Third-Quarter 2010 Results 1 

Resource Center: 1-800-732-6643 

Contacts: Todd Davenport 

202-752-5115 

Number: 5214a 

Date: November 5, 2010 

Fannie Mae Reports Third-Quarter 2010 Results 

Net Loss of $1.3 Billion Reflects Stabilizing Credit-Related Expenses and Increased Revenue 

Company Has Reserved for Substantial Majority of Expected Losses 

Credit Profile of 2009 – 2010 Single-Family Loan Book Remains Strong 

WASHINGTON DC – Fannie Mae (FNMA/OTC) today reported a net loss of $1.3 billion in the third quarter of 2010, 

compared to a net loss of $1.2 billion in the second quarter of the year. The company continues to focus on building a 

strong new book of business and returning to profitability (excluding Treasury dividend payments), and its operating 

results reflect stabilizing credit-related expenses and increasing revenues. 

The company’s net loss attributable to common stockholders was $3.5 billion, including $2.1 billion in dividend payments 

to the U.S. Treasury. To eliminate the company’s net worth deficit of $2.4 billion as of September 30, 2010, more than 85 

percent of which is the dividend payment to Treasury, the Federal Housing Finance Agency has requested $2.5 billion on 

the company’s behalf from Treasury. Upon receiving those funds, the company’s total obligation to Treasury for its senior 

preferred stock will be $88.6 billion. The company has paid a total of $8.1 billion in dividends to Treasury. 

“Our operating results reflect our ongoing efforts to manage the credit-related expenses in our legacy business and build a 

new, profitable book of business,” said Fannie Mae President and CEO Michael J. Williams. “The loans we have acquired 

since the beginning of 2009 reflect our commitment to realistic, common-sense lending standards and sustainable 

homeownership. Their credit profile remains strong, and we expect these loans to be profitable over their lifecycle. We are 

building this new book of business while we continue to provide liquidity to America’s housing market as it struggles to 

recover, and to support programs to help families stay in their homes and avoid foreclosure whenever possible.” 
Third-Quarter 2010 Results 2 

 2009 – 2010 Single-Family Book of Business: Single-family loans the company has acquired since the beginning of 

2009 comprised more than 35 percent of its single-family guaranty book of business as of September 30, 2010, 

compared with 24 percent as of December 31, 2009. The company continues to expect that these loans will be 

profitable over their lifecycle, given their strong credit risk profile and performance to date. The rate at which loans 

become seriously delinquent within a short period of time after acquisition is an early predictor of the ultimate 

performance of loans, and the loans the company acquired in 2009 have experienced historically low levels of earlystage delinquencies. 

 2005 – 2008 Single-Family Book of Business: From the beginning of 2009 through the third quarter of 2010, the 

company has reserved for or realized approximately $110 billion of losses on its single-family loans, the vast majority 

of which are attributable to loans it purchased or guaranteed from 2005 through 2008. The company estimates that it 

has reserved for the substantial majority of the remaining losses on these loans. Single-family loans that the company 

purchased or guaranteed from 2005 through 2008 are becoming a smaller percentage of the company’s guaranty book 

of business, having decreased to 42 percent as of September 30, 2010 from 63 percent as of December 31, 2008. The 

company’s single-family serious delinquency rate, which has fallen for seven consecutive months, decreased to 4.56 

percent as of September 30, 2010, from 4.99 percent as of June 30, 2010, and was the first year-over-year decline in 

the company’s serious delinquency rate since 2007. The company expects serious delinquency rates may be affected 

in the future by home price changes, changes in other macroeconomic conditions, and the extent to which borrowers 

with modified loans again become delinquent in their payments. 

 Providing Liquidity to the Market: During the first nine months of 2010, the company purchased or guaranteed an 

estimated $613 billion in loans, which includes approximately $195 billion in delinquent loans the company 

purchased from its single-family mortgage-backed securities trusts. Fannie Mae remained the largest single issuer of 

mortgage-related securities in the secondary market during the third quarter, with an estimated market share of new 

single-family mortgage-related securities of 44.5 percent, compared with 39.1 percent in the second quarter of 2010. 

Since January 2009, Fannie Mae has provided about $1.4 trillion in liquidity to the market through loan purchases and 

guarantees, including approximately $230 billion in delinquent loans the company purchased from its single-family 

MBS trusts, financing approximately 4,874,000 conventional single-family loans and approximately 571,000 

multifamily units. 

 Avoiding Foreclosure: During the first nine months of 2010, the company completed more than 410,000 singlefamily loan workouts, including more than 350,000 home-retention workouts. In the third quarter of 2010, the 

company completed home-retention workouts (including modifications, repayment plans, and forbearances) for more 

than 113,000 loans with an aggregate unpaid principal balance of $23 billion. On a loan count basis, this represented a 

14 percent decrease over home-retention workouts completed in the second quarter of 2010, which was due primarily 

to a decrease in loan modifications. Details of the company’s home-retention workouts, other foreclosure alternatives, 

and refinances include: 
Third-Quarter 2010 Results 3 

o Loan modifications, including permanent modifications under the Home Affordable Modification Program, of 

106,365, compared with 121,693 in the second quarter of 2010. This figure does not include HAMP modifications 

in trial periods. Modifications decreased in the third quarter as the company began verifying borrower income 

prior to completing Fannie Mae modifications for borrowers who were ineligible under HAMP, which reduced 

the company’s modifications outside the program. 

o Repayment plans/forbearances completed of 6,208, compared with 8,716 in the second quarter of 2010. 

o Preforeclosure sales and deeds-in-lieu of foreclosure of 20,918, compared with 21,515 in the second quarter of 

2010. The decrease was due primarily to weak market conditions affecting pre-foreclosure sales during the 

quarter. 

o Fannie Mae acquired or guaranteed approximately 541,000 loans that were refinances during the third quarter of 

2010, including approximately 159,000 loans through its Refi PlusTM initiative. On average, borrowers who 

refinanced during the third quarter of 2010 through Refi Plus reduced their monthly mortgage payments by $141, 

or $1,692 annually. The company acquired or guaranteed approximately 354,000 loans that were refinances in the 

second quarter of 2010, including 126,000 through Refi Plus.

