PART I—FINANCIAL INFORMATION
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
| We have been under conservatorship, with the Federal Housing Finance Agency (“FHFA”) acting as conservator, since September 6, 2008. As conservator, FHFA succeeded to all rights, titles, powers and privileges of the company, and of any shareholder, officer or director of the company with respect to the company and its assets. The conservator has since provided for the exercise of certain functions and authorities by our Board of Directors. Our directors owe their fiduciary duties of care and loyalty solely to the conservator. Thus, while we are in conservatorship, the Board has no fiduciary duties to the company or its stockholders. |
| We do not know when or how the conservatorship will terminate, what further changes to our business will be made during or following conservatorship, what form we will have and what ownership interest, if any, our current common and preferred stockholders will hold in us after the conservatorship is terminated or whether we will continue to exist following conservatorship. Members of Congress and the Administration continue to express the importance of housing finance system reform. |
| We are not currently permitted to pay dividends or other distributions to stockholders. Our agreements with the U.S. Department of the Treasury (“Treasury”) include a commitment from Treasury to provide us with funds to maintain a positive net worth under specified conditions; however, the U.S. government does not guarantee our securities or other obligations. Our agreements with Treasury also include covenants that significantly restrict our business activities. For additional information on the conservatorship, the uncertainty of our future, and our agreements with Treasury, see “Business—Conservatorship, Treasury Agreements and Housing Finance Reform” and “Risk Factors—GSE and Conservatorship Risk” in our Form 10-K for the year ended December 31, 2021 (“2021 Form 10-K”). |

You should read this Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) in conjunction with our unaudited condensed consolidated financial statements and related notes in this report and the more detailed information in our 2021 Form 10-K. You can find a “Glossary of Terms Used in This Report” in our 2021 Form 10-K.
Forward-looking statements in this report are based on management’s current expectations and are subject to significant uncertainties and changes in circumstances, as we describe in “Forward-Looking Statements.” Future events and our future results may differ materially from those reflected in our forward-looking statements due to a variety of factors, including those discussed in “Risk Factors” and elsewhere in this report and in our 2021 Form 10-K.
Introduction
Fannie Mae is a leading source of financing for mortgages in the United States, with $4.3 trillion in assets as of September 30, 2022. Organized as a government-sponsored entity, Fannie Mae is a shareholder-owned corporation. Our charter is an act of Congress, which establishes that our purposes are to provide liquidity and stability to the residential mortgage market and to promote access to mortgage credit. We were initially established in 1938.
Our revenues are primarily driven by guaranty fees we receive for assuming the credit risk on loans underlying the mortgage-backed securities we issue. We do not originate loans or lend money directly to borrowers. Rather, we work primarily with lenders who originate loans to borrowers. We securitize those loans into Fannie Mae mortgage-backed securities that we guarantee (which we refer to as Fannie Mae MBS or our MBS).
Effectively managing credit risk is key to our business. In exchange for assuming credit risk on the loans we acquire, we receive guaranty fees. These fees take into account the credit risk characteristics of the loans we acquire. Guaranty fees are set at the time we acquire loans and do not change over the life of the loan. How long a loan remains in our guaranty book is heavily dependent on interest rates. When interest rates decrease, a larger portion of our book of business turns over as more loans refinance. On the other hand, as interest rates increase, fewer loans refinance and our book turns over more slowly. Since guaranty fees are set at the time a loan is originated, the impact of any change in guaranty fees on future revenues depends on the rates at which loans in our book of business turn over and new loans are added.
| Fannie Mae Third Quarter 2022 Form 10-Q | 1 |

| MD&A | Executive Summary |

Executive Summary
Summary of Our Financial Performance
•Net revenues increased $146 million in the third quarter of 2022 compared with the third quarter of 2021, primarily due to:
◦higher income from portfolios, primarily due to higher yields on assets in our other investments portfolio as a result of increases in interest rates; and
◦higher base guaranty fee income due to an increase in the size of our guaranty book of business and higher average charged guaranty fees.
These increases were partially offset by lower net amortization income as a result of a higher interest rate environment in the third quarter of 2022, which slowed refinancing activity driving lower prepayment volumes compared with the third quarter of 2021.
•Net income decreased $2.4 billion for the third quarter of 2022 compared with the third quarter of 2021, driven primarily by shifts to credit-related expense and investment losses in the third quarter of 2022 from credit-related income and investment gains in the third quarter of 2021.
◦Credit-related expense in the third quarter of 2022 was primarily driven by decreases in actual and forecasted home prices.
◦The shift from investment gains in the third quarter of 2021 to investment losses in the third quarter of 2022 was primarily driven by a significant decrease in the volume of single-family loan sales coupled with lower loan sale prices in the third quarter of 2022.
•Net worth increased to $58.8 billion as of September 30, 2022 from $56.4 billion as of June 30, 2022. The increase is attributable to $2.4 billion of comprehensive income for the third quarter of 2022.
| Fannie Mae Third Quarter 2022 Form 10-Q | 2 |

| MD&A | Executive Summary |

•Net revenues increased $299 million in the first nine months of 2022 compared with the first nine months of 2021, primarily due to:
◦higher base guaranty fee income due to an increase in the size of our guaranty book of business and higher average charged guaranty fees; and
◦higher income from portfolios, primarily due to higher yields on assets in our other investments portfolio as a result of increases in interest rates as well as a decrease in interest expense on our funding debt due to a decrease in the average outstanding balance.
These increases were partially offset by lower net amortization income as a result of a higher interest rate environment in the first nine months of 2022, which slowed refinancing activity driving lower prepayment volumes compared with the first nine months of 2021.
•Net income decreased $5.5 billion in the first nine months of 2022 compared with the first nine months of 2021, primarily driven by shifts to credit-related expense and investment losses in the first nine months of 2022 from credit-related income and investment gains in the first nine months of 2021, partially offset by higher fair value gains.
◦Credit-related expense in the first nine months of 2022 was primarily driven by decreases in actual and forecasted home prices in the third quarter of 2022, higher actual and projected interest rates, and provision relating to newly acquired loans. These factors were partially offset by the benefit from actual and forecasted home price growth in the first and second quarters of 2022.
◦The shift from investment gains in the first nine months of 2021 to investment losses in the first nine months of 2022 was primarily driven by a significant decrease in the volume of single-family loan sales coupled with lower loan sale prices in 2022.
◦Fair value gains in the first nine months of 2022 were primarily driven by the impact of rising interest rates and widening of the secondary spread on the fair value of our mortgage commitment derivatives and long-term debt of consolidated trusts held at fair value, partially offset by fair value losses on fixed-rate trading securities.
•Net worth increased to $58.8 billion as of September 30, 2022 from $47.4 billion as of December 31, 2021. The increase is attributable to $11.5 billion of comprehensive income for the first nine months of 2022.
See “Consolidated Results of Operations” for more information on our financial results for the third quarter and first nine months of 2022 compared with the third quarter and first nine months of 2021.
| Fannie Mae Third Quarter 2022 Form 10-Q | 3 |

| MD&A | Executive Summary |

Financial Performance Outlook
Given the amount of credit-related expense we recognized in the first nine months of 2022, we expect significant credit-related expense in 2022 compared with significant credit-related income in 2021. We also expect much lower amortization income in 2022 compared with 2021, driven by significantly less refinancing activity in 2022 due to a higher mortgage interest-rate environment; however, we expect this decline in amortization income to be largely offset by increases in interest income from portfolios and base guaranty fee income. We expect these factors to result in lower net income in 2022 compared with 2021. See “Key Market Economic Indicators” for a discussion of how home prices, interest rates and other macroeconomic factors can affect our financial results.
Liquidity Provided in the First Nine Months of 2022
Through our single-family and multifamily business segments, we provided $580 billion in liquidity to the mortgage market in the first nine months of 2022, enabling the financing of 2.2 million home purchases, refinancings and rental units.
Fannie Mae Provided $580 Billion in Liquidity in the First Nine Months of 2022
| Unpaid Principal Balance | Units |
| $307B | 931KSingle-Family Home Purchases |
| $222B | 826KSingle-Family Refinancings |
| $51B | 435KMultifamily Rental Units |

We continued our commitment to green financing in the first nine months of 2022, issuing a total of $7.3 billion in multifamily green MBS, $1.1 billion in single-family green MBS, and $781 million in multifamily green resecuritizations. We also issued $8.1 billion in multifamily social MBS and $381 million in multifamily social resecuritizations in the first nine months of 2022. These green and social bonds were issued in alignment with our Sustainable Bond Framework, which guides our issuances of green and social bonds that support energy and water efficiency and housing affordability.
Legislation and Regulation
The information in this section updates and supplements information regarding legislative, regulatory, conservatorship and other developments affecting our business set forth in “Business—Conservatorship, Treasury Agreements and Housing Finance Reform” and “Business—Legislation and Regulation” in our 2021 Form 10-K, as well as in “MD&A—Legislation and Regulation” in our Form 10-Q for the quarter ended March 31, 2022 (“First Quarter 2022 Form 10-Q”) and our Form 10-Q for the quarter ended June 30, 2022 (“Second Quarter 2022 Form 10-Q”). Also see “Risk Factors” in our 2021 Form 10-K and in this report for discussions of risks relating to legislative and regulatory matters.
Proposed Multifamily Housing Goals for 2023 and 2024
On August 18, 2022, FHFA published a proposed rule on the multifamily housing goals for Fannie Mae and Freddie Mac for 2023 and 2024. The proposed rule would establish a new methodology for measuring our multifamily housing goals. Rather than measuring the multifamily housing goals based on a fixed number of units as our 2022 goals require, the proposed rule for our 2023 and 2024 multifamily housing goals would be based on the percentage share of the goal-eligible units in our annual multifamily loan acquisitions that are affordable to each income category. The proposed rule did not include any changes to the underlying criteria that determine which multifamily units qualify for credit under the housing goals.
| Fannie Mae Third Quarter 2022 Form 10-Q | 4 |

| MD&A | Legislation and Regulation |

The chart below sets forth the multifamily housing goals applicable to Fannie Mae for 2022, as compared with FHFA’s proposed multifamily housing goals for 2023 and 2024.
| Multifamily Housing Goals |
| Current Goals | Proposed Goals |
| 2022 | 2023 and 2024 |
| (Number of units) | (Percentage share of goal-eligible units) |
| Low-Income Goal (≤ 80% of area median income)(1) | 415,000 | 61 | % |
| Very Low-Income Subgoal (≤ 50% of area median income)(2) | 88,000 | 12 |
| Small Multifamily (5-50 Units) Low-Income Subgoal(3) | 17,000 | 2 |

(1) Affordable to low-income families, defined as families with incomes less than or equal to 80% of area median income.
(2) Affordable to very low-income families, defined as families with incomes less than or equal to 50% of area median income.
(3) Units in small multifamily properties (defined as properties with 5 to 50 units) affordable to low-income families, defined as families with incomes less than or equal to 80% of area median income.
The proposed rule indicates that these benchmark levels may be adjusted as needed in the final rule based on comments received and new information that becomes available before publication of the final rule.
Comments on the proposed rule were due October 17, 2022. We submitted a comment letter to FHFA relating to the proposed multifamily housing goals on October 14, 2022. As noted in our comment letter, we believe the new percentage share-based methodology of the proposed rule will allow us to provide liquidity that reflects the variable nature of the multifamily mortgage market, and that the proposed benchmarks provide challenging, yet attainable, goals for us to support affordable multifamily housing while maintaining safety and soundness.
As described in “Risk Factors—GSE and Conservatorship Risk” in our 2021 Form 10-K, actions we may take to meet our housing goals may increase our credit losses and credit-related expense.
2021 Housing Goals and Duty to Serve Performance
In August 2022, FHFA notified us that it had preliminarily determined that we met all of our single-family and multifamily housing goals for 2021. In October 2022, FHFA reported its determination that we complied with our 2021 duty to serve requirements. See “Business—Legislation and Regulation—GSE-Focused Matters” in our 2021 Form 10-K for more information regarding our 2021 housing goals and duty to serve underserved markets.
Stress Testing
Pursuant to an FHFA rule implementing a provision of the Dodd-Frank Wall Street Reform and Consumer Protection Act, each year we are required to conduct a stress test, based on our data as of the prior December 31, using two different scenarios of financial conditions provided by FHFA—baseline and severely adverse—and to publish a summary of our stress test results for the severely adverse scenario by August 15. We publish our stress test results on our website. On August 11, 2022, we and FHFA published our 2022 stress test results for the severely adverse scenario. Refer to our website and the FHFA website for updated stress test information.
| Fannie Mae Third Quarter 2022 Form 10-Q | 5 |

| MD&A | Key Market Economic Indicators |

Key Market Economic Indicators
Below we discuss how varying macroeconomic conditions can influence our financial results across different business and economic environments. Our forecasts and expectations are based on many assumptions, subject to many uncertainties and may change, perhaps substantially, from our current forecasts and expectations. For further discussion on housing activity, see “Single-Family Business—Single-Family Mortgage Market” and “Multifamily Business—Multifamily Mortgage Market.”
Selected Benchmark Interest Rates
(1)Refers to the U.S. weekly average fixed-rate mortgage rate according to Freddie Mac's Primary Mortgage Market Survey®. These rates are reported using the latest available data for a given period.
(2)According to Bloomberg.
(3)Refers to the daily rate per the Federal Reserve Bank of New York.
How Interest Rates Can Affect Our Financial Results
•Net interest income. In a rising interest-rate environment, our mortgage loans tend to prepay more slowly as borrowers are less incentivized or unable to refinance. We amortize various cost basis adjustments over the life of the mortgage loan, including those relating to loan-level price adjustments we receive as upfront fees at the time we acquire single-family loans. As a result, any prepayment of a loan results in an accelerated realization of those upfront fees as income. Therefore, as loan prepayments slow, the accelerated realization of amortization income also slows. Conversely, in a declining interest-rate environment, our mortgage loans tend to prepay faster as borrowers are more likely to refinance, typically resulting in the opposite trend of higher net amortization income from cost basis adjustments on mortgage loans and related debt. Interest rates also affect the amount of interest income we earn on our assets. Our other investments portfolio and certain mortgage-related assets earn more interest income in a higher interest-rate environment and less interest income in a lower interest-rate environment. See “Consolidated Results of Operations—Net Interest Income” for a discussion of how interest rate changes impacted our financial results.
•Fair value gains (losses). We have exposure to fair value gains and losses resulting from changes in interest rates, primarily through our mortgage commitment derivatives and risk management derivatives, which we mark to market through earnings. Fair value gains and losses on our mortgage commitment derivatives fluctuate depending on how interest rates and prices move between the time a commitment is opened and
| Fannie Mae Third Quarter 2022 Form 10-Q | 6 |

| MD&A | Key Market Economic Indicators |

when it settles. The net position and composition across the yield curve of our risk management derivatives changes over time. As a result, interest rate changes (increases or decreases) and yield curve changes (parallel, steepening or flattening shifts) will generate varying amounts of fair value gains or losses in a given period.
•Credit-related income (expense). Increases in mortgage interest rates tend to lengthen the expected lives of our loans as borrowers are less likely or unable to refinance, which generally increases the expected impairment and provision for credit losses on loans, particularly those modified in troubled debt restructuring (“TDR”) arrangements. Decreases in mortgage interest rates tend to shorten the expected lives of our loans as borrowers are more likely to refinance, which generally reduces the impairment and provision for credit losses on such loans. See “Consolidated Results of Operations—Credit-Related Income (Expense)” and “Note 1, Summary of Significant Accounting Policies” for additional information on our adoption of Accounting Standards Update (“ASU”) 2022-02, Financial Instruments – Credit Losses (Topic 326) Troubled Debt Restructurings and Vintage Disclosures (“ASU 2022-02”) on January 1, 2022, resulting in the prospective discontinuation of TDR accounting, and its impact on our financial results.
Single-Family Quarterly Home Price Growth (Decline) Rate (1)
(1)Calculated internally using property data on loans purchased by Fannie Mae, Freddie Mac and other third-party home sales data. Fannie Mae’s home price index is a weighted repeat-transactions index, measuring average price changes in repeat sales on the same properties. Fannie Mae’s home price index excludes prices on properties sold in foreclosure. Fannie Mae’s home price estimates are based on non-seasonally adjusted preliminary data and are subject to change as additional data becomes available.
How Home Prices Can Affect Our Financial Results
•Actual and forecasted home prices impact our provision or benefit for credit losses as well as the growth and size of our guaranty book of business.
•Changes in home prices affect the amount of equity that borrowers have in their homes. Borrowers with less equity typically have higher delinquency and default rates.
•As home prices increase, the severity of losses we incur on defaulted loans that we hold or guarantee decreases because the amount we can recover from the properties securing the loans increases. Declines in home prices increase the losses we incur on defaulted loans.
•As home prices rise, the principal balance of loans associated with newly acquired purchase money mortgages may increase, causing growth in the size of our guaranty book. Additionally, rising home prices can increase the amount of equity borrowers have in their home, which may lead to an increase in origination volumes for cash-out refinance loans with higher principal balances than the existing loan. Replacing existing loans with newly acquired cash-out refinances can affect the growth and size of our guaranty book.
•Following a period of significant home price growth in 2021 and the first half of 2022, home prices declined on a national basis in the third quarter of 2022, driven by elevated mortgage interest rates which reduced affordability.
•We expect additional home price declines in the fourth quarter of 2022. As a result, we expect home price growth on a national basis to moderate to 9.0% for full year 2022, compared with 18.7% growth in 2021. We expect home price declines on a national basis of 1.5% for full year 2023 driven by elevated mortgage interest rates, a weakening economy and labor market, and affordability constraints. We also expect regional variation in the timing and rate of home price changes.
| Fannie Mae Third Quarter 2022 Form 10-Q | 7 |

| MD&A | Key Market Economic Indicators |

New Housing Starts(1)
(1)According to U.S. Census Bureau and subject to revision.
How Housing Activity Can Affect Our Financial Results
•Housing is among the most interest-rate sensitive sectors of the economy. In addition to interest rates, two key aspects of economic activity that can impact supply and demand for housing, and thus our business and financial results, are the rates of household formation and housing construction.
•Household formation is a key driver of demand for both single-family and multifamily housing as a newly formed household will either rent or purchase a home. Thus, changes in the pace of household formation can affect home prices and credit performance as well as the degree of loss on defaulted loans.
•Growth of household formation stimulates homebuilding. Homebuilding has typically been a cyclical leader, weakening prior to a slowdown in U.S. economic activity and accelerating prior to a recovery, which contributes to the growth of gross domestic product (“GDP”) and employment. However, the housing sector’s performance may vary from its historical precedent due to the many uncertainties surrounding future economic or housing policy as well as the impact of labor and material availability and cost on the economy and the housing market.
•A decline in housing starts results in fewer new homes being available for purchase and potentially a lower volume of mortgage originations. Construction activity can also affect credit losses through its impact on home prices. If the growth of demand exceeds the growth of supply, prices will appreciate and impact the risk profile of newly originated home purchase mortgages, depending on where in the housing cycle the market is. A reduced pace of construction is often associated with a broader economic slowdown and may signal expected increases in delinquency and losses on defaulted loans.
•We expect home sales and single-family housing starts through the remainder of 2022 will continue to decline in response to elevated mortgage rates, diminished home purchase affordability, and a stalling economy. Single-family housing starts in the third quarter of 2022 fell in response to anticipated decreases in demand. In 2023, we expect single-family and multifamily housing starts to decline compared with 2022 due to the economic constraints of continued high interest rates and an expected modest recession.
| Fannie Mae Third Quarter 2022 Form 10-Q | 8 |

| MD&A | Key Market Economic Indicators |

GDP, Unemployment Rate and Personal Consumption
(1)Real GDP growth (decline) and personal consumption growth (decline) are based on the quarterly series calculated by the Bureau of Economic Analysis and are subject to revision.
(2)According to the U.S. Bureau of Labor Statistics and subject to revision.
How GDP, the Unemployment Rate and Personal Consumption Can Affect Our Financial Results
•Changes in GDP, the unemployment rate and personal consumption can affect several mortgage market factors, including the demand for both single-family and multifamily housing and the level of loan delinquencies, which impacts credit losses.
•Economic growth is a key factor for the performance of mortgage-related assets. In a growing economy, employment and income are typically rising, thus allowing borrowers to meet payment requirements, existing homeowners to consider purchasing and moving to another home, and renters to consider becoming homeowners. Homebuilding typically increases to meet the rise in demand. Mortgage delinquencies typically fall in an expanding economy, thereby decreasing credit losses.
•In a slowing economy, income growth and housing activity typically slow as an early indicator of reduced economic activity, followed by slowing employment. Typically, as an economic slowdown intensifies, households reduce their spending. This reduction in consumption then accelerates the slowdown. An economic slowdown can lead to employment losses, impairing the ability of borrowers and renters to meet mortgage and rental payments, thus causing loan delinquencies to rise. Home sales and mortgage originations also typically fall in a slowing economy.
•While GDP declined in the first half of 2022, GDP grew moderately in the third quarter of 2022. We currently expect a GDP contraction in the fourth quarter of 2022, resulting in essentially flat GDP growth for 2022. We expect that a modest recession is likely to occur beginning in the first quarter of 2023, resulting in an increase in the unemployment rate. We expect our economic outlook will be influenced by a number of factors that are subject to change, such as the persistence of inflationary pressures, the speed at which expected monetary policy tightening is adjusted and the increasing risk of international financial market disruptions.
See “Risk Factors” in this report and “Risk Factors—Market and Industry Risk” in our 2021 Form 10-K for further discussion of risks to our business and financial results associated with interest rates, home prices, housing activity and economic conditions.
| Fannie Mae Third Quarter 2022 Form 10-Q | 9 |

| MD&A | Consolidated Results of Operations |

Consolidated Results of Operations
This section discusses our condensed consolidated results of operations and should be read together with our condensed consolidated financial statements and the accompanying notes.
| Summary of Condensed Consolidated Results of Operations |
| For the Three Months Ended September 30, | For the Nine Months Ended September 30, |
| 2022 | 2021 | Variance | 2022 | 2021 | Variance |
| (Dollars in millions) |
| Net interest income | $ | 7,124 | $ | 6,972 | $ | 152 | $ | 22,331 | $ | 22,000 | $ | 331 |
| Fee and other income | 105 | 111 | (6) | 269 | 301 | (32) |
| Net revenues | 7,229 | 7,083 | 146 | 22,600 | 22,301 | 299 |
| Investment gains (losses), net | (172) | 243 | (415) | (323) | 934 | (1,257) |
| Fair value gains (losses), net | 292 | (17) | 309 | 1,301 | 321 | 980 |
| Administrative expenses | (870) | (745) | (125) | (2,473) | (2,239) | (234) |
| Credit-related income (expense): |
| Benefit (provision) for credit losses | (2,536) | 937 | (3,473) | (2,994) | 4,290 | (7,284) |
| Foreclosed property income (expense) | 15 | (69) | 84 | 21 | (105) | 126 |
| Total credit-related income (expense) | (2,521) | 868 | (3,389) | (2,973) | 4,185 | (7,158) |
| TCCA fees(1) | (850) | (781) | (69) | (2,515) | (2,270) | (245) |
| Credit enhancement expense(2) | (364) | (233) | (131) | (974) | (791) | (183) |
| Change in expected credit enhancement recoveries(3) | 290 | (42) | 332 | 303 | (117) | 420 |
| Other expenses, net(4) | (169) | (268) | 99 | (633) | (867) | 234 |
| Income before federal income taxes | 2,865 | 6,108 | (3,243) | 14,313 | 21,457 | (7,144) |
| Provision for federal income taxes | (429) | (1,266) | 837 | (2,816) | (4,470) | 1,654 |
| Net income | $ | 2,436 | $ | 4,842 | $ | (2,406) | $ | 11,497 | $ | 16,987 | $ | (5,490) |
| Total comprehensive income | $ | 2,433 | $ | 4,828 | $ | (2,395) | $ | 11,483 | $ | 16,914 | $ | (5,431) |

(1)TCCA fees refers to the expense recognized as a result of the 10 basis point increase in guaranty fees on all single-family residential mortgages delivered to us on or after April 1, 2012 pursuant to the Temporary Payroll Tax Cut Continuation Act of 2011 and as extended by the Infrastructure Investment and Jobs Act, which we remit to Treasury. For more information on TCCA fees, see “Note 1, Summary of Significant Accounting Policies—Related Parties—Transactions with Treasury.”
(2)Consists of costs associated with our freestanding credit enhancements, which primarily include our Connecticut Avenue Securities® (“CAS”) and Credit Insurance Risk TransferTM (“CIRTTM”) programs, enterprise-paid mortgage insurance (“EPMI”) and certain lender risk-sharing programs.
(3)Includes estimated changes in benefits, as well as any realized amounts, from our freestanding credit enhancements.
(4)Consists of debt extinguishment gains and losses, housing trust fund expenses, loan subservicing costs, servicer fees paid in connection with certain loss mitigation activities, and gains and losses from partnership investments.
| Fannie Mae Third Quarter 2022 Form 10-Q | 10 |

| MD&A | Consolidated Results of Operations |

Net Interest Income
Our primary source of net interest income is guaranty fees we receive for managing the credit risk on loans underlying Fannie Mae MBS held by third parties.
Guaranty fees consist of two primary components:
•base guaranty fees that we receive over the life of the loan; and
•upfront fees that we receive at the time of loan acquisition primarily related to single-family loan-level price adjustments and other fees we receive from lenders, which are amortized into net interest income as cost basis adjustments over the contractual life of the loan. We refer to this as amortization income.
We recognize almost all of our guaranty fee revenue in net interest income because we consolidate the substantial majority of loans underlying our Fannie Mae MBS in consolidated trusts in our condensed consolidated balance sheets. Guaranty fees from these loans account for the difference between the interest income on loans in consolidated trusts and the interest expense on the debt of consolidated trusts.
The timing of when we recognize amortization income can vary based on a number of factors, the most significant of which is a change in mortgage interest rates. In a rising interest-rate environment, our mortgage loans tend to prepay more slowly, which typically results in lower net amortization income. Conversely, in a declining interest-rate environment, our mortgage loans tend to prepay faster, typically resulting in higher net amortization income.
We also recognize net interest income on the difference between interest income earned on the assets in our retained mortgage portfolio and our other investments portfolio (collectively, our “portfolios”) and the interest expense associated with the debt that funds those assets. See “Retained Mortgage Portfolio” and “Liquidity and Capital Management—Liquidity Management—Other Investments Portfolio” for more information about our portfolios.
We recognize fair value changes attributable to movements in benchmark interest rates for mortgage loans and funding debt, and for related interest-rate swaps in hedging relationships, as a component of net interest income, including the amortization of hedge-related basis adjustments on mortgage loans or funding debt and any related interest accrual on the swaps. The income or expense associated with this activity is presented in the “Income (expense) from hedge accounting” line item in the table below. See “MD&A—Consolidated Results of Operations—Hedge Accounting Impact” and “Note 1, Summary of Significant Accounting Policies” in our 2021 Form 10-K for more information about our hedge accounting program.
| Fannie Mae Third Quarter 2022 Form 10-Q | 11 |

| MD&A | Consolidated Results of Operations |

The table below displays the components of our net interest income from our guaranty book of business, which we discuss in “Guaranty Book of Business,” and from our portfolios, as well as from hedge accounting.
| Components of Net Interest Income |
| For the Three Months Ended September 30, | For the Nine Months Ended September 30, |
| 2022 | 2021 | Variance | 2022 | 2021 | Variance |
| (Dollars in millions) |
| Net interest income from guaranty book of business: |
| Base guaranty fee income(1) | $ | 4,116 | $ | 3,643 | $ | 473 | $ | 12,091 | $ | 10,260 | $ | 1,831 |
| Base guaranty fee income related to TCCA fees(2) | 850 | 781 | 69 | 2,515 | 2,270 | 245 |
| Net amortization income(3) | 1,429 | 2,338 | (909) | 5,924 | 8,600 | (2,676) |
| Total net interest income from guaranty book of business | 6,395 | 6,762 | (367) | 20,530 | 21,130 | (600) |
| Net interest income from portfolios(4) | 794 | 170 | 624 | 1,747 | 742 | 1,005 |
| Income (expense) from hedge accounting | (65) | 40 | (105) | 54 | 128 | (74) |
| Total net interest income | $ | 7,124 | $ | 6,972 | $ | 152 | $ | 22,331 | $ | 22,000 | $ | 331 |
| Income (expense) from hedge accounting included in net interest income: |
| Fair value gains (losses) on designated risk management derivatives in fair value hedges | $ | (1,020) | $ | (192) | $ | (828) | $ | (2,548) | $ | (1,053) | $ | (1,495) |
| Fair value gains on hedged mortgage loans held for investment and debt of Fannie Mae(5) | 1,192 | 194 | 998 | 2,981 | 1,069 | 1,912 |
| Contractual interest income (expense) accruals related to interest-rate swaps designated as hedging instruments | (101) | 61 | (162) | (64) | 169 | (233) |
| Discontinued hedge-related basis adjustment amortization expense | (136) | (23) | (113) | (315) | (57) | (258) |
| Total income (expense) from hedge accounting in net interest income | $ | (65) | $ | 40 | $ | (105) | $ | 54 | $ | 128 | $ | (74) |

