UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

☑ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES 

EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2020

OR

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES 

EXCHANGE ACT OF 1934

For the transition period from to 

Commission file number: 0-50231

Federal National Mortgage Association

(Exact name of registrant as specified in its charter) 

Fannie Mae

Federally chartered corporation 52-0883107 1100 15th Street, NW 800 232-6643

Washington, DC 20005

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

(Address of principal executive 

offices, including zip code)

(Registrant’s telephone number, 

including area code)

Securities registered pursuant to Section 12(b) of the Act: 

Title of each class Trading Symbol(s) Name of each exchange on which registered

None N/A N/A

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities 

Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such 

reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 

pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that 

the registrant was required to submit such files). Yes ☑ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller 

reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller 

reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. 

Large accelerated filer ☑ Accelerated filer ☐

Non-accelerated filer ☐ Smaller reporting company ☐

Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for 

complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☑ 

As of June 30, 2020, there were 1,158,087,567 shares of common stock of the registrant outstanding.
TABLE OF CONTENTS

Page

PART I—Financial Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

Item 1. Financial Statements

Condensed Consolidated Balance Sheets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70

Condensed Consolidated Statements of Operations and Comprehensive Income . . . . . . . . . . . . . . . . . . . . 71

Condensed Consolidated Statements of Cash Flows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72

Condensed Consolidated Statements of Changes in Equity (Deficit) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73

Note 1—Summary of Significant Accounting Policies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75

Note 2—Consolidations and Transfers of Financial Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83

Note 3—Mortgage Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85

Note 4—Allowance for Loan Losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96

Note 5—Investments in Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99

Note 6—Financial Guarantees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102

Note 7—Short-Term and Long-Term Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103

Note 8—Derivative Instruments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104

Note 9—Segment Reporting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 107

Note 10—Concentrations of Credit Risk . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 109

Note 11—Netting Arrangements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 113

Note 12—Fair Value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 114

Note 13—Commitments and Contingencies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 126

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations . . . . . . . . . . . . . 1

Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

Executive Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

Legislation and Regulation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

Key Market Economic Indicators . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

Consolidated Results of Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

Consolidated Balance Sheet Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24

Retained Mortgage Portfolio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25

Guaranty Book of Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27

Business Segments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28

Single-Family Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28

Multifamily Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48

Liquidity and Capital Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57

Off-Balance Sheet Arrangements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62

Risk Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63

Critical Accounting Policies and Estimates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65

Impact of Future Adoption of New Accounting Guidance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66

Forward-Looking Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66

Item 3. Quantitative and Qualitative Disclosures about Market Risk . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 128

Item 4. Controls and Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 128

PART II—Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 130

Item 1. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 130

Item 1A. Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 131

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 135

Item 3. Defaults Upon Senior Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 136

Item 4. Mine Safety Disclosures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 136

Item 5. Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 136

Item 6. Exhibits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 137

Fannie Mae Second Quarter 2020 Form 10-Q i
PART I—FINANCIAL INFORMATION

Item 2. Management’s Discussion and Analysis of Financial 

Condition and Results of Operations

We have been under conservatorship, with the Federal Housing Finance Agency (“FHFA”) acting as conservator, since 

September 6, 2008. As conservator, FHFA succeeded to all rights, titles, powers and privileges of the company, and of any 

shareholder, officer or director of the company with respect to the company and its assets. The conservator has since 

provided for the exercise of certain authorities by our Board of Directors. Our directors do not have any fiduciary duties to 

any person or entity except to the conservator and, accordingly, are not obligated to consider the interests of the company, 

the holders of our equity or debt securities, or the holders of Fannie Mae MBS unless specifically directed to do so by the 

conservator. 

We do not know when or how the conservatorship will terminate, what further changes to our business will be made 

during or following conservatorship, what form we will have and what ownership interest, if any, our current common and 

preferred stockholders will hold in us after the conservatorship is terminated or whether we will continue to exist following 

conservatorship. The U.S. Department of the Treasury (“Treasury”) released a plan in September 2019 for housing 

finance reform (the “Treasury plan”) that includes recommendations related to ending our conservatorship. Congress and 

the Administration continue to consider options for reform of the housing finance system, including Fannie Mae. We are 

not permitted to retain more than $25 billion in capital reserves or to pay dividends or other distributions to stockholders 

other than Treasury. Our agreements with Treasury include covenants that significantly restrict our business activities. For 

additional information on the conservatorship, the uncertainty of our future, our agreements with Treasury, and recent 

developments relating to housing finance reform, see “Business—Conservatorship, Treasury Agreements and Housing 

Finance Reform” in our Form 10-K for the year ended December 31, 2019 (“2019 Form 10-K”), “Risk Factors” in our 2019 

Form 10-K and in this report, and “Management’s Discussion and Analysis of Financial Condition and Results of 

Operations (‘MD&A’)—Legislation and Regulation” in this report.

You should read this MD&A in conjunction with our unaudited condensed consolidated financial statements and related notes 

in this report and the more detailed information in our 2019 Form 10-K. You can find a “Glossary of Terms Used in This

Report” in our 2019 Form 10-K. 

Forward-looking statements in this report are based on management’s current expectations and are subject to significant 

uncertainties and changes in circumstances, as we describe in “Forward-Looking Statements.” Future events and our future 

results may differ materially from those reflected in our forward-looking statements due to a variety of factors, including those 

discussed in “Risk Factors” and elsewhere in this report and in our 2019 Form 10-K. 

Introduction

Fannie Mae is a leading source of financing for mortgages in the United States. Our revenues are primarily driven by guaranty 

fees we receive for managing the credit risk on loans underlying the mortgage-backed securities we issue. Our mission is to 

provide a stable source of liquidity to support housing in the U.S. for low- and moderate-income borrowers and renters. We 

operate in the secondary mortgage market, primarily working with lenders, who originate loans to borrowers. We do not 

originate loans or lend money directly to borrowers in the primary mortgage market. Instead, we securitize mortgage loans 

originated by lenders into Fannie Mae mortgage-backed securities that we guarantee (which we refer to as Fannie Mae MBS 

or our MBS); purchase mortgage loans and mortgage-related securities, primarily for securitization and sale at a later date; 

manage mortgage credit risk; and engage in other activities that support access to credit and the supply of affordable housing. 

Through our single-family and multifamily business segments, we provided $575.4 billion in liquidity to the mortgage market in 

the first half of 2020, which enabled the financing of approximately 2.3 million home purchases, refinancings or rental units.

 Fannie Mae Provided $575.4 Billion in Liquidity in the First Half of 2020

Unpaid Principal Balance Units

$161.0B 593K

Single-Family Home Purchases

$380.7B 1.3M

Single-Family Refinancings

$33.7B 373K

Multifamily Rental Units

MD&A | Introduction

Fannie Mae Second Quarter 2020 Form 10-Q 1
Executive Summary

Summary of Our Financial Performance

Quarterly Condensed Consolidated Results

(Dollars in billions)

$5.3

$5.9

$3.4

$2.5

$3.4

$2.5

Net revenues Net income Comprehensive income

Q2 2019 Q2 2020

The decrease in our net income in the second quarter of 2020, compared with the second quarter of 2019, was primarily driven 

by a shift from credit-related income to credit-related expense due to the economic dislocation caused by the COVID-19 

pandemic, partially offset by an increase in net interest income due to higher loan prepayments as a result of the historically 

low interest rate environment. Our net interest income for the second quarter of 2020 was also impacted by an update to our 

application of our accounting policy for nonaccrual loans that allowed us to continue accruing interest income on delinquent 

loans that were current at March 1, 2020 and have been negatively impacted by the COVID-19 pandemic. As a result of this 

update, we recognized $1.5 billion in net interest income related to these loans in the second quarter. See “Consolidated 

Results of Operations” for more information on our financial results and “Note 1, Summary of Significant Accounting Policies—

New Accounting Guidance” for more information about our policy for nonaccrual loans.

Year-to-Date Condensed Consolidated Results

(Dollars in billions)

$10.3

$11.3

$5.8

$3.0

$5.7

$3.0

Net revenues Net income Comprehensive income

First Half 2019 First Half 2020

The decrease in our net income in the first half of 2020, compared with the first half of 2019, was primarily driven by a shift 

from credit-related income to credit-related expense driven by the economic dislocation caused by the COVID-19 pandemic, 

partially offset by an increase in net interest income due to higher loan prepayments as a result of the historically low interest 

rate environment. Our net interest income in the first half of 2020 was also impacted by our recognition in the second quarter

of $1.5 billion in net interest income as a result of the update in our application of our policy for nonaccrual loans.

MD&A | Executive Summary

Fannie Mae Second Quarter 2020 Form 10-Q 2
Net worth. Our net worth was $16.5 billion as of June 30, 2020. This amount reflects:

• our net worth of $14.6 billion as of December 31, 2019;

• a reduction in our net worth of $663 million in the first quarter of 2020 driven by a charge of $1.1 billion to retained 

earnings due to our implementation of Accounting Standards Update 2016-13, Financial Instruments—Credit Losses, 

Measurement of Credit Losses on Financial Instruments and related amendments (the “CECL standard”) on January 

1, 2020, partially offset by comprehensive income of $476 million in the first quarter of 2020; and

• our comprehensive income of $2.5 billion in the second quarter of 2020.

See “Note 1, Summary of Significant Accounting Policies—New Accounting Guidance—The Current Expected Credit Loss 

Standard” for further details.

Changes in our net worth can be significantly impacted by market conditions that affect our net interest income; fluctuations in 

the estimated fair value of our derivatives and other financial instruments that we mark to market through our earnings; 

developments that affect our loss reserves, such as changes in interest rates, home prices or accounting standards, or events 

such as natural disasters or pandemics; and other factors, as we discuss in “Risk Factors” and “Consolidated Results of 

Operations” in our 2019 Form 10-K and in this report.

Financial performance. Our long-term financial performance will depend on many factors, including:

• the size of and our share of the U.S. mortgage market, which in turn will depend upon macroeconomic factors such 

as population growth, household formation and housing supply; 

• borrower performance and changes in macroeconomic factors, including home prices and interest rates; and

• actions by FHFA, the Administration and Congress relating to our business and housing finance reform, including the 

capital requirements that will be applicable to us, our ongoing financial obligations to Treasury, potential restrictions 

on our activities and our business footprint, our competitive environment, and actions we are required to take to 

support borrowers or the mortgage market.

Quarterly fluctuations in acquisition volumes, market share, guaranty fees, or acquisition credit characteristics in any one 

period typically have limited impact on the size and stability of our conventional guaranty book of business and the associated 

revenue, profitability, and credit quality. Only a portion of our guaranty book of business turns over each year. In eight of the 

past ten years, less than 20% of loans in our single-family conventional guaranty book of business held at year end had been 

originated during the year. Low mortgage rates have contributed to a significant amount of refinancing activity in the first six 

months of 2020. As a result, we acquired a higher-than-usual portion of our book of business during the first half of the year, 

with approximately 15% of the loans in our single-family conventional guaranty book of business as of June 30, 2020 

originated in the first half of 2020. Because we expect mortgage rates to remain low through 2021, we anticipate a large and 

growing portion of our book of business, originated in a historically-low-interest-rate environment, will have less incentive to 

refinance, slowing the pace at which loans in our book of business turn over in future years. A slower turnover rate in our book 

of business would reduce our ability to increase our revenues by increasing guaranty fees, as any such change would take 

longer to meaningfully increase the average charged guaranty fee on our total book of business. See “Legislation and 

Regulation—Developments Relating to Exiting Conservatorship” for a discussion of how this may impact our efforts to 

generate capital and “Consolidated Results of Operations—Net Interest Income” for information on how this may affect 

amortization income we receive in future periods.

As described further in “COVID-19 Impact” and “Risk Factors,” the COVID-19 pandemic has significantly affected our financial 

performance and we expect that it will continue to do so. Given the unprecedented nature of the COVID-19 pandemic and the 

fast pace at which new developments relating to the pandemic are occurring, it is difficult to assess or predict the short-term or 

long-term effects of the pandemic on our financial performance.

MD&A | Executive Summary

Fannie Mae Second Quarter 2020 Form 10-Q 3
Net Worth, Treasury Funding and Senior Preferred Stock Dividends 

Treasury has made a commitment under a senior preferred stock purchase agreement to provide funding to us under certain 

circumstances if we have a net worth deficit. Pursuant to the senior preferred stock purchase agreement, we issued shares of 

senior preferred stock to Treasury in 2008. 

Under the terms of the senior preferred stock, we will not owe senior preferred stock dividends to Treasury until we have 

accumulated over $25 billion in net worth as of the end of a quarter. Accordingly, no dividends were payable to Treasury for the 

second quarter of 2020, and none are payable for the third quarter of 2020. 

The charts below show information about our net worth, the remaining amount of Treasury’s funding commitment to us, senior 

preferred stock dividends we have paid Treasury and funds we have drawn from Treasury pursuant to its funding commitment.

Net Worth and Treasury

Funding Commitment

(Dollars in billions)

$16.5

$113.9

Net worth

Remaining Treasury funding commitment

As of June 30, 2020

Dividend Payments and Draws

(Dollars in billions)

$181.4

$119.8

Cumulative dividend payments to Treasury1

Cumulative draws from Treasury2

As of June 30, 2020

(1) Aggregate amount of dividends we have paid to Treasury on the senior preferred stock from 2008 through June 30, 2020. Under the terms 

of the senior preferred stock purchase agreement, dividend payments we make to Treasury do not offset our draws of funds from Treasury.

(2) Aggregate amount of funds we have drawn from Treasury pursuant to the senior preferred stock purchase agreement from 2008 through 

June 30, 2020.

The aggregate liquidation preference of the senior preferred stock was $135.4 billion as of June 30, 2020, unchanged from 

March 31, 2020 as a result of the decrease in our net worth during the first quarter of 2020. The aggregate liquidation 

preference of the senior preferred stock will increase to $138.0 billion as of September 30, 2020 due to the $2.5 billion

increase in our net worth during the second quarter of 2020. 

If we were to draw additional funds from Treasury under the senior preferred stock purchase agreement with respect to a 

future period, the amount of remaining funding under the agreement would be reduced by the amount of our draw, and the 

aggregate liquidation preference of the senior preferred stock would increase by the amount of our draw. For a description of 

the terms of the senior preferred stock purchase agreement and the senior preferred stock, see “Business—Conservatorship, 

Treasury Agreements and Housing Finance Reform” in our 2019 Form 10-K.

Treasury owns our senior preferred stock and a warrant to purchase 79.9% of our common stock. Treasury has also made a 

commitment under the senior preferred stock purchase agreement to provide us with funds to maintain a positive net worth 

under specified conditions. However, the U.S. government does not guarantee our securities or other obligations.

COVID-19 Impact

In March 2020, President Trump declared the COVID-19 outbreak in the United States a national emergency. The COVID-19 

pandemic in the United States has resulted in stay-at-home orders, school closures and widespread business shutdowns 

across the country. Although business activity has begun to resume to varying degrees, the speed and nature of the 

resumption of economic activity remains highly uncertain. 

The pandemic continues to have a significant impact on our business and on our financial results. We provide a brief overview 

below of the economic impact of the pandemic, our response to it, and the pandemic’s impact on our business and financial 

results, with references to where these items are discussed in more detail in this report. We also highlight below the many 

uncertainties relating to the impact of the COVID-19 pandemic on Fannie Mae and the housing market.

MD&A | Executive Summary

Fannie Mae Second Quarter 2020 Form 10-Q 4
Economic Impact

The COVID-19 pandemic caused substantial financial market volatility and has significantly adversely affected both the U.S. 

and global economies. While state and local governments throughout the country have taken steps to re-open their 

economies, lifting shut-down and stay-at-home orders to varying degrees, a number of states and local governments are 

slowing or pausing their re-openings, or imposing new shut-down orders, as the daily number of new cases of COVID-19 has 

continued to reach new highs. The extensive shutdowns and other reductions in business activity across the country and 

globally, including those resulting from individuals and households seeking to avoid infection, have substantially increased 

unemployment from pre-pandemic levels. The federal government has taken many actions to reduce the negative economic 

impact of the COVID-19 pandemic. For example, the Federal Reserve lowered the federal funds rate and increased its 

purchases of Treasury and mortgage-backed securities, is purchasing corporate debt securities, and established and 

expanded liquidity facilities to support the flow of credit to consumers and businesses. In addition, the federal government 

passed legislation increasing and expanding unemployment benefits, providing direct cash payments to eligible taxpayers, and 

allocating funds to assist businesses, states, and municipalities. 

The disruption caused by the pandemic differs from previous economic downturns because of the high level of uncertainty 

related to the health and safety of consumers and workers. We expect the path and timing of economic recovery will be 

impacted by the rate of new COVID-19 cases and the associated mortality rates. We believe that economic recovery depends 

on the stable return of consumer spending, increased business activity, and a reduction in unemployment, all of which impact 

the ability of borrowers and renters to make their monthly payments. Government support, as described above, has played a 

role in helping to reduce the negative economic impact of the pandemic with direct funding provided to affected households 

and businesses. Absent additional government action, some of these programs are ending, including the $600 weekly addition 

to unemployment benefits, which expires at the end of July. The ultimate impact of these programs expiring and the extent to 

which existing and future government actions will mitigate the negative impacts of COVID-19 on the U.S. economy and our 

business is unclear. The pandemic resulted in a contraction in U.S. gross domestic product (“GDP”) for the first half of 2020 

and could result in future declines in or a sustained drop in the level of U.S. economic activity. See “Key Market Economic 

Indicators” for information on macroeconomic conditions during the first half of 2020 and our current forecasts regarding future 

macroeconomic conditions. 

Fannie Mae Response

We are taking a number of actions to help borrowers, renters, lenders and servicers manage the negative impact of the 

COVID-19 pandemic, including providing payment forbearance (that is, a temporary suspension of the borrower’s monthly 

mortgage payments) to single-family and multifamily borrowers with COVID-19-related financial hardships, suspending 

foreclosure-related activities, providing lenders and servicers temporary flexibilities for certain of our Selling Guide and 

Servicing Guide requirements, and providing liquidity to lenders by purchasing a higher-than-usual volume of loans through 

our whole loan conduit. We have also taken steps to mitigate the risk to Fannie Mae from the impacts of the pandemic. See 

“Single-Family Business—Single-Family Mortgage Credit Risk Management” and “Multifamily Business—Multifamily Mortgage 

Credit Risk Management” for more information on the actions we are taking in response to the COVID-19 pandemic.

We have also taken steps to protect the safety and resiliency of our workforce. We have required nearly all of our workforce to 

work remotely since mid-March and continue to assess when it will be safe for employees to return to the office. To date, our 

business resiliency plans and technology systems have effectively supported this company-wide telework arrangement.

Impact on our Business and Financial Results

The economic dislocation caused by the COVID-19 pandemic was the primary driver of the decline in our net income in the 

first half of 2020, as compared with the first half of 2019. We significantly increased our allowance for loan losses in the first 

quarter of 2020 to reflect our expected loan losses as a result of the pandemic, which resulted in substantial credit-related 

expenses. We expect the impact of the pandemic to continue to negatively affect our financial results, contributing to lower net 

income in 2020 than in 2019. We could also have net losses in future periods. In addition, we expect the pandemic to 

negatively affect our returns on capital under FHFA’s conservatorship capital requirements. See “Consolidated Results of 

Operations,” “Single-Family Business” and “Multifamily Business” for more information on our financial results for the second 

quarter and first half of 2020.

We did not enter into credit risk transfer transactions in the second quarter of 2020 due to continuing adverse market 

conditions as a result of the COVID-19 pandemic. Although market conditions have improved, we currently do not have plans 

to engage in additional credit risk transfer transactions as we evaluate FHFA’s recently re-proposed capital rule, which would 

reduce the amount of capital relief we obtain from these transactions. We will continue to review our plans, which may be 

affected by our evaluation of the proposed capital rule and changes in the rule as it is finalized, our progress in meeting FHFA’s 

2020 conservatorship scorecard, the strength of future market conditions, and our review of our overall business and capital 

plan to enable us to exit conservatorship. See “Legislation and Regulation” for more information on FHFA’s proposed capital 

rule. See “Single-Family Business—Single-Family Mortgage Credit Risk Management—Single-Family Credit Enhancement 

and Transfer of Mortgage Credit Risk” and “Multifamily Business—Multifamily Mortgage Credit Risk Management—Transfer of 

Multifamily Mortgage Credit Risk” for more information about our credit-risk transfer activity. 

MD&A | Executive Summary

Fannie Mae Second Quarter 2020 Form 10-Q 5
Also see “Retained Mortgage Portfolio,” “Liquidity and Capital Management” and “Risk Management” for discussions of the 

impact of the COVID-19 pandemic on our business.

Risks and Uncertainties

Our current forecasts and expectations relating to the impact of the COVID-19 pandemic are subject to many uncertainties and 

may change, perhaps substantially. It is difficult to assess or predict the impact of this unprecedented event on our business, 

financial results or financial condition. Factors that will impact the extent to which the COVID-19 pandemic affects our 

business, financial results and financial condition include: the duration, spread and severity of COVID-19 outbreaks; the 

actions taken to contain the virus or treat its impact, including government actions to mitigate the economic impact of the 

pandemic; the extent to which consumers, workers and families feel safe resuming business activities and school; the nature 

and extent of the forbearance, modification, and other loss mitigation options borrowers affected by the pandemic obtain from 

us; accounting elections and estimates relating to the impact of the COVID-19 pandemic; borrower and renter behavior in 

response to the pandemic and its economic impact; how quickly and to what extent normal economic and operating conditions 

can resume, including whether any future outbreaks interrupt economic recovery; and how quickly and to what extent affected 

borrowers, renters and counterparties can recover from the negative economic impact of the pandemic. See “Risk Factors” for 

a discussion of the risks to our business, financial results and financial condition relating to the COVID-19 pandemic. See 

“Forward-Looking Statements” for a discussion of factors that could cause actual conditions, events or results to differ 

materially from those described in our forecasts, expectations and other forward-looking statements in this report.

Legislation and Regulation

The information in this section updates and supplements information regarding legislative and regulatory developments 

affecting our business set forth in “Business—Conservatorship, Treasury Agreements and Housing Finance Reform” and 

“Business—Charter Act and Regulation” in our 2019 Form 10-K, as well as in “MD&A—Legislation and Regulation” in our Form 

10-Q for the quarter ended March 31, 2020 (“First Quarter 2020 Form 10-Q”). Also see “Risk Factors” in this report and in our 

2019 Form 10-K for discussions of risks relating to legislative and regulatory matters.

Developments Relating to Exiting Conservatorship 

In September 2019, Treasury released a plan recommending reforms to the housing finance system, including 

recommendations relating to ending our conservatorship. The Treasury plan contemplates FHFA ending the conservatorships 

of each of Fannie Mae and Freddie Mac (the “GSEs”) when the GSE has met specified preconditions. As described below, 

FHFA and we took key steps during the second quarter of 2020 in connection with these preconditions through FHFA’s 

proposal of a new regulatory capital framework for the GSEs and our hiring of a financial advisor to assist us in planning the 

company’s recapitalization and exit from conservatorship.

