts include a net discount and other cost basis adjustments of $12.4 billion and $15.6 billion as of December 31, 2010 and 2009, respectively. |
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Assuming Callable Debt | ||||||||
Long-Term Debt by | Redeemed at Next | |||||||
Year of Maturity | Available Call Date | |||||||
(Dollars in millions) | ||||||||
2011 | $ | 97,245 | $ | 297,703 | ||||
2012 | 150,913 | 146,091 | ||||||
2013 | 122,278 | 65,677 | ||||||
2014 | 71,705 | 45,553 | ||||||
2015 | 66,741 | 18,282 | ||||||
Thereafter | 119,278 | 54,854 | ||||||
Total debt of Fannie Mae(1) | 628,160 | 628,160 | ||||||
Debt of consolidated trusts(2) | 2,411,597 | 2,411,597 | ||||||
Total long-term debt(3) | $ | 3,039,757 | $ | 3,039,757 | ||||
(1) | Reported amount includes a net discount and other cost basis adjustments of $12.4 billion. | |
(2) | Contractual maturity of debt of consolidated trusts is not a reliable indicator of expected maturity because borrowers of the underlying loans generally have the right to prepay their obligations at any time. | |
(3) | Includes a portion of structured debt instruments that is reported at fair value. |
For the Year Ended December 31, | ||||||||||||
2010 | 2009 | 2008 | ||||||||||
(Dollars in millions) | ||||||||||||
Debt called | $ | 289,770 | $ | 166,777 | $ | 158,988 | ||||||
Weighted-average interest rate of debt called | 3.1 | % | 4.2 | % | 5.3 | % | ||||||
Debt repurchased | $ | 1,333 | $ | 6,919 | $ | 13,214 | ||||||
Weighted-average interest rate of debt repurchased | 3.3 | % | 4.3 | % | 4.8 | % |
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10. | Derivative Instruments and Hedging Activities |
• | Interest rate swap contracts. An interest rate swap is a transaction between two parties in which each party agrees to exchange payments tied to different interest rates or indices for a specified period of time, generally based on a notional amount of principal. The types of interest rate swaps we use include pay-fixed swaps, receive-fixed swaps and basis swaps. |
• | Interest rate option contracts. These contracts primarily include pay-fixed swaptions, receive-fixed swaptions, cancelable swaps and interest rate caps. A swaption is an option contract that allows us or a counterparty 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. |
• | Futures. These are standardized exchange-traded contracts that either obligate a buyer to buy an asset at a predetermined date and price or a seller to sell an asset at a predetermined date and price. The types of futures contracts we enter into include Eurodollar, U.S. Treasury and swaps. |
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
As of December 31, | ||||||||||||||||||||||||||||||||
2010 | 2009 | |||||||||||||||||||||||||||||||
Asset Derivatives | Liability Derivatives | Asset Derivatives | Liability Derivatives | |||||||||||||||||||||||||||||
Notional | Estimated | Notional | Estimated | Notional | Estimated | Notional | Estimated | |||||||||||||||||||||||||
Amount | Fair Value | Amount | Fair Value | Amount | Fair Value | Amount | Fair Value | |||||||||||||||||||||||||
(Dollars in millions) | ||||||||||||||||||||||||||||||||
Risk management derivatives: | ||||||||||||||||||||||||||||||||
Swaps: | ||||||||||||||||||||||||||||||||
Pay-fixed | $ | 49,085 | $ | 1,812 | $ | 228,142 | $ | (14,115 | ) | $ | 68,099 | $ | 1,422 | $ | 314,501 | $ | (17,758 | ) | ||||||||||||||
Receive-fixed | 172,174 | 6,493 | 52,003 | (578 | ) | 160,384 | 8,250 | 115,033 | (2,832 | ) | ||||||||||||||||||||||
Basis | 435 | 29 | 50 | — | 2,715 | 61 | 510 | (4 | ) | |||||||||||||||||||||||
Foreign currency | 1,274 | 164 | 286 | (51 | ) | 727 | 107 | 810 | (49 | ) | ||||||||||||||||||||||
Swaptions: | ||||||||||||||||||||||||||||||||
Pay-fixed | 66,200 | 482 | 30,950 | (1,773 | ) | 97,100 | 2,012 | 2,200 | (1 | ) | ||||||||||||||||||||||
Receive-fixed | 48,340 | 4,992 | 30,275 | (673 | ) | 75,380 | 4,043 | — | — | |||||||||||||||||||||||
Interest rate caps | 7,000 | 24 | — | — | 7,000 | 128 | — | — | ||||||||||||||||||||||||
Futures | 220 | 3 | 25 | (1 | ) | — | — | — | — | |||||||||||||||||||||||
Other(1) | 689 | 72 | — | — | 740 | 84 | 8 | — | ||||||||||||||||||||||||
Total gross risk management derivatives | 345,417 | 14,071 | 341,731 | (17,191 | ) | 412,145 | 16,107 | 433,062 | (20,644 | ) | ||||||||||||||||||||||
Collateral receivable (payable)(2) | — | 3,452 | — | (604 | ) | — | 5,437 | — | (1,023 | ) | ||||||||||||||||||||||
Accrued interest receivable (payable) | — | 1,288 | — | (1,805 | ) | — | 2,596 | — | (2,813 | ) | ||||||||||||||||||||||
Total net risk management derivatives | $ | 345,417 | $ | 18,811 | $ | 341,731 | $ | (19,600 | ) | $ | 412,145 | $ | 24,140 | $ | 433,062 | $ | (24,480 | ) | ||||||||||||||
Mortgage commitment derivatives: | ||||||||||||||||||||||||||||||||
Mortgage commitments to purchase whole loans | $ | 2,880 | $ | 19 | $ | 4,435 | $ | (105 | ) | $ | 273 | $ | — | $ | 4,453 | $ | (66 | ) | ||||||||||||||
Forward contracts to purchase mortgage-related securities | 19,535 | 123 | 27,697 | (468 | ) | 3,403 | 7 | 23,287 | (283 | ) | ||||||||||||||||||||||
Forward contracts to sell mortgage-related securities | 40,761 | 811 | 24,562 | (169 | ) | 83,299 | 1,141 | 7,232 | (14 | ) | ||||||||||||||||||||||
Total mortgage commitment derivatives | $ | 63,176 | $ | 953 | $ | 56,694 | $ | (742 | ) | $ | 86,975 | $ | 1,148 | $ | 34,972 | $ | (363 | ) | ||||||||||||||
Derivatives at fair value | $ | 408,593 | $ | 19,764 | $ | 398,425 | $ | (20,342 | ) | $ | 499,120 | $ | 25,288 | $ | 468,034 | $ | (24,843 | ) | ||||||||||||||
(1) | Includes swap credit enhancements and mortgage insurance contracts that we account for as derivatives. The mortgage insurance contracts have payment provisions that are not based on a notional amount. | |
(2) | Collateral receivable represents cash collateral posted by us for derivatives in a loss position. Collateral payable represents cash collateral posted by counterparties to reduce our exposure for derivatives in a gain position. |
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For the Year Ended December 31, | ||||||||||||
2010 | 2009 | 2008 | ||||||||||
(Dollars in millions) | ||||||||||||
Risk management derivatives: | ||||||||||||
Swaps: | ||||||||||||
Pay-fixed | $ | (17,573 | ) | $ | 15,012 | $ | (64,764 | ) | ||||
Receive-fixed | 14,382 | (11,737 | ) | 44,553 | ||||||||
Basis | 17 | 96 | (102 | ) | ||||||||
Foreign currency(1) | 157 | 166 | (130 | ) | ||||||||
Swaptions: | ||||||||||||
Pay-fixed | (2,026 | ) | 453 | (666 | ) | |||||||
Receive-fixed | 3,327 | (8,706 | ) | 6,153 | ||||||||
Interest rate caps | (104 | ) | 11 | (1 | ) | |||||||
Futures | 2 | — | — | |||||||||
Other(2) | 11 | 9 | (6 | ) | ||||||||
Total risk management derivatives fair value losses, net | (1,807 | ) | (4,696 | ) | (14,963 | ) | ||||||
Mortgage commitment derivatives fair value losses, net | (1,193 | ) | (1,654 | ) | (453 | ) | ||||||
Total derivatives fair value losses, net | $ | (3,000 | ) | $ | (6,350 | ) | $ | (15,416 | ) | |||
(1) | Includes the effect of net contractual interest income of approximately $47 million, $38 million and $9 million for 2010, 2009 and 2008, respectively. | |
(2) | Includes swap credit enhancements and mortgage insurance contracts. |
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For the Year Ended December 31, 2010 | ||||||||||||||||||||||||||||||||||||||||
Interest Rate Swaps | Interest Rate Swaptions | |||||||||||||||||||||||||||||||||||||||
Pay- | Receive- | Foreign | Pay- | Receive- | Interest | |||||||||||||||||||||||||||||||||||
Fixed | Fixed | Basis | Currency(1) | Fixed | Fixed | Rate Caps | Futures | Other(2) | Total | |||||||||||||||||||||||||||||||
(Dollars in millions) | ||||||||||||||||||||||||||||||||||||||||
Beginning notional balance | $ | 382,600 | $ | 275,417 | $ | 3,225 | $ | 1,537 | $ | 99,300 | $ | 75,380 | $ | 7,000 | $ | — | $ | 748 | $ | 845,207 | ||||||||||||||||||||
Additions | 212,214 | 250,417 | 55 | 636 | 51,700 | 51,025 | — | 598 | — | 566,645 | ||||||||||||||||||||||||||||||
Terminations(3) | (317,587 | ) | (301,657 | ) | (2,795 | ) | (613 | ) | (53,850 | ) | (47,790 | ) | — | (353 | ) | (59 | ) | (724,704 | ) | |||||||||||||||||||||
Ending notional balance | $ | 277,227 | $ | 224,177 | $ | 485 | $ | 1,560 | $ | 97,150 | $ | 78,615 | $ | 7,000 | $ | 245 | $ | 689 | $ | 687,148 | ||||||||||||||||||||
For the Year Ended December 31, 2009 | ||||||||||||||||||||||||||||||||||||||||
Interest Rate Swaps | Interest Rate Swaptions | |||||||||||||||||||||||||||||||||||||||
Pay- | Receive- | Foreign | Pay- | Receive- | Interest | |||||||||||||||||||||||||||||||||||
Fixed | Fixed | Basis | Currency(1) | Fixed | Fixed | Rate Caps | Futures | Other(2) | Total | |||||||||||||||||||||||||||||||
(Dollars in millions) | ||||||||||||||||||||||||||||||||||||||||
Beginning notional balance | $ | 546,916 | $ | 451,081 | $ | 24,560 | $ | 1,652 | $ | 79,500 | $ | 93,560 | $ | 500 | $ | — | $ | 827 | $ | 1,198,596 | ||||||||||||||||||||
Additions | 297,379 | 279,854 | 2,765 | 577 | 32,825 | 19,175 | 6,500 | — | 13 | 639,088 | ||||||||||||||||||||||||||||||
Terminations(3) | (461,695 | ) | (455,518 | ) | (24,100 | ) | (692 | ) | (13,025 | ) | (37,355 | ) | — | — | (92 | ) | (992,477 | ) | ||||||||||||||||||||||
Ending notional balance | $ | 382,600 | $ | 275,417 | $ | 3,225 | $ | 1,537 | $ | 99,300 | $ | 75,380 | $ | 7,000 | $ | — | $ | 748 | $ | 845,207 | ||||||||||||||||||||
(1) | Exchange rate adjustments to foreign currency swaps existing at both the beginning and the end of the period are included in terminations. Exchange rate adjustments to foreign currency swaps that are added or terminated during the period are reflected in the respective categories. | |
(2) | Includes swap credit enhancements and mortgage insurance contracts. | |
(3) | Includes matured, called, exercised, assigned and terminated amounts. |
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For the Year Ended December 31, | ||||||||||||||||
2010 | 2009 | |||||||||||||||
Purchase | Sale | Purchase | Sale | |||||||||||||
Commitments | Commitments | Commitments | Commitments | |||||||||||||
(Dollars in millions) | ||||||||||||||||
Beginning of period notional balance | $ | 31,416 | $ | 90,531 | $ | 35,004 | $ | 36,232 | ||||||||
Mortgage related securities: | ||||||||||||||||
Open commitments | 660,037 | 841,997 | 833,221 | 1,089,500 | ||||||||||||
Settled commitments | (639,495 | ) | (867,205 | ) | (832,279 | ) | (1,035,201 | ) | ||||||||
Loans: | ||||||||||||||||
Open commitments | 90,043 | — | 114,054 | — | ||||||||||||
Settled commitments | (87,454 | ) | — | (118,584 | ) | — | ||||||||||
End of period notional balance | $ | 54,547 | $ | 65,323 | $ | 31,416 | $ | 90,531 | ||||||||
As of December 31, 2010 | ||||||||||||||||||||
Credit Rating(1) | ||||||||||||||||||||
AA+/AA/AA- | A+/A | Subtotal | Other(2) | Total | ||||||||||||||||
(Dollars in millions) | ||||||||||||||||||||
Credit loss exposure(3) | $ | 350 | $ | 325 | $ | 675 | $ | 75 | $ | 750 | ||||||||||
Less: Collateral held(4) | 273 | 325 | 598 | — | 598 | |||||||||||||||
Exposure net of collateral | $ | 77 | $ | — | $ | 77 | $ | 75 | $ | 152 | ||||||||||
Additional information: | ||||||||||||||||||||
Notional amount(5) | $ | 208,898 | $ | 476,766 | $ | 685,664 | $ | 1,484 | $ | 687,148 | ||||||||||
Number of counterparties(5) | 7 | 8 | 15 |
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
As of December 31, 2009 | ||||||||||||||||||||
Credit Rating(1) | ||||||||||||||||||||
AA+/AA/AA- | A+/A | Subtotal | Other(2) | Total | ||||||||||||||||
(Dollars in millions) | ||||||||||||||||||||
Credit loss exposure(3) | $ | 658 | $ | 583 | $ | 1,241 | $ | 84 | $ | 1,325 | ||||||||||
Less: Collateral held(4) | 580 | 507 | 1,087 | — | 1,087 | |||||||||||||||
Exposure net of collateral | $ | 78 | $ | 76 | $ | 154 | $ | 84 | $ | 238 | ||||||||||
Additional information: | ||||||||||||||||||||
Notional amount(5) | $ | 220,791 | $ | 623,668 | $ | 844,459 | $ | 748 | $ | 845,207 | ||||||||||
Number of counterparties(5) | 7 | 9 | 16 |
(1) | We manage collateral requirements based on the lower credit rating of the legal entity, as issued by Standard & Poor’s and Moody’s. The credit rating reflects the equivalent Standard & Poor’s rating for any ratings based on Moody’s scale. | |