(1)Excludes revenues generated by the 10 basis point guaranty fee increase we implemented pursuant to the TCCA, the incremental revenue from which is remitted to Treasury and not retained by us.
(2)Represents revenues generated by the 10 basis point guaranty fee increase we implemented pursuant to the TCCA, the incremental revenue from which is remitted to Treasury and not retained by us.
(3)Net amortization income refers primarily to the amortization of premiums and discounts on mortgage loans and debt of consolidated trusts. These cost basis adjustments represent the difference between the initial fair value and the carrying value of these instruments as well as upfront fees we receive at the time of loan acquisition. It does not include the amortization of cost basis adjustments resulting from hedge accounting, which is included in income (expense) from hedge accounting.
(4)Includes interest income from assets held in our retained mortgage portfolio and our other investments portfolio, as well as other assets used to support lender liquidity. Also includes interest expense on our outstanding Connecticut Avenue Securities debt.
(5)Amounts are recorded as cost basis adjustments on the hedged loans or debt and amortized over the hedged item’s remaining contractual life beginning at the termination of the hedging relationship. See “Note 8, Derivative Instruments” for additional information on the effect of our fair value hedge accounting program and related disclosures.
| Fannie Mae Third Quarter 2022 Form 10-Q | 12 |

| MD&A | Consolidated Results of Operations |

Net interest income increased in the third quarter and first nine months of 2022 compared with the third quarter and first nine months of 2021, primarily as a result of higher base guaranty fee income and higher income from portfolios, partially offset by lower net amortization income. More specifically, our net interest income was impacted in the periods by:
•Higher base guaranty fee income. An increase in the size of our guaranty book of business combined with higher average charged guaranty fees were the primary drivers of the increase in base guaranty fee income for the third quarter and first nine months of 2022 compared with the third quarter and first nine months of 2021.
•Higher income from portfolios. Higher income from portfolios in the third quarter and first nine months of 2022 compared with the third quarter and first nine months of 2021, was primarily driven by higher yields on assets in our other investments portfolio as a result of increases in interest rates. For the first nine months of 2022, higher income from portfolios was also driven by a decrease in interest expense on our funding debt due to a decrease in the average outstanding balance compared with the first nine months of 2021.
•Lower net amortization income. Throughout the third quarter and first nine months of 2022, we were in a higher interest-rate environment and observed lower volumes of refinancing activity compared with the third quarter and first nine months of 2021, which drove fewer loan prepayments. As a result, we had lower amortization income in the third quarter and first nine months of 2022 compared with the third quarter and first nine months of 2021. For a description of how fewer loan prepayments results in lower amortization income, refer to “Key Market Economic Indicators—How Interest Rates Can Affect Our Financial Results—Net Interest Income.”
We expect refinancing activity to be significantly lower throughout 2022 compared with 2021 levels, as the recent sharp rise in interest rates has resulted in few borrowers who could benefit from refinancing. As described in “Executive Summary—Financial Performance Outlook,” we expect much lower amortization income in 2022 compared with 2021, driven by significantly less refinancing activity in 2022 due to a higher mortgage interest-rate environment; however, we expect this decline in amortization income to be largely offset by increases in interest income from portfolios and base guaranty fee income. Because we expect mortgage interest rates will remain elevated throughout 2023 and therefore refinancing activity will remain low, we expect these trends to continue with amortization income declining and interest income from portfolios increasing in 2023 compared with 2022.
| Fannie Mae Third Quarter 2022 Form 10-Q | 13 |

| MD&A | Consolidated Results of Operations |

Analysis of Net Interest Income
The table below displays an analysis of our net interest income, average balances and related yields earned on assets and incurred on liabilities. For most components of the average balances, we use a daily weighted average of unpaid principal balance net of unamortized cost basis adjustments. When daily average balance information is not available, such as for mortgage loans, we use monthly averages.
| Analysis of Net Interest Income and Yield(1) |
| For the Three Months Ended September 30, |
| 2022 | 2021 |
| Average Balance | Interest Income/ (Expense) | Average Rates Earned/Paid | Average Balance | Interest Income/ (Expense) | Average Rates Earned/Paid |
| (Dollars in millions) |
| Interest-earning assets: |
| Mortgage loans of Fannie Mae | $ | 58,290 | $ | 628 | 4.31 | % | $ | 81,999 | $ | 673 | 3.28 | % |
| Mortgage loans of consolidated trusts | 4,048,625 | 29,486 | 2.91 | 3,800,970 | 24,125 | 2.54 |
| Total mortgage loans(2) | 4,106,915 | 30,114 | 2.93 | 3,882,969 | 24,798 | 2.55 |
| Mortgage-related securities | 4,612 | 35 | 3.04 | 5,975 | 34 | 2.28 |
| Non-mortgage-related securities(3) | 104,009 | 490 | 1.88 | 184,325 | 111 | 0.24 |
| Securities purchased under agreements to resell | 30,829 | 171 | 2.22 | 36,839 | 5 | 0.05 |
| Advances to lenders | 4,935 | 40 | 3.24 | 8,522 | 33 | 1.55 |
| Total interest-earning assets | $ | 4,251,300 | $ | 30,850 | 2.90 | % | $ | 4,118,630 | $ | 24,981 | 2.43 | % |
| Interest-bearing liabilities: |
| Short-term funding debt | $ | 3,695 | $ | (17) | 1.84 | % | $ | 4,324 | * | * |
| Long-term funding debt | 122,571 | (635) | 2.07 | 225,568 | $ | (659) | 1.17 | % |
| CAS debt | 7,221 | (126) | 6.98 | 13,855 | (144) | 4.16 |
| Total debt of Fannie Mae | 133,487 | (778) | 2.33 | 243,747 | (803) | 1.32 |
| Debt securities of consolidated trusts held by third parties | 4,055,958 | (22,948) | 2.26 | 3,829,882 | (17,206) | 1.80 |
| Total interest-bearing liabilities | $ | 4,189,445 | $ | (23,726) | 2.27 | % | $ | 4,073,629 | $ | (18,009) | 1.77 | % |
| Net interest income/net interest yield | $ | 7,124 | 0.67 | % | $ | 6,972 | 0.66 | % |

| Fannie Mae Third Quarter 2022 Form 10-Q | 14 |

| MD&A | Consolidated Results of Operations |

| For the Nine Months Ended September 30, |
| 2022 | 2021 |
| Average Balance | Interest Income/ (Expense) | Average Rates Earned/Paid | Average Balance | Interest Income/ (Expense) | Average Rates Earned/Paid |
| (Dollars in millions) |
| Interest-earning assets: |
| Mortgage loans of Fannie Mae | $ | 62,460 | $ | 2,202 | 4.70 | % | $ | 96,249 | $ | 2,280 | 3.16 | % |
| Mortgage loans of consolidated trusts | 4,004,225 | 84,136 | 2.80 | 3,704,361 | 70,803 | 2.55 |
| Total mortgage loans(2) | 4,066,685 | 86,338 | 2.83 | 3,800,610 | 73,083 | 2.56 |
| Mortgage-related securities | 5,025 | 92 | 2.44 | 6,667 | 118 | 2.36 |
| Non-mortgage-related securities(3) | 129,003 | 917 | 0.94 | 160,623 | 326 | 0.27 |
| Securities purchased under agreements to resell | 22,495 | 205 | 1.20 | 52,705 | 17 | 0.04 |
| Advances to lenders | 5,800 | 93 | 2.11 | 9,135 | 106 | 1.53 |
| Total interest-earning assets | $ | 4,229,008 | $ | 87,645 | 2.76 | % | $ | 4,029,740 | $ | 73,650 | 2.44 | % |
| Interest-bearing liabilities: |
| Short-term funding debt | $ | 3,909 | $ | (23) | 0.78 | % | $ | 5,944 | $ | (4) | 0.09 | % |
| Long-term funding debt | 146,165 | (1,724) | 1.57 | 243,659 | (2,092) | 1.14 |
| CAS debt | 9,358 | (373) | 5.31 | 14,323 | (446) | 4.15 |
| Total debt of Fannie Mae | 159,432 | (2,120) | 1.77 | 263,926 | (2,542) | 1.28 |
| Debt securities of consolidated trusts held by third parties | 4,016,013 | (63,194) | 2.10 | 3,739,575 | (49,108) | 1.75 |
| Total interest-bearing liabilities | $ | 4,175,445 | $ | (65,314) | 2.09 | % | $ | 4,003,501 | $ | (51,650) | 1.72 | % |
| Net interest income/net interest yield | $ | 22,331 | 0.70 | % | $ | 22,000 | 0.73 | % |

* Represents less than $0.5 million of interest expense and less than 0.005% of average yield.
(1)Includes the effects of discounts, premiums and other cost basis adjustments.
(2)Average balance includes mortgage loans on nonaccrual status. Interest income from yield maintenance revenue and the amortization of loan fees, primarily consisting of upfront cash fees, was $1.1 billion and $4.4 billion, respectively, for the third quarter of 2022 and first nine months of 2022, compared with $2.5 billion and $7.3 billion, respectively, for the third quarter of 2021 and first nine months of 2021.
(3)Consists of cash, cash equivalents and U.S. Treasury securities.
| Fannie Mae Third Quarter 2022 Form 10-Q | 15 |

| MD&A | Consolidated Results of Operations |

Analysis of Deferred Amortization Income
We initially recognize mortgage loans and debt of consolidated trusts in our condensed consolidated balance sheets at fair value. The difference between the initial fair value and the carrying value of these instruments is recorded as a cost basis adjustment, either as a premium or a discount, in our condensed consolidated balance sheets. We amortize these cost basis adjustments over the contractual lives of the loans or debt. On a net basis, for mortgage loans and debt of consolidated trusts, we are in a premium position with respect to debt of consolidated trusts, which represents deferred income we will recognize in our condensed consolidated statements of operations and comprehensive income as amortization income in future periods. Our net premium position on debt of consolidated MBS trusts decreased as of September 30, 2022, compared with December 31, 2021, primarily as a result of higher interest rates, which resulted in recognizing primarily net discounts on newly issued MBS debt as prices declined.
Deferred Amortization Income Represented by Net Premium Position
on Debt of Consolidated Trusts
(Dollars in billions)
Investment Gains (Losses), Net
Investment gains (losses), net primarily includes gains and losses recognized on the sale of available-for-sale (“AFS”) securities, the sale of loans, gains and losses recognized on the consolidation and deconsolidation of securities, and lower of cost or fair value adjustments on held-for-sale (“HFS”) loans.
The shift from net investment gains in the third quarter and first nine months of 2021 to net investment losses in the third quarter and first nine months of 2022 was primarily driven by a significant decrease in the volume of single-family loan sales coupled with lower loan sale prices in 2022.
Fair Value Gains (Losses), Net
The estimated fair value of our derivatives, trading securities and other financial instruments carried at fair value may fluctuate substantially from period to period because of changes in interest rates, the yield curve, mortgage and credit spreads and implied volatility, as well as activity related to these financial instruments.
As discussed below in “Impact of Hedge Accounting on Fair Value Gains (Losses), Net,” we apply fair value hedge accounting to reduce earnings volatility in our financial statements driven by changes in benchmark interest rates. Accordingly, we recognize the fair value gains and losses and the contractual interest income and expense associated with risk management derivatives designated in qualifying hedging relationships in net interest income.
| Fannie Mae Third Quarter 2022 Form 10-Q | 16 |

| MD&A | Consolidated Results of Operations |

The table below displays the components of our fair value gains and losses, which includes the impact of hedge accounting.
| Fair Value Gains (Losses), Net |
| For the Three Months Ended September 30, | For the Nine Months Ended September 30, |
| 2022 | 2021 | 2022 | 2021 |
| (Dollars in millions) |
| Risk management derivatives fair value gains (losses) attributable to: |
| Net contractual interest income (expense) on interest-rate swaps | $ | (164) | $ | 59 | $ | (166) | $ | 163 |
| Net change in fair value during the period | (433) | (97) | (2,135) | (734) |
| Impact of hedge accounting | 1,121 | 131 | 2,612 | 884 |
| Risk management derivatives fair value gains, net | 524 | 93 | 311 | 313 |
| Mortgage commitment derivatives fair value gains (losses), net | 517 | (25) | 2,933 | 504 |
| Credit enhancement derivatives fair value losses, net | (32) | (55) | (83) | (163) |
| Total derivatives fair value gains, net | 1,009 | 13 | 3,161 | 654 |
| Trading securities losses, net | (1,319) | (129) | (3,754) | (726) |
| Long-term debt fair value gains, net(1) | 787 | 62 | 2,424 | 346 |
| Other, net(2) | (185) | 37 | (530) | 47 |
| Fair value gains (losses), net | $ | 292 | $ | (17) | $ | 1,301 | $ | 321 |

(1)Consists of fair value gains and losses on CAS and non-CAS debt held at fair value.
(2)Consists primarily of fair value gains and losses on mortgage loans held at fair value.
Fair value gains, net in the third quarter and first nine months of 2022 were primarily driven by:
•increases in the fair value of mortgage commitment derivatives due to gains on commitments to sell mortgage-related securities as prices decreased during the commitment period due to rising interest rates and widening of the secondary spread, which is the spread between the 30-year MBS current coupon yield and 10-year U.S. Treasury rate; and
•gains associated with decreases in the fair value of long-term debt of consolidated trusts held at fair value, also due to rising interest rates and widening of the secondary spread.
These gains were partially offset by fair value losses in the third quarter and first nine months of 2022 on trading securities, primarily driven by increases in U.S. Treasury yields, which resulted in losses on fixed-rate securities held in our other investments portfolio.
Fair value losses, net in the third quarter of 2021 were primarily driven by losses on trading securities due to increases in U.S. Treasury yields during the third quarter of 2021, which resulted in losses on fixed-rate securities held in our other investments portfolio. These losses were offset by gains associated with decreases in the fair value of long-term debt of consolidated trusts held at fair value due to rising interest rates.
Fair value gains, net in the first nine months of 2021 were primarily driven by:
•increases in the fair value of mortgage commitment derivatives due to gains on commitments to sell mortgage-related securities as prices decreased during the commitment period as interest rates increased; and
•gains associated with decreases in the fair value of long-term debt of consolidated trusts held at fair value due to rising interest rates.
These gains were partially offset by fair value losses in the first nine months of 2021 on trading securities, primarily driven by increases in interest rates during the first quarter of 2021, which resulted in losses on fixed-rate securities held in our other investments portfolio.
Impact of Hedge Accounting on Fair Value Gains (Losses), Net
Our earnings can experience volatility due to interest-rate changes and differing accounting treatments that apply to certain financial instruments on our balance sheet. To help address this volatility, we began applying fair value hedge accounting in January 2021 to reduce the current-period impact on our earnings related to changes in specified benchmark interest rates. Hedge accounting aligns the timing of when we recognize fair value changes in hedged items attributable to these benchmark interest-rate movements with fair value changes in the hedging instrument. For
| Fannie Mae Third Quarter 2022 Form 10-Q | 17 |

| MD&A | Consolidated Results of Operations |

additional discussion on the purpose and structure of our hedge accounting program, see “Risk Management—Market Risk Management, including Interest-Rate Risk Management—Earnings Exposure to Interest-Rate Risk.”
The table below displays the amount of contractual interest accruals and fair value gains and losses related to designated interest-rate swaps in qualifying hedging relationships that are recognized in “Net interest income” rather than “Fair value gains (losses), net” as a result of hedge accounting. Derivatives not in hedging relationships are not affected.
| Impact of Hedge Accounting on Fair Value Gains (Losses), Net |
| For the Three Months Ended September 30, | For the Nine Months Ended September 30, |
| 2022 | 2021 | 2022 | 2021 |
| (Dollars in millions) |
| Net contractual interest income (expense) accruals related to interest-rate swaps designated as hedging instruments recognized in net interest income | $ | (101) | $ | 61 | $ | (64) | $ | 169 |
| Fair value losses on derivatives designated as hedging instruments recognized in net interest income | (1,020) | (192) | (2,548) | (1,053) |
| Fair value losses, net recognized in net interest income (expense) from hedge accounting | $ | (1,121) | $ | (131) | $ | (2,612) | $ | (884) |

Credit-Related Income (Expense)
Our credit-related income or expense can vary substantially from period to period based on a number of factors, such as changes in actual and forecasted home prices or property valuations, fluctuations in actual and forecasted interest rates, borrower payment behavior, events such as natural disasters or pandemics, the types, volume and effectiveness of our loss mitigation activities, including forbearances and loan modifications, the volume of foreclosures completed and the volume and pricing of loans redesignated from held for investment (“HFI”) to held for sale (“HFS”).
In recent periods, changes in actual and projected interest rates have been a significant driver of our credit-related income (expense) as these changes drive prepayment speeds, which impacts the measurement of the economic concessions granted to borrowers on modified loans. Pursuant to our adoption of Accounting Standards Update (“ASU”) 2022-02 on January 1, 2022, we prospectively discontinued TDR accounting and no longer measure the economic concession for restructurings occurring on or after the adoption date. This accounting also results in the elimination of any existing economic concession related to a loan that was previously designated as a TDR if such loan is restructured on or after January 1, 2022. Although increases in interest rates were a meaningful driver of our credit-related expense in the first nine months of 2022, we expect the decrease in the balance of loans that were previously designated as TDRs will reduce the sensitivity of our credit-related income (expense) to interest rate volatility over time. See “Note 1, Summary of Significant Accounting Policies—New Accounting Guidance” and “Note 3, Mortgage Loans” for more information about our adoption of ASU 2022-02.
Our credit-related income or expense and our related loss reserves can also be impacted by updates to the models, assumptions and data used in determining our allowance for loan losses. Although we believe the estimates underlying our allowance as of September 30, 2022 are reasonable, they are subject to uncertainty. Changes in future economic conditions and loan performance from our current expectations may result in volatility in our allowance for loan losses and, as a result, our credit-related income or expense. See “Critical Accounting Estimates” for additional information about how our estimate of credit losses is subject to uncertainty, including a discussion of management’s evaluation of the impact of Hurricanes Ian and Fiona (collectively, the “hurricanes”) on our estimate of credit losses as of September 30, 2022.
| Fannie Mae Third Quarter 2022 Form 10-Q | 18 |

| MD&A | Consolidated Results of Operations |

Benefit (Provision) for Credit Losses
The table below provides a quantitative analysis of the drivers of our single-family and multifamily benefit or provision for credit losses and the change in expected credit enhancement recoveries. The benefit or provision for credit losses includes our benefit or provision for loan losses, accrued interest receivable losses and our guaranty loss reserves, and excludes credit losses on our available for sale (“AFS”) securities. Many of the drivers that contribute to our benefit or provision for credit losses overlap or are interdependent. The attribution shown below is based on internal allocation estimates.
| Components of Benefit (Provision) for Credit Losses and Change in Expected Credit Enhancement Recoveries |
| For the Three Months Ended September 30, | For the Nine Months Ended September 30, |
| 2022 | 2021 | 2022 | 2021 |
| (Dollars in millions) |
| Single-family benefit (provision) for credit losses: |
| Changes in loan activity(1)(2) | $ | (373) | $ | 185 | $ | (964) | $ | 155 |
| Redesignation of loans from HFI to HFS | (116) | 118 | (120) | 1,103 |
| Actual and forecasted home prices | (1,732) | 584 | (1,194) | 2,887 |
| Actual and projected interest rates | (225) | (86) | (1,116) | (674) |
| Release of economic concessions(3) | 155 | — | 758 | — |
| Changes in assumptions regarding COVID-19 forbearance and loan delinquencies(2) | — | 214 | — | 551 |
| Other(4) | (70) | (130) | (201) | 78 |
| Single-family benefit (provision) for credit losses | (2,361) | 885 | (2,837) | 4,100 |
| Multifamily benefit (provision) for credit losses: |
| Changes in loan activity(1)(2) | (65) | (40) | (54) | (180) |
| Actual and projected interest rates | (97) | (7) | (258) | 15 |
| Actual and projected economic data | (3) | 68 | 85 | 389 |
| Estimated impact of the COVID-19 pandemic(2) | — | 42 | — | 119 |
| Other(4) | (10) | (13) | 70 | (155) |
| Multifamily benefit (provision) for credit losses | (175) | 50 | (157) | 188 |
| Total benefit (provision) for credit losses | $ | (2,536) | $ | 935 | $ | (2,994) | $ | 4,288 |
| Change in expected credit enhancement recoveries for active loans: |
| Single-family | $ | 245 | $ | (28) | $ | 271 | $ | (101) |
| Multifamily | 45 | (15) | 32 | (30) |
| Change in expected credit enhancement recoveries for active loans | $ | 290 | $ | (43) | $ | 303 | $ | (131) |

(1)Primarily consists of loan acquisitions, liquidations and amortization of modification concessions granted to borrowers and write-offs of amounts determined to be uncollectible. For multifamily, changes in loan activity also includes changes in the allowance due to loan delinquencies and the impact of changes in debt service coverage ratios (“DSCRs”) based on updated property financial information, which is used to assess loan credit quality.
(2)Beginning January 1, 2022, changes in assumptions regarding COVID-19 forbearance and loan delinquencies are included in “Changes in loan activity.”
(3)Represents the benefit from the release of economic concessions related to loans previously designated as TDRs that received loss mitigation arrangements during the period due to the adoption of ASU 2022-02.
(4)Includes provision for allowance on accrued interest receivable. For single-family, also includes changes in the reserve for guaranty losses that are not separately included in the other components. For multifamily, also includes the impact of model enhancements implemented in the first quarter of 2021.
| Fannie Mae Third Quarter 2022 Form 10-Q | 19 |

| MD&A | Consolidated Results of Operations |

Single-Family Benefit (Provision) for Credit Losses
Our single-family provision for credit losses in the third quarter of 2022 was primarily driven by a provision from actual and forecasted home prices. Actual home prices declined slightly on a national basis in the third quarter of 2022. In addition, our home price forecast worsened compared with the second quarter of 2022. While our second quarter 2022 home price forecast estimated home price growth in the second half of 2022 and in 2023, our current home price forecast estimates additional home price declines in the fourth quarter of 2022 and throughout 2023. Lower home prices increase the likelihood that loans will default and increase the amount of credit loss on loans that do default, which increases our estimate of losses and ultimately increases our loss reserves and provision for credit losses. See “Key Market Economic Indicators” for additional information about how home prices affect our credit loss estimates, including a discussion of home price growth and declines, and our home price forecast. Also see “Critical Accounting Estimates” for more information about our home price forecast.
The largest drivers of our single-family provision for credit losses for first nine months of 2022 were:
•Provision from actual and forecasted home prices. The provision from actual and forecasted home prices in the third quarter of 2022 discussed above was the largest driver of our single-family provision for credit losses for the first nine months of 2022. The impact of this home-price related provision in the third quarter of 2022 was partially offset by a benefit from actual and expected home price growth in each of the first and second quarters of 2022. During the first half of the year, our forecasted home prices were positive for the second half of 2022 through 2023. In addition, we observed strong actual home price growth through the second quarter of 2022.
•Provision from higher actual and projected interest rates as of September 30, 2022 compared with December 31, 2021. As mortgage rates increase, we expect a decrease in future prepayments on single-family loans, including modified loans accounted for as TDRs. Lower expected prepayments extend the expected lives of these TDR loans, which increases the expected impairment relating to economic concessions provided on them, resulting in a provision for credit losses.
•Provision from changes in loan activity, which includes provision on newly acquired loans. Throughout the first nine months of 2022, refinance loan volumes have continued to decline and purchase loans have increased as a percentage of acquisitions compared to the first nine months of 2021. As we shift to more purchase loans, the credit profile of our acquisitions weakens as purchase loans generally have higher origination LTV ratios than refinance loans. This drove a higher estimated risk of default and loss severity in the allowance and therefore a higher credit loss provision for those loans at the time of acquisition. In addition, for the third quarter of 2022, our credit loss provision also increased as our more negative home price forecast impacted our estimate of losses on newly acquired loans. See “Single-Family Business— Single-Family Mortgage Credit Risk Management” for more information on our loan acquisitions for the first nine months of 2022.
The primary factors that contributed to our single-family benefit for credit losses in the third quarter of 2021 were:
•Benefit from actual and forecasted home price growth. During the third quarter of 2021, actual home price growth continued to be strong. We also increased our expectations for home price growth on a national basis for full-year 2021.
•Benefit from changes in assumptions regarding COVID-19 forbearance and loan delinquencies. During the third quarter of 2021, the benefit was driven by the removal of the remaining non-modeled adjustment related to COVID-19 as discussed below.
The primary factors that contributed to our single-family benefit for credit losses in the first nine months of 2021 were:
•Benefit from actual and forecasted home price growth, which was robust throughout 2021.
•Benefit from the redesignation of certain nonperforming and reperforming single-family loans from HFI to HFS. We redesignated certain nonperforming and reperforming single-family loans from HFI to HFS, as we no longer intended to hold them for the foreseeable future or to maturity. Upon redesignation of these loans, we recorded the loans at the lower of cost or fair value with a write-off against the allowance for loan losses. Amounts recorded in the allowance related to these loans exceeded the amounts written off, resulting in a net benefit for credit losses.
•Benefit from changes in assumptions regarding COVID-19 forbearance and loan delinquencies. During the first and second quarters of 2021, management used its judgment to supplement the loss projections developed by our credit loss model to account for uncertainty arising from the COVID-19 pandemic that was not represented in historical data or otherwise captured by our credit model. As of September 30, 2021, management removed the remaining non-modeled adjustment as the effects of the economic stimulus, the vaccine rollout, and the effectiveness of COVID-19-related loss mitigation strategies became much less uncertain. Specifically, the decrease in uncertainty as of September 30, 2021 compared with the end of 2020 was primarily driven by the
| Fannie Mae Third Quarter 2022 Form 10-Q | 20 |

| MD&A | Consolidated Results of Operations |

passage of the American Rescue Plan Act of 2021 and the broad implementation of the COVID-19 vaccination program in the United States, which contributed to a significant increase in business activity and helped support continued economic growth. There was also a steady decline in the number of borrowers in a COVID-19-related forbearance, lessening expectations of credit losses. Additionally, we believed the array of possible future economic environments included in our credit model, which captured scenarios that may be remote, combined with data consumed over the course of the COVID-19 pandemic, removed the need to continue to supplement modeled results.
The impact of these factors was partially offset by a provision for higher actual and projected interest rates, which reduced our single-family benefit for credit losses recognized in the first nine months of 2021 as interest rates were higher as of September 30, 2021 compared with December 31, 2020.
Multifamily Benefit (Provision) for Credit Losses
The largest driver of our multifamily provision for credit losses in the third quarter and first nine months of 2022 was a provision for higher actual and projected interest rates. Rising interest rates may reduce the ability of multifamily borrowers to refinance their loans, which often have balloon balances at maturity, increasing our provision for credit losses. Additionally, rising interest rates also increase the chance that multifamily borrowers with adjustable-rate mortgages may default due to higher payments if the property net operating income is not increasing at a similar rate.
The primary factors that contributed to our multifamily benefit for credit losses in the third quarter and first nine months of 2021 were:
•Benefit from actual and projected economic data. In the third quarter and first nine months of 2021, property value forecasts increased due to continued demand for multifamily housing. In addition, improved job growth led to an increase in projected average property net operating income, which reduced the probability of loan defaults resulting in a benefit for credit losses for the quarter and year-to-date.
•Benefit from lower expected credit losses as a result of the COVID-19 pandemic. Similar to our single-family benefit for credit losses described above, for the first and second quarters of 2021 management used its judgment to supplement the loss projections developed by our credit loss model to account for uncertainty arising from the COVID-19 pandemic. As of September 30, 2021, management removed the remaining non-modeled adjustment as the effects of the economic stimulus, the vaccine rollout, and the effectiveness of COVID-19-related loss mitigation strategies were less uncertain. See “Single-Family Benefit (Provision) for Credit Losses,” above for more information on these factors.
Federal Income Taxes
Our provision for federal income taxes decreased for the third quarter and first nine months of 2022 compared with the third quarter and first nine months of 2021 primarily due to lower pre-tax income. Also contributing to the decrease in our provision for federal income taxes was a reduction in our effective tax rate, particularly for the third quarter of 2022, as a result of filing amended returns for certain prior years to claim research and development tax credits.
| Fannie Mae Third Quarter 2022 Form 10-Q | 21 |

| MD&A | Consolidated Balance Sheet Analysis |

Consolidated Balance Sheet Analysis
This section discusses our condensed consolidated balance sheets and should be read together with our condensed consolidated financial statements and the accompanying notes.
| Summary of Condensed Consolidated Balance Sheets |
| As of |
| September 30, 2022 | December 31, 2021 | Variance |
| (Dollars in millions) |
| Assets |
| Cash and cash equivalents and securities purchased under agreements to resell | $ | 59,590 | $ | 63,191 | $ | (3,601) |
| Restricted cash and cash equivalents | 27,921 | 66,183 | (38,262) |
| Investments in securities | 58,994 | 89,043 | (30,049) |
| Mortgage loans: |
| Of Fannie Mae | 54,122 | 66,127 | (12,005) |
| Of consolidated trusts | 4,058,908 | 3,907,744 | 151,164 |
| Allowance for loan losses | (8,302) | (5,629) | (2,673) |
| Mortgage loans, net of allowance for loan losses | 4,104,728 | 3,968,242 | 136,486 |
| Deferred tax assets, net | 12,729 | 12,715 | 14 |
| Other assets | 25,491 | 29,792 | (4,301) |
| Total assets | $ | 4,289,453 | $ | 4,229,166 | $ | 60,287 |
| Liabilities and equity |
| Debt: |
| Of Fannie Mae | $ | 129,776 | $ | 200,892 | $ | (71,116) |
| Of consolidated trusts | 4,078,038 | 3,957,299 | 120,739 |
| Other liabilities | 22,799 | 23,618 | (819) |
| Total liabilities | 4,230,613 | 4,181,809 | 48,804 |
| Fannie Mae stockholders’ equity: |
| Senior preferred stock | 120,836 | 120,836 | — |
| Other net deficit | (61,996) | (73,479) | 11,483 |
| Total equity | 58,840 | 47,357 | 11,483 |
| Total liabilities and equity | $ | 4,289,453 | $ | 4,229,166 | $ | 60,287 |

