Fannie Mae Mission Report 1

Introduction

A Report on

Fannie Mae’s Mission Activities

April 2011
In this Mission Report, the company has presented a number of estimates, forecasts, expectations,

and other forward-looking statements, including statements regarding the company's future results;

the profitability of its loans; the performance and caliber of loans it has acquired and will acquire; its

credit loss reduction efforts; its planned homeowner initiatives; and macroeconomic factors, such as

growth in the U.S. economy, housing activity, and household formation. These estimates, forecasts,

expectations, and statements are forward-looking statements and are based on the company's

current assumptions regarding numerous factors, including assumptions about future home prices

and the future performance of its loans.

The company's future estimates of these amounts, as well as the actual amounts, may differ

materially from its current estimates as a result of home price changes; interest rate changes;

unemployment; other macroeconomic variables; government policy matters; changes in generally

accepted accounting principles; credit availability; social behaviors; the volume of loans it modifies;

the effectiveness of its loss mitigation strategies; management of its real estate owned inventory

and pursuit of contractual remedies; changes in the fair value of its assets and liabilities;

impairments of its assets; the adequacy of its loss reserves; its ability to maintain a positive net

worth; effects from activities the company takes to support the mortgage market and help

homeowners; the conservatorship and its effect on the company's business; the investment by

Treasury and its effect on the company's business; changes in the structure and regulation of the

financial services industry; the company's ability to access the debt markets; disruptions in the

housing, credit, and stock markets; government investigations and litigation; the extent of the

servicer foreclosure process deficiencies and the duration of the related foreclosure pause; and

many other factors. Changes in the company's underlying assumptions and actual outcomes, which

could be affected by the economic environment, government policy, and many other factors,

including those discussed in the “Risk Factors” section of the company's annual report on Form 10-K

for the period ended December 31, 2010 and in our other filings made with the SEC from time to time,

could result in actual results being materially different from what is set forth in the forward-looking

statements.

Any forward-looking statements made by Fannie Mae speak only as of the date on which they are

made. Fannie Mae is under no obligation to, and expressly disclaims any obligation to, update or alter

its forward-looking statements, whether as a result of new information, subsequent events, or

otherwise.

© 2011 Fannie Mae
Fannie Mae Mission Report 3

Fannie Mae has served the housing market and America’s families for more than 70

years, and we remain deeply committed to our mission. We help ensure that working

families have access to mortgage credit to buy homes they can afford over the long term

or that they can secure quality rental housing.

We’re also focused on helping struggling families. We understand the human cost of the

housing crisis to people and communities. Working with our partners, we’re doing everything we can to help families avoid foreclosure and keep their homes whenever possible.

Everyone with a stake in housing — from families to lenders and others — wants a

stronger housing market. At Fannie Mae, we’re helping build a stronger foundation for

housing — one based on returning to common sense lending standards and redefining

sensible risk.

We are also committed to creating long-term value to help build a stable, sustainable

housing market for the future.

The work that we do affects families and neighborhoods across the country, every day.

This report illustrates how we are putting our resources to work for the housing market,

for communities across the country, and for the American people.

Phil Laskawy

Chairman of the Board

Mike Williams

President and Chief Executive Officer

A Message from

Phil Laskawy

and Mike Williams
4 Fannie Mae Mission Report

Who Is Fannie Mae Today?

A company on a mission. Fannie Mae exists to serve America’s housing market. We’re a national mortgage finance

company, but we don’t offer home loans. We stand behind

mortgage lenders — local and national banks, thrifts, credit

unions, and other financial institutions in all 50 states — to

buy the mortgage loans they originate, replenishing their

funds so they can lend to other homeowners and apartment

owners. Lenders and Fannie Mae work together to help families buy homes or refinance their mortgages. Similarly, we

keep funds flowing to support affordable rental housing.

Fannie Mae has served at the center of the U.S. mortgage

market since 1938. Our mission to provide liquidity, stability,

and affordability to the U.S. housing market has never been

more critical than it is right now.

A vital role in the market. Fannie Mae plays an even greater

role in the housing market today as our nation recovers from

the worst housing crisis since the Great Depression. In

uncertain economic times, funds for mortgages tend to dry

up as investors who supply financing leave the market. That

threatens to stall mortgage lending, construction, home

sales, and financing for apartments. And since housing

activity represents about 15 percent of our gross domestic

product, the entire U.S. economy suffers. Fannie Mae’s role

in the market — and our charter requiring us to serve in all

communities at all times, good and bad — gives us a unique

ability to respond to market challenges. When others pull

back or leave the market, we step forward.

An urgent responsibility. Our mandate is to keep money

flowing to mortgage lenders and to make sure people can

still buy, refinance, or rent housing. We launched an unprecedented effort to help struggling homeowners keep

making their mortgage payments and avoid losing their

homes. Today, we continue to focus on delivering on our

important mission, building a sustainable foundation for

housing for the future, and strengthening our company so

we can better serve the housing market and families.

How Has Fannie Mae Helped?

Steady, measurable progress. The housing market is

showing some signs of improvement but the recovery is

still fragile, and many homeowners continue to struggle.

We have made important progress since being placed in

conservatorship, but we have much more work to do.

■ We provided nearly $1.5 trillion in funds to the mortgage

market in 2009 and 2010.

■ We are building a new book of business (loans acquired

from 2009 forward) that we expect to be profitable and

managing losses on our legacy book (loans prior to

2009) through our foreclosure prevention efforts.

■ In 2009 and 2010, we helped more than one million

families buy homes and more than four million families

refinance into lower-cost, safer mortgages. Approximately 1.95 million of these mortgages are on properties owned by families earning at or below the median

income in their area.

■ We helped more than 700,000 homeowners struggling

to pay their mortgages work out their loans in 2009 and

2010. That helped to protect neighborhoods, home

prices, and the housing market.

■ We are also a leading provider of capital to the rental

housing market. In conjunction with our multifamily

lenders and housing partners, Fannie Mae provided

approximately $37 billion in debt financing for the rental

housing market in 2009 and 2010.

■ We continue our commitment to affordable rental housing. In 2009 and 2010, 87 percent and 91 percent,

respectively, of the multifamily units we financed were

affordable to families earning at or below the median

income in their area.