(2) | Includes defined benefit mortgage insurance contracts and swap credit enhancements accounted for as derivatives where the right of legal offset does not exist. Also includes exchange-traded derivatives, such as futures and interest rate swaps, which are settled daily through a clearinghouse. | |
(3) | Represents the exposure to credit loss on derivative instruments, which we estimate using the fair value of all outstanding derivative contracts in a gain position. We net derivative gains and losses with the same counterparty where a legal right of offset exists under an enforceable master netting agreement. This table excludes mortgage commitments accounted for as derivatives. | |
(4) | Represents both cash and non-cash collateral posted by our counterparties to us. Does not include collateral held in excess of exposure. We reduce the value of non-cash collateral in accordance with the counterparty agreements to help ensure recovery of any loss through the disposition of the collateral. We posted cash collateral of $3.4 billion and $5.4 billion related to our counterparties’ credit exposure to us as of December 31, 2010 and 2009, respectively. | |
(5) | We had exposure to 3 and 6 interest rate and foreign currency derivative counterparties in a net gain position as of December 31, 2010 and 2009, respectively. Those interest rate and foreign currency derivatives had notional balances of $106.5 billion and $310.0 billion as of December 31, 2010 and 2009, respectively. |
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
11. | Income Taxes |
For the Year Ended December 31, | ||||||||||||
2010 | 2009 | 2008 | ||||||||||
(Dollars in millions) | ||||||||||||
Current income tax expense (benefit) | $ | (82 | ) | $ | (999 | ) | $ | 403 | ||||
Deferred income tax expense(1) | — | 14 | 13,346 | |||||||||
Provision (benefit) for federal income taxes | $ | (82 | ) | $ | (985 | ) | $ | 13,749 | ||||
(1) | Amount excludes the income tax effect of items recognized directly in “Fannie Mae stockholders’ equity (deficit)” where we did not establish a valuation allowance. |
For the Year Ended December 31, | ||||||||||||
2010 | 2009 | 2008 | ||||||||||
Statutory corporate tax rate | 35.0 | % | 35.0 | % | 35.0 | % | ||||||
Tax-exempt interest and dividends-received deductions | 1.3 | 0.3 | 0.5 | |||||||||
Equity investments in affordable housing projects | 6.3 | 1.3 | 2.1 | |||||||||
Other | 0.1 | — | — | |||||||||
Valuation allowance | (42.1 | ) | (35.2 | ) | (68.2 | ) | ||||||
Effective tax rate | 0.6 | % | 1.4 | % | (30.6 | )% | ||||||
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
As of December 31, | ||||||||
2010 | 2009 | |||||||
(Dollars in millions) | ||||||||
Deferred tax assets:(1) | ||||||||
Allowance for loan losses and basis in acquired property, net | $ | 27,063 | $ | 23,615 | ||||
Mortgage and mortgage-related assets, including acquired credit-impaired loans | 10,825 | 10,547 | ||||||
Debt and derivative instruments | 6,627 | 8,255 | ||||||
Partnership credits | 4,500 | 3,587 | ||||||
Partnership and other equity investments | 2,175 | 2,411 | ||||||
Unrealized losses on AFS securities | 772 | 927 | ||||||
Net operating loss and alternative minimum tax credit carryforwards | 3,341 | 688 | ||||||
Other, net | 1,818 | 3,661 | ||||||
Total deferred tax assets | 57,121 | 53,691 | ||||||
Deferred tax liabilities: | ||||||||
Other, net | 53 | 45 | ||||||
Total deferred tax liabilities | 53 | 45 | ||||||
Valuation allowance | (56,314 | ) | (52,737 | ) | ||||
Net deferred tax assets | $ | 754 | $ | 909 | ||||
(1) | Certain prior year amounts have been reclassified to conform to the current year presentation. |
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For the Year Ended December 31, | ||||||||||||
2010 | 2009 | 2008 | ||||||||||
(Dollars in millions) | ||||||||||||
Unrecognized tax benefits as of January 1 | $ | 911 | $ | 1,745 | $ | 124 | ||||||
Gross increases—tax positions in prior years | 83 | 38 | 49 | |||||||||
Gross decreases—tax positions in prior years | (31 | ) | (1 | ) | (6 | ) | ||||||
Gross increases—tax positions in current year | — | 761 | — | |||||||||
Settlements | (99 | ) | (1,632 | ) | 1,578 | |||||||
Unrecognized tax benefits as of December 31(1) | $ | 864 | $ | 911 | $ | 1,745 | ||||||
(1) | Amounts exclude tax credits of $804 million, $716 million and $456 million as of December 31, 2010, 2009 and 2008, respectively. |
12. | Loss Per Share |
For the Year Ended | ||||||||||||
December 31, | ||||||||||||
2010 | 2009 | 2008 | ||||||||||
(Dollars and shares in millions, except per share amounts) | ||||||||||||
Loss before extraordinary losses | $ | (14,018 | ) | $ | (72,022 | ) | $ | (58,319 | ) | |||
Extraordinary losses, net of tax effect | — | — | (409 | ) | ||||||||
Net loss | (14,018 | ) | (72,022 | ) | (58,728 | ) | ||||||
Less: Net loss attributable to the noncontrolling interest | 4 | 53 | 21 | |||||||||
Net loss attributable to Fannie Mae | (14,014 | ) | (71,969 | ) | (58,707 | ) | ||||||
Preferred stock dividends and issuance costs at redemption | (7,704 | ) | (2,474 | ) | (1,069 | ) | ||||||
Net loss attributable to common stockholders-basic and diluted | $ | (21,718 | ) | $ | (74,443 | ) | $ | (59,776 | ) | |||
Weighted-average common shares outstanding-basic and diluted(1) | 5,694 | 5,680 | 2,487 | |||||||||
Basic and diluted loss per share: | ||||||||||||
Loss before extraordinary losses | $ | (3.81 | ) | $ | (13.11 | ) | $ | (23.88 | ) | |||
Extraordinary losses, net of tax effect | — | — | (0.16 | ) | ||||||||
Basic and diluted loss per share | $ | (3.81 | ) | $ | (13.11 | ) | $ | (24.04 | ) | |||
(1) | Amounts include 4.6 billion for both the years ended December 31, 2010 and 2009 and 1.4 billion for the year ended December 31, 2008 of weighted-average shares of common stock, that would be issued upon the full exercise of the warrant issued to Treasury from the date the warrant was issued through December 31, 2010, 2009 and 2008, respectively. |
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13. | Stock-Based Compensation |
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For the Year Ended December 31, | ||||||||||||||||||||||||
2010 | 2009 | 2008 | ||||||||||||||||||||||
Weighted | Weighted | Weighted | ||||||||||||||||||||||
Average | Average | Average | ||||||||||||||||||||||
Fair | Fair | Fair | ||||||||||||||||||||||
Number of | Value at | Number of | Value at | Number of | Value at | |||||||||||||||||||
Shares | Grant Date | Shares | Grant Date | Shares | Grant Date | |||||||||||||||||||
(Shares in thousands) | ||||||||||||||||||||||||
Nonvested as of January 1 | 2,873 | $ | 39.53 | 5,934 | $ | 41.19 | 4,375 | $ | 57.67 | |||||||||||||||
Granted | — | — | — | — | 4,518 | 31.96 | ||||||||||||||||||
Vested | (1,199 | ) | 42.58 | (1,858 | ) | 44.78 | (1,768 | ) | 58.25 | |||||||||||||||
Forfeited | (164 | ) | 37.34 | (1,203 | ) | 39.61 | (1,191 | ) | 41.58 | |||||||||||||||
Nonvested as of December 31 | 1,510 | $ | 37.34 | 2,873 | $ | 39.53 | 5,934 | $ | 41.19 | |||||||||||||||
For the Year Ended December 31, | ||||||||||||||||||||||||||||||||||||
2010 | 2009 | 2008 | ||||||||||||||||||||||||||||||||||
(Dollars in millions) | ||||||||||||||||||||||||||||||||||||
Unrecognized compensation cost | $ | 19 | $ | 56 | $ | 148 | ||||||||||||||||||||||||||||||
Expected weighted-average life of unvested restricted stock | 1.0 years | 1.6 years | 2.4 years |
For the Year Ended December 31, | ||||||||||||||||||||||||||||||||||||
2010 | 2009 | 2008 | ||||||||||||||||||||||||||||||||||
Weighted- | Weighted- | Weighted- | ||||||||||||||||||||||||||||||||||
Weighted- | Average | Weighted- | Average | Weighted- | Average | |||||||||||||||||||||||||||||||
Average | Fair | Average | Fair | Average | Fair | |||||||||||||||||||||||||||||||
Exercise | Value at | Exercise | Value at | Exercise | Value at | |||||||||||||||||||||||||||||||
Options | Price | Grant Date | Options | Price | Grant Date | Options | Price | Grant Date | ||||||||||||||||||||||||||||
Beginning balance, January 1 | 8,759 | $ | 72.39 | $ | 23.60 | 12,293 | $ | 72.12 | $ | 23.62 | 17,031 | $ | 71.90 | $ | 23.49 | |||||||||||||||||||||
Forfeited and/or expired | (3,960 | ) | 69.15 | 25.26 | (3,534 | ) | 71.45 | 23.66 | (4,738 | ) | 71.19 | 23.13 | ||||||||||||||||||||||||
Ending balance, December 31(1) | 4,799 | $ | 75.07 | $ | 23.01 | 8,759 | $ | 72.39 | $ | 23.60 | 12,293 | $ | 72.12 | $ | 23.62 | |||||||||||||||||||||
Options exercisable, December 31 | 4,799 | $ | 75.07 | $ | 23.01 | 8,759 | $ | 72.39 | $ | 23.60 | 12,291 | $ | 72.12 | $ | 23.62 | |||||||||||||||||||||
(1) | All options outstanding are fully vested. |
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
14. | Employee Retirement Benefits |
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
For the Year Ended December 31, | ||||||||||||||||||||||||
2010 | 2009 | 2008 | ||||||||||||||||||||||
Other Post- | Other Post- | Other Post- | ||||||||||||||||||||||
Pension | Retirement | Pension | Retirement | Pension | Retirement | |||||||||||||||||||
Plans | Plan | Plans | Plan | Plans | Plan | |||||||||||||||||||
(Dollars in millions) | ||||||||||||||||||||||||
Service cost | $ | 37 | $ | 6 | $ | 37 | $ | 5 | $ | 46 | $ | 5 | ||||||||||||
Interest cost | 66 | 9 | 62 | 9 | 58 | 9 | ||||||||||||||||||
Other | (51 | ) | (2 | ) | (22 | ) | (2 | ) | (59 | ) | 1 | |||||||||||||
Net periodic benefit cost | $ | 52 | $ | 13 | $ | 77 | $ | 12 | $ | 45 | $ | 15 | ||||||||||||
As of December 31, | ||||||||||||||||||||||||
2010 | 2009 | |||||||||||||||||||||||
Other Post- | Other Post- | |||||||||||||||||||||||
Pension | Retirement | Pension | Retirement | |||||||||||||||||||||
Plans | Plan | Plans | Plan | |||||||||||||||||||||
(Dollars in millions) | ||||||||||||||||||||||||
Net actuarial loss | $ | 218 | $ | 42 | $ | 162 | $ | 39 | ||||||||||||||||
Net prior service cost (credit) | 6 | (56 | ) | 7 | (61 | ) | ||||||||||||||||||
Net transition obligation | — | 4 | — | 5 | ||||||||||||||||||||
Pre-tax amount recorded in AOCI | $ | 224 | $ | (10 | ) | $ | 169 | $ | (17 | ) | ||||||||||||||
After-tax amount recorded in AOCI(1) | $ | 224 | $ | (10 | ) | $ | 169 | $ | (17 | ) | ||||||||||||||
(1) | During 2008, we established a valuation allowance for our deferred tax assets, which has resulted in the reversal of the tax benefit amounts recorded in AOCI for our pension and other postretirement plans. Refer to “Note 11, Income Taxes” for additional information. |
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For the Year Ended December 31, | ||||||||||||||||
2010 | 2009 | |||||||||||||||
Other Post- | Other Post- | |||||||||||||||
Pension | Retirement | Pension | Retirement | |||||||||||||
Plans | Plan | Plans | Plan | |||||||||||||
(Dollars in millions) | ||||||||||||||||
Actuarial (Gain) Loss | ||||||||||||||||
Beginning balance, January 1 | $ | 162 | $ | 39 | $ | 276 | $ | 32 | ||||||||
Current year actuarial (gain) loss | 64 | 4 | (92 | ) | 8 | |||||||||||
Actuarial gain due to curtailments | — | — | (1 | ) | — | |||||||||||
Amortization | (8 | ) | (1 | ) | (21 | ) | (1 | ) | ||||||||
Ending balance, December 31 | $ | 218 | $ | 42 | $ | 162 | $ | 39 | ||||||||
Prior Service Cost (Credit) | ||||||||||||||||
Beginning balance, January 1 | $ | 7 | $ | (61 | ) | $ | 10 | $ | (66 | ) | ||||||
Prior service credit due to curtailments | — | — | (1 | ) | — | |||||||||||
Amortization | (1 | ) | 5 | (2 | ) | 5 | ||||||||||
Ending balance, December 31 | $ | 6 | $ | (56 | ) | $ | 7 | $ | (61 | ) | ||||||
As of December 31, 2010 | ||||||||
Other Post- | ||||||||
Pension | Retirement | |||||||
Plans | Plan | |||||||
(Dollars in millions) | ||||||||
Net actuarial loss | $ | 11 | $ | 2 | ||||
Net prior service cost (credit) | 1 | (5 | ) | |||||
Net transition obligation | — | 1 | ||||||
Total | $ | 12 | $ | (2 | ) | |||
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As of December 31, | ||||||||||||||||
2010 | 2009 | |||||||||||||||
Other Post- | Other Post- | |||||||||||||||
Pension | Retirement | Pension | Retirement | |||||||||||||
Plans | Plan | Plans | Plan | |||||||||||||