Restricted Cash and Cash Equivalents
Restricted cash and cash equivalents declined from December 31, 2021 to September 30, 2022 primarily driven by a decrease in prepayments due to lower refinance volumes for loans of consolidated trusts, resulting in lower cash balances held in trust at period end. For information on our accounting policy for restricted cash and cash equivalents, see “Note 1, Summary of Significant Accounting Policies” in our 2021 Form 10-K.
Investments in Securities
Investments in securities declined from December 31, 2021 to September 30, 2022 as we primarily used short-term liquid assets that accumulated in prior periods to fund our operations and to pay off maturing debt during the first nine months of 2022. For further discussion, see “Liquidity and Capital Management—Liquidity Management.”
Mortgage Loans, Net of Allowance
The mortgage loans reported in our condensed consolidated balance sheets are classified as either HFS or HFI and include loans owned by Fannie Mae and loans held in consolidated trusts.
Mortgage loans, net of allowance for loan losses increased from December 31, 2021 to September 30, 2022, driven by loan acquisitions outpacing liquidations and sales.
For additional information on our mortgage loans, see “Note 3, Mortgage Loans,” and for additional information on changes in our allowance for loan losses, see “Note 4, Allowance for Loan Losses.”
| Fannie Mae Third Quarter 2022 Form 10-Q | 22 |

| MD&A | Consolidated Balance Sheet Analysis |

Debt
The decrease in debt of Fannie Mae from December 31, 2021 to September 30, 2022 was primarily due to the maturity of long-term debt, which outpaced new issuances as our funding needs remained low. The increase in debt of consolidated trusts from December 31, 2021 to September 30, 2022 was primarily driven by sales of Fannie Mae MBS, which are accounted for as issuances of debt of consolidated trusts in our condensed consolidated balance sheets, since the MBS certificate ownership is transferred from us to a third party. See “Liquidity and Capital Management—Liquidity Management—Debt Funding” for a summary of activity in short-term and long-term debt of Fannie Mae. Also see “Note 7, Short-Term and Long-Term Debt” for additional information on our total outstanding debt.
Stockholders’ Equity
Our stockholders’ equity (also referred to as our net worth) increased to $58.8 billion as of September 30, 2022, compared with $47.4 billion as of December 31, 2021, due to the $11.5 billion in comprehensive income recognized during the first nine months of 2022.
The aggregate liquidation preference of the senior preferred stock increased to $177.9 billion as of September 30, 2022 due to the $4.6 billion increase in our net worth in the second quarter of 2022. The aggregate liquidation preference of the senior preferred stock will further increase to $180.3 billion as of December 31, 2022 due to the $2.4 billion increase in our net worth in the third quarter of 2022. For more information about how this liquidation preference is determined, see “Business—Conservatorship, Treasury Agreements and Housing Finance Reform—Treasury Agreements—Senior Preferred Stock” in our 2021 Form 10-K and “Liquidity and Capital Management—Capital Management—Capital Activity” in this report.
Retained Mortgage Portfolio
We use our retained mortgage portfolio primarily to provide liquidity to the mortgage market through our whole loan conduit and to support our loss mitigation activities, particularly in times of economic stress when other sources of liquidity to the mortgage market may decrease or withdraw. Previously, we also used our retained mortgage portfolio for investment purposes.
Our retained mortgage portfolio consists of mortgage loans and mortgage-related securities that we own, including Fannie Mae MBS and non-Fannie Mae mortgage-related securities. Assets held by consolidated MBS trusts that back mortgage-related securities owned by third parties are not included in our retained mortgage portfolio.
The chart below separates the instruments within our retained mortgage portfolio, measured by unpaid principal balance, into three categories based on each instrument’s use:
•Lender liquidity, which includes balances related to our whole loan conduit activity, supports our efforts to provide liquidity to the single-family and multifamily mortgage markets.
•Loss mitigation supports our loss mitigation efforts through the purchase of delinquent loans from our MBS trusts.
•Other represents assets that were previously purchased for investment purposes. The majority of the balance of “Other” as of September 30, 2022 consisted of Fannie Mae reverse mortgage securities and reverse mortgage loans. We expect the amount of assets in “Other” will continue to decline over time as they liquidate, mature or are sold.
Retained Mortgage Portfolio
(Dollars in billions)
| Fannie Mae Third Quarter 2022 Form 10-Q | 23 |

| MD&A | Retained Mortgage Portfolio |

The decrease in our retained mortgage portfolio as of September 30, 2022 compared with December 31, 2021 was primarily due to a decrease in our lender liquidity portfolio driven by sales of Fannie Mae securities and a decline in mortgage refinance activity leading to lower acquisition volumes through the whole loan conduit.
The table below displays the components of our retained mortgage portfolio, measured by unpaid principal balance. Based on the nature of the asset, these balances are included in either “Investments in securities” or “Mortgage loans of Fannie Mae” in our Summary of Condensed Consolidated Balance Sheets shown above.
| Retained Mortgage Portfolio |
| As of |
| September 30, 2022 | December 31, 2021 |
| (Dollars in millions) |
| Lender liquidity: |
| Agency securities(1) | $ | 22,045 | $ | 34,509 |
| Mortgage loans | 4,337 | 16,174 |
| Total lender liquidity | 26,382 | 50,683 |
| Loss mitigation mortgage loans(2) | 41,194 | 37,601 |
| Other: |
| Reverse mortgage loans | 6,867 | 9,908 |
| Mortgage loans | 3,544 | 3,954 |
| Reverse mortgage securities(3) | 5,161 | 6,146 |
| Other(4) | 834 | 929 |
| Total other | 16,406 | 20,937 |
| Total retained mortgage portfolio | $ | 83,982 | $ | 109,221 |
| Retained mortgage portfolio by segment: |
| Single-family mortgage loans and mortgage-related securities | $ | 79,600 | $ | 101,518 |
| Multifamily mortgage loans and mortgage-related securities | $ | 4,382 | $ | 7,703 |

(1)Consists of Fannie Mae, Freddie Mac and Ginnie Mae mortgage-related securities, including Freddie Mac securities guaranteed by Fannie Mae. Excludes Fannie Mae and Ginnie Mae reverse mortgage securities and Fannie Mae-wrapped private-label securities.
(2)Includes single-family loans on nonaccrual status of $8.4 billion and $11.0 billion, and multifamily loans on nonaccrual status of $294 million and $340 million as of September 30, 2022 and December 31, 2021, respectively.
(3)Consists of Fannie Mae and Ginnie Mae reverse mortgage securities.
(4)Consists of private-label and other securities, Fannie Mae-wrapped private-label securities and mortgage revenue bonds.
The amount of mortgage assets that we may own is capped at $250 billion and will decrease to $225 billion on December 31, 2022 under the terms of our senior preferred stock purchase agreement with Treasury. In addition, we are currently required to cap our mortgage assets at $225 billion per instruction from FHFA. See “Business—Conservatorship, Treasury Agreements and Housing Finance Reform” in our 2021 Form 10-K for additional information on our portfolio cap.
We include 10% of the notional value of interest-only securities in calculating the size of the retained portfolio for the purpose of determining compliance with the senior preferred stock purchase agreement retained portfolio limits and associated FHFA guidance. As of September 30, 2022, 10% of the notional value of our interest-only securities was $1.8 billion, which is not included in the table above.
Under the terms of our MBS trust documents, we have the option or, in some instances, the obligation, to purchase mortgage loans that meet specific criteria from an MBS trust. The purchase price for these loans is the unpaid principal balance of the loan plus accrued interest. If a delinquent loan remains in a single-family MBS trust, the servicer is responsible for advancing the borrower’s missed scheduled principal and interest payments to the MBS holders for up to four months, after which time we must make these missed payments. In addition, we must reimburse servicers for advanced principal and interest payments.
In support of our loss mitigation strategies, we purchased $14.2 billion of loans from our single-family MBS trusts in the first nine months of 2022, the substantial majority of which were delinquent, compared with $6.1 billion of loans purchased from single-family MBS trusts in the first nine months of 2021. We purchased more loans out of trust in the first nine months of 2022 than in the first nine months of 2021 because the forbearance periods for many loans that entered into a COVID-19-related forbearance began expiring in late 2021. The size of our retained mortgage portfolio
| Fannie Mae Third Quarter 2022 Form 10-Q | 24 |

| MD&A | Retained Mortgage Portfolio |

will be impacted by the volume of loans we ultimately buy, the timing of those purchases, and the length of time those loans remain in our retained mortgage portfolio. See “Single-Family Business—Single-Family Mortgage Credit Risk Management—Single-Family Problem Loan Management—Single-Family Loans in Forbearance” and “Multifamily Business—Multifamily Mortgage Credit Risk Management—Multifamily Problem Loan Management and Foreclosure Prevention—Multifamily Loan Forbearance” for information on our loans in forbearance.
Guaranty Book of Business
Our “guaranty book of business” consists of:
•Fannie Mae MBS outstanding, excluding the portions of any structured securities we issue that are backed by Freddie Mac securities;
•mortgage loans of Fannie Mae held in our retained mortgage portfolio; and
•other credit enhancements that we provide on mortgage assets.
“Total Fannie Mae guarantees” consists of:
•our guaranty book of business; and
•the portions of any structured securities we issue that are backed by Freddie Mac securities.
We and Freddie Mac issue single-family uniform mortgage-backed securities, or “UMBS.” In this report, we use the term “Fannie Mae-issued UMBS” to refer to single-family Fannie Mae MBS that are directly backed by fixed-rate mortgage loans and generally eligible for trading in the to-be-announced (“TBA”) market. We use the term “Fannie Mae MBS” or “our MBS” to refer to any type of mortgage-backed security that we issue, including UMBS®, Supers®, Real Estate Mortgage Investment Conduit securities (“REMICs”) and other types of single-family or multifamily mortgage-backed securities.
Some Fannie Mae MBS that we issue are backed in whole or in part by Freddie Mac securities. When we resecuritize Freddie Mac securities into Fannie Mae-issued structured securities, such as Supers and REMICs, our guaranty of principal and interest extends to the underlying Freddie Mac securities. However, Freddie Mac continues to guarantee the payment of principal and interest on the underlying Freddie Mac securities that we have resecuritized. Although our guaranty of the underlying Freddie Mac securities requires us to hold additional capital under the enterprise regulatory capital framework, prior to July 1, 2022, we did not charge an incremental fee to create structured securities that include Freddie Mac securities. Effective July 1, 2022, we began charging an upfront fee of 50 basis points to include Freddie Mac securities in our structured securities. For more information regarding this upfront fee, see “MD&A—Legislation and Regulation—Upfront Fee for Commingled Securities and Review of the Enterprise Regulatory Capital Framework” in our Second Quarter 2022 Form 10-Q. References to our single-family guaranty book of business exclude Freddie Mac-acquired mortgage loans underlying Freddie Mac securities that we have resecuritized.
Our issuance of structured securities backed in whole or in part by Freddie Mac securities creates additional off-balance sheet exposure. Our guaranty extends to the underlying Freddie Mac security included in the structured security, but we do not have control over the Freddie Mac mortgage loan securitizations. Because we do not have the power to direct matters (primarily the servicing of mortgage loans) that impact the credit risk to which we are exposed, which constitute control of these securitization trusts, we do not consolidate these trusts in our condensed consolidated balance sheet, giving rise to off-balance sheet exposure. See “Liquidity and Capital Management—Liquidity Management—Off-Balance Sheet Arrangements” and “Note 6, Financial Guarantees” for information regarding our maximum exposure to loss on unconsolidated Fannie Mae MBS and Freddie Mac securities.
| Fannie Mae Third Quarter 2022 Form 10-Q | 25 |

| MD&A | Guaranty Book of Business |

The table below displays the composition of our guaranty book of business based on unpaid principal balance.
| Composition of Fannie Mae Guaranty Book of Business |
| As of |
| September 30, 2022 | December 31, 2021 |
| Single-Family | Multifamily | Total | Single-Family | Multifamily | Total |
| (Dollars in millions) |
| Conventional guaranty book of business(1) | $ | 3,647,567 | $ | 432,694 | $ | 4,080,261 | $ | 3,536,613 | $ | 419,463 | $ | 3,956,076 |
| Government guaranty book of business(2) | 12,960 | 607 | 13,567 | 16,777 | 718 | 17,495 |
| Guaranty book of business | 3,660,527 | 433,301 | 4,093,828 | 3,553,390 | 420,181 | 3,973,571 |
| Freddie Mac securities guaranteed by Fannie Mae(3) | 239,888 | — | 239,888 | 212,259 | — | 212,259 |
| Total Fannie Mae guarantees | $ | 3,900,415 | $ | 433,301 | $ | 4,333,716 | $ | 3,765,649 | $ | 420,181 | $ | 4,185,830 |

(1)Refers to mortgage loans and mortgage-related securities that are not guaranteed or insured, in whole or in part, by the U.S. government.
(2)Refers to mortgage loans and mortgage-related securities guaranteed or insured, in whole or in part, by the U.S. government.
(3)Consists of off-balance sheet arrangements of approximately (i) $198.8 billion and $177.8 billion in unpaid principal balance of Freddie Mac-issued UMBS backing Fannie Mae-issued Supers as of September 30, 2022 and December 31, 2021, respectively; and (ii) $41.1 billion and $34.5 billion in unpaid principal balance of Freddie Mac securities backing Fannie Mae-issued REMICs as of September 30, 2022 and December 31, 2021, respectively.
The Federal Housing Enterprises Financial Safety and Soundness Act of 1992, as amended, including by the Housing and Economic Recovery Act of 2008 (together, the “GSE Act”) requires us to set aside each year an amount equal to 4.2 basis points of the unpaid principal balance of our new business purchases and to pay this amount to specified U.S. Department of Housing and Urban Development (“HUD”) and Treasury funds in support of affordable housing. In March 2022, we paid $598 million to the funds based on our new business purchases in 2021. For the first nine months of 2022, we recognized an expense of $244 million related to this obligation based on $580.4 billion in new business purchases during the period. We expect to pay this amount to the funds in 2023, plus additional amounts to be accrued based on our new business purchases in the fourth quarter of 2022. See “Business—Legislation and Regulation—GSE-Focused Matters—Affordable Housing Allocations” in our 2021 Form 10-K for more information regarding this obligation.
Business Segments
We have two reportable business segments: Single-Family and Multifamily. The Single-Family business operates in the secondary mortgage market relating to single-family mortgage loans, which are secured by properties containing four or fewer residential dwelling units. The Multifamily business operates in the secondary mortgage market relating primarily to multifamily mortgage loans, which are secured by properties containing five or more residential units.
The chart below displays net revenues and net income for each of our business segments for the first nine months of 2022 compared with the first nine months of 2021. Net revenues consist of net interest income and fee and other income.
Business Segment Net Revenues and Net Income
(Dollars in billions)
| Fannie Mae Third Quarter 2022 Form 10-Q | 26 |

| MD&A | Business Segments |

In the following sections, we describe each segment’s business metrics, financial results and credit performance. For an overview of how we are compensated for and manage the risk of credit losses through the life cycle of our loans and how we measure our credit risk, see “Business—Managing Mortgage Credit Risk” in our 2021 Form 10-K.
Single-Family Business
This section supplements and updates information regarding our Single-Family business segment in our 2021 Form 10-K. See “MD&A—Single-Family Business” in our 2021 Form 10-K for additional information regarding the primary business activities, lenders, investors and competition of our Single-Family business.
Single-Family Mortgage Market
Housing activity decreased in the third quarter of 2022 compared with the second quarter of 2022. Total existing home sales averaged 4.8 million units annualized in the third quarter of 2022, compared with 5.4 million units in the second quarter of 2022, according to data from the National Association of REALTORS®. According to the U.S. Census Bureau, new single-family home sales averaged an annualized rate of approximately 608,000 units in the third quarter of 2022, compared with approximately 609,000 units in the second quarter of 2022.
The 30-year fixed mortgage rate averaged 6.11% in September 2022, compared with 5.52% in June 2022, according to Freddie Mac’s Primary Mortgage Market Survey®.
According to the October forecast from our Economic and Strategic Research Group, we forecast that total originations in the U.S. single-family mortgage market in 2022 will decrease from 2021 levels by approximately 49%, from an estimated $4.57 trillion in 2021 to $2.33 trillion in 2022, and the amount of refinance originations in the U.S. single-family mortgage market will decrease from an estimated $2.67 trillion in 2021 to $701 billion in 2022. Our October forecast is based on data available as of October 10, 2022. See “Key Market Economic Indicators” for additional discussion of how housing activity can affect our financial results and the uncertainties that may affect our forecasts and expectations.
Single-Family Market Activity
Single-Family Mortgage-Related Securities Issuances Share
Our single-family Fannie Mae MBS issuances were $125.8 billion for the third quarter of 2022, compared with $303.1 billion for the third quarter of 2021. This decrease was driven by a lower volume of refinance activity in the third quarter of 2022 due to higher mortgage rates. Based on the latest data available, the chart below displays our estimated share of single-family mortgage-related securities issuances in the third quarter of 2022 as compared with that of our primary competitors for the issuance of single-family mortgage-related securities.
Single-Family Mortgage-Related Securities Issuances Share
Third Quarter 2022
We estimate our share of single-family mortgage-related securities issuances was 36% in the second quarter of 2022 and 36% in the third quarter of 2021.
| Fannie Mae Third Quarter 2022 Form 10-Q | 27 |

| MD&A | Single-Family Business | Single-Family Business Metrics |

Presentation of Our Single-Family Conventional Guaranty Book of Business
For purposes of the information reported in this “Single-Family Business” section, we measure the single-family conventional guaranty book of business using the unpaid principal balance of our mortgage loans underlying Fannie Mae MBS outstanding. By contrast, the single-family conventional guaranty book of business presented in the “Composition of Fannie Mae Guaranty Book of Business” table in the “Guaranty Book of Business” section is based on the unpaid principal balance of the Fannie Mae MBS outstanding, rather than the unpaid principal balance of the underlying mortgage loans. These amounts differ primarily as a result of payments we receive on underlying loans that have not yet been remitted to the MBS holders or instances where we have advanced missed borrower payments on mortgage loans to make required distributions to related MBS holders. As measured for purposes of the information reported below, our single-family conventional guaranty book of business was $3,629.0 billion as of September 30, 2022 and $3,483.1 billion as of December 31, 2021.
Single-Family Business Metrics
Select Business Metrics
Net interest income for our Single-Family business is driven by the guaranty fees we charge and the size of our single-family conventional guaranty book of business. The guaranty fees we charge are based on the characteristics of the loans we acquire. We may adjust our guaranty fees in light of market conditions and to achieve return targets. As a result, the average charged guaranty fee on new acquisitions may fluctuate based on the credit quality and product mix of loans acquired, as well as market conditions and other factors.
The charts below display our average charged guaranty fees, net of TCCA fees, on our single-family conventional guaranty book of business and on new single-family conventional loan acquisitions, along with our average single-family conventional guaranty book of business and our single-family conventional loan acquisitions for the periods presented.
Select Single-Family Business Metrics
(Dollars in billions)
| Average charged guaranty fee on single-family conventional guaranty book of business, net of TCCA fees(1) | Average single-family conventional guaranty book of business(2) |
| Average charged guaranty fee on new single-family conventional acquisitions, net of TCCA fees(1) | Single-family conventional acquisitions |

(1) Excludes the impact of a 10 basis point guaranty fee increase implemented pursuant to the TCCA, the incremental revenue from which is remitted to Treasury and not retained by us.
(2) Our single-family conventional guaranty book of business primarily consists of single-family conventional mortgage loans underlying Fannie Mae MBS outstanding. It also includes single-family conventional mortgage loans of Fannie Mae held in our retained mortgage portfolio, and other credit enhancements that we provide on single-family conventional mortgage assets. Our single-family conventional guaranty book of business does not include: (a) mortgage loans guaranteed or insured, in whole or in part, by the U.S. government; (b) Freddie Mac-acquired mortgage loans underlying Freddie Mac-issued UMBS that we have resecuritized; or (c) non-Fannie Mae single-
| Fannie Mae Third Quarter 2022 Form 10-Q | 28 |

| MD&A | Single-Family Business | Single-Family Business Metrics |

family mortgage-related securities held in our retained mortgage portfolio for which we do not provide a guaranty. Our average single-family conventional guaranty book of business is based on quarter-end balances.
As shown in the chart above, our third quarter 2022 single-family conventional acquisitions decreased compared with the third quarter of 2021, primarily as a result of the recent sharp rise in interest rates, which decreased refinancing acquisitions as fewer borrowers could benefit from refinancing.
Average charged guaranty fee on newly acquired conventional single-family loans is a metric management uses to measure the price we earn as compensation for the credit risk we manage and to assess our return. Average charged guaranty fee represents, on an annualized basis, the average of the base guaranty fees charged during the period for our single-family conventional guaranty arrangements, which we receive monthly over the life of the loan, plus the recognition of any upfront cash payments, including loan-level price adjustments, based on an estimated average life at the time of acquisition. The calculation of single-family conventional charged guaranty fees at acquisition is sensitive to changes in inputs used in the calculation, including assumptions about the weighted average life of the loan, therefore changes in charged guaranty fees are not necessarily indicative of a change in pricing.
Our average charged guaranty fee on newly acquired conventional single-family loans, net of TCCA fees, increased in the third quarter of 2022 compared with the third quarter of 2021. The increase in average charged guaranty fee on newly acquired single-family loans was primarily driven by the overall weaker credit risk profile of our third quarter 2022 acquisitions. We generally charge higher guaranty fees on loans with weaker credit risk characteristics. The weaker credit profile of our third quarter 2022 acquisitions was primarily driven by the increased share of our acquisitions that were purchase loans in the third quarter of 2022 compared with a higher share of refinance loans in the third quarter of 2021, as purchase loans generally have higher origination LTV ratios than refinance loans. See “Single-Family Mortgage Credit Risk Management—Single-Family Portfolio Diversification and Monitoring” below for a description of key risk characteristics of our single-family acquisitions in the third quarter of 2022 and third quarter of 2021.
Recent and Future Price Changes
We use loan-level price adjustments, including various upfront risk-based fees, to price for the credit risk we assume in providing our guaranty. FHFA, as conservator, must approve changes to the national loan-level price adjustments (or upfront fees) that we charge for the risk we assume in providing our guaranty and can direct us to make other changes to our single-family guaranty fee pricing. We have the ability to change our base contractual guaranty fee pricing, subject to minimum base guaranty fees set by FHFA. For new single-family acquisitions, FHFA has instructed us to meet a minimum return on equity target based on our capital requirements. FHFA also has instructed us to establish a long-term target for returns at the enterprise level, which may impact our guaranty fees.
In January 2022, FHFA announced targeted increases to the upfront fees we charge for certain high-balance loans and second home loans. High-balance loans are mortgages originated in certain designated areas above the baseline conforming loan limit. The new fees became effective for loans purchased on or after April 1, 2022, and for loans delivered into an MBS trust with an issue date on or after April 1, 2022. High-balance loans continue to be eligible for our existing affordable loan products, HomeReady® and HFA PreferredTM, which offer caps on loan-level price adjustments for eligible borrowers. In addition, the high-balance upfront fees are not charged on loans to first time homebuyers in high-cost areas with incomes at or below 100% of area median income. The portion of our acquisitions attributed to high-balance and second home loans decreased in the second and third quarters of 2022 compared with the first quarter of 2022.
In October 2022, FHFA announced targeted changes to Fannie Mae and Freddie Mac’s guaranty fee pricing that would eliminate upfront fees for certain borrowers and affordable mortgage products, while increasing upfront fees for some cash-out refinance loans. FHFA has instructed us to eliminate upfront fees for the following borrowers and products:
•First-time homebuyers at or below 100% of area median income in most of the United States and below 120% of area median income in high-cost areas;
•HomeReady loans;
•HFA Preferred loans; and
•Single-family loans supporting the Duty-to-Serve program.
FHFA has instructed us to implement these fee reductions on December 1, 2022 and the fee increases for cash-out refinance loans on February 1, 2023.
In announcing these pricing changes, the Director of FHFA stated that FHFA will continue its ongoing review of Fannie Mae and Freddie Mac’s pricing framework.
We expect that the elimination of upfront fees for the borrowers and products referenced above likely will not be fully offset by the increase in upfront fees on cash-out refinances, given that we expect cash-out refinancing activity to remain low in 2023. These pricing changes may also negatively impact the credit risk profile of our new single-family acquisitions and investor interest in our future single-family credit risk transfer transactions. Changes in our pricing or other aspects of our business can significantly affect our competitive position, our loan acquisition volumes, or the type
| Fannie Mae Third Quarter 2022 Form 10-Q | 29 |

| MD&A | Single-Family Business | Single-Family Business Metrics |

of business we do. FHFA’s ability to direct us to make changes in our guaranty fee pricing can challenge our ability to address changing market conditions, meet FHFA’s return targets for our acquisitions and/or manage the mix of loans we acquire.
| Single-Family Business Financial Results(1) |
| For the Three Months Ended September 30, | For the Nine Months Ended September 30, |
| 2022 | 2021 | Variance | 2022 | 2021 | Variance |
| (Dollars in millions) |
| Net interest income(2) | $ | 5,918 | $ | 5,870 | $ | 48 | $ | 18,746 | $ | 19,087 | $ | (341) |
| Fee and other income | 83 | 86 | (3) | 204 | 228 | (24) |
| Net revenues | 6,001 | 5,956 | 45 | 18,950 | 19,315 | (365) |
| Investment gains (losses), net | (178) | 222 | (400) | (271) | 944 | (1,215) |
| Fair value gains (losses), net | 309 | (31) | 340 | 1,379 | 323 | 1,056 |
| Administrative expenses | (730) | (620) | (110) | (2,084) | (1,862) | (222) |
| Credit-related income (expense)(3) | (2,367) | 807 | (3,174) | (2,834) | 4,011 | (6,845) |
| TCCA fees(2) | (850) | (781) | (69) | (2,515) | (2,270) | (245) |
| Credit enhancement expense | (298) | (174) | (124) | (778) | (619) | (159) |
| Change in expected credit enhancement recoveries(4) | 245 | (28) | 273 | 271 | (101) | 372 |
| Other expenses, net(5) | (159) | (261) | 102 | (556) | (863) | 307 |
| Income before federal income taxes | 1,973 | 5,090 | (3,117) | 11,562 | 18,878 | (7,316) |
| Provision for federal income taxes | (276) | (1,065) | 789 | (2,270) | (3,952) | 1,682 |
| Net income | $ | 1,697 | $ | 4,025 | $ | (2,328) | $ | 9,292 | $ | 14,926 | $ | (5,634) |

(1)See “Note 9, Segment Reporting” for information about our segment allocation methodology.
(2)Reflects the impact of a 10 basis point guaranty fee increase implemented pursuant to the TCCA, the incremental revenue from which is remitted to Treasury. The resulting revenue is included in “Net interest income” and the expense is recognized as “TCCA fees.”
(3)Consists of the benefit or provision for credit losses and foreclosed property income or expense.
(4)Consists of increase (decrease) in benefits recognized from our single-family freestanding credit enhancements, which primarily relate to our CAS and CIRT programs.
(5)Consists primarily of debt extinguishment gains and losses, housing trust fund expenses, servicer fees paid in connection with certain loss mitigation activities, and loan subservicing costs.
Net Interest Income
The increase in single-family net interest income for the third quarter of 2022 compared with the third quarter of 2021 was primarily driven by higher base guaranty fee income and higher income from portfolios, partially offset by lower net amortization income.
The decrease in single-family net interest income for the first nine months of 2022 compared with the first nine months of 2021 was primarily driven by lower net amortization income, partially offset by higher base guaranty fee income and higher income from portfolios.
See “Consolidated Results of Operations—Net Interest Income” for more information on the factors that impact our single-family net interest income.
Investment Gains (Losses), Net
The shift from net investment gains in the third quarter and first nine months of 2021 to net investment losses in the third quarter and first nine months of 2022 was primarily driven by a significant decrease in the volume of single-family loan sales coupled with lower loan sale prices in 2022.
The drivers of investment gains (losses), net for the Single-Family segment are consistent with the drivers of investment gains (losses), net in our condensed consolidated statements of operations and comprehensive income, which we discuss in “Consolidated Results of Operations—Investment Gains (Losses), Net.”
Fair Value Gains (Losses), Net
Fair value gains, net in the third quarter and first nine months of 2022 were primarily driven by gains as a result of increases in the fair value of mortgage commitment derivatives and gains associated with decreases in the fair value of
| Fannie Mae Third Quarter 2022 Form 10-Q | 30 |

| MD&A | Single-Family Business | Single-Family Business Financial Results |

long-term debt of consolidated trusts held at fair value, which were partially offset by fair value losses on trading securities.
Fair value losses, net in the third quarter of 2021 were primarily driven by losses on trading securities, partially offset by decreases in the fair value of long-term debt of consolidated trusts held at fair value.
Fair value gains, net in the first nine months of 2021 were primarily driven by gains as a result of increases in the
fair value of mortgage commitment derivatives and gains associated with decreases in the fair value of long-term debt of consolidated trusts held at fair value, which were partially offset by losses on trading securities.
The drivers of fair value gains, net for the Single-Family segment are consistent with the drivers of fair value gains, net in our condensed consolidated statements of operations and comprehensive income, which we discuss in “Consolidated Results of Operations—Fair Value Gains (Losses), Net.”
For information on the implementation of our hedge accounting program and its impact on our financial statements, see “Consolidated Results of Operations—Hedge Accounting Impact” in our 2021 Form 10-K and “Consolidated Results of Operations—Fair Value Gains (Losses), Net” in this report.
Credit-Related Income (Expense)
Credit-related expense for the third quarter of 2022 was driven primarily by decreases in actual and forecasted home prices.
Credit-related expense for the first nine months of 2022 was primarily driven by decreases in actual and forecasted home prices in the third quarter of 2022, higher actual and projected interest rates, and provision relating to newly acquired loans. These factors were partially offset by the benefit from actual and forecasted home price growth in the first and second quarters of 2022.
Credit-related income for the third quarter of 2021 was driven by a benefit for credit losses due primarily to strong actual and forecasted home price growth and a reduction in our estimate of losses we expected to incur as a result of the COVID-19 pandemic.
Credit-related income for the first nine months of 2021 was driven by a benefit for credit losses due primarily to strong actual and forecasted home price growth, the redesignation of certain nonperforming and reperforming single-family loans from HFI to HFS and a reduction in our estimate of losses we expected to incur as a result of the COVID-19 pandemic. The impact of those factors was partially offset by higher actual and projected interest rates.
See “Consolidated Results of Operations—Credit-Related Income (Expense)” for more information on the primary factors that contributed to our single-family credit-related income or expense. See “Note 1, Summary of Significant Accounting Policies” and “Note 3, Mortgage Loans” for additional information on our adoption of ASU 2022-02 on January 1, 2022 and the prospective discontinuation of TDR accounting.
Provision for Federal Income Taxes
Our provision for federal income taxes decreased for the third quarter and first nine months of 2022 compared with the third quarter and first nine months of 2021 primarily due to lower pre-tax income. Also contributing to the decrease in our provision for federal income taxes was a reduction in our effective tax rate, particularly for the third quarter of 2022, as a result of filing amended returns for certain prior years to claim research and development tax credits.
Single-Family Mortgage Credit Risk Management
This section updates our discussion of single-family mortgage credit risk management in our 2021 Form 10-K. For an overview of key elements of our mortgage credit risk management, see “Business—Managing Mortgage Credit Risk” in our 2021 Form 10-K. For additional information on our acquisition and servicing policies, underwriting and servicing standards, quality control process, repurchase requests, and representation and warranty framework, see “MD&A—Single-Family Business—Single-Family Mortgage Credit Risk Management” in our 2021 Form 10-K.
Single-Family Acquisition and Servicing Policies and Underwriting and Servicing Standards
Desktop Underwriter Update
As part of our comprehensive risk management approach, we periodically update our proprietary automated underwriting system, Desktop Underwriter® (“DU®”), to reflect changes to our underwriting and eligibility guidelines. In July 2022, we implemented updates to DU’s risk and eligibility assessment in response to changing market conditions. These changes have resulted in a reduction in loans eligible for acquisition through DU, particularly for cash-out refinance transactions when multiple high-risk factors are present. We will continue to closely monitor loan acquisitions
| Fannie Mae Third Quarter 2022 Form 10-Q | 31 |

| MD&A | Single-Family Business | Single-Family Mortgage Credit Risk Management |