■ In 2010, on top of our daily work, Fannie Mae employees

gave more than 69,000 volunteer hours to efforts

focused on preventing foreclosures, strengthening

communities, and addressing homelessness. Our

commitment is both professional and personal.

Introduction
Fannie Mae Mission Report 5

Introduction

These numbers demonstrate that Fannie Mae and our partners are playing a meaningful role in supporting America’s

housing market and serving America’s families.

How Is Fannie Mae Moving Forward?

The housing recovery remains uneven. Creating solutions

will require practical, effective, and long-term changes

across the housing market.

Fannie Mae has conducted focused market research to

understand evolving consumer attitudes and their potential

impact on the housing market. Our National Housing

Survey was developed to identify, assess, and track emerging consumer attitudes on important housing issues. Our

Own-Rent analyses examine why Americans choose either

to buy or to rent their homes. Our extensive analyses also

provide insights into specific demographic, income, and

educational groups.

Over the past year, our research has identified several

important themes. For example, the vast majority of Americans continue to believe that owning a home makes more

sense for them than renting. They want to own primarily

for non-financial reasons, which include obtaining a good

place to raise their children, promoting safety, and having

more space. Additionally, the perception that owning a

home is a safe investment remains strong but has declined

meaningfully from levels seen prior to the housing market

downturn. And, many Americans, especially renters, have

grown more cautious and realistic about homeownership.

(To access the complete survey, visit

www.fanniemae.com/media/survey.)

At Fannie Mae, we are focusing on five actions to build a

stronger, more sustainable foundation for housing:

■ Keep liquidity flowing. In 2010, we estimate our competitive market share was almost 40 percent of singlefamily and approximately 35 percent of multifamily

mortgage financing. We continue our commitment to

our fundamental mission — providing mortgage liquidity

in all cycles, good and bad.

■ Help distressed homeowners. Everyone loses when

families are faced with a foreclosure. The cost to homeowners, their neighborhoods, the market, and to our

company can be severe. We will continue to find ways to

help. We have one of the largest foreclosure prevention

operations in the country. Our efforts help stabilize

communities and help Fannie Mae avoid losses, which

benefits taxpayers.

■ Encourage sustainable lending. Fannie Mae has

strengthened lending standards to help ensure that

working Americans who buy homes can afford them

over the long term. We are emphasizing long-term,

fixed-rate mortgages — loans that protect homeowners

from interest rate swings. Through our Loan Quality

Initiative, we are helping minimize future risk for borrowers, lenders, and Fannie Mae by requiring borrowers

to provide more information about their credit status

earlier in the process and by enhancing property

appraisals. We are also creating tools for lenders to

better understand the quality of a loan before they sell it

to Fannie Mae. In addition, we are committed to working

with our regulator, the Federal Housing Finance Agency

(FHFA), and others to develop a better model for servicing mortgages to help reduce risk, increase flexibility,

and improve service for borrowers.

■ Support rental housing. As demographics change, demand for quality affordable rental housing will continue

to grow. Fannie Mae provides critical capital to help meet

this need and has guaranteed the credit risk of more

than $1 of every $5 of outstanding multifamily debt.

■ Build a better company. We are working to improve

performance. Loans acquired since the start of 2009

comprise more than 40 percent of our book of business,

and we expect them to be profitable over their lifecycle.

As we continue to build this new book of business, our

foreclosure prevention efforts help reduce losses on our

legacy book of business. We are also driving operational

excellence to strengthen our company’s capabilities,

reduce risk, and be a responsible steward of the resources we’ve been provided.

We know the mortgage market will change in the years

ahead. As we prepare for change, Fannie Mae is focused on

creating value and delivering on our responsibilities to the

U.S. housing market.

Our efforts are making a difference to families and communities across the country. We will continue to work with

industry partners, lenders, and families to build a stronger

housing market for the future.
6 Fannie Mae Mission Report

Investor capital is essential to keep the mortgage market

functioning. During the housing crisis, many mortgage

investors left the market or sharply reduced their involvement. Fannie Mae has supported mortgage lenders with the

funds they need to provide financing for families, refinance

loans, and finance multifamily housing at affordable rates.

Supporting Homeownership

Fannie Mae plays a significant role in providing liquidity to

the single-family mortgage market. The interest rate for

30-year fixed-rate conforming mortgages is lower than

the rate for “jumbo” mortgage loans (or loans above our

current $417,000 limit in most markets and $729,750 in

certain high-cost areas).

■ In 2010, Fannie Mae worked with approximately 1,100

lenders to provide financing for 599,000 borrowers to

buy homes and for 2.1 million homeowners to refinance

their loans.

■ Our Refi PlusTM initiative, which streamlines the refinancing process, served approximately 659,000 of

our borrowers.

America’s Favorite Mortgage

The 30-year fixed-rate mortgage is the most popular

choice for America’s homeowners. It provides predictable

payments that protect homeowners from interest rate

swings. We believe this creates more stability for borrowers

and for the housing market. Since the 30-year fixed-rate

mortgage was developed, it has enabled millions of families

to buy homes.

Fannie Mae emphasizes long-term, fixed-rate mortgages

that are pre-payable (without penalty) as a way to support

sustainable homeownership. Fixed-rate mortgages

accounted for 83 percent of all outstanding single-family

mortgages according to FHFA’s latest available data.

Supporting Smaller Lenders

The credit crunch has hit small and mid-sized lenders especially hard. These lenders are particularly vulnerable when

credit lines dry up and investors reduce their interest in

acquiring mortgage-related assets. Fannie Mae met the

liquidity needs of many small to mid-sized lenders by purchasing over $80 billion of their mortgage loan production

in 2010.

We worked with various trade associations and affinity

groups, whose membership includes many of the lenders in

this segment, to help them realize the value of their Fannie

Mae relationship. We dedicated a team of people who were

focused on the unique needs of the lenders’ business

models to help the lenders meet their specific objectives.

In addition, we provided classroom training on mortgage

lending fundamentals for more than 1,000 employees of our

customers in various cities around the country, and offered

free access via eFannieMae.com to hundreds of live Web

seminars, recorded tutorials, and job aids.