 Homeowner and Borrower Initiatives: The company continues to develop programs and initiatives that are 

designed to help keep people in homes, help prospective homeowners, and support the mortgage and housing markets 

overall. During the third quarter, it: 

o Launched KnowYourOptions.com, a Web site designed to give borrowers a one-stop shop to find out how to 

save their homes or choose other options to avoid foreclosure. 

o Opened Mortgage Help Centers in Atlanta and Chicago. The company plans to open additional centers in 

2010 and 2011. 

o Announced that more than 29,000 owner-occupants purchased homes under its First LookTM program in the 

past year, with public entities using Neighborhood Stabilization Program funds purchasing an additional 

5,000 properties. Under First Look, the company only considers offers from owner occupants and participants 

in the Neighborhood Stabilization Program during the initial period that its foreclosed properties are on the 

market, which allows these purchasers to submit offers without competition from investors. 

The ultimate performance of loans the company has acquired since the beginning of 2009 will be affected by 

macroeconomic trends, including unemployment, the economy, and home prices. For further discussion of the company’s 

credit performance, see the Executive Summary of its quarterly report on Form 10-Q for the quarter ended September 30, 

2010, which was filed today with the Securities and Exchange Commission. 
Third-Quarter 2010 Results 4 

SUMMARY OF THIRD-QUARTER RESULTS

The company’s net loss attributable to common stockholders was $3.5 billion, or ($0.61) per diluted share, compared with 

a loss of $3.1 billion, or ($0.55) per diluted share, in the second quarter of 2010. The net worth deficit of $2.4 billion as of 

September 30, 2010 takes into account the company’s net loss, dividends paid on senior preferred stock held by Treasury, 

and a reduction in unrealized losses on available-for-sale securities during the third quarter. 

(dollars in millions, except per share amounts) (1) 3Q10 2Q10 Variance 3Q10 3Q09 (3) Variance

Net interest income $ 4,776 4,207$ $ 569 $ 4,776 3,830$ $ 946

Guaranty fee income 51 52 (1) 1,923 51 (1,872)

Fee and other income 253 242 11 253 194 59

Net revenues 5,080 4,501 579 5,080 5,947 (867)

Investment gains (losses), net 82 23 59 82 785 (703)

Net other-than-temporary impairments (326) (137) (189) (326) (939) 613

Fair value gains (losses), net 525 303 222 525 (1,536) 2,061

Income (losses) from partnership investments 47 (26) 73 47 (520) 567

Administrative expenses (730) (670) (60) (730) (562) (168)

Credit-related expenses (2) (5,561) (4,851) (710) (5,561) (21,960) 16,399

Other non-interest expenses (457) (357) (100) (457) (242) (215)

Net losses and expenses (6,420) (5,715) (705) (6,420) (24,974) 18,554

Loss before federal income taxes (1,340) (1,214) (126) (1,340) (19,027) 17,687

Benefit (provision) for federal income taxes 9 (9) 18 9 143 (134)

Net loss (1,331) (1,223) (108) (1,331) (18,884) 17,553

Less: Net (income) loss attributable to the noncontrolling interest (8) 5 (13) (8) 12 (20)

Net loss attributable to Fannie Mae $ (1,339) $ (1,218) $ (121) $ (1,339) $ (18,872) $ 17,533

Preferred stock dividends (2,116) (1,907) (209) (2,116) (883) (1,233)

Net loss attributable to common stockholders $ (3,455) $ (3,125) $ (330) $ (3,455) $ (19,755) $ 16,300

Loss per share - basic and diluted $ (0.61) (0.55)$ $ (0.06) $ (0.61) $ (3.47) $ 2.86

(1) Certain prior period amounts have been reclassified to conform to the current period presentation. 

(3) Third-quarter 2009 results do not reflect accounting standards for consolidation that the company adopted prospectively on January 1, 2010.

(2) Consists of provision for loan losses, provision for guaranty losses and foreclosed property expense.

Net revenues were $5.1 billion in the third quarter of 2010, up 13 percent from $4.5 billion in the second quarter of 2010, 

due primarily to an increase in net interest income. Net interest income was $4.8 billion, up 14 percent from $4.2 billion in 

the second quarter of 2010. The increase was due primarily to lower debt funding costs and the purchase from MBS trusts 

of the substantial majority of the single-family loans that are four or more monthly payments delinquent, as the cost of 

purchasing these delinquent loans and holding them in the company’s portfolio is less than the cost of advancing 

delinquent payments to security holders. 

For the third quarter of 2010, interest income that the company did not recognize for nonaccrual mortgage loans was $1.8 

billion, compared with $2.2 billion in the second quarter of 2010. 
Third-Quarter 2010 Results 5 

Credit-related expenses, which are the total provision for credit losses plus foreclosed property expense, were $5.6 

billion, up from $4.9 billion in the second quarter of 2010. The increase was driven in part by valuation adjustments that 

reduced the value of the company’s real-estate-owned inventory, as well as higher expenses due to increased acquisitions 

of foreclosed properties. 

Credit losses, which the company defines generally as net charge-offs plus foreclosed property expense, excluding certain 

fair-value losses, were $8.2 billion in the third quarter of 2010, compared with $7.0 billion in the second quarter of 2010. 

The increase was attributable to an increase in defaults, particularly those due to the prolonged period of high 

unemployment and the decline in home prices. 

Total loss reserves and fair value losses previously recognized on acquired credit-impaired loans were $84.6 billion as of 

September 30, 2010, or 2.8 percent of the company’s book of business, compared with $87.4 billion, or 2.9 percent of the 

company’s guaranty book of business, as of June 30, 2010. The company considers its $19.8 billion of total fair value 

losses previously recognized on loans purchased out of MBS trusts an “effective reserve” for credit losses because the 

mortgage loan balances were reduced by these fair value losses at acquisition. Total nonperforming loans in the 

company’s guaranty book of business were $213.3 billion, compared with $218.2 billion as of June 30, 2010. 