and market conditions and, as appropriate, make changes to DU, including its eligibility criteria, to ensure that the loans we acquire are consistent with our risk appetite and mission.
New Credit Score Models and Expected Change to Credit Report Requirement
Fannie Mae uses credit scores to establish a minimum credit threshold for mortgage lending, provide a foundation for risk-based pricing, and support disclosures to investors. We currently use the “classic FICO® Score” from Fair Isaac Corporation as our credit score model, which FHFA has approved.
In October 2022, FHFA announced the validation and approval of two new credit score models for use by Fannie Mae and Freddie Mac: the FICO® Score 10 T credit score model and the VantageScore® 4.0 credit score model. FHFA’s announcement stated that they expect implementation of these new credit score models will be a multiyear effort. Once implemented, lenders will be required to deliver both FICO Score 10 T and VantageScore 4.0 credit scores with each loan sold to us when available, replacing the classic FICO Score model. The new models are expected to improve both the accuracy and inclusivity of borrower credit scores, including by capturing new payment histories for borrowers when available, such as rent, utilities and telecom payments.
FHFA also announced in October 2022 that Fannie Mae and Freddie Mac will work toward changing the requirement that lenders provide credit reports from all three nationwide consumer reporting agencies. Instead, we will require lenders to provide credit reports from any two of the three nationwide consumer reporting agencies. FHFA expects this change will reduce costs and encourage innovation, without introducing additional risk to Fannie Mae and Freddie Mac.
Repurchase Requests and Representation and Warranty Framework
If we determine that a mortgage loan did not meet our Selling Guide requirements, then our mortgage sellers and/or servicers are obligated to repurchase the loan, reimburse us for our losses or provide other remedies, unless the loan is eligible for relief under our representation and warranty framework. We describe our representation and warranty framework in “MD&A—Single-Family Business—Single-Family Mortgage Credit Risk Management—Single-Family Acquisition and Servicing Policies and Underwriting and Servicing Standards—Repurchase Requests and Representation and Warranty Framework” in our 2021 Form 10-K. We refer to our demands that mortgage sellers and servicers meet these obligations as repurchase requests.
As of September 30, 2022, we had issued repurchase requests on approximately 0.25% of the $1.4 trillion in unpaid principal balance of single-family loans delivered to us during the twelve months ended December 31, 2021. The amount of our total outstanding repurchase requests to mortgage sellers and servicers was $939 million as of September 30, 2022, of which 4.7% was over 180 days outstanding. In comparison, we had issued repurchase requests on approximately 0.21% of the $1.4 trillion in unpaid principal balance of single-family loans delivered to us during the twelve months ended December 31, 2020. The amount of our total outstanding repurchase requests to mortgage sellers and servicers was $589 million as of September 30, 2021 of which 4.5% was over 180 days outstanding.
The dollar amounts of our outstanding repurchase requests are based on the unpaid principal balance of the loans underlying the repurchase request, not the actual amount we have requested from the mortgage sellers or servicers.
Single-Family Portfolio Diversification and Monitoring
The following table displays our single-family conventional business volumes and our single-family conventional guaranty book of business, based on certain key risk characteristics that we use to evaluate the risk profile and credit quality of our single-family loans.
We provide additional information on the credit characteristics of our single-family loans in quarterly financial supplements, which we furnish to the Securities and Exchange Commission (the “SEC”) with current reports on Form 8-K and make available on our website. Information in our quarterly financial supplements is not incorporated by reference into this report.
| Fannie Mae Third Quarter 2022 Form 10-Q | 32 |

| MD&A | Single-Family Business | Single-Family Mortgage Credit Risk Management |

| Key Risk Characteristics of Single-Family Conventional Business Volume and Guaranty Book of Business(1) |
| Percent of Single-Family Conventional Business Volume at Acquisition(2) | Percent of Single-Family ConventionalGuaranty Book of Business(3)As of |
| For the Three Months Ended September 30, | For the Nine Months Ended September 30, |
| 2022 | 2021 | 2022 | 2021 | September 30, 2022 | December 31, 2021 |
| Original loan-to-value (“LTV”) ratio:(4) |
| <= 60% | 17 | % | 30 | % | 23 | % | 32 | % | 26 | % | 27 | % |
| 60.01% to 70% | 11 | 16 | 14 | 16 | 15 | 15 |
| 70.01% to 80% | 34 | 31 | 33 | 31 | 33 | 33 |
| 80.01% to 90% | 14 | 9 | 11 | 9 | 10 | 10 |
| 90.01% to 95% | 18 | 10 | 14 | 9 | 11 | 10 |
| 95.01% to 100% | 6 | 4 | 5 | 3 | 4 | 4 |
| Greater than 100% | — | — | — | * | 1 | 1 |
| Total | 100 | % | 100 | % | 100 | % | 100 | % | 100 | % | 100 | % |
| Weighted average | 78 | % | 70 | % | 74 | % | 69 | % | 72 | % | 72 | % |
| Average loan amount | $ | 306,126 | $ | 282,305 | $ | 301,161 | $ | 282,206 | $ | 205,467 | $ | 198,865 |
| Loan count (in thousands) | 384 | 1,050 | 1,758 | 3,792 | 17,662 | 17,515 |
| Estimated mark-to-market LTV ratio:(5) |
| <= 60% | 69 | % | 61 | % |
| 60.01% to 70% | 15 | 19 |
| 70.01% to 80% | 10 | 13 |
| 80.01% to 90% | 4 | 5 |
| 90.01% to 100% | 2 | 2 |
| Greater than 100% | * | * |
| Total | 100 | % | 100 | % |
| Weighted average | 50 | % | 54 | % |
| FICO credit score at origination:(6) |
| < 620 | * | % | — | % | * | % | — | % | 1 | % | 1 | % |
| 620 to < 660 | 4 | 4 | 4 | 3 | 4 | 4 |
| 660 to < 680 | 4 | 4 | 4 | 3 | 4 | 3 |
| 680 to < 700 | 8 | 7 | 8 | 6 | 6 | 7 |
| 700 to < 740 | 23 | 19 | 22 | 18 | 19 | 19 |
| >= 740 | 61 | 66 | 62 | 70 | 66 | 66 |
| Total | 100 | % | 100 | % | 100 | % | 100 | % | 100 | % | 100 | % |
| Weighted average | 746 | 753 | 747 | 757 | 752 | 753 |
| Debt-to-income (“DTI”) ratio at origination:(7) |
| <= 43% | 65 | % | 76 | % | 69 | % | 78 | % | 76 | % | 77 | % |
| 43.01% to 45% | 10 | 8 | 10 | 8 | 9 | 9 |
| Greater than 45% | 25 | 16 | 21 | 14 | 15 | 14 |
| Total | 100 | % | 100 | % | 100 | % | 100 | % | 100 | % | 100 | % |
| Weighted average | 38 | % | 35 | % | 37 | % | 34 | % | 35 | % | 34 | % |

| Fannie Mae Third Quarter 2022 Form 10-Q | 33 |

| MD&A | Single-Family Business | Single-Family Mortgage Credit Risk Management |

| Percent of Single-Family Conventional Business Volume at Acquisition(2) | Percent of Single-Family ConventionalGuaranty Book of Business(3)As of |
| For the Three Months Ended September 30, | For the Nine Months Ended September 30, |
| 2022 | 2021 | 2022 | 2021 | September 30, 2022 | December 31, 2021 |
| Product type: |
| Fixed-rate:(8) |
| Long-term | 93 | % | 82 | % | 89 | % | 83 | % | 85 | % | 84 | % |
| Intermediate-term | 5 | 17 | 10 | 17 | 14 | 15 |
| Total fixed-rate | 98 | 99 | 99 | 100 | 99 | 99 |
| Adjustable-rate | 2 | 1 | 1 | * | 1 | 1 |
| Total | 100 | % | 100 | % | 100 | % | 100 | % | 100 | % | 100 | % |
| Number of property units: |
| 1 unit | 98 | % | 99 | % | 98 | % | 98 | % | 97 | % | 97 | % |
| 2-4 units | 2 | 1 | 2 | 2 | 3 | 3 |
| Total | 100 | % | 100 | % | 100 | % | 100 | % | 100 | % | 100 | % |
| Property type: |
| Single-family homes | 91 | % | 91 | % | 91 | % | 91 | % | 91 | % | 91 | % |
| Condo/Co-op | 9 | 9 | 9 | 9 | 9 | 9 |
| Total | 100 | % | 100 | % | 100 | % | 100 | % | 100 | % | 100 | % |
| Occupancy type: |
| Primary residence | 91 | % | 95 | % | 91 | % | 93 | % | 91 | % | 90 | % |
| Second/vacation home | 2 | 3 | 3 | 3 | 3 | 4 |
| Investor | 7 | 2 | 6 | 4 | 6 | 6 |
| Total | 100 | % | 100 | % | 100 | % | 100 | % | 100 | % | 100 | % |
| Loan purpose: |
| Purchase | 79 | % | 39 | % | 58 | % | 32 | % | 39 | % | 36 | % |
| Cash-out refinance | 17 | 26 | 27 | 22 | 22 | 21 |
| Other refinance | 4 | 35 | 15 | 46 | 39 | 43 |
| Total | 100 | % | 100 | % | 100 | % | 100 | % | 100 | % | 100 | % |
| Geographic concentration:(9) |
| Midwest | 14 | % | 14 | % | 12 | % | 13 | % | 14 | % | 14 | % |
| Northeast | 13 | 13 | 13 | 14 | 16 | 16 |
| Southeast | 27 | 22 | 26 | 22 | 23 | 23 |
| Southwest | 24 | 20 | 23 | 18 | 19 | 18 |
| West | 22 | 31 | 26 | 33 | 28 | 29 |
| Total | 100 | % | 100 | % | 100 | % | 100 | % | 100 | % | 100 | % |
| Origination year: |
| 2016 and prior | 19 | % | 23 | % |
| 2017 | 3 | 4 |
| 2018 | 2 | 3 |
| 2019 | 5 | 6 |
| 2020 | 26 | 30 |
| 2021 | 33 | 34 |
| 2022 | 12 | — |
| Total | 100 | % | 100 | % |

* Represents less than 0.5% of single-family conventional business volume or guaranty book of business.
(1)Second-lien mortgage loans held by third parties are not reflected in the original LTV or the estimated mark-to-market LTV ratios in this table.
(2)Calculated based on the unpaid principal balance of single-family loans for each category at time of acquisition.
(3)Calculated based on the aggregate unpaid principal balance of single-family loans for each category divided by the aggregate unpaid principal balance of loans in our single-family conventional guaranty book of business as of the end of each period.
(4)The original LTV ratio generally is based on the original unpaid principal balance of the loan divided by the appraised property value reported to us at the time of acquisition of the loan. Excludes loans for which this information is not readily available.
| Fannie Mae Third Quarter 2022 Form 10-Q | 34 |

| MD&A | Single-Family Business | Single-Family Mortgage Credit Risk Management |

(5)The aggregate estimated mark-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.
(6)Loans with unavailable FICO credit scores represent less than 0.5% of single-family conventional business volume or guaranty book of business, and therefore are not presented separately in this table.
(7)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 loans have maturities equal to or less than 15 years.
(9)Midwest consists of IL, IN, IA, MI, MN, NE, ND, OH, SD and WI. Northeast consists of 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.
Characteristics of our New Single-Family Loan Acquisitions
Refinancing activity has declined significantly in the first nine months of 2022 compared with the first nine months of 2021, particularly in the third quarter of 2022, as a large portion of our single-family guaranty book of business had already recently refinanced and interest rates increased. Accordingly, the share of our single-family loan acquisitions consisting of refinance loans (versus home purchase loans) decreased to 21% in the third quarter of 2022 compared with 61% in the third quarter of 2021. Typically, home purchase loans have higher LTV ratios than refinance loans. This trend contributed to an increase in the percentage of our single-family loan acquisitions with LTV ratios over 80%, from 23% in the third quarter of 2021 to 38% in the third quarter of 2022. The decline in refinance share also contributed to a decline in the percentage of loans we acquired with a FICO credit score of 740 or greater, from 66% in the third quarter of 2021 to 61% in the third quarter of 2022.
Our share of acquisitions of loans with DTI ratios above 45% increased to 25% in the third quarter of 2022 compared with 16% in the third quarter of 2021. This increase was driven by the higher share of home purchase acquisitions, which tend to have higher DTI ratios than refinance loan acquisitions. It also reflects the impact of higher interest rates and inflation on borrowers’ monthly obligations.
For a discussion of factors that may impact the volume and credit characteristics of loans we acquire in the future, see “MD&A—Single-Family Business—Single-Family Mortgage Credit Risk Management—Single-Family Portfolio Diversification and Monitoring” in our 2021 Form 10-K. In this section of our 2021 Form 10-K, we also provide more information on the credit characteristics of loans in our single-family conventional guaranty book of business, including high-balance loans, reverse mortgages and mortgage products with rate resets.
Single-Family Credit Enhancement and Transfer of Mortgage Credit Risk
Our charter generally requires credit enhancement on any single-family conventional mortgage loan that we purchase or securitize if it has an LTV ratio over 80% at the time of purchase. We generally achieve this through primary mortgage insurance. We also enter into various other types of transactions in which we transfer mortgage credit risk to third parties.
Our approved monoline mortgage insurers’ financial ability and willingness to pay claims is an important determinant of our overall credit risk exposure. For a discussion of our exposure to and management of the institutional counterparty credit risk associated with the providers of these credit enhancements, see “MD&A—Risk Management—Institutional Counterparty Credit Risk Management” and “Note 13, Concentrations of Credit Risk” in our 2021 Form 10-K and “Risk Management—Institutional Counterparty Credit Risk Management” and “Note 10, Concentrations of Credit Risk” in this report. Also see “Risk Factors” in our 2021 Form 10-K.
| Fannie Mae Third Quarter 2022 Form 10-Q | 35 |

| MD&A | Single-Family Business | Single-Family Mortgage Credit Risk Management |

The table below displays information about loans in our single-family conventional guaranty book of business covered by one or more forms of credit enhancement, including mortgage insurance or a credit risk transfer transaction. For a description of primary mortgage insurance and the other types of credit enhancements specified in the table, see “MD&A—Single-Family Business—Single-Family Mortgage Credit Risk Management—Single-Family Credit Enhancement and Transfer of Mortgage Credit Risk” in our 2021 Form 10-K.
| Single-Family Loans with Credit Enhancement |
| As of |
| September 30, 2022 | December 31, 2021 |
| Unpaid Principal Balance | Percentage of Single-Family Conventional Guaranty Book of Business | Unpaid Principal Balance | Percentage of Single-Family Conventional Guaranty Book of Business |
| (Dollars in billions) |
| Primary mortgage insurance and other | $ | 746 | 20 | % | $ | 697 | 20 | % |
| Connecticut Avenue Securities | 740 | 20 | 512 | 14 |
| Credit Insurance Risk Transfer | 313 | 9 | 168 | 5 |
| Lender risk-sharing | 59 | 2 | 70 | 2 |
| Less: Loans covered by multiple credit enhancements | (355) | (10) | (253) | (7) |
| Total single-family loans with credit enhancement | $ | 1,503 | 41 | % | $ | 1,194 | 34 | % |

Transfer of Mortgage Credit Risk
In addition to primary mortgage insurance, our Single-Family business has developed other risk-sharing capabilities to transfer portions of our single-family mortgage credit risk to the private market. Our credit risk transfer transactions have been designed to transfer a portion of the losses we expect would be incurred in an economic downturn or a stressed credit environment. Generally, benefits are received after the underlying property has been liquidated and all applicable proceeds, including private mortgage insurance benefits, have been applied to reduce the loss. As described in “MD&A—Single-Family Business—Single-Family Mortgage Credit Risk Management—Single-Family Credit Enhancement and Transfer of Mortgage Credit Risk—Credit Risk Transfer Transactions” in our 2021 Form 10-K, we have used primarily three single-family credit risk transfer programs: Connecticut Avenue Securities® (“CAS”), Credit Insurance Risk TransferTM (“CIRTTM”), and lender risk-sharing.
In the first nine months of 2022, we transferred a portion of the mortgage credit risk on single-family mortgage loans with an unpaid principal balance of $515.7 billion at the time of the transactions; substantially all of the loans in these credit risk transfer transactions were acquired in 2021. The rise in interest rates throughout 2022, increased macroeconomic uncertainty and the increased supply of credit risk transfer securities in the market has negatively impacted investor demand for our credit risk transfer transactions. As a result, in our more recent credit risk transfer transactions, the premium investors require has generally increased. Taking into account the increasing cost of these transactions, the resulting capital relief, and the credit risk transfer market capacity, we have chosen to increase the first loss position retained by Fannie Mae compared with prior transactions.
The factors that we expect will affect the extent to which we engage in single-family credit risk transfer transactions in the future and the structure of those transactions include our risk appetite, future market conditions, the cost of the transactions, FHFA guidance or requirements (including FHFA’s scorecard), the capital relief provided by the transactions, and our overall business and capital plans.
In March 2022, FHFA published a final rule amending the enterprise regulatory capital framework. Among other changes, the amendment refined the risk-based capital treatment of credit risk transfer transactions. These changes to the enterprise regulatory capital framework increase the capital relief afforded by credit risk transfer transactions.
| Fannie Mae Third Quarter 2022 Form 10-Q | 36 |

| MD&A | Single-Family Business | Single-Family Mortgage Credit Risk Management |

The table below displays the aggregate mortgage credit risk transferred to third parties and retained by Fannie Mae pursuant to our single-family credit risk transfer transactions. The table does not include the credit risk transferred on single-family transactions that were cancelled or terminated as of September 30, 2022. The table below also excludes coverage obtained through primary mortgage insurance. The risk in force of these transactions, which refers to the maximum amount of losses that could be absorbed by credit risk transfer investors, was approximately $41 billion as of September 30, 2022, compared with approximately $34 billion as of September 30, 2021. Our credit risk transfer transactions issued prior to 2021 were impacted by high levels of refinancing activity. As a result, the losses on the remaining covered reference pools must generally be higher before we would receive a benefit from those credit risk transfer transactions. In addition, home price appreciation since we entered into the transactions reduces the likelihood that we will incur losses on the covered loans large enough to receive a benefit from these transactions. As of September 30, 2022, approximately 51% of the outstanding risk in force of our single-family credit risk transfer transactions was from transactions issued prior to 2021.
| Outstanding as of September 30, 2022 |
| (Dollars in billions) |
| Senior | Fannie Mae(1)$1,063 | Outstanding Reference Pool(4)(6)$1,120 |
| Mezzanine | Fannie Mae(1)$5 | CIRT(2)(3)$13 | CAS(2)$12 | Lender Risk-Sharing(2)$4 |
| First Loss | Fannie Mae(1)$11 | CAS(2)(5)$10 | Lender Risk-Sharing(2)$2 |

(1)Credit risk retained by Fannie Mae in CAS, CIRT and lender risk-sharing transactions. Tranche sizes vary across programs.
(2)Credit risk transferred to third parties. Tranche sizes vary across programs.
(3)Includes mortgage pool insurance transactions covering loans with an unpaid principal balance of approximately $1.3 billion outstanding as of September 30, 2022.
(4)For CIRT and some lender risk-sharing transactions, “Reference Pool” reflects a pool of covered loans.
(5)For CAS transactions, “First Loss” represents all B tranche balances.
(6)For CAS and some lender risk-sharing transactions, represents outstanding reference pools, not the outstanding unpaid principal balance of the underlying loans. The outstanding unpaid principal balance for all loans covered by credit risk transfer programs, including all loans on which risk has been transferred in lender risk-sharing transactions, was approximately $1,112 billion as of September 30, 2022.
The following table displays information about the credit enhancement recovery receivables we have recognized within “Other assets” in our condensed consolidated balance sheets. The increase in our single-family freestanding credit enhancement receivables as of September 30, 2022 compared to December 31, 2021, was primarily a result of an increase in our estimate of credit losses for the nine months ending September 30, 2022. As our estimate for credit losses increase, so does the benefit we expect to receive from our freestanding credit enhancements.
| Single-Family Credit Enhancement Receivables |
| As Of |
| September 30, 2022 | December 31, 2021 |
| (Dollars in millions) |
| Freestanding credit enhancement receivables | $ | 367 | $ | 99 |
| Primary mortgage insurance receivables, net of allowance(1) | 54 | 54 |

(1)Amount is net of a valuation allowance of $463 million and $479 million as of September 30, 2022 and December 31, 2021, respectively. The vast majority of this valuation allowance related to deferred payment obligations associated with unpaid claim amounts for which collectability is uncertain.
| Fannie Mae Third Quarter 2022 Form 10-Q | 37 |

| MD&A | Single-Family Business | Single-Family Mortgage Credit Risk Management |

The following table displays the approximate cash paid or transferred to investors for credit risk transfer transactions outstanding. The cash represents the portion of the guaranty fee paid to investors as compensation for taking on a share of the credit risk.
| Credit Risk Transfer Transactions |
| For the Nine Months Ended September 30, |
| 2022 | 2021 |
| Cash paid or transferred for: | (Dollars in millions) |
| CAS transactions(1) | $ | 649 | $ | 619 |
| CIRT transactions | 240 | 210 |
| Lender risk-sharing transactions | 107 | 196 |

(1)Consists of cash paid for interest expense net of LIBOR or SOFR, as applicable, on outstanding CAS debt and amounts paid for both CAS REMIC® and CAS Credit-linked notes (“CLN”) transactions.
Cash paid or transferred to investors for CIRT transactions includes cancellation fees paid on certain CIRT transactions where we determined that the cost of these deals exceeded the expected remaining benefit. The table excludes cash paid upon the repurchase of legacy CAS debt. In July 2022, we paid $2.4 billion to repurchase a portion of our outstanding CAS debt.
The table below displays the primary characteristics of loans in our single-family conventional guaranty book of business without credit enhancement as of the specified dates.
| Single-Family Loans without Credit Enhancement |
| As of |
| September 30, 2022 | December 31, 2021 |
| Unpaid Principal Balance | Percentage of Single-Family Conventional Guaranty Book of Business | Unpaid Principal Balance | Percentage of Single-Family Conventional Guaranty Book of Business |
| (Dollars in billions) |
| Low LTV ratio or short-term(1) | $ | 1,185 | 33 | % | $ | 1,167 | 34 | % |
| Pre-credit risk transfer program inception(2) | 276 | 7 | 324 | 9 |
| Recently acquired(3) | 530 | 15 | 983 | 28 |
| Other(4) | 607 | 17 | 565 | 16 |
| Less: Loans in multiple categories | (472) | (13) | (750) | (21) |
| Total single-family loans without credit enhancement | $ | 2,126 | 59 | % | $ | 2,289 | 66 | % |

(1)Represents loans with an LTV ratio less than or equal to 60% or loans with an original maturity of 20 years or less.
(2)Represents loans that were acquired before the inception of our credit risk transfer programs. Also includes Refi PlusTM loans.
(3)Represents loans that were recently acquired and have not been included in a reference pool.
(4)Includes adjustable-rate mortgage loans, loans with a combined LTV ratio greater than 97%, non-Refi Plus loans acquired after the inception of our credit risk transfer programs that became 30 or more days delinquent prior to inclusion in a credit risk transfer transaction and loans that were delinquent as of September 30, 2022 or December 31, 2021.
Single-Family Problem Loan Management
Our problem loan management strategies focus primarily on reducing defaults to avoid losses that would otherwise occur and pursuing foreclosure alternatives to mitigate the severity of the losses we incur. See “MD&A—Single-Family Business—Single-Family Mortgage Credit Risk Management—Single-Family Problem Loan Management” in our 2021 Form 10-K for a discussion of delinquency statistics on our problem loans, efforts undertaken to manage our problem loans, metrics regarding our loan workout activities, real estate owned (“REO”) management and other single-family credit-related information. The discussion below updates some of that information. We also provide ongoing credit performance information on loans underlying single-family Fannie Mae MBS and loans covered by single-family credit risk transfer transactions. For loans backing Fannie Mae MBS, see the “Forbearance and Delinquency Dashboard” available in the MBS section of our Data Dynamics® tool, which is available at www.fanniemae.com/datadynamics. For loans covered by credit risk transfer transactions, see the “Deal Performance Data” report available in the CAS and CIRT sections of the tool. Information on our website is not incorporated into this report. Information in Data Dynamics
| Fannie Mae Third Quarter 2022 Form 10-Q | 38 |

| MD&A | Single-Family Business | Single-Family Mortgage Credit Risk Management |

may differ from similar measures presented in our financial statements and other public disclosures for a variety of reasons, including as a result of variations in the loan population covered, timing differences in reporting and other factors.
Single-Family Serious Delinquency Rates
The tables below display the delinquency status of loans and changes in the volume of seriously delinquent loans in our single-family conventional guaranty book of business based on the number of loans. Single-family seriously delinquent loans are loans that are 90 days or more past due or in the foreclosure process, expressed as a percentage of our single-family conventional guaranty book of business based on loan count. Management monitors the single-family serious delinquency rate as an indicator of potential future credit losses and loss mitigation activities. Serious delinquency rates are reflective of our performance in assessing and managing credit risk associated with single-family loans in our guaranty book of business. Typically, higher serious delinquency rates result in a higher allowance for loan losses.
| Delinquency Status and Activity of Single-Family Conventional Loans |
| As of |
| September 30, 2022 | December 31, 2021 | September 30, 2021 |
| Delinquency status: |
| 30 to 59 days delinquent | 0.80 | % | 0.86 | % | 0.78 | % |
| 60 to 89 days delinquent | 0.20 | 0.20 | 0.20 |
| Seriously delinquent (“SDQ”): | 0.69 | 1.25 | 1.62 |
| Percentage of SDQ loans that have been delinquent for more than 180 days | 63 | 75 | 79 |
| Percentage of SDQ loans that have been delinquent for more than two years | 19 | 9 | 8 |

| For the Nine Months Ended September 30, |
| 2022 | 2021 |
| Single-family SDQ loans (number of loans): |
| Beginning balance | 218,329 | 495,806 |
| Additions | 125,519 | 184,352 |
| Removals: |
| Modifications and other loan workouts | (137,074) | (257,632) |
| Liquidations and sales | (33,975) | (61,187) |
| Cured or less than 90 days delinquent | (51,158) | (78,322) |
| Total removals | (222,207) | (397,141) |
| Ending balance | 121,641 | 283,017 |

Our single-family serious delinquency rate decreased as of September 30, 2022 compared with December 31, 2021 and September 30, 2021 as a result of single-family borrowers exiting forbearance through a loan workout or by otherwise reinstating their loan. As of September 30, 2022, single-family loans in forbearance comprised 26% of our single-family seriously delinquent loans compared with 36% as of December 31, 2021. We expect that some borrowers affected by the hurricanes will become seriously delinquent on their loans.
The table below displays the serious delinquency rates for, and the percentage of our seriously delinquent single-family conventional loans represented by, the specified loan categories. Percentage of book amounts represent the unpaid principal balance of loans for each category divided by the unpaid principal balance of our total single-family conventional guaranty book of business. The reported categories are not mutually exclusive.
| Fannie Mae Third Quarter 2022 Form 10-Q | 39 |

| MD&A | Single-Family Business | Single-Family Mortgage Credit Risk Management |

| Single-Family Conventional Seriously Delinquent Loan Concentration Analysis |
| As of |
| September 30, 2022 | December 31, 2021 | September 30, 2021 |
| Percentage of Book Outstanding | Percentage of Seriously Delinquent Loans(1) | Serious Delinquency Rate | Percentage of Book Outstanding | Percentage of Seriously Delinquent Loans(1) | Serious Delinquency Rate | Percentage of Book Outstanding | Percentage of Seriously Delinquent Loans(1) | Serious Delinquency Rate |
| States: |
| California | 19 | % | 9 | % | 0.48 | % | 19 | % | 11 | % | 1.01 | % | 20 | % | 11 | % | 1.38 | % |
| Florida | 6 | 7 | 0.77 | 6 | 8 | 1.59 | 6 | 8 | 2.11 |
| Illinois | 3 | 6 | 0.95 | 3 | 5 | 1.55 | 3 | 5 | 2.00 |
| New Jersey | 3 | 4 | 0.98 | 3 | 5 | 1.90 | 3 | 5 | 2.58 |
| New York | 5 | 8 | 1.28 | 5 | 7 | 2.24 | 5 | 8 | 2.92 |
| All other states | 64 | 66 | 0.66 | 64 | 64 | 1.16 | 63 | 63 | 1.48 |
| Vintages: |
| 2004 and prior | 1 | 11 | 2.41 | 1 | 10 | 3.48 | 1 | 10 | 4.25 |
| 2005-2008 | 1 | 14 | 3.83 | 2 | 14 | 5.87 | 2 | 15 | 7.21 |
| 2009-2022 | 98 | 75 | 0.55 | 97 | 76 | 1.01 | 97 | 75 | 1.31 |
| Estimated mark-to-market LTV ratio: |
| <= 60% | 69 | 79 | 0.69 | 61 | 73 | 1.27 | 60 | 71 | 1.63 |
| 60.01% to 70% | 15 | 12 | 0.75 | 19 | 16 | 1.37 | 19 | 16 | 1.78 |
| 70.01% to 80% | 10 | 6 | 0.62 | 13 | 8 | 1.08 | 14 | 9 | 1.53 |
| 80.01% to 90% | 4 | 2 | 0.54 | 5 | 2 | 0.88 | 5 | 3 | 1.08 |
| 90.01% to 100% | 2 | 1 | 0.34 | 2 | 1 | 0.51 | 2 | 1 | 0.77 |
| Greater than 100% | * | * | 7.42 | * | * | 12.41 | * | * | 16.04 |
| Credit enhanced:(2) |
| Primary MI & other(3) | 20 | 30 | 1.21 | 20 | 29 | 2.14 | 20 | 28 | 2.64 |
| Credit risk transfer(4) | 31 | 27 | 0.68 | 21 | 32 | 1.80 | 18 | 33 | 2.66 |
| Non-credit enhanced | 59 | 55 | 0.60 | 66 | 53 | 0.98 | 67 | 53 | 1.26 |