What Lenders Have to Say About

Fannie Mae

“It is organizations like ours that will help rebuild and

reaffirm the confidence in the housing market that

has been lacking. Small businesses like mine are

those that employ locally, that continue to pay taxes,

continue to eke out a living. ... We know Fannie Mae

has made us a priority. They go above and beyond in

involving us in events, in information distribution so

that we can grow our business soundly and

responsibly.”

— Chris George, Founder and President, CMG Mortgage,

a leading mortgage bank located in San Ramon, CA

Providing Liquidity and

Affordability to the

Housing Market
Fannie Mae Mission Report 7

Providing Liquidity and Affordability to the Housing Market

Credit Union Partnerships

Many families utilize credit unions, or cooperative financial

institutions that make loans and provide other banking

services to their members, when obtaining a mortgage.

Historically, credit unions kept mortgages on their balance

sheets because they represented solid, reliable assets.

Credit unions had good track records on borrower screening and low foreclosure risk.

However, the weak economy has prompted many credit

unions to look for new ways to manage their core assets

and ensure their mortgage loan liquidity. Earning investment income is always important, but not-for-profit credit

unions also maintain a commitment to serve their members’ financing needs when buying homes or making other

major expenditures.

Fannie Mae helps credit unions balance their portfolios,

freeing up capital for new lending and mitigating risk. We

do so by purchasing new or seasoned loans in exchange for

cash, thus replenishing their supply of funds for additional

lending, or for a mortgage-backed security to hold in their

portfolios or sell to an investor. In 2010, Fannie Mae purchased $21.3 billion in loans originated by credit unions.

Combating Mortgage Fraud

According to the FBI, "Combating significant mortgage

fraud is a priority, because mortgage lending and the

housing market have a significant overall effect on

the nation's economy." The U.S. enjoys accessible,

affordable mortgage funding, based largely on investor

interest in mortgage-backed investments. Lack of

investor confidence in the mortgages backing those

investments could reduce demand, making mortgages

more difficult and costly to obtain.

Fannie Mae is committed to preserving the quality of

our mortgages and we are actively working to combat

fraud. We partner with lenders, law enforcement, nonprofits, and others to prevent or stop fraud schemes

and develop solutions to prevent future losses due to

fraud. Our efforts include:

■ Prevention — Fannie Mae’s Loan Quality Initiative

provides tools to help lenders identify and avoid

potential fraud.

■ Education — Fannie Mae’s Mortgage Fraud Program

offers live and Web-based education on fraud

trends. Our Mortgage Fraud Resources Web page

on eFannieMae.com features the latest fraud prevention tools, information, and presentations.

■ Enforcement — Fannie Mae enforces our lenders’

contractual representations regarding mortgage

fraud, reinforcing accountability for the quality of

loans sold to us. We report mortgage fraud to FHFA

and ultimately to law enforcement through the

Financial Crimes Enforcement Network.

Fannie Mae also invests in efforts to combat fraud

directed at homeowners. One recent success is the

Loan Modification Scam Prevention Network (LMSPN)

we founded in collaboration with the U.S. Department

of Housing and Urban Development (HUD), Freddie

Mac, and a variety of banks and nonprofit organizations to assist homeowners victimized by foreclosure

rescue schemes. (For more information, visit

LoanScamAlert.org and PreventLoanScams.org.)

The coalition conducts a national media outreach

campaign to educate the public on potential scams

and facilitates law enforcement referrals and prosecution. Since the launch of the LMSPN database in

February 2010, more than 10,000 homeowners have

reported scams or potential scams, totaling over

$27 million in lost money.
8 Fannie Mae Mission Report

Providing Liquidity and Affordability to the Housing Market

Rentals as a Key Component

of the Nation’s Housing

As demographics in this country change, demand for

affordable rental housing will continue to grow. According

to the Harvard Joint Center for Housing Studies (JCHS),

the number of renter households in America is expected to

surge over the next ten years. Depending on immigration,

that growth could be anywhere from 3.8 million to 5 million

rental households over the ten-year period.

Notes: High immigration projection assumes immigration rises from 1.1 million in 2005

to 1.5 million in 2020, as estimated by the Census Bureau's 2008 population projections. Low immigration projection assumes immigration is half the Census Bureau's

projected totals. Source: JCHS household projections.

Supporting Multifamily

Rental Housing

In the wake of the housing crisis, many Americans seeking

a viable and more affordable housing option are choosing

renting over buying. Fannie Mae has long played a significant role in providing financing for the multifamily rental

housing sector and continues to do so, largely by packaging

multifamily loans into mortgage-backed securities and

providing a credit guarantee on the securities. Fannie

Mae’s Multifamily Mortgage Business has several business

channels that focus on numerous types of multifamily

housing including:

■ Conventional rental properties (large and small)

that provide safe, decent, and affordable housing;

■ Rent-restricted housing that is targeted to lowerincome populations;

■ Seniors housing, including independent and

assisted living;

■ Manufactured housing communities;

■ Cooperative housing; and

■ Student housing.

Last year, in conjunction with our lender and housing

partners, Fannie Mae provided nearly $17 billion in debt

financing for the rental housing market. We did this by

acquiring approximately 2,300 multifamily mortgages

across the country.

Our financing supports both the workforce rental and rentrestricted housing markets. Approximately 91 percent of

the multifamily units we financed in 2010 were affordable

to families earning at or below the area median income for

their communities.

Small Multifamily Rental Loans

Smaller rental properties are critically important because

they provide many of the housing opportunities needed for

working families. However, financing these properties can

be challenging. Fannie Mae plays a key role in ensuring the

small multifamily loan market has the liquidity it needs.

The lending market for smaller rental properties is fragmented, with more than 2,600 lenders originating an

average of six small loans each. Smaller rental property

financing also tends to rely on a broad range of borrowers,

including individual investors, entrepreneurs, or smaller

commercial businesses of varying credit profiles that invest

in a limited number of properties. This can create financial,

underwriting, and credit issues for national investors in

these loans, which limits the supply of low-cost financing.