Net fair value gains were $525 million in the third quarter, compared with gains of $303 million in the second quarter of 

2010. The increase was attributable primarily to gains on the company’s trading mortgage securities due to rate declines 

and spread tightening. 

Net other-than-temporary impairment was $326 million in the third quarter, compared with $137 million in the second 

quarter of 2010. The increase was due primarily to a decline in forecasted home prices for certain geographic regions that 

resulted in a decrease in projected cash flows on subprime and Alt-A securities. 

The company provides further discussion of its financial results and condition, credit performance, fair value balance 

sheets, and other matters in its quarterly report on Form 10-Q for the quarter ended September 30, 2010, which was filed 

today with the Securities and Exchange Commission. Further information about the company’s credit performance, the 

characteristics of its guaranty book of business, the drivers of its credit losses, its calculation of credit losses, its 

foreclosure-prevention efforts, and other measures is contained in the “Third-Quarter 2010 Credit Supplement” on Fannie 

Mae’s Web site, www.fanniemae.com. 
Third-Quarter 2010 Results 6 

NET WORTH AND U.S. TREASURY FUNDING

The Acting Director of FHFA has requested $2.5 billion of funds from Treasury on the company’s behalf under the terms 

of the senior preferred stock purchase agreement between Fannie Mae and Treasury to eliminate the company’s net worth 

deficit as of September 30, 2010. The company’s third quarter dividend of $2.1 billion on its senior preferred stock held 

by Treasury was declared by FHFA and paid by us on September 30, 2010. 

On September 30, 2010, Treasury provided to the company $1.5 billion to cure its net worth deficit as of June 30, 2010. 

As a result of this draw, the aggregate liquidation preference of the senior preferred stock increased from $84.6 billion to 

$86.1 billion as of September 30, 2010, and will increase to $88.6 billion upon the receipt of funds from Treasury to 

eliminate the company’s third-quarter 2010 net worth deficit. Through September 30, 2010, the company has paid in 

aggregate $8.1 billion to Treasury in dividends on the senior preferred stock. 

Although Treasury’s funds under the senior preferred stock purchase agreement permit the company to remain solvent 

and avoid receivership, the resulting dividend payments are substantial and the company does not expect to earn profits in 

excess of its annual dividend obligation to Treasury for the indefinite future. As draws from Treasury for credit losses 

abate, the company expects its draws to be driven increasingly by dividend payments to Treasury. 

FAIR VALUE UPDATE

The fair value of the company’s net assets increased by $7.1 billion from June 30, 2010, which resulted in a fair value net 

deficit of $130.8 billion as of September 30, 2010. The increase was due to credit-related items that benefited from the 

decline in the level of interest rates, which shortened the expected life of the guaranty book of business and reduced 

expected losses; continued improvement in the spread between the company’s mortgage assets and associated debt and 

derivatives; and the receipt of $1.5 billion of capital from Treasury under the senior preferred stock purchase agreement. 

As part of Fannie Mae’s disclosure requirements with FHFA, the company discloses on a quarterly basis supplemental 

non-GAAP consolidated fair value balance sheets, which reflect the company’s assets and liabilities at estimated fair 

value. The fair value of the company’s net assets is not a measure defined within generally accepted accounting principles 

and may not be comparable to similarly titled measures reported by other companies. The estimated fair value of the 

company’s net assets is calculated as of a particular point in time based on its existing assets and liabilities, and does not 

incorporate other factors that may have a significant impact on its long-term fair value. As a result, the estimated fair 

value of the company’s net assets presented in its non-GAAP consolidated fair value balance sheets does not represent an 

estimate of its net realizable value, liquidation value, or its market value as a whole. In addition, the fair value of the 

company’s net assets attributable to common stockholders presented in its fair value balance sheet does not represent an 

estimate of the value it expects to realize from operating the company, nor what it expects to draw from Treasury under 

the terms of the senior preferred stock purchase agreement. 
Third-Quarter 2010 Results 7 

For more information on the change in the company’s fair value net deficit, please refer to “Supplemental Non-GAAP 

Information—Fair Value Balance Sheets” in the company’s quarterly report on Form 10-Q for the period ended 

September 30, 2010, which was filed today with the SEC. See also “Supplemental Non-GAAP Consolidated Fair Value 

Balance Sheets” and “Explanation and Reconciliation of Non-GAAP Measures to GAAP Measures” later in this release 

for a reconciliation of the company’s fair value balance sheets to its GAAP condensed consolidated balance sheets. 

FORECLOSURE PROCESS DEFICIENCIES 

Recently, a number of the company’s single-family mortgage servicers temporarily halted foreclosures in some or all 

states after discovering deficiencies in their processes relating to the execution of affidavits in connection with the 

foreclosure process. These deficiencies have generated significant public concern and are currently being investigated by 

various government agencies and by the attorneys general of all 50 states, and have resulted in courts in at least two states 

issuing rules applying to the foreclosure process that the company anticipates will increase costs and may result in delays. 

The company has directed its servicers to review their policies and procedures relating to the execution of affidavits, 

verifications, and other legal documents in connection with the foreclosure process. The company is also addressing 

concerns that have been raised regarding the practices of some law firms that handle the foreclosure process in Florida for 

the company’s mortgage servicers. In the case of one law firm under investigation by the Florida attorney general’s office, 

the company has instructed the firm to stop processing foreclosures for its mortgage loans and has stopped servicers from 

referring new matters to the firm. 

The Acting Director of FHFA issued statements on October 1 and October 13, 2010 regarding servicers’ foreclosure 

processing issues. The company is currently coordinating with FHFA regarding appropriate corrective actions consistent 

with the four-point policy framework issued by FHFA on October 13, 2010. During the first nine months of 2010, 80 

percent of the single-family properties the company acquired through foreclosures involved mortgages on which the 

borrowers had made three or fewer payments in the preceding 12 months. 

Although the company expects the foreclosure pause will likely negatively affect its serious delinquency rates, creditrelated expenses, credit losses, and foreclosure timelines, it cannot yet predict the extent of the impact. 