Proposed Capital Framework

On May 20, 2020, FHFA released a proposed new regulatory capital framework for the GSEs. The proposed framework is 

expected to require us to hold significantly more capital than the rule FHFA first proposed in June 2018. The proposed rule 

includes a mortgage-risk-sensitive framework, similar to the 2018 proposal, but differs from the 2018 proposal in a number of 

ways, including the following:

• The proposed rule includes supplemental capital requirements relating to the amount and form of the capital we hold, 

based on definitions of capital used in U.S. banking regulators’ regulatory capital framework. The proposal specifies 

complementary leverage-based and risk-based requirements, which together determine the requirements for each 

tier of capital;

• The proposed rule requires us to hold capital buffers that can be drawn down in periods of financial stress and then 

rebuilt over time as economic conditions improve. If we fall below the prescribed buffer amounts, we must restrict 

capital distributions such as stock repurchases and dividends, as well as discretionary bonus payments to executives, 

until the buffer amounts are restored;

• The proposed rule provides less capital relief for credit risk transfer activities than the 2018 proposal; 

• The proposed rule imposes specific minimum percentages, or “floors,” on the risk-weight applicable to single-family 

and multifamily exposures, as well as to retained portions of credit risk transfer transactions; and

• The proposed rule incorporates additional elements based on U.S. banking regulators’ regulatory capital framework, 

including the introduction of the advanced approach to complement the standardized approach for measuring riskweighted assets. 

The capital requirements and buffers established by the proposed rule would have a delayed compliance date, unless adjusted 

by FHFA, of the later of one year from publication of the final rule or the date our conservatorship terminates. 

MD&A | Executive Summary

Fannie Mae Second Quarter 2020 Form 10-Q 6
We continue to study the proposed capital rule and its potential impact on Fannie Mae and the housing market. Comments on 

the proposed capital rule are due by August 31, 2020. We do not yet know what changes FHFA may make to the capital rule 

before it is finalized or when it will be finalized. We expect that the final capital rule will have a significant impact on our 

business. For example, actions we take to maintain appropriate risk-adjusted returns could adversely affect our competitive 

position. Approximately 15% of the loans in our single-family conventional guaranty book of business as of June 30, 2020 were 

originated in the first half of 2020. Once loans have refinanced to current low rates, they are less likely to refinance in the 

future, which reduces our opportunity to adjust our guaranty fees on these loans in support of our efforts to generate capital. 

See “Business—Charter Act and Regulation—GSE Act and Other Legislation—Capital” in our 2019 Form 10-K for information 

about capital requirements under the current rule and while we are under conservatorship.

Selection of Financial Advisor to Assist with Recapitalization Plan

In June 2020, we hired Morgan Stanley & Co. LLC as underwriting financial advisor to assist us in developing and 

implementing a plan for recapitalizing the company and responsibly ending our conservatorship. Our advisor is working closely 

with us, FHFA, and Treasury to consider business and capital structures, market impacts and timing, and available capitalraising alternatives, among other items.

Proposed Replacement for the Qualified Mortgage Patch

The Consumer Financial Protection Bureau’s (the “CFPB’s”) “ability-to-repay” rule under the Truth in Lending Act includes a 

general “qualified mortgage” definition, and an exception to that definition referred to as the qualified mortgage “patch,” 

pursuant to which conventional mortgage loans are considered qualified mortgages if they (1) meet certain qualified mortgage 

requirements generally and (2) are eligible to be purchased or guaranteed by Fannie Mae or Freddie Mac operating under the 

conservatorship or receivership of FHFA. The qualified mortgage patch is currently scheduled to expire on the earlier of 

January 10, 2021 or the exit of the GSEs from conservatorship. In June 2020, the CFPB proposed to eliminate the qualified 

mortgage patch and revise the general qualified mortgage definition. Under the proposal, a loan would no longer need to meet 

a maximum debt-to-income ratio of 43% and requirements in Appendix Q to the rule to be considered a qualified mortgage. 

Qualified mortgage status would instead be determined using a priced-based approach along with consideration and 

verification of the borrower’s income, assets and debts. The CFPB also proposed in June to delay the expiration of the 

qualified mortgage patch until its replacement becomes effective or when Fannie Mae and Freddie Mac cease to be in 

conservatorship or receivership, whichever occurs first. 

State and Local Government Responses to COVID-19

Many states and localities have issued executive orders and are considering or have enacted legislation requiring mortgage 

forbearance, foreclosure and eviction moratoriums, and rent flexibilities. The terms of these new and proposed requirements 

vary significantly in duration and scope, with some providing borrower or renter relief that goes beyond the scope of the 

Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), an economic stimulus bill enacted by Congress in 

March 2020 that contains a number of provisions aimed at providing relief for borrowers and renters experiencing financial 

hardship caused by the COVID-19 pandemic. Actions taken by federal, state or local lawmakers to provide additional relief to 

borrowers and renters during the COVID-19 outbreak, depending on their scope and whether and to what extent they apply to 

our business, could have a material adverse effect on our business and financial results.

Proposed 2021 Housing Goals and Temporary Adjustments to Duty to Serve 

Program

In July 2020, FHFA published proposed single-family and multifamily housing goals for Fannie Mae and Freddie Mac for 2021. 

In the past, FHFA has proposed housing goals for a three-year period, but due to the COVID-19 pandemic and associated 

economic uncertainty, FHFA proposed benchmark levels for only the 2021 calendar year. Under FHFA’s proposed rule, the 

benchmark levels for our single-family and multifamily housing goals would remain the same as those currently applicable for 

2020. Comments on the proposed rule are due in September 2020. FHFA will issue a final rule after considering the comments 

received on the proposed rule.

Also in response to the disruption and uncertainty caused by the pandemic, in July 2020 FHFA approved temporary 

adjustments to our duty-to-serve obligations. As a result, the duty-to-serve plan we submit in September 2020 will extend our 

current plan by one year, so that it covers 2018 to 2021, rather than covering 2021 to 2023 in a new plan. FHFA expects our 

next proposed three-year plan, which will be due to FHFA in May 2021, will cover 2022 to 2024. In addition, FHFA provided 

guidance clarifying how FHFA will take into account market conditions when evaluating our 2020 and 2021 achievements 

under our duty-to-serve plan.

MD&A | Legislation and Regulation

Fannie Mae Second Quarter 2020 Form 10-Q 7
Possible Designation of Secondary Mortgage Market Activities as Systemically 

Important

In December 2019, the Financial Stability Oversight Counsel (the “FSOC”) finalized new interpretive guidance on designating 

nonbank financial companies as systemically important financial institutions. The guidance implemented an “activities-based” 

approach to identifying and addressing potential risks to financial stability, providing for entity-specific designations only if a 

potential risk cannot adequately be addressed through an activities-based approach. In July 2020, the FSOC announced that it 

will begin an activities-based review of the secondary mortgage market to assess both the risk that activities in the secondary 

mortgage market pose to the stability of the financial system and the efficacy of various risk mitigants. If the FSOC designates 

us as a systemically important financial institution following this review, we would become subject to additional regulation and 

oversight by the Federal Reserve Board. See “Risk Factors” in our 2019 Form 10-K for discussions of our uncertain future and 

how regulatory actions could negatively impact our business, results of operations, financial condition or net worth.

Swap Transactions; Minimum Capital and Margin Requirements 

As a result of the Dodd-Frank Wall Street Reform and Consumer Protection Act, we are required to submit new swap 

transactions for clearing to a derivatives clearing organization. Additionally, in October 2015, an inter-agency body of 

regulators issued a final rule under the act governing margin and capital requirements applicable to entities that are subject to 

their oversight. The rule is effective in two phases and each phase requires that we implement operational changes and 

changes relating to the collateral we collect and provide for swap transactions. The first phase of the rule became effective in 

2017. Effectiveness of the second phase of the rule was scheduled for September 2020, but was delayed in June 2020 to 

September 2021 in light of exigent circumstances caused by the COVID-19 pandemic. This phase will require additional 

operational changes and changes to collateral requirements, which may increase the costs associated with hedging our 

retained mortgage portfolio.

Transition from LIBOR to Alternative Reference Rates 

We continue working with the Alternative Reference Rates Committee (the “ARRC”), FHFA, Freddie Mac, and other industry 

participants on a process to replace LIBOR by the end of 2021. In May 2020, we announced that we will cease issuing LIBORindexed Single-Family and Multifamily Connecticut Avenue Securities®

 (“CAS”) products by the end of the fourth quarter of 

2020. We expect that any CAS products we issue after that time would be based on the Secured Overnight Financing Rate 

(“SOFR”). We also announced that we expected to begin offering SOFR-indexed Real Estate Mortgage Investment Conduit 

securities (“REMICs”) and interest-only and principal-only strip securities (“SMBS”) beginning in July 2020, and that we will 

cease issuing new LIBOR-indexed REMICs and SMBS no later than September 30, 2020. 

Working with FHFA, in May 2020 we also jointly published with Freddie Mac a LIBOR transition playbook and issued frequently 

asked questions (“FAQs”) that provide answers regarding Fannie Mae’s and Freddie Mac’s transition away from LIBORindexed products to SOFR-indexed products. Fannie Mae and Freddie Mac also each launched a LIBOR transition web page 

that serves as a resource for lenders, servicers, investors and vendors to access key updates and information during the shift 

from LIBOR to alternative reference rates.

MD&A | Legislation and Regulation

Fannie Mae Second Quarter 2020 Form 10-Q 8
Key Market Economic Indicators

The COVID-19 pandemic has had a significant adverse effect on both the U.S. and global economies. Below we discuss how 

varying macroeconomic conditions can influence our financial results across different business and economic environments. 

See “Executive Summary—COVID-19 Impact” for additional information on the effects of the pandemic on the economy and 

the uncertainty associated with its ultimate impact on our business and financial results.

Our forecasts and expectations relating to the impact of the COVID-19 pandemic are subject to many uncertainties and may 

change, perhaps substantially, from our current forecasts and expectations.

Selected Benchmark Interest Rates

2.34%

2.32%

0.30%

2.12%

2.50%

0.10%

2.93%

1.96%

0.64%

2.86%

2.01%

0.66%

3.60%

2.74%

1.57%

4.55%

3.73%

3.13%

3-month LIBOR1 SOFR1 10-year swap rate1

10-year Treasury rate1 30-year Fannie Mae MBS

par coupon rate1

30-year FRM rate2

06/30/18 09/30/18 12/31/18 03/31/19 06/30/19 09/30/19 12/31/19 03/31/20 6/30/2020

(1) According to Bloomberg. 

(2) Refers to the U.S. weekly average fixed-rate mortgage rate according to Freddie Mac's Primary Mortgage Market Survey®

. These rates are 

reported using the latest available data for a given period.

How interest rates can affect our financial results

• Net interest income. In a rising interest-rate environment, our mortgage loans tend to prepay more slowly, which 

typically results in lower net amortization income from cost basis adjustments on mortgage loans and related debt. 

Conversely, in a declining interest-rate environment, our mortgage loans tend to prepay faster, typically resulting in 

higher net amortization income from cost basis adjustments on mortgage loans and related debt.

• Fair value gains (losses). We have exposure to fair value gains and losses resulting from changes in interest rates, 

primarily through our mortgage commitment derivatives and risk management derivatives, which we mark to market 

through earnings. Fair value gains and losses on our mortgage commitment derivatives fluctuate depending on how 

interest rates and prices move between the time the commitment is opened and settled. The net position and 

composition across the yield curve of our risk management derivatives changes over time. As a result, interest rate 

changes (increases or decreases) and yield curve changes (parallel, steepening or flattening shifts) will generate 

varying amounts of fair value gains or losses in a given period. We are preparing to implement hedge accounting to 

reduce the impact of interest-rate volatility on our financial results. For additional information on the expected impact 

of hedge accounting, see “Consolidated Results of Operations—Fair Value Losses, Net.”

• Credit-related income (expense). Increases in mortgage interest rates tend to lengthen the expected lives of our 

loans, which generally increases the expected impairment and provision for credit losses on such loans. Decreases in 

mortgage interest rates tend to shorten the expected lives of our loans, which reduces the impairment and provision 

for credit losses on such loans. 

MD&A | Key Market Economic Indicators

Fannie Mae Second Quarter 2020 Form 10-Q 9
Single-Family Quarterly Home Price Growth Rate(1)

2.4%

1.1%

0.4%

1.7%

2.2%

Fannie Mae national home price index

2Q19 3Q19 4Q19 1Q20 2Q20

(1) Calculated internally using property data on loans purchased by Fannie Mae, Freddie Mac, and other third-party home sales data. Fannie 

Mae’s home price index is a weighted repeat transactions index, measuring average price changes in repeat sales on the same properties. 

Fannie Mae’s home price index excludes prices on properties sold in foreclosure. Fannie Mae’s home price estimates are based on 

preliminary data and are subject to change as additional data become available.

How home prices can affect our financial results

• Actual and forecasted home prices impact our provision or benefit for credit losses.

• Changes in home prices affect the amount of equity that borrowers have in their homes. Borrowers with less equity 

typically have higher delinquency and default rates.

• As home prices increase, the severity of losses we incur on defaulted loans that we hold or guarantee decreases 

because the amount we can recover from the properties securing the loans increases. Decreases in home prices 

increase the losses we incur on defaulted loans.

• Home prices in the second quarter of 2020 remained relatively strong despite the COVID-19 pandemic. We believe 

home prices benefited from continuing low levels of supply and high levels of demand due to historically low interest 

rates, particularly from first-time homebuyers, and a greater contraction in supply than in demand since the start of 

the pandemic. Higher-than-expected increases in supply or decreases in demand could lead to substantial decreases 

in home prices.

• We currently expect home prices on a national basis to moderate slightly to 4.4% growth in 2020, compared with the 

4.8% home price growth rate in 2019. Our current expectations for home price growth in 2020 have increased 

significantly from our first-quarter estimate of near-zero growth for the year. This improvement in our 2020 home price 

growth forecast is due to better-than-expected home sales data in the first half of the year. However, we have 

adjusted downward our longer-term projection of home price growth as we believe there may be a delayed response 

in home prices due to the ongoing economic and labor market weaknesses caused by the pandemic. We also expect 

significant regional variation in the timing and rate of home price growth.

• Our forecasts and expectations relating to the impact of the COVID-19 pandemic are subject to many uncertainties 

and may change, perhaps substantially, from our current forecasts and expectations. For example, home price growth 

could slow and potentially decline if GDP growth is weaker than we currently expect, unemployment, particularly 

among existing homeowners and potential new home buyers, is higher than we expect, or if the housing market is 

more sensitive to economic and labor-market weaknesses than we expect. For further discussion on housing activity, 

see “Single-Family Business—Single-Family Mortgage Market” and “Multifamily Business—Multifamily Mortgage 

Market.”

MD&A | Key Market Economic Indicators

Fannie Mae Second Quarter 2020 Form 10-Q 10
New Housing Starts(1)

(1.1)%

5.6%

7.4%

0.4% (23.6)%

18.0%

(4.0)%

20.2%

10.2%

(41.2)%

% quarterly change in single-family housing starts

% quarterly change in multifamily housing starts

2Q19 3Q19 4Q19 1Q20 2Q20

(1) According to U.S. Census Bureau and subject to revision.

How housing activity can affect our financial results

• Two key aspects of economic activity that can impact supply and demand for housing and thus mortgage lending are 

the rate of household formation and new housing construction.

• Household formation is a key driver of demand for both single-family and multifamily housing. A newly formed 

household will either rent or purchase a home. Thus, changes in the pace of household formation can affect prices 

and credit performance as well as the degree of loss on defaulted loans.

• Growth of household formation stimulates homebuilding. Homebuilding has typically been a cyclical leader of broader 

economic activity contributing to the growth of GDP and to employment. Residential construction activity has 

historically been a leading indicator, weakening prior to a slowdown in U.S. economic activity and accelerating prior to 

a recovery. However, the 2008-2009 recession was significantly impacted by real estate and real estate finance. 

Therefore, various policy responses were targeted to real estate and real estate finance, potentially altering the 

cyclical performance of the real estate sector. Due to the adverse nature of the current economic situation, the 

housing sector’s performance may vary from its historical precedent. 

• In light of the uncertainties surrounding the effects of the COVID-19 pandemic and its impact on the economy, home 

sales fell sharply in the second quarter; however, we expect a partial rebound in the third quarter as purchase 

demand is supported by the low mortgage-rate environment. This trend is expected to increase single-family housing 

starts in the third quarter, though we still expect full-year 2020 single-family housing starts to decline.

• A decline in housing starts results in fewer new homes being available for purchase and potentially a lower volume of 

mortgage originations. Construction activity can also affect credit losses. If the growth of demand exceeds the growth 

of supply, prices will appreciate and impact the risk profile of newly originated home purchase mortgages, depending 

on where in the housing cycle the market is. A reduced pace of construction is often associated with a broader 

economic slowdown and signals expected increases in delinquency and losses on defaulted loans.

MD&A | Key Market Economic Indicators

Fannie Mae Second Quarter 2020 Form 10-Q 11
GDP, Unemployment Rate and Personal Consumption

4.0% 3.5%

1.4% 1.1%

4.6% 3.2% 1.8%

(6.8)%

(32.3)%

3.5% 2.9% 1.1%

3.1% 2.0% 2.1% 2.1%

(5.0)%

(34.8)%

4.0% 3.7% 3.9% 3.8% 3.7% 3.5% 3.5% 4.4%

11.1%

Growth (decline) in U.S. personal consumption, annualized percentage change1

Growth (decline) in GDP, annualized percentage change1

U.S. unemployment rate, as of period end2

2Q18 3Q18 4Q18 1Q19 2Q19 3Q19 4Q19 1Q20 2Q20

(1) GDP growth (decline) and personal consumption growth (decline) for periods prior to the second quarter of 2020 are based on the 

quarterly series calculated by the Bureau of Economic Analysis and are subject to revision. GDP growth (decline) and personal 

consumption growth (decline) for the second quarter of 2020 are based on Fannie Mae’s forecast.

(2) According to the U.S. Bureau of Labor Statistics and subject to revision.

How GDP, the unemployment rate and personal consumption can affect our 

financial results

• Changes in GDP, the unemployment rate and personal consumption can affect several mortgage market factors, 

including the demand for both single-family and multifamily housing and the level of loan delinquencies.

• Economic growth is a key factor for the performance of mortgage-related assets. In a growing economy, employment 

and income are rising, thus allowing existing borrowers to meet payment requirements, existing homeowners to 

consider purchasing another home, and renters to consider becoming homeowners. Homebuilding typically increases 

to meet the rise in demand. Mortgage delinquencies typically fall in an expanding economy, thereby decreasing credit 

losses. 

• In a slowing economy, employment and income growth slow and housing activity slows as an early indicator of 

reduced economic activity. As the slowdown intensifies, households become more conservative and debt repayment 

takes precedence over consumption, which then falls and accelerates the slowdown. If the slowdown of economic 

growth turns to recession, employment losses occur impairing the ability of borrowers and renters to meet mortgage 

and rental payments, and loan delinquencies rise. Home sales and mortgage originations also typically fall in a 

slowing economy.

• Due to the impact of COVID-19, the unemployment rate rose significantly and GDP declined significantly in the first 

half of 2020. While we expect GDP to improve in the second half of the year, overall for 2020 we expect a decline in 

GDP compared with 2019, as well as elevated unemployment levels.

See “Risk Factors—Market and Industry Risk” in our 2019 Form 10-K and “Risk Factors” in this report for further discussion of 

risks to our business and financial results associated with interest rates, home prices, housing activity and economic 

conditions.

MD&A | Key Market Economic Indicators

Fannie Mae Second Quarter 2020 Form 10-Q 12
Consolidated Results of Operations

This section discusses our condensed consolidated results of operations and should be read together with our condensed 

consolidated financial statements and the accompanying notes.

Summary of Condensed Consolidated Results of Operations

For the Three Months 

Ended June 30,

For the Six Months 

Ended June 30,

2020 2019 Variance 2020 2019 Variance

(Dollars in millions)

Net interest income(1) $ 5,777 $ 5,227 $ 550 $ 11,124 $ 10,023 $ 1,101 

Fee and other income 90 113 (23) 210 247 (37) 

Net revenues 5,867 5,340 527 11,334 10,270 1,064 

Investment gains (losses), net 149 461 (312) (9) 594 (603) 

Fair value losses, net (1,018) (754) (264) (1,294) (1,585) 291 

Administrative expenses (754) (744) (10) (1,503) (1,488) (15) 

Credit-related income (expenses):

Benefit (provision) for credit losses (12) 1,225 (1,237) (2,595) 1,875 (4,470) 

Foreclosed property expense (10) (128) 118 (90) (268) 178 

Total credit-related income (expenses) (22) 1,097 (1,119) (2,685) 1,607 (4,292) 

Temporary Payroll Tax Cut Continuation Act of 

2011 (“TCCA”) fees (660) (600) (60) (1,297) (1,193) (104) 

Credit enhancement expense(2) (360) (276) (84) (736) (492) (244) 

Change in expected credit enhancement

 recoveries(3) 273 — 273 461 — 461 

Other expenses, net(4) (261) (203) (58) (479) (365) (114) 

Income before federal income taxes 3,214 4,321 (1,107) 3,792 7,348 (3,556) 

Provision for federal income taxes (669) (889) 220 (786) (1,516) 730 

Net income $ 2,545 $ 3,432 $ (887) $ 3,006 $ 5,832 $ (2,826) 

Total comprehensive income $ 2,532 $ 3,365 $ (833) $ 3,008 $ 5,726 $ (2,718) 

(1) Prior-period amounts have been adjusted to reflect the current-year change in presentation related to our yield maintenance fees. See 

“Note 1, Summary of Significant Accounting Policies” for more information about our change in presentation.

(2) Previously included in Other expenses, net. Consists of costs associated with our freestanding credit enhancements, which primarily 

include our Connecticut Avenue Securities® (“CAS”) and Credit Insurance Risk TransferTM (“CIRTTM”) programs, enterprise-paid mortgage 

insurance (“EPMI”), and certain lender risk-sharing programs. See “Note 1, Summary of Significant Accounting Policies” for more 

information about our change in presentation.

(3) Consists of change in benefits recognized from our freestanding credit enhancements, including any realized amounts. See “Note 1, 

Summary of Significant Accounting Policies” for more information about our change in presentation.

(4) Consists of debt extinguishment gains and losses, housing trust fund expenses, loan subservicing costs, servicer fees paid in connection 

with certain loss mitigation activities, and gains and losses from partnership investments. 

Net Interest Income

Our primary source of net interest income is guaranty fees we receive for managing the credit risk on loans underlying Fannie 

Mae MBS held by third parties.

Guaranty fees consist of two primary components: 

• base guaranty fees that we receive over the life of the loan; and

• upfront fees that we receive at the time of loan acquisition primarily related to single-family loan-level pricing 

adjustments and other fees we receive from lenders, which are amortized into net interest income as cost basis 

adjustments over the contractual life of the loan. We refer to this as amortization income.

We recognize almost all of our guaranty fee revenue in net interest income because we consolidate the substantial majority of 

loans underlying our Fannie Mae MBS in consolidated trusts in our condensed consolidated balance sheets. Those guaranty 

fees are the primary component of the difference between the interest income on loans in consolidated trusts and the interest 

expense on the debt of consolidated trusts.