Fannie Mae helps ensure that the small rental property loan

market has the funding it needs. “Small multifamily loans”

are loans under $3 million (or $5 million in higher-cost

areas). Over the past ten years, we have developed a dedi1,500

1,250

1,000

750

500

250

0

-250

15-24

Age of Household

■ Assuming Low Immigration ■ Assuming High Immigration

Projected Renter Household Growth, 2010-2020 (In Thousands)

25-34 35-44 45-54 55-64 65-74 75 and

Over
Fannie Mae Mission Report 9

Providing Liquidity and Affordability to the Housing Market

Supporting Affordable Housing

Fannie Mae helps provide financing to enable Americans

to buy or rent quality affordable housing. In 2010, we

supported lending that served more than 750,000 lowincome families, including more than 87,000 very lowincome households.

Housing Finance Agency Partnerships

Fannie Mae has a long-standing partnership with state

Housing Finance Agencies (HFAs) and their nonprofit

trade association, the National Council of State Housing

Agencies (NCSHA). These entities work to meet affordable

housing needs across the country through a variety of

housing initiatives, including homeownership and rental

housing programs for low- and moderate-income families

and first-time home buyers.

Multifamily Green Initiative

Fannie Mae’s Green Initiative assists multifamily property owners seeking to reduce utility costs, operate

their properties more efficiently, and reduce their

impact on the environment through energy and water

efficiency property improvement projects and rehabilitations. By focusing on energy and water efficiency,

Fannie Mae is helping maintain the quality and affordability of America’s multifamily rental housing. Our

work toward this goal includes:

■ Establishing the Green Rental Housing Task Force

— Fannie Mae has organized a task force to bring

together a broad range of industry experts to

provide information for the Green Initiative strategy. The group is also working to integrate energy

efficiency performance metrics into multifamily

underwriting and existing loan products.

■ Rehabilitating Fannie Mae-owned properties —

In select cases, Fannie Mae is acquiring and

rehabilitating multifamily properties that have

entered into foreclosure. By investing in these

properties, Fannie Mae is helping to keep housing

affordable for families while improving the quality

of the properties. Fannie Mae intends to sell the

properties after the market has stabilized, thereby

returning value to the market.

cated small multifamily loan platform to provide consistent

liquidity to the small rental property loan market and financed more than $60 billion of small multifamily loans.

During 2010, Fannie Mae acquired 1,177 small multifamily

loans totaling $2.3 billion, which accounted for 51 percent

of our total multifamily loan count. As of December 31,

2010, we had a $33 billion book of business in more than

29,000 small multifamily loans. These properties tend to

be more affordable and concentrated in urban areas in

proximity to transportation and jobs, helping to lower the

cost of living.

Fannie Mae's Significant Impact

on Affordable Rentals

Fannie Mae plays a significant role in funding affordable

rental housing for American families.

Source: Fannie Mae Annual Housing Activities Reports 2002-2010

600,000

500,000

400,000

300,000

200,000

100,000

0

2002

■ Affordable at no more than 60 percent of median income

■ Affordable at more than 60 percent but no more than 100 percent of

median income

■ Affordable at more than 100 percent of median income

■ Not provided by lender

Distribution of Rental Units Financed with Multifamily

Mortgage and Securities Purchases by Fannie Mae 2002-2010

as per the Annual Housing Activities Reports

2003 2004 2005 2006 2007 2008 2009 2010
draw NIBP funding through the end of 2011. At the end of

2010, there was $6.9 billion in total outstanding principal

balance on the TCLF, which provides a credit and liquidity

backstop for the HFAs.

Hardest-Hit Fund (HHF)

In early 2010, the Obama Administration launched the

Hardest-Hit Fund program, making funds available to HFAs

in 18 jurisdictions that have experienced sustained unemployment rates at or above the national average. The

majority of the funds is being used to assist unemployed

and underemployed homeowners by providing temporary

mortgage payment assistance or loan modifications.

Michigan, Arizona, and Ohio were among the first states

to roll out their programs. In October 2010, Fannie Mae

issued a letter to all servicers instructing them to work

closely with the HFAs participating in the Hardest-Hit Fund

program to assist borrowers as part of the HHF

Unemployment Program.

10 Fannie Mae Mission Report

Providing Liquidity and Affordability to the Housing Market

HFA Single-Family Business

In 2006, Fannie Mae entered into an Affinity Agreement

with state HFAs and NCSHA. The agreement provides

preferred pricing and terms to HFAs in exchange for highperforming loans. To date, 34 HFAs have participated and

delivered approximately $6.4 billion in volume. In 2010,

Fannie Mae purchased more than 3,700 HFA loans, with a

principal balance of $593 million. Of this volume, approximately 69 percent was purchased through the Affinity

Agreement. Fannie Mae hopes to continue our partnership

with the state HFAs and NCSHA by rolling out a second

Affinity Agreement in 2011.

Treasury Initiative

In October 2009, the U.S. Department of Treasury, in collaboration with HUD and FHFA, launched an initiative to

provide $23 billion in financing and liquidity to participating

state and local HFAs. Fannie Mae and Freddie Mac have

supported the design, implementation, and 50/50 funding

of the HFA initiative, which consists of two programs: the

New Issue Bond Program (NIBP) and the Temporary Credit

and Liquidity Facilities Program (TCLF).

During 2010, HFAs used $5.1 billion in total NIBP funding,

including $3.9 billion to support bonds that were utilized

to finance single-family mortgage loans, and $1.2 billion to

support bonds that were utilized to finance long-term

multifamily mortgage loans. HFAs may continue to with-
Fannie Mae Mission Report 11

Providing Liquidity and Affordability to the Housing Market

Preserving and Supporting

Affordable Housing

In Madison, WI, the owner of a housing complex for residents with annual incomes of approximately $20,000 or

less decided to sell the property, putting the building’s

Section 8 status at potential risk. Section 8 provides federal housing assistance to occupants in the form of rental

subsidies. If the property had been sold to a for-profit

buyer, the new owner could have decided to stop offering

Section 8 housing, forcing the more than 200 low-income

seniors living in the complex to find new homes. Adding to

the challenge, Section 8 housing in the area was scarce,

and the displaced residents would have had to go through

the process of applying for Section 8 vouchers.

A local, well-known nonprofit organization committed to

preserving affordable housing decided to buy the property,

entering into a purchase agreement with the owner. HUD

approved the borrower so the building could continue

to provide Section 8 assistance, Fannie Mae agreed to

purchase the loan, and the nonprofit acquired the property

— successfully preserving more than 200 units of affordable housing.