FORECLOSURE ACTIVITY

The company acquired 85,349 single-family REO properties through foreclosure in the third quarter of 2010, compared 

with 68,838 in the second quarter of 2010. As of September 30, 2010, the company’s inventory of single-family REO 

properties was 166,787, compared with 129,310 as of June 30, 2010. The carrying value of the company’s single-family 

REO was $16.4 billion, compared with $13.0 billion as of June 30, 2010. 
Third-Quarter 2010 Results 8 

The company has seen an increase in the percentage of its properties that it is unable to market for sale in 2010 compared 

with 2009, in most cases because the properties are within redemption periods, are still occupied, or are being repaired. As 

of September 30, 2010, approximately 31 percent of the company’s properties that it is unable to market for sale were in 

redemption status, which lengthens the time a property is in REO inventory by an average of two to six months. 

Additionally, as of September 30, 2010, approximately 38 percent of the company’s properties that it is unable to market 

for sale were in occupied status, which lengthens the time a property is in REO inventory by an average of one to four 

months. 

The company’s single-family foreclosure rate, which reflects the annualized number of single-family properties acquired 

through foreclosure as a percentage of the total number of loans in its conventional single-family guaranty book of 

business, was 1.91 percent on an annualized basis in the third quarter, compared with 1.52 percent in the second quarter of 

2010. 

BUSINESS SEGMENT RESULTS

Fannie Mae conducts its activities through three complementary businesses: Single-Family Credit Guaranty, Multifamily 

Credit Guaranty, and Capital Markets. The company’s Single-Family Credit Guaranty business works with its lender 

customers to securitize single-family mortgage loans into Fannie Mae MBS and to facilitate the purchase of single-family 

mortgage loans for its mortgage portfolio. Multifamily works with the company’s lender customers to securitize 

multifamily mortgage loans into Fannie Mae MBS and to facilitate the purchase of multifamily mortgage loans for its 

mortgage portfolio. The company’s Multifamily business also makes debt and equity investments to increase the supply of 

affordable housing. The company’s Capital Markets group manages its investment activity in mortgage loans, mortgagerelated securities, and other investments. 

Single-Family guaranty book of business was $2.85 trillion as of September 30, 2010, compared with $2.87 trillion as of 

June 30, 2010. Single-family guaranty fee income for the third quarter of 2010 was $1.8 billion, the same as the second 

quarter of 2010. The Single-Family business lost $5.5 billion in the third quarter of 2010 due primarily to credit-related 

expenses of $5.6 billion, almost all of which were attributable to loans purchased or guaranteed from 2005 through 2008. 

The Single-Family business lost $5.1 billion in the second quarter of 2010. 

Multifamily guaranty book of business as of September 30, 2010 was $187.4 billion, compared with $186.1 billion as of 

June 30, 2010. Multifamily recorded credit-related expenses of $2 million in the third quarter of 2010, compared with a 

net benefit of $20 million in the second quarter of 2010. Multifamily earned $181 million in the third quarter of 2010, 

compared with $119 million in the second quarter of 2010. 
Third-Quarter 2010 Results 9 

Capital Markets’ net interest income was $4.1 billion in the third quarter of 2010, compared with $3.5 billion in the 

second quarter of 2010. Fair value gains were $436 million, compared with $631 million in the second quarter of 2010. 

Net other-than-temporary impairment was $323 million, compared with $137 million in the second quarter of 2010. The 

net mortgage investment portfolio balance was $802.9 billion on September 30, 2010, compared with $817.8 billion on 

June 30, 2010, resulting from purchases of $57.8 billion, liquidations of $47.2 billion, and sales of $25.6 billion during the 

quarter. Capital Markets earned $4.8 billion in the third quarter of 2010, compared with $4.4 billion in the second quarter 

of 2010. 

# # # 

In this release, the company has presented a number of estimates, forecasts, expectations, and other forward-looking statements regarding the 

company’s future financial results, the profitability of its loans, its future serious delinquency rates, credit losses and credit-related expenses, its 

draws from and dividends to be paid to Treasury, the performance and caliber of loans it has acquired and will acquire, its planned borrower 

initiatives, and the impact of the foreclosure pause on the company’s serious delinquency rates, credit-related expenses, credit losses, and 

foreclosure timelines. 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 borrowers, 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 quarterly report on Form 10-Q for the period ended September 30, 2010 and its annual report on Form 10-K for 

the year ended December 31, 2009, and elsewhere in this release, could result in actual results being materially different from what is set forth in the 

forward-looking statements. 

Fannie Mae exists to expand affordable housing and bring global capital to local communities in order to serve the U.S. housing market. Fannie 

Mae has a federal charter and operates in America's secondary mortgage market to enhance the liquidity of the mortgage market by providing funds 

to mortgage bankers and other lenders so that they may lend to home buyers. Our job is to help those who house America. 

 
Third-Quarter 2010 Results 10 

 

ANNEX I 

FANNIE MAE

 (In conservatorship)

Condensed Consolidated Balance Sheets

(Dollars in millions, except share amounts) 

(Unaudited) 

 As of

 September 30, December 31, 

 2010 2009 

ASSETS

Cash and cash equivalents (includes cash of consolidated trusts of $4 and $2,092, respectively) $ 11,382 $ 6,812 

Restricted cash (includes restricted cash of consolidated trusts of $52,796 and $-, respectively) 59,764 3,070 

Federal funds sold and securities purchased under agreements to resell or similar arrangements 20,006 53,684 

Investments in securities: 

 Trading, at fair value (includes securities of consolidated trusts of $22 and $5,599, respectively) 69,459 111,939 

 Available-for-sale, at fair value (includes securities of consolidated trusts of $591 and $10,513, respectively, 

 and securities pledged as collateral that may be sold or repledged of $- and $1,148, respectively) 102,185 237,728 

 Total investments in securities 171,644 349,667 

Mortgage loans: 