(Dollars in millions) | ||||||||||||||||
Change in Benefit Obligation | ||||||||||||||||
Benefit obligation at beginning of year | $ | 1,055 | $ | 166 | $ | 959 | $ | 151 | ||||||||
Service cost | 37 | 6 | 37 | 5 | ||||||||||||
Interest cost | 66 | 9 | 62 | 9 | ||||||||||||
Plan participants’ contributions | — | 2 | — | 2 | ||||||||||||
Net actuarial loss | 130 | 4 | 29 | 8 | ||||||||||||
Curtailment gain | — | — | (4 | ) | — | |||||||||||
Benefits paid | (31 | ) | (7 | ) | (28 | ) | (9 | ) | ||||||||
Benefit obligation at end of year | 1,257 | 180 | 1,055 | 166 | ||||||||||||
Change in Plan Assets | ||||||||||||||||
Fair value of plan assets at beginning of year | 799 | — | 579 | — | ||||||||||||
Actual return on plan assets | 125 | — | 166 | — | ||||||||||||
Employer contributions | 49 | 6 | 82 | 8 | ||||||||||||
Plan participants’ contributions | — | 2 | — | 2 | ||||||||||||
Benefits paid | (31 | ) | (8 | ) | (28 | ) | (10 | ) | ||||||||
Fair value of plan assets at end of year | 942 | — | 799 | — | ||||||||||||
Funded status at end of year | $ | (315 | ) | $ | (180 | ) | $ | (256 | ) | $ | (166 | ) | ||||
Amounts Recognized in our Consolidated Balance Sheets | ||||||||||||||||
Accrued benefit cost | $ | (315 | ) | $ | (180 | ) | $ | (256 | ) | $ | (166 | ) | ||||
Accumulated other comprehensive (income) loss | 224 | (10 | ) | 169 | (17 | ) | ||||||||||
Net amount recognized | $ | (91 | ) | $ | (190 | ) | $ | (87 | ) | $ | (183 | ) | ||||
As of December 31, | ||||||||
2010 | 2009 | |||||||
(Dollars in millions) | ||||||||
Projected benefit obligation | $ | 1,257 | $ | 1,055 | ||||
Accumulated benefit obligation | 1,111 | 926 | ||||||
Fair value of plan assets | 942 | 799 |
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As of December 31, | ||||||||||||||||||||||||
Pension Benefits | Postretirement Benefits | |||||||||||||||||||||||
2010 | 2009 | 2008 | 2010 | 2009 | 2008 | |||||||||||||||||||
Weighted-average assumptions used to determine net periodic benefit costs: | ||||||||||||||||||||||||
Discount rate | 6.10 | % | 6.15 | % | 6.40 | % | 5.75 | % | 6.15 | % | 6.40 | % | ||||||||||||
Average rate of increase in future compensation | 4.00 | 4.00 | 5.00 | |||||||||||||||||||||
Expected long-term weighted-average rate of return on plan assets | 7.50 | 7.50 | 7.50 | |||||||||||||||||||||
Weighted-average assumptions used to determine benefit obligation at year-end: | ||||||||||||||||||||||||
Discount rate | 5.65 | % | 6.10 | % | 6.15 | % | 5.40 | % | 5.75 | % | 6.15 | % | ||||||||||||
Average rate of increase in future compensation | 4.00 | 4.00 | 4.00 | |||||||||||||||||||||
Health care cost trend rate assumed for next year: | ||||||||||||||||||||||||
Pre-65 | 8.00 | % | 8.00 | % | 8.00 | % | ||||||||||||||||||
Post-65 | 8.00 | 8.00 | 8.00 | |||||||||||||||||||||
Rate that cost trend rate gradually declines to and remains at: | 5.00 | 5.00 | 5.00 | |||||||||||||||||||||
Year that rate reaches the ultimate trend rate | 2018 | 2018 | 2015 |
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Fair Value Measurements as of December 31, | ||||||||||||||||||||||||
2010 | 2009 | |||||||||||||||||||||||
Quoted | Quoted | |||||||||||||||||||||||
Prices in | Prices in | |||||||||||||||||||||||
Active | Significant | Active | Significant | |||||||||||||||||||||
Markets for | Other | Markets for | Other | |||||||||||||||||||||
Identical | Observable | Identical | Observable | |||||||||||||||||||||
Assets | Inputs | Assets | Inputs | |||||||||||||||||||||
(Level 1) | (Level 2) | Total | (Level 1) | (Level 2) | Total | |||||||||||||||||||
(Dollars in millions) | ||||||||||||||||||||||||
Cash equivalents | $ | — | $ | 13 | $ | 13 | $ | — | $ | 14 | $ | 14 | ||||||||||||
Equity securities: | ||||||||||||||||||||||||
U.S. large-cap(1) | 329 | — | 329 | 408 | — | 408 | ||||||||||||||||||
U.S. mid/small cap(2) | 83 | — | 83 | 116 | — | 116 | ||||||||||||||||||
International(3) | — | 255 | 255 | — | 115 | 115 | ||||||||||||||||||
Fixed income securities: | ||||||||||||||||||||||||
Investment grade credit(4) | — | 262 | 262 | — | 146 | 146 | ||||||||||||||||||
Total plan assets at fair value | $ | 412 | $ | 530 | $ | 942 | $ | 524 | $ | 275 | $ | 799 | ||||||||||||
(1) | Consists of a publicly traded equity index fund that tracks the S&P 500. | |
(2) | Consists of a publicly traded equity index fund that tracks all regularly traded U.S. stocks except those in the S&P 500. | |
(3) | Consists of an international equity fund that tracks an index that consists of approximately 6,500 and 4,000 securities for 2010 and 2009, respectively, across over 40 countries. Japan has the largest share with 15% in 2010. | |
(4) | Consists of a bond fund that tracks a broadly diversified investment grade index that consists of approximately 2,700 issuances of investment grade bonds from diverse industries. International markets represent 19% of the fund. |
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Expected Retirement Plan Benefit Payments | ||||||||||||
Other Postretirement Benefits | ||||||||||||
Pension | Before Medicare | Medicare | ||||||||||
Benefits | Part D Subsidy | Part D Subsidy | ||||||||||
(Dollars in millions) | ||||||||||||
2011 | $ | 33 | $ | 9 | $ | 1 | ||||||
2012 | 36 | 9 | 1 | |||||||||
2013 | 40 | 10 | 1 | |||||||||
2014 | 44 | 11 | 1 | |||||||||
2015 | 49 | 12 | 1 | |||||||||
2016—2020 | 348 | 73 | 8 |
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15. | Segment Reporting |
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• | 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 fees (both the previously recorded deferred cash fees that were eliminated from our consolidated balance sheets at transition and deferred guaranty fees received subsequent to transition that are currently recognized in our consolidated financial statements through interest income), such asbuy-ups, buy-downs, and risk-based pricing adjustments, and (3) the guaranty fees from the Capital Markets group on single-family loans in our mortgage portfolio. To reconcile to our consolidated statements of operations, we eliminate guaranty fees and the amortization of deferred cash fees related to consolidated trusts as they are now reflected as a component of interest income. However, such accounting continues to be reflected for the segment reporting presentation. | |
• | Net interest income (expense)—Net interest expense within the Single-Family segment reflects interest expense to reimburse Capital Markets and consolidated trusts for contractual interest not received on mortgage loans, when interest income is no longer recognized in accordance with our nonaccrual accounting policy in our consolidated statements of operations. Net interest income (expense), also includes an allocated cost of capital charge among the three segments that is not included in net interest income in the consolidated statement of operations. |
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• | Guaranty fee income—Guaranty fee income reflects the cash guaranty fees paid by MBS trusts to Multifamily and the guaranty fees from the Capital Markets group on multifamily loans in Fannie Mae’s portfolio. To reconcile to our consolidated statements of operations, we eliminate guaranty fees related to consolidated trusts. | |
• | Income (losses) from partnership investments—Income (losses) from partnership investments primarily reflect losses on investments in affordable rental and for-sale housing partnerships measured under the equity method of accounting. To reconcile to our consolidated statements of operations, we adjust the losses to reflect the consolidation of certain partnership investments. |
• | Net interest income—Net interest income reflects the interest income on mortgage loans and securities owned by Fannie Mae and interest expense on funding debt issued by Fannie Mae, including accretion and amortization of any cost basis adjustments. To reconcile to our consolidated statements of operations, we adjust for the impact of consolidated trusts and intercompany eliminations as follows: |
• | Interest income: Interest income consists of interest on the segment’s interest-earning assets, which differs from interest-earning assets in our consolidated balance sheets. We exclude loans and securities that underlie the consolidated trusts from our Capital Markets group balance sheets. The net interest income reported by the Capital Markets group excludes the interest income earned on assets held by consolidated trusts. As a result, we report interest income and amortization of cost basis adjustments only on securities and loans that are held in our portfolio. For mortgage loans held in our portfolio, when interest income is no longer recognized in accordance with our nonaccrual accounting policy, the Capital Markets group recognizes interest income for reimbursement from Single-Family and Multifamily for the contractual interest due under the terms of our intracompany guaranty arrangement. | |
• | Interest expense: Interest expense consists of contractual interest on the Capital Markets group’s interest-bearing liabilities, including the accretion and amortization of any cost basis adjustments. It excludes interest expense on debt issued by consolidated trusts. Therefore, the interest expense recognized on the Capital Markets group income statement is limited to our funding debt, which is reported as “Debt of Fannie Mae” in our consolidated balance sheets. Net interest expense also includes an allocated cost of capital charge among the three business segments that is not included in net interest income in our consolidated statements of operations. |
• | Investment gains or losses, net—Investment gains or losses, net reflects the gains and losses on securitizations and sales ofavailable-for-sale securities from our portfolio. To reconcile to our |
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consolidated statements of operations, we eliminate gains and losses on securities that have been consolidated to loans. |
• | Fair value gains or losses, net—Fair value gains or losses, net for the Capital Markets group includes derivative gains and losses, foreign exchange gains and losses, and the fair value gains and losses on certain debt securities in our portfolio. To reconcile to our consolidated statements of operations, we eliminate fair value gains or losses on Fannie Mae MBS that have been consolidated to loans. | |
• | Other expenses, net—Debt extinguishment gains or losses recorded on the segment statements of operations relate exclusively to our funding debt, which is reported as “Debt of Fannie Mae” on our consolidated balance sheets. To reconcile to our consolidated statements of operations, we include debt extinguishment gains or losses related to consolidated trusts to arrive at our total recognized debt extinguishment gains or losses. |
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For the Year Ended December 31, 2010 | ||||||||||||||||||||||||
Business Segments | Other Activity/Reconciling Items | |||||||||||||||||||||||
Single- | Capital | Consolidated | Eliminations/ | Total | ||||||||||||||||||||
Family | Multifamily | Markets | Trusts(1) | Adjustments(2) | Results | |||||||||||||||||||
(Dollars in millions) | ||||||||||||||||||||||||
Net interest income (expense)(3) | $ | (5,386 | ) | $ | 3 | $ | 14,321 | $ | 5,073 | $ | 2,398 | $ | 16,409 | |||||||||||
Provision for loan losses | (24,503 | ) | (199 | ) | — | — | — | (24,702 | ) | |||||||||||||||
Net interest income (expense) after provision for loan losses | (29,889 | ) | (196 | ) | 14,321 | 5,073 | 2,398 | (8,293 | ) | |||||||||||||||
Guaranty fee income (expense)(4) | 7,206 | 791 | (1,440 | ) | (4,525 | ) | (1,830 | ) | 202 | |||||||||||||||
Investment gains (losses), net | 9 | 6 | 4,047 | (418 | ) | (3,298 | ) | 346 | ||||||||||||||||
Netother-than-temporary impairments | — | — | (720 | ) | (2 | ) | — | (722 | ) | |||||||||||||||
Fair value gains (losses), net | — | — | 239 | (155 | ) | (595 | ) | (511 | ) | |||||||||||||||
Debt extinguishment losses, net | — | — | (459 | ) | (109 | ) | — | (568 | ) | |||||||||||||||
Losses from partnership investments | — | (70 | ) | — | — | (4 | ) | (74 | ) | |||||||||||||||