Since the organization was a nonprofit, when it assumed

ownership of the building it became eligible for a property

tax reduction. Fannie Mae worked closely with the group

and the lender to approve additional financing through a

supplemental loan based on its new savings, completing

the process in just one month. This allowed the nonprofit to

recoup a portion of its equity, enabling it to invest more into

the property for enhancements and to preserve additional

housing properties in the area to help other underprivileged

seniors and families.

As part of our effort to support affordable housing, Fannie

Mae completes hundreds of preservation transactions

every year. In 2010 alone, Fannie Mae provided $643

million in financing that supported the preservation of

apartment rent restrictions for over 14,000 affordable

rental units.

Rural Affordable Housing:

Hancock County 538 Loan

In Carthage, IL, a developer affiliated with the local

hospital sought to build a 21-unit supportive living

complex for senior citizens nearby. More than half of

the apartments would be reserved for persons with

low incomes. The project was particularly important

to the community because the area had a shortage

of supportive housing for the elderly.

In many instances, developers looking to build small

multifamily unit projects in rural markets have a

difficult time securing funding. The income these

projects generate from rents often cannot support

the fixed operating costs involved, including debt

payments. The developer for this project was also

looking to fund the project at a time when investor

interest was scarce. However, in this case, one of

Fannie Mae’s approved multifamily affordable

lenders stepped up and worked closely with the

developer to facilitate financing for the project.

The project was able to qualify for federal low-income

housing tax credits, which resulted in less debt and

more affordable rents. The lender then brought the

loan to the U.S. Department of Agriculture (USDA)

and Fannie Mae. As part of its Rural Development

(RD) 538 program, which encourages partnerships

between RD, private lenders, and public agencies,

the USDA agreed to guarantee 90 percent of the

loan. Fannie Mae worked closely with the USDA and

the approved lender to move the deal forward, and

the project was able to secure the necessary permanent financing.

Today, this supportive living complex is home for

more than 21 senior citizens and an important

anchor for the Carthage community. It’s also a

strong example of how Fannie Mae can work with

the USDA and approved lenders to facilitate financing and development in rural America.
Housing Goals and Duty to Serve

Underserved Markets

Housing Goals

Fannie Mae is subject to affordable housing goals established by FHFA. Last year, the structure of these goals

changed.

Single-Family

Our 2010 and 2011 single-family housing goal benchmarks,

and our 2010 performance against these benchmarks, are

outlined below. Our 2010 results have not been validated

by FHFA, and after validation they may differ from the

results reported below. Although we did not meet all of our

single-family housing goal benchmarks, we may still meet

our goals. In addition to the benchmarks, our single-family

housing goals performance will be measured against the

share of goals-qualifying originations in the primary mortgage market. We will be in compliance with the housing

goals if we meet either the benchmarks or market share

measures.

12 Fannie Mae Mission Report

Providing Liquidity and Affordability to the Housing Market

Multifamily

FHFA also established a new multifamily housing goal

and subgoal. For each of 2010 and 2011, our multifamily

mortgage acquisitions must finance at least 177,750 units

affordable to low-income families, and at least 42,750

units affordable to very low-income families. There is no

market-based alternative measurement for the multifamily

goals. Our 2010 results were 212,768 and 53,184 units,

respectively.

Duty to Serve

FHFA will also require GSEs to provide market leadership

in three specific areas: affordable housing preservation,

manufactured housing, and rural areas. Fannie Mae is

preparing a plan of action for implementation when FHFA

issues the final Duty to Serve rule.

Other Affordable Housing Contributions

Fannie Mae offers specialized mortgage financing solutions

that help increase the supply of affordable owned and rental

housing as well as preserve the existing inventory.

Single-Family

Our single-family acquisitions include several products that

address specific housing needs. For instance, during 2010,

Fannie Mae purchased:

■ $831 million in mortgages targeted specifically to lowerincome and/or first-time home buyers through banks

and state housing finance agencies.

■ $944 million in mortgages secured by manufactured

homes.

■ $138 million in single-family mortgages in rural areas.

Multifamily

Our multifamily mortgage business provided more than

$1.4 billion in affordable lending in 2010 including:

■ $643 million in mortgages that preserved over 14,000

rent-restricted affordable units.

■ $804 million in financing that supported over 11,000

units of rental housing to targeted populations, including

nearly 1,300 units for the homeless and more than 6,700

units for elderly who rely on Medicaid.

Single-Family Number of

Housing Goals Result Benchmark Mortgages

Low-income families1

home purchases 25.1% 27.0% 120,445

Very low-income families2

home purchases 7.2 8.0 34,680

Low-income areas

(with disaster areas)3

home purchases 24.0 24.0 115,040

Low-income areas

(without disaster areas)4

home purchases 12.4 13.0 59,184

Low-income families1

refinancing 20.9 21.0 417,474

(1) Families with income no higher than 80 percent of area median income.

(2) Families with income no higher than 50 percent of area median income.

(3) Families in low-income census tracts, moderate-income families in minority

census tracts, or moderate-income families in designated disaster areas.

(4) Families in low-income census tracts or moderate-income families in

minority census tracts.
Fannie Mae Mission Report 13

Fannie Mae is committed to helping struggling homeowners

and preventing foreclosures whenever possible and, when

foreclosures are unavoidable, putting properties back

to productive use to help protect property values.

Helping Families

Avoid Foreclosure

Fannie Mae works with mortgage servicers, housing counselors, and other partners to help distressed homeowners

understand their options and find the best solution to meet

their needs. Our goal is to help as many families as possible

stay in their homes, protect property values in communities

across the country, and build a stronger foundation for the

U.S. housing market.