*Represents less than 0.5% of single-family conventional guaranty book of business.
(1)Calculated based on the number of single-family loans that were seriously delinquent for each category divided by the total number of single-family conventional loans that were seriously delinquent.
(2)The credit-enhanced categories are not mutually exclusive. A loan with primary mortgage insurance that is also covered by a credit risk transfer transaction will be included in both the “Primary MI & other” category and the “Credit risk transfer” category. As a result, the “Credit enhanced” and “Non-credit enhanced” categories do not sum to 100%. The total percentage of our single-family conventional guaranty book of business with some form of credit enhancement as of September 30, 2022 was 41%.
(3)Refers to loans included in an agreement used to reduce credit risk by requiring primary mortgage insurance, collateral, letters of credit, corporate guarantees, or other agreements to provide an entity with some assurance that it will be compensated to some degree in the event of a financial loss. Excludes loans covered by credit risk transfer transactions unless such loans are also covered by primary mortgage insurance.
(4)Refers to loans included in reference pools for credit risk transfer transactions, including loans in these transactions that are also covered by primary mortgage insurance. For CAS and some lender risk-sharing transactions, this represents the outstanding unpaid principal balance of the underlying loans on the single-family mortgage credit book, not the outstanding reference pool, as of the specified date. Loans included in our credit risk transfer transactions have all been acquired since 2009.
Single-Family Loans in Forbearance
As a part of our relief programs, we have authorized our servicers to permit payment forbearance to borrowers experiencing a COVID-19-related financial hardship for up to 12 months without regard to the delinquency status of the loan, and for borrowers already in forbearance as of February 28, 2021, for a total of up to 18 months, provided that the forbearance does not result in the loan becoming greater than 18 months delinquent. We believe that the substantial majority of borrowers who will ultimately request COVID-19-related relief have already done so.
As of September 30, 2022, the unpaid principal balance of single-family loans in forbearance was $11.0 billion compared with $23.6 billion as of December 31, 2021. The percentage of loans in our single-family conventional guaranty book of business in forbearance has declined to 0.3% as of September 30, 2022 compared with 0.7% as of December 31, 2021. As of September 30, 2022, 63% of the single-family loans in forbearance were seriously delinquent compared with 66% as of December 31, 2021. The unpaid principal balance of our single-family loans in forbearance may increase as a result of borrowers affected by the hurricanes requesting forbearance.
| Fannie Mae Third Quarter 2022 Form 10-Q | 40 |

| MD&A | Single-Family Business | Single-Family Mortgage Credit Risk Management |

The table below displays the status as of September 30, 2022 of the single-family loans in our guaranty book of business that received a forbearance in 2020, 2021 or 2022. The vast majority of these forbearance arrangements were offered to borrowers who experienced a COVID-19-related financial hardship. Many of these borrowers have successfully resolved their forbearance arrangement, primarily through payment deferral, reinstatement or modification. In addition, many of the loans that received a forbearance arrangement have subsequently liquidated, primarily as a result of refinancing.
As of September 30, 2022, 91% of single-family loans that received a forbearance and subsequently received a payment deferral were current, and 88% of single-family loans that received a forbearance and subsequently received a completed modification were current. See “Loan Workout Metrics” for additional information about actions we have taken to help reinstate loans to current status.
| Status of Single-Family Forbearance Loans |
| As of September 30, 2022 |
| Number of Loans | Percentage of Loans with Forbearance by Category |
| Loans that received a forbearance, by status:(1) |
| Active forbearance | 49,609 | 3 | % |
| Payment deferral | 385,475 | 26 |
| Modification(2) | 91,681 | 6 |
| Reinstated(3) | 269,852 | 19 |
| Delinquent at time of exit or repayment plan(4) | 36,697 | 3 |
| Total loans that received a forbearance in our single-family guaranty book of business | 833,314 | 57 |
| Loans that have received a forbearance, but paid off | 628,329 | 43 |
| Total loans that have received a forbearance(5) | 1,461,643 | 100 | % |

(1)Loans are classified based on their status as of period end; therefore, loans may move from one category to another.
(2)Includes 9,977 loans that are in trial modifications.
(3)Represents loans that are no longer in forbearance but are current according to the original terms of the loan. Also includes loans that remained current throughout the forbearance arrangement and continue to perform.
(4)Consists of 35,871 loans that were delinquent upon the expiration of the forbearance arrangement and 826 delinquent loans that exited forbearance through a repayment plan.
(5)Includes 5,415 loans that were in forbearance as of January 1, 2020.
| Fannie Mae Third Quarter 2022 Form 10-Q | 41 |

| MD&A | Single-Family Business | Single-Family Mortgage Credit Risk Management |

The table below displays the status as of December 31, 2021 for single-family loans in our guaranty book of business that received a forbearance in 2020 or 2021. As of December 31, 2021, 93% of loans that received a forbearance and subsequently received a payment deferral were current, and 86% of loans that received a forbearance and subsequently received a completed modification were current.
| Status of Single-Family Forbearance Loans |
| As of December 31, 2021 |
| Number of Loans | Percentage of Loans with Forbearance by Category |
| Loans that received a forbearance, by status:(1) |
| Active forbearance | 117,440 | 8 | % |
| Payment deferral | 380,070 | 27 |
| Modification(2) | 65,383 | 5 |
| Reinstated(3) | 291,039 | 21 |
| Delinquent at time of exit or repayment plan(4) | 63,069 | 4 |
| Total loans that received a forbearance in our single-family guaranty book of business | 917,001 | 65 |
| Loans that have received a forbearance, but paid off | 497,288 | 35 |
| Total loans that have received a forbearance(5) | 1,414,289 | 100 | % |

(1)Loans are classified based on their status as of period end; therefore, loans may move from one category to another.
(2)Includes 33,444 loans that are in trial modifications.
(3)Represents loans that are no longer in forbearance but are current according to the original terms of the loan. Also includes loans that remained current throughout the forbearance arrangement and continue to perform.
(4)Consists of 60,638 loans that were delinquent upon the expiration of the forbearance arrangement and 2,431 delinquent loans that exited forbearance through a repayment plan.
(5)Includes 5,415 loans that were in forbearance as of January 1, 2020.
| Fannie Mae Third Quarter 2022 Form 10-Q | 42 |

| MD&A | Single-Family Business | Single-Family Mortgage Credit Risk Management |

Loan Workout Metrics
As a part of our credit risk management efforts, loan workouts represent actions we take to help reinstate loans to current status and help homeowners stay in their home or to otherwise avoid foreclosure. Our loan workouts reflect various types of home retention solutions, including repayment plans, payment deferrals, and loan modifications. Our loan workouts also include foreclosure alternatives, such as short sales and deeds-in-lieu of foreclosure.
The chart below displays the unpaid principal balance of our completed single-family loan workouts by type, as well as the number of loan workouts, for the first nine months of 2021 compared with the first nine months of 2022. This table does not include loans in an active forbearance arrangement, trial modifications, loans to certain borrowers who have received bankruptcy relief and repayment plans that have been initiated but not completed.
(1)There were approximately 18,200 loans and 19,000 loans in a trial modification period that was not yet complete as of September 30, 2022 and 2021, respectively.
(2)Other was $251 million and $748 million for the first nine months of 2022 and the first nine months of 2021, respectively. Other includes repayment plans and foreclosure alternatives. Repayment plans reflect only those plans associated with loans that were 60 days or more delinquent.
The overall decline in loan workout activity was driven by fewer outstanding COVID-19-related forbearances in the first nine months of 2022 compared with the first nine months of 2021.
| Fannie Mae Third Quarter 2022 Form 10-Q | 43 |

| MD&A | Single-Family Business | Single-Family Mortgage Credit Risk Management |

As we indicated in “Single-Family Loans in Forbearance,” we believe that the substantial majority of borrowers who will ultimately request COVID-19-related relief have already done so. The total amount of principal and interest deferred to the end of the loan term for single-family loans that received a payment deferral in the first nine months of 2022 was $883 million, of which $535 million was deferred interest. For the first nine months of 2021, the total amount of principal and interest deferred was $2.9 billion, of which $1.8 billion was deferred interest.
Single-Family REO Management
If a loan defaults, we may acquire the property through foreclosure or a deed-in-lieu of foreclosure. The table below displays our REO activity by region. Regional REO acquisition trends generally follow a pattern that is similar to, but lags, that of regional delinquency trends.
| Single-Family REO Properties |
| For the Nine Months Ended September 30, |
| 2022 | 2021 |
| Single-family REO properties (number of properties): |
| Beginning of period inventory of single-family REO properties(1) | 7,166 | 7,973 |
| Acquisitions by geographic area:(2) |
| Midwest | 1,241 | 755 |
| Northeast | 821 | 780 |
| Southeast | 842 | 743 |
| Southwest | 570 | 389 |
| West | 220 | 159 |
| Total REO acquisitions(1) | 3,694 | 2,826 |
| Dispositions of REO | (2,507) | (4,245) |
| End of period inventory of single-family REO properties(1) | 8,353 | 6,554 |
| Carrying value of single-family REO properties (dollars in millions) | $ | 1,222 | $ | 956 |
| Single-family foreclosure rate(3) | 0.03 | % | 0.02 | % |
| REO net sales price to unpaid principal balance(4) | 112 | % | 110 | % |
| Short sales net sales price to unpaid principal balance(5) | 90 | % | 83 | % |

(1)Includes held-for-use properties, which are reported in our condensed consolidated balance sheets as a component of “Other assets.”
(2)See footnote 9 to the “Key Risk Characteristics of Single-Family Conventional Business Volume and Guaranty Book of Business” table for states included in each geographic region.
(3)Estimated based on the annualized total number of properties acquired through foreclosure or deeds-in-lieu of 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 period.
(4)Calculated as the amount of sale proceeds received on disposition of REO properties during the respective periods, excluding those subject to repurchase requests made to our sellers or servicers, divided by the aggregate unpaid principal balance of the related loans at the time of foreclosure. Net sales price represents the contract sales price less selling costs for the property and other charges paid by the seller at closing.
(5)Calculated as the amount of sale proceeds received on properties sold in short sale transactions during the respective periods divided by the aggregate unpaid principal balance of the related loans. Net sales price includes borrower relocation incentive payments and subordinate lien(s) negotiated payoffs.
In response to the pandemic and with instruction from FHFA, we prohibited our servicers from completing foreclosures on our single-family loans through July 31, 2021, except in the case of vacant or abandoned properties. In addition, our servicers were required to comply with a Consumer Financial Protection Bureau (the “CFPB”) rule that prohibited certain new single-family foreclosures on mortgage loans secured by the borrower’s principal residence until after December 31, 2021. As a result, our foreclosure volumes were higher in the first nine months of 2022 compared with the first nine months of 2021.
In April 2022, FHFA announced a suspension of foreclosure activities for up to 60 days for borrowers who apply for assistance under Treasury’s Homeowner Assistance Fund.
Single-Family Credit Loss Metrics and Loan Sale Performance
The single-family credit loss metrics and loan sale performance measures below present information about losses or gains we realized on our single-family loans during the periods presented. The amount of these losses or gains in a given period is driven by foreclosures, pre-foreclosure sales, post-foreclosure REO activity, mortgage loan
| Fannie Mae Third Quarter 2022 Form 10-Q | 44 |

| MD&A | Single-Family Business | Single-Family Mortgage Credit Risk Management |

redesignations, and other events that trigger write-offs and recoveries. The single-family credit loss metrics we present are not defined terms and may not be calculated in the same manner as similarly titled measures reported by other companies. Management uses these measures to evaluate the effectiveness of our single-family credit risk management strategies in conjunction with leading indicators such as serious delinquency and forbearance rates, which are potential indicators of future realized single-family credit losses.
We believe these measures provide useful information about our single-family credit performance and the factors that impact it.
The table below displays the components of our single-family credit loss metrics and loan sale performance.
| Single-Family Credit Loss Metrics and Loan Sale Performance |
| For the Three Months Ended September 30, | For the Nine Months Ended September 30, |
| 2022 | 2021 | 2022 | 2021 |
| (Dollars in millions) |
| Write-offs | $ | (95) | $ | (7) | $ | (151) | $ | (30) |
| Recoveries | 68 | 137 | 192 | 221 |
| Foreclosed property income (expense) | (6) | (80) | 3 | (91) |
| Credit gains (losses) | (33) | 50 | 44 | 100 |
| Write-offs on the redesignation of mortgage loans from HFI to HFS(1) | (196) | (47) | (418) | (247) |
| Net credit gains (losses) and write-offs on redesignations | (229) | 3 | (374) | (147) |
| Gains (losses) on sales and other valuation adjustments(2) | (169) | 215 | (260) | 850 |
| Net credit gains (losses), write-offs on redesignations and gains (losses) on sales and other valuation adjustments | $ | (398) | $ | 218 | $ | (634) | $ | 703 |
| Credit gain (loss) ratio (in bps)(3) | (0.4) | 0.6 | 0.2 | 0.4 |
| Net credit gains (losses), write-offs on redesignations and gains (losses) on sales and other valuation adjustments ratio (in bps)(3) | (4.4) | 2.6 | (2.4) | 2.8 |

(1)Consists of the lower of cost or fair value adjustment at time of redesignation.
(2)Consists of gains or losses realized on the sales of nonperforming and reperforming mortgage loans during the period and temporary lower-of-cost-or-market adjustments on HFS loans, which are recognized in “Investment gains (losses), net” in our condensed consolidated statements of operations and comprehensive income.
(3)Calculated based on the annualized amount of “Credit gains (losses)” and “Net credit gains (losses), write-offs on redesignations and gains (losses) on sales and other valuation adjustments” divided by the average single-family conventional guaranty book of business during the period.
The increase in our single-family write-offs in the third quarter and first nine months of 2022 compared with the third quarter and first nine months of 2021 was largely driven by an increase in foreclosure activity, due in part to the expiration of the CFPB rule that prohibited certain new single-family foreclosures on mortgage loans secured by the borrower’s principal residence until after December 31, 2021, as well as a decrease in the estimated proceeds from sales of REO as a result of the recent decline in home prices. At the time of foreclosure, we record a write off to the extent that estimated proceeds from the sale of REO, less the estimated cost to sell the property net of any insurance proceeds, exceeds the carrying value of the loan.
The increase in our single-family write-offs on redesignations in the third quarter and first nine months of 2022 compared with the third quarter and first nine months of 2021 was primarily driven by higher lower-of-cost-or-market adjustments at the time of redesignation due to price declines on our HFS loans as interest rates rose.
We had losses on sales and other valuation adjustments in the third quarter and first nine months of 2022 primarily due to losses on subsequent lower-of-cost-or-market valuation adjustments. Recent market conditions, including higher interest rates in the third quarter and first nine months of 2022, have reduced the demand for reperforming loans and resulted in lower sales volumes as well as price declines on our HFS loans. In the third quarter and first nine months of 2021, we had gains on sales and other valuation adjustments due to higher levels of loan sales as well as gains on subsequent lower-of-cost-or-market valuation adjustments driven by price increases on our HFS loans as a result of the market recovery following the onset of the COVID-19 pandemic.
| Fannie Mae Third Quarter 2022 Form 10-Q | 45 |

| MD&A | Single-Family Business | Single-Family Mortgage Credit Risk Management |

For information on our credit-related income or expense, which includes changes in our allowance, see “Consolidated Results of Operations—Credit-Related Income (Expense)” and “Single-Family Business Financial Results.”
Multifamily Business
This section supplements and updates information regarding our Multifamily business segment in our 2021 Form 10-K. See “MD&A—Multifamily Business” in our 2021 Form 10-K for additional information regarding the primary business activities, lenders, competition and market share of our Multifamily business.
Multifamily Mortgage Market
Multifamily market fundamentals, which include factors such as vacancy rates and rents, began to moderate during the third quarter of 2022, despite positive job growth and favorable demographics.
•Vacancy rates. Based on preliminary third-party data, we estimate that the national multifamily vacancy rate for institutional investment-type apartment properties was 5.0% as of September 30, 2022, an increase from an estimated 4.8% as of June 30, 2022, and back to the same level as of September 30, 2021. The national multifamily vacancy rate remained below its average rate of about 5.3% over the last 10 years.
•Rents. Based on preliminary third-party data, we estimate that effective rents increased by 1.0% during the third quarter of 2022 compared with an increase of 2.5% during the second quarter of 2022 and an increase of 3.5% during the third quarter of 2021. We expect annualized rent growth for 2022 will be between 5.0% and 6.0%.
Vacancy rates and rents are important to loan performance because multifamily loans are generally repaid from the cash flows generated by the underlying property. Several years of improvement in these fundamentals have helped to increase property values in most metropolitan areas. Based on preliminary multifamily property sales data, transaction volumes for much of 2022 remained elevated but moderated in the third quarter of 2022. Despite this moderation in transaction volumes, capitalization rates remained stable in the third quarter of 2022. As higher interest rates appear to have contributed to softened investment demand in the multifamily sector, we do not expect annual multifamily property sales to reach 2021 levels.
Multifamily construction underway remains elevated. While more than 500,000 multifamily units are scheduled to be delivered in 2022, we expect that ongoing supply chain issues make it more likely that the number of units completed this year will be between 400,000 and 450,000 units.
Based on a drop-off in rental demand observed over the latter half of the third quarter 2022, coupled with persistent inflation and slowing job growth in September, we now believe that the multifamily sector will be impacted by softening demand, leading to higher vacancy levels and stagnant rent growth over the remainder of the year.
| Fannie Mae Third Quarter 2022 Form 10-Q | 46 |

| MD&A | Multifamily Business | Multifamily Business Metrics |

Multifamily Business Metrics
Through the secondary mortgage market, we support rental housing for the workforce population, for senior citizens and students, and for those with the greatest economic need. Over 95% of the multifamily units we financed in the third quarter of 2022 that were potentially eligible for housing goals credit were affordable to those earning at or below 120% of the median income in their area, providing support for both workforce housing and affordable housing.
Multifamily New Business Volume
(Dollars in billions)
(1)Reflects unpaid principal balance of multifamily Fannie Mae MBS issued, multifamily loans purchased, and credit enhancements provided on multifamily mortgage assets during the period.
(2)Reflects new units financed by first liens; excludes second liens on units for which we had financed the first lien, as well as manufactured housing rentals. Units financed reported for prior periods have been updated in this report to exclude previously included second liens and manufactured housing rentals. Second liens and manufactured housing rentals are included in unpaid principal balance.
FHFA has capped our multifamily loan purchases for 2022 at $78 billion. FHFA also requires that a minimum of 50% of loan purchases must be mission-driven, focused on specified affordable and underserved market segments. In addition, 25% of loan purchases must be affordable to residents earning 60% or less of area median income, up from the 20% requirement in 2021.
For information on how conservatorship may affect our business activities, see “Risk Factors—GSE and Conservatorship Risk” in our 2021 Form 10-K.
| Fannie Mae Third Quarter 2022 Form 10-Q | 47 |

| MD&A | Multifamily Business | Multifamily Business Metrics |

Presentation of Our Multifamily Guaranty Book of Business
For purposes of the information reported in this “Multifamily Business” section, we measure our multifamily guaranty book of business using the unpaid principal balance of mortgage loans underlying Fannie Mae MBS. By contrast, the multifamily guaranty book of business presented in the “Composition of Fannie Mae Guaranty Book of Business” table in the “Guaranty Book of Business” section is based on the unpaid principal balance of Fannie Mae MBS outstanding. These amounts differ primarily as a result of payments we receive on underlying loans that have not yet been remitted to the MBS holders.
Multifamily Guaranty Book of Business
(Dollars in billions)
(1)Our multifamily guaranty book of business primarily consists of multifamily mortgage loans underlying Fannie Mae MBS outstanding, multifamily mortgage loans of Fannie Mae held in our retained mortgage portfolio, and other credit enhancements that we provide on multifamily mortgage assets. It does not include non-Fannie Mae multifamily mortgage-related securities held in our retained mortgage portfolio for which we do not provide a guaranty.
Average charged guaranty fee represents our effective revenue rate relative to the size of our multifamily guaranty book of business. Management uses this metric to assess the return we earn as compensation for the multifamily credit risk we manage. Average charged guaranty fee is impacted by the rate at which loans in our book of business turn over as well as the guaranty fees we charge, which are set at the time we acquire the loans. Our multifamily guaranty fee pricing is primarily based on the individual credit risk characteristics of the loans we acquire and the aggregate credit risk characteristics of our multifamily guaranty book of business. Our multifamily guaranty fee pricing is also influenced by external forces such as the availability of other sources of liquidity, our mission-related goals, the FHFA volume cap, interest rates, MBS spreads, and the management of the overall composition of our multifamily guaranty book of business. While our average charged guaranty fee increased as of September 30, 2022 from September 30, 2021, these internal and external factors may be volatile and therefore lead to variability in our multifamily guaranty fees.
| Fannie Mae Third Quarter 2022 Form 10-Q | 48 |

| MD&A | Multifamily Business | Multifamily Business Financial Results |

| Multifamily Business Financial Results(1) |
| For the Three Months Ended September 30, | For the Nine Months Ended September 30, |
| 2022 | 2021 | Variance | 2022 | 2021 | Variance |
| (Dollars in millions) |
| Net interest income | $ | 1,206 | $ | 1,102 | $ | 104 | $ | 3,585 | $ | 2,913 | $ | 672 |
| Fee and other income | 22 | 25 | (3) | 65 | 73 | (8) |
| Net revenues | 1,228 | 1,127 | 101 | 3,650 | 2,986 | 664 |
| Fair value gains (losses), net | (17) | 14 | (31) | (78) | (2) | (76) |
| Administrative expenses | (140) | (125) | (15) | (389) | (377) | (12) |
| Credit-related income (expense)(2) | (154) | 61 | (215) | (139) | 174 | (313) |
| Credit enhancement expense(3) | (66) | (59) | (7) | (196) | (172) | (24) |
| Change in expected credit enhancement recoveries(4) | 45 | (14) | 59 | 32 | (16) | 48 |
| Other income (expenses), net(5) | (4) | 14 | (18) | (129) | (14) | (115) |
| Income before federal income taxes | 892 | 1,018 | (126) | 2,751 | 2,579 | 172 |
| Provision for federal income taxes | (153) | (201) | 48 | (546) | (518) | (28) |
| Net income | $ | 739 | $ | 817 | $ | (78) | $ | 2,205 | $ | 2,061 | $ | 144 |

(1)See “Note 9, Segment Reporting” for information about our segment allocation methodology.
(2)Consists of the benefit or provision for credit losses and foreclosed property income or expense.
(3)Primarily consists of costs associated with our Multifamily CIRTTM (“MCIRTTM”) and Multifamily Connecticut Avenue SecuritiesTM (“MCASTM”) programs as well as amortization expense for certain lender risk-sharing programs.
(4)Consists of change in benefits recognized from our freestanding credit enhancements that primarily relate to our Delegated Underwriting and Servicing (“DUS®”) lender risk-sharing.
(5)Consists of investment gains or losses, gains or losses from partnership investments, debt extinguishment gains or losses, and other income or expenses.
Net Interest Income
Multifamily net interest income increased in the third quarter and first nine months of 2022 compared with the third quarter and first nine months of 2021 primarily due to higher guaranty fee income as a result of an increase in the size of our multifamily guaranty book of business combined with an increase in average charged guaranty fees and higher yield maintenance revenue related to the prepayment of multifamily loans.
Credit-Related Income (Expense)
The largest driver of credit-related expense for the third quarter and first nine months of 2022 was a provision for higher actual and projected interest rates.
Credit-related income for the third quarter and first nine months of 2021 was primarily driven by a benefit from actual and projected economic data and lower expected losses resulting from the COVID-19 pandemic.
See “Consolidated Results of Operations—Credit-Related Income (Expense)” for more information on our multifamily benefit or provision for credit losses.
Other Income (Expenses), Net
The increase in other expenses from the first nine months of 2021 to the first nine months of 2022 primarily reflects losses driven by the impact of higher interest rates on our commitments to purchase multifamily Fannie Mae MBS, which resulted in the decline of multifamily MBS prices and the recognition of debt extinguishment losses.
Multifamily Mortgage Credit Risk Management
This section supplements and updates our discussion of multifamily mortgage credit risk management in our 2021 Form 10-K in “MD&A—Multifamily Business—Multifamily Mortgage Credit Risk Management.” For an overview of key elements of our mortgage credit risk management, see “Business—Managing Mortgage Credit Risk” in our 2021 Form 10-K.
| Fannie Mae Third Quarter 2022 Form 10-Q | 49 |

| MD&A | Multifamily Business | Multifamily Mortgage Credit Risk Management |

Multifamily Acquisition Policy and Underwriting Standards
Our Multifamily business is responsible for pricing and managing the credit risk on our multifamily guaranty book of business, with oversight from our Enterprise Risk Management division. Multifamily loans that we purchase or that back Fannie Mae MBS are underwritten by a Fannie Mae-approved lender and may be subject to our underwriting review prior to closing, depending on the product type, loan size, market and/or other factors. Our underwriting standards generally include, among other things, property cash flow analysis and third-party appraisals.
Additionally, our standards for multifamily loans specify maximum original LTV ratio and minimum original debt service coverage ratio (“DSCR”) values that vary based on loan characteristics. Our experience has been that original LTV ratio and DSCR values have been reliable indicators of future credit performance. At underwriting, we evaluate the DSCR based on both actual and underwritten debt service payments. The original DSCR is calculated using the underwritten debt service payments for the loan, which assumes both principal and interest payments, including stressed assumptions in certain cases, rather than the actual debt service payments. Depending on the loan’s interest rate and structure, using the underwritten debt service payments will often result in a more conservative estimate of the debt service payments (for example, loans with an interest-only period). This approach is used for all loans, including those with full and partial interest-only terms.
The following table displays certain key risk characteristics of our multifamily guaranty book of business that we use to evaluate the risk profile and credit quality of our multifamily loans.
| Key Risk Characteristics of Multifamily Guaranty Book of Business |
| As of |
| September 30, 2022 | December 31, 2021 | September 30, 2021 |
| Weighted-average original LTV ratio | 65 | % | 65 | % | 65 | % |
| Original LTV ratio greater than 80% | 1 | 1 | 1 |
| Original DSCR less than or equal to 1.10 | 12 | 11 | 11 |
| Full term interest-only loans | 37 | 33 | 32 |
| Partial term interest-only loans(1) | 49 | 51 | 51 |

(1)Consists of mortgage loans that were underwritten with an interest-only term, regardless of whether the loan is currently in its interest-only period.
We provide additional information on the credit characteristics of our multifamily loans in quarterly financial supplements, which we furnish to the SEC with current reports on Form 8-K. Information in our quarterly financial supplements is not incorporated by reference into this report.
Transfer of Multifamily Mortgage Credit Risk
We primarily transfer risk through our Delegated Underwriting and Servicing (“DUS®”) program, which delegates to DUS lenders the ability to underwrite and service multifamily loans, in accordance with our standards and requirements. See “MD&A—Multifamily Business—Multifamily Mortgage Credit Risk Management—Transfer of Multifamily Mortgage Credit Risk” in our 2021 Form 10-K for a description of our DUS program.
Our DUS model typically results in our lenders sharing approximately one-third of the credit risk on our multifamily loans, either on a pro-rata or tiered basis. Loans serviced by DUS lenders and their affiliates represented substantially all of our multifamily guaranty book of business as of September 30, 2022 and December 31, 2021. In certain situations, to effectively manage our counterparty risk, we do not allow the lenders to fully share in one-third of the credit risk, but have them share in a smaller portion.
While not a large portion of our multifamily guaranty book of business, our non-DUS lenders typically also have lender risk-sharing, where the lenders typically share or absorb losses based on a negotiated percentage of the loan or the pool balance.
To complement our front-end lender-risk sharing program, we engage in back-end credit risk transfer transactions through our Multifamily CIRTTM (“MCIRTTM”) and Multifamily Connecticut Avenue SecuritiesTM (“MCASTM”) transactions. Through these transactions, we transfer a portion of the credit risk associated with a reference pool of multifamily mortgage loans to insurers, reinsurers, or investors.
We transfer multifamily credit risk through lender risk-sharing at the time of acquisition, but our multifamily back-end credit risk transfer activity occurs later, typically up to a year or more after acquisition. In September 2022, we entered into a new credit risk transfer transaction, transferring mortgage credit risk through our MCIRT program. The factors that we expect will affect the extent to which we engage in multifamily credit risk transfer transactions in the future and the
| Fannie Mae Third Quarter 2022 Form 10-Q | 50 |

| MD&A | Multifamily Business | Multifamily Mortgage Credit Risk Management |

structure of those transactions include our risk appetite, future market conditions, the cost of the transactions, FHFA guidance or requirements (including FHFA’s scorecard), the capital relief provided by the transactions, and our overall business and capital plans.
The table below displays the total unpaid principal balance of multifamily loans and the percentage of our multifamily guaranty book of business, based on unpaid principal balance, that is covered by a back-end credit risk transfer transaction. The table does not reflect front-end lender risk-sharing arrangements, as only a small portion of our multifamily guaranty book of business is not covered by these arrangements.
| Multifamily Loans in Back-End Credit Risk Transfer Transactions |
| As of |
| September 30, 2022 | December 31, 2021 |
| Unpaid Principal Balance | Percentage of Multifamily Guaranty Book of Business | Unpaid Principal Balance | Percentage of Multifamily Guaranty Book of Business |
| (Dollars in millions) |
| MCIRT | $ | 89,509 | 21 | % | $ | 84,894 | 20 | % |
| MCAS | 25,254 | 6 | 27,088 | 7 |
| Total | $ | 114,763 | 27 | % | $ | 111,982 | 27 | % |