MD&A | Consolidated Results of Operations

Fannie Mae Second Quarter 2020 Form 10-Q 13
The timing of when we recognize amortization income can vary based on a number of factors, the most significant of which is 

a change in mortgage interest rates. In a rising interest-rate environment, our mortgage loans tend to prepay more slowly, 

which typically results in lower net amortization income. Conversely, in a declining interest-rate environment, our mortgage 

loans tend to prepay faster, typically resulting in higher net amortization income. 

We also recognize net interest income on the difference between interest income earned on the assets in our retained 

mortgage portfolio and our other investments portfolio (collectively, our “portfolios”) and the interest expense associated with 

the debt that funds those assets. See “Retained Mortgage Portfolio” and “Liquidity and Capital Management—Liquidity 

Management—Other Investments Portfolio” for more information about our portfolios.

The table below displays the components of our net interest income from our guaranty book of business, which we discuss in 

“Guaranty Book of Business,” and from our portfolios. Prior period amounts have been adjusted to reflect the current year 

change in presentation related to our yield maintenance fees. 

Components of Net Interest Income

For the Three Months 

Ended June 30,

For the Six Months 

Ended June 30,

2020 2019 Variance 2020 2019 Variance

(Dollars in millions)

Net interest income from guaranty book of business:

Base guaranty fee income, net of TCCA $ 2,677 $ 2,382 $ 295 $ 5,277 $ 4,700 $ 577 

Base guaranty fee income related to TCCA(1) 660 600 60 1,297 1,193 104 

Net amortization income 1,955 1,378 577 3,461 2,364 1,097 

Total net interest income from guaranty book of 

business 5,292 4,360 932 10,035 8,257 1,778 

Net interest income from portfolios 485 867 (382) 1,089 1,766 (677) 

Total net interest income $ 5,777 $ 5,227 $ 550 $ 11,124 $ 10,023 $ 1,101 

(1) Represents revenues generated by the 10 basis point guaranty fee increase we implemented pursuant to the TCCA, the incremental 

revenue from which is remitted to Treasury and not retained by us. 

Net interest income increased in the second quarter and first half of 2020 compared with the second quarter and first half of 

2019, driven by higher net amortization income and higher base guaranty fee income, partially offset by lower income from 

portfolios. 

• Net amortization income increased in the second quarter and first half of 2020 compared with the second quarter and 

first half of 2019 as a declining interest-rate environment in the first half of 2020 led to increased prepayments on 

mortgage loans, which accelerated the amortization of cost basis adjustments on mortgage loans of consolidated 

trusts and the related debt. 

• Net interest income from base guaranty fees increased in the second quarter and first half of 2020 compared with the 

second quarter and first half of 2019 due to an increase in the size of our guaranty book of business and loans with 

higher base guaranty fees comprising a larger part of our guaranty book of business.

• Net interest income from portfolios decreased in the second quarter and first half of 2020 compared with the second 

quarter and first half of 2019 primarily due to lower yields on mortgage loans and assets in our other investments 

portfolio, partially offset by a decrease in interest expense on our funding debt as key benchmark rates declined as a 

result of the COVID-19 pandemic. For a discussion of the impact of COVID-19 on our funding needs and funding 

activity, see “Liquidity and Capital Management—Liquidity Management—Debt Funding.”

We expect mortgage rates to remain low through 2021, contributing to a significant amount of mortgage refinance activity and 

high levels of amortization income. Because a large portion of our book of business has been and is expected to be originated 

in a historically low interest rate environment, we anticipate that refinancing activity will decrease at some point as fewer 

borrowers can benefit from a refinancing or as interest rates rise. Lower levels of refinancing in the future will likely reduce the 

amount of amortization income we recognize.

MD&A | Consolidated Results of Operations

Fannie Mae Second Quarter 2020 Form 10-Q 14
Analysis of Deferred Amortization Income

We initially recognize mortgage loans and debt of consolidated trusts in our condensed consolidated balance sheets at fair 

value. The difference between the initial fair value and the carrying value of these instruments is recorded as a cost basis 

adjustment, either as a premium or a discount, in our condensed consolidated balance sheets. We amortize these cost basis 

adjustments over the contractual lives of the loans or debt. On a net basis, for mortgage loans and debt of consolidated trusts, 

we are in a premium position with respect to debt of consolidated trusts, which represents deferred income we will recognize in 

our condensed consolidated statements of operations and comprehensive income as amortization income in future periods.

Deferred Income Represented by Net Premium Position

on Debt of Consolidated Trusts

(Dollars in billions)

$35.7 $33.6 $32.5

6/30/2019 12/31/2019 6/30/2020

Analysis of Net Interest Income

We have updated the application of our accounting policy for nonaccrual loans in the current period for loans negatively 

impacted by COVID-19. As a result, for loans that were current as of March 1, 2020 and subsequently become delinquent, we 

continue to accrue interest income for up to six months pursuant to an April 2020 Interagency Statement on Loan Modifications 

and Reporting for Financial Institutions Working with Customers Affected by the Coronavirus (the “Interagency Statement”). If 

those loans are in a forbearance plan beyond six months of delinquency, we will continue to accrue interest income provided 

collection of principal and interest continues to be reasonably assured. As a result of this update, we recognized $1.5 billion in 

net interest income related to these loans in the second quarter and first half of 2020. We also recognized $172 million of 

provision for loan losses on the related accrued interest receivable as of June 30, 2020. This update also resulted in a 

significant portion of delinquent loans staying on accrual status. See “Note 1, Summary of Significant Accounting Policies” for 

more information about our accounting policy update and “Single-Family Business—Single-Family Mortgage Credit Risk 

Management—Single-Family Problem Loan Management” and “Multifamily Business—Multifamily Mortgage Credit Risk 

Management” for details about loans in a forbearance plan, as well as on-balance sheet loans past due 90 days or more and 

continuing to accrue interest.

MD&A | Consolidated Results of Operations

Fannie Mae Second Quarter 2020 Form 10-Q 15
The table below displays an analysis of our net interest income, average balances, and related yields earned on assets and 

incurred on liabilities. For most components of the average balances, we use a daily weighted average of unpaid principal 

balance net of unamortized cost basis adjustments. When daily average balance information is not available, such as for 

mortgage loans, we use monthly averages. Prior-period amounts have been adjusted to reflect the current-year change in 

presentation related to our yield maintenance fees.

Analysis of Net Interest Income and Yield(1)

For the Three Months Ended June 30,

2020 2019

Average

Balance

Interest

Income/

(Expense)

Average

Rates

Earned/

Paid

Average

Balance

Interest

Income/

(Expense)

Average

Rates

Earned/

Paid

(Dollars in millions)

Interest-earning assets:

Mortgage loans of Fannie Mae $ 115,310 $ 1,028 3.57 % $ 117,235 $ 1,277 4.36 %

Mortgage loans of consolidated trusts 3,311,267 25,979 3.14 3,160,712 28,234 3.57 

Total mortgage loans(2) 3,426,577 27,007 3.15 3,277,947 29,511 3.60 

Mortgage-related securities 10,976 116 4.23 9,794 107 4.37 

Non-mortgage-related securities(3) 103,935 129 0.49 60,184 370 2.43 

Federal funds sold and securities purchased under 

agreements to resell or similar arrangements 46,487 14 0.12 40,851 257 2.49 

Advances to lenders 7,917 25 1.25 4,936 41 3.28 

Total interest-earning assets $ 3,595,892 $ 27,291 3.04 % $ 3,393,712 $ 30,286 3.57 %

Interest-bearing liabilities:

Short-term funding debt $ 50,777 $ (54) 0.42 % $ 19,613 $ (119) 2.40 %

Long-term funding debt 189,906 (777) 1.64 173,871 (1,102) 2.54 

Connecticut Avenue Securities® (“CAS”) 18,993 (219) 4.61 24,277 (376) 6.20 

Total debt of Fannie Mae 259,676 (1,050) 1.62 217,761 (1,597) 2.93 

Debt securities of consolidated trusts held by third 

parties 3,350,210 (20,464) 2.44 3,167,754 (23,462) 2.96 

Total interest-bearing liabilities $ 3,609,886 $ (21,514) 2.38 % $ 3,385,515 $ (25,059) 2.96 %

Net interest income/net interest yield $ 5,777 0.64 % $ 5,227 0.62 %

MD&A | Consolidated Results of Operations

Fannie Mae Second Quarter 2020 Form 10-Q 16
For the Six Months Ended June 30,

2020 2019

Average

Balance

Interest

Income/

(Expense)

Average

Rates

Earned/

Paid

Average

Balance

Interest

Income/

(Expense)

Average

Rates

Earned/

Paid

(Dollars in millions)

Interest-earning assets:

Mortgage loans of Fannie Mae $ 108,668 $ 2,044 3.76 % $ 118,567 $ 2,600 4.39 %

Mortgage loans of consolidated trusts 3,287,673 53,901 3.28 3,156,951 56,773 3.60 

Total mortgage loans(2) 3,396,341 55,945 3.29 3,275,518 59,373 3.63 

Mortgage-related securities 10,926 215 3.94 9,420 209 4.44 

Non-mortgage-related securities(3) 84,370 377 0.88 60,507 748 2.46 

Federal funds sold and securities purchased under 

agreements to resell or similar arrangements 37,911 121 0.63 41,190 520 2.51 

Advances to lenders 7,167 59 1.63 4,320 73 3.36 

Total interest-earning assets $ 3,536,715 $ 56,717 3.21 % $ 3,390,955 $ 60,923 3.59 %

Interest-bearing liabilities:

Short-term funding debt $ 41,309 $ (156) 0.75 % $ 20,160 $ (244) 2.41 %

Long-term funding debt 162,661 (1,564) 1.92 176,497 (2,216) 2.51 

Connecticut Avenue Securities® (“CAS”) 19,765 (508) 5.14 24,579 (758) 6.17 

Total debt of Fannie Mae 223,735 (2,228) 1.99 221,236 (3,218) 2.91 

Debt securities of consolidated trusts held by third 

parties 3,315,963 (43,365) 2.62 3,162,108 (47,682) 3.02 

Total interest-bearing liabilities $ 3,539,698 $ (45,593) 2.58 % $ 3,383,344 $ (50,900) 3.01 %

Net interest income/net interest yield $ 11,124 0.63 % $ 10,023 0.59 %

(1) Includes the effects of discounts, premiums and other cost basis adjustments.

(2) Average balance includes mortgage loans on nonaccrual status. For nonaccrual mortgage loans not subject to the COVID-19-related 

nonaccrual guidance, interest income is recognized when cash is received. Interest income from the amortization of loan fees, primarily 

consisting of upfront cash fees and yield maintenance fees, was $2.4 billion and $4.0 billion, respectively, for the second quarter and first 

half of 2020, compared with $1.4 billion and $2.5 billion, respectively, for the second quarter and first half of 2019.

(3) Consists of cash, cash equivalents and U.S Treasury securities.

Investment Gains (Losses), Net

Investment gains (losses), net primarily includes gains and losses recognized from the sale of available-for-sale (“AFS”) 

securities, the sale of loans, gains and losses recognized on the consolidation and deconsolidation of securities, net of otherthan-temporary impairments recognized on our investments, and the lower of cost or fair value adjustments on single-family 

held-for-sale (“HFS”) loans.

Investment gains decreased in the second quarter of 2020, compared with the second quarter of 2019, as a result of a decline 

in sales of single-family HFS loans. We recognized investment losses in the first half of 2020, compared with investment gains 

in the first half of 2019, as a result of a decrease in sales of single-family HFS loans and a decline in the fair value of singlefamily HFS loans driven by price decreases during the first half of 2020. 

Fair Value Losses, Net

The estimated fair value of our derivatives, trading securities and other financial instruments carried at fair value may fluctuate 

substantially from period to period because of changes in interest rates, the yield curve, mortgage and credit spreads and 

implied volatility, as well as activity related to these financial instruments. While the estimated fair value of our derivatives that 

mitigate certain risk exposures may fluctuate, some of the financial instruments that generate these exposures are not 

recorded at fair value in our condensed consolidated financial statements. 

We are preparing to implement fair value hedge accounting to reduce the impact of interest-rate volatility on our financial 

results. Once implemented, for derivatives in designated hedges, fair value gains and losses attributable to changes in certain 

benchmark interest rates, such as LIBOR or SOFR, may be reduced by offsetting gains and losses in the fair value of 

designated hedged mortgage loans or debt. Therefore, we expect the volatility of our financial results associated with changes 

in interest rates will be reduced substantially. We expect fair value gains and losses driven by other factors, such as credit 

spreads, will remain. 

MD&A | Consolidated Results of Operations

Fannie Mae Second Quarter 2020 Form 10-Q 17
The table below displays the components of our fair value gains and losses.

Fair Value Losses, Net

For the Three Months 

Ended June 30,

For the Six Months 

Ended June 30,

2020 2019 2020 2019

(Dollars in millions)

Risk management derivatives fair value losses attributable to:

Net contractual interest expense on interest-rate swaps $ (64) $ (242) $ (170) $ (508) 

Net change in fair value during the period 126 (125) (129) (247) 

Total risk management derivatives fair value gains (losses), net 62 (367) (299) (755) 

Mortgage commitment derivatives fair value losses, net (662) (469) (1,655) (769) 

Credit enhancement derivatives fair value gains (losses), net 31 (17) 20 (24) 

Total derivatives fair value losses, net (569) (853) (1,934) (1,548) 

Trading securities gains, net 135 183 782 275 

CAS debt fair value gains (losses), net (163) 119 474 97 

Other, net(1) (421) (203) (616) (409) 

Fair value losses, net $ (1,018) $ (754) $ (1,294) $ (1,585) 

(1) Consists of fair value gains and losses on non-CAS debt and mortgage loans held at fair value.

Our fair value losses in the second quarter and first half of 2020 were impacted by market disruptions due to COVID-19 that 

resulted in lower interest rates. 

Fair value losses in the second quarter of 2020 were primarily driven by: 

• decreases in the fair value of mortgage commitment derivatives due to losses on commitments to sell mortgagerelated securities as prices increased during the commitment period as interest rates declined, which were partially 

offset by gains on commitments to buy mortgage-related securities;

• increases in the fair value of long-term debt of consolidated trusts held at fair value, which are included in “Other, net,” 

due to declines in interest rates; and

• losses on CAS debt reported at fair value resulting from tightening spreads between CAS debt yields and LIBOR 

during the period.

These losses were partially offset by fair value gains in the second quarter of 2020 on trading securities primarily driven by 

declines in interest rates, which resulted in gains on mortgage-related securities held in our retained mortgage portfolio.

Fair value losses in the first half of 2020 were primarily driven by: 

• decreases in the fair value of mortgage commitment derivatives due to losses on commitments to sell mortgagerelated securities as prices increased during the commitment period as interest rates declined, which were partially 

offset by gains on commitments to buy mortgage-related securities; 

• increases in the fair value of long-term debt of consolidated trusts held at fair value, which are included in “Other, net,” 

due to declines in interest rates; and

• net interest expense on risk management derivatives combined with decreases in the fair value of pay-fixed risk 

management derivatives due to declines in swap rates, which were partially offset by increases in the fair value of 

receive-fixed risk management derivatives.

These losses were partially offset by fair value gains in the first half of 2020 on trading securities and CAS debt, primarily 

driven by declines in interest rates and widened spreads between CAS debt yields and LIBOR, which resulted in gains on 

fixed-rate securities held in our other investments portfolio and our CAS debt held at fair value. 

Fair value losses in the second quarter and first half of 2019 were primarily driven by: 

• decreases in the fair value of our mortgage commitment derivatives due to losses on commitments to sell mortgagerelated securities as a result of increases in the prices of securities as interest rates decreased during the 

commitment periods;

• net interest expense accruals on risk management derivatives combined with decreases in the fair value of pay-fixed 

risk management derivatives due to declines in longer-term swap rates, which were partially offset by increases in the 

fair value of our receive-fixed risk management derivatives; and

• increases in the fair value of our long-term debt of consolidated trusts held at fair value, which are included in “Other, 

net,” due to declines in interest rates.

MD&A | Consolidated Results of Operations

Fannie Mae Second Quarter 2020 Form 10-Q 18
Credit-Related Income (Expense)

Our credit-related income or expense can vary substantially from period to period based on a number of factors, such as 

changes in actual and forecasted home prices or property valuations, fluctuations in actual and forecasted interest rates, 

borrower payment behavior, events such as natural disasters or pandemics, the types and volume of our loss mitigation 

activities, including forbearance and loan modifications, the volume of foreclosures completed, and the redesignation of loans 

from held for investment (“HFI”) to HFS. In recent periods, the redesignation of certain reperforming and nonperforming singlefamily loans has been a significant driver of credit-related income. We expect this activity to have a significantly reduced 

impact in 2020. We suspended new sales of nonperforming and reperforming loans in the second quarter of 2020, as investor 

interest in purchasing these loans was severely impacted by the COVID-19 pandemic and its effects. Investor interest in 

purchasing reperforming loans has recently returned, and therefore we are considering resuming sales of reperforming loans. 

As investor interest in purchasing nonperforming loans has not returned, we do not anticipate entering into new contracts for 

sales of these loans in the near future. 

Our credit-related income or expense and our loss reserves can also be impacted by updates to the models, assumptions and 

data used in determining our allowance for loan losses. The January 1, 2020 CECL standard implementation introduced 

additional volatility in our financial results as credit-related income or expense now includes expected lifetime losses on our 

loans and thus are sensitive to fluctuations in the factors detailed above. 

In the first quarter of 2020, we increased our allowance for loan losses due to our estimate of loan losses we expect to incur as 

a result of the COVID-19 pandemic, using an expected lifetime loss methodology. This increase was the primary driver of 

credit-related expense in the first half of 2020. An increase in our estimate of multifamily credit losses and an offsetting 

decrease in our estimate of single-family credit losses, contributed to modest credit-related expense in the second quarter of 

2020.

Estimating the impact of the COVID-19 pandemic on our expected credit loss reserves required significant management 

judgment as we continue to observe uncertainty in our economic forecast caused by elevated levels of unemployment, the 

impact of fiscal stimulus actions, and variability surrounding the continued spread of COVID-19; thereby impacting projected 

borrower behavior. We applied management judgment in estimating the number of single-family borrowers who will receive 

forbearance and any resulting repayment plans, deferrals, or loan modifications that will be provided once the forbearance 

period ends. Under our CECL methodology, depending on the type of loan modification granted, loss severity estimates vary.

In determining our allowance for loan losses as of June 30, 2020, we estimated that up to 12.5% of our single-family borrowers 

based on loan count and up to 10% of our multifamily guaranty book of business based on unpaid principal balance would

ultimately receive forbearance due to a COVID-19-related financial hardship. This represents a downward revision from our 

March 31, 2020 estimate of up to 15% of single-family borrowers and up to 20% of our multifamily guaranty book of business 

and is based on recent economic data and actual forbearance activity observed in the second quarter of 2020. Although we 

believe our estimates underlying our allowance determination are reasonable, we may observe future volatility in these 

estimates as we continue to observe actual loan performance data and update our models and assumptions surrounding this 

unprecedented event. See “Single-Family Business—Single-Family Mortgage Credit Risk Management—Single-Family 

Problem Loan Management—Single-Family Loans in Forbearance” and “Multifamily Business—Multifamily Mortgage Credit 

Risk Management—-Multifamily Problem Loan Management and Foreclosure Prevention” for information on our loans in 

forbearance.

MD&A | Consolidated Results of Operations

Fannie Mae Second Quarter 2020 Form 10-Q 19
Benefit (Provision) for Credit Losses

The table below provides a quantitative analysis of the drivers for the second quarter and first half of 2020 of our single-family 

and multifamily provision for credit losses and the increase in expected benefit from freestanding credit enhancements. The 

provision for credit losses includes our provision for loan losses and the related accrued interest receivable on our book of 

business as well as our provision for our guaranty loss reserves. It excludes the transition impact of adopting the CECL 

standard, which was recorded as an adjustment to retained earnings as of January 1, 2020. Many of the drivers that contribute 

to our provision for credit losses overlap or are interdependent. The attribution shown below is based on internal allocation 

estimates. 

Components of Provision for Credit Losses and Change in Expected 

Credit Enhancement Recoveries 

For the Three Months 

Ended June 30, 2020

For the Six Months 

Ended June 30, 2020

(Dollars in millions)

Single-family benefit (provision) for credit losses:

Changes in loan activity(1) $ (70) $ (67) 

Redesignation of loans from HFI to HFS — 175 

Actual and forecasted home prices 337 (584) 

Actual and projected interest rates 84 1,341 

Estimated impact of the COVID-19 pandemic(2) (3) (2,590) 

Other(3) (129) (226) 

Single-family benefit (provision) for credit losses 219 (1,951) 

Multifamily provision for credit losses:

Changes in loan activity(1) (52) (74) 

Actual and projected interest rates 58 274 

Actual and projected economic data and estimated impact of the COVID-19 

pandemic (261) (874) 

Other(3) 24 33 

Multifamily provision for credit losses (231) (641) 

Total provision for credit losses(4) $ (12) $ (2,592) 

Change in expected credit enhancement recoveries:(5)

Single-family $ 208 $ 266 

Multifamily 65 192 

Total change in expected credit enhancement recoveries $ 273 $ 458 

(1) Primarily consists of loan liquidations, new troubled debt restructurings (“TDRs”), amortization of concessions granted to borrowers and the 

impact of FHFA’s Advisory Bulletin 2012-02, “Framework for Adversely Classifying Loans, Other Real Estate Owned, and Other Assets and 

Listing Assets for Special Mention” (the “Advisory Bulletin”). For multifamily, changes in loan activity also includes changes in the allowance 

due to loan delinquencies and the impact of changes in debt service coverage ratios (“DSCRs”) based on updated property financial 

information.

(2) Includes changes in the allowance due to actual and expected loan delinquencies.

(3) Includes provision for allowance on accrued interest receivable.

(4) Excludes credit losses on our AFS securities, which are included in “Benefit (provision) for credit losses” in Summary of Condensed 

Consolidated Results of Operations.

(5) Excludes recoveries received after foreclosure, which are included in “Changes in expected credit enhancement recoveries” in Summary 

of Condensed Consolidated Results of Operations.

The primary factors that impacted our single-family benefit (provision) for credit losses in the second quarter and first half of 

2020 were:

• Expected credit losses as a result of the COVID-19 pandemic, which includes adjustments to modeled results. In the 

first quarter of 2020, the rapidly changing conditions as a result of the unprecedented COVID-19 pandemic caused us 

to believe our model used to estimate single-family credit losses does not capture the entirety of losses we expect to 

incur relating to COVID-19, which includes our expectations surrounding loan forbearance and borrower behavior 

once the forbearance period ends. As a result, management used its judgment to increase the loss projections 

developed by our credit loss model in the first quarter of 2020 by $2.5 billion.