As part of our foreclosure prevention efforts, Fannie Mae

plays two distinct and central roles in the Administration’s

Making Home Affordable Program. The Making Home

Affordable Program consists primarily of the Home Affordable Refinance Program (HARP), under which we acquire or

guarantee loans that are refinancings of mortgage loans we

own or guarantee, and Freddie Mac does the same, and the

Home Affordable Modification Program (HAMP), which

provides for the modification of mortgage loans owned or

guaranteed by us or Freddie Mac, as well as other mortgage

loans. These two programs were designed to expand the

number of borrowers who can refinance or modify their

mortgages to achieve a monthly payment that is more

affordable now and into the future or to obtain a more stable loan product, such as a fixed-rate mortgage in lieu of an

adjustable-rate mortgage. We participate in the Making

Home Affordable Program, and our sellers and servicers

offer HARP and HAMP to Fannie Mae borrowers. We also

serve as Treasury’s program administrator for HAMP and

other initiatives under the Making Home Affordable Program.

In 2010, we completed more than 500,000 mortgage loan

workouts, including more than 440,000 solutions — such

as modifications, repayment plans, and forbearances —

that allowed families to keep their homes. Details of our

efforts include:

■ Completed approximately 403,000 permanent

modifications.

■ Completed nearly 37,000 repayment, forbearance, or

other home retention plans.

■ Executed over 75,000 pre-foreclosure (e.g., “short”)

sales and deeds-in-lieu of foreclosure.

■ Acquired approximately 2,113,000 refinance loans,

including approximately 659,000 loans through the

company's Refi PlusTM initiative, which includes 222,000

loans through HARP.

In addition, we continued to conduct extensive homeowner

education under our Know Your OptionsTM campaign and

in-person and phone outreach through our Mortgage Help

Centers across the country. In 2010, Fannie Mae opened

Mortgage Help Centers in Atlanta, Chicago, Dallas/Fort

Worth, Los Angeles, Miami, and Phoenix.

We use direct mail and phone calls to encourage homeowners to pursue foreclosure alternatives, and have also

established partnerships with counseling agencies in

communities to provide similar services. Also, our

KnowYourOptions.com Web site helps educate distressed

homeowners about their options to avoid foreclosure and

encourages struggling families to take action by contacting

their mortgage company or a housing counselor.

Know Your OptionsTM

In 2010, Fannie Mae launched KnowYourOptions.com, a bilingual consumer education Web site that outlines the options

that may be available to homeowners who are struggling with

their mortgage payments and provides guidance on how

they can contact and work with their mortgage company to

find solutions. The site has had more than 210,000 unique

visitors and has been well-received by independent reviewers

and industry experts.

Helping Distressed

Families & Communities
KnowYourOptions.com is part of Fannie Mae’s Know Your

Options consumer initiative — an unprecedented effort to

assist distressed homeowners and help them avoid foreclosure. This initiative is not only helping families, it’s also working to help stabilize communities and help Fannie Mae

mitigate credit losses, which benefits taxpayers.

Mortgage Help Centers

Our Mortgage Help Centers are designed so that struggling

families who have a Fannie Mae mortgage can walk in and

talk with our staff and a local counselor. We then help the

families organize their financial documents and work with

servicers to find an affordable and sustainable solution.

The Mortgage Help Centers across the country are an

essential component of our goal to bring stability to the

housing market and minimize the negative impact foreclosure has on families and communities. By working quickly

to outline the options available, struggling families can

make decisions to put themselves on a stronger financial

footing. On average, help center staff is able to process the

mortgage and communicate an outcome to a customer in

30 days. The services provided at our help centers are free

of charge. These efforts are creating value for the future by

stabilizing neighborhoods.

Turning Foreclosed

Properties into Homes

Despite our comprehensive foreclosure prevention efforts,

some foreclosures cannot be avoided. When all other

options are exhausted and foreclosure is the end result, we

do our best to sell these properties quickly to people who

will make the properties their homes — helping to stabilize

neighborhoods and home values. Once Fannie Mae

acquires the properties, we focus our marketing efforts

toward owner occupants, including first-time home buyers.

One of the ways we do this is by making repairs to many of

our properties, which makes them more attractive to

14 Fannie Mae Mission Report

Helping Distressed Families & Communities

owner-occupant buyers and also makes them more eligible

for financing. During 2010, Fannie Mae made repairs to

more than 87,000 properties.

Fannie Mae works with real estate agents to market these

properties directly to consumers under the HomePathTM

initiative. Launched in 2010, HomePath.com makes available to the public every Fannie Mae property available for

sale. Fannie Mae also offers special financing options for

first-time buyers with our HomePath Mortgage and Renovation MortgageTM products. The products enable a buyer

to purchase a Fannie Mae home with as little as 3 percent

down. In 2010, we also offered an incentive of up to 3.5

percent closing cost assistance to buyers who purchased

a HomePath property as their primary residence.

Helping Owner Occupants with First LookTM

Owner occupants are vital to any neighborhood and community. In an effort to promote neighborhood stabilization

through higher owner occupancy rates, in August of 2009

we created First Look. The program focuses on providing

potential buyers who intend to live in the homes a headstart to bid on HomePath properties. Owner occupants (or

any organization using public funds) can submit an offer on

a Fannie Mae property without competition from investors

for the first 15 days. Fannie Mae also supports prospective

home buyers by partnering with public entities and nonprofits to help them take advantage of Neighborhood Stabilization Program (NSP) funds to purchase HomePath

properties. In 2010, Fannie Mae sold more than 120,000

HomePath properties to owner-occupant and NSP buyers.

Helping Stabilize Hard-Hit Neighborhoods

Stabilizing neighborhoods and building communities has

been part of our mission for decades. Fannie Mae partners

with nonprofit entities across the country whose focus is

community development and neighborhood stabilization.

Some examples of these partnerships in 2010 included

working with Habitat for Humanity in 25 states to sell 179

properties to 70 of their affiliates — where properties are

transformed into homes for owner occupants — and selling

What Families are Saying about

Fannie Mae’s Mortgage Help Centers

“I am so grateful for the opening of the Fannie Mae

Mortgage Help Center in this community. It is the best

thing that could have ever happened to help people in

this community, like myself, who are struggling with

their housing situations and have not received

adequate help from their lenders.” — Culver City, CA
200 properties to the Cuyahoga County Land Bank in Cleveland, OH — where they take dilapidated properties and convert them into land for urban farms and neighborhood parks.