Multifamily Portfolio Monitoring
As part of our ongoing credit risk management process, we and our lenders monitor the performance and risk characteristics of our multifamily loans and the underlying properties on an ongoing basis throughout the loan term at the asset and portfolio level. We closely monitor loans with an estimated current DSCR below 1.0, as that is an indicator of heightened default risk. The percentage of loans in our multifamily guaranty book of business, calculated based on unpaid principal balance, with a current DSCR less than 1.0 was approximately 3% as of September 30, 2022 and 2% as of December 31, 2021.
We also monitor and manage our exposure to interest-rate risk relating to multifamily loans, which can manifest in multiple ways. Interest rates have increased significantly since the beginning of the year and may increase further. Rising interest rates may reduce the ability of multifamily borrowers to refinance their loans, which often have balloon balances at maturity. Additionally, in a rising rate environment, multifamily borrowers with adjustable-rate mortgages will have higher monthly payments, which may lower their debt service coverage ratio if property net operating income is not increasing at a similar rate. We generally require multifamily borrowers with adjustable-rate mortgages to purchase interest rate caps to protect against large movements in rates. Purchasing or replacing required interest rate caps, especially those with longer terms, becomes more expensive as interest rates rise. We generally require our multifamily borrowers to maintain escrows at our servicers to reserve for this cost. We actively monitor these interest-rate related risks as part of our risk management process. We provide additional information on the maturity schedule of our multifamily loans in quarterly financial supplements, which we furnish to the SEC with current reports on Form 8-K and make available on our website. Information in our quarterly financial supplements is not incorporated by reference into this report.
For additional information on credit risk characteristics of our multifamily loans and other factors that we monitor to assess the performance of our Multifamily business, see “MD&A—Multifamily Business—Multifamily Mortgage Credit Risk Management—Multifamily Portfolio Diversification and Monitoring” in our 2021 Form 10-K. See “Note 3, Mortgage Loans” for the internal risk categories we use to determine our loan credit quality. Also see “MD&A—Consolidated Results of Operations—Credit-Related Income (Expense)” for more information on how rising interest rates impact credit-related income (expense).
Multifamily Problem Loan Management and Foreclosure Prevention
In addition to the credit performance information on our multifamily loans provided below, we provide information about multifamily loans in a COVID-19-related forbearance that back MBS and whole loan REMICs in a “Multifamily MBS COVID-19 Forbearance List” in the “Data Collections” section of our DUS Disclose® tool, available at www.fanniemae.com/dusdisclose. Information on our website is not incorporated into this report.
Delinquency Statistics on our Multifamily Problem Loans
The percentage of our multifamily loans classified as substandard in our guaranty book of business increased as of September 30, 2022 compared with December 31, 2021. Substandard loans are loans that have a well-defined
| Fannie Mae Third Quarter 2022 Form 10-Q | 51 |

| MD&A | Multifamily Business | Multifamily Mortgage Credit Risk Management |

weakness that could impact their timely full repayment. While the majority of the substandard loans in our multifamily guaranty book of business are currently making timely payments, we continue to monitor the performance of our substandard loan population. Loans classified as substandard increased as of September 30, 2022 compared to December 31, 2021, primarily as a result of the ongoing impact of the COVID-19 pandemic. While overall DSCR on the book has improved, there were a greater number of properties reporting low DSCRs in their latest annual statements. The increase was largely driven by seniors housing loans, which were disproportionally impacted by the pandemic. For more information on our credit quality indicators, including our population of substandard loans, see “Note 3, Mortgage Loans.”
Our multifamily serious delinquency rate decreased to 0.26% as of September 30, 2022 compared with 0.42% as of December 31, 2021 and September 30, 2021, primarily as a result of loans that received forbearance resolving their delinquency through completion of their repayment plans or otherwise reinstating. Our multifamily serious delinquency rate consists of multifamily loans that were 60 days or more past due based on unpaid principal balance, expressed as a percentage of our multifamily guaranty book of business. The percentage of loans in our multifamily guaranty book of business that were 180 days or more delinquent was 0.17% as of September 30, 2022, compared with 0.23% as of December 31, 2021.
Management monitors the multifamily serious delinquency rate as an indicator of potential future credit losses and loss mitigation activities. Serious delinquency rates are reflective of our performance in assessing and managing credit risk associated with multifamily loans in our guaranty book of business. Typically, higher serious delinquency rates result in a higher allowance for loan losses.
Our multifamily serious delinquency rate, excluding loans that have received a forbearance since the start of the pandemic, was 0.04% as of September 30, 2022, the same as of December 31, 2021. We monitor the multifamily serious delinquency rate excluding loans that received a forbearance to better understand the impact that forbearance activity has had on the rate and to monitor loans that are seriously delinquent not as a result of COVID-19 or natural disasters.
Multifamily Loan Forbearance
As of September 30, 2022, the vast majority of our multifamily loans that have received forbearance were associated with a COVID-19-related financial hardship, but only a small portion of these loans remained in forbearance. As of September 30, 2022, there were 8 multifamily loans with an unpaid principal balance of $18 million in active forbearance, compared with 22 loans with an unpaid principal balance of $363 million as of December 31, 2021.
For additional information on our response to the COVID-19 pandemic, see “MD&A—Multifamily Business—Multifamily Mortgage Credit Risk Management—Multifamily Problem Loan Management and Foreclosure Prevention” in our 2021 Form 10-K. We also provide additional information on multifamily forbearances in our quarterly financial supplements, which we furnish to the SEC with current reports on Form 8-K and make available on our website. Information in our quarterly financial supplements is not incorporated by reference into this report.
Multifamily REO Management
The number of multifamily foreclosed properties held for sale was 27 properties with a carrying value of $318 million as of September 30, 2022, compared with 31 properties with a carrying value of $302 million as of December 31, 2021. We expect additional foreclosures on loans that received a COVID-19 forbearance that are unable to successfully cure their delinquency through a repayment plan or other modification.
Multifamily Credit Loss Performance Metrics
The amount of multifamily credit loss or income we realize in a given period is driven by foreclosures, pre-foreclosure sales, REO activity and write-offs, net of recoveries. Our multifamily credit loss performance metrics are not defined terms and may not be calculated in the same manner as similarly titled measures reported by other companies. We believe our multifamily credit losses, and our multifamily credit losses net of freestanding loss-sharing benefit, may be useful to stakeholders because they display our credit losses in the context of our multifamily guaranty book of business, including the benefit we receive from loss-sharing arrangements. Management views multifamily credit losses, net of freestanding loss-sharing benefit, as a key metric related to our multifamily business model and our strategy to share multifamily credit risk.
| Fannie Mae Third Quarter 2022 Form 10-Q | 52 |

| MD&A | Multifamily Business | Multifamily Mortgage Credit Risk Management |

The table below displays the components of our multifamily credit loss performance metrics, as well as our multifamily initial write-off severity rate and write-off loan count.
| Multifamily Credit Loss Performance Metrics |
| For the Three Months Ended September 30, | For the Nine Months Ended September 30, |
| 2022 | 2021 | 2022 | 2021 |
| (Dollars in millions) |
| Write-offs(1) | $ | (40) | $ | (7) | $ | (40) | $ | (54) |
| Recoveries | 4 | 21 | 21 | 40 |
| Foreclosed property income (expense) | 21 | 11 | 18 | (14) |
| Credit gains (losses) | (15) | 25 | (1) | (28) |
| Freestanding loss-sharing benefit(2) | 10 | 1 | — | 22 |
| Credit gains (losses), net of freestanding loss-sharing benefit | $ | (5) | $ | 26 | $ | (1) | $ | (6) |
| Credit gain (loss) ratio (in bps)(3) | (1.4) | 2.5 | — | (0.9) |
| Credit gain (loss) ratio, net of freestanding loss-sharing benefit (in bps)(2)(3) | (0.5) | 2.6 | — | (0.2) |
| Multifamily initial write-off severity rate(4) | — | % | 6.6 | % | 5.4 | % | 11.9 | % |
| Multifamily write-off loan count | 1 | 8 | 6 | 23 |

(1)Write-offs associated with non-REO sales are net of loss sharing.
(2)Represents expected benefits that we receive from write-offs as a result of certain freestanding credit enhancements, primarily multifamily DUS lender risk-sharing transactions. These benefits are recorded in “Change in expected credit enhancement recoveries” in our condensed consolidated statements of operations and comprehensive income.
(3)Calculated based on the annualized amount of “Credit gains (losses)” and “Credit gains (losses), net of freestanding loss-sharing benefit,” divided by the average multifamily guaranty book of business during the period.
(4)Rate is calculated as the initial write-off amount divided by the average defaulted unpaid principal balance. The rate excludes write-offs not associated with foreclosures or other liquidation events (such as a deed-in-lieu of foreclosure or a short-sale) and any costs, gains or losses associated with REO after initial acquisition through final disposition. Write-offs are net of lender loss-sharing agreements.
| Fannie Mae Third Quarter 2022 Form 10-Q | 53 |

| MD&A | Consolidated Credit Ratios and Select Credit Information |

Consolidated Credit Ratios and Select Credit Information
The table below displays select credit ratios on our single-family conventional guaranty book of business and our multifamily guaranty book of business, as well as the inputs used in calculating these ratios.
| Consolidated Credit Ratios and Select Credit Information |
| As of |
| September 30, 2022 | December 31, 2021 |
| Single-family | Multifamily | Total | Single-family | Multifamily | Total |
| (Dollars in millions) |
| Credit loss reserves as a percentage of: |
| Guaranty book of business | 0.21 | % | 0.19 | % | 0.21 | % | 0.15 | % | 0.17 | % | 0.15 | % |
| Nonaccrual loans at amortized cost | 62.27 | 66.69 | 62.68 | 25.63 | 54.49 | 27.35 |
| Nonaccrual loans as a percentage of: |
| Guaranty book of business | 0.34 | % | 0.29 | % | 0.33 | % | 0.57 | % | 0.30 | % | 0.54 | % |
| Select financial information used in calculating credit ratios: |
| Credit loss reserves(1) | $ | (7,600) | $ | (821) | $ | (8,421) | $ | (5,088) | $ | (686) | $ | (5,774) |
| Guaranty book of business(2) | 3,629,035 | 429,421 | 4,058,456 | 3,483,054 | 413,090 | 3,896,144 |
| Nonaccrual loans at amortized cost | 12,204 | 1,231 | 13,435 | 19,851 | 1,259 | 21,110 |
| Components of credit loss reserves: |
| Allowance for loan losses | $ | (7,488) | $ | (814) | $ | (8,302) | $ | (4,950) | $ | (679) | $ | (5,629) |
| Allowance for accrued interest receivable | (112) | — | (112) | (138) | (2) | (140) |
| Reserve for guaranty losses(3) | — | (7) | (7) | — | (5) | (5) |
| Total credit loss reserves(1) | $ | (7,600) | $ | (821) | $ | (8,421) | $ | (5,088) | $ | (686) | $ | (5,774) |

(1)Our multifamily credit loss reserves exclude the expected benefit of freestanding credit enhancements on multifamily loans of $267 million as of September 30, 2022 and $235 million as of December 31, 2021, which are recorded in “Other assets” in our condensed consolidated balance sheets.
(2)Represents conventional guaranty book of business for single-family.
(3)Reserve for guaranty losses is recorded in “Other liabilities” in our condensed consolidated balance sheets.
Our nonaccrual loans decreased as of September 30, 2022 compared with December 31, 2021 primarily as a result of loan modifications, as borrowers continue to exit forbearance. Modifications bring a loan current and generally require completion of a trial period of three to four months.
Our credit loss reserves increased as of September 30, 2022 compared with December 31, 2021 primarily as a result of a provision for credit losses, which we describe in "Consolidated Results of Operations—Credit-Related Income (Expense).”
| Fannie Mae Third Quarter 2022 Form 10-Q | 54 |

| MD&A | Consolidated Credit Ratios and Select Credit Information |

| Consolidated Write-off Ratio and Select Credit Information |
| For the Three Months Ended September 30, |
| 2022 | 2021 |
| Single-family | Multifamily | Total | Single-family | Multifamily | Total |
| (Dollars in millions) |
| Select credit ratio: |
| Write-offs, net of recoveries annualized, as a percentage of the average guaranty book of business (in bps) | 2.5 | 3.4 | 2.6 | (1.0) | (1.4) | (1.0) |
| Select financial information used in calculating credit ratio: |
| Write-offs | $ | 291 | $ | 40 | $ | 331 | $ | 54 | $ | 7 | $ | 61 |
| Recoveries | (68) | (4) | (72) | (137) | (21) | (158) |
| Write-offs, net of recoveries | 223 | 36 | 259 | (83) | (14) | (97) |
| Average guaranty book of business(1) | 3,621,447 | 427,586 | 4,049,033 | 3,399,589 | 405,030 | 3,804,619 |
| For the Nine Months Ended September 30, |
| 2022 | 2021 |
| Single-family | Multifamily | Total | Single-family | Multifamily | Total |
| (Dollars in millions) |
| Select credit ratio: |
| Write-offs, net of recoveries annualized, as a percentage of the average guaranty book of business (in bps) | 1.4 | 0.6 | 1.3 | 0.2 | 0.5 | 0.3 |
| Select financial information used in calculating credit ratio: |
| Write-offs | $ | 569 | $ | 40 | $ | 609 | $ | 277 | $ | 54 | $ | 331 |
| Recoveries | (192) | (21) | (213) | (221) | (40) | (261) |
| Write-offs, net of recoveries | 377 | 19 | 396 | 56 | 14 | 70 |
| Average guaranty book of business(1) | 3,573,333 | 422,013 | 3,995,346 | 3,318,031 | 398,425 | 3,716,456 |

(1)Average guaranty book of business is based on quarter-end balances.
For discussion on the drivers of single-family write-offs for the third quarter and first nine months of 2022, see “Single-Family Business—Single-Family Problem Loan Management—Single-Family Credit Loss Metrics and Loan Sale Performance.”
Liquidity and Capital Management
Liquidity Management
This section supplements and updates information regarding liquidity management in our 2021 Form 10-K. See “MD&A—Liquidity and Capital Management—Liquidity Management” in our 2021 Form 10-K for additional information, including discussions of our primary sources and uses of funds, our liquidity and funding risk management practices and contingency planning, factors that influence our debt funding activity, factors that may impact our access to or the cost of our debt funding and factors that could adversely affect our liquidity and funding. Also see “Risk Factors—Liquidity and Funding Risk” in our 2021 Form 10-K for a discussion of liquidity and funding risks.
Debt Funding
We are currently subject to a $300 billion debt limit under our senior preferred stock purchase agreement with Treasury, which will decrease to $270 billion as of December 31, 2022. The unpaid principal balance of our aggregate
| Fannie Mae Third Quarter 2022 Form 10-Q | 55 |

| MD&A | Liquidity and Capital Management |

indebtedness was $134.9 billion as of September 30, 2022. Pursuant to the terms of the senior preferred stock purchase agreement, we are prohibited from issuing debt without the prior consent of Treasury if it would result in our aggregate indebtedness exceeding our outstanding debt limit. The calculation of our indebtedness for purposes of complying with our debt limit reflects the unpaid principal balance and excludes debt basis adjustments and debt of consolidated trusts.
Outstanding Debt
Total outstanding debt of Fannie Mae includes short-term and long-term debt and excludes debt of consolidated trusts. 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. Long-term debt of Fannie Mae consists of borrowings with an original contractual maturity of greater than one year.
The following chart and table display information on our outstanding short-term and long-term debt based on original contractual maturity. Our long-term debt continued to decrease in the first nine months of 2022 as our funding needs remained low and were primarily satisfied through cash and other liquid assets that accumulated in prior periods, as well as earnings retained from our operations.
Debt of Fannie Mae(1)
(Dollars in billions)
(1)Outstanding debt balance consists of the unpaid principal balance, premiums and discounts, fair value adjustments, hedge-related basis adjustments and other cost basis adjustments. Reported amounts include net discount unamortized cost basis adjustments and fair value adjustments of $5.1 billion and $1.6 billion as of September 30, 2022 and December 31, 2021, respectively.
(2)Short-term debt was $3.0 billion and $2.8 billion as of September 30, 2022 and December 31, 2021, respectively.
| Fannie Mae Third Quarter 2022 Form 10-Q | 56 |

| MD&A | Liquidity and Capital Management |

| Selected Debt Information |
| As of |
| September 30, 2022 | December 31, 2021 |
| (Dollars in billions) |
| Selected Weighted-Average Interest Rates(1) |
| Interest rate on short-term debt | 2.63 | % | 0.03 | % |
| Interest rate on long-term debt, including portion maturing within one year | 2.25 | 1.55 |
| Interest rate on callable long-term debt | 1.68 | 1.44 |
| Selected Maturity Data |
| Weighted-average maturity of debt maturing within one year (in days) | 211 | 109 |
| Weighted-average maturity of debt maturing in more than one year (in months) | 54 | 57 |
| Other Data |
| Outstanding callable long-term debt | $ | 43.4 | $ | 47.0 |
| Connecticut Avenue Securities debt(2) | 7.0 | 11.2 |

(1)Excludes the effects of fair value adjustments and hedge-related basis adjustments.
(2)Represents CAS debt issued prior to November 2018. See “MD&A—Single-Family Business—Single-Family Mortgage Credit Risk Management—Single-Family Credit Enhancement and Transfer of Mortgage Credit Risk—Credit Risk Transfer Transactions” in our 2021 Form 10-K for information regarding our Connecticut Avenue Securities.
We intend to repay our short-term and long-term debt obligations as they become due primarily through cash from business operations, the sale of other liquid assets and the issuance of additional debt securities.
For information on the maturity profile of our outstanding long-term debt, see “Note 7, Short-Term and Long-Term Debt.”
| Fannie Mae Third Quarter 2022 Form 10-Q | 57 |

| MD&A | Liquidity and Capital Management |

Debt Funding Activity
The table below displays activity in debt of Fannie Mae. This activity excludes the debt of consolidated trusts and intraday borrowing. The reported amounts of debt issued and paid off during each period represent the face amount of the debt at issuance and redemption.
Although we had a substantial increase in short-term debt issued during the first nine months of 2022 compared with the first nine months of 2021, most of the short-term debt issued was paid off during the period, and we ended the third quarter with $3.0 billion in outstanding short-term debt.
The increase in long-term debt paid off during the first nine months of 2022 compared with the first nine months of 2021 was primarily due to a higher amount of maturing shorter duration long-term debt in the first nine months of 2022, particularly in the first half of the year.
| Activity in Debt of Fannie Mae |
| For the Three Months Ended September 30, | For the Nine Months Ended September 30, |
| 2022 | 2021 | 2022 | 2021 |
| (Dollars in millions) |
| Issued during the period: |
| Short-term: |
| Amount | $ | 29,779 | $ | 39,022 | $ | 97,724 | $ | 52,448 |
| Weighted-average interest rate(1) | 2.11 | % | 0.01 | % | 0.83 | % | 0.01 | % |
| Long-term:(2) |
| Amount | $ | 1,000 | $ | — | $ | 1,000 | $ | 2,815 |
| Weighted-average interest rate | 2.01 | % | — | % | 2.01 | % | 0.59 | % |
| Total issued: |
| Amount | $ | 30,779 | $ | 39,022 | $ | 98,724 | $ | 55,263 |
| Weighted-average interest rate | 2.10 | % | 0.01 | % | 0.84 | % | 0.04 | % |
| Paid off during the period:(3) |
| Short-term: |
| Amount | $ | 35,845 | $ | 32,894 | $ | 97,524 | $ | 56,214 |
| Weighted-average interest rate(1) | 1.69 | % | 0.01 | % | 0.71 | % | 0.03 | % |
| Long-term:(2) |
| Amount | $ | 9,777 | $ | 22,330 | $ | 68,691 | $ | 52,557 |
| Weighted-average interest rate | 2.57 | % | 0.58 | % | 1.22 | % | 0.84 | % |
| Total paid off: |
| Amount | $ | 45,622 | $ | 55,224 | $ | 166,215 | $ | 108,771 |
| Weighted-average interest rate | 1.88 | % | 0.24 | % | 0.92 | % | 0.42 | % |

(1)Includes interest generated from negative interest rates on certain repurchase agreements, which offset our short-term funding costs.
(2)Includes credit risk-sharing securities issued as CAS debt prior to November 2018. For information on our credit risk transfer transactions, see “MD&A—Single-Family Business—Single-Family Mortgage Credit Risk Management—Single-Family Credit Enhancement and Transfer of Mortgage Credit Risk—Credit Risk Transfer Transactions” in our 2021 Form 10-K.
(3)Consists of all payments on debt, including regularly scheduled principal payments, payments at maturity, payments resulting from calls and payments for any other repurchases. Repurchases of debt and early retirements of zero-coupon debt are reported at original face value, which does not equal the amount of actual cash payment.
| Fannie Mae Third Quarter 2022 Form 10-Q | 58 |

| MD&A | Liquidity and Capital Management |

Other Investments Portfolio
The chart below displays information on the composition of our other investments portfolio. The balance of our other investments portfolio fluctuates as a result of changes in our cash flows, liquidity in the fixed-income markets, and our liquidity risk management framework and practices.
Our other investments portfolio decreased during the first nine months of 2022 as we primarily used accumulated cash and other liquid assets to fund our operations and to pay off maturing debt.
| Cash and cash equivalents(1) |
| Securities purchased under agreements to resell(2) |
| U.S. Treasury securities |

(1) Cash equivalents are composed of overnight repurchase agreements and U.S. Treasuries that have a maturity at the date of acquisition of three months or less.
(2) We held $10.8 billion and $7.2 billion in securities purchased under agreements to resell as of September 30, 2022 and December 31, 2021, respectively.
Off-Balance Sheet Arrangements
We enter into certain business arrangements to facilitate our statutory purpose of providing liquidity to the secondary mortgage market and to reduce our exposure to interest rate fluctuations. Some of these arrangements are not recorded in our condensed consolidated balance sheets or may be recorded in amounts different from the full contract or notional amount of the transaction, depending on the nature or structure of, and the accounting required to be applied to, the arrangement. These arrangements are commonly referred to as “off-balance sheet arrangements” and expose us to potential losses in excess of the amounts recorded in our condensed consolidated balance sheets.
Our off-balance sheet arrangements result primarily from the following:
•our guaranty of mortgage loan securitization and resecuritization transactions over which we have no control, which are reflected in our unconsolidated Fannie Mae MBS net of any beneficial ownership interest we retain, and other financial guarantees that we do not control;
•liquidity support transactions; and
•partnership interests.
The total amount of our off-balance sheet exposure related to unconsolidated Fannie Mae MBS net of any beneficial interest that we retain, and other financial guarantees was $252.9 billion as of September 30, 2022 and $226.4 billion as of December 31, 2021. The majority of the other financial guarantees consists of Freddie Mac securities backing Fannie Mae structured securities. See “Guaranty Book of Business” and “Note 6, Financial Guarantees” for more information regarding our maximum exposure to loss on unconsolidated Fannie Mae MBS and Freddie Mac securities.
Our total outstanding liquidity commitments to advance funds for securities backed by multifamily housing revenue bonds totaled $4.9 billion as of September 30, 2022 and $5.4 billion as of December 31, 2021. These commitments require us to advance funds to third parties that enable them to repurchase tendered bonds or securities that are unable to be remarketed. We hold cash and cash equivalents in our other investments portfolio in excess of these commitments to advance funds.
| Fannie Mae Third Quarter 2022 Form 10-Q | 59 |

| MD&A | Liquidity and Capital Management |

We make investments in various limited partnerships and similar legal entities, which consist of low-income housing tax credit investments, community investments and other entities. When we do not have a controlling financial interest in those entities, our condensed consolidated balance sheets reflect only our investment rather than the full amount of the partnership’s assets and liabilities. See “Note 2, Consolidations and Transfers of Financial Assets—Unconsolidated VIEs” for information regarding our limited partnerships and similar legal entities.
Cash Flows
Nine Months Ended September 30, 2022. Cash, cash equivalents and restricted cash and cash equivalents decreased from $108.6 billion as of December 31, 2021 to $63.6 billion as of September 30, 2022. The decrease was primarily driven by cash outflows from (1) payments on outstanding debt of consolidated trusts, (2) the redemption of funding debt, which outpaced issuances, and (3) purchases of loans held for investment.
Partially offsetting these cash outflows were cash inflows from (1) proceeds from repayments of loans and (2) the sale of Fannie Mae MBS to third parties.
Nine Months Ended September 30, 2021. Cash, cash equivalents and restricted cash and cash equivalents increased from $115.6 billion as of December 31, 2020 to $133.5 billion as of September 30, 2021. The increase was primarily driven by cash inflows from (1) the sale of Fannie Mae MBS to third parties and (2) proceeds from repayments and sales of loans.
Partially offsetting these cash inflows were cash outflows primarily from (1) payments on outstanding debt of consolidated trusts, (2) purchases of loans held for investment, and (3) the redemption of funding debt, which outpaced issuances.
Credit Ratings
In July 2022, Fitch Ratings Limited (“Fitch”) affirmed our “AAA” long-term issuer default rating and revised our rating outlook to stable from negative, following its affirmation of the United States’ “AAA” issuer default rating with a stable outlook. Fitch noted that Fannie Mae’s long-term issuer default rating is directly linked to the United States’ long-term issuer default rating, based on Fitch’s view of the U.S. government’s direct financial support of Fannie Mae. There have been no other changes in our credit ratings since we filed our 2021 Form 10-K. For more information on our credit ratings, see “MD&A—Liquidity and Capital Management—Liquidity Management—Credit Ratings” in our 2021 Form 10-K.
Capital Management
Capital Requirements
FHFA published a final rule establishing a new enterprise regulatory capital framework for the GSEs in December 2020. FHFA published a final rule amending the enterprise regulatory capital framework in March 2022. We refer to the rule’s requirements, as amended, as the “enterprise regulatory capital framework.” The enterprise regulatory capital framework establishes new supplemental leverage and risk-based capital requirements for the GSEs. Under the leverage capital requirements, we must maintain a tier 1 capital ratio of 2.5% of adjusted total assets. Under the risk-based capital requirements, we must maintain minimum common equity tier 1 capital, tier 1 capital, and adjusted total capital ratios of 4.5%, 6%, and 8%, respectively, of risk-weighted assets. For more information on the enterprise regulatory capital framework, see “Business—Legislation and Regulation—GSE-Focused Matters—Capital” in our 2021 Form 10-K and “MD&A—Legislation and Regulation” in our First Quarter 2022 Form 10-Q and our Second Quarter 2022 Form 10-Q. The enterprise regulatory capital framework requires substantially higher levels of capital than the previously applicable statutory minimum capital requirement.
Although the enterprise regulatory capital framework went into effect in February 2021, we are not required to hold capital according to the framework’s requirements until the date of termination of our conservatorship, or such later date as may be ordered by FHFA.
Beginning in 2022, on a quarterly basis, we are required to report to FHFA and disclose in an appropriate publicly available filing or other document our regulatory capital levels, buffers, adjusted total assets, and total risk-weighted assets under the standardized approach of the enterprise regulatory capital framework.
The enterprise regulatory capital framework provides a granular assessment of credit risk specific to different mortgage loan categories, as well as components for market risk and operational risk. The enterprise regulatory capital framework includes the following requirements:
•Supplemental capital requirements relating to the amount and form of the capital we hold, based largely on definitions of capital used in U.S. banking regulators’ regulatory capital framework. The enterprise regulatory
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capital framework specifies complementary leverage and risk-based requirements, which together determine the requirements for each tier of capital;
•A requirement that we hold prescribed capital buffers that can be drawn down in periods of financial stress and then rebuilt over time as economic conditions improve. If we fall below the prescribed buffer amounts, we must restrict capital distributions such as stock repurchases and dividends, as well as discretionary bonus payments to executives, until the buffer amounts are restored. The prescribed capital buffers represent the amount of capital we are required to hold above the minimum leverage and risk-based capital requirements.
◦The prescribed leverage buffer amount (“PLBA”) represents the amount of tier 1 capital we are required to hold above the minimum tier 1 leverage capital requirement;
◦The risk-based capital buffers consist of three separate components: a stability capital buffer, a stress capital buffer, and a countercyclical capital buffer. Taken together, these risk-based buffers comprise the prescribed capital conservation buffer amount (“PCCBA”). The PCCBA must be comprised entirely of common equity tier 1 capital; and
•Specific minimum percentages, or “floors,” on the risk-weights applicable to single-family and multifamily exposures, as well as retained portions of credit risk transfer transactions.
The table below sets forth information about our capital requirements under the standardized approach of the enterprise regulatory capital framework. Available capital for purposes of the enterprise regulatory capital framework excludes the stated value of the senior preferred stock ($120.8 billion) and other amounts specified in footnote 3 to the table below. Because of these exclusions, we had a deficit in available capital as of September 30, 2022, even though we had positive net worth under GAAP of $58.8 billion as of September 30, 2022.
| Capital Metrics under the Enterprise Regulatory Capital Framework as of September 30, 2022(1) |
| (Dollars in billions) |
| Stress capital buffer | $ | 34 |
| Stability capital buffer | 45 |
| Adjusted total assets | $ | 4,540 | Countercyclical capital buffer | — |
| Risk-weighted assets | 1,298 | Prescribed capital conservation buffer amount | $ | 79 |
| Minimum Capital Ratio Requirement | Minimum Capital Requirement | Applicable Buffers(2) | Total Capital Requirement (including Buffers) | Available Capital (Deficit)(3) | Capital Shortfall(4) |
| Risk-based capital: |
| Total capital(5) | 8.0 | % | $ | 104 | N/A | $ | 104 | $ | (53) | $ | (157) |
| Common equity tier 1 capital | 4.5 | 58 | $ | 79 | 137 | (94) | (231) |
| Tier 1 capital | 6.0 | 78 | 79 | 157 | (75) | (232) |
| Adjusted total capital | 8.0 | 104 | 79 | 183 | (75) | (258) |
| Leverage capital: |
| Core capital(6) | 2.5 | 113 | N/A | 113 | (62) | (175) |
| Tier 1 capital | 2.5 | 113 | 23 | 136 | (75) | (211) |