Fee and other income (expense)(5) | 306 | 146 | 519 | (88 | ) | (1 | ) | 882 | ||||||||||||||||
Administrative expenses | (1,628 | ) | (384 | ) | (585 | ) | — | — | (2,597 | ) | ||||||||||||||
Benefit (provision) for guaranty losses | (237 | ) | 43 | — | — | — | (194 | ) | ||||||||||||||||
Foreclosed property expense | (1,680 | ) | (38 | ) | — | — | — | (1,718 | ) | |||||||||||||||
Other income (expenses) | (836 | ) | (68 | ) | 125 | — | (74 | ) | (853 | ) | ||||||||||||||
Income (loss) before federal income taxes | (26,749 | ) | 230 | 16,047 | (224 | ) | (3,404 | ) | (14,100 | ) | ||||||||||||||
Benefit (provision) for federal income taxes | 69 | (14 | ) | 27 | — | — | 82 | |||||||||||||||||
Net income (loss) | (26,680 | ) | 216 | 16,074 | (224 | ) | (3,404 | ) | (14,018 | ) | ||||||||||||||
Less: Net loss attributable to noncontrolling interests | — | — | — | — | 4 | 4 | ||||||||||||||||||
Net income (loss) attributable to Fannie Mae | $ | (26,680 | ) | $ | 216 | $ | 16,074 | $ | (224 | ) | $ | (3,400 | ) | $ | (14,014 | ) | ||||||||
(1) | Column represents activity of consolidated trusts and it also includes the issuances and extinguishment of debt due to sales and purchases of our MBS. | |
(2) | Column represents adjustments during the period used to reconcile segment results to consolidated results which include the elimination of intersegment transactions occurring between the three operating segments and our consolidated trusts. | |
(3) | Includes cost of capital charge among our three business segments. | |
(4) | The charge to Capital Markets represents an intracompany guaranty fee expense allocated to Capital Markets from Single-Family and Multifamily for absorbing the credit risk on mortgage loans held in our portfolio. | |
(5) | Fee and other income for Single-Family and Multifamily segments include trust management income. |
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For the Year Ended December 31, 2009 | ||||||||||||||||
Single- | Capital | |||||||||||||||
Family | Multifamily | Markets | Total | |||||||||||||
(Dollars in millions) | ||||||||||||||||
Net interest income (expense)(1) | $ | 428 | $ | (193 | ) | $ | 14,275 | $ | 14,510 | |||||||
Guaranty fee income (expense)(2) | 8,002 | 675 | (1,466 | ) | 7,211 | |||||||||||
Investment gains (losses), net | (2 | ) | — | 1,460 | 1,458 | |||||||||||
Netother-than-temporary impairments | — | — | (9,861 | ) | (9,861 | ) | ||||||||||
Fair value losses, net | — | — | (2,811 | ) | (2,811 | ) | ||||||||||
Debt extinguishment losses, net | — | — | (325 | ) | (325 | ) | ||||||||||
Losses from partnership investments | — | (6,735 | ) | — | (6,735 | ) | ||||||||||
Fee and other income(3) | 354 | 100 | �� | 319 | 773 | |||||||||||
Administrative expenses | (1,419 | ) | (363 | ) | (425 | ) | (2,207 | ) | ||||||||
Provision for credit losses | (70,463 | ) | (2,163 | ) | — | (72,626 | ) | |||||||||
Foreclosed property expense | (857 | ) | (53 | ) | — | (910 | ) | |||||||||
Other expenses | (1,216 | ) | (38 | ) | (230 | ) | (1,484 | ) | ||||||||
Income (loss) before federal income taxes | (65,173 | ) | (8,770 | ) | 936 | (73,007 | ) | |||||||||
Benefit (provision) for federal income taxes | 1,375 | (311 | ) | (79 | ) | 985 | ||||||||||
Net income (loss) | (63,798 | ) | (9,081 | ) | 857 | (72,022 | ) | |||||||||
Less: Net loss attributable to noncontrolling interest | — | 53 | — | 53 | ||||||||||||
Net income (loss) attributable to Fannie Mae | $ | (63,798 | ) | $ | (9,028 | ) | $ | 857 | $ | (71,969 | ) | |||||
(1) | Includes cost of capital charge. | |
(2) | The charge to Capital Markets represents an intercompany guaranty fee expense allocated to Capital Markets from Single-Family and Multifamily for absorbing the credit risk on mortgage loans held in our portfolio. | |
(3) | Certain prior period amounts have been reclassified to conform to the current period presentation. |
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For the Year Ended December 31, 2008 | ||||||||||||||||
Single- | Capital | |||||||||||||||
Family | Multifamily | Markets | Total | |||||||||||||
(Dollars in millions) | ||||||||||||||||
Net interest income (expense)(1) | $ | 461 | $ | (343 | ) | $ | 8,664 | $ | 8,782 | |||||||
Guaranty fee income (expense)(2) | 8,390 | 633 | (1,402 | ) | 7,621 | |||||||||||
Investment losses, net | (72 | ) | — | (174 | ) | (246 | ) | |||||||||
Netother-than-temporary impairments | — | — | (6,974 | ) | (6,974 | ) | ||||||||||
Fair value losses, net | — | — | (20,129 | ) | (20,129 | ) | ||||||||||
Debt extinguishment losses, net | — | — | (222 | ) | (222 | ) | ||||||||||
Losses from partnership investments | — | (1,554 | ) | — | (1,554 | ) | ||||||||||
Fee and other income(3) | 583 | 186 | 264 | 1,033 | ||||||||||||
Administrative expenses | (1,127 | ) | (404 | ) | (448 | ) | (1,979 | ) | ||||||||
Provision for credit losses | (27,881 | ) | (70 | ) | — | (27,951 | ) | |||||||||
Foreclosed property expense | (1,844 | ) | (14 | ) | — | (1,858 | ) | |||||||||
Other expenses | (823 | ) | (133 | ) | (137 | ) | (1,093 | ) | ||||||||
Loss before federal income taxes and extraordinary losses | (22,313 | ) | (1,699 | ) | (20,558 | ) | (44,570 | ) | ||||||||
Provision for federal income taxes | (4,788 | ) | (511 | ) | (8,450 | ) | (13,749 | ) | ||||||||
Loss before extraordinary losses | (27,101 | ) | (2,210 | ) | (29,008 | ) | (58,319 | ) | ||||||||
Extraordinary losses, net of tax effect | — | — | (409 | ) | (409 | ) | ||||||||||
Net loss | (27,101 | ) | (2,210 | ) | (29,417 | ) | (58,728 | ) | ||||||||
Less: Net loss attributable to the noncontrolling interest | — | 21 | — | 21 | ||||||||||||
Net loss attributable to Fannie Mae | $ | (27,101 | ) | $ | (2,189 | ) | $ | (29,417 | ) | $ | (58,707 | ) | ||||
(1) | Includes cost of capital charge. | |
(2) | The charge to Capital Markets represents an intercompany guaranty fee expense allocated to Capital Markets from Single-Family and Multifamily for absorbing the credit risk on mortgage loans held in our portfolio. | |
(3) | Certain prior period amounts have been reclassified to conform to the current period presentation. |
As of December 31, | ||||||||
2010 | 2009 | |||||||
(Dollars in millions) | ||||||||
Single-Family(1) | $ | 14,843 | $ | 19,991 | ||||
Multifamily(1) | 4,881 | 5,698 | ||||||
Capital Markets | 873,052 | 843,452 | ||||||
Consolidated trusts | 2,673,937 | — | ||||||
Eliminations/adjustments(1) | (344,741 | ) | — | |||||
Total assets | $ | 3,221,972 | $ | 869,141 | ||||
(1) | Beginning in 2010, the allowance for loan losses, allowance for accrued interest receivable and fair value losses previously recognized on acquired credit impaired loans are not treated as assets for Single-Family and Multifamily segment reporting purposes because these allowances and losses relate to loan assets that are held by the Capital Markets segment and consolidated trusts. |
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16. | Equity (Deficit) |
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Annual | ||||||||||||||||||||||||||||||||
Issued and Outstanding as of | Dividend | |||||||||||||||||||||||||||||||
December 31, | Stated | Rate as of | ||||||||||||||||||||||||||||||
2010 | 2009 | Value | December 31, | Redeemable on | ||||||||||||||||||||||||||||
Title | Issue Date | Shares | Amount | Shares | Amount | per share | 2010 | or After | ||||||||||||||||||||||||
(Dollars and shares in millions, except per share amounts) | ||||||||||||||||||||||||||||||||
Senior Preferred Stock | ||||||||||||||||||||||||||||||||
Series 2008-2 | September 8, 2008 | 1 | $ | 88,600 | 1 | $ | 60,900 | $ | 88,600 | (1) | 10.000 | %(2) | (3 | ) | ||||||||||||||||||
Total | 1 | $ | 88,600 | 1 | $ | 60,900 | ||||||||||||||||||||||||||
Preferred Stock | ||||||||||||||||||||||||||||||||
Series D | September 30, 1998 | 3 | $ | 150 | 3 | $ | 150 | $ | 50 | 5.250 | % | September 30, 1999 | ||||||||||||||||||||
Series E | April 15, 1999 | 3 | 150 | 3 | 150 | 50 | 5.100 | April 15, 2004 | ||||||||||||||||||||||||
Series F | March 20, 2000 | 14 | 690 | 14 | 690 | 50 | 0.890 | (4) | March 31, 2002 | (5) | ||||||||||||||||||||||
Series G | August 8, 2000 | 6 | 288 | 6 | 288 | 50 | 0.270 | (6) | September 30, 2002 | (5) | ||||||||||||||||||||||
Series H | April 6, 2001 | 8 | 400 | 8 | 400 | 50 | 5.810 | April 6, 2006 | ||||||||||||||||||||||||
Series I | October 28, 2002 | 6 | 300 | 6 | 300 | 50 | 5.375 | October 28, 2007 | ||||||||||||||||||||||||
Series L | April 29, 2003 | 7 | 345 | 7 | 345 | 50 | 5.125 | April 29, 2008 | ||||||||||||||||||||||||
Series M | June 10, 2003 | 9 | 460 | 9 | 460 | 50 | 4.750 | June 10, 2008 | ||||||||||||||||||||||||
Series N | September 25, 2003 | 5 | 225 | 5 | 225 | 50 | 5.500 | September 25, 2008 | ||||||||||||||||||||||||
Series O | December 30, 2004 | 50 | 2,500 | 50 | 2,500 | 50 | 7.000 | (7) | December 31, 2007 | |||||||||||||||||||||||
Convertible | ||||||||||||||||||||||||||||||||
Series 2004-1(8) | December 30, 2004 | — | 2,492 | — | 2,492 | 100,000 | 5.375 | January 5, 2008 | ||||||||||||||||||||||||
Series P | September 28, 2007 | 40 | 1,000 | 40 | 1,000 | 25 | 4.500 | (9) | September 30, 2012 | |||||||||||||||||||||||
Series Q | October 4, 2007 | 15 | 375 | 15 | 375 | 25 | 6.750 | September 30, 2010 | ||||||||||||||||||||||||
Series R(10) | November 21, 2007 | 21 | 530 | 21 | 530 | 25 | 7.625 | November 21, 2012 | ||||||||||||||||||||||||
Series S | December 11, 2007 | 280 | 7,000 | 280 | 7,000 | 25 | 7.750 | (11) | December 31, 2010 | (12) | ||||||||||||||||||||||
Mandatory | ||||||||||||||||||||||||||||||||
Convertible | ||||||||||||||||||||||||||||||||
Series 2008-1 | May 14, 2008 | 21 | 1,074 | 24 | 1,218 | 50 | 8.750 | N/A | ||||||||||||||||||||||||
Series T(13) | May 19, 2008 | 89 | 2,225 | 89 | 2,225 | 25 | 8.250 | May 20, 2013 | ||||||||||||||||||||||||
Total | 577 | $ | 20,204 | 580 | $ | 20,348 | ||||||||||||||||||||||||||
(1) | Initial Stated Value per share was $1,000. Based on our draws of funds under the Senior Preferred Stock Variable Liquidation Preference agreement with Treasury, the Stated Value per share on December 31, 2010 was $88,600. | |
(2) | Rate effective September 9, 2008. If at any time we fail to pay cash dividends in a timely manner, then immediately following such failure and for all dividend periods thereafter until the dividend period following the date on which we have paid in cash full cumulative dividends (including any unpaid dividends added to the liquidation preference), the dividend rate will be 12% per year. | |
(3) | Any liquidation preference of our senior preferred stock in excess of $1.0 billion may be repaid through an issuance of common or preferred stock. The initial $1.0 billion investment may be repaid only in conjunction with termination of the senior preferred stock purchase agreement. The provisions for termination under the senior preferred stock purchase agreement are very restrictive and cannot occur while we are in conservatorship. | |
(4) | Rate effective March 31, 2010. Variable dividend rate resets every two years at a per annum rate equal to the two-year Maturity U.S. Treasury Rate (“CMT”) minus 0.16% with a cap of 11% per year. As of December 31, 2010, the annual dividend rate was 0.89%. |
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(5) | Represents initial call date. Redeemable every two years thereafter. | |
(6) | Rate effective September 30, 2010. Variable dividend rate resets every two years at a per annum rate equal to the two-year CMT rate minus 0.18% with a cap of 11% per year. As of December 31, 2010, the annual dividend rate was 0.27%. | |
(7) | Rate effective December 31, 2010. Variable dividend rate resets quarterly thereafter at a per annum rate equal to the greater of 7.00% and10-year CMT rate plus 2.375%. As of December 31, 2010, the annual dividend rate was 7.00%. | |
(8) | Issued and outstanding shares were 24,922 both as of December 31, 2010 and 2009, respectively. | |
(9) | Rate effective December 31, 2010. Variable dividend rate resets quarterly thereafter at a per annum rate equal to the greater of 4.50% and3-Month LIBOR plus 0.75%. As of December 31, 2010, the annual dividend rate was 4.50%. | |