Assisting Families with Stability

and Transitioning

Renters in foreclosed properties often face uncertainty

through no fault of their own. Through our Tenant-in-Place

rental program, Fannie Mae offers these renters several

options that provide them the opportunity for greater stability or time to transition to new housing. Options for

renters may include remaining under their pre-existing

lease pursuant to the Protecting Tenants at Foreclosure

Act of 2009, entering into a lease with Fannie Mae, or receiving financial assistance for relocation. When it is time

to sell the property, Fannie Mae also works with renters

who may be interested in purchasing the property or with

investors who would purchase the property with the intent

of continuing the lease. Fannie Mae has helped over 13,000

families remain in their homes after foreclosure since

these rental initiatives were introduced in 2009.

Rehabilitation of Foreclosed Property

Helps Revitalize Neighborhood in

Riverside, CA

Fannie Mae’s work to put foreclosed homes to productive

use is having a strong impact across the country. In Riverside County, CA, a developer bought a Fannie Mae-owned

foreclosed property in 2010 using funds from the development firm’s public-private partnership with the Riverside

County Economic Development Agency (RivCo). The partnership’s primary goal is to stabilize neighborhoods that

have been devastated by the foreclosure crisis and to

ensure long-term affordability by requiring future sales to

low- and moderate-income families for the next 45 years.

The family — first-time buyers — that purchased the home

qualified for RivCo’s down payment assistance program.

The house is now noticeably improved and well-maintained,

which is helping revitalize the surrounding neighborhood.

The developer also recently acquired and renovated a second Fannie Mae foreclosed home in the same community.

In total, RivCo has funded the acquisition and renovation of

18 Fannie Mae homes — and the ripple effect continues as

other homes on these streets are also noticeably enhanced.

Redeveloped Rental Property Helps to

Address Homelessness in Tulsa, OK

In June 2010, Fannie Mae sold a 54-unit apartment complex in Tulsa, OK to a community nonprofit organization.

Fannie Mae Mission Report 15

Helping Distressed Families & Communities

This organization used both stimulus funds from the state

of Oklahoma and privately raised funds, as well as HUD’s

Supportive Housing Program and other subsidies to

acquire, redevelop, and operate the property. The organization, which owns and manages a considerable portfolio of

affordable housing, has begun to rehabilitate the property

and helped the existing tenants move to other affordable

housing units around Tulsa during the repairs.

Some of the units will provide permanent supportive housing for chronically homeless individuals. Others will be

used for a program that provides an alternative to incarceration for mothers, enabling them to have regular visitation

time with their children as they take advantage of the social

and educational services they need to achieve stability and

self-sufficiency. The remaining units will be market-rate

rental housing.

Foreclosed Multifamily Property in

Dearborn, MI Becomes Homeownership

Opportunity for Tenants

In Dearborn, MI, a multifamily property consisting of 33

detached single-family homes went into foreclosure, transferring ownership to Fannie Mae. We reached out to existing tenants who might be interested in buying their homes,

including coordinating through a local broker to translate

documents into Arabic and holding meetings in the local

community center.

Our efforts helped these families access the information

they needed to move forward. Ultimately, many of the

existing tenants bought their homes — most of them firsttime home buyers. This was a positive outcome for both

the families and their neighborhood. The homes remained

occupied and were purchased by people with strong roots

in the community, helping ensure stability.

How First Look is Helping Families

"We recently sold a home to a young family who had

been trying for more than a year to buy a property.

They had made several offers, only to lose the bids to

all-cash investors. When they called me, they seemed

reluctant to write another offer. But, after I explained

the First Look program, they decided to give it one

more try. Because of First Look, they were successful

in buying their first home."

— Christopher Suarez, Quantum Realtors
16 Fannie Mae Mission Report

Fannie Mae is deeply committed to social responsibility

within and outside of our organization.

Workplace and Supplier Diversity

Fannie Mae is committed to diversity and inclusion within

our culture, our people, and our business. We strive to

create an environment where employees — our greatest

asset — can fully engage and contribute their ideas and

perspectives toward innovative solutions that meet the

company's goals and create value in the housing market.

We work to attract diverse talent, understanding that each

employee brings unique and valuable skills, perspectives,

and experiences to Fannie Mae. We also work to develop all

of our current employees in ways that give each individual

the opportunity to succeed, contribute to the company’s

success, and serve the needs of our customers, partners,

and communities.

Fannie Mae offers resource groups that bring together

employees who share common cultural, lifestyle, spiritual,

professional, or other interests. The groups, which are open

to all employees, are designed to help strengthen leadership abilities, share and leverage cultural and business

competencies, increase awareness of diverse cultures,

positively affect diverse communities, and help Fannie

Mae meet its business and mission objectives.

As part of our commitment to diversity, Fannie Mae also

focuses on the consideration of minorities; women; individuals with disabilities; and minority-, women-, and disabledowned businesses in all of our contracting activities.

Additionally, Fannie Mae supports increased procurement

opportunities for qualified diverse suppliers that are

Small Businesses; Veteran-Owned Businesses; HUBZone

(Historically Underutilized Business Zone) Businesses;

8(a) Businesses; and Gay-, Lesbian-, Bisexual-, and Transgender-Owned Businesses in our procurement process.

We take diversity into account as we make decisions in our

evaluation process.

Fannie Mae participates in numerous business opportunity

fairs and conferences across the country. We are also

members of several business councils that address diverse

supplier business concerns. Our partnership and support

extends to organizations and events within the real estate

and financial services industries, as well as to entities dedicated to creating greater access to business opportunities

for diverse individuals and firms across the economy.

Environmental Stewardship —

Urbana Data Center Fifth Anniversary

In 2010, Fannie Mae’s technology center in Urbana, MD —

the nation’s first LEED®-certified data center — marked its

fifth anniversary. The energy-efficient design has reduced

energy consumption by 35 percent. This has produced a

net savings of $340,000 annually or $1.7 million over its

five years of operation.

The LEED designation, awarded by the U.S. Green Building

Council (USGBC) in June 2005, recognized a number of

energy-saving innovations. For example, the data center

has a unique irrigation design that uses waste water from

the cooling plant and captured rain water. In addition, its

landscaping features drought-tolerant plants. As a result of

these factors, the facility preserves nearly 13,000

gallons of municipal water per day from consumption and

waste, and has saved more than 23 million gallons over

five years.