MD&A | Consolidated Results of Operations

Fannie Mae Second Quarter 2020 Form 10-Q 20
During the second quarter of 2020 our credit loss model consumed data from the initial months of the pandemic, 

including loan delinquencies, updated profile data for loans in forbearance, and an updated home price forecast. As 

more of this data was consumed by our credit loss model, we reduced our non-modeled adjustment. However, 

management continued to apply its judgment and supplement model results as of June 30, 2020, taking into account 

uncertainty regarding the type and extent of loss mitigation that may be needed when loans complete their 

forbearance period and the continued high degree of uncertainty regarding the future course of the pandemic and its 

effect on the economy, including the continued availability of fiscal stimulus to support borrowers. 

For the second quarter of 2020, our estimate of expected losses due to the pandemic, which includes both modeled 

and non-modeled adjustments, remained relatively flat compared with the first quarter. A reduction in overall expected 

forbearance volumes was offset by a weaker credit profile for loans entering forbearance. Furthermore, the positive 

impact of higher-than-initially-expected borrower prepayment activity was offset by heightened uncertainty as noted 

above. When taken together, the net impact for the second quarter was a $3 million increase to expected losses as 

shown in the table above.

• Changes in our expectations for home price growth. In the first quarter, we significantly reduced our expectations for 

home price growth to near-zero for 2020, which contributed to our provision for credit losses for the period. However, 

the negative impact from the first quarter was partially reduced in the second quarter as we revised our home price 

forecast to reflect an increase in home price appreciation on a national basis for 2020 based on strong home sales 

data for the period. This improvement in the 2020 home price forecast was partially offset by our updated long-term 

projected home price growth estimate, which was lowered as a result of a longer projected economic recovery period. 

Higher home prices decrease the likelihood that loans will default and decrease the amount of credit loss on loans 

that do default, which impacts our estimate of losses and ultimately decreases our loss reserves and provision for 

credit losses. Conversely, lower home prices increase the likelihood that loans will default, thereby increasing loss 

reserves and provision for credit losses. 

• Credit benefit from lower actual and projected mortgage interest rates. As mortgage interest rates decline, we expect 

an increase in future prepayments on single-family loans, including modified loans. Higher expected prepayments 

shorten the expected lives of modified loans, which decreases the expected impairment relating to term and interestrate concessions provided on these loans and results in a benefit for credit losses. 

 Our multifamily provision for credit losses in the second quarter and first half of 2020 was primarily driven by: 

• Actual and projected economic data and expected credit losses as a result of the COVID-19 pandemic. Similar to the 

single-family provision for credit losses discussed above, we believe our model used to estimate multifamily credit 

losses as of June 30, 2020 does not capture the entirety of losses we expect to incur relating to COVID-19. As a 

result, management used its judgment to increase the loss projections developed by our credit loss model to reflect 

our current expectations relating to the impact of the pandemic. Accordingly, our multifamily provision for credit losses 

was primarily driven by elevated unemployment rates compared with pre-COVID-19 levels. We expect higher 

unemployment rates will reduce the operating income of multifamily properties in the near term, resulting in an 

increase in the number of loans in forbearance. Additionally, property values are expected to decrease, increasing the 

probability of loan defaults.

In the second quarter, we increased our expected credit losses as a result of significant economic uncertainty and 

worsened forecasted capitalization rates. We also increased our expected credit losses on senior housing loans to 

reflect that these properties have been disproportionately impacted by the pandemic, which has resulted in increased 

operating expenses and has limited these borrowers’ ability to attract new tenants. These increases in expected credit 

losses were partially offset by a reduction in our overall estimated forbearance volumes and lower actual and 

projected interest rates. In developing these adjustments, management considered the current credit risk profile of 

our multifamily loan book of business, as well as relevant historical credit loss experience during rare or stressful 

economic environments. 

MD&A | Consolidated Results of Operations

Fannie Mae Second Quarter 2020 Form 10-Q 21
The table below provides quantitative analysis of the drivers for the second quarter and first half of 2019 of our single-family 

benefit for credit losses. The presentation of our components represents amounts recognized prior to our transition to the 

lifetime loss model prescribed by the CECL standard. Many of the drivers that contribute to our benefit for credit losses overlap 

or are interdependent. The attribution shown below is based on internal allocation estimates. The table does not include our 

multifamily benefit (provision) for credit losses as the amounts for 2019 were less than $50 million. 

Components of Benefit for Credit Losses

For the Three Months 

Ended June 30, 2019

For the Six Months 

Ended June 30, 2019

(Dollars in millions)

Single-family benefit for credit losses:

Changes in loan activity(1) $ 198 $ 222 

Redesignation of loans from HFI to HFS 423 650 

Actual and forecasted home prices 312 540 

Actual and projected interest rates 195 360 

Other(2) 124 141 

Total single-family benefit for credit losses $ 1,252 $ 1,913 

(1) Primarily consists of changes in the allowance due to loan delinquency, loan liquidations, new TDRs, amortization of concessions granted 

to borrowers and the impact of FHFA’s Advisory Bulletin. 

(2) Primarily consists of the impact of model and assumption changes and changes in the reserve for guaranty losses that are not separately 

included in the other components.

The primary factors that contributed to our benefit for credit losses in the second quarter and first half of 2019 were:

• The redesignation of certain reperforming single-family loans from HFI to HFS as we no longer intend to hold them for 

the foreseeable future or to maturity. Upon redesignation of these loans, we recorded the loans at the lower of cost or 

fair value with a charge-off to the allowance for loan losses. Amounts recorded in the allowance related to these loans 

exceeded the amounts charged off, which contributed to the benefit for credit losses.

• An increase in actual and forecasted home prices. Higher home prices decrease the likelihood that loans will default 

and reduce the amount of credit loss on loans that do default, which impacts our estimate of losses and ultimately 

reduces our loss reserves and provision for credit losses.

• Lower actual and projected mortgage interest rates. As mortgage interest rates decline, we expect an increase in 

future prepayments on single-family individually impaired loans, including modified loans. Higher expected 

prepayments shorten the expected lives of modified loans, which decreases the impairment relating to term and 

interest rate concessions provided on these loans and results in a decrease in the provision for credit losses.

• Changes in loan activity. Higher loan liquidation activity generally occurs during a lower interest rate environment as 

loans prepay, and during the peak home buying season of the second and third quarters of each year. When 

mortgage loans prepay, we reverse any remaining allowance related to these loans, which contributed to the benefit 

for credit losses. 

TCCA Fees 

Pursuant to the TCCA, in 2012, FHFA directed us to increase our single-family guaranty fees by 10 basis points and remit this 

increase to Treasury. This TCCA-related revenue is included in “Net interest income” and the expense is recognized as “TCCA 

fees” in our condensed consolidated financial statements. TCCA fees increased in the second quarter of 2020 compared with 

the second quarter of 2019 as our book of business subject to the TCCA continued to grow. Based on guidance we received 

from FHFA in May 2020, if we do not collect these fees due to deferred or forborne payments not being made to servicers, we 

will not be required to remit them to Treasury. We will resume accrual and remittance when payments resume. See “Business

—Charter Act and Regulation—GSE Act and Other Legislation—Guaranty Fees and Pricing” in our 2019 Form 10-K for further 

discussion of the TCCA. 

Credit Enhancement Expense

Credit enhancement expense consists of costs associated with our freestanding credit enhancements, which primarily include 

our CAS and CIRT programs, EPMI, and amortization expense for certain lender risk-sharing programs. We exclude from this 

expense costs related to our CAS transactions accounted for as debt instruments and credit risk transfer programs accounted 

for as derivative instruments. Credit enhancement expense has been presented as a separate line item for all periods 

presented as these expenses have become a more significant driver of our results of operations. In prior periods, credit 

enhancement expenses were recorded in “Other expenses, net.” 

MD&A | Consolidated Results of Operations

Fannie Mae Second Quarter 2020 Form 10-Q 22
Credit enhancement expense increased in the second quarter and first half of 2020 compared with the second quarter and first 

half of 2019 primarily due to higher outstanding volumes of loans covered by credit risk transfer transactions. We discuss the 

transfer of mortgage credit risk in “Single-Family Business—Single-Family Mortgage Credit Risk Management—Single-Family 

Credit Enhancement and Transfer of Mortgage Credit Risk” and “Multifamily Business—Multifamily Mortgage Credit Risk 

Management—Transfer of Multifamily Mortgage Credit Risk.” 

Change in Expected Credit Enhancement Recoveries 

Change in expected credit enhancement recoveries consists of the change in benefits recognized from our freestanding credit 

enhancements, including any realized amounts. Benefits, if any, from our CAS, CIRT and EPMI programs previously recorded 

in “Fee and other income” have been reclassified to “Change in expected credit enhancement recoveries” for all periods 

presented. Benefits from other lender risk-sharing programs, including our multifamily Delegated Underwriting and Servicing 

(“DUS®”) program, were recorded as a reduction of credit-related expense in periods prior to 2020. However, with our adoption 

of the CECL standard on January 1, 2020, benefits from freestanding credit enhancements are no longer recorded as a 

reduction of credit-related expenses. These benefits from lender risk-sharing have been reclassified into “Change in expected 

credit enhancement recoveries” on a prospective basis beginning January 1, 2020.

Other Expenses, Net

Other expenses primarily consists of debt extinguishment gains and losses, housing trust fund expenses, loan subservicing 

costs, servicer fees paid in connection with certain loss mitigation activities and gains and losses from partnership 

investments. We expect our fees paid to servicers for loss mitigation work to increase into 2021 as single-family borrowers 

who received a COVID-19-related forbearance enter into various loss mitigation solutions once the forbearance period ends, 

such as repayment plans, payment deferrals or loan modifications. For additional information about our loans in forbearance, 

see “Single-Family Business—Single-Family Mortgage Credit Risk Management—Single-Family Loans in Forbearance.” 

MD&A | Consolidated Results of Operations

Fannie Mae Second Quarter 2020 Form 10-Q 23
Consolidated Balance Sheet Analysis

This section discusses our condensed consolidated balance sheets and should be read together with our condensed 

consolidated financial statements and the accompanying notes. 

Summary of Condensed Consolidated Balance Sheets

As of

June 30,

2020

December 31, 

2019 Variance

(Dollars in millions)

Assets

Cash and cash equivalents and federal funds sold and securities purchased 

under agreements to resell or similar arrangements $ 79,960 $ 34,762 $ 45,198 

Restricted cash 65,714 40,223 25,491 

Investments in securities 108,864 50,527 58,337 

Mortgage loans:

Of Fannie Mae 115,313 101,668 13,645 

Of consolidated trusts 3,356,988 3,241,510 115,478 

Allowance for loan losses (12,966) (9,016) (3,950) 

Mortgage loans, net of allowance for loan losses 3,459,335 3,334,162 125,173 

Deferred tax assets, net 13,119 11,910 1,209 

Other assets 33,684 31,735 1,949 

Total assets $ 3,760,676 $ 3,503,319 $ 257,357 

Liabilities and equity

Debt:

Of Fannie Mae $ 275,637 $ 182,247 $ 93,390 

Of consolidated trusts 3,444,338 3,285,139 159,199 

Other liabilities 24,224 21,325 2,899 

Total liabilities 3,744,199 3,488,711 255,488 

Fannie Mae stockholders’ equity:

Senior preferred stock 120,836 120,836 — 

Other net deficit (104,359) (106,228) 1,869 

Total equity 16,477 14,608 1,869 

Total liabilities and equity $ 3,760,676 $ 3,503,319 $ 257,357 

Cash and Cash Equivalents and Federal Funds Sold and Securities Purchased 

Under Agreements to Resell or Similar Arrangements and Investments in 

Securities

The increase in both (1) cash and cash equivalents and federal funds sold and securities purchased under agreements to 

resell or similar arrangements and (2) investments in securities from December 31, 2019 to June 30, 2020 was primarily driven 

by the investment of proceeds from new debt issuances to support refinancing activity and in anticipation of future potential 

liquidity needs, which we discuss in “Liquidity and Capital Management—Debt Funding—Debt Funding Activity,” as well as 

proceeds from loan payoffs. These funds were invested in cash equivalents or U.S. Treasury securities at period end where 

possible.

Mortgage Loans, Net of Allowance

The mortgage loans reported in our condensed consolidated balance sheets are classified as either HFS or HFI and include 

loans owned by Fannie Mae and loans held in consolidated trusts. 

Mortgage loans, net of allowance increased as of June 30, 2020 compared with December 31, 2019, primarily driven by:

• an increase in mortgage loans due to acquisitions, primarily from higher mortgage refinance activity, outpacing 

liquidations and sales; 

• partially offset by an increase in our allowance for loan losses due to losses we expect to incur as a result of the 

COVID-19 pandemic and the impact of our adoption of the CECL standard on January 1, 2020.

MD&A | Consolidated Balance Sheet Analysis

Fannie Mae Second Quarter 2020 Form 10-Q 24
For additional information on our mortgage loans, see “Note 3, Mortgage Loans,” and for additional information on changes in 

our allowance for loan losses, see “Note 4, Allowance for Loan Losses.” 

Debt

The increase in debt of Fannie Mae from December 31, 2019 to June 30, 2020 was primarily driven by new short- and longterm debt issuances to support refinancing activity and in anticipation of future potential liquidity needs as a result of the 

COVID-19 pandemic. The increase in debt of consolidated trusts from December 31, 2019 to June 30, 2020 was primarily 

driven by sales of Fannie Mae MBS, which are accounted for as issuances of debt of consolidated trusts in our condensed 

consolidated balance sheets, since the MBS certificate ownership is transferred from us to a third party. See “Liquidity and 

Capital Management—Debt Funding” for a summary of activity in debt of Fannie Mae and a comparison of the mix between 

our outstanding short-term and long-term debt. Also see “Note 7, Short-Term and Long-Term Debt” for additional information 

on our total outstanding debt.

Stockholders’ Equity

Our net equity increased as of June 30, 2020 compared with December 31, 2019 by the amount of our comprehensive

income recognized during the first half of 2020, partially offset by a charge of $1.1 billion to retained earnings due to our 

implementation of the CECL standard on January 1, 2020. See “Note 1, Summary of Significant Accounting Policies—New 

Accounting Guidance—The Current Expected Credit Loss Standard” for further details.

The aggregate liquidation preference of the senior preferred stock was $135.4 billion as of June 30, 2020, unchanged from 

March 31, 2020 as a result of the decrease in our net worth during the first quarter of 2020. The aggregate liquidation 

preference of the senior preferred stock will increase to $138.0 billion as of September 30, 2020 due to the $2.5 billion

increase in our net worth during the second quarter of 2020.

Retained Mortgage Portfolio

Our retained mortgage portfolio consists of mortgage loans and mortgage-related securities that we own, including Fannie 

Mae MBS and non-Fannie Mae mortgage-related securities. Assets held by consolidated MBS trusts that back mortgagerelated securities owned by third parties are not included in our retained mortgage portfolio. 

We use our retained mortgage portfolio primarily to provide liquidity to the mortgage market and support our loss mitigation 

activities. Previously, we also used our retained mortgage portfolio for investment purposes.

The chart below separates the instruments within our retained mortgage portfolio, measured by unpaid principal balance, into 

three categories based on each instrument’s use:

• Lender liquidity, which includes balances related to our whole loan conduit activity, supports our efforts to provide 

liquidity to the single-family and multifamily mortgage markets. 

• Loss mitigation supports our loss mitigation efforts through the purchase of delinquent loans from our MBS trusts. 

• Other represents assets that were previously purchased for investment purposes. More than half of the balance of 

“Other” as of June 30, 2020 consisted of Fannie Mae reverse mortgage securities and reverse mortgage loans. We 

expect the amount of assets in “Other” will continue to decline over time as they liquidate, mature or are sold.

Retained Mortgage Portfolio

(Dollars in billions)

$59.5 $76.3

$60.7 $60.5

$33.4 $30.2

$153.6 $167.0

Lender liquidity Loss mitigation Other

12/31/2019 6/30/2020

The increase in our retained mortgage portfolio as of June 30, 2020 compared with December 31, 2019 was primarily due to 

an increase in our acquisitions of loans through our whole loan conduit in the first half of 2020 driven by higher mortgage 

MD&A | Consolidated Balance Sheet Analysis

Fannie Mae Second Quarter 2020 Form 10-Q 25
refinance activity. This increase was partially offset by a decrease in our legacy investment portfolio due to continued 

liquidations of loans and sales of private-label securities from this portfolio.

The table below displays the components of our retained mortgage portfolio, measured by unpaid principal balance.

Retained Mortgage Portfolio

As of

June 30, 2020 December 31, 2019

(Dollars in millions)

Lender liquidity:

Agency securities(1) $ 40,255 $ 38,375 

Mortgage loans 36,035 21,152 

Total lender liquidity 76,290 59,527 

Loss mitigation mortgage loans(2) 60,454 60,731 

Other:

Reverse mortgage loans 15,777 17,129 

Mortgage loans 5,728 6,546 

Reverse mortgage securities(3) 7,023 7,575 

Private-label and other securities 933 1,250 

Fannie Mae-wrapped private-label securities 544 581 

Mortgage revenue bonds 239 272 

Total other 30,244 33,353 

Total retained mortgage portfolio $ 166,988 $ 153,611 

Retained mortgage portfolio by segment:

Single-family mortgage loans and mortgage-related securities $ 160,517 $ 145,179 

Multifamily mortgage loans and mortgage-related securities $ 6,471 $ 8,432 

(1) Consists of Fannie Mae, Freddie Mac, and Ginnie Mae mortgage-related securities, including Freddie Mac securities guaranteed by 

Fannie Mae. Excludes Fannie Mae and Ginnie Mae reverse mortgage securities and Fannie Mae-wrapped private-label securities.

(2) Includes single-family loans classified as TDRs that were on accrual status of $37.4 billion and $38.2 billion as of June 30, 2020 and 

December 31, 2019, respectively, and single-family loans on nonaccrual status of $19.7 billion and $19.6 billion as of June 30, 2020 and 

December 31, 2019. Includes multifamily loans classified as TDRs that were on accrual status of $24 million and $51 million as of June 30, 

2020 and December 31, 2019, respectively, and multifamily loans on nonaccrual status of $158 million and $132 million as of June 30, 

2020 and December 31, 2019, respectively.

(3) Consists of Fannie Mae and Ginnie Mae reverse mortgage securities.

The amount of mortgage assets that we may own is capped at $250 billion by our senior preferred stock purchase agreement 

with Treasury, and FHFA has directed that we further cap our mortgage assets at $225 billion. The Treasury plan includes a 

recommendation that Treasury and FHFA amend our senior preferred stock purchase agreement to further reduce the cap on 

our investments in mortgage-related assets, and also to restrict our retained mortgage portfolio to solely supporting the 

business of securitizing MBS. See “Business—Conservatorship, Treasury Agreements and Housing Finance Reform” in our 

2019 Form 10-K for additional information on our portfolio cap and the Treasury plan. 

Effective January 31, 2020, FHFA directed us to include 10% of the notional value of interest-only securities in calculating the 

size of the retained portfolio for the purpose of determining compliance with the senior preferred stock purchase agreement 

retained portfolio limits and associated FHFA guidance. As of June 30, 2020, 10% of the notional value of our interest-only 

securities was $2.2 billion, which is not included in the table above. 

We have the option or, in some instances, the obligation, to purchase mortgage loans that meet specific criteria from an MBS 

trust. In support of our loss mitigation strategies, we purchased $5.6 billion of loans from our single-family MBS trusts in the 

first half of 2020, the substantial majority of which were delinquent. In deciding whether and when to exercise our option to 

purchase a loan from a single-family MBS trust, we consider a variety of factors, including, but not limited to, the cost of funds, 

general market conditions, and relevant market yields. The weight we give to these factors, among others, changes depending 

on market circumstances and other factors. See “MD&A—Retained Mortgage Portfolio—Purchases of Loans from Our MBS 

Trusts” in our 2019 Form 10-K for more information relating to our purchases of loans from MBS trusts.

As a result of the COVID-19 pandemic, we have made a number of changes to our single-family and multifamily loss mitigation 

strategies. This includes providing single-family borrowers experiencing COVID-19-related financial hardship with payment 

MD&A | Retained Mortgage Portfolio

Fannie Mae Second Quarter 2020 Form 10-Q 26
forbearance for up to 12 months, as well as repayment plan, payment deferral and loan modification options once the 

forbearance period ends. Typically, we do not buy loans out of our MBS trusts while they are in forbearance or when they are 

granted certain other loss mitigation options, such as a repayment plan, payment deferral or certain types of loan 

modifications. We expect the amount of loans we buy out of trusts over the long term as a result of loan delinquencies or loss 

mitigation strategies will increase the size of our retained mortgage portfolio, perhaps substantially. The volume of loans we 

ultimately buy, the timing of those purchases, and the length of time those loans remain in our retained mortgage portfolio 

remain highly uncertain and depend on a number of factors, including the success of our loss mitigation activities. As 

described in “Liquidity and Capital Management—Debt Funding,” depending on the extent of our funding needs and the 

amount of mortgage loans we purchase from MBS trusts, we may be required to obtain FHFA’s and Treasury’s prior written 

consent to increase our current debt limit and mortgage asset limit. See “Single-Family Business—Single-Family Mortgage 

Credit Risk Management—Single-Family Problem Loan Management—Single-Family Loans in Forbearance” and “Multifamily 

Business—Multifamily Mortgage Credit Risk Management—Multifamily Problem Loan Management and Foreclosure 

Prevention” for information on our loans in forbearance.

Guaranty Book of Business

Our “guaranty book of business” consists of: 

• Fannie Mae MBS outstanding, excluding the portions of any structured securities we issue that are backed by Freddie 

Mac securities; 

• mortgage loans of Fannie Mae held in our retained mortgage portfolio; and 

• other credit enhancements that we provide on mortgage assets. 

“Total Fannie Mae guarantees” consists of: 

• our guaranty book of business; and 

• the portions of any structured securities we issue that are backed by Freddie Mac securities.

We and Freddie Mac began issuing single-family uniform mortgage-backed securities, or “UMBS®,” in June 2019. In this 

report, we use the term “Fannie Mae-issued UMBS” to refer to single-family Fannie Mae MBS that are directly backed by fixedrate mortgage loans and generally eligible for trading in the to-be-announced (“TBA”) market. We use the term “Fannie Mae 

MBS” or “our MBS” to refer to any type of mortgage-backed security that we issue, including UMBS, SupersTM, Real Estate 

Mortgage Investment Conduit securities (“REMICs”) and other types of single-family or multifamily mortgage-backed 

securities. 

Some Fannie Mae MBS that we issue are backed in whole or in part by Freddie Mac securities. When we resecuritize Freddie 

Mac securities into Fannie Mae-issued structured securities, such as Supers and REMICs, our guaranty of principal and 

interest extends to the underlying Freddie Mac securities. However, Freddie Mac continues to guarantee the payment of 

principal and interest on the underlying Freddie Mac securities that we have resecuritized. We do not charge an incremental 

guaranty fee to include Freddie Mac securities in the structured securities that we issue. References to our single-family 

guaranty book of business in this report exclude Freddie Mac-acquired mortgage loans underlying Freddie Mac securities that 

we have resecuritized.

The table below displays the composition of our guaranty book of business based on unpaid principal balance. Our singlefamily guaranty book of business accounted for 90% of our guaranty book of business as of June 30, 2020 and December 31, 

2019.