(10) | On November 21, 2007, we issued 20 million shares of preferred stock in the amount of $500 million. Subsequent to the initial issuance, we issued an additional 1.2 million shares in the amount of $30 million on December 14, 2007 under the same terms as the initial issuance. | |
(11) | Rate effective December 31, 2010. Variable dividend rate resets quarterly thereafter at a per annum rate equal to the greater of 7.75% and3-Month LIBOR plus 4.23%. As of December 31, 2010, the annual dividend rate was 7.75%. | |
(12) | Represents initial call date. Redeemable every five years thereafter. | |
(13) | On May 19, 2008, we issued 80 million shares of preferred stock in the amount of $2.0 billion. Subsequent to the initial issuance, we issued an additional 8 million shares in the amount of $200 million on May 22, 2008 and one million shares in the amount of $25 million on June 4, 2008 under the same terms as the initial issuance. |
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• | Declare or pay any dividend (preferred or otherwise) or make any other distribution with respect to any Fannie Mae equity securities (other than with respect to the senior preferred stock or warrant); | |
• | Redeem, purchase, retire or otherwise acquire any Fannie Mae equity securities (other than the senior preferred stock or warrant); | |
• | Sell or issue any Fannie Mae equity securities (other than the senior preferred stock, the warrant and the common stock issuable upon exercise of the warrant and other than as required by the terms of any binding agreement in effect on the date of the senior preferred stock purchase agreement); | |
• | Terminate the conservatorship (other than in connection with a receivership); | |
• | Sell, transfer, lease or otherwise dispose of any assets, other than dispositions for fair market value: (a) to a limited life regulated entity (in the context of receivership); (b) of assets and properties in the ordinary course of business, consistent with past practice; (c) in connection with a liquidation of Fannie Mae by a receiver; (d) of cash or cash equivalents for cash or cash equivalents; or (e) to the extent necessary to comply with the covenant described below relating to the reduction of our mortgage assets beginning in 2010; | |
• | Incur indebtedness that would result in our aggregate indebtedness exceeding $1,080 billion through December 31, 2010. Beginning in 2011 and each year thereafter, our debt cap will equal 120% of the amount of mortgage assets we are allowed to hold on December 31 of the immediately preceding calendar year; | |
• | Issue any subordinated debt; | |
• | Enter into a corporate reorganization, recapitalization, merger, acquisition or similar event; or | |
• | Engage in transactions with affiliates unless the transaction is (a) pursuant to the senior preferred stock purchase agreement, the senior preferred stock or the warrant, (b) upon arm’s-length terms or (c) a transaction undertaken in the ordinary course or pursuant to a contractual obligation or customary employment arrangement in existence on the date of the senior preferred stock purchase agreement. |
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17. | Regulatory Capital Requirements |
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As of December 31, | ||||||||
2010(1) | 2009(1) | |||||||
(Dollars in millions) | ||||||||
Core capital(2) | $ | (89,516 | ) | $ | (74,540 | ) | ||
Statutory minimum capital requirement(3) | 33,676 | 33,057 | ||||||
Deficit of core capital over statutory minimum capital requirement | $ | (123,192 | ) | $ | (107,597 | ) | ||
Deficit of core capital percentage over statutory minimum capital requirement | (366 | )% | (325 | )% |
(1) | Amounts as of December 31, 2010 and 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; (c) our paid-in capital; and (d) our retained earnings (accumulated deficit). Core capital does not include: (a) accumulated other comprehensive income (loss) or (b) senior preferred stock. | |
(3) | Generally, the sum of (a) 2.50% of on-balance sheet assets, except those underlying Fannie Mae MBS held by third parties; (b) 0.45% of the unpaid principal balance of outstanding Fannie Mae MBS held by third parties; and (c) up to 0.45% of other off-balance sheet obligations, which may be adjusted by the Director of FHFA under certain circumstances (See 12 CFR 1750.4 for existing adjustments made by the Director). |
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18. | Concentrations of Credit Risk |
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Geographic Concentration(1) | ||||||||||||||||
Percentage of Conventional | Percentage of | |||||||||||||||
Single-Family Guaranty | Multifamily Guaranty | |||||||||||||||
Book of Business(2) | Book of Business(3) | |||||||||||||||
As of December 31, | As of December 31, | |||||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
Midwest | 15 | % | 16 | % | 8 | % | 9 | % | ||||||||
Northeast | 19 | 19 | 22 | 23 | ||||||||||||
Southeast | 24 | 24 | 20 | 19 | ||||||||||||
Southwest | 15 | 15 | 16 | 15 | ||||||||||||
West | 27 | 26 | 34 | 34 | ||||||||||||
Total | 100 | % | 100 | % | 100 | % | 100 | % | ||||||||
(1) | Midwest includes IL, IN, IA, MI, MN, NE, ND, OH, SD, WI; Northeast includes CT, DE, ME, MA, NH, NJ, NY, PA, PR, RI, VT, VI; Southeast includes AL, DC, FL, GA, KY, MD, NC, MS, SC, TN, VA, WV; Southwest includes AZ, AR, CO, KS, LA, MO, NM, OK, TX, UT; West include AK, CA, GU, HI, ID, MT, NV, OR, WA and WY. | |
(2) | Consists of the portion of our single-family conventional guaranty book of business for which we have detailed loan level information, which constituted over 99% and 98% of our total single-family conventional guaranty book of business as of December 31, 2010 and 2009, respectively. | |
(3) | Consists of the portion of our multifamily guaranty book of business for which we have detailed loan level information, which constituted 99% and 98% of our total multifamily guaranty book of business as of December 31, 2010 and 2009, respectively. |
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Percentage of | ||||||||
Single-Family | ||||||||
Conventional Guaranty | ||||||||
Book of Business | ||||||||
As of December 31, | ||||||||
2010 | 2009 | |||||||
Interest-only loans | 6 | % | 7 | % | ||||
Negative-amortizing ARMs | * | 1 | ||||||
80%+mark-to-market LTV loans | 40 | 37 |
* | Represents less than 0.5% of our single-family conventional guaranty book of business |
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As of December 31, | ||||||||||||||||
2010 | 2009 | |||||||||||||||
Unpaid | Percent of | Unpaid | Percent of | |||||||||||||
Principal | Book of | Principal | Book of | |||||||||||||
Balance | Business(1) | Balance | Business(1) | |||||||||||||
(Dollars in millions) | ||||||||||||||||
Loans and Fannie Mae MBS: | ||||||||||||||||
Alt-A(2) | $ | 213,597 | 7 | % | $ | 251,111 | 8 | % | ||||||||
Subprime(3) | 15,266 | ** | 16,268 | ** | ||||||||||||
Total | $ | 228,863 | 8 | % | $ | 267,379 | 9 | % | ||||||||
Private-label securities: | ||||||||||||||||
Alt-A(4) | $ | 22,283 | ** | $ | 24,505 | ** | ||||||||||
Subprime(5) | 18,410 | ** | 20,527 | ** | ||||||||||||
Total | $ | 40,693 | 1 | % | $ | 45,032 | 2 | % | ||||||||
** | Represent less than 1.0% of single-family mortgage credit book of business. | |
(1) | Calculated based on total unpaid principal balance of our single-family mortgage credit book of business. | |
(2) | Represents Alt-A mortgage loans held in our portfolio and Fannie Mae MBS backed by Alt-A mortgage loans. | |
(3) | Represents subprime mortgage loans held in our portfolio and Fannie Mae MBS backed by subprime mortgage loans. | |
(4) | Represents private-label mortgage-related securities backed by Alt-A mortgage loans. | |
(5) | Represents private-label mortgage-related securities backed by subprime mortgage loans. |
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As of December 31, | ||||||||
2010 | 2009 | |||||||
(Dollars in millions) | ||||||||
Fannie Mae MBS and other guarantees(1) | $ | 10,299 | $ | 135,697 | ||||
Loan purchase commitments | 311 | 486 |
(1) | Represents maximum exposure on guarantees not reflected in our consolidated balance sheets. |
19. | Fair Value |
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Fair Value Measurements as of December 31, 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 | $ | 4,049 | $ | 2,300 | $ | — | $ | — | $ | 6,349 | ||||||||||
Trading securities: | ||||||||||||||||||||
Mortgage-related securities: | ||||||||||||||||||||
Fannie Mae | — | 5,196 | 2,202 | — | 7,398 | |||||||||||||||
Freddie Mac | — | 1,326 | — | — | 1,326 | |||||||||||||||
Ginnie Mae | — | 590 | — | — | 590 | |||||||||||||||
Alt-A private-label securities | — | 1,663 | 20 | — | 1,683 | |||||||||||||||
Subprime private-label securities | — | — | 1,581 | — | 1,581 | |||||||||||||||
CMBS | — | 10,764 | — | — | 10,764 | |||||||||||||||
Mortgage revenue bonds | — | — | 609 | — | 609 | |||||||||||||||
Other | — | — | 152 | — | 152 | |||||||||||||||
Non-mortgage-related securities: | ||||||||||||||||||||
U.S. Treasury securities | 27,432 | — | — | — | 27,432 | |||||||||||||||
Asset-backed securities | — | 5,309 | 12 | — | 5,321 | |||||||||||||||
Total trading securities | 27,432 | 24,848 | 4,576 | — | 56,856 | |||||||||||||||
Available-for-sale securities: | ||||||||||||||||||||
Mortgage-related securities: | ||||||||||||||||||||
Fannie Mae | — | 22,714 | 114 | — | 22,828 | |||||||||||||||
Freddie Mac | — | 16,993 | 3 | — | 16,996 | |||||||||||||||
Ginnie Mae | — | 1,039 | — | — | 1,039 | |||||||||||||||
Alt-A private-label securities | — | 6,841 | 7,049 | — | 13,890 | |||||||||||||||
Subprime private-label securities | — | — | 9,932 | — | 9,932 | |||||||||||||||
CMBS | — | 14,844 | — | — | 14,844 | |||||||||||||||
Mortgage revenue bonds | — | 11 | 11,030 | — | 11,041 | |||||||||||||||
Other | — | 16 | 3,806 | — | 3,822 | |||||||||||||||
Totalavailable-for-sale securities | — | 62,458 | 31,934 | — | 94,392 | |||||||||||||||
Mortgage loans of consolidated trusts | — | 755 | 2,207 | — | 2,962 | |||||||||||||||
Other assets: | ||||||||||||||||||||
Risk management derivatives: | ||||||||||||||||||||
Swaps | — | 9,623 | 163 | — | 9,786 | |||||||||||||||
Swaptions | — | 5,474 | — | — | 5,474 | |||||||||||||||
Interest rate caps | — | 24 | — | — | 24 | |||||||||||||||
Futures | 3 | — | — | — | 3 | |||||||||||||||
Other | — | — | 72 | — | 72 | |||||||||||||||
Netting adjustment | — | — | — | (15,175 | ) | (15,175 | ) | |||||||||||||
Mortgage commitment derivatives | — | 941 | 12 | — | 953 | |||||||||||||||
Total other assets | 3 | 16,062 | 247 | (15,175 | ) | 1,137 | ||||||||||||||
Total assets at fair value | $ | 31,484 | $ | 106,423 | $ | 38,964 | $ | (15,175 | ) | $ | 161,696 | |||||||||
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Fair Value Measurements as of December 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) | ||||||||||||||||||||
Liabilities: | ||||||||||||||||||||
Long-term debt: | ||||||||||||||||||||
Of Fannie Mae: | ||||||||||||||||||||
Senior fixed | $ | — | $ | 472 | $ | — | $ | — | $ | 472 | ||||||||||
Senior floating | — | — | 421 | — | 421 | |||||||||||||||
Total Fannie Mae | — | 472 | 421 | — | 893 | |||||||||||||||
Of consolidated trusts | — | 1,644 | 627 | — | 2,271 | |||||||||||||||
Total long-term debt | — | 2,116 | 1,048 | — | 3,164 | |||||||||||||||
Other liabilities: | ||||||||||||||||||||
Risk management derivatives: | ||||||||||||||||||||
Swaps | — | 16,436 | 113 | — | 16,549 | |||||||||||||||
Swaptions | — | 2,446 | — | — | 2,446 | |||||||||||||||
Futures | 1 | — | — | — | 1 | |||||||||||||||
Netting adjustment | — | — | — | (18,023 | ) | (18,023 | ) | |||||||||||||
Mortgage commitment derivatives | — | 712 | 30 | — | 742 | |||||||||||||||
Total other liabilities | 1 | 19,594 | 143 | (18,023 | ) | 1,715 | ||||||||||||||
Total liabilities at fair value | $ | 1 | $ | 21,710 | $ | 1,191 | $ | (18,023 | ) | $ | 4,879 | |||||||||
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Fair Value Measurements as of December 31, 2009 | ||||||||||||||||||||
Quoted | ||||||||||||||||||||
Prices in | ||||||||||||||||||||
Active | Significant | |||||||||||||||||||