 Loans held for sale, at lower of cost or fair value 923 18,462 

 Loans held for investment, at amortized cost 

 Of Fannie Mae 410,019 256,434 

 Of consolidated trusts (includes loans at fair value of $707 and $-, respectively, and loans pledged as collateral that may be sold or repledged 

 of $2,993 and $1,947, respectively) 2,559,629 129,590 

 Total loans held for investment 2,969,648 386,024 

 Allowance for loan losses (59,740) (9,925)

 Total loans held for investment, net of allowance 2,909,908 376,099 

 Total mortgage loans 2,910,831 394,561 

Advances to lenders 7,061 5,449 

Accrued interest receivable: 

 Of Fannie Mae 5,754 3,774 

 Of consolidated trusts 10,029 519 

 Allowance for accrued interest receivable (3,785) (536)

 Total accrued interest receivable, net of allowance 11,998 3,757 

Acquired property, net 17,590 9,142 

Derivative assets, at fair value 955 1,474 

Guaranty assets 419 8,356 

Deferred tax assets, net 528 909 

Partnership investments 1,823 2,372 

Servicer and MBS trust receivable 1,128 18,329 

Other assets 14,493 11,559 

Total assets $ 3,229,622 $ 869,141 

LIABILITIES AND EQUITY (DEFICIT)

Liabilities: 

Accrued interest payable: 

 Of Fannie Mae $ 4,374 $ 4,951 

 Of consolidated trusts 9,838 29 

Federal funds purchased and securities sold under agreements to repurchase 185 - 

Short-term debt: 

 Of Fannie Mae 219,166 200,437 

 Of consolidated trusts 5,969 - 

Long-term debt: 

 Of Fannie Mae (includes debt at fair value of $2,950 and $3,274, respectively) 592,881 567,950 

 Of consolidated trusts (includes debt at fair value of $351 and $-, respectively) 2,385,446 6,167 

Derivative liabilities, at fair value 1,641 1,029 

Reserve for guaranty losses (includes $38 and $4,772, respectively, related to Fannie Mae MBS included in Investments in securities) 276 54,430 

Guaranty obligations 747 13,996 

Partnership liabilities 1,850 2,541 

Servicer and MBS trust payable 3,173 25,872 

Other liabilities 6,523 7,020 

 Total liabilities 3,232,069 884,422 

Commitments and contingencies (Note 17) - - 

Fannie Mae stockholders' equity (deficit): 

 Senior preferred stock, 1,000,000 shares issued and outstanding 86,100 60,900 

 Preferred stock, 700,000,000 shares are authorized—577,206,010 and 579,735,457 shares both issued 

 and outstanding, respectively 20,221 20,348 

 Common stock, no par value, no maximum authorization—1,269,572,119 and 1,265,674,761 shares 

 issued, respectively; 1,117,978,432 and 1,113,358,051 shares outstanding, respectively 667 664 

 Additional paid-in capital - 2,083 

 Accumulated deficit (100,932) (90,237)

 Accumulated other comprehensive loss (1,182) (1,732)

 Treasury stock, at cost, 151,593,687 and 152,316,710 shares, respectively (7,401) (7,398)

 Total Fannie Mae stockholders’ deficit (2,527) (15,372)

Noncontrolling interest 80 91 

 Total deficit (2,447) (15,281)

Total liabilities and equity (deficit) $ 3,229,622 $ 869,141 

See Notes to Condensed Consolidated Financial Statements 
Third-Quarter 2010 Results 11 

FANNIE MAE

(In conservatorship)

Condensed Consolidated Statements of Operations

(Dollars and shares in millions, except per share amounts) 

(Unaudited) 

 For the For the 

 Three Months Ended Nine Months Ended

 September 30, September 30,

 2010 2009 2010 2009 

Interest income: 

 Trading securities $ 310 $ 862 $ 955 $ 2,775 

 Available-for-sale securities 1,313 3,475 4,175 10,503 

 Mortgage loans: 

 Of Fannie Mae 3,859 3,229 11,107 12,328 

 Of consolidated trusts 32,807 2,061 100,810 4,171 

 Other 31 48 111 314 

 Total interest income 38,320 9,675 117,158 30,091 

Interest expense: 

 Short-term debt: 

 Of Fannie Mae 190 390 470 2,097 

 Of consolidated trusts 4 - 9 - 

 Long-term debt: 

 Of Fannie Mae 4,472 5,370 14,528 16,922 

 Of consolidated trusts 28,878 85 90,379 259 

 Total interest expense 33,544 5,845 105,386 19,278 

Net interest income 4,776 3,830 11,772 10,813 

Provision for loan losses (4,696) (2,546) (20,930) (7,670)

Net interest income (loss) after provision for loan losses 80 1,284 (9,158) 3,143 

Guaranty fee income (includes imputed interest of $27 and $461 for the three months ended September 30, 2010 and 

 2009, respectively, and $86 and $932 for the nine months ended September 30, 2010 and 2009, respectively) 51 1,923 157 5,334 

Investment gains, net 82 785 271 963 

Other-than-temporary impairments (366) (1,018) (600) (7,768)

Noncredit portion of other-than-temporary impairments recognized in other comprehensive loss 40 79 (99) 423 

Net other-than-temporary impairments (326) (939) (699) (7,345)

Fair value gains (losses), net 525 (1,536) (877) (2,173)

Debt extinguishment losses, net (includes debt extinguishment losses related to 

 consolidated trusts of $29 and $129 for the three months and nine months ended September 30, 2010, respectively) (214) (11) (497) (280)

Income (losses) from partnership investments 47 (520) (37) (1,448)

Fee and other income 253 194 674 583 

 Non-interest income (loss) 418 (104) (1,008) (4,366)

Administrative expenses: 

 Salaries and employee benefits 325 293 973 831 

 Professional services 305 178 759 501 

 Occupancy expenses 43 47 124 141 

 Other administrative expenses 57 44 149 122 

 Total administrative expenses 730 562 2,005 1,595 

Provision for guaranty losses 78 19,350 111 52,785 

Foreclosed property expense 787 64 1,255 1,161 

Other expenses 243 231 613 828 

 Total expenses 1,838 20,207 3,984 56,369 

Loss before federal income taxes (1,340) (19,027) (14,150) (57,592)