Composition of Fannie Mae Guaranty Book of Business(1)

As of

June 30, 2020 December 31, 2019

SingleFamily Multifamily TotalSingleFamily Multifamily Total

(Dollars in millions)

Conventional guaranty book of business(2) $ 3,142,861 $ 359,071 $ 3,501,932 $ 2,997,475 $ 341,522 $ 3,338,997 

Government guaranty book of business(3) 25,102 958 26,060 27,422 1,079 28,501 

Guaranty book of business 3,167,963 360,029 3,527,992 3,024,897 342,601 3,367,498 

Freddie Mac securities guaranteed by Fannie Mae(4) 101,430 — 101,430 50,100 — 50,100 

Total Fannie Mae guarantees $ 3,269,393 $ 360,029 $ 3,629,422 $ 3,074,997 $ 342,601 $ 3,417,598 

(1) Includes other single-family Fannie Mae guaranty arrangements of $1.2 billion and $1.3 billion as of June 30, 2020 and December 31, 

2019, and other multifamily Fannie Mae guaranty arrangements of $11.0 billion and $11.3 billion as of June 30, 2020 and December 31, 

2019, respectively. The unpaid principal balance of resecuritized Fannie Mae MBS is included only once in the reported amount.

MD&A | Retained Mortgage Portfolio

Fannie Mae Second Quarter 2020 Form 10-Q 27
(2) Refers to mortgage loans and mortgage-related securities that are not guaranteed or insured, in whole or in part, by the U.S. government.

(3) Refers to mortgage loans and mortgage-related securities guaranteed or insured, in whole or in part, by the U.S. government.

(4) Consists of approximately (i) $79.8 billion and $37.8 billion in unpaid principal balance of Freddie Mac-issued UMBS backing Fannie Maeissued Supers as of June 30, 2020 and December 31, 2019, respectively; and (ii) $21.6 billion and $12.3 billion in unpaid principal balance 

of Freddie Mac securities backing Fannie Mae-issued REMICs, a portion of which may be backed in whole or in part by Fannie Mae MBS,

as of June 30, 2020 and December 31, 2019, respectively. Therefore, our total exposure to Freddie Mac securities included in Fannie Mae 

REMIC collateral is likely lower.

The Federal Housing Enterprises Financial Safety and Soundness Act of 1992, as amended, including by the Federal Housing 

Finance Regulatory Reform Act of 2008 (together, the “GSE Act”) requires us to set aside each year an amount equal to 4.2 

basis points of the unpaid principal balance of our new business purchases and to pay this amount to specified U.S. 

Department of Housing and Urban Development (“HUD”) and Treasury funds in support of affordable housing. In February 

2020, we paid $280 million to the funds based on our new business purchases in 2019. For the first six months of 2020, we 

recognized an expense of $242 million related to this obligation based on $575.9 billion in new business purchases during the 

period. We expect to pay this amount to the funds in 2021, plus additional amounts to be accrued based on our new business 

purchases in the second half of 2020. See “Business—Charter Act and Regulation—GSE Act and Other Legislation—

Affordable Housing Allocations” in our 2019 Form 10-K for more information regarding this obligation.

Business Segments

We have two reportable business segments: Single-Family and Multifamily. The Single-Family business operates in the 

secondary mortgage market relating to single-family mortgage loans, which are secured by properties containing four or fewer 

residential dwelling units. The Multifamily business operates in the secondary mortgage market relating primarily to multifamily 

mortgage loans, which are secured by properties containing five or more residential units.

The chart below displays the net revenues and net income for each of our business segments for the first half of 2019

compared with the first half of 2020. Net revenues consist of net interest income and fee and other income.

Business Segment Net Revenues and Net Income

(Dollars in billions) 

$8.7

$9.6

$4.7

$2.2

Single-Family net revenues

Single-Family net income

First Half 2019 First Half 2020

$1.6 $1.7 $1.1 $0.8

Multifamily net revenues

Multifamily net income

First Half 2019 First Half 2020

In the following sections, we describe each segment’s business metrics, financial results and credit performance.

Single-Family Business

Working with our lender customers, our Single-Family business provides liquidity to the mortgage market primarily by acquiring 

single-family loans from lenders and securitizing those loans into Fannie Mae MBS, which are either delivered to the lenders or 

sold to investors or dealers. 

This section supplements and updates information regarding our Single-Family business segment in our 2019 Form 10-K. See 

“MD&A—Single-Family Business” in our 2019 Form 10-K for additional information regarding the primary business activities, 

customers and competition of our Single-Family business.

Single-Family Market Share

Single-Family Mortgage Acquisition Market Share

Our share of the single-family mortgage acquisition market, including loans held on lenders’ books, may fluctuate from period 

to period. We currently estimate our single-family acquisition market share in the last three years was within the range of 24%

MD&A | Guaranty Book of Business

Fannie Mae Second Quarter 2020 Form 10-Q 28
to 30%, supporting approximately one in four single-family mortgage loans. Our market share estimate is based on publicly 

available data regarding the amount of single-family first-lien mortgage loans originated and our competitors’ acquisitions. 

Single-Family Mortgage-Related Securities Issuances Market Share

Our single-family Fannie Mae MBS issuances were $342.8 billion for the second quarter of 2020, compared with $120.1 billion

for the second quarter of 2019. This increase was driven by a high volume of refinance activity in the first half of 2020 due to 

lower mortgage rates. Based on the latest data available, the chart below displays our estimated market share of single-family 

mortgage-related securities issuances in the second quarter of 2020 as compared with that of our primary competitors for the 

issuance of single-family mortgage-related securities.

Single-Family Mortgage-Related Securities Issuances

Second Quarter 2020 Market Share 

Fannie Mae: 45%

Freddie Mac: 29%

Ginnie Mae: 24%

Private-label securities: 2%

We estimate our market share of single-family mortgage-related securities issuances was 45% in the second quarter of 2020, 

compared with 38% in the first quarter of 2020 and 35% in the second quarter of 2019. 

Single-Family Mortgage Market

Housing activity, especially sales of existing homes and construction of single-family housing, slowed significantly in the 

second quarter of 2020 due to the COVID-19 pandemic. While we expect a modest recovery in the third quarter of 2020, total 

home sales and housing starts are expected to decline significantly for the full year of 2020. However, we expect continued low 

mortgage rates will support refinance originations throughout 2020. 

Housing activity decreased in the second quarter of 2020 compared with the first quarter of 2020. Total existing home sales 

averaged 4.3 million units annualized in the second quarter of 2020, compared with 5.5 million units in the first quarter of 2020, 

according to data from the National Association of REALTORS®. According to the U.S. Census Bureau, new single-family 

home sales decreased during the second quarter of 2020, averaging an annualized rate of 676,000 units, compared with 

701,000 units in the first quarter of 2020. 

The 30-year fixed mortgage rate averaged 3.23% in the second quarter of 2020, compared with 3.51% in the first quarter of 

2020, according to Freddie Mac’s Primary Mortgage Market Survey®.

We forecast that total originations in the U.S. single-family mortgage market in 2020 will increase from 2019 levels by 

approximately 36%, from an estimated $2.31 trillion in 2019 to $3.14 trillion in 2020, and that the amount of originations in the 

U.S. single-family mortgage market that are refinances will increase from an estimated $1.01 trillion in 2019 to $1.88 trillion in 

2020.

Presentation of Our Single-Family Guaranty Book of Business

For purposes of the information reported in this “Single-Family Business” section, we measure the single-family guaranty book 

of business using the unpaid principal balance of our mortgage loans underlying Fannie Mae MBS outstanding. By contrast, 

the single-family guaranty book of business presented in the “Composition of Fannie Mae Guaranty Book of Business” table in 

the “Guaranty Book of Business” section is based on the unpaid principal balance of the Fannie Mae MBS outstanding, rather 

than the unpaid principal balance of the underlying mortgage loans. These amounts differ primarily as a result of payments we 

receive on underlying loans that have not yet been remitted to the MBS holders. As measured for purposes of the information 

reported below, our single-family conventional guaranty book of business was $3,052.1 billion as of June 30, 2020 and 

$2,951.9 billion as of December 31, 2019.

MD&A | Single-Family Business

Fannie Mae Second Quarter 2020 Form 10-Q 29
Single-Family Business Metrics

Net interest income for our Single-Family business is driven by the guaranty fees we charge and the size of our single-family 

conventional guaranty book of business. The guaranty fees we charge are based on the characteristics of the loans we 

acquire. We may adjust our guaranty fees in light of market conditions and to achieve return targets, which are based on 

FHFA’s conservatorship capital framework that currently applies to Fannie Mae. As a result, the average charged guaranty fee 

on new acquisitions may fluctuate based on the credit quality and product mix of loans acquired, as well as market conditions 

and other factors.

The charts below display our average charged guaranty fees, net of TCCA fees, on our single-family conventional guaranty 

book of business and on new single-family conventional loan acquisitions, along with our average single-family conventional 

guaranty book of business and our single-family conventional loan acquisitions for the periods presented.

Single-Family Guaranty Fees, Acquisitions

 and Book of Business Metrics

(Dollars in billions)

43.4 bps 44.2 bps

46.7 bps 46.7 bps

Q2 2019 Q2 2020

$2,906.7 $3,014.4

$128.1

$351.3

Q2 2019 Q2 2020

Average charged guaranty fee on single-family 

conventional guaranty book of business, net of TCCA 

fees(1) 

Average single-family conventional guaranty book 

of business(2)

Average charged guaranty fee on new single-family 

conventional acquisitions, net of TCCA fees(1)

Single-family conventional acquisitions

(1) Excludes the impact of a 10 basis point guaranty fee increase implemented pursuant to the TCCA, the incremental revenue from which is 

remitted to Treasury and not retained by us.

(2) Our single-family conventional guaranty book of business primarily consists of single-family conventional mortgage loans underlying 

Fannie Mae MBS outstanding. It also includes single-family conventional mortgage loans of Fannie Mae held in our retained mortgage 

portfolio, and other credit enhancements that we provide on single-family conventional mortgage assets. Our single-family conventional 

guaranty book of business does not include: (a) non-Fannie Mae single-family mortgage-related securities held in our retained mortgage 

portfolio for which we do not provide a guaranty; (b) mortgage loans guaranteed or insured, in whole or in part, by the U.S. government; or 

(c) Freddie Mac-acquired mortgage loans underlying Freddie Mac-issued UMBS that we have resecuritized. Our average single-family 

conventional guaranty book of business is based on quarter-end balances.

Average charged guaranty fee represents, on an annualized basis, the sum of the average base guaranty fees for our singlefamily conventional guaranty arrangements, which we receive over the life of the loan, during the period, plus the recognition 

of any upfront cash payments relating to these guaranty arrangements based on an estimated average life at the time of 

acquisition. Management uses average charged guaranty fee on new acquisitions as a metric to assess the reasonableness of 

our compensation for the credit risk we manage on newly acquired loans.

MD&A | Single-Family Business

Fannie Mae Second Quarter 2020 Form 10-Q 30
Single-Family Business Financial Results

For the Three Months 

Ended June 30,

For the Six Months 

Ended June 30,

2020 2019 Variance 2020 2019 Variance

(Dollars in millions)

Net interest income(1) $ 4,939 $ 4,419 $ 520 $ 9,480 $ 8,458 $ 1,022 

Fee and other income 71 88 (17) 165 194 (29) 

Net revenues 5,010 4,507 503 9,645 8,652 993 

Investment gains (losses), net 96 417 (321) (56) 511 (567) 

Fair value losses, net (1,030) (758) (272) (1,490) (1,645) 155 

Administrative expenses (625) (634) 9 (1,254) (1,265) 11 

Credit-related income (expense)(2) 216 1,126 (910) (2,034) 1,644 (3,678) 

TCCA fees(1) (660) (600) (60) (1,297) (1,193) (104) 

Credit enhancement expense (307) (229) (78) (623) (399) (224) 

Change in expected credit enhancement 

recoveries(3) 208 — 208 266 — 266 

Other expenses, net(4) (252) (189) (63) (415) (356) (59) 

Income before federal income taxes 2,656 3,640 (984) 2,742 5,949 (3,207) 

Provision for federal income taxes (556) (769) 213 (574) (1,253) 679 

Net income $ 2,100 $ 2,871 $ (771) $ 2,168 $ 4,696 $ (2,528) 

(1) Reflects the impact of a 10 basis point guaranty fee increase implemented pursuant to the TCCA, the incremental revenue from which is 

remitted to Treasury. The resulting revenue is included in net interest income and the expense is recognized as “TCCA fees.” 

(2) Consists of the benefit or provision for credit losses and foreclosed property income or expense. The presentation of our credit-related 

income for the three and six months ended June 30, 2019 represents amounts recognized prior to our transition to the lifetime loss model 

prescribed by the CECL standard.

(3) Consists of change in benefits recognized from our single-family freestanding credit enhancements, which primarily relate to our CAS and 

CIRT programs. See “Note 1, Summary of Significant Accounting Policies” for more information about our change in presentation.

(4) Consists primarily of debt extinguishment gains and losses, housing trust fund expenses, servicer fees paid in connection with certain loss 

mitigation activities, and loan subservicing costs.

Net Interest Income

Single-family net interest income increased in the second quarter and first half of 2020 compared with the second quarter and 

first half of 2019, primarily due to higher net amortization income and higher base guaranty fee income, partially offset by a 

decline in income from portfolios. The drivers of net interest income for the Single-Family segment are consistent with the 

drivers of net interest income in our condensed consolidated statements of operations and comprehensive income, which we 

discuss in “Consolidated Results of Operations—Net Interest Income.” 

Investment Gains (Losses), Net

Investment gains decreased in the second quarter of 2020 compared with the second quarter of 2019 as a result of a decline 

in sales of single-family HFS loans. We recognized investment losses in the first half of 2020, compared with investment gains 

in the first half of 2019, as a result of a decrease in sales of single-family loans and a decline in the fair value of HFS loans 

driven by price decreases during the first half of 2020. The drivers of investment gains (losses), net for the Single-Family 

segment are consistent with the drivers of investment gains (losses), net in our condensed consolidated statements of 

operations and comprehensive income, which we discuss in “Consolidated Results of Operations—Investment Gains (Losses), 

Net.”

Fair Value Losses, Net

Fair value losses, net in the second quarter and first half of 2020 were primarily driven by decreases in the fair values of our 

mortgage commitment derivatives, partially offset by fair value gains on trading securities. Fair value losses, net in the second 

quarter and first half of 2019 were primarily driven by decreases in the fair value of our mortgage commitments and our payfixed risk management derivatives, and net interest expense accruals on our risk management derivatives. The drivers of fair 

value losses, net for the Single-Family segment are consistent with the drivers of fair value losses, net in our condensed 

consolidated statements of operations and comprehensive income, which we discuss in “Consolidated Results of Operations—

Fair Value Losses, Net.” 

MD&A | Single-Family Business

Fannie Mae Second Quarter 2020 Form 10-Q 31
As we discuss in “Consolidated Results of Operations—Fair Value Losses, Net,” we expect that implementing a hedge 

accounting program will reduce the volatility of our financial results associated with changes in interest rates, while fair value 

gains and losses driven by other factors such as credit spreads will remain.

Credit-Related Income (Expense)

Credit-related income for the second quarter of 2020 was primarily driven by an increase in actual home prices. In the first 

quarter, our expectations for home price growth for 2020 were near-zero. However, in the second quarter of 2020, we revised 

our home price forecast for the year to reflect an increase in home price appreciation on a national basis for 2020 based on 

continued strong home sales. This change contributed to credit-related income for the period. 

Credit-related expense for the first half of 2020 was primarily driven by an increase in our allowance for loan losses due to 

losses we expect to incur as a result of the COVID-19 pandemic. This was partially offset by lower actual and projected 

mortgage interest rates.

Credit-related income for the second quarter and first half of 2019 was primarily driven by the redesignation of certain singlefamily loans from HFI to HFS; an increase in actual and forecasted home prices; lower actual and projected mortgage interest 

rates; and changes in loan activity related to loan liquidations.

See “Consolidated Results of Operations—Credit-Related Income (Expense)” in this report for more information on the primary 

factors that contributed to our single-family credit-related income (expense).

Single-Family Mortgage Credit Risk Management

This section updates our discussion of single-family mortgage credit risk management in our 2019 Form 10-K. For additional 

information on our acquisition and servicing policies, underwriting and servicing standards, quality control process, repurchase 

requests, and representation and warranty framework, see “MD&A—Single-Family Business—Single-Family Mortgage Credit 

Risk Management” in our 2019 Form 10-K.

Single-Family Acquisition and Servicing Policies and Underwriting and 

Servicing Standards

COVID-19 Selling Policies

We are working closely with Freddie Mac, under the guidance and at the direction of FHFA, to offer temporary measures 

during the COVID-19 national emergency that provide lenders with the clarity and flexibility to continue lending in a prudent 

and responsible manner. We will continue monitoring the market to determine whether further adjustments to our temporary 

policies are appropriate.

Temporary policy flexibilities and updates to our Selling Guide requirements are designed to mitigate the operational impact of 

COVID-19 on loan underwriting and originations. These flexibilities include: 

• purchasing certain loans that are subject to a COVID-19-related forbearance at the time of sale, subject to payment of 

a loan-level price adjustment;

• offering additional methods of obtaining verbal verifications of borrower employment;

• allowing alternative property valuation methods;

• expanding guidelines for the use of a power of attorney; and

• permitting remote online notarizations.

Temporary policy updates to provide clarity and mitigate risk include: 

• assessment of more recent documentation of borrower employment (including self-employment), income, and assets; 

• requiring evidence of receipt of funds from stocks, stock options and mutual funds when used for down payment or 

closing costs, and reducing the value to 70% when considered for reserves; 

• requiring additional due diligence regarding the payment status of a borrower’s existing mortgage loans;

• providing clarity for assessing self-employment income for qualifying purposes; and

• requiring that loans be no more than six months old to be eligible for sale to us.

COVID-19 Servicing Policies

We also continue to work with Freddie Mac under the direction of FHFA to implement temporary policies to enable our singlefamily loan servicers to better assist borrowers impacted by COVID-19. We issued initial requirements to servicers on 

temporary policies to assist borrowers impacted by COVID-19 in March 2020, and have subsequently amended the 

requirements. We will continue monitoring the market to determine whether further adjustments to our temporary policies are 

appropriate.

MD&A | Single-Family Business

Fannie Mae Second Quarter 2020 Form 10-Q 32
These temporary policies include requiring that our single-family loan servicers: 

• provide forbearance upon the request of any single-family borrower experiencing a financial hardship due to the 

COVID-19 pandemic, regardless of the borrower’s delinquency status and with no additional documentation required 

other than the borrower’s attestation to a financial hardship caused by COVID-19. The borrower must be provided an 

initial forbearance plan for a period up to 180 days, and that forbearance period may be extended for up to an 

additional 180 days at the request of the borrower. If the borrower’s COVID-19-related hardship has not been 

resolved during an incremental forbearance period, the servicer must extend the borrower’s forbearance period at the 

borrower’s request, not to exceed 12 months total;

• suspend foreclosures and foreclosure-related activities for single-family properties through at least August 31, 2020, 

other than for vacant or abandoned properties; and

• report as current the obligation of a borrower who receives a forbearance plan or other form of relief as a result of the 

COVID-19 pandemic during the covered period and who was current before the accommodation and makes 

payments as agreed under the accommodation in accordance with the Fair Credit Reporting Act, as amended by the 

CARES Act.

A servicer is required to contact a borrower on a forbearance plan no later than 30 days before the end of the forbearance 

period to evaluate them for a workout option after the forbearance period. Those options include:

• a reinstatement (where the borrower repays all of the missed payments at one time);

• a repayment plan (where the borrower repays the missed payments over time);

• a deferral of some missed payments to the end of the loan term; or

• a modification of the loan term so that the borrower may be brought current and either continues to make their original 

monthly contractual payment or makes reduced monthly contractual payments over a longer period of time. 

In addition, some states and local governments are considering proposals that would assist borrowers and renters impacted by 

COVID-19 that are more extensive than the CARES Act or our Servicing Guide requirements. 

Desktop Underwriter Update

As part of our comprehensive risk management approach, we periodically update our proprietary automated underwriting 

system, Desktop Underwriter® (“DU®”), to reflect changes to our underwriting and eligibility guidelines. As part of normal 

business operations, we regularly review DU to determine whether its risk analysis and eligibility assessment are appropriate 

based on the current market environment and loan performance information. As a result of our most recent review, in April 

2020 we enhanced the DU eligibility assessment to help Fannie Mae and our customers better manage credit risk in the 

current market while providing sustainable options to borrowers. We expect this change will result in a modest reduction of 

loans with high-risk factors being eligible for acquisition through DU.

We will continue to closely monitor loan acquisitions and market conditions and, as appropriate, seek to make changes in our 

eligibility criteria so that the loans we acquire are consistent with our risk appetite.

For further information regarding Desktop Underwriter, please see “MD&A—Single-Family Business—Single-Family Mortgage 

Credit Risk Management—Single-Family Acquisition and Servicing Policies and Underwriting and Servicing Standards” in our 

2019 Form 10-K.

MD&A | Single-Family Business

Fannie Mae Second Quarter 2020 Form 10-Q 33
Single-Family Portfolio Diversification and Monitoring

The table below displays our single-family conventional business volumes and our single-family conventional guaranty book of 

business, based on certain key risk characteristics that we use to evaluate the risk profile and credit quality of our single-family 

loans. We provide additional information on the credit characteristics of our single-family loans in quarterly financial 

supplements, which we furnish to the U.S. Securities and Exchange Commission (“SEC”) with current reports on Form 8-K. 

Information in our quarterly financial supplements is not incorporated by reference into this report.