Markets for | Other | Significant | ||||||||||||||||||
Identical | Observable | Unobservable | ||||||||||||||||||
Assets | Inputs | Inputs | Netting | Estimated | ||||||||||||||||
(Level 1) | (Level 2) | (Level 3) | Adjustment(1) | Fair Value | ||||||||||||||||
(Dollars in millions) | ||||||||||||||||||||
Assets: | ||||||||||||||||||||
Trading securities: | ||||||||||||||||||||
Mortgage-related securities: | ||||||||||||||||||||
Fannie Mae | $ | — | $ | 69,094 | $ | 5,656 | $ | — | $ | 74,750 | ||||||||||
Freddie Mac | — | 15,082 | — | — | 15,082 | |||||||||||||||
Ginnie Mae | — | 1 | — | — | 1 | |||||||||||||||
Alt-A private-label securities | — | 791 | 564 | — | 1,355 | |||||||||||||||
Subprime private-label securities | — | — | 1,780 | — | 1,780 | |||||||||||||||
CMBS | — | 9,335 | — | — | 9,335 | |||||||||||||||
Mortgage revenue bonds | — | — | 600 | — | 600 | |||||||||||||||
Other | — | — | 154 | — | 154 | |||||||||||||||
Non-mortgage-related securities: | ||||||||||||||||||||
Asset-backed securities | — | 8,408 | 107 | — | 8,515 | |||||||||||||||
Corporate debt securities | — | 364 | — | — | 364 | |||||||||||||||
U.S. Treasury securities | 3 | — | — | — | 3 | |||||||||||||||
Total trading securities | 3 | 103,075 | 8,861 | — | 111,939 | |||||||||||||||
Available-for-sale securities: | ||||||||||||||||||||
Mortgage-related securities: | ||||||||||||||||||||
Fannie Mae | — | 153,823 | 596 | — | 154,419 | |||||||||||||||
Freddie Mac | — | 27,442 | 27 | — | 27,469 | |||||||||||||||
Ginnie Mae | — | 1,230 | 123 | — | 1,353 | |||||||||||||||
Alt-A private-label securities | — | 5,838 | 8,312 | — | 14,150 | |||||||||||||||
Subprime private-label securities | — | — | 10,746 | — | 10,746 | |||||||||||||||
CMBS | — | 13,193 | — | — | 13,193 | |||||||||||||||
Mortgage revenue bonds | — | 26 | 12,820 | — | 12,846 | |||||||||||||||
Other | — | 22 | 3,530 | — | 3,552 | |||||||||||||||
Totalavailable-for-sale securities | — | 201,574 | 36,154 | — | 237,728 | |||||||||||||||
Other assets: | ||||||||||||||||||||
Derivative assets | — | 19,724 | 150 | (18,400 | ) | 1,474 | ||||||||||||||
Guaranty assets andbuy-ups | — | — | 2,577 | — | 2,577 | |||||||||||||||
Total other assets | — | 19,724 | 2,727 | (18,400 | ) | 4,051 | ||||||||||||||
Total assets at fair value | $ | 3 | $ | 324,373 | $ | 47,742 | $ | (18,400 | ) | $ | 353,718 | |||||||||
Liabilities: | ||||||||||||||||||||
Long-term debt | $ | — | $ | 2,673 | $ | 601 | $ | — | $ | 3,274 | ||||||||||
Other liabilities: | ||||||||||||||||||||
Derivative liabilities | — | 23,815 | 27 | (22,813 | ) | 1,029 | ||||||||||||||
Other liabilities | — | 270 | — | — | 270 | |||||||||||||||
Total other liabilities | — | 24,085 | 27 | (22,813 | ) | 1,299 | ||||||||||||||
Total liabilities at fair value | $ | — | $ | 26,758 | $ | 628 | $ | (22,813 | ) | $ | 4,573 | |||||||||
(1) | Derivative contracts are reported on a gross basis by level. The netting adjustment represents the effect of the legal right to offset under legally enforceable master netting agreements to settle with the same counterparty on a net basis, as well as cash collateral. |
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Fair Value Measurements Using Significant Unobservable Inputs (Level 3) | ||||||||||||||||||||||||||||||||||||
For the Year Ended December 31, 2010 | ||||||||||||||||||||||||||||||||||||
Net Unrealized | ||||||||||||||||||||||||||||||||||||
Total Gains or (Losses) | Gains (Losses) | |||||||||||||||||||||||||||||||||||
(Realized/Unrealized) | Included in Net | |||||||||||||||||||||||||||||||||||
Purchases, | Loss Related to | |||||||||||||||||||||||||||||||||||
Sales, | Assets and | |||||||||||||||||||||||||||||||||||
Impact of | Included | Issuances, | Liabilities Still | |||||||||||||||||||||||||||||||||
Balance, | New | Included | in Other | and | Transfers | Transfers | Balance, | Held as of | ||||||||||||||||||||||||||||
December 31, | Accounting | in Net | Comprehensive | Settlements, | Out of | into | December 31, | December 31, | ||||||||||||||||||||||||||||
2009 | Standards | Loss | Loss | Net | Level 3(1) | Level 3(1) | 2010 | 2010(2) | ||||||||||||||||||||||||||||
(Dollars in millions) | ||||||||||||||||||||||||||||||||||||
Trading securities: | ||||||||||||||||||||||||||||||||||||
Mortgage-related: | ||||||||||||||||||||||||||||||||||||
Fannie Mae | $ | 5,656 | $ | (2 | ) | $ | (1 | ) | $ | — | $ | (223 | ) | $ | (5,551 | ) | $ | 2,323 | $ | 2,202 | $ | 13 | ||||||||||||||
Freddie Mac | — | — | — | — | (1 | ) | (3 | ) | 4 | — | — | |||||||||||||||||||||||||
Alt-A private-label securities | 564 | 62 | 226 | — | (77 | ) | (1,069 | ) | 314 | 20 | 4 | |||||||||||||||||||||||||
Subprime private-label securities | 1,780 | — | 41 | — | (240 | ) | — | — | 1,581 | 41 | ||||||||||||||||||||||||||
Mortgage revenue bonds | 600 | — | 67 | — | (58 | ) | — | — | 609 | 66 | ||||||||||||||||||||||||||
Other | 154 | — | 6 | — | (8 | ) | — | — | 152 | 5 | ||||||||||||||||||||||||||
Non-mortgage-related: | ||||||||||||||||||||||||||||||||||||
Asset-backed securities | 107 | — | 1 | — | (62 | ) | (47 | ) | 13 | 12 | — | |||||||||||||||||||||||||
Total trading securities | 8,861 | 60 | 340 | — | (669 | ) | (6,670 | ) | 2,654 | 4,576 | 129 | |||||||||||||||||||||||||
Available-for-sale securities: | ||||||||||||||||||||||||||||||||||||
Mortgage-related: | ||||||||||||||||||||||||||||||||||||
Fannie Mae | 596 | (203 | ) | (1 | ) | 2 | 181 | (580 | ) | 119 | 114 | — | ||||||||||||||||||||||||
Freddie Mac | 27 | — | — | (1 | ) | (29 | ) | — | 6 | 3 | — | |||||||||||||||||||||||||
Ginnie Mae | 123 | — | — | 2 | (125 | ) | — | — | — | — | ||||||||||||||||||||||||||
Alt-A private-label securities | 8,312 | 471 | (54 | ) | 1,240 | (1,322 | ) | (4,951 | ) | 3,353 | 7,049 | — | ||||||||||||||||||||||||
Subprime private-label securities | 10,746 | (118 | ) | (70 | ) | 1,078 | (1,704 | ) | — | — | 9,932 | — | ||||||||||||||||||||||||
Mortgage revenue bonds | 12,820 | 21 | 11 | 82 | (1,902 | ) | (2 | ) | — | 11,030 | — | |||||||||||||||||||||||||
Other | 3,530 | 366 | (3 | ) | 402 | (489 | ) | — | — | 3,806 | — | |||||||||||||||||||||||||
Totalavailable-for-sale securities | 36,154 | 537 | (117 | ) | 2,805 | (5,390 | ) | (5,533 | ) | 3,478 | 31,934 | — | ||||||||||||||||||||||||
Mortgage loans of consolidated trusts | — | — | (29 | ) | — | 2,188 | (11 | ) | 59 | 2,207 | (29 | ) | ||||||||||||||||||||||||
Guaranty assets andbuy-ups | 2,577 | (2,568 | ) | 1 | 1 | (11 | ) | — | — | — | — | |||||||||||||||||||||||||
Net derivatives | 123 | — | 61 | — | (74 | ) | (1 | ) | (5 | ) | 104 | (33 | ) | |||||||||||||||||||||||
Long-term debt: | ||||||||||||||||||||||||||||||||||||
Of Fannie Mae: | ||||||||||||||||||||||||||||||||||||
Senior floating | (601 | ) | — | 20 | — | 160 | — | — | (421 | ) | 24 | |||||||||||||||||||||||||
Of consolidated trusts | — | (77 | ) | 19 | — | (631 | ) | 92 | (30 | ) | (627 | ) | 2 | |||||||||||||||||||||||
Total long-term debt | $ | (601 | ) | $ | (77 | ) | $ | 39 | $ | — | $ | (471 | ) | $ | 92 | $ | (30 | ) | $ | (1,048 | ) | $ | 26 | |||||||||||||
F-121
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Fair Value Measurements Using Significant Unobservable Inputs (Level 3) | ||||||||||||||||||||||||||||
For the Year Ended December 31, 2009 | ||||||||||||||||||||||||||||
Net Unrealized | ||||||||||||||||||||||||||||
Total Gains or (Losses) | Gains (Losses) | |||||||||||||||||||||||||||
(Realized/Unrealized) | Included in Net | |||||||||||||||||||||||||||
Purchases, | Loss Related to | |||||||||||||||||||||||||||
Sales, | Assets and | |||||||||||||||||||||||||||
Included in | Issuances, | Transfers | Liabilities Still | |||||||||||||||||||||||||
Balance, | Other | and | in/out of | Balance, | Held as of | |||||||||||||||||||||||
January 1, | Included in | Comprehensive | Settlements, | Level 3, | December 31, | December 31, | ||||||||||||||||||||||
2009 | Net Loss | Loss | Net | Net(3) | 2009 | 2009(2) | ||||||||||||||||||||||
(Dollars in millions) | ||||||||||||||||||||||||||||
Trading securities: | ||||||||||||||||||||||||||||
Mortgage-related: | ||||||||||||||||||||||||||||
Fannie Mae | $ | 6,935 | $ | 278 | $ | — | $ | (1,277 | ) | $ | (280 | ) | $ | 5,656 | $ | 274 | ||||||||||||
Alt-A private-label securities | 1,118 | 57 | — | (154 | ) | (457 | ) | 564 | (25 | ) | ||||||||||||||||||
Subprime private-label securities | 2,318 | (83 | ) | — | (455 | ) | — | 1,780 | (74 | ) | ||||||||||||||||||
Mortgage revenue bonds | 695 | (75 | ) | — | (20 | ) | — | 600 | (75 | ) | ||||||||||||||||||
Other | 167 | (1 | ) | — | (12 | ) | — | 154 | (1 | ) | ||||||||||||||||||
Non-mortgage-related: | ||||||||||||||||||||||||||||
Asset-backed securities | 1,475 | (38 | ) | — | (108 | ) | (1,222 | ) | 107 | 2 | ||||||||||||||||||
Corporate debt securities | 57 | 3 | — | (116 | ) | 56 | — | — | ||||||||||||||||||||
Total trading securities | $ | 12,765 | $ | 141 | $ | — | $ | (2,142 | ) | $ | (1,903 | ) | $ | 8,861 | $ | 101 | ||||||||||||
Available-for-sale securities: | ||||||||||||||||||||||||||||
Mortgage-related: | ||||||||||||||||||||||||||||
Fannie Mae | $ | 5,609 | $ | (47 | ) | $ | 191 | $ | (569 | ) | $ | (4,588 | ) | $ | 596 | $ | — | |||||||||||
Freddie Mac | 80 | 3 | (6 | ) | (21 | ) | (29 | ) | 27 | — | ||||||||||||||||||
Ginnie Mae | 190 | — | 1 | (7 | ) | (61 | ) | 123 | — | |||||||||||||||||||
Alt-A private-label securities | 11,675 | (1,717 | ) | 2,192 | (1,554 | ) | (2,284 | ) | 8,312 | — | ||||||||||||||||||
Subprime private-label securities | 14,318 | (5,290 | ) | 4,862 | (3,144 | ) | — | 10,746 | — | |||||||||||||||||||
Mortgage revenue bonds | 12,456 | (16 | ) | 1,349 | (969 | ) | — | 12,820 | — | |||||||||||||||||||
Other | 3,509 | (81 | ) | 651 | (549 | ) | — | 3,530 | — | |||||||||||||||||||
Totalavailable-for-sale securities | $ | 47,837 | $ | (7,148 | ) | $ | 9,240 | $ | (6,813 | ) | $ | (6,962 | ) | $ | 36,154 | $ | — | |||||||||||
Guaranty assets andbuy-ups | 1,083 | 466 | 243 | 785 | — | 2,577 | 783 | |||||||||||||||||||||
Net derivatives | 310 | (42 | ) | — | (48 | ) | (97 | ) | 123 | 3 | ||||||||||||||||||
Long-term debt | (2,898 | ) | (18 | ) | — | 1,791 | 524 | (601 | ) | (49 | ) |
F-122
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Fair Value Measurements Using Significant | ||||||||||||||||||||
Unobservable Inputs (Level 3) | ||||||||||||||||||||
For the Year Ended December 31, 2008 | ||||||||||||||||||||
Guaranty | ||||||||||||||||||||
Assets | ||||||||||||||||||||
Trading | Available-for-sale | Net | and | Long-Term | ||||||||||||||||
Securities | Securities | Derivatives | Buy-ups | Debt | ||||||||||||||||
(Dollars in millions) | ||||||||||||||||||||
Beginning balance as of January 1, 2008 | $ | 18,508 | $ | 20,920 | $ | 161 | $ | 1,568 | $ | (7,888 | ) | |||||||||
Realized/unrealized gains (losses) included in net loss | (1,881 | ) | (3,152 | ) | 282 | (512 | ) | (73 | ) | |||||||||||
Unrealized losses included in other comprehensive loss | — | (4,136 | ) | — | (342 | ) | — | |||||||||||||
Purchases, sales, issuances, and settlements, net | (4,337 | ) | (3,640 | ) | (227 | ) | 369 | 5,396 | ||||||||||||
Transfers in/out of Level 3, net(4) | 475 | 37,845 | 94 | — | (333 | ) | ||||||||||||||
Ending balance as of December 31, 2008 | $ | 12,765 | $ | 47,837 | $ | 310 | $ | 1,083 | $ | (2,898 | ) | |||||||||
Net unrealized gains (losses) included in net loss related to assets and liabilities still held as of December 31, 2008(2) | $ | (1,293 | ) | $ | — | $ | 159 | $ | (26 | ) | $ | (18 | ) | |||||||
(1) | For the year ended December 31, 2010, the transfers out of Level 3 consisted primarily of Fannie Mae guaranteed mortgage-related securities and private-label mortgage-related securities backed by Alt-A loans. Prices for these securities were obtained from multiple third-party vendors supported by market observable inputs. For the year ended December 31, 2010, the transfers into Level 3 consisted primarily of private-label mortgage-related securities backed by Alt-A loans as well as Fannie Mae guaranteed mortgage-related securities. Prices for these securities are based on inputs from a single source or inputs that were not readily observable. | |