Benefit for federal income taxes (9) (143) (67) (743)

Net loss (1,331) (18,884) (14,083) (56,849)

 Less: Net (income) loss attributable to the noncontrolling interest (8) 12 (4) 55 

Net loss attributable to Fannie Mae (1,339) (18,872) (14,087) (56,794)

Preferred stock dividends (2,116) (883) (5,550) (1,323)

Net loss attributable to common stockholders $ (3,455) $ (19,755) $ (19,637) $ (58,117)

 

Loss per share - Basic and Diluted $ (0.61) $ (3.47) $ (3.45) $ (10.24)

Weighted-average common shares outstanding - Basic and Diluted 5,695 5,685 5,694 5,677 

 

 

See Notes to Condensed Consolidated Financial Statements 
Third-Quarter 2010 Results 12 

FANNIE MAE

(In conservatorship)

Condensed Consolidated Statements of Cash Flows

(Dollars in millions) 

(Unaudited) 

 For the Nine Months 

 Ended September 30, 

 2010 2009 

Cash flows used in operating activities: 

Net loss $ (14,083) $ (56,849)

Reconciliation of net loss to net cash used in operating activities 

 Amortization of debt of Fannie Mae cost basis adjustments 1,225 2,807 

 Amortization of debt of consolidated trusts cost basis adjustments (721) (5)

 Provision for loan and guaranty losses 21,041 60,455 

 Valuation (gains) losses (2,023) 2,961 

 Current and deferred federal income taxes 272 (1,861)

 Derivatives fair value adjustments 910 (708)

 Purchases of loans held for sale (61) (91,889)

 Proceeds from repayments of loans held for sale 43 1,991 

 Net change in trading securities, excluding non-cash transfers (36,227) 9,150 

 Other, net (6,222) (4,575)

Net cash used in operating activities (35,846) (78,523)

Cash flows provided by investing activities:

 Purchases of trading securities held for investment (7,984) (27,183)

 Proceeds from maturities of trading securities held for investment 1,997 9,413 

 Proceeds from sales of trading securities held for investment 21,488 7,395 

 Purchases of available-for-sale securities (262) (158,893)

 Proceeds from maturities of available-for-sale securities 12,927 37,842 

 Proceeds from sales of available-for-sale securities 6,680 270,678 

 Purchases of loans held for investment (59,145) (35,169)

 Proceeds from repayments of loans held for investment of Fannie Mae 15,025 26,576 

 Proceeds from repayments of loans held for investment of consolidated trusts 378,941 19,210 

 Net change in restricted cash (11,111) - 

 Advances to lenders (44,951) (66,017)

 Proceeds from disposition of acquired property and preforeclosure sales 28,079 15,791 

 Net change in federal funds sold and securities purchased under agreements to resell or similar arrangements 33,219 23,101 

 Other, net (476) (19,632)

Net cash provided by investing activities 374,427 103,112 

Cash flows used in financing activities:

 Proceeds from issuance of short-term debt of Fannie Mae 555,422 1,118,028 

 Proceeds from issuance of short-term debt of consolidated trusts 10,067 - 

 Payments to redeem short-term debt of Fannie Mae (537,181) (1,210,316)

 Payments to redeem short-term debt of consolidated trusts (27,852) - 

 Proceeds from issuance of long-term debt of Fannie Mae 335,115 232,956 

 Proceeds from issuance of long-term debt of consolidated trusts 182,014 22 

 Payments to redeem long-term debt of Fannie Mae (311,257) (211,063)

 Payments to redeem long-term debt of consolidated trusts (560,170) (394)

Payments of cash dividends on senior preferred stock to Treasury (5,554) (1,320)

 Proceeds from senior preferred stock purchase agreement with Treasury 25,200 44,900 

 Net change in federal funds purchased and securities sold under agreements to repurchase 185 47 

Net cash used in financing activities (334,011) (27,140)

Net increase (decrease) in cash and cash equivalents 4,570 (2,551)

Cash and cash equivalents at beginning of period 6,812 17,933 

Cash and cash equivalents at end of period $ 11,382 $ 15,382 

Cash paid during the period for:

Interest $ 107,324 $ 21,403 

Income taxes - 876 

Non-cash activities (excluding transition-related impacts - see Note 2):

Mortgage loans acquired by assuming debt $ 322,923 $ 4 

Net transfers from mortgage loans held for investment of consolidated trusts to mortgage loans held for 

 investment of Fannie Mae 142,736 - 

Transfers from advances to lenders to investments in securities - 65,218 

Transfers from advances to lenders to loans held for investment of consolidated trusts 40,795 - 

Net transfers from mortgage loans to acquired property 49,305 3,744 

See Notes to Condensed Consolidated Financial Statements 
Third-Quarter 2010 Results 13 

FANNIE MAE

(In conservatorship)

Condensed Consolidated Statements of Changes in Equity (Deficit)

(Dollars and shares in millions, except per share amounts) 

(Unaudited) 

 Fannie Mae Stockholders’ Equity (Deficit)

 Retained Accumulated

 Shares Outstanding Additional Earnings Other Non Total 

 Senior Senior Preferred Common Paid-In (Accumulated Comprehensive Treasury Controlling Equity 

 Preferred Preferred Common Preferred Stock Stock Capital Deficit) Loss Stock Interest (Deficit) 

Balance as of December 31, 2008 1 597 1,085 $ 1,000 $ 21,222 $ 650 $ 3,621 $ (26,790) $ (7,673) $ (7,344) $ 157 $ (15,157)

Cumulative effect from the adoption of a

new accounting standard on other-than-

 temporary impairments, net of tax - - - - - - - 8,520 (5,556) - - 2,964 

Change in investment in noncontrolling 

 interest - - - - - - - - - - 3 3 

 Comprehensive loss: 

 Net loss - - - - - - - (56,794) - - (55) (56,849)

 Other comprehensive loss, net of tax effect: 