Key Risk Characteristics of Single-Family Conventional Business Volume 

and Guaranty Book of Business(1)

Percent of Single-Family Conventional 

Business Volume at Acquisition(2) Percent of Single-Family Conventional

Guaranty Book of Business(3)

As of

For the Three Months 

Ended June 30,

For the Six Months 

Ended June 30,

2020 2019 2020 2019 June 30, 2020 December 31, 2019

Original loan-to-value (“LTV”) 

ratio:(4)

<= 60% 24 % 15 % 23 % 15 % 20 % 19 %

60.01% to 70% 16 11 16 11 14 13 

70.01% to 80% 35 37 35 36 37 37 

80.01% to 90% 12 14 13 13 12 12 

90.01% to 95% 10 15 10 16 11 12 

95.01% to 100% 3 8 3 9 4 5 

Greater than 100% * * * * 2 2 

Total 100 % 100 % 100 % 100 % 100 % 100 %

Weighted average 72 % 78 % 73 % 78 % 75 % 76 %

Average loan amount $ 280,846 $ 248,993 $ 278,525 $ 244,880 $ 178,018 $ 173,804 

Estimated mark-to-market 

LTV ratio:(5)

<= 60% 53 % 54 %

60.01% to 70% 17 17 

70.01% to 80% 17 16 

80.01% to 90% 9 8 

90.01% to 100% 4 5 

Greater than 100% * *

Total 100 % 100 %

Weighted average 57 % 57 %

Product type:

Fixed-rate:(6)

Long-term 85 % 89 % 85 % 90 % 85 % 85 %

Intermediate-term 15 10 14 9 13 13 

Total fixed-rate 100 99 99 99 98 98 

Adjustable-rate * 1 1 1 2 2 

Total 100 % 100 % 100 % 100 % 100 % 100 %

Number of property units:

1 unit 98 % 98 % 98 % 98 % 97 % 97 %

2 to 4 units 2 2 2 2 3 3 

Total 100 % 100 % 100 % 100 % 100 % 100 %

Property type:

Single-family homes 92 % 90 % 92 % 90 % 91 % 91 %

Condo/Co-op 8 10 8 10 9 9 

Total 100 % 100 % 100 % 100 % 100 % 100 %

MD&A | Single-Family Business

Fannie Mae Second Quarter 2020 Form 10-Q 34
Percent of Single-Family Conventional

Business Volume at Acquisition(2)

Percent of Single-Family Conventional

Guaranty Book of Business(3)

As of

For the Three Months 

Ended June 30,

For the Six Months 

Ended June 30,

2020 2019 2020 2019 June 30, 2020 December 31, 2019

Occupancy type: 

Primary residence 93 % 91 % 93 % 90 % 89 % 89 %

Second/vacation home 3 4 3 4 4 4 

Investor 4 5 4 6 7 7 

Total 100 % 100 % 100 % 100 % 100 % 100 %

FICO credit score at 

origination:

< 620 * % * % * % * % 1 % 1 %

620 to < 660 2 4 2 5 5 5 

660 to < 680 2 4 2 5 4 5 

680 to < 700 5 8 6 8 7 7 

700 to < 740 19 24 20 24 21 21 

>= 740 72 60 70 58 62 61 

Total 100 % 100 % 100 % 100 % 100 % 100 %

Weighted average 759 746 757 744 748 746 

Debt-to-income (“DTI”) ratio 

at origination:(7)

<= 43% 80 % 70 % 78 % 68 % 76 % 76 %

43.01% to 45% 8 10 8 10 9 9 

Greater than 45% 12 20 14 22 15 15 

Total 100 % 100 % 100 % 100 % 100 % 100 %

Weighted average 34 % 37 % 34 % 37 % 35 % 35 %

Loan purpose:

Purchase 26 % 62 % 30 % 64 % 41 % 45 %

Cash-out refinance 20 19 21 20 20 19 

Other refinance 54 19 49 16 39 36 

Total 100 % 100 % 100 % 100 % 100 % 100 %

Geographic concentration:(8)

Midwest 15 % 13 % 14 % 14 % 15 % 15 %

Northeast 12 13 12 13 17 17 

Southeast 21 23 21 23 22 22 

Southwest 21 22 21 22 18 18 

West 31 29 32 28 28 28 

Total 100 % 100 % 100 % 100 % 100 % 100 %

Origination year:

2014 and prior 32 % 38 %

2015 7 8 

2016 12 14 

2017 10 12 

2018 8 11 

2019 16 17 

2020 15 — 

Total 100 % 100 %

MD&A | Single-Family Business

Fannie Mae Second Quarter 2020 Form 10-Q 35
* Represents less than 0.5% of single-family conventional business volume or guaranty book of business.

(1) Second-lien mortgage loans held by third parties are not reflected in the original LTV or the estimated mark-to-market LTV ratios in this 

table. 

(2) Calculated based on the unpaid principal balance of single-family loans for each category at time of acquisition.

(3) Calculated based on the aggregate unpaid principal balance of single-family loans for each category divided by the aggregate unpaid 

principal balance of loans in our single-family conventional guaranty book of business as of the end of each period.

(4) The original LTV ratio generally is based on the original unpaid principal balance of the loan divided by the appraised property value 

reported to us at the time of acquisition of the loan. Excludes loans for which this information is not readily available.

(5) The aggregate estimated mark-to-market LTV ratio is based on the unpaid principal balance of the loan as of the end of each reported 

period divided by the estimated current value of the property, which we calculate using an internal valuation model that estimates periodic 

changes in home value. Excludes loans for which this information is not readily available.

(6) Long-term fixed-rate consists of mortgage loans with maturities greater than 15 years, while intermediate-term fixed-rate loans have 

maturities equal to or less than 15 years.

(7) Excludes loans for which this information is not readily available.

(8) Midwest consists of IL, IN, IA, MI, MN, NE, ND, OH, SD and WI. Northeast consists of CT, DE, ME, MA, NH, NJ, NY, PA, PR, RI, VT and 

VI. Southeast consists of AL, DC, FL, GA, KY, MD, MS, NC, SC, TN, VA and WV. Southwest consists of AZ, AR, CO, KS, LA, MO, NM, OK, 

TX and UT. West consists of AK, CA, GU, HI, ID, MT, NV, OR, WA and WY.

Characteristics of our New Single-Family Loan Acquisitions

The share of our single-family loan acquisitions consisting of refinance loans rather than home purchase loans increased in the 

second quarter of 2020 compared with the second quarter of 2019, primarily due to a lower interest-rate environment, which 

encouraged refinance activity. Typically, refinance loans have lower LTV ratios than home purchase loans. This trend 

contributed to a decrease in the percentage of our single-family loan acquisitions with LTV ratios over 90%, from 23% in the 

second quarter of 2019 to 13% in the second quarter of 2020. The historically low interest interest-rate environment, combined 

with the high level of refinancing activity, also led to an increase in the percentage of loans we acquired with a FICO credit 

score over 740, from 60% in the second quarter of 2019 to 72% in the second quarter of 2020. Borrowers who refinance when 

interest rates initially drop tend to have a higher degree of financial literacy and, as a result, higher FICO credit scores 

Our share of acquisitions of loans with DTI ratios above 45% decreased in the second quarter of 2020 compared with the 

second quarter of 2019. This decrease was driven in part by changes in our eligibility guidelines implemented in 2019 to 

further limit risk layering, particularly with respect to loans with DTI ratios above 45%, as well as a higher volume of refinance 

loan acquisitions.

For a discussion of factors that may impact the credit characteristics of loans we acquire in the future, see “MD&A—SingleFamily Business—Single-Family Mortgage Credit Risk Management—Single-Family Portfolio Diversification and Monitoring” in 

our 2019 Form 10-K. In this section of our 2019 Form 10-K, we also provide more information on the credit characteristics of 

loans in our single-family conventional guaranty book of business, including Home Affordable Refinance Program® (“HARP®”) 

and Refi PlusTM loans, jumbo-conforming and high-balance loans, reverse mortgages and mortgage products with rate resets. 

MD&A | Single-Family Business

Fannie Mae Second Quarter 2020 Form 10-Q 36
Single-Family Credit Enhancement and Transfer of Mortgage Credit Risk

Single-Family Credit Enhancement

Our charter generally requires credit enhancement on any single-family conventional mortgage loan that we purchase or 

securitize if it has an LTV ratio over 80% at the time of purchase. We generally achieve this through primary mortgage 

insurance. We also enter into various other types of transactions in which we transfer mortgage credit risk to third parties.

The table below displays information about loans in our single-family conventional guaranty book of business covered by one 

or more forms of credit enhancement, including mortgage insurance or a credit risk transfer transaction. For a description of 

primary mortgage insurance and the other types of credit enhancements specified in the table, see “MD&A—Single-Family 

Business—Single-Family Mortgage Credit Risk Management—Single-Family Credit Enhancement and Transfer of Mortgage 

Credit Risk” in our 2019 Form 10-K. For a discussion of our exposure to and management of the institutional counterparty 

credit risk associated with the providers of these credit enhancements, see “MD&A—Risk Management—Institutional 

Counterparty Credit Risk Management” and “Note 13, Concentrations of Credit Risk” in our 2019 Form 10-K and “Note 10, 

Concentrations of Credit Risk” in this report. Also see “Risk Factors” in our 2019 Form 10-K and in this report. 

Single-Family Loans with Credit Enhancement

As of

June 30, 2020 December 31, 2019

Unpaid 

Principal 

Balance

Percentage of 

Single-Family 

Conventional 

Guaranty Book 

of Business

Unpaid 

Principal 

Balance

Percentage of 

Single-Family 

Conventional 

Guaranty Book 

of Business

(Dollars in billions)

Primary mortgage insurance and other $ 662 22 % $ 653 22 %

Connecticut Avenue Securities 813 27 919 31 

Credit Insurance Risk Transfer 279 9 275 10 

Lender risk-sharing 132 4 147 5 

Less: Loans covered by multiple credit enhancements (394) (13) (438) (15) 

Total single-family loans with credit enhancement $ 1,492 49 % $ 1,556 53 %

Transfer of Mortgage Credit Risk

In addition to primary mortgage insurance, our Single-Family business has developed other risk-sharing capabilities to transfer 

portions of our single-family mortgage credit risk to the private market. Our credit risk transfer transactions are designed to 

transfer a portion of the losses we expect would be incurred in an economic downturn or a stressed credit environment. As 

described in “MD&A—Single-Family Business—Single-Family Mortgage Credit Risk Management—Single-Family Credit 

Enhancement and Transfer of Mortgage Credit Risk—Credit Risk Transfer Transactions” in our 2019 Form 10-K, we have 

three primary single-family credit risk transfer programs: Connecticut Avenue Securities, Credit Insurance Risk Transfer, and 

lender risk-sharing. In March 2020, FHFA directed us to wind down our single-family lender risk-sharing transactions by the 

end of this year. We continually evaluate our credit risk transfer transactions which, in addition to managing our credit risk, also 

affect our returns on capital under FHFA’s conservatorship capital requirements. 

During the first half of 2020, pursuant to our credit risk transfer transactions, we transferred a portion of the mortgage credit 

risk on single-family mortgages with an unpaid principal balance of $127 billion at the time of the transactions. As of June 30, 

2020, approximately 40% of the loans in our single-family conventional guaranty book of business, measured by unpaid 

principal balance, were included in a reference pool for a credit risk transfer transaction. 

We did not enter into credit risk transfer transactions in the second quarter of 2020 due to continuing adverse market 

conditions resulting from the COVID-19 pandemic. This contributed to the percentage of loans in our single-family conventional 

guaranty book of business with credit enhancement declining from 53% as of December 31, 2019 to 49% as of June 30, 2020.

Although market conditions have improved, we currently do not have plans to engage in additional credit risk transfer 

transactions as we evaluate FHFA’s re-proposed capital rule, which would reduce the amount of capital relief we obtain from 

these transactions. We will continue to review our plans, which may be affected by our evaluation of the proposed capital rule 

and changes in the rule as it is finalized, our progress in meeting FHFA’s 2020 conservatorship scorecard, the strength of 

future market conditions, and our review of our overall business and capital plan to enable us to exit conservatorship. See 

“Risk Factors” in this report for additional information on the risks associated with the constraints on our entering into new 

credit risk transfer transactions and “Legislation and Regulation” for more information on FHFA’s proposed capital rule. 

MD&A | Single-Family Business

Fannie Mae Second Quarter 2020 Form 10-Q 37
The table below displays the mortgage credit risk transferred to third parties and retained by Fannie Mae pursuant to our 

single-family credit risk transfer transactions. 

Single-Family Credit Risk Transfer Transactions

Issuances from Inception to June 30, 2020

(Dollars in billions)

Senior

Fannie Mae(1)

Initial 

Reference 

Pool(5)

$2,091

Mezzanine Fannie Mae(1) CIRT(2)(3) CAS(2)

Lender RiskSharing(2)(4)

$2 $12 $41 $4 $2,168

First Loss Fannie Mae(1) CAS(2)(6)

Lender RiskSharing(2)(4)

$9 $6 $3

Outstanding as of June 30, 2020

(Dollars in billions)

Senior

Fannie Mae(1)

Outstanding 

Reference 

Pool(5)(7)

$1,243

Mezzanine Fannie Mae(1) CIRT(2)(3) CAS(2)

Lender RiskSharing(2)(4)

$1 $9 $22 $4 $1,296

First Loss Fannie Mae(1) CAS(2)(6)

Lender RiskSharing(2)(4)

$9 $6 $2

(1) Credit risk retained by Fannie Mae in CAS, CIRT and lender risk-sharing transactions. Tranche sizes vary across programs.

(2) Credit risk transferred to third parties. Tranche sizes vary across programs.

(3) Includes mortgage pool insurance transactions covering loans with an unpaid principal balance of approximately $7 billion at issuance and 

approximately $3 billion outstanding as of June 30, 2020. 

(4) For some lender risk-sharing transactions, does not reflect completed transfers of risk prior to settlement.

(5) For CIRT and some lender risk-sharing transactions, “Reference Pool” reflects a pool of covered loans. 

(6) For CAS transactions, “First Loss” represents all B tranche balances.

(7) For CAS and some lender risk-sharing transactions, represents outstanding reference pools, not the outstanding unpaid principal balance 

of the underlying loans. The outstanding unpaid principal balance for all loans covered by credit risk transfer programs, including all loans 

on which risk has been transferred in lender risk-sharing transactions, was $1,224 billion as of June 30, 2020.

MD&A | Single-Family Business

Fannie Mae Second Quarter 2020 Form 10-Q 38
The following table displays the approximate cash paid or transferred to investors for these credit risk transfer transactions. 

The cash represents the portion of the guaranty fee paid to investors as compensation for taking on a share of the credit risk. 

Credit Risk Transfer Transactions

For the Six Months Ended June 30,

2020 2019

Cash paid or transferred for: (Dollars in millions)

CAS transactions(1) $ 528 $ 474 

CIRT transactions 207 174 

Lender risk-sharing transactions 160 134 

(1) Consists of cash paid for interest expense net of LIBOR on outstanding CAS debt and amounts paid for both CAS REMIC®

 and CAS 

credit-linked notes (“CLN”) transactions. CAS REMICs are Connecticut Avenue Securities that are structured as notes issued by trusts that 

qualify as REMICs. CAS CLNs are similar to CAS REMICs with the exception that loans underlying the transactions were not tagged for 

use in a REMIC transaction at the time of acquisition.

The following table displays the primary characteristics of the loans in our single-family conventional guaranty book of 

business currently without credit enhancement.

Single-Family Loans without Credit Enhancement

As of

June 30, 2020 December 31, 2019

Unpaid 

Principal 

Balance

Percentage of 

Single-Family 

Conventional 

Guaranty Book 

of Business

Unpaid 

Principal 

Balance

Percentage of 

Single-Family 

Conventional 

Guaranty Book 

of Business

(Dollars in billions)

Low LTV ratio or short-term(1) $ 803 26 % $ 736 25 %

Pre-credit risk transfer program inception(2) 549 18 608 20 

Recently acquired(3) 545 18 287 10 

Other(4) 279 9 246 8 

Less: Loans in multiple categories (616) (20) (481) (16) 

Total single-family loans currently without credit 

enhancement $ 1,560 51 % $ 1,396 47 %

(1) Represents loans with an LTV ratio less than or equal to 60% or loans with an original maturity of 20 years or less.

(2) Represents loans that were acquired before the inception of our credit risk transfer programs. Also includes Refi Plus loans.

(3) Represents loans that were recently acquired and have not been included in a reference pool.

(4) Includes adjustable-rate mortgage loans, loans with a combined LTV ratio greater than 97%, non-Refi Plus loans acquired after the 

inception of our credit risk transfer programs that became 30 or more days delinquent prior to inclusion in a credit risk transfer transaction, 

and loans that were delinquent as of June 30, 2020 or December 31, 2019.

MD&A | Single-Family Business

Fannie Mae Second Quarter 2020 Form 10-Q 39
Single-Family Problem Loan Management

Our problem loan management strategies focus primarily on reducing defaults to avoid losses that would otherwise occur and 

pursuing foreclosure alternatives to mitigate the severity of the losses we incur. See “MD&A—Single-Family Business—SingleFamily Mortgage Credit Risk Management—Problem Loan Management” in our 2019 Form 10-K for a discussion of 

delinquency statistics on our problem loans, efforts undertaken to manage our problem loans, metrics regarding our loan 

workout activities, real estate owned (“REO”) management and other single-family credit-related information. The discussion 

below updates some of that information.

Delinquency

The table below displays the delinquency status of loans and changes in the balance of seriously delinquent loans in our 

single-family conventional guaranty book of business, based on the number of loans. Single-family seriously delinquent loans 

are loans that are 90 days or more past due or in the foreclosure process.

As described above in “Single-Family Acquisition and Servicing Policies and Underwriting and Servicing Standards—

COVID-19 Servicing Policies,” pursuant to the CARES Act, for purposes of reporting to the credit bureaus, servicers must 

report a borrower receiving a COVID-19-related payment accommodation, such as a forbearance plan or loan modification, as 

current if the borrower was current prior to receiving the accommodation and the borrower makes all required payments in 

accordance with the accommodation. For purposes of our disclosures regarding delinquency status, we will continue to report 

loans receiving COVID-19-related payment forbearance as delinquent according to the contractual terms of the loan.

Delinquency Status and Activity of Single-Family Conventional Loans

As of

June 30, 

2020

December 31, 

2019

June 30, 

2019

Delinquency status:

30 to 59 days delinquent 1.47 % 1.27 % 1.47 %

60 to 89 days delinquent 1.60 0.35 0.35 

Seriously delinquent (“SDQ”) 2.65 0.66 0.70 

Percentage of SDQ loans that have been delinquent for more than 180 days 14 % 49 % 52 %

Percentage of SDQ loans that have been delinquent for more than two years 3 11 12 

For the Six Months Ended 

June 30,

2020 2019

Single-family SDQ loans (number of loans):

Beginning balance 112,434 130,440 

Additions 427,657 101,121 

Removals:

Modifications and other loan workouts (18,680) (24,653) 

Liquidations and sales (15,449) (24,395) 

Cured or less than 90 days delinquent (52,172) (63,394) 

Total removals (86,301) (112,442) 

Ending balance 453,790 119,119 

Our single-family delinquency rates increased as of June 30, 2020 compared with December 31, 2019 and June 30, 2019, due 

to economic dislocation caused by the COVID-19 pandemic, which increased borrower participation in forbearance plans. Of 

our single-family SDQ loan additions in the first half of 2020, 357,541 were loans in a forbearance plan. Our single-family 

seriously delinquent rate excluding loans in forbearance was 0.59% as of June 30, 2020. We expect the COVID-19 pandemic 

to result in continued higher delinquency rates over the next several quarters. 

Certain higher-risk loan categories, such as Alt-A loans, loans with mark-to-market LTV ratios greater than 100%, and our 2005 

through 2008 loan vintages, continue to exhibit higher-than-average delinquency rates and/or account for a higher share of our 

credit losses. Single-family loans originated in 2005 through 2008 constituted 3% of our single-family book of business as of 

June 30, 2020, but constituted 15% of our seriously delinquent single-family loans as of June 30, 2020 and drove 32% of our 

single-family credit losses in the first half of 2020. In addition, loans in certain judicial foreclosure states such as Florida, New 

Jersey and New York with historically long foreclosure timelines have exhibited higher-than-average delinquency rates and/or 

account for a higher share of our credit losses. 

MD&A | Single-Family Business

Fannie Mae Second Quarter 2020 Form 10-Q 40
The table below displays the serious delinquency rates for, and the percentage of our total seriously delinquent single-family 

conventional loans represented by, the specified loan categories. Percentage of book amounts present the unpaid principal 

balance of loans for each category divided by the unpaid principal balance of our total single-family conventional guaranty 

book of business. We also include information for our loans in California because the state accounts for a large share of our 

single-family conventional guaranty book of business. The reported categories are not mutually exclusive.

Single-Family Conventional Seriously Delinquent Loan Concentration Analysis

As of

June 30, 2020 December 31, 2019 June 30, 2019

Percentage 

of Book 

Outstanding

Percentage 

of Seriously 

Delinquent 

Loans(1)

Serious 

Delinquency 

Rate

Percentage of 

Book 

Outstanding

Percentage 

of Seriously 

Delinquent 

Loans(1)

Serious 

Delinquency 

Rate

Percentage 

of Book 

Outstanding

Percentage of 

Seriously 

Delinquent 

Loans(1)

Serious 

Delinquency 

Rate

States:

California 19 % 13 % 2.54 % 19 % 6 % 0.32 % 19 % 6 % 0.33 %

Florida 6 10 3.98 6 8 0.84 6 9 0.94 

Illinois 4 4 2.71 4 6 0.91 3 5 0.94 

New Jersey 3 5 4.81 3 5 1.13 4 6 1.28 

New York 5 8 4.96 5 8 1.18 5 8 1.32 

All other states 63 60 2.30 63 67 0.64 63 66 0.67 

Product type:

Alt-A(2) 1 6 8.07 2 9 2.95 2 11 3.25 

Vintages:

2004 and prior 2 10 5.00 2 20 2.48 3 22 2.61 

2005-2008 3 15 8.37 4 33 4.11 4 38 4.45 

2009-2020 95 75 2.21 94 47 0.35 93 40 0.32 

Estimated mark-tomarket LTV ratio:

<= 60% 53 52 2.16 54 52 0.53 55 51 0.55 

60.01% to 70% 17 18 3.36 17 17 0.80 18 17 0.81 

70.01% to 80% 17 15 3.18 16 14 0.75 15 14 0.83 

80.01% to 90% 9 10 4.21 8 9 1.00 8 9 1.10 

90.01% to 100% 4 4 3.43 5 4 0.86 4 4 1.15 

Greater than 100% * 1 18.12 * 4 10.14 * 5 10.63 

Credit enhanced:(3)

Primary MI & other(4) 22 26 3.85 22 26 0.96 22 26 1.01 

Credit risk transfer(5) 40 37 2.78 45 16 0.27 42 11 0.24 

Non-credit enhanced 51 51 2.37 47 66 0.79 51 68 0.79 

* Represents less than 0.5% of single-family conventional guaranty book of business.

(1) Calculated based on the number of single-family loans that were seriously delinquent for each category divided by the total number of 

single-family conventional loans that were seriously delinquent.

(2) For a description of our Alt-A loan classification criteria, see “MD&A—Glossary of Terms Used in This Report” in our 2019 Form 10-K. 

(3) The credit-enhanced categories are not mutually exclusive. A loan with primary mortgage insurance that is also covered by a credit risk 

transfer transaction will be included in both the “Primary MI & other” category and the “Credit risk transfer” category. As a result, the “Credit 

enhanced” and “Non-credit enhanced” categories do not sum to 100%. The total percentage of our single-family conventional guaranty 

book of business with some form of credit enhancement as of June 30, 2020 was 49%. 

(4) Refers to loans included in an agreement used to reduce credit risk by requiring primary mortgage insurance, collateral, letters of credit, 

corporate guarantees, or other agreements to provide an entity with some assurance that it will be compensated to some degree in the 

event of a financial loss. Excludes loans covered by credit risk transfer transactions unless such loans are also covered by primary 

mortgage insurance.

(5) Refers to loans included in reference pools for credit risk transfer transactions, including loans in these transactions that are also covered 

by primary mortgage insurance. For CAS and some lender risk-sharing transactions, this represents outstanding unpaid principal balance 

of the underlying loans on the single-family mortgage credit book, not the outstanding reference pool, as of the specified date. Loans 

included in our credit risk transfer transactions have all been acquired since 2009.