(2) | Amount represents temporary changes in fair value. Amortization, accretion andother-than-temporary impairments are not considered unrealized and are not included in this amount. | |
(3) | For the year ended December 31, 2009, the net transfers to Level 2 from Level 3 consisted primarily of Fannie Mae guaranteed mortgage-related securities, which include securities backed by jumbo conforming loans, and private-label mortgage-related securities backed by non-fixed rate Alt-A loans. Price transparency improved as a result of increased market activity, and we noted some convergence in prices obtained from third-party vendors. As a result, we determined that our fair value estimates for these securities did not rely on significant unobservable inputs. | |
(4) | During the year ended December 31, 2008, transfers into Level 3 consisted primarily of private-label mortgage-related securities backed by Alt-A and subprime mortgage loans. |
Fair Value Measurements Using Significant | ||||||||||||||||||||
Unobservable Inputs (Level 3) | ||||||||||||||||||||
For the Year Ended December 31, 2010 | ||||||||||||||||||||
Loans of | ||||||||||||||||||||
Trading | Available-For-Sale | Consolidated | Net | Long-Term | ||||||||||||||||
Securities | Securities | Trusts | Derivatives | Debt | ||||||||||||||||
(Dollars in millions) | ||||||||||||||||||||
Realized and unrealized gains (losses) included in net loss | $ | 126 | $ | (36 | ) | $ | (33 | ) | $ | (32 | ) | $ | (3 | ) | ||||||
Unrealized losses included in other comprehensive loss | — | (151 | ) | — | — | — | ||||||||||||||
Total gains (losses) | $ | 126 | $ | (187 | ) | $ | (33 | ) | $ | (32 | ) | $ | (3 | ) | ||||||
Amount of Level 3 transfers in | $ | 2,654 | $ | 3,478 | $ | 59 | $ | (5 | ) | $ | (30 | ) | ||||||||
F-123
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Fair Value Measurements Using Significant | ||||||||||||||||
Unobservable Inputs (Level 3) | ||||||||||||||||
For the Year Ended December 31, 2009 | ||||||||||||||||
Trading | Available-for-Sale | Net | Long-term | |||||||||||||
Securities | Securities | Derivatives | Debt | |||||||||||||
(Dollars in millions) | ||||||||||||||||
Realized and unrealized gains (losses) included in net loss | $ | (6 | ) | $ | 62 | $ | (2 | ) | $ | — | ||||||
Unrealized gains included in other comprehensive loss | — | 174 | — | — | ||||||||||||
Total gains (losses) | $ | (6 | ) | $ | 236 | $ | (2 | ) | $ | — | ||||||
Amount of Level 3 transfers in | $ | 1,136 | $ | 7,877 | $ | 107 | $ | — | ||||||||
Fair Value Measurements Using Significant | ||||||||||||||||
Unobservable Inputs (Level 3) | ||||||||||||||||
For the Year Ended December 31, 2008 | ||||||||||||||||
Trading | Available-for-Sale | Net | Long-term | |||||||||||||
Securities | Securities | Derivatives | Debt | |||||||||||||
(Dollars in millions) | ||||||||||||||||
Realized and unrealized gains (losses) included in net loss | $ | (679 | ) | $ | (2,014 | ) | $ | 18 | $ | (35 | ) | |||||
Unrealized losses included in other comprehensive loss | — | (2,261 | ) | — | — | |||||||||||
Total gains (losses) | $ | (679 | ) | $ | (4,275 | ) | $ | 18 | $ | (35 | ) | |||||
Amount of Level 3 transfers in | $ | 10,189 | $ | 55,621 | $ | 18 | $ | (531 | ) | |||||||
For the Year Ended December 31, 2010 | ||||||||||||||||||||
Net | ||||||||||||||||||||
Fair Value | Other-than- | |||||||||||||||||||
Interest | Gains | Temporary | ||||||||||||||||||
Income | (Losses), net | Impairments | Other | Total | ||||||||||||||||
(Dollars in millions) | ||||||||||||||||||||
Total realized and unrealized gains (losses) included in net loss | $ | 319 | $ | 416 | $ | (480 | ) | $ | 40 | $ | 295 | |||||||||
Net unrealized gains related to Level 3 assets and liabilities still held as of December 31, 2010 | $ | — | $ | 93 | $ | — | $ | — | $ | 93 |
For the Year Ended December 31, 2009 | ||||||||||||||||||||
Interest | Net | |||||||||||||||||||
Income | Guaranty | Fair Value | Other-than- | |||||||||||||||||
Investments | Fee | Gain | Temporary | |||||||||||||||||
in Securities | Income | (Losses), net | Impairments | Total | ||||||||||||||||
(Dollars in millions) | ||||||||||||||||||||
Total realized and unrealized gains (losses) included in net loss | $ | 545 | $ | 466 | $ | 94 | $ | (7,706 | ) | $ | (6,601 | ) | ||||||||
Net unrealized gains related to Level 3 assets and liabilities still held as of December 31, 2009 | $ | — | $ | 783 | $ | 55 | $ | — | $ | 838 |
F-124
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
For the Year Ended December 31, 2008 | ||||||||||||||||||||||||||||
Interest | Fair | Other than | ||||||||||||||||||||||||||
Income | Guaranty | Investment | Value Gains | Temporary | ||||||||||||||||||||||||
Investment | Fee | Gains | (Losses), | Impairments, | Extraordinary | |||||||||||||||||||||||
in Securities | Income | (Losses), Net | net | net | Losses | Total | ||||||||||||||||||||||
(Dollars in millions) | ||||||||||||||||||||||||||||
Total realized and unrealized gains (losses) included in net loss | $ | 90 | $ | (915 | ) | $ | 448 | $ | (1,640 | ) | $ | (3,260 | ) | $ | (59 | ) | $ | (5,336 | ) | |||||||||
Net unrealized losses related to level 3 assets and liabilities still held as of December 31, 2008 | $ | — | $ | (26 | ) | $ | — | $ | (1,152 | ) | $ | — | $ | — | $ | (1,178 | ) |
F-125
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
F-126
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(In conservatorship)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
F-127
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
For the Year | ||||||||||||||||||||
Fair Value Measurements | Ended | |||||||||||||||||||
For the Year Ended December 31, 2010 | December 31, 2010 | |||||||||||||||||||
Quoted | ||||||||||||||||||||
Prices in | ||||||||||||||||||||
Active | Significant | |||||||||||||||||||
Markets for | Other | Significant | ||||||||||||||||||
Identical | Observable | Unobservable | Estimated | |||||||||||||||||
Assets | Inputs | Inputs | Fair | Total | ||||||||||||||||
(Level 1) | (Level 2) | (Level 3) | Value | Losses | ||||||||||||||||
(Dollars in millions) | ||||||||||||||||||||
Assets: | ||||||||||||||||||||
Mortgage loans held for sale, at lower of cost or fair value | $ | — | $ | 6,776 | $ | 535 | $ | 7,311(1 | )(2) | $ | (91 | )(2) | ||||||||
Single-family mortgage loans held for investment, at amortized cost: | ||||||||||||||||||||
Of Fannie Mae | — | — | 38,150 | 38,150 | (3) | (2,244 | ) | |||||||||||||
Of consolidated trusts | — | — | 1,294 | 1,294 | (3) | (235 | ) | |||||||||||||
Multifamily mortgage loans held for investment, at amortized cost: | ||||||||||||||||||||
Of Fannie Mae | — | — | 1,836 | 1,836 | (3) | (481 | ) | |||||||||||||
Acquired property, net: | ||||||||||||||||||||
Single-family | — | — | 20,248 | 20,248 | (4) | (2,617 | ) | |||||||||||||
Multifamily | — | — | 206 | 206 | (4) | (65 | ) | |||||||||||||
Other assets | ||||||||||||||||||||
Guaranty assets | — | — | 27 | 27 | (6 | ) | ||||||||||||||
Partnership investments | — | — | 107 | 107 | (145 | )(6) | ||||||||||||||
Other assets | — | — | 597 | 597 | (5) | (43 | ) | |||||||||||||
Total assets at fair value | $ | — | $ | 6,776 | $ | 63,000 | $ | 69,776 | $ | (5,927 | ) | |||||||||
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
For the Year | ||||||||||||||||||||
Fair Value Measurements | Ended | |||||||||||||||||||
For the Year Ended December 31, 2009 | December 31, 2009 | |||||||||||||||||||
Quoted | ||||||||||||||||||||
Prices in | ||||||||||||||||||||
Active | Significant | |||||||||||||||||||
Markets for | Other | Significant | ||||||||||||||||||
Identical | Observable | Unobservable | Estimated | |||||||||||||||||
Assets | Inputs | Inputs | Fair | Total | ||||||||||||||||
(Level 1) | (Level 2) | (Level 3) | Value | Losses | ||||||||||||||||
(Dollars in millions) | ||||||||||||||||||||
Assets: | ||||||||||||||||||||
Mortgage loans held for sale, at lower of cost or fair value | $ | — | $ | 22,238 | $ | 3,557 | $ | 25,795 | (1) | $ | (1,210 | ) | ||||||||
Mortgage loans held for investment, at amortized cost | — | 330 | 4,820 | 5,150 | (3) | (1,173 | ) | |||||||||||||
Acquired property, net | — | — | 10,132 | 10,132 | (4) | (503 | ) | |||||||||||||
Other assets: | ||||||||||||||||||||
Guaranty assets | — | — | 2,327 | 2,327 | (231 | ) | ||||||||||||||
Master servicing assets | — | — | 147 | 147 | (546 | ) | ||||||||||||||
Partnership investments | — | — | 212 | 212 | (5,943 | )(6) | ||||||||||||||
Total assets at fair value | $ | — | $ | 22,568 | $ | 21,195 | $ | 43,763 | $ | (9,606 | ) | |||||||||
Liabilities: | ||||||||||||||||||||
Master servicing liabilities | $ | — | $ | — | $ | 254 | $ | 254 | $ | (200 | ) | |||||||||
Total liabilities at fair value | $ | — | $ | — | $ | 254 | $ | 254 | $ | (200 | ) | |||||||||
F-129
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
For the Year | ||||||||||||||||||||
Fair Value Measurements | Ended | |||||||||||||||||||
For the Year Ended December 31, 2008 | December 31, 2008 | |||||||||||||||||||
Quoted | ||||||||||||||||||||
Prices in | ||||||||||||||||||||
Active | Significant | |||||||||||||||||||
Markets for | Other | Significant | ||||||||||||||||||
Identical | Observable | Unobservable | Estimated | |||||||||||||||||
Assets | Inputs | Inputs | Fair | Total | ||||||||||||||||
(Level 1) | (Level 2) | (Level 3) | Value | Losses | ||||||||||||||||
(Dollars in millions) | ||||||||||||||||||||
Assets: | ||||||||||||||||||||
Mortgage loans held for sale, at lower of cost or fair value | $ | — | $ | 26,303 | $ | 1,294 | $ | 27,597 | (1) | $ | (433 | ) | ||||||||
Mortgage loans held for investment, at amortized cost | — | — | 1,838 | 1,838 | (3) | (107 | ) | |||||||||||||
Acquired property, net | — | — | 9,624 | 9,624 | (4) | (1,533 | ) | |||||||||||||
Other assets: | ||||||||||||||||||||
Guaranty assets | — | — | 5,473 | 5,473 | (2,967 | ) | ||||||||||||||
Master servicing assets | — | — | 547 | 547 | (553 | ) | ||||||||||||||
Partnership investments | — | — | 4,877 | 4,877 | (764 | )(6) | ||||||||||||||
Total assets at fair value | $ | — | $ | 26,303 | $ | 23,653 | $ | 49,956 | $ | (6,357 | ) | |||||||||
Liabilities: | ||||||||||||||||||||
Master servicing liabilities | $ | — | $ | — | $ | 22 | $ | 22 | $ | (12 | ) | |||||||||
Total liabilities at fair value | $ | — | $ | — | $ | 22 | $ | 22 | $ | (12 | ) | |||||||||
(1) | Includes $7.1 billion, $15.1 billion, and $25.2 billion of mortgage loans held for sale that were sold, retained as a mortgage-related security or redesignated to mortgage loans held for investment as of December 31, 2010, 2009, and 2008, respectively. | |
(2) | Includes $7.1 billion of estimated fair value and $68 million in losses due to the adoption of the new accounting standards. | |
(3) | Includes $3.4 billion, $1.1 billion and $157 million of mortgage loans held for investment that were redesignated to mortgage loans held for sale, liquidated or transferred to foreclosed properties as of December 31, 2010, 2009, and 2008, respectively. | |
(4) | Includes $10.5 billion, $7.1 billion and $4.0 billion of acquired properties that were sold or transferred as of December 31, 2010, 2009 and 2008, respectively. | |
(5) | Includes $22 million of other assets that were sold or transferred as of December 31, 2010. | |
(6) | Represents impairment charges related to LIHTC partnerships and other equity investments in multifamily properties. We recognized other than temporary impairment losses of $16 million, $5.5 billion and $506 million related to LIHTC partnerships for the years ended December 31, 2010, 2009 and 2008, respectively. |
F-130
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
F-131
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
As of December 31, | ||||||||||||||||
2010 | 2009(2) | |||||||||||||||
Carrying | Estimated | Carrying | Estimated | |||||||||||||
Value | Fair Value | Value | Fair Value | |||||||||||||
(Dollars in millions) | ||||||||||||||||
Financial assets: | ||||||||||||||||
Cash and cash equivalents(1) | $ | 80,975 | $ | 80,975 | $ | 9,882 | $ | 9,882 | ||||||||
Federal funds sold and securities purchased under agreements to resell or similar arrangements | 11,751 | 11,751 | 53,684 | 53,656 | ||||||||||||
Trading securities | 56,856 | 56,856 | 111,939 | 111,939 | ||||||||||||