The LEED rating system is a voluntary, consensus-based

national standard for developing high-performance, sustainable buildings. LEED certification distinguishes building

projects that have demonstrated a commitment to sustainability by meeting the highest performance standards.

Committed to Our

Core Values
Fannie Mae Mission Report 17

Committed to Our Core Values

Committed to the

Communities We Serve

2010 Corporate Giving

Fannie Mae's Office of Community and Charitable Giving

provides grant investments to nonprofit organizations

that help struggling borrowers avoid foreclosure; work to

stabilize neighborhoods by acquiring, rehabilitating, and

reselling foreclosed properties; provide affordable rental

housing; strive to prevent and end homelessness; and

create strong neighborhoods. Last year, Fannie Mae’s

support helped our grant partners:

■ Provide foreclosure prevention information and

counseling to more than 370,000 at-risk families

nationwide, assisting more than 104,000 families

avoid foreclosure.

■ Acquire more than 10,000 foreclosed properties to

help stabilize neighborhoods hard hit by foreclosures.

■ Preserve more than 4,000 affordable for-sale or rental

units nationwide.

■ Develop and complete more than 9,000 units of

permanent supportive housing.

■ Produce more than 2,000 units of affordable for-sale or

rental housing.

Habitat for Humanity International

In 2010, Fannie Mae provided a grant to Habitat for

Humanity International for its Neighborhood Revitalization Initiative. The grant will be used to help Habitat

affiliates across the country acquire properties —

some of them foreclosed — rehabilitate them, and

resell them to low-income families.

The grant will also help develop and deliver training and

technical assistance to Habitat affiliates and enhance

their best practices under mortgage lending laws.

Nearly 130,000 people participated in the 2010 Help the Homeless Program.

Help the Homeless

Homelessness is a chronic problem in the Washington, DC

metropolitan area. Among the homeless population, one

out of four is a child.

Fannie Mae’s Help the Homeless Program (HTH) is a public

awareness program that raises funds to support nonprofit

organizations working to prevent and end homelessness

in our nation’s capital. The initiative also encourages volunteerism in service to the homeless and those at risk of

becoming homeless.

Fannie Mae employees started the program in 1988 with a

modest walk. Since that time, HTH has grown extensively

and, in 2010, included a Walkathon on the National Mall

and 715 community Mini-Walks in the DC metro area. Overall, nearly 130,000 people participated last year, raising

$6.5 million.

The HTH Program focuses on the homeless in our community by supporting a “continuum of care,” whereby service

providers that offer permanent affordable housing, permanent supportive housing, transitional housing, prevention

and rapid re-housing, social services, and emergency

shelters are selected to become HTH beneficiaries.

All six of these focus areas align the program with Fannie

Mae’s corporate priorities of providing stability and affordability to the U.S. housing market by directly supporting

foreclosure prevention and affordable housing. The agencies in the HTH Program help more than 400,000 clients,

offering more than 6,200 housing units to the Washington,

DC metro area.
18 Fannie Mae Mission Report

Committed to Our Core Values

Employee Volunteer Profile

Ransom Miller embodies the spirit of service that

Fannie Mae employees demonstrate every day in

communities across the country.

In 1995, Miller, who works in Fannie Mae’s corporate

tax division, founded Project GiveBack — a small

Washington, DC nonprofit with a simple mission to

provide families with food at Thanksgiving. He collected

$500 in donations from friends and colleagues that

first year, bought enough food to feed six families for a

week, and delivered it the Saturday before Thanksgiving.

Inspired by this early success, he made plans to

expand the effort. He never imagined how much it

would grow.

On the Saturday before Thanksgiving 2010, Miller was

up before sunrise sorting through piles of turkeys,

chickens, fish fillets, sausages, beef patties, stuffing,

and sweet potatoes at the Bell Multicultural High

School. He and approximately 500 volunteers busily

packed boxes of food to distribute later that day to 1,000

families across the Washington metropolitan area.

Over the past 16 years, Miller has raised more than

$230,000 for Project GiveBack and fed more than

4,200 families.

This year, Miller plans to recruit volunteers from the

Fannie Mae Dallas and Chicago offices, Baltimore,

Oklahoma City, and Houston and show them how to

organize Thanksgiving food drives in their cities. “I

think there’s a real need for programs like this across

the country, especially in this economy,” said Miller. “I’d

love to help make it happen.”

Fannie Mae employee Ransom Miller has served over 4,200 families

in the Washington, DC area through Project GiveBack, a publicservice nonprofit he started in 1995.

One hundred percent of registration fees, sponsorships,

and donations to HTH go directly to nonprofit beneficiary

organizations dedicated to assisting the homeless. The

HTH Program does not use any of those monies to underwrite its efforts. In a recent poll conducted among past

participants, the practice of having 100 percent of all

walker registration fees and donations going directly to the

nonprofits was a top driver for participation, second to

helping homeless children.

Employee Volunteerism and Giving

Through Fannie Mae's SERVE employee volunteer and

giving program (Serving, Engaged, Ready to Volunteer

Employees), approximately 54 percent of our employee

workforce gave over 69,000 volunteer hours in 2010. Their

efforts benefited nearly 1,000 nonprofit organizations,

schools, and community groups in our company's headquarters of Washington, DC, and across the country. In

addition, Fannie Mae employees donated more than

$1.2 million to nonprofits in 2010.
Fannie Mae Mission Report 19

In 2011, we expect the U.S. economy to move from a fragile

recovery to a steadier expansion, as well as slightly

stronger growth in housing activity. But given the many

variables, our optimism remains tempered. Many families

continue to struggle. The housing market continues to

work through a backlog in inventory. And housing prices

remain uneven.

While Fannie Mae made important progress in 2010, we

have much more work to do to help the U.S. housing market

get back on track. In addition to providing liquidity and helping distressed families, we will continue our efforts to build

a better foundation for housing in the future — one based

on stronger lending standards, a common-sense definition

of what constitutes appropriate risk, and quality affordable

home and rental options.

We will continue to strengthen our company so we can

better serve the housing market, deliver on our mission,

and create value for taxpayers.

Looking Ahead
20 Fannie Mae Mission Report

Introduction

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Washington, DC 20016-2892

Phone (202) 752-7000

www.fanniemae.com