 Changes in net unrealized losses on 

 available-for-sale securities 

 (net of tax of $3,039) - - - - - - - - 5,644 - - 5,644 

 Reclassification adjustment for other-than- 

 temporary impairments recognized 

 in net loss (net of tax of $2,536) - - - - - - - - 4,809 - - 4,809 

 Reclassification adjustment for gains 

 included in net loss (net of tax of $102) - - - - - - - - (190) - - (190)

 Unrealized gains on guaranty assets and 

 guaranty fee buy-ups - - - - - - - - 196 - - 196 

 Amortization of net cash flow hedging 

 gains - - - - - - - - 9 - - 9 

 Prior service cost and actuarial gains, 

 net of amortization for defined 

 benefit plans - - - - - - - - 22 - - 22 

 Total comprehensive loss (46,359)

 Senior preferred stock dividends - - - - - - (1,320) - - - - (1,320)

 Increase to senior preferred liquidation 

 preference - - - 44,900 - - - - - - - 44,900 

 Conversion of convertible preferred stock 

 into common stock - (15) 24 - (765) 13 752 - - - - - 

 Other - - 1 - - - 58 1 - (50) - 9 

Balance as of September 30, 2009 1 582 1,110 $ 45,900 $ 20,457 $ 663 $ 3,111 $ (75,063) $ (2,739) $ (7,394) $ 105 $ (14,960)

 

Balance as of December 31, 2009 1 580 1,113 $ 60,900 $ 20,348 $ 664 $ 2,083 $ (90,237) $ (1,732) $ (7,398) $ 91 $ (15,281)

 Cumulative effect from the adoption of 

 the accounting standards on transfers of 

 financial assets and consolidation - - - - - - - 6,706 (3,394) - (14) 3,298 

Balance as of January 1, 2010, adjusted 1 580 1,113 60,900 20,348 664 2,083 (83,531) (5,126) (7,398) 77 (11,983)

 Change in investment in noncontrolling 

 interest - - - - - - - - - - (1) (1)

 Comprehensive loss: 

 Net loss - - - - - - - (14,087) - - 4 (14,083)

 Other comprehensive loss, net of tax effect: 

 Changes in net unrealized losses on 

 available-for-sale securities, (net of tax 

 of $1,889) - - - - - - - - 3,507 - - 3,507 

 Reclassification adjustment for other-than- 

 temporary impairments recognized 

 in net loss (net of tax of $239) - - - - - - - - 460 - - 460 

 Reclassification adjustment for gains 

 included in net loss (net of tax of $16) - - - - - - - - (29) - - (29)

 Unrealized gains on guaranty assets and 

 guaranty fee buy-ups - - - - - - - - 1 - - 1 

 Prior service cost and actuarial gains, 

 

net of amortization for defined benefit 

plans - - - - - - - - 5 - - 5 

 Total comprehensive loss (10,139)

 Senior preferred stock dividends - - - - - - (2,240) (3,314) - - - (5,554)

 Increase to senior preferred liquidation 

 preference - - - 25,200 - - - - - - - 25,200 

 Conversion of convertible preferred stock 

 into common stock - (3) 4 - (127) 3 124 - - - - - 

 Other - - 1 - - - 33 - - (3) - 30 

Balance as of September 30, 2010 1 577 1,118 $ 86,100 $ 20,221 $ 667 $ - $ (100,932) $ (1,182) $ (7,401) $ 80 $ (2,447)

See Notes to Condensed Consolidated Financial Statements 
Third-Quarter 2010 Results 14 

Supplemental Non-GAAP Consolidated Fair Value Balance Sheets 

 As of September 30, 2010 As of December 31, 2009(1) 

 GAAP GAAP 

 Carrying Fair Value Estimated Carrying Fair Value Estimated 

 Value Adjustment(2) Fair Value Value Adjustment(2) Fair Value 

 (Dollars in millions) 

Assets: 

Cash and cash equivalents $ 71,146 $ - $ 71,146 (3) $ 9,882 $ - $ 9,882 (3) 

Federal funds sold and securities purchased 

under agreements to resell or similar 

arrangements 20,006 - 20,006 (3) 53,684 (28) 53,656 (3) 

Trading securities 69,459 - 69,459 (3) 111,939 - 111,939 (3) 

Available-for-sale securities 102,185 - 102,185 (3) 237,728 - 237,728 (3) 

Mortgage loans: 

Mortgage loans held for sale 923 9 932 (3) 18,462 153 18,615 (3) 

Mortgage loans held for investment, net of 

 allowance for loan losses: 

 Of Fannie Mae 364,746 (36,151) 328,595 (3) 246,509 (5,209) 241,300 (3) 

 Of consolidated trusts 2,545,162 66,355 (4) 2,611,517 (3) (5) 129,590 (45) 129,545 (3) (5) 

Total mortgage loans 2,910,831 30,213 2,941,044 (6) 394,561 (5,101) 389,460 (6) 

Advances to lenders 7,061 (236) 6,825 (3) 5,449 (305) 5,144 (3) 

Derivative assets at fair value 955 - 955 (3) 1,474 - 1,474 (3) 

Guaranty assets and buy-ups, net 419 387 806 (3) (7) 9,520 5,104 14,624 (3) (7) 

Total financial assets 3,182,062 30,364 3,212,426 (3) 824,237 (330) 823,907 (3) 

Master servicing assets and credit enhancements 491 3,539 4,030 (7) (8) 651 5,917 6,568 (7) (8) 

Other assets 47,069 (251) 46,818 (8) 44,253 373 44,626 (8) 

Total assets $ 3,229,622 $ 33,652 $ 3,263,274 $ 869,141 $ 5,960 $ 875,101 

Liabilities: 

Federal funds purchased and securities sold 

under agreements to repurchase $ 185 $ - $ 185 (3) $ - $ - $ - (3) 

Short-term debt: 

 Of Fannie Mae 219,166 150 219,316 (3) 200,437 56 200,493 (3) 

 Of consolidated trusts 5,969 - 5,969 (3) - - - (3) 

Long-term debt: 

 Of Fannie Mae 592,881 (9) 30,869 623,750 (3) 567,950 (9) 19,473 587,423 (3) 