Available-for-sale securities | 94,392 | 94,392 | 237,728 | 237,728 | ||||||||||||
Mortgage loans held for sale | 915 | 915 | 18,462 | 18,615 | ||||||||||||
Mortgage loans held for investment, net of allowance for loan losses: | ||||||||||||||||
Of Fannie Mae | 358,698 | 319,367 | 246,509 | 241,300 | ||||||||||||
Of consolidated trusts | 2,564,107 | 2,610,145 | 129,590 | 129,545 | ||||||||||||
Mortgage loans held for investment | 2,922,805 | 2,929,512 | 376,099 | 370,845 | ||||||||||||
Advances to lenders | 7,215 | 6,990 | 5,449 | 5,144 | ||||||||||||
Derivative assets at fair value | 1,137 | 1,137 | 1,474 | 1,474 | ||||||||||||
Guaranty assets andbuy-ups | 458 | 814 | 9,520 | 14,624 | ||||||||||||
Total financial assets | $ | 3,176,504 | $ | 3,183,342 | $ | 824,237 | $ | 823,907 | ||||||||
Financial liabilities: | ||||||||||||||||
Federal funds purchased and securities sold under agreements to repurchase | $ | 52 | $ | 51 | $ | — | $ | — | ||||||||
Short-term debt: | ||||||||||||||||
Of Fannie Mae | 151,884 | 151,974 | 200,437 | 200,493 | ||||||||||||
Of consolidated trusts | 5,359 | 5,359 | — | — | ||||||||||||
Long-term debt: | ||||||||||||||||
Of Fannie Mae | 628,160 | 649,684 | 567,950 | 587,423 | ||||||||||||
Of consolidated trusts | 2,411,597 | 2,514,929 | 6,167 | 6,310 | ||||||||||||
Derivative liabilities at fair value | 1,715 | 1,715 | 1,029 | 1,029 | ||||||||||||
Guaranty obligations | 769 | 3,854 | 13,996 | 138,582 | ||||||||||||
Total financial liabilities | $ | 3,199,536 | $ | 3,327,566 | $ | 789,579 | $ | 933,837 | ||||||||
(1) | Includes restricted cash of $63.7 billion and $3.1 billion as of December 31, 2010 and 2009, respectively. | |
(2) | Certain prior period amounts have been reclassified to conform to the current period presentation. |
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As of December 31, | ||||||||||||||||
2010 | 2009 | |||||||||||||||
Long-Term | ||||||||||||||||
Loans of | Long-Term | Debt of | Long-Term | |||||||||||||
Consolidated | Debt of | Consolidated | Debt of | |||||||||||||
Trusts(1) | Fannie Mae | Trusts(2) | Fannie Mae | |||||||||||||
(Dollars in millions) | ||||||||||||||||
Fair value | $ | 2,962 | $ | (893 | ) | $ | (2,271 | ) | $ | (3,274 | ) | |||||
Unpaid principal balance | 3,456 | (829 | ) | (2,572 | ) | (3,181 | ) |
(1) | Includes nonaccrual loans with a fair value of $219 million and loans that are 90 or more days past due with a fair value of $369 million as of December 31, 2010. | |
(2) | Includes interest-only debt instruments with no unpaid principal balance and a fair value of $151 million as of December 31, 2010. |
For the Year Ended December 31, | ||||||||||||||||||||||||||||||||
2010 | 2009 | 2008 | ||||||||||||||||||||||||||||||
Long- | Long- | Total | Short- | Long- | Total | |||||||||||||||||||||||||||
Term | Total | Term | Gains | Term | Term | Gains | ||||||||||||||||||||||||||
Loans | Debt | Losses | Debt | (Losses) | Debt | Debt | (Losses) | |||||||||||||||||||||||||
(Dollars in millions) | ||||||||||||||||||||||||||||||||
Changes in instrument-specific credit risk | $ | (58 | ) | $ | (9 | ) | $ | (67 | ) | $ | 33 | $ | 33 | $ | 6 | $ | 94 | $ | 100 | |||||||||||||
Other changes in fair value | (73 | ) | 14 | (59 | ) | (64 | ) | (64 | ) | (6 | ) | (151 | ) | (157 | ) | |||||||||||||||||
Fair value gains (losses), net | $ | (131 | ) | $ | 5 | $ | (126 | ) | $ | (31 | ) | $ | (31 | ) | $ | — | $ | (57 | ) | $ | (57 | ) | ||||||||||
20. | Commitments and Contingencies |
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As of December 31, 2010 | ||||||||||||||||
Loans and Mortgage- | ||||||||||||||||
Related Securities(1) | Unfunded Lending | Operating Leases | Other(2) | |||||||||||||
(Dollars in millions) | ||||||||||||||||
2011 | $ | 54,837 | $ | 72 | $ | 40 | $ | 34 | ||||||||
2012 | 10 | 92 | 36 | 19 | ||||||||||||
2013 | 11 | 42 | 25 | 10 | ||||||||||||
2014 | — | — | 17 | 2 | ||||||||||||
2015 | — | 3 | 14 | — | ||||||||||||
Thereafter | — | — | 26 | — | ||||||||||||
Total | $ | 54,858 | $ | 209 | $ | 158 | $ | 65 | ||||||||
(1) | Includes $54.5 billion, which have been accounted for as mortgage commitment derivatives. | |
(2) | Includes purchase commitments for certain telecom services, computer software and services, and other agreements. |
21. | Selected Quarterly Financial Information (Unaudited) |
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For the 2010 Quarter Ended | ||||||||||||||||
March 31 | June 30(1) | September 30 | December 31(2) | |||||||||||||
(Dollars and shares in millions, except per share amounts) | ||||||||||||||||
Interest income: | ||||||||||||||||
Trading securities | $ | 315 | $ | 330 | $ | 310 | $ | 296 | ||||||||
Available-for-sale securities | 1,473 | 1,389 | 1,313 | 1,115 | ||||||||||||
Mortgage loans: | ||||||||||||||||
Of Fannie Mae | 3,298 | 3,950 | 3,859 | 3,885 | ||||||||||||
Of consolidated trusts | 34,321 | 33,682 | 32,807 | 31,781 | ||||||||||||
Other | 39 | 41 | 31 | 35 | ||||||||||||
Total interest income | 39,446 | 39,392 | 38,320 | 37,112 | ||||||||||||
�� | ||||||||||||||||
Interest expense: | ||||||||||||||||
Short-term debt: | ||||||||||||||||
Of Fannie Mae | 116 | 164 | 190 | 149 | ||||||||||||
Of consolidated trusts | 2 | 3 | 4 | 3 | ||||||||||||
Long-term debt: | ||||||||||||||||
Of Fannie Mae | 5,081 | 4,975 | 4,472 | 4,329 | ||||||||||||
Of consolidated trusts | 31,458 | 30,043 | 28,878 | 27,994 | ||||||||||||
Total interest expense | 36,657 | 35,185 | 33,544 | 32,475 | ||||||||||||
Net interest income | 2,789 | 4,207 | 4,776 | 4,637 | ||||||||||||
Provision for loan losses | (11,939 | ) | (4,295 | ) | (4,696 | ) | (3,772 | ) | ||||||||
Net interest income (loss) after provision for loan losses | (9,150 | ) | (88 | ) | 80 | 865 | ||||||||||
Guaranty fee income | 54 | 52 | 51 | 45 | ||||||||||||
Investment gains, net | 166 | 23 | 82 | 75 | ||||||||||||
Other-than-temporary impairments | (186 | ) | (48 | ) | (366 | ) | (94 | ) | ||||||||
Noncredit portion ofother-than-temporary impairments recognized in other comprehensive loss | (50 | ) | (89 | ) | 40 | 71 | ||||||||||
Netother-than-temporary impairments | (236 | ) | (137 | ) | (326 | ) | (23 | ) | ||||||||
Fair value gains (losses), net | (1,705 | ) | 303 | 525 | 366 | |||||||||||
Debt extinguishment losses, net | (124 | ) | (159 | ) | (214 | ) | (71 | ) | ||||||||
Income (losses) from partnership investments | (58 | ) | (26 | ) | 47 | (37 | ) | |||||||||
Fee and other income | 179 | 242 | 253 | 208 | ||||||||||||
Non-interest income (loss) | (1,724 | ) | 298 | 418 | 563 | |||||||||||
Administrative expenses: | ||||||||||||||||
Salaries and employee benefits | 324 | 324 | 325 | 304 | ||||||||||||
Professional services | 194 | 260 | 305 | 183 | ||||||||||||
Occupancy expenses | 41 | 40 | 43 | 46 | ||||||||||||
Other administrative expenses | 46 | 46 | 57 | 59 | ||||||||||||
Total administrative expenses | 605 | 670 | 730 | 592 | ||||||||||||
Provision (benefit) for guaranty losses | (36 | ) | 69 | 78 | 83 | |||||||||||
Foreclosed property expense (income) | (19 | ) | 487 | 787 | 463 | |||||||||||
Other expenses | 172 | 198 | 243 | 240 | ||||||||||||
Total expenses | 722 | 1,424 | 1,838 | 1,378 | ||||||||||||
Income (loss) before federal income taxes | (11,596 | ) | (1,214 | ) | (1,340 | ) | 50 | |||||||||
Provision (benefit) for federal income taxes | (67 | ) | 9 | (9 | ) | (15 | ) | |||||||||
Net income (loss) | (11,529 | ) | (1,223 | ) | (1,331 | ) | 65 | |||||||||
Less: Net (income) loss attributable to the noncontrolling interest | (1 | ) | 5 | (8 | ) | 8 | ||||||||||
Net income (loss) attributable to Fannie Mae | (11,530 | ) | (1,218 | ) | (1,339 | ) | 73 | |||||||||
Preferred stock dividends | (1,527 | ) | (1,907 | ) | (2,116 | ) | (2,154 | ) | ||||||||
Net loss attributable to common stockholders | $ | (13,057 | ) | $ | (3,125 | ) | $ | (3,455 | ) | $ | (2,081 | ) | ||||
Loss per share—Basic and Diluted | $ | (2.29 | ) | $ | (0.55 | ) | $ | (0.61 | ) | $ | (0.37 | ) | ||||
Weighted-average common shares outstanding—Basic and Diluted | 5,692 | 5,694 | 5,695 | 5,696 | ||||||||||||
(1) | Includesout-of-period adjustment of $1.1 billion to provision for loan losses, reflecting our assessment of the collectibility of the receivable from the borrowers for preforeclosure property taxes and insurance. | |
(2) | Includes settlement from Bank of America Inc. related to repurchase requests for residential mortgage loans of $1.3 billion. |
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For the 2009 Quarter Ended | ||||||||||||||||
March 31 | June 30 | September 30 | December 31 | |||||||||||||
(Dollars and shares in millions, except per share amounts) | ||||||||||||||||
Interest income: | ||||||||||||||||
Trading securities | $ | 990 | $ | 923 | $ | 862 | $ | 1,084 | ||||||||
Available-for-sale securities | 3,721 | 3,307 | 3,475 | 3,115 | ||||||||||||
Mortgage loans: | ||||||||||||||||
Of Fannie Mae | 4,707 | 4,392 | 3,229 | 3,050 | ||||||||||||
Of consolidated trusts | 891 | 1,219 | 2,061 | 1,972 | ||||||||||||
Other | 127 | 139 | 48 | 43 | ||||||||||||
Total interest income | 10,436 | 9,980 | 9,675 | 9,264 | ||||||||||||
Interest expense: | ||||||||||||||||
Short-term debt: | ||||||||||||||||
Of Fannie Mae | 1,107 | 600 | 390 | 209 | ||||||||||||
Long-term debt: | ||||||||||||||||
Of Fannie Mae | 5,992 | 5,560 | 5,370 | 5,273 | ||||||||||||
Of consolidated trusts | 89 | 85 | 85 | 85 | ||||||||||||
Total interest expense | 7,188 | 6,245 | 5,845 | 5,567 | ||||||||||||
Net interest income | 3,248 | 3,735 | 3,830 | 3,697 | ||||||||||||
Provision for loan losses | (2,509 | ) | (2,615 | ) | (2,546 | ) | (1,899 | ) | ||||||||
Net interest income after provision for loan losses | 739 | 1,120 | 1,284 | 1,798 | ||||||||||||
Guaranty fee income | 1,752 | 1,659 | 1,923 | 1,877 | ||||||||||||
Investment gains (losses), net | 223 | (45 | ) | 785 | 495 | |||||||||||
Other-than-temporary impairments | (5,653 | ) | (1,097 | ) | (1,018 | ) | (1,289 | ) | ||||||||
Noncredit portion ofother-than-temporary impairments recognized in other comprehensive loss | — | 344 | 79 | (1,227 | ) | |||||||||||
Netother-than-temporary impairments | (5,653 | ) | (753 | ) | (939 | ) | (2,516 | ) | ||||||||
Fair value gains (losses), net | (1,460 | ) | 823 | (1,536 | ) | (638 | ) | |||||||||
Debt extinguishment losses, net | (79 | ) | (190 | ) | (11 | ) | (45 | ) | ||||||||
Losses from partnership investments | (357 | ) | (571 | ) | (520 | ) | (5,287 | ) | ||||||||
Fee and other income | 192 | 197 | 194 | 190 | ||||||||||||
Non-interest income (loss) | (5,382 | ) | 1,120 | (104 | ) | (5,924 | ) | |||||||||
Administrative expenses: | ||||||||||||||||
Salaries and employee benefits | 293 | 245 | 293 | 302 | ||||||||||||
Professional services | 143 | 180 | 178 | 183 | ||||||||||||
Occupancy expenses | 48 | 46 | 47 | 64 | ||||||||||||
Other administrative expenses | 39 | 39 | 44 | 63 | ||||||||||||
Total administrative expenses | 523 | 510 | 562 | 612 | ||||||||||||
Provision for guaranty losses | 17,825 | 15,610 | 19,350 | 10,272 | ||||||||||||
Foreclosed property expense (income) | 538 | 559 | 64 | (251 | ) | |||||||||||
Other expenses | 279 | 318 | 231 | 656 | ||||||||||||
Total expenses | 19,165 | 16,997 | 20,207 | 11,289 | ||||||||||||
Loss before federal income taxes and extraordinary losses | (23,808 | ) | (14,757 | ) | (19,027 | ) | (15,415 | ) | ||||||||
Provision (benefit) for federal income taxes | (623 | ) | 23 | (143 | ) | (242 | ) | |||||||||
Net loss | (23,185 | ) | (14,780 | ) | (18,884 | ) | (15,173 | ) | ||||||||
Less: Net (income) loss attributable to the noncontrolling interest | 17 | 26 | 12 | (2 | ) | |||||||||||
Net loss attributable to Fannie Mae | (23,168 | ) | (14,754 | ) | (18,872 | ) | (15,175 | ) | ||||||||
Preferred stock dividends | (29 | ) | (411 | ) | (883 | ) | (1,151 | ) | ||||||||
Net loss attributable to common stockholders | $ | (23,197 | ) | $ | (15,165 | ) | $ | (19,755 | ) | $ | (16,326 | ) | ||||
Loss per share—Basic and Diluted | $ | (4.09 | ) | $ | (2.67 | ) | $ | (3.47 | ) | $ | (2.87 | ) | ||||
Weighted-average common shares outstanding—Basic and Diluted | 5,666 | 5,681 | 5,685 | 5,687 |
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