MD&A | Single-Family Business

Fannie Mae Second Quarter 2020 Form 10-Q 41
Single-Family Loans in Forbearance

The following table displays information about our single-family loans in forbearance. As a part of our credit loss mitigation 

strategy and pursuant to the CARES Act, we are providing payment forbearance for up to 12 months to borrowers 

experiencing a COVID-19-related financial hardship. Of our single-family loans in forbearance as of June 30, 2020, 93% were 

in a payment forbearance as a result of the borrower experiencing a COVID-19-related financial hardship. Some borrowers 

whose loans are in forbearance continued making payments according to the original contractual terms of the loan 

notwithstanding the forbearance arrangement; we expect some of these borrowers to continue to do so. In the table below we 

provide information on the credit profile of our single-family loans in forbearance, which is somewhat weaker than the credit 

profile of our overall single-family guaranty book of business. We expect the number of single-family loans in forbearance to 

remain high in the near term due to the COVID-19 pandemic.

Single-Family Loans in Forbearance

As of

June 30, 2020 December 31, 2019

(Dollars in millions)

Number of loans 972,088 5,415 

Amortized cost $ 206,961 $ 989 

Unpaid principal balance $ 203,485 $ 991 

Percentage of single-family guaranty book of business based on unpaid principal 

balance 6.7 % * 

Percentage of single-family guaranty book of business based on loan count 5.7 * 

* Represents less than 0.05% of single-family guaranty book of business.

The following tables display interest income recognized on single-family loans in forbearance held as of period end and the 

delinquency status and risk characteristics of such loans. As discussed in “Note 1, Summary of Significant Accounting 

Policies,” we have updated our application of our nonaccrual accounting policy for those loans negatively impacted by the 

COVID-19 pandemic. For loans that were current as of March 1, 2020 and subsequently become delinquent, we will continue 

to accrue interest income according to the updated policy. This update resulted in a significant portion of delinquent loans, 

including those in forbearance, remaining on accrual status. 

The amount of interest income we recognized on loans in forbearance was not material for the three and six months ended 

June 30, 2019, which was prior to the Interagency Statement and the update to our application of our nonaccrual policy.

Interest Income Recognized on Single-Family Loans in Forbearance

 For the Three Months 

Ended June 30, 2020

For the Six Months 

Ended June 30, 2020

(Dollars in millions)

Interest income recognized on loans in forbearance held as of period end(1) $ 2,065 $ 4,090 

(1) Represents interest income recognized on these loans during the period, including amounts recognized prior to entry into a forbearance 

arrangement.

MD&A | Single-Family Business

Fannie Mae Second Quarter 2020 Form 10-Q 42
Delinquency Status and Risk Characteristics of Loans in Forbearance

As of June 30, 2020 As of December 31, 2019

Number of 

Loans

Percentage of 

Loans in 

Forbearance(1) 

Unpaid 

Principal 

Balance

Number of 

Loans

Percentage of 

Loans in 

Forbearance(1) 

Unpaid

Principal 

Balance

(Dollars in millions)

Delinquency status:

Current 248,639 25 % $ 49,228 454 8 % $ 76 

30 to 59 days delinquent 124,947 13 25,382 592 11 103 

60 to 89 days delinquent 239,932 25 51,010 710 13 126 

Seriously delinquent 358,570 37 77,865 3,659 68 686 

Total loans in forbearance 972,088 100 % $ 203,485 5,415 100 % $ 991 

As of June 30, 2020 As of December 31, 2019

Number of 

Loans

Percentage 

of Unpaid 

Principal 

Balance in 

Forbearance

Number of 

Loans

Percentage 

of Unpaid 

Principal 

Balance in 

Forbearance

(Dollars in millions)

Loans in forbearance with certain higher-risk

 characteristics:(2)

Estimated mark-to-market LTV ratio > 80% 135,395 18 % 1,073 24 %

Estimated mark-to-market LTV ratio > 80% without mortgage 

insurance 15,313 2 54 1 

DTI > 43% 369,021 40 1,956 39 

FICO credit score at origination < 680 241,693 21 2,395 42 

(1) Calculated as a percentage based on loan count.

(2) The higher-risk categories are not mutually exclusive.

Principal and Interest Payments while Loans are in Forbearance

While a loan is in forbearance and backs an MBS trust, investors in the MBS are entitled to continue to receive principal and 

interest payments on the MBS even though the borrower is not required to make principal and interest payments on the loan.

For the majority of loans in our single-family guaranty book of business, our Single-Family Servicing Guide has, until recently, 

required servicers to advance missed scheduled principal and interest payments to the MBS trusts until the loans were 

purchased from the MBS trusts. Because we typically do not purchase loans from MBS trusts while they are in forbearance, 

this servicer payment obligation could have continued for the entirety of the forbearance plan (which could be up to 12 

months). In April 2020, FHFA instructed us to reduce our single-family servicers’ obligations to advance these missed borrower 

payments and to only require servicers to advance missed scheduled principal and interest payments on a loan for the first 

four months of missed borrower payments. After four months, we will make the missed scheduled principal and interest 

payments to the MBS trust for payment to MBS holders so long as the loan remains in the MBS trust. See “Liquidity and 

Capital Management—Liquidity Management—Debt Funding—Debt Funding Activity” for information on the COVID-19 

pandemic’s expected impact on our liquidity and debt funding needs.

MD&A | Single-Family Business

Fannie Mae Second Quarter 2020 Form 10-Q 43
Loan Workout Metrics

Our loan workouts reflect:

• home retention solutions, including loan modifications, completed repayment plans and completed forbearance plans; 

and

• foreclosure alternatives, including short sales and deeds-in-lieu of foreclosure.

The table below displays the unpaid principal balance of our completed single-family loan workouts by type for the first half of 

2019 compared with the first half of 2020, as well as the number of loan workouts for each period. We exclude from this table 

loans that are in a forbearance arrangement that is not yet complete. 

Completed Loan Workout Activity

(Dollars in billions)

$4.6

$3.6

$0.4

$0.3

$5.0

$3.9

30.9

23.4

Home retention solutions1 Foreclosure alternatives2

Number of loan workouts (in thousands)

First Half 2019 First Half 2020

(1) Consists of loan modifications and completed repayment plans and forbearances. Repayment plans reflect only those plans associated 

with loans that were 60 days or more delinquent. Forbearances reflect only completed forbearance arrangements that involve loans that 

were 90 days or more delinquent. Excludes trial modifications, loans to certain borrowers who have received bankruptcy relief that are 

classified as troubled debt restructurings, and repayment and forbearance plans that have been initiated but not completed. There were 

approximately 14,800 loans in a trial modification period and approximately 972,000 loans in a forbearance arrangement that were not yet 

complete as of June 30, 2020.

(2) Consists of short sales and deeds-in-lieu of foreclosure.

The decline in home retention solutions in the first half of 2020 compared with the first half of 2019 was primarily driven by the 

improved loan performance in recent periods preceding the COVID-19 pandemic. In the second quarter of 2020, we began 

providing payment forbearance for up to 12 months to borrowers experiencing a COVID-19 financial hardship, which has 

resulted in loans that otherwise might have entered into a loan workout to instead remain in a forbearance arrangement that 

has not yet completed. As these forbearance arrangements end, we expect significant increases in our loan workouts.

MD&A | Single-Family Business

Fannie Mae Second Quarter 2020 Form 10-Q 44
REO Management

If a loan defaults, we may acquire the home through foreclosure or a deed-in-lieu of foreclosure. The table below displays our 

REO activity by region. Regional REO acquisition trends generally follow a pattern that is similar to, but lags, that of regional 

delinquency trends.

Single-Family REO Properties

For the Six Months Ended June 30,

2020 2019

Single-family REO properties (number of properties):

Beginning of period inventory of single-family REO properties(1) 17,501 20,156 

Acquisitions by geographic area:(2)

Midwest 1,066 2,521 

Northeast 980 2,698 

Southeast 1,272 3,453 

Southwest 661 1,530 

West 300 926 

Total REO acquisitions(1) 4,279 11,128 

Dispositions of REO (9,105) (13,371) 

End of period inventory of single-family REO properties(1) 12,675 17,913 

Carrying value of single-family REO properties (dollars in millions) $ 1,747 $ 2,314 

Single-family foreclosure rate(3) 0.05 % 0.13 %

REO net sales price to unpaid principal balance(4) 83 % 78 %

Short sales net sales price to unpaid principal balance(5) 80 % 77 %

(1) Includes held-for-use properties, which are reported in our condensed consolidated balance sheets as a component of “Other assets.” 

(2) See footnote 8 to the “Key Risk Characteristics of Single-Family Conventional Business Volume and Guaranty Book of Business” table for 

states included in each geographic region.

(3) Estimated based on the annualized total number of properties acquired through foreclosure or deeds-in-lieu of foreclosure as a percentage 

of the total number of loans in our single-family conventional guaranty book of business as of the end of each period.

(4) Calculated as the amount of sale proceeds received on disposition of REO properties during the respective periods, excluding those 

subject to repurchase requests made to our sellers or servicers, divided by the aggregate unpaid principal balance of the related loans at 

the time of foreclosure. Net sales price represents the contract sales price less selling costs for the property and other charges paid by the 

seller at closing. 

(5) Calculated as the amount of sale proceeds received on properties sold in short sale transactions during the respective periods divided by 

the aggregate unpaid principal balance of the related loans. Net sales price includes borrower relocation incentive payments and 

subordinate lien(s) negotiated payoffs. 

The decline in single-family REO properties in the first half of 2020 compared with the first half of 2019 was primarily due to the 

suspension of foreclosures and a reduction in REO acquisitions from serious delinquencies aged greater than 180 days. With 

instruction from FHFA, we have prohibited our servicers from completing foreclosures on our single-family loans through at 

least August 31, 2020, except in the case of vacant or abandoned properties. In addition, some states and local governments 

have enacted additional foreclosure constraints that extend beyond that timeframe.

Other Single-Family Credit Information

Single-Family Credit Loss Metrics and Loan Sale Performance

The single-family credit loss and loan sale performance measures below present information about gains (losses) we realized 

on our single-family loans during the periods presented. The amount of these gains (losses) in a given period is driven by 

foreclosures, pre-foreclosure sales, REO activity, mortgage loan redesignations, and other events that trigger write-offs and 

recoveries. The credit loss metrics we present are not defined terms within generally accepted accounting principles in the 

United States of America (“GAAP”) and may not be calculated in the same manner as similarly titled measures reported by 

other companies. Management uses these measures to evaluate the effectiveness of our credit risk management strategies in 

tandem with leading indicators such as SDQ and forbearance rates, which are potential indicators of future realized credit 

losses. We believe these measures provide useful information about our credit performance and the factors that impact our 

credit performance.

MD&A | Single-Family Business

Fannie Mae Second Quarter 2020 Form 10-Q 45
We revised the presentation of our single-family credit loss metrics in connection with our implementation of the CECL 

standard in January 2020, principally by separating the “Charge-offs, net of recoveries” line item into three line items: “Writeoffs,” “Recoveries” and “Write-offs on the redesignation of mortgage loans from HFI to HFS.” Because sales of nonperforming 

and reperforming loans have been an important part of our credit loss mitigation strategy in recent periods, we also provide 

information in the table below on our loan sale performance through the “Gains (losses) on sales and other valuation 

adjustments” line item.

We suspended new sales of nonperforming and reperforming loans in the second quarter of 2020, as investor interest in 

purchasing these loans was severely impacted by the COVID-19 pandemic and its effects. Investor interest in purchasing 

reperforming loans has recently returned, and therefore we are considering resuming sales of reperforming loans. As investor 

interest in purchasing nonperforming loans has not returned, we do not anticipate entering into new contracts for sales of these 

loans in the near future. 

The table below displays the components of our single-family credit metrics and loan sale performance.

Single-Family Credit Loss Metrics and Loan Sale Performance

For the Three Months Ended June 30, For the Six Months Ended June 30,

2020 2019 2020 2019

Amount Ratio(1) Amount Ratio(1) Amount Ratio(1) Amount Ratio(1)

(Dollars in millions)

Write-offs $ (50) $ (82) $ (115) $ (228) 

Recoveries 5 27 19 87 

Foreclosed property expense (3) (126) (81) (269) 

Credit losses and credit loss ratio (48) 0.6 bps (181) 2.5 bps (177) 1.2 bps (410) 2.8 bps

Write-offs on the redesignation of 

mortgage loans from HFI to HFS — (479) (9) (719) 

Gains (losses) on sales and other 

valuation adjustments(2) 88 285 (79) 308 

Total credit gains (losses), write-offs on 

redesignations, and gains (losses) 

on sales and other valuation 

adjustments, and related ratio $ 40 (0.5) bps $ (375) 5.2 bps $ (265) 1.8 bps $ (821) 5.7 bps

(1) Basis points are calculated based on the amount of each line item annualized divided by the average single-family conventional guaranty 

book of business during the period.

(2) Consists of gains (losses) realized on the sales of nonperforming and reperforming mortgage loans during the period and temporary lowerof-cost-or-market adjustments on HFS loans, which are recognized in “Investment gains (losses), net” in our condensed consolidated 

financial statements.

Our single-family credit losses and credit loss ratio decreased in the second quarter and first half of 2020 compared with the 

second quarter and first half of 2019 primarily due to reduced foreclosures driven mostly by the COVID-19 related foreclosure 

moratorium.

Our single-family write-offs on redesignation decreased in the second quarter and first half of 2020 compared with the second 

quarter and first half of 2019 primarily as a result of our not redesignating mortgage loans from HFI to HFS in the second 

quarter of 2020 due to the COVID-19 pandemic. Gains (losses) on sales and other valuation adjustments decreased in the 

second quarter and first half of 2020 compared with the second quarter and first half of 2019 primarily due to lower gains on 

sales of loans.

We do not expect a substantial increase in our single-family credit losses in the near term as a result of COVID-19, as we are 

currently offering up to 12 months of forbearance to single-family borrowers suffering financial hardship relating to the 

pandemic. We have suspended foreclosures and foreclosure-related activities for single-family properties through at least 

August 31, 2020; however, over the longer term, the COVID-19 pandemic is likely to result in higher single-family credit losses 

as reflected in an increased allowance for loans losses since the inception of the pandemic. See “Risk Factors” for additional 

information on the credit risk impact of the COVID-19 pandemic.

For information on our credit-related income or expense, which includes changes in our allowance, see “Consolidated Results 

of Operations—Credit-Related Income (Expense)” and “Single-Family Business Financial Results.”

MD&A | Single-Family Business

Fannie Mae Second Quarter 2020 Form 10-Q 46
Single-Family Loss Reserves

Our single-family loss reserves, which include our allowances for loan losses and the related accrued interest receivable, and 

reserve for guaranty losses, provide for an estimate of credit losses in our single-family guaranty book of business. For periods 

beginning January 1, 2020, our measurement of loss reserves reflects a lifetime credit loss methodology pursuant to our 

adoption of the CECL standard and requires consideration of a broader range of reasonable and supportable forecast 

information to develop credit loss estimates. For prior periods, single-family loss reserves were measured using an incurred 

loss impairment methodology for loans that were collectively evaluated for impairment. For further details on our previous 

single-family loss reserves methodology, refer to “Note 1, Summary of Significant Accounting Policies” in our 2019 Form 10-K. 

The table below summarizes the changes in our single-family loss reserves, excluding credit losses on our AFS securities. For 

a discussion of changes in our benefit (provision) for credit losses see “Consolidated Results of Operations—Credit-Related 

Income (Expense).”

Single-Family Loss Reserves

For the Three Months 

Ended June 30,

For the Six Months Ended 

June 30,

2020 2019 2020 2019

(Dollars in millions)

Changes in loss reserves:

Beginning balance $ (12,092) $ (13,019) $ (8,779) $ (14,007) 

Transition impact of the adoption of the CECL standard — — (1,231) — 

Benefit (provision) for credit losses 219 1,252 (1,951) 1,913 

Write-offs 50 561 124 947 

Recoveries (5) (27) (19) (87) 

Other 40 (6) 68 (5) 

Ending balance $ (11,788) $ (11,239) $ (11,788) $ (11,239) 

Write-offs, net of recoveries annualized, as a percentage of 

the average single-family conventional guaranty book of 

business (in bps) 0.6 7.4 0.7 5.9

As of

June 30, 

2020

December 31, 

2019

Loss reserves as a percentage of single-family:

Conventional guaranty book of business 0.39 % 0.30 %

Nonaccrual loans at amortized cost 40.92 30.58 

MD&A | Single-Family Business

Fannie Mae Second Quarter 2020 Form 10-Q 47
Troubled Debt Restructurings and Nonaccrual Loans

The tables below display the single-family loans classified as TDRs that were on accrual status and single-family loans on 

nonaccrual status. The tables include our amortized cost in HFI and HFS single-family mortgage loans as well as interest 

income forgone and recognized for on-balance sheet TDRs on accrual status and nonaccrual loans. For more information on 

TDRs and nonaccrual loans, see “Note 3, Mortgage Loans.” 

We have elected to account for eligible COVID-19-related loss mitigation activities, including forbearance plans, payment 

deferrals, and loan modifications, as permitted under the CARES Act, which provides relief from TDR accounting and 

disclosure requirements. To be eligible for this treatment, a loan must not have been more than 30 days delinquent as of 

December 31, 2019, and the activity must occur between March 1, 2020 and the earlier of December 31, 2020 or 60 days after 

the date on which the COVID-19 pandemic national emergency terminates. Accordingly, we do not expect a significant 

increase in our single-family TDRs in 2020. We have also updated the application of our accounting policy for nonaccrual loans 

and continue to accrue interest income on delinquent loans that were current as of March 1, 2020 and negatively impacted by 

COVID-19. This update, combined with the elevated number of borrowers in forbearance, contributed to a significant increase 

in loans accruing on-balance sheet that were past due 90 days or more as of June 30, 2020. As a result, we established a 

valuation allowance of $169 million for expected credit losses on single-family accrued interest receivable as of June 30, 2020. 

See “Note 1, Summary of Significant Accounting Policies” for additional information on our accounting for TDRs and 

nonaccrual loans.

Single-Family TDRs on Accrual Status and Nonaccrual Loans

As of

June 30, 2020 December 31, 2019

(Dollars in millions)

TDRs on accrual status $ 79,129 $ 81,634 

Nonaccrual loans 28,810 28,708 

Total TDRs on accrual status and nonaccrual loans $ 107,939 $ 110,342 

Accruing on-balance sheet loans past due 90 days or more(1) $ 71,876 $ 191 

For the Six Months Ended June 30,

2020 2019

(Dollars in millions)

Interest related to on-balance sheet TDRs on accrual status and nonaccrual 

loans:

Interest income forgone(2) $ 818 $ 917 

Interest income recognized(3) 2,083 2,460 

(1) Includes loans that, as of the end of each period, are 90 days or more past due and continuing to accrue interest. As of June 30, 2020, the 

substantial majority of these loans had a COVID-19-related forbearance.

(2) Represents the amount of interest income we did not recognize, but would have recognized during the period for nonaccrual loans and 

TDRs on accrual status as of the end of each period had the loans performed according to their original contractual terms.

(3) Primarily includes amounts accrued while the loans were performing and cash payments received on nonaccrual loans.

Multifamily Business

Our Multifamily business provides mortgage market liquidity primarily for properties with five or more residential units, which 

may be apartment communities, cooperative properties, seniors housing, dedicated student housing or manufactured housing 

communities.

This section supplements and updates information regarding our Multifamily business segment in our 2019 Form 10-K. See 

“MD&A—Multifamily Business” in our 2019 Form 10-K for additional information regarding the primary business activities, 

customers, competition and market share of our Multifamily business.

Multifamily Mortgage Market

Multifamily market fundamentals, which include factors such as vacancy rates and rents, were negatively impacted in most 

parts of the country throughout the second quarter of 2020 by the COVID-19 pandemic, which has resulted in higher 

unemployment and economic uncertainty.

• Vacancy rates. Based on preliminary third-party data, the estimated national multifamily vacancy rate for institutional 

investment-type apartment properties as of June 30, 2020 remained at 5.8%, the same as of March 31, 2020 and up 

MD&A | Single-Family Business

Fannie Mae Second Quarter 2020 Form 10-Q 48
from 5.3% as of June 30, 2019. We believe this is due to the limited mobility of many tenants resulting from stay-athome orders that were in place in many metropolitan areas across the country over the past few months.

• Rents. Effective rents are estimated to have declined by 0.5% during the second quarter of 2020, compared to 

estimated increases of 0.5% during the first quarter of 2020 and 1.0% during the second quarter of 2019. We believe 

this is due to a softening of multifamily demand, stemming from a combination of new supply entering the market and 

elevated unemployment levels. 

Vacancy rates and rents are important to loan performance because multifamily loans are generally repaid from the cash flows

generated by the underlying property. Several years of improvement in these fundamentals helped to increase property values 

in most metropolitan areas. Based on current multifamily property sales data, although transaction volumes have significantly 

declined, property valuations in the form of capitalization rates appear to have remained stable during the second quarter of 

2020. This may be due to property owners choosing to retain their multifamily properties rather than accept a discounted offer, 

thus keeping market capitalization rates at 2019 levels over the past three months. 

Although the most recent third-party estimates indicate that approximately 470,000 new multifamily units are expected to be 

completed in 2020, we expect fewer new units due to lingering supply chain disruptions, coupled with the current social 

distancing restrictions in place on construction sites across many parts of the country.

We expect the multifamily sector to be negatively impacted in 2020 from rising vacancy rates, as well as from declining or 

negative rent growth due to the economic dislocation resulting from the COVID-19 pandemic.

Multifamily Business Metrics

Through the secondary mortgage market, we support rental housing for the workforce population, for senior citizens and 

students, and for families with the greatest economic need. Over 90% of the multifamily units we financed in the second 

quarter of 2020 were affordable to families earning at or below 120% of the median income in their area, providing support for 

both workforce housing and affordable housing. 

Multifamily New Business Volume

(Dollars in billions) 

$17.2 $19.6

$34.1 $33.7

183,000 214,000

354,000 373,000

Multifamily new business volume1

Multifamily units financed from new business volume

Q2 2019 Q2 2020 First Half 2019 First Half 2020

(1) Reflects unpaid principal balance of multifamily Fannie Mae MBS issued, multifamily loans purchased, and credit enhancements provided 

on multifamily mortgage assets during the period.

FHFA’s 2020 conservatorship scorecard includes an objective to maintain the dollar volume of new multifamily business at or 

below $100 billion for the five-quarter period from October 1, 2019 through December 31, 2020. In addition, FHFA directed that 

at least 37.5% of our multifamily business during that time period must be mission-driven, affordable housing, pursuant to 

FHFA’s guidelines for mission-driven loans. Our multifamily new business volume was $18.1 billion for the fourth quarter of 

2019 and $33.7 billion for the first half of 2020, leaving $48.2 billion of capacity remaining under our current multifamily volume 

cap for the remainder of 2020. 