 Of consolidated trusts 2,385,446 (9) 128,233 (4) 2,513,679 (3) 6,167 (9) 143 6,310 (3) 

Derivative liabilities at fair value 1,641 - 1,641 (3) 1,029 - 1,029 (3) 

Guaranty obligations 747 3,134 3,881 (3) 13,996 124,586 138,582 (3) 

Total financial liabilities 3,206,035 162,386 3,368,421 (3) 789,579 144,258 933,837 (3) 

Other liabilities 26,034 (415) 25,619 (10) 94,843 (54,878) 39,965 (10) 

Total liabilities 3,232,069 161,971 3,394,040 884,422 89,380 973,802 

Equity (deficit): 

Fannie Mae stockholders' equity (deficit): 

Senior preferred(11) 86,100 - 86,100 60,900 - 60,900 

Preferred 20,221 (19,916) 305 20,348 (19,629) 719 

Common (108,848) (108,403) (217,251) (96,620) (63,791) (160,411) 

Total Fannie Mae stockholders' 

 deficit/non-GAAP fair value of net assets $ (2,527) $ (128,319) $ (130,846) $ (15,372) $ (83,420) $ (98,792) 

Noncontrolling interests 80 - 80 91 - 91 

Total deficit (2,447) (128,319) (130,766) (15,281) (83,420) (98,701) 

Total liabilities and equity (deficit) $ 3,229,622 $ 33,652 $ 3,263,274 $ 869,141 $ 5,960 $ 875,101 
Third-Quarter 2010 Results 15 

Explanation and Reconciliation of Non-GAAP Measures to GAAP Measures 

(1) Certain prior period amounts have been reclassified to conform to the current period presentation. 

(2) Each of the amounts listed as a “fair value adjustment” represents the difference between the carrying value included in our 

GAAP condensed consolidated balance sheets and our best judgment of the estimated fair value of the listed item. 

(3) We determined the estimated fair value of these financial instruments in accordance with the fair value accounting standard 

as described in “Note 16, Fair Value.” 

(4) Fair value exceeds the carrying value of consolidated loans and debt of consolidated trusts due to the fact that the loans and 

debt were consolidated in our GAAP condensed consolidated balance sheet at unpaid principal balance at transition. Also 

impacting the difference between fair value and carrying value of the consolidated loans is the credit component of the loan. 

This credit component is reflected in the net guaranty obligation, which is included in the consolidated loan fair value, but 

was presented as a separate line item in our fair value balance sheet in prior periods. 

(5) Includes certain mortgage loans that we elected to report at fair value in our GAAP condensed consolidated balance sheet of 

$707 million as of September 30, 2010. We did not elect to report any mortgage loans at fair value in our consolidated 

balance sheet as of December 31, 2009. 

(6) Performing loans had a fair value of $2.8 trillion and an unpaid principal balance of $2.7 trillion as of September 30, 2010 

compared to a fair value of $345.5 billion and an unpaid principal balance of $348.2 billion as of December 31, 

2009. Nonperforming loans, which include loans that are delinquent by one or more payments, had a fair value of $178.7 

billion and an unpaid principal balance of $301.5 billion as of September 30, 2010 compared to a fair value of $43.9 billion 

and an unpaid principal balance of $79.8 billion as of December 31, 2009. See "Note 16, Fair Value" for additional 

information on valuation techniques for performing and non performing loans. 

(7) In our GAAP condensed consolidated balance sheets, we report the guaranty assets as a separate line item. Other guaranty 

related assets are within the “Other assets” line items and they include buy-ups, master servicing assets and credit 

enhancements. On a GAAP basis, our guaranty assets totaled $419 million and $8.4 billion as of September 30, 2010 and 

December 31, 2009, respectively. The associated buy-ups totaled $1 million and $1.2 billion as of September 30, 2010 and 

December 31, 2009, respectively. 

(8) The line items “Master servicing assets and credit enhancements” and “Other assets” together consist of the assets presented 

on the following six line items in our GAAP condensed consolidated balance sheets: (a) Total accrued interest receivable, 

net of allowance; (b) Acquired property, net; (c) Deferred tax assets, net; (d) Partnership investments; (e) Servicer and MBS 

trust receivable and (f) Other assets. The carrying value of these items in our GAAP condensed consolidated balance sheets 

together totaled $47.6 billion and $46.1 billion as of September 30, 2010 and December 31, 2009, respectively. We deduct 

the carrying value of the buy-ups associated with our guaranty obligation, which totaled $1 million and $1.2 billion as of 

September 30, 2010 and December 31, 2009, respectively, from “Other assets” reported in our GAAP condensed 

consolidated balance sheets because buy-ups are a financial instrument that we combine with guaranty assets in our 

disclosure in “Note 16, Fair Value.” We have estimated the fair value of master servicing assets and credit enhancements 

based on our fair value methodologies described in Note 16. 

(9) Includes certain long-term debt instruments that we elected to report at fair value in our GAAP condensed consolidated 

balance sheets of $3.3 billion as of September 30, 2010 and December 31, 2009. 

(10) The line item “Other liabilities” consists of the liabilities presented on the following six line items in our GAAP condensed 

consolidated balance sheets: (a) Accrued interest payable of Fannie Mae; (b) Accrued interest payable of consolidated 

trusts; (c) Reserve for guaranty losses; (d) Partnership liabilities; (e) Servicer and MBS trust payable; and (f) Other 

liabilities. The carrying value of these items in our GAAP condensed consolidated balance sheets together totaled $26.0 

billion and $94.8 billion as of September 30, 2010 and December 31, 2009, respectively. The GAAP carrying values of 

these other liabilities generally approximate fair value. We assume that certain other liabilities, such as deferred revenues, 

have no fair value. Although we report the “Reserve for guaranty losses” as a separate line item in our condensed 

consolidated balance sheets, it is incorporated into and reported as part of the fair value of our guaranty obligations in our 

non-GAAP supplemental consolidated fair value balance sheets. 

(11) The amount included in “estimated fair value” of the senior preferred stock is the liquidation preference, which is the same 

as the GAAP carrying value, and does not reflect fair value.