(1)Ratios are calculated as a percentage of risk-weighted assets for risk-based capital metrics and as a percentage of adjusted total assets for leverage capital metrics.
(2)The applicable buffer for common equity tier 1 capital, tier 1 capital, and adjusted total capital is the PCCBA, which is composed of a stress capital buffer, a stability capital buffer, and a countercyclical capital buffer. The applicable buffer for tier 1 capital (leverage based) is the PLBA. The stress capital buffer and countercyclical capital buffer are each calculated by multiplying prescribed factors by adjusted total assets as of the last day of the previous calendar quarter. The 2022 stability capital buffer is calculated by multiplying a factor determined based on our share of mortgage debt outstanding by adjusted total assets as of December 31, 2020. The prescribed leverage buffer for
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2022 is set at 50% of the 2022 stability buffer. Going forward the stability buffer and the prescribed leverage buffer will be updated with an effective date that depends on whether the stability capital buffer increases or decreases relative to the previously calculated value.
(3)Available capital (deficit) for all line items excludes the stated value of the senior preferred stock ($120.8 billion). Available capital (deficit) for all line items except total capital and core capital also deducts a portion of deferred tax assets. Deferred tax assets arising from temporary differences between GAAP and tax requirements are deducted from capital to the extent they exceed 10% of common equity. As of September 30, 2022, this resulted in the full deduction of deferred tax assets ($12.7 billion) from our available capital (deficit). Available capital (deficit) for common equity tier 1 capital also excludes the value of the non-cumulative perpetual preferred stock ($19.1 billion).
(4)Our capital shortfall consists of the difference between the applicable capital requirement (including buffers) and the applicable available capital (deficit).
(5)The sum of (a) core capital (see definition in footnote 6 below); and (b) a general allowance for foreclosure losses, which (i) shall include an allowance for portfolio mortgage losses, an allowance for non-reimbursable foreclosure costs on government claims, and an allowance for liabilities reflected on the balance sheet for estimated foreclosure losses on mortgage-backed securities; and (ii) shall not include any reserves made or held against specific assets; and (c) any other amounts from sources of funds available to absorb losses that the Director of FHFA by regulation determines are appropriate to include in determining total capital.
(6)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 or (b) senior preferred stock.
As a result of our capital shortfall, our maximum payout ratio under the enterprise regulatory capital framework as of September 30, 2022 was 0%. While it is not applicable until the date of termination of our conservatorship, our maximum payout ratio represents the percentage of eligible retained income that we are permitted to pay out in the form of distributions or discretionary bonus payments under the enterprise regulatory capital framework. The maximum payout ratio for a given quarter is the lowest of the payout ratios determined by our capital conservation buffer and our leverage buffer. See “Note 14—Regulatory Capital Requirements” in this report for information on our capital ratios as of September 30, 2022 under the enterprise regulatory capital framework.
Capital Activity
Under the terms governing the senior preferred stock, no dividends were payable to Treasury for the third quarter of 2022 and none are payable for the fourth quarter of 2022.
Under the terms governing the senior preferred stock, through and including the capital reserve end date, any increase in our net worth during a fiscal quarter results in an increase in the same amount of the aggregate liquidation preference of the senior preferred stock in the following quarter. The capital reserve end date is defined as the last day of the second consecutive fiscal quarter during which we have had and maintained capital equal to, or in excess of, all of the capital requirements and buffers under the enterprise regulatory capital framework.
As a result of these terms governing the senior preferred stock, the aggregate liquidation preference of the senior preferred stock increased to $177.9 billion as of September 30, 2022, due to the $4.6 billion increase in our net worth in the second quarter of 2022. The aggregate liquidation preference of the senior preferred stock will further increase to $180.3 billion as of December 31, 2022, due to the $2.4 billion increase in our net worth in the third quarter of 2022. See “Business—Conservatorship, Treasury Agreements and Housing Finance Reform—Treasury Agreements” in our 2021 Form 10-K for more information on the terms of our senior preferred stock, including how the aggregate liquidation preference is determined.
Increases in our net worth improve our capital position and our ability to absorb losses; however, increases in our net worth also increase the aggregate liquidation preference of the senior preferred stock by the same amount until the capital reserve end date as discussed above.
Treasury Funding Commitment
Treasury made a commitment under the senior preferred stock purchase agreement to provide funding to us under certain circumstances if we have a net worth deficit. As of September 30, 2022, the remaining amount of Treasury’s funding commitment to us was $113.9 billion. See “Note 11, Equity” in our 2021 Form 10-K for more information on the funding commitment provided by Treasury under the senior preferred stock purchase agreement.
Risk Management
Our business activities expose us to the following major categories of risk: credit risk (including mortgage credit risk and institutional counterparty credit risk), market risk (including interest-rate risk), liquidity and funding risk, and operational risk (including cyber/information security risk, third-party risk and model risk), as well as strategic risk, compliance risk and reputational risk. See “MD&A—Risk Management” in our 2021 Form 10-K for a discussion of our management of
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these risks. This section supplements and updates that discussion but does not address all of the risk management categories described in our 2021 Form 10-K.
Institutional Counterparty Credit Risk Management
This section supplements and updates our discussion of institutional counterparty credit risk management in our 2021 Form 10-K. See “MD&A—Risk Management—Institutional Counterparty Credit Risk Management” and “Risk Factors—Credit Risk” in our 2021 Form 10-K for a discussion of our exposure to institutional counterparty credit risk and our strategy for managing this risk. Also see “Note 10, Concentrations of Credit Risk” in this report for an update on our counterparty credit risk exposure.
Seller and Servicer Minimum Financial Eligibility Requirements
In August 2022, FHFA announced updated minimum financial eligibility requirements for Fannie Mae and Freddie Mac sellers and servicers. We use these financial eligibility requirements to monitor and manage risk exposures to non-depository sellers and servicers while largely relying on banking regulators’ prudential capital and liquidity standards as financial requirements for depository sellers and servicers. Under the financial eligibility requirements, both depository and non-depository sellers and servicers are subject to the same tangible net worth requirements. These new requirements will increase capital and liquidity requirements for our single-family non-depository sellers and servicers, including some requirements that apply only to large non-depository sellers and servicers. The majority of the new financial eligibility requirements are effective on September 30, 2023, with the remaining requirements going into effect on December 31, 2023 or March 31, 2024.
CIRT Counterparties
We use CIRT deals to transfer credit risk on a pool of loans to an insurance provider that retains the risk, or to an insurance provider that simultaneously cedes all of its risk to one or more reinsurers. In CIRT transactions, we select the insurance and reinsurance providers and approve the allocation of coverage that may be simultaneously transferred to reinsurers by a direct provider of our CIRT insurance coverage. As of September 30, 2022, our CIRT counterparties had a maximum liability to us of $15.2 billion, of which $4.5 billion was secured with liquid assets held in trust accounts. As of December 31, 2021, our CIRT counterparties had a maximum liability to us of $12.6 billion, of which $3.6 billion was secured with liquid assets held in trust accounts.
Market Risk Management, including Interest-Rate Risk Management
We are subject to market risk, which includes interest-rate risk and spread risk. These risks arise from our mortgage asset investments. Interest-rate risk is the risk that movements in benchmark interest rates could adversely affect the fair value of our assets or liabilities or our future earnings. Spread risk represents the change in an instrument’s fair value that relates to factors other than changes in the benchmark interest rate.
We are exposed to interest-rate risk through our “net portfolio,” which we define as our retained mortgage portfolio assets; other investments portfolio; outstanding debt of Fannie Mae used to fund the retained mortgage portfolio assets and other investments portfolio; and mortgage commitments and risk management derivatives. Our goal is to manage interest-rate risk from our net portfolio to be neutral to movements in interest rates and volatility on an economic basis, subject to model constraints and prevailing market conditions. We actively manage the interest-rate risk of our net portfolio through the use of interest-rate derivatives and by issuing a broad range of both callable and non-callable debt instruments.
We are also exposed to interest-rate risk in connection with mortgage assets held by our consolidated MBS trusts. One exposure is cost basis adjustments that often result from upfront cash fees exchanged at the time of loan acquisition, which include buy-ups, buy-downs, and loan-level risk-based price adjustments. Another exposure is the float income earned by MBS trusts on the short-term reinvestment of loan payments received from borrowers in highly liquid investments with short maturities, such as U.S. Treasury securities. This float income is paid to us as trust management income and recorded within “Net interest income” in our condensed consolidated financial statements.
Changes in interest rates can influence mortgage prepayment rates and float reinvestment yields. Therefore, they impact the timing of when we recognize amortization income related to cost basis amounts as well as the amount of float income generated by MBS trusts, thereby impacting our earnings. Typically, interest-rate driven changes in the timing of income recognition related to cost basis amortization are partially offset by interest-rate driven changes in the amount of float income earned. See “Consolidated Results of Operations—Net Interest Income—Analysis of Deferred Amortization Income” for more information on our outstanding net cost basis adjustments related to consolidated MBS trusts.
We do not currently actively manage or hedge, on an economic basis, our spread risk or the interest-rate risk arising from cost basis adjustments and float income associated with mortgage assets held by our consolidated MBS trusts.
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| MD&A | Risk Management | Market Risk Management, including Interest-Rate Risk Management |

For additional information on the impact of interest-rate risk on our earnings, see “Earnings Exposure to Interest-Rate Risk” below.
This section supplements and updates information regarding market risk management in our 2021 Form 10-K. See “MD&A—Risk Management—Market Risk Management, including Interest-Rate Risk Management” and “Risk Factors—Market and Industry Risk” in our 2021 Form 10-K for additional information, including our sources of interest-rate risk exposure, business risks posed by changes in interest rates, and our strategy for managing interest-rate risk.
Measurement of Interest-Rate Risk
The table below displays the pre-tax market value sensitivity of our net portfolio to changes in the level of interest rates and the slope of the yield curve as measured on the last day of each period presented.
The table below also provides the daily average, minimum, maximum and standard deviation values for duration gap and for the most adverse market value impact on the net portfolio to changes in the level of interest rates and the slope of the yield curve for the three months ended September 30, 2022 and 2021. Our practice is to allow interest rates to go below zero in the downward shock models unless otherwise prevented through contractual floors.
For information on how we measure our interest-rate risk, see our 2021 Form 10-K in “MD&A—Risk Management—Market Risk Management, including Interest-Rate Risk Management.”
| Interest-Rate Sensitivity of Net Portfolio to Changes in Interest-Rate Level and Slope of Yield Curve |
| As of (1)(2) |
| September 30, 2022 | December 31, 2021 |
| (Dollars in millions) |
| Rate level shock: |
| -100 basis points | $ | (85) | $ | (184) |
| -50 basis points | (33) | (69) |
| +50 basis points | 26 | 54 |
| +100 basis points | 48 | 75 |
| Rate slope shock: |
| -25 basis points (flattening) | (7) | (8) |
| +25 basis points (steepening) | 7 | 8 |

| For the Three Months Ended September 30, (1)(3) |
| 2022 | 2021 |
| Duration Gap | Rate Slope Shock 25 bps | Rate Level Shock 50 bps | Duration Gap | Rate Slope Shock 25 bps | Rate Level Shock 50 bps |
| Market Value Sensitivity | Market Value Sensitivity |
| (In years) | (Dollars in millions) | (In years) | (Dollars in millions) |
| Average | (0.03) | $ | (7) | $ | (32) | (0.03) | $ | (1) | $ | (83) |
| Minimum | (0.07) | (11) | (64) | (0.06) | (9) | (117) |
| Maximum | — | (3) | (7) | — | 3 | (47) |
| Standard deviation | 0.01 | 2 | 12 | 0.01 | 3 | 16 |

(1)Computed based on changes in U.S. LIBOR interest-rates swap curve. Changes in the level of interest rates assume a parallel shift in all maturities of the U.S. LIBOR interest-rate swap curve. Changes in the slope of the yield curve assume a constant 7-year rate, a shift of 16.7 basis points for the 1-year rate (and shorter tenors) and an opposite shift of 8.3 basis points for the 30-year rate. Rate shocks for remaining maturity points are interpolated.
(2)Measured on the last business day of each period presented.
(3)Computed based on daily values during the period presented.
The market value sensitivity of our net portfolio varies across a range of interest-rate shocks depending upon the duration and convexity profile of our net portfolio. The market value sensitivity of the net portfolio is measured by quantifying the change in the present value of the cash flows of our financial assets and liabilities that would result from an instantaneous shock to interest rates, assuming spreads are held constant. For the subset of floating-rate liabilities and assets that are indexed to LIBOR or SOFR, the interest component of their future cash flows is calculated using the
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| MD&A | Risk Management | Market Risk Management, including Interest-Rate Risk Management |

projection of the corresponding index rate. For all assets and liabilities, the discount factor used to calculate the present value of the future cash flows is constructed using the LIBOR yield curve.
LIBOR rate quotes will cease on June 30, 2023, and after that date the interest accrued on floating-rate instruments that are contractually indexed to LIBOR will reset based on SOFR. Before that LIBOR cessation date, the portfolio interest-rate risk measurement process will transition from using LIBOR to using SOFR as the benchmark interest rate. This change is not expected to have a significant impact on the measurement of our interest-rate risk or our financial results.
We use derivatives to help manage the residual interest-rate risk exposure between the assets and liabilities in our net portfolio. Derivatives have enabled us to keep our economic interest-rate risk exposure at consistently low levels in a wide range of interest-rate environments. The table below displays an example of how derivatives impacted the net market value exposure for a 50 basis point parallel interest-rate shock. For additional information on our derivative positions, see “Note 8, Derivative Instruments” in our 2021 Form 10-K and in this report.
| Derivative Impact on Interest-Rate Risk (50 Basis Points) |
| As of (1) |
| September 30, 2022 | December 31, 2021 |
| (Dollars in millions) |
| Before derivatives | $ | 2 | $ | (539) |
| After derivatives | (33) | (69) |
| Effect of derivatives | (35) | 470 |

(1)Measured on the last business day of each period presented.
Earnings Exposure to Interest-Rate Risk
While we manage the interest-rate risk of our net portfolio with the objective of remaining neutral to movements in interest rates and volatility on an economic basis, our earnings can experience volatility due to interest-rate changes and differing accounting treatments that apply to certain financial instruments on our balance sheet. Specifically, we have exposure to earnings volatility that is driven by changes in interest rates in two primary areas: our net portfolio and our consolidated MBS trusts. The exposure in the net portfolio is primarily driven by changes in the fair value of risk management derivatives, mortgage commitments, and certain assets, primarily securities, that are carried at fair value. The exposure related to our consolidated MBS trusts relates to changes in our credit loss reserves and to the amortization of cost basis adjustments resulting from changes in interest rates.
We apply fair value hedge accounting to address some of the exposure to interest rates, particularly the earnings volatility related to changes in benchmark interest rates, including LIBOR and SOFR. Although our hedge accounting program is designed to address the volatility of our financial results associated with changes in fair value related to changes in the benchmark interest rates, earnings variability driven by other factors, such as spreads or changes in cost basis amortization recognized in net interest income, remains. In addition, our ability to effectively reduce earnings volatility is dependent upon the volume and type of interest-rate swaps available, which is driven by our interest-rate risk management strategy discussed above. As our range of available interest-rate swaps varies over time, our ability to reduce earnings volatility through hedge accounting may vary as well. When the shape of the yield curve shifts significantly from period to period, hedge accounting may be less effective. In our current program, we establish new hedging relationships daily to provide flexibility in our overall risk management strategy.
See “MD&A—Consolidated Results of Operations—Hedge Accounting Impact” and “Note 1, Summary of Significant Accounting Policies” in our 2021 Form 10-K and “Note 8, Derivative Instruments” in this report for additional information on our fair value hedge accounting policy and related disclosures.
Critical Accounting Estimates
The preparation of financial statements in accordance with generally accepted accounting principles in the United States of America (“GAAP”) requires management to make a number of judgments, estimates and assumptions that affect the reported amount of assets, liabilities, income and expenses in our condensed consolidated financial statements. Understanding our accounting policies and the extent to which we use management judgment and estimates in applying these policies is integral to understanding our financial statements. We describe our most significant accounting policies in “Note 1, Summary of Significant Accounting Policies” in this report and in our 2021 Form 10-K.
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| MD&A | Critical Accounting Estimates |

We evaluate our critical accounting estimates and judgments required by our policies on an ongoing basis and update them as necessary based on changing conditions. Management has discussed any significant changes in judgments and assumptions in applying our critical accounting estimates with the Audit Committee of our Board of Directors. See “Risk Factors” in our 2021 Form 10-K for a discussion of the risks associated with the need for management to make judgments and estimates in applying our accounting policies and methods. We have identified one of our accounting estimates, allowance for loan losses, as critical because it involves significant judgments and assumptions about highly complex and inherently uncertain matters, and the use of reasonably different judgments and assumptions could have a material impact on our reported results of operations or financial condition.
Allowance for Loan Losses
The allowance for loan losses is an estimate of single-family and multifamily HFI loan receivables that we expect will not be collected related to loans held by Fannie Mae or by consolidated Fannie Mae MBS trusts. The expected credit losses are deducted from the amortized cost basis of HFI loans to present the net amount expected to be received.
The allowance for loan losses involves substantial judgment on a number of matters including the development and weighting of macroeconomic forecasts, the reversion period applied, the assessment of similar risk characteristics, which determines the historic loss experience used to derive probability of loan default, the valuation of collateral, and the determination of a loan’s remaining expected life. Our most significant judgments involved in estimating our allowance for loan losses relate to the macroeconomic data used to develop reasonable and supportable forecasts for key economic drivers, which are subject to significant inherent uncertainty. Most notably, for single-family, the model uses forecasted single-family home prices as well as a range of possible future interest rate environments, which drive prepayment speeds and impact the measurement of the economic concession provided on loans modified in a restructuring which are accounted for as a TDR. For multifamily, the model uses forecasted rental income and property valuations. For purposes of the macroeconomic sensitivities disclosed below, we have determined that our single-family home price forecast and interest rate forecast are the most significant judgments used in our estimation of credit losses for the periods presented below.
In future periods, changes in projected interest rates may not be as significant to our measurement of expected credit losses. Pursuant to our adoption of ASU 2022-02 on January 1, 2022, we prospectively discontinued TDR accounting and no longer measure the economic concession for loan modifications occurring on or after the adoption date. In addition, modifications to loans previously designated as TDRs that occur on or after January 1, 2022, are accounted for under the newly adopted ASU and result in the elimination of any prior economic concession recorded in the allowance related to such loans. Although increases in interest rates were a meaningful driver of our credit-related expense in the first nine months of 2022, we expect the decrease in the balance of loans that were previously designated as TDRs will reduce the sensitivity of our credit-related income (expense) to interest rate volatility over time. See “Note 1, Summary of Significant Accounting Policies—New Accounting Guidance” for more information about our adoption of ASU 2022-02.
Quantitative Component
We use a discounted cash flow method to measure expected credit losses on our single-family mortgage loans and an undiscounted loss method to measure expected credit losses on our multifamily mortgage loans. The models use reasonable and supportable forecasts for key macroeconomic drivers.
Our modeled loan performance is based on our historical experience of loans with similar risk characteristics adjusted to reflect current conditions and reasonable and supportable forecasts. Our historical loss experience and our loan loss estimates capture the possibility of a multitude of events, including remote events that could result in credit losses on loans that are considered low risk. Our credit loss models, including the macroeconomic forecast data used as key inputs, are subject to our model oversight and review processes as well as other established governance and controls.
Qualitative Component, including Management Adjustments
Our process for measuring expected credit losses is complex and involves significant management judgment, including a reliance on historical loss information and current economic forecasts that may not be representative of credit losses we ultimately realize. Management adjustments may be necessary to take into consideration external factors and current macroeconomic events that have occurred but are not yet reflected in the data used to derive the model outputs. Qualitative factors and events not previously observed by the models through historical loss experience may also be considered, as well as the uncertainty of their impact on credit loss estimates.
Impact of the Hurricanes
Management evaluated the impact of the recent hurricanes on our estimate of credit losses as of September 30, 2022 and concluded that our modeled results appropriately considered the impact of the hurricanes. In making this
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| MD&A | Critical Accounting Estimates |

determination, management evaluated recent trends, available data relating to the hurricanes, and our historical loss experience for natural disasters. Our credit loss model incorporates historical loss experience for loans impacted by natural disasters, including hurricanes. That loss experience considers the typical borrower performance following a natural disaster based on the amount of equity in their homes, as well as factors that mitigate the impact of natural disasters on our credit losses, including insurance coverage for sustained damages, the availability of federal and state disaster relief to borrowers in impacted areas, and our forbearance and other loss mitigation programs. Management will continue to monitor the hurricanes’ impact on loan performance, changes to expectations surrounding insurance coverage, and the amount and availability of federal and state assistance to affected borrowers, which may change our estimate of credit losses relating to the hurricanes in future periods.
Macroeconomic Variables and Sensitivities
Our credit-related income or expense can vary substantially from period to period based on forecasted macroeconomic drivers; primarily home prices and interest rates related to our single-family book of business. We develop regional forecasts for single-family home prices using a multi-path simulation that captures home price projections over a five-year period, which is the period for which we can develop reasonable and supportable forecasts. After the five-year period, the home price forecast reverts to a historical long-term growth rate. Additionally, our model projects the range of possible interest rate scenarios over the life of the loan. This process captures multiple possible outcomes of what could be more or less favorable economic environments for the borrower, and therefore will increase or decrease the likelihood of default or prepayment depending on the environment in each path of the simulation.
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| MD&A | Critical Accounting Estimates |

The table below provides information about our most significant key macroeconomic inputs used in determining our single-family allowance for loan losses: forecasted home price growth rates and interest rates. Although the model consumes a wide range of possible regional home price forecasts and interest rate scenarios that take into account inherent uncertainty, the forecasts below represent the mean path of those simulations used in determining the allowance for each quarter through the nine months ended September 30, 2022, and for each quarter during the year ended December 31, 2021, and how those forecasts have changed between periods of estimate. Below we present the two succeeding periods used in our estimate of expected credit losses. The forecasts consider periods beyond those presented below.
| Select Single-Family Macroeconomic Model Inputs(1) |
| Forecasted home price growth (decline) rate by period of estimate:(2) |
| For the Full Year ending December 31, |
| 2022 | 2023 | 2024 |
| Third Quarter 2022 | 9.0 | % | (1.5) | % | (1.4) | % |
| Second Quarter 2022 | 16.0 | 4.4 | 0.5 |
| First Quarter 2022 | 10.8 | 3.2 | 1.3 |
| For the Full Year ending December 31, |
| 2021 | 2022 | 2023 |
| Fourth Quarter 2021 | 18.8 | % | 8.2 | % | 2.9 | % |
| Third Quarter 2021 | 18.4 | 7.9 | 2.4 |
| Second Quarter 2021 | 14.8 | 5.4 | 2.5 |
| First Quarter 2021 | 8.8 | 2.5 | 1.7 |
| Forecasted 30-year interest rates by period of estimate:(3) |
| Through the end of December 31, | For the Full Year ending December 31, |
| 2022 | 2023 | 2024 |
| Third Quarter 2022 | 6.8 | % | 6.7 | % | 6.2 | % |
| Second Quarter 2022 | 5.7 | 5.4 | 5.2 |
| First Quarter 2022 | 4.7 | 4.8 | 4.7 |
| Through the end of December 31, | For the Full Year ending December 31, |
| 2021 | 2022 | 2023 |
| Fourth Quarter 2021 | 3.2 | % | 3.5 | % | 3.7 | % |
| Third Quarter 2021 | 3.1 | 3.4 | 3.7 |
| Second Quarter 2021 | 3.1 | 3.4 | 3.6 |
| First Quarter 2021 | 3.1 | 3.3 | 3.6 |

(1)These forecasts are provided here solely for the purpose of providing insight into our credit loss model. Forecasts for future periods are subject to significant uncertainty, which increases for periods that are further in the future. We provide our most recent forecasts for certain macroeconomic and housing market conditions in “Key Market Economic Indicators.” In addition, each month our Economic & Strategic Research group provides its forecast of economic and housing market conditions, which are available in the “Research and Insights” section of our website, www.fanniemae.com. Information on our website is not incorporated into this report.
(2)These estimates are based on our national home price index, which is calculated differently from the S&P/Case-Shiller U.S. National Home Price Index and therefore results in different percentages for comparable growth. We periodically update our home price growth estimates and forecasts as new data become available. As a result, the forecast data in this table may also differ from the forecasted home price growth rate presented in “Key Market Economic Indicators,” because that section reflects our most recent forecast as of the filing date of this report, while this table reflects the quantitative forecast data we used in our model to estimate credit losses for the periods shown. Management continues to monitor macroeconomic updates to our inputs in our credit loss model from the time they are approved as part
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| MD&A | Critical Accounting Estimates |

of our established governance process to ensure the reasonableness of the inputs used to calculate estimated credit losses. The forecast data excludes the impact of any qualitative adjustments.
(3)Forecasted 30-year interest rates represent the mean of possible future interest rate environments that are simulated by our interest rate model and used in the estimation of credit losses. Forecasts through the end of December 31, 2022 and 2021 represent the average forecasted rate from the quarter-end through the calendar year end of December 31st. The fourth quarter of 2021 interest rate represents the 30-year interest rate as of December 31, 2021. This table reflects the forecasted interest rate data we used in estimating credit losses for the periods shown and does not reflect changes in interest rates that occurred after the forecast date.
It is difficult to estimate how potential changes in any one factor or input might affect the overall credit loss estimates, because management considers a wide variety of factors and inputs in estimating the allowance for loan losses. Changes in the factors and inputs considered may not occur at the same rate and may not be consistent across all geographies or loan types, and changes in factors and inputs may be directionally inconsistent, such that improvement in one factor or input may offset deterioration in others. Changes in our assumptions and forecasts of economic conditions could significantly affect our estimate of expected credit losses and lead to significant changes in the estimate from one reporting period to the next.
As noted above, our allowance for loan losses is sensitive to changes in home prices and interest rate changes. To consider the impact of a hypothetical change in home prices, assuming a positive one-percentage point change in the home price growth rate for the first twelve months of the forecast, on a normalized basis, with all other factors held constant, the single-family allowance for loan losses as of September 30, 2022 would decrease by approximately 4%. Conversely, assuming a negative one-percentage point change in the home price growth rate for the first twelve months of the forecast, on a normalized basis, the single-family allowance for loan losses would increase by approximately 3%.
To consider the impact of a hypothetical change in 30-year interest rates, assuming a 50-basis point increase in estimated 30-year interest rates, with all other factors held constant, the single-family allowance for loan losses as of September 30, 2022 would increase by approximately 2%. Conversely, assuming a 50-basis point decrease in 30-year interest rates, the single-family allowance for loan losses would decrease by approximately 2%.
These sensitivity analyses are hypothetical and are provided solely for the purpose of providing insight into our credit loss model inputs. In addition, sensitivities for home price and interest rate changes are non-linear. As a result, changes in these estimates are not incrementally proportional. The purpose of this analysis is to provide an indication of the impact of home price appreciation and 30-year interest rates on the estimate of the allowance for credit losses. For example, it is not intended to imply management’s expectation of future changes in our forecasts or any other variables that may change as a result.
We provide more detailed information on our accounting for the allowance for loan losses in “Note 1, Summary of Significant Accounting Policies” in our 2021 Form 10-K. See “Note 4, Allowance for Loan Losses” for additional information about our current period benefit (provision) for loan losses.
See “Key Market Economic Indicators” for additional information about how home prices can affect our credit loss estimates, including a discussion of home price growth/decline rates and our home price forecast. Also see “Consolidated Results of Operations—Credit-Related Income (Expense)” for information on how our home price forecast impacted our single-family benefit (provision) for credit losses.
Impact of Future Adoption of New Accounting Guidance
We identify and discuss the expected impact on our condensed consolidated financial statements of recently issued accounting guidance in “Note 1, Summary of Significant Accounting Policies.”
Forward-Looking Statements
This report includes statements that constitute forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934 (the “Exchange Act”). In addition, we and our senior management may from time to time make forward-looking statements in our other filings with the SEC, our other publicly available written statements, and orally to analysts, investors, the news media and others. Forward-looking statements often include words such as “expect,” “anticipate,” “intend,” “plan,” “believe,” “seek,” “estimate,” “forecast,” “project,” “would,” “should,” “could,” “likely,” “may,” “will” or similar words. Examples of forward-looking statements in this report include, among others, statements relating to our expectations regarding the following matters:
•our future financial performance and the factors that will affect such performance;
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| MD&A | Forward-Looking Statements |

•economic, mortgage market and housing market conditions (including expectations regarding economic growth and declines, home price growth and declines, refinance volumes and interest rates), the factors that will affect those conditions, and the impact of those conditions on our business and financial results;
•our business plans and their impact;
•the impact of future changes in our guaranty fee pricing;
•the impact of future changes to our credit score model requirements and our credit report requirements;
•the effects of our credit risk transfer transactions, as well as the factors that will affect our engagement in future credit risk transfer transactions;
•volatility in our financial results and the impact of our adoption of hedge accounting on such volatility;
•the size and composition of our retained mortgage portfolio, and the factors that will affect them;
•the impact of the adoption of new accounting guidance;
•the impact of the transition from LIBOR to SOFR on our measurement of interest-rate risk and financial results;
•our payments to HUD and Treasury funds under the GSE Act;
•the risks to our business;
•future loan delinquencies, forbearances and foreclosures relating to the loans in our guaranty book of business and the factors that will affect them;
•how we intend to meet our debt obligations;
•future restrictions on our ability to pay dividends or make other distributions under the enterprise regulatory capital framework; and
•the impact of legal and regulatory proceedings on our business or financial condition.
Forward-looking statements reflect our management’s current expectations, forecasts or predictions of future conditions, events or results based on various assumptions and management’s estimates of trends and economic factors in the markets in which we are active and that otherwise impact our business plans. Forward-looking statements are not guarantees of future performance. By their nature, forward-looking statements are subject to significant risks and uncertainties and changes in circumstances. Our actual results and financial condition may differ, possibly materially, from the anticipated results and financial condition indicated in these forward-looking statements.
There are a number of factors that could cause actual conditions, events or results to differ materially from those described in our forward-looking statements, including, among others, the following:
•uncertainty regarding our future, our exit from conservatorship and our ability to raise or earn the capital needed to meet our capital requirements;
•significant challenges we face in retaining and hiring qualified executives and other employees;
•the duration, spread and severity of the COVID-19 pandemic; the actions taken to contain the virus or treat its impact, including government actions to mitigate the economic impact of the pandemic and COVID-19 vaccination rates; the effectiveness of available COVID-19 vaccines over time and against variants of the coronavirus; the nature, extent and success of the forbearance, payment deferrals, modifications and other loss mitigation options we provide to borrowers affected by the pandemic; accounting elections and estimates relating to the impact of the COVID-19 pandemic; borrower and renter behavior in response to the pandemic and its economic impact; the extent to which any future outbreaks or increases in new COVID-19 cases affect economic growth; and the pace and extent to which borrowers, renters and counterparties who continue to be negatively impacted by the pandemic recover;
•the impact of the senior preferred stock purchase agreement and the enterprise regulatory capital framework, as well as future legislative and regulatory requirements or changes, governmental initiatives, or executive orders affecting us, such as the enactment of housing finance reform legislation, including changes that limit our business activities or our footprint or impose new mandates on us;
•actions by FHFA, Treasury, HUD, the CFPB, the SEC or other regulators, Congress, the Executive Branch, or state or local governments that affect our business;
•changes in the structure and regulation of the financial services industry;
•the potential impact of a change in the corporate income tax rate, which we expect would affect our net income in the quarter of enactment as a result of a change in our measurement of our deferred tax assets and our net income in subsequent quarters as a result of the change in our effective federal income tax rate;
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| MD&A | Forward-Looking Statements |

•the timing and level of, as well as regional variation in, home price changes;
•future interest rates and credit spreads;
•developments that may be difficult to predict, including: market conditions that result in changes in our net amortization income from our guaranty book of business or changes in net interest income from our portfolios, fluctuations in the estimated fair value of our derivatives and other financial instruments that we mark to market through our earnings; and developments that affect our loss reserves, such as changes in interest rates, home prices or accounting standards, or events such as natural or other disasters, the emergence of widespread health emergencies or pandemics, or other disruptive or catastrophic events;
•uncertainties relating to the discontinuance of LIBOR, or other market changes that could impact the loans we own or guarantee or our MBS;
•disruptions or instability in the housing and credit markets;
•the size and our share of the U.S. mortgage market and the factors that affect them, including population growth and household formation;
•growth, deterioration and the overall health and stability of the U.S. economy, including U.S. GDP, unemployment rates, personal income, inflation and other indicators thereof;
•changes in fiscal or monetary policy of the U.S. or other countries, and the impact of such changes on domestic and international financial markets;
•our and our competitors’ future guaranty fee pricing and the impact of that pricing on our competitive environment and guaranty fee revenues;
•the volume of mortgage originations;
•the size, composition, quality and performance of our guaranty book of business and retained mortgage portfolio;
•the competitive environment in which we operate, including the impact of legislative, regulatory or other developments on levels of competition in our industry and other factors affecting our market share;
•how long loans in our guaranty book of business remain outstanding;
•the effectiveness of our business resiliency plans and systems;
•changes in the demand for Fannie Mae MBS, in general or from one or more major groups of investors;
•our conservatorship, including any changes to or termination (by receivership or otherwise) of the conservatorship and its effect on our business;
•the investment by Treasury, including the impact of past or potential future changes to the terms of the senior preferred stock purchase agreement, and their effect on our business, including restrictions imposed on us by the terms of the senior preferred stock purchase agreement, the senior preferred stock, and the warrant, as well as the extent that these or other restrictions on our business and activities are applied to us through other mechanisms even if we cease to be subject to these agreements and instruments;
•adverse effects from activities we undertake to support the mortgage market and help borrowers, renters, lenders and servicers;
•actions we may be required to take by FHFA, in its role as our conservator or as our regulator, such as actions in response to the COVID-19 pandemic, changes in the type of business we do, or actions relating to UMBS or our resecuritization of Freddie Mac-issued securities;
•limitations on our business imposed by FHFA, in its role as our conservator or as our regulator;
•our current and future objectives and activities in support of those objectives, including actions we may take to reach additional underserved borrowers or address barriers to sustainable housing opportunities and advance equity in housing finance;
•the possibility that changes in leadership at FHFA or the Administration may result in changes that affect our company or our business;
•our reliance on Common Securitization Solutions, LLC (“CSS”), a limited liability company we own jointly with Freddie Mac, and the common securitization platform CSS operates for a majority of our single-family securitization activities; provisions in the CSS limited liability company agreement that permit FHFA to add members to the CSS Board of Managers, which may limit the ability of Fannie Mae and Freddie Mac to control decisions of the Board; and changes FHFA may require in our relationship with or in our support of CSS;
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| MD&A | Forward-Looking Statements |

•a decrease in our credit ratings;
•limitations on our ability to access the debt capital markets;
•constraints on our entry into new credit risk transfer transactions;
•significant changes in forbearance, modification and foreclosure activity;
•the volume and pace of future nonperforming and reperforming loan sales and their impact on our results and serious delinquency rates;
•changes in borrower behavior;
•actions we may take to mitigate losses, and the effectiveness of our loss mitigation strategies, management of our REO inventory and pursuit of contractual remedies;
•defaults by one or more institutional counterparties;
•resolution or settlement agreements we may enter into with our counterparties;
•our need to rely on third parties to fully achieve some of our corporate objectives;
•our reliance on mortgage servicers;
•changes in GAAP, guidance by the Financial Accounting Standards Board and changes to our accounting policies;
•changes in the fair value of our assets and liabilities;
•the stability and adequacy of the systems and infrastructure that impact our operations, including ours and those of CSS, our other counterparties and other third parties;
•the impact of interdependence between the single-family mortgage securitization programs of Fannie Mae and Freddie Mac in connection with UMBS;
•operational control weaknesses;
•our reliance on models and future updates we make to our models, including the assumptions used by these models;
•domestic and global political risks and uncertainties, including the impact of the Russian war in Ukraine and escalating tensions between China and Taiwan;
•natural disasters, environmental disasters, terrorist attacks, widespread health emergencies or pandemics, infrastructure failures, or other disruptive or catastrophic events;
•severe weather events, fires, floods or other climate change events or impacts, including those for which we may be uninsured or under-insured or that may affect our counterparties, and other risks resulting from climate change and efforts to address climate change and related risks;
•cyber attacks or other information security breaches or threats; and
•the other factors described in “Risk Factors” in this report and in our 2021 Form 10-K.
Readers are cautioned not to unduly rely on the forward-looking statements we make and to place these forward-looking statements into proper context by carefully considering the factors discussed in “Risk Factors” in our 2021 Form 10-K and in this report. These forward-looking statements are representative only as of the date they are made, and we undertake no obligation to update any forward-looking statement as a result of new information, future events or otherwise, except as required under the federal securities laws.
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Item 3. Quantitative and Qualitative Disclosures about Market Risk
Information about market risk is set forth in “MD&A—Risk Management—Market Risk Management, including Interest-Rate Risk Management.”
Item 4. Controls and Procedures
Overview
We are required under applicable laws and regulations to maintain controls and procedures, which include disclosure controls and procedures as well as internal control over financial reporting, as further described below.
Evaluation of Disclosure Controls and Procedures
Disclosure Controls and Procedures
Disclosure controls and procedures refer to controls and other procedures designed to provide reasonable assurance that information required to be disclosed in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC. Disclosure controls and procedures include, without limitation, controls and procedures designed to provide reasonable assurance that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding our required disclosure. In designing and evaluating our disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management was required to apply its judgment in evaluating and implementing possible controls and procedures.
Evaluation of Disclosure Controls and Procedures
As required by Rule 13a-15 under the Exchange Act, management has evaluated, with the participation of our Chief Executive Officer and Chief Financial Officer, the effectiveness of our disclosure controls and procedures in effect as of September 30, 2022, the end of the period covered by this report. As a result of management’s evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were not effective at a reasonable assurance level as of September 30, 2022 or as of the date of filing this report.
Our disclosure controls and procedures were not effective as of September 30, 2022 or as of the date of filing this report because they did not adequately ensure the accumulation and communication to management of information known to FHFA that is needed to meet our disclosure obligations under the federal securities laws. As a result, we were not able to rely upon the disclosure controls and procedures that were in place as of September 30, 2022 or as of the date of this filing, and we continue to have a material weakness in our internal control over financial reporting. This material weakness is described in more detail below under “Description of Material Weakness.” Based on discussions with FHFA and the structural nature of this material weakness, we do not expect to remediate this material weakness while we are under conservatorship.
Description of Material Weakness
The Public Company Accounting Oversight Board’s Auditing Standard 2201 defines a material weakness as a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company’s annual or interim financial statements will not be prevented or detected on a timely basis.
Management has determined that we continued to have the following material weakness as of September 30, 2022 and as of the date of filing this report:
•Disclosure Controls and Procedures. We have been under the conservatorship of FHFA since September 6, 2008. Under the GSE 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 GSE 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
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| Controls and Procedures |

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 GSE Act, FHFA is limited in its ability to design and implement a complete set of disclosure controls and procedures relating to Fannie Mae, particularly with respect to current reporting pursuant to Form 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.
Due to these circumstances, we have not been able to update our disclosure controls and procedures in a manner that adequately ensures the accumulation and communication to management of information known to FHFA that is needed to meet our disclosure obligations under the federal securities laws, including disclosures affecting our condensed consolidated financial statements. As a result, we did not maintain effective controls and procedures designed to ensure complete and accurate disclosure as required by GAAP as of September 30, 2022 or as of the date of filing this report. Based on discussions with FHFA and the structural nature of this weakness, we do not expect to remediate this material weakness while we are under conservatorship.
Mitigating Actions Related to Material Weakness
As described above under “Description of Material Weakness,” we continue to have a material weakness in our internal control over financial reporting relating to our disclosure controls and procedures. However, we and FHFA have engaged in the following practices intended to permit accumulation and communication to management of information needed to meet our disclosure obligations under the federal securities laws:
•FHFA has established the Division of Conservatorship Oversight and Readiness, 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 quarterly report on Form 10-Q for the quarter ended September 30, 2022 (“Third Quarter 2022 Form 10-Q”), and engaged in discussions regarding issues associated with the information contained in those filings. Prior to filing our Third Quarter 2022 Form 10-Q, FHFA provided Fannie Mae management with written acknowledgment that it had reviewed the Third Quarter 2022 Form 10-Q, and it was not aware of any material misstatements or omissions in the Third Quarter 2022 Form 10-Q and had no objection to our filing the Third Quarter 2022 Form 10-Q.
•Our senior management meets regularly with senior leadership at FHFA, including, but not limited to, the Director.
•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, 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.
Changes in Internal Control Over Financial Reporting
Management has evaluated, with the participation of our Chief Executive Officer and Chief Financial Officer, whether any changes in our internal control over financial reporting that occurred during our last fiscal quarter have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. There were no changes in our internal control over financial reporting from July 1, 2022 through September 30, 2022 that management believes have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
In the ordinary course of business, we review our system of internal control over financial reporting and make changes that we believe will improve these controls and increase efficiency, while continuing to ensure that we maintain effective internal controls. Changes may include implementing new, more efficient systems, automating manual processes and updating existing systems.
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| Other Information |

PART II—OTHER INFORMATION
Item 1. Legal Proceedings
The information in this item supplements and updates information regarding certain legal proceedings set forth in “Legal Proceedings” in our 2021 Form 10-K, our First Quarter 2022 Form 10-Q and our Second Quarter 2022 Form 10-Q. We also provide information regarding material legal proceedings in “Note 13, Commitments and Contingencies,” which is incorporated herein by reference. In addition to the matters specifically described or incorporated by reference in this item, we are involved in legal and regulatory proceedings that arise in the ordinary course of business that we do not expect will have a material impact on our business or financial condition. However, litigation claims and proceedings of all types are subject to many factors and their outcome and effect on our business and financial condition generally cannot be predicted accurately.
We establish an accrual for legal claims only when a loss is probable and we can reasonably estimate the amount of such loss. The actual costs of resolving legal claims may be substantially higher or lower than the amounts accrued for those claims. If certain of these matters are determined against us, FHFA or Treasury, it could have a material adverse effect on our results of operations, liquidity and financial condition, including our net worth.
Senior Preferred Stock Purchase Agreements Litigation
Since June 2013, preferred and common stockholders of Fannie Mae and Freddie Mac filed lawsuits in multiple federal courts against one or more of the United States, Treasury and FHFA, challenging actions taken by the defendants relating to the Fannie Mae and Freddie Mac senior preferred stock purchase agreements and the conservatorships of Fannie Mae and Freddie Mac. Some of these lawsuits also contain claims against Fannie Mae and Freddie Mac. The legal claims being advanced by one or more of these lawsuits include challenges to the net worth sweep dividend provisions of the senior preferred stock that were implemented pursuant to August 2012 amendments to the agreements, the payment of dividends to Treasury under the net worth sweep dividend provisions, and FHFA’s decision to require Fannie Mae and Freddie Mac to draw funds from Treasury to pay dividends to Treasury prior to the August 2012 amendments. The plaintiffs seek various forms of equitable and injunctive relief as well as damages. The cases that remain pending after June 30, 2022 are as follows:
District of Columbia (In re Fannie Mae/Freddie Mac Senior Preferred Stock Purchase Agreement Class Action Litigations and Fairholme Funds v. FHFA). Fannie Mae is a defendant in two cases in the U.S. District Court for the District of Columbia, including a consolidated class action. The cases were consolidated for trial and the trial was conducted from October 17, 2022 to November 1, 2022. Jury deliberations began on November 1, 2022. The jury in this trial was not able to reach a verdict and the judge declared a mistrial on November 7, 2022. We expect the court to set a new trial date. See “Note 13, Commitments and Contingencies” for additional information.
Southern District of Texas (Collins, et al. v. Yellen, et al.). On October 20, 2016, preferred and common stockholders filed a complaint against FHFA and Treasury in the U.S. District Court for the Southern District of Texas. On May 22, 2017, the court dismissed the case. On September 6, 2019, the U.S. Court of Appeals for the Fifth Circuit, sitting en banc, affirmed the district court’s dismissal of claims against Treasury, but reversed the dismissal of claims against FHFA.
On June 23, 2021, the U.S. Supreme Court held that FHFA did not exceed its statutory powers as conservator when it agreed to the net worth sweep dividend provisions of the third amendment to the senior preferred stock purchase agreements in August 2012. The court also held that the provision of the Housing and Economic Recovery Act of 2008 that restricts the President’s power to remove the FHFA Director without cause violates the Constitution’s separation of powers and, thus, the FHFA Director may be removed by the President for any reason. The court rejected plaintiffs’ request to rescind the third amendment to the senior preferred stock purchase agreements. However, the Supreme Court remanded the case to the Fifth Circuit for further proceedings on the sole issue of whether the stockholders suffered compensable harm related to the constitutional claim during the limited time-period when a Senate-confirmed FHFA Director was in office. On March 4, 2022, the Fifth Circuit remanded the case to the district court for further proceedings on the compensable harm issue. On June 3, 2022, the stockholders filed an amended complaint and on July 18, 2022, FHFA and Treasury moved to dismiss that complaint.
Western District of Michigan (Rop et al. v. FHFA et al.). On June 1, 2017, preferred and common stockholders of Fannie Mae and Freddie Mac filed a complaint for declaratory and injunctive relief against FHFA and Treasury in the U.S. District Court for the Western District of Michigan. FHFA and Treasury moved to dismiss the case on September 8, 2017, and plaintiffs filed a motion for summary judgment on October 6, 2017. On September 8, 2020, the court denied plaintiffs’ motion for summary judgment and granted defendants’ motion to dismiss. On October 4, 2022, the U.S. Court
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| Other Information |

of Appeals for the Sixth Circuit reversed the dismissal and remanded the case to the district court to determine whether the stockholders suffered compensable harm.
District of Minnesota (Bhatti et al. v. FHFA et al.). On June 22, 2017, preferred and common stockholders of Fannie Mae and Freddie Mac filed a complaint for declaratory and injunctive relief against FHFA and Treasury in the U.S. District Court for the District of Minnesota. The court dismissed the case on July 6, 2018. On October 6, 2021, the U.S. Court of Appeals for the Eighth Circuit affirmed in part and reversed in part the district court’s ruling and remanded the case to the district court to determine whether the stockholders suffered compensable harm. On January 26, 2022, plaintiffs filed an amended complaint. On March 11 and March 14, 2022, Treasury and FHFA each filed motions to dismiss the new complaint.
Eastern District of Pennsylvania. (Wazee Street Opportunities Fund IV L.P. et al. v. FHFA et al.). On August 16, 2018, common stockholders of Fannie Mae and Freddie Mac filed a complaint for declaratory and injunctive relief against FHFA and Treasury in the U.S. District Court for the Eastern District of Pennsylvania. FHFA and Treasury moved to dismiss the case on November 16, 2018, and plaintiffs filed a motion for summary judgment on December 21, 2018. This case is currently stayed.
U.S. Court of Federal Claims. Numerous cases are pending against the United States in the U.S. Court of Federal Claims. Fannie Mae is a nominal defendant in four of these cases: Fisher v. United States of America, filed on December 2, 2013; Rafter v. United States of America, filed on August 14, 2014; Perry Capital LLC v. United States of America, filed on August 15, 2018; and Fairholme Funds Inc. v. United States, which was originally filed on July 9, 2013, and amended publicly to include Fannie Mae as a nominal defendant on October 2, 2018. Plaintiffs in these cases allege that the net worth sweep dividend provisions of the senior preferred stock that were implemented pursuant to the August 2012 amendment constitute a taking of Fannie Mae’s property without just compensation in violation of the U.S. Constitution. The Fisher plaintiffs are pursuing this claim derivatively on behalf of Fannie Mae, while the Rafter, Perry Capital and Fairholme Funds plaintiffs are pursuing the claim both derivatively and directly against the United States. Plaintiffs in Rafter also allege direct and derivative breach of contract claims against the government. The Perry Capital and Fairholme Funds plaintiffs allege similar breach of contract claims, as well as direct and derivative breach of fiduciary duty claims against the government. Plaintiffs in Fisher request just compensation to Fannie Mae in an unspecified amount. Plaintiffs in Rafter, Perry Capital and Fairholme Funds seek just compensation for themselves on their direct claims and payment of damages to Fannie Mae on their derivative claims. The United States filed a motion to dismiss the Fisher, Rafter and Fairholme Funds cases, as well as other cases where Fannie Mae is not a nominal defendant, on August 1, 2018. On December 6, 2019, the court entered an order in the Fairholme Funds case that granted the government’s motion to dismiss all the direct claims but denied the motion as to the derivative claims brought on behalf of Fannie Mae. On June 18, 2020, the U.S. Court of Appeals for the Federal Circuit agreed to hear the appeal of the court’s December 6, 2019 order. The Federal Circuit also agreed to hear appeals in cases where Fannie Mae is not a nominal defendant. In the Fisher case, the court denied the government’s motion to dismiss on May 8, 2020 and, on August 21, 2020, the Federal Circuit denied the Fisher plaintiffs’ request for interlocutory appeal. On February 22, 2022, in the Fairholme Funds case and other cases on appeal, the Federal Circuit affirmed the dismissal of the plaintiffs’ direct claims, but reversed the U.S. Court of Federal Claims’ ruling on plaintiffs’ derivative claims, holding that those claims should also be dismissed. On July 22, 2022, the plaintiffs in Fairholme Funds and plaintiffs in other cases where Fannie Mae is not a nominal defendant filed petitions with the Supreme Court seeking review of the Federal Circuit’s decision.
Item 1A. Risk Factors
In addition to the information in this report, you should carefully consider the risks relating to our business that we identify in “Risk Factors” in our 2021 Form 10-K. This section supplements and updates that discussion. Also refer to “MD&A—Risk Management,” “MD&A—Single-Family Business” and “MD&A—Multifamily Business” in our 2021 Form 10-K and in this report for more detailed descriptions of the primary risks to our business and how we seek to manage those risks.
The risks we face could materially adversely affect our business, results of operations, financial condition, liquidity and net worth, and could cause our actual results to differ materially from our past results or the results contemplated by any forward-looking statements we make. We believe the risks described in the sections of this report and our 2021 Form 10-K identified above are the most significant we face; however, these are not the only risks we face. We face additional risks and uncertainties not currently known to us or that we currently believe are immaterial.
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Our business and financial results are affected by general economic conditions, including home prices and employment trends, and changes in economic conditions or financial markets may materially adversely affect our business and financial condition.
In general, a prolonged period of slow growth in the U.S. economy or any deterioration in general economic conditions or financial markets could materially adversely affect our results of operations, net worth and financial condition. Our business is significantly affected by the status of the U.S. economy, including home prices and employment trends, as well as economic output levels, interest and inflation rates, and shifts in fiscal and monetary policies. As described in “MD&A—Key Market Economic Indicators” in this report, we currently expect that a modest recession is likely to occur beginning in the first quarter of 2023, resulting in an increase in the unemployment rate. In addition, home prices declined slightly on a national basis in the third quarter of 2022, and we expect additional home price declines in the fourth quarter of 2022 and in 2023.
In recent years, the Federal Reserve has purchased a significant amount of mortgage-backed securities issued by us, Freddie Mac and Ginnie Mae. The Federal Reserve began to taper these purchases in November 2021 and concluded its asset purchase program in March 2022. In March 2022, the Federal Reserve stated that it would reinvest principal payments from its holdings of both agency debt and agency mortgage-backed securities into agency mortgage-backed securities, and that it expected to begin reducing its holdings of agency debt and agency mortgage-backed securities. In May 2022, the Federal Reserve announced its plans to reduce its securities holdings over time by reinvesting principal payments from agency debt and agency mortgage-backed securities only to the extent those payments exceed monthly caps; the cap was initially set at $17.5 billion per month beginning on June 1, 2022, and increased to $35 billion per month in September 2022. In addition, the Federal Reserve has raised the target range for the federal funds rate several times this year to address inflation, and in November 2022 stated that it anticipates that ongoing increases in the target range will be appropriate. The strength in inflation also contributed to the sharp rise in mortgage rates in 2022, and mortgage rates may continue to rise. The increase in mortgage interest rates has already led to a slowdown in housing demand and a reduction in our business volume. Due to the recent sharp rise in interest rates and increases in mortgage spreads, we have been issuing MBS with higher coupon yields. Demand for, and liquidity of, these higher MBS coupon yields has been lower than typical demand and liquidity for our MBS. Further rate increases would likely further reduce our business volume and demand for and the liquidity of our MBS, which could adversely affect our results of operations, net worth and financial condition. Further rate increases also could result in greater home price declines, which also could adversely affect our results of operations, net worth and financial condition.
Global economic conditions can also adversely affect our business and financial results. Changes or volatility in market conditions resulting from deterioration in or uncertainty regarding global economic conditions can adversely affect the value of our assets, which could materially adversely affect our results of operations, net worth and financial condition. Differing rates of economic recovery from the COVID-19 pandemic around the world along with continued dislocations in supply chains remain a concern for policy makers and financial markets. To the extent global economic conditions negatively affect the U.S. economy, they also could negatively affect the credit performance of the loans in our book of business.
Volatility or uncertainty in global or domestic political conditions also can significantly affect economic conditions and financial markets. Global or domestic political unrest also could affect economic growth and financial markets. For example, the Russian war in Ukraine and related economic sanctions imposed on Russia, as well as any further actions by Russia, the United States or others relating to this conflict, may further impact the global economy and financial markets, which could further increase inflationary pressure and interest rates, as well as negatively affect economic growth and result in disruptions in the financial markets. We describe in “Risk Factors” in our 2021 Form 10-K the risks to our business posed by changes in interest rates and changes in spreads. In addition, future changes or disruptions in financial markets could significantly change the amount, mix and cost of funds we obtain, as well as our liquidity position.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Common Stock
Our common stock is traded in the over-the-counter market and quoted on the OTCQB, operated by OTC Markets Group Inc., under the ticker symbol “FNMA.”
Recent Sales of Unregistered Equity Securities
Under the terms of our senior preferred stock purchase agreement with Treasury, we are prohibited from selling or issuing our equity interests without the prior written consent of Treasury except under limited circumstances, which are
| Fannie Mae Third Quarter 2022 Form 10-Q | 135 |

| Other Information |

described in “Business—Conservatorship, Treasury Agreements and Housing Finance Reform—Treasury Agreements—Covenants under Treasury Agreements” in our 2021 Form 10-K. During the quarter ended September 30, 2022, we did not sell any equity securities.
Information about Certain Securities Issuances by Fannie Mae
Pursuant to SEC regulations, public companies are required to disclose certain information when they incur a material direct financial obligation or become directly or contingently liable for a material obligation under an off-balance sheet arrangement. The disclosure must be made in a current report on Form 8-K under Item 2.03 or, if the obligation is incurred in connection with certain types of securities offerings, in prospectuses for that offering that are filed with the SEC.
Because the securities we issue are exempted securities under the Securities Act of 1933, we do not file registration statements or prospectuses with the SEC with respect to our securities offerings. To comply with the disclosure requirements of Form 8-K relating to the incurrence of material financial obligations, in accordance with a “no-action” letter we received from the SEC staff in 2004, we report our incurrence of these types of obligations in offering circulars or prospectuses (or supplements thereto) that we post on our website within the same time period that a prospectus for a non-exempt securities offering would be required to be filed with the SEC. To the extent we incur a material financial obligation that is not disclosed in this manner, we would file a Form 8-K if required to do so under applicable Form 8-K requirements.
The website address for disclosure about our debt securities is www.fanniemae.com/debtsearch. From this address, investors can access the offering circular and related supplements for debt securities offerings under Fannie Mae’s universal debt facility, including pricing supplements for individual issuances of debt securities.
Disclosure about our obligations pursuant to the MBS we issue, some of which may be off-balance sheet obligations, can be found at www.fanniemae.com/mbsdisclosure. From this address, investors can access information and documents about our MBS, including prospectuses and related prospectus supplements.
We are providing our website address solely for your information. Information appearing on our website is not incorporated into this report.
Our Purchases of Equity Securities
We did not repurchase any of our equity securities during the third quarter of 2022.
Dividend Restrictions
Our payment of dividends is subject to the following restrictions:
Restrictions Relating to Conservatorship. Our conservator announced on September 7, 2008 that we would not pay any dividends on the common stock or on any series of preferred stock, other than the senior preferred stock. In addition, FHFA’s regulations relating to conservatorship and receivership operations prohibit us from paying any dividends while in conservatorship unless authorized by the Director of FHFA. The Director of FHFA has directed us to make dividend payments on the senior preferred stock on a quarterly basis for every dividend period for which dividends were payable.
Restrictions Under Senior Preferred Stock Purchase Agreement and Senior Preferred Stock. The senior preferred stock purchase agreement prohibits us from declaring or paying any dividends on Fannie Mae equity securities (other than the senior preferred stock) without the prior written consent of Treasury. In addition, the provisions of the senior preferred stock provide for dividends each quarter through and including the capital reserve end date in the amount, if any, by which our net worth as of the end of the immediately preceding fiscal quarter exceeds an applicable capital reserve amount. The applicable capital reserve amount is the amount of adjusted total capital necessary for us to meet the capital requirements and buffers set forth in the enterprise regulatory capital framework. The capital reserve end date is defined as the last day of the second consecutive fiscal quarter during which we have had and maintained capital equal to, or in excess of, all of the capital requirements and buffers under the enterprise regulatory capital framework. After the capital reserve end date, the amount of quarterly dividends to Treasury will be equal to the lesser of any quarterly increase in our net worth and a 10% annual rate on the then-current liquidation preference of the senior preferred stock. As a result, our ability to retain earnings in excess of the capital requirements and buffers set forth in the enterprise regulatory capital framework will be limited. For more information on the terms of the senior preferred stock purchase agreement and senior preferred stock, see “Business—Conservatorship, Treasury Agreements and Housing Finance Reform” in our 2021 Form 10-K.
Additional Restrictions Relating to Preferred Stock. Payment of dividends on our common stock is also subject to the prior payment of dividends on our preferred stock and our senior preferred stock. Payment of dividends on all outstanding preferred stock, other than the senior preferred stock, is also subject to the prior payment of dividends on the senior preferred stock.
| Fannie Mae Third Quarter 2022 Form 10-Q | 136 |

| Other Information |

Statutory Restrictions. Under the GSE Act, FHFA has authority to prohibit capital distributions, including payment of dividends, if we fail to meet our capital requirements. If FHFA classifies us as significantly undercapitalized, approval of the Director of FHFA is required for any dividend payment. Under the Charter Act and the GSE Act, we are not permitted to make a capital distribution if, after making the distribution, we would be undercapitalized. The Director of FHFA, however, may permit us to repurchase shares if the repurchase is made in connection with the issuance of additional shares or obligations in at least an equivalent amount and will reduce our financial obligations or otherwise improve our financial condition.
While not currently applicable, our payment of dividends will be subject to the following restrictions under the enterprise regulatory capital framework effective on the date of termination of our conservatorship:
Restrictions Under Enterprise Regulatory Capital Framework. During a calendar quarter, we will not be permitted to pay dividends or make any other capital distributions (or create an obligation to make such distributions) that, in the aggregate, exceed the amount equal to our eligible retained income for the quarter multiplied by our maximum payout ratio. The maximum payout ratio for a given quarter is the lowest of the payout ratios determined by our capital conservation buffer and our leverage buffer. We will not be subject to this limitation on distributions if we have a capital conservation buffer that is greater than our prescribed capital conservation buffer amount and a leverage buffer that is greater than our prescribed leverage buffer amount. Notwithstanding the above-described limitations, FHFA may permit us to make a distribution upon our request, if FHFA determines that the distribution would not be contrary to the purposes of this section of the enterprise regulatory capital framework or to our safety and soundness. We will not be permitted to make any distributions during a quarter if our eligible retained income is negative and either (a) our capital conservation buffer is less than our stress capital buffer or (b) our leverage buffer is less than our prescribed leverage buffer amount.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
None.
Item 5. Other Information
None.
| Fannie Mae Third Quarter 2022 Form 10-Q | 137 |

| Other Information |

Item 6. Exhibits
The exhibits listed below are being filed or furnished with or incorporated by reference into this report.
| Item | Description |
| 3.1 | Fannie Mae Charter Act (12 U.S.C. § 1716 et seq.) as amended through July 25, 2019 (Incorporated by reference to Exhibit 3.1 to Fannie Mae’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2019, filed October 31, 2019.) |
| 3.2 | Fannie Mae Bylaws, as amended through January 29, 2019 (Incorporated by reference to Exhibit 3.2 to Fannie Mae’s Annual Report on Form 10-K for the year ended December 31, 2018, filed February 14, 2019.) |
| 31.1 | Certification of Chief Executive Officer pursuant to Securities Exchange Act Rule 13a-14(a) |
| 31.2 | Certification of Chief Financial Officer pursuant to Securities Exchange Act Rule 13a-14(a) |
| 32.1 | Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350 |
| 32.2 | Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350 |
| 101. INS | Inline XBRL Instance Document* - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document |
| 101. SCH | Inline XBRL Taxonomy Extension Schema* |
| 101. CAL | Inline XBRL Taxonomy Extension Calculation* |
| 101. DEF | Inline XBRL Taxonomy Extension Definition* |
| 101. LAB | Inline XBRL Taxonomy Extension Label* |
| 101. PRE | Inline XBRL Taxonomy Extension Presentation* |
| 104 | Cover Page Interactive Data File* (embedded within the Inline XBRL document) |

* The financial information contained in these Inline XBRL documents is unaudited.
| Fannie Mae Third Quarter 2022 Form 10-Q | 138 |

| Signatures |

SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| Federal National Mortgage Association |
| By: | /s/ David C. Benson |
| David C. BensonPresident and Interim Chief Executive Officer |

Date: November 8, 2022
| By: | /s/ Chryssa C. Halley |
| Chryssa C. HalleyExecutive Vice President and Chief Financial Officer |

Date: November 8, 2022
| Fannie Mae Third Quarter 2022 Form 10-Q | 139 |


Question: What is the change in net profit margin from 2021 to 2022 in percentage points?

Python solution:
def solution():
     #Define variables name and value

    total_interest_earning_assets_2022 = 4229008  # million dollars
    total_interest_income_2022 = 87645  # million dollars
    total_interest_bearing_liabilities_2022 = 4175445  # million dollars
    total_interest_expense_2022 = 65314  # million dollars

    total_interest_earning_assets_2021 = 4029740  # million dollars
    total_interest_income_2021 = 73650  # million dollars
    total_interest_bearing_liabilities_2021 = 4003501  # million dollars
    total_interest_expense_2021 = 51650  # million dollars

    #Do math calculation to get the answer
    net_profit_2022 = total_interest_income_2022 - total_interest_expense_2022
    net_profit_2021 = total_interest_income_2021 - total_interest_expense_2021
    total_revenue_2022 = total_interest_earning_assets_2022
    total_revenue_2021 = total_interest_earning_assets_2021
    net_profit_margin_2022 = net_profit_2022 / total_revenue_2022 * 100
    net_profit_margin_2021 = net_profit_2021 / total_revenue_2021 * 100
    change_in_net_profit_margin = net_profit_margin_2022 - net_profit_margin_2021
    return change_in_net_profit_margin


Answer: -0.0178974731