Presentation of Our Multifamily Guaranty Book of Business

For purposes of the information reported in this “Multifamily Business” section, we measure our multifamily guaranty book of 

business using the unpaid principal balance of mortgage loans underlying Fannie Mae MBS. By contrast, the multifamily 

guaranty book of business presented in the “Composition of Fannie Mae Guaranty Book of Business” table in the “Guaranty 

Book of Business” section is based on the unpaid principal balance of Fannie Mae MBS outstanding, rather than the unpaid 

principal balance of the underlying mortgage loans. These amounts differ primarily as a result of payments we receive on 

underlying loans that have not yet been remitted to the MBS holders. As measured for purposes of the information reported 

below, the following chart displays our multifamily guaranty book of business.

MD&A | Multifamily Business

Fannie Mae Second Quarter 2020 Form 10-Q 49
Multifamily Guaranty Book of Business

(Dollars in billions) 

$322.6

$357.8

73.3 72.3

Unpaid principal balance of multifamily guaranty book of business1

Average charged guaranty fee rate on multifamily guaranty book of business (in basis points), at end of period

6/30/2019 6/30/2020

(1) Our multifamily guaranty book of business primarily consists of multifamily mortgage loans underlying Fannie Mae MBS outstanding, 

multifamily mortgage loans of Fannie Mae held in our retained mortgage portfolio, and other credit enhancements that we provide on 

multifamily mortgage assets. It does not include non-Fannie Mae multifamily mortgage-related securities held in our retained mortgage 

portfolio for which we do not provide a guaranty.

Average charged guaranty fee represents our effective revenue rate relative to the size of our multifamily guaranty book of 

business. Management uses this metric to assess the reasonableness of our annual compensation rate for the multifamily 

credit risk we manage.

Multifamily Business Financial Results(1)

For the Three Months 

Ended June 30,

For the Six Months 

Ended June 30,

2020 2019 Variance 2020 2019 Variance

(Dollars in millions)

Net interest income $ 838 $ 808 $ 30 $ 1,644 $ 1,565 $ 79 

Fee and other income 19 25 (6) 45 53 (8) 

Net revenues 857 833 24 1,689 1,618 71 

Fair value gains, net 12 4 8 196 60 136 

Administrative expenses (129) (110) (19) (249) (223) (26) 

Credit-related expense(2) (238) (29) (209) (651) (37) (614) 

Credit enhancement expense (53) (47) (6) (113) (93) (20) 

Change in expected credit enhancement 

recoveries(3) 65 — 65 195 — 195 

Other income (expenses), net(4) 44 30 14 (17) 74 (91) 

Income before federal income taxes 558 681 (123) 1,050 1,399 (349) 

Provision for federal income taxes (113) (120) 7 (212) (263) 51 

Net income $ 445 $ 561 $ (116) $ 838 $ 1,136 $ (298) 

(1) See “Note 1, Summary of Significant Accounting Policies” for more information about the change in presentation of our yield maintenance 

fees. Prior period amounts have been adjusted to reflect the current year change in presentation. 

(2) Consists of the benefit or provision for credit losses and foreclosed property income or expense. The presentation of our credit-related 

expense for the three and six months ended June 30, 2019 represents amounts recognized prior to our transition to the lifetime loss model 

prescribed by the CECL standard.

(3) Consists of change in benefits recognized from our freestanding credit enhancements that primarily relates to our Delegated Underwriting 

and Servicing (“DUS®”) lender risk-sharing. See “Note 1, Summary of Significant Accounting Policies” for more information about our 

change in presentation.

(4) Consists of investment gains or losses, gains or losses from partnership investments, debt extinguishment gains or loss and other income 

or expenses.

MD&A | Multifamily Business

Fannie Mae Second Quarter 2020 Form 10-Q 50
Net Interest Income

Multifamily net interest income is primarily driven by guaranty fee income. Guaranty fee income increased in the second 

quarter and first half of 2020 as compared with the second quarter and first half of 2019 as a result of growth in the size of our 

multifamily guaranty book of business, partially offset by a slight decrease in average charged guaranty fees on the multifamily 

guaranty book.

Fair Value Gains, Net

Depending on portfolio activity, our multifamily mortgage commitment derivatives may be in a net-buy or net-sell position 

during any given period. Fair value gains in the first half of 2020 and the first half of 2019 were primarily driven by gains on 

commitments to buy multifamily mortgage-related securities as a result of increases in prices as interest rates declined during 

the commitment periods.

Credit-Related Expense

Credit-related expense for the second quarter and first half of 2020 was primarily driven by an increase in our allowance for 

loan losses due to losses we expect to incur as a result of the COVID-19 pandemic using an expected lifetime loss 

methodology consistent with our implementation of the CECL standard.

See “Consolidated Results of Operations—Credit-Related Income (Expense)” in this report for more information on our 

multifamily provision for credit losses.

Other Income (Expenses), Net

Other income (expense), net decreased in the first half of 2020 as compared with the first half of 2019 due to higher debt 

extinguishment losses, driven by the interest rate environment, and lower investment gains. 

Multifamily Mortgage Credit Risk Management

This section updates our discussion of multifamily mortgage credit risk management in our 2019 Form 10-K in “MD&A—

Multifamily Business—Multifamily Mortgage Credit Risk Management.”

Multifamily Acquisition Policy and Underwriting Standards

Our standards for multifamily loans specify maximum original LTV ratio and minimum original debt service coverage ratio 

(“DSCR”) values that vary based on loan characteristics. Our experience has been that original LTV ratio and DSCR values 

have been reliable indicators of future credit performance. At underwriting, we evaluate the DSCR based on both actual and 

underwritten debt service payments. The original DSCR is calculated using the underwritten debt service payments for the 

loan, which assumes both principal and interest payments, rather than the actual debt service payments. Depending on the 

loan’s interest rate and structure, using the underwritten debt service payments may result in a more conservative estimate of 

the debt service payments (for example, loans with an interest-only period). This approach is used for all loans, including those 

with full and partial interest-only terms. 

To address possible fluctuations in borrower income and expenses resulting from the COVID-19 pandemic, we instituted 

additional reserve requirements for certain new multifamily loan acquisitions depending on the product type, as well as LTV 

ratios and DSCRs.

Key Risk Characteristics of Multifamily Guaranty Book of Business 

As of

June 30, 2020 December 31, 2019 June 30, 2019

Weighted average original LTV ratio 66 % 66 % 66 %

Original LTV ratio greater than 80% 1 1 1 

Original DSCR less than or equal to 1.10 11 11 11 

Full interest-only loans 29 27 26 

Partial interest-only loans(1) 51 51 49 

(1) Consists of mortgage loans that were underwritten with an interest-only term, regardless of whether the loan is currently in its interest-only 

period.

We provide additional information on the credit characteristics of our multifamily loans in quarterly financial supplements, which 

we furnish to the SEC with current reports on Form 8-K. Information in our quarterly financial supplements is not incorporated 

by reference into this report. 

MD&A | Multifamily Business

Fannie Mae Second Quarter 2020 Form 10-Q 51
Transfer of Multifamily Mortgage Credit Risk

Lender risk-sharing is a cornerstone of our Multifamily business. We primarily transfer risk through our DUS program, which 

delegates to DUS lenders the ability to underwrite and service multifamily loans, in accordance with our standards and 

requirements. DUS lenders receive credit risk-related revenues for their respective portion of credit risk retained, and, in turn, 

are required to fulfill any loss-sharing obligation. This aligns the interests of the lender and Fannie Mae throughout the life of 

the loan. 

Our DUS model typically results in our lenders sharing on a pro-rata or tiered basis approximately one-third of the credit risk on 

our multifamily loans. As of June 30, 2020, 99% of the unpaid principal balance in our multifamily guaranty book of business 

had this front-end lender risk-sharing arrangement, compared with 98% as of December 31, 2019.

To complement our front-end lender risk-sharing arrangements, we have engaged in back-end credit risk transfer transactions 

through our Multifamily CIRTTM (“MCIRTTM”) and Multifamily Connecticut Avenue Securities® (“MCASTM”) transactions. Through 

these transactions, we transfer a portion of credit risk associated with Fannie Mae losses on a reference pool of multifamily 

mortgage loans. 

While we were able to enter into both an MCIRT and an MCAS transaction in the first quarter of 2020, we did not enter into 

credit risk transfer transactions in the second quarter of 2020 due to continuing adverse market conditions resulting from the 

COVID-19 pandemic. In addition, we currently do not have plans to engage in additional credit risk transfer transactions as we 

evaluate FHFA’s re-proposed capital rule, which would reduce the amount of capital relief we obtain from these transactions. 

We will continue to review our plans, which may be affected by our evaluation of the proposed capital rule and changes in the 

rule as it is finalized, the strength of future market conditions, and our review of our overall business and capital plan to enable 

us to exit conservatorship. We expect to continue entering into front-end lender risk-sharing arrangements, primarily through 

our DUS program. See “Risk Factors” in this report for additional information on the risks associated with the constraints on 

our entering into new credit risk transfer transactions and “Legislation and Regulation” for more information on FHFA’s 

proposed capital rule. 

The table below displays the number of transactions and unpaid principal balance of multifamily mortgage loans covered by a 

back-end credit risk transfer transaction at the time of issuance. The table also includes the total unpaid principal balance of 

multifamily loans and percentage of our multifamily guaranty book of business that are covered by a back-end credit risk 

transfer transaction. The table does not reflect front-end lender risk-sharing arrangements, as only a small portion of our 

multifamily guaranty book of business does not include these arrangements.

Multifamily Loans in Back-End Credit Risk Transfer Transactions

For the Six Months Ended June 30,

2020 Since Inception

Number of 

Back-End Credit 

Risk Transfer 

Transactions

Unpaid 

Principal 

Balance 

Covered at 

Issuance

Number of 

Back-End Credit 

Risk Transfer 

Transactions

Unpaid 

Principal 

Balance 

Covered at 

issuance

(Dollars in millions)

MCIRT 1 $ 8,720 8 $ 80,617 

MCAS 1 12,212 2 29,293 

Total 2 $ 20,932 10 $ 109,910 

As of

June 30, 2020 December 31, 2019

Unpaid 

Principal 

Balance

Percentage of 

Multifamily 

Guaranty Book 

of Business

Unpaid 

Principal 

Balance

Percentage of 

Multifamily 

Guaranty Book 

of Business

(Dollars in millions)

MCIRT $ 74,079 21 % $ 66,851 20 %

MCAS 29,162 8 17,077 5 

Total $ 103,241 29 % $ 83,928 25 %

For more information on our multifamily credit-risk sharing transactions and their impact on our conservatorship capital 

requirements, see “MD&A—Multifamily Business—Multifamily Mortgage Credit Risk Management” in our 2019 Form 10-K.

MD&A | Multifamily Business

Fannie Mae Second Quarter 2020 Form 10-Q 52
Multifamily Portfolio Diversification and Monitoring

Diversification within our multifamily book of business by geographic concentration, term to maturity, interest rate structure, 

borrower concentration, loan size and credit enhancement coverage, are important factors that influence credit performance 

and help reduce our credit risk. 

As part of our ongoing credit risk management process, we and our lenders monitor the performance and risk characteristics 

of our multifamily loans and the underlying properties on an ongoing basis throughout the loan term at the asset and portfolio 

level. We require lenders to provide quarterly and annual financial updates for the loans for which we are contractually entitled 

to receive such information. We closely monitor loans with an estimated current DSCR below 1.0, as that is an indicator of 

heightened default risk. The percentage of loans in our multifamily guaranty book of business, calculated based on unpaid 

principal balance, with a current DSCR less than 1.0 was approximately 2% as of June 30, 2020 and December 31, 2019. Our 

estimates of current DSCRs are based on the latest available income information for these properties and exclude co-op 

loans. Although we use the most recently available results from our multifamily borrowers, there is a lag in reporting, which 

typically can range from three to six months, but in some cases may be longer. As a result, the financial information we have 

received from borrowers to date have largely not reflected the impact of COVID-19.

In addition to the factors discussed above, we track the following credit risk characteristics to determine loan credit quality 

indicators, which are the internal risk categories we use and which are further discussed in “Note 3, Mortgage Loans:”

• the physical condition of the property;

• delinquency status;

• the relevant local market and economic conditions that may signal changing risk or return profiles; and

• other risk factors.

For example, we closely monitor the rental payment trends and vacancy levels in local markets, as well as capitalization rates, 

to identify loans that merit closer attention or loss mitigation actions. We manage our exposure to refinancing risk for 

multifamily loans maturing in the next several years. We have a team that proactively manages upcoming loan maturities to 

minimize losses on maturing loans. This team assists lenders and borrowers with timely and appropriate refinancing of 

maturing loans with the goal of reducing defaults and foreclosures related to these loans. The primary asset management 

responsibilities for our multifamily loans are performed by our DUS and other multifamily lenders. We periodically evaluate 

these lenders’ performance for compliance with our asset management criteria.

Multifamily Problem Loan Management and Foreclosure Prevention

Delinquency Statistics on our Problem Loans

The percentage of our multifamily loans classified as substandard increased as of June 30, 2020 due to loans in a COVID-19-

related forbearance. Substandard loans are loans that have a well-defined weakness that could impact their timely full 

repayment. While the majority of the substandard loans in our multifamily guaranty book of business are currently making 

timely payments or are in forbearance, we continue to monitor the performance of the full substandard loan population. For 

more information on our credit quality indicators, including our population of substandard loans, see “Note 3, Mortgage Loans.” 

The multifamily serious delinquency rate increased to 1.00% as of June 30, 2020, compared with 0.04% as of December 31, 

2019 and 0.05% as of June 30, 2019, due to the economic dislocation caused by the COVID-19 pandemic, which increased 

borrower participation in forbearance plans. Our multifamily seriously delinquent rate consists of multifamily loans that were 60 

days or more past due based on unpaid principal balance expressed as a percentage of our multifamily guaranty book of 

business. Based on unpaid principal balance, $3.3 billion of multifamily seriously delinquent loans were in forbearance as of 

June 30, 2020. Our multifamily seriously delinquent rate excluding loans in forbearance was 0.09% as of June 30, 2020.

COVID-19 Forbearance and Eviction Moratorium 

We initially offered forbearance relief to multifamily borrowers by delegating to our lenders the authority to execute a 

forbearance agreement with a multifamily borrower experiencing a documented financial hardship due to the COVID-19 

pandemic for up to three monthly payments, beginning with the first missed monthly payment occurring after February 1, 2020. 

Effective July 1, 2020, we delegated to our lenders the ability to extend forbearance for up to three additional monthly 

payments, except for certain types of loans, including seniors housing loans and loans with unpaid principal balances above 

$50 million. For those loans, Fannie Mae will make decisions on extended forbearance relief directly. For forbearance of any 

duration after July 1, 2020, the borrower is required to bring the loan current within a time period determined by multiplying the 

number of months of forbearance by four. For example, if a borrower receives a six-month forbearance period, the borrower 

would be required to make all missed payments over a period of 24 months. The borrower may also repay the missed 

payments in a lump sum at any time. In exchange for forbearance under our initial or extended program, borrowers must agree 

to suspend tenant evictions for nonpayment of rent, provide monthly operating statements and remit any excess cash flow to 

our servicers on a monthly basis, to be held until the end of the forbearance period and then applied to missed mortgage 

MD&A | Multifamily Business

Fannie Mae Second Quarter 2020 Form 10-Q 53
payments. Effective July 1, 2020, borrowers with new or extended forbearance agreements must also provide additional renter 

protections and certify their compliance with all tenant protections in writing on a monthly basis.

Multifamily Loans in Forbearance

The following table displays multifamily loans in a payment forbearance. As of June 30, 2020, nearly all of the multifamily loans 

in a payment forbearance were associated with a COVID-19-related financial hardship. Seniors housing loans, which 

constituted 5% of our multifamily guaranty book of business as of June 30, 2020, comprised nearly half of the total multifamily 

unpaid principal balance of loans in forbearance.

Multifamily Loans in Forbearance

As of

June 30, 2020 December 31, 2019

(Dollars in millions)

Number of loans 281 6 

Amortized cost $ 4,335 $ 16 

Unpaid principal balance $ 4,288 $ 15 

Percentage of multifamily guaranty book of business based on unpaid principal 

balance 1.2 % *

* Represents less than 0.05% of multifamily guaranty book of business.

The following table displays interest income recognized on multifamily loans in forbearance held as of period end. As 

discussed in “Note 1, Summary of Significant Accounting Policies,” we have updated our application of our accounting policy 

for nonaccrual for loans negatively impacted by the COVID-19 pandemic. For loans that were current as of March 1, 2020 and 

subsequently become delinquent, we will continue to accrue interest income according to the updated policy. The amount of 

interest income we recognized on loans in forbearance was not material for the three and six months ended June 30, 2019, 

which was prior to the update to our application of our nonaccrual policy.

Interest Income Recognized on Multifamily Loans in Forbearance

For the Three Months 

Ended June 30, 2020

For the Six Months 

Ended June 30, 2020

(Dollars in millions)

Interest income recognized on loans in forbearance held as of period end(1) $ 39 $ 81 

 (1) Represents interest income recognized on these loans during the period, including amounts recognized prior to entry into a forbearance 

arrangement.

REO Management

The number of multifamily foreclosed properties held for sale was 14 properties with a carrying value of $99 million as of June 

30, 2020, compared with 12 properties with a carrying value of $72 million as of December 31, 2019.

MD&A | Multifamily Business

Fannie Mae Second Quarter 2020 Form 10-Q 54
Other Multifamily Credit Information 

Multifamily Credit Loss Performance Metrics

The amount of credit loss or income we realize in a given period is driven by foreclosures, pre-foreclosure sales, REO activity 

and write-offs, net of recoveries. Our credit loss performance metrics are not defined terms within GAAP and may not be 

calculated in the same manner as similarly titled measures reported by other companies. We believe our credit losses and our 

credit losses, net of loss-sharing benefit, may be useful to stakeholders because they display our credit losses in the context of 

our guaranty book of business, including the benefit we receive from loss-sharing arrangements. Management views credit 

losses net of loss-sharing benefit as a key metric related to our business model and our strategy to share credit risk. 

The table below displays the components of our multifamily credit loss performance metrics, as well as our multifamily initial 

write-off severity rate. Our multifamily guaranty book of business has experienced very low levels of write-offs in the past 

several years, which in some periods has resulted in credit income rather than losses, and drives variability in our write-off 

severity rate.

Multifamily Credit Loss Performance Metrics

For the Three Months Ended June 30, For the Six Months Ended June 30,

2020 2019 2020 2019

(Dollars in millions)

Write-offs(1) $ 2 $ (4) $ (18) $ (4) 

Recoveries — 2 1 2 

Foreclosed property income (expense) (7) (2) (9) 1 

Credit losses (5) (4) (26) (1) 

Freestanding loss-sharing benefit(2)

 — N/A 3 N/A

Credit losses net of freestanding 

loss-sharing benefit $ (5) $ (4) $ (23) $ (1) 

Credit loss ratio(3) (in bps) 0.6 0.5 1.5 0.1 

Credit loss ratio, net of freestanding 

loss-sharing benefit(2)(3) (in bps) 0.6 N/A 1.3 N/A

Initial write-off severity rate(4) 8.2 % 23.0 % 17.4 % 23.0 %

Loan write-off count 3 3 6 3 

(1) Includes write-offs related to loans pursuant to Accounting Bulletin 2012-02. Write-offs associated with non-REO sales are net of loss 

sharing.

(2) Represents expected benefits that we receive upon foreclosure as a result of certain freestanding credit enhancements, primarily 

multifamily DUS lender risk-sharing transactions. These benefits are recorded in “Change in expected credit enhancement recoveries” in 

our condensed consolidated statements of operations. Prior to the adoption of the CECL standard, benefits from lender risk-sharing 

transactions were included in the benefit (provision) for credit losses in our condensed consolidated statements of operations and 

comprehensive income.

(3) Calculated based on the annualized amount of credit income (losses), and credit losses net of freestanding loss-sharing benefit, divided by 

the average multifamily guaranty book of business during the period. 

(4) Rate is calculated as the initial write-off amount divided by the average defaulted unpaid principal balance. The rate includes write-offs 

pursuant to the provisions of the Advisory Bulletin and excludes any costs, gains or losses associated with REO after initial acquisition 

through final disposition. Write-offs are net of lender loss sharing agreements. Recoveries primarily include amounts accrued while the 

loans were performing and cash payments received on nonaccrual loans.

We expect our multifamily credit losses will be higher over the long term as a result of the COVID-19 pandemic as reflected in 

our increased allowance for loan losses since the inception of the pandemic. However, we do not expect our multifamily credit 

losses to increase significantly in the short term while loans remain in forbearance as described above. See “Risk Factors” for 

additional information on the credit risk impact of the COVID-19 pandemic.

Multifamily Loss Reserves

Our multifamily loss reserves, which include our allowances for loan losses and the related accrued interest receivable, and 

our reserve for guaranty losses, provide for an estimate of credit losses in our multifamily guaranty book of business. For 

periods beginning January 1, 2020, our measurement of loss reserves reflects a lifetime credit loss methodology pursuant to 

our adoption of the CECL standard and requires consideration of a broader range of reasonable and supportable forecast 

information to develop credit loss estimates. For prior periods, multifamily loss reserves were measured using an incurred loss 

methodology. For further details on our previous multifamily loss reserves methodology, refer to “Note 1, Summary of 

Significant Accounting Policies” in our 2019 Form 10-K. 

MD&A | Multifamily Business

Fannie Mae Second Quarter 2020 Form 10-Q 55
The table below summarizes the changes in our multifamily loss reserves, excluding credit losses on our AFS securities. For a 

discussion of changes in our provision for credit losses see “Consolidated Results of Operations—Credit-Related Income 

(Expense).”

Multifamily Loss Reserves

For the Three Months Ended 

June 30,

For the Six Months Ended 

June 30,

2020 2019 2020 2019

(Dollars in millions)

Changes in loss reserves:

Beginning balance $ (1,149) $ (256) $ (268) $ (245) 

Transition impact of the adoption of the CECL standard(1)

 — — (490) — 

Provision for credit losses (231) (27) (641) (38) 

Write-offs (2) 4 18 4 

Recoveries — (2) (1) (2) 

Ending balance $ (1,382) $ (281) $ (1,382) $ (281) 

Expected benefit of freestanding credit enhancements on multifamily loans not netted against 

loss reserves as of the end of the period(2)

$ 413 N/A

As of

June 30, 

2020

December 

31, 2019

Loss reserves as a percentage of multifamily guaranty book of business 0.39 % 0.08 %

(1) Includes the transition impact of $221 million for the reclassification of freestanding credit enhancements, such as DUS lender risk-sharing, 

to “Other assets” from “Allowance for loan losses” on our condensed consolidated balance sheets.

(2) Prior to our adoption of the CECL standard, benefits for freestanding credit enhancements were netted against our multifamily loss 

reserves, which was $96 million as of June 30, 2019. As of January 1, 2020 these credit enhancements are recorded in “Other assets” in 

our condensed consolidated balance sheets. 

Troubled Debt Restructurings and Nonaccrual Loans

The table below displays the multifamily loans classified as TDRs that were on accrual status and multifamily loans on 

nonaccrual status. The table includes our amortized cost in HFI mortgage loans, as well as interest income forgone and 

recognized for on-balance sheet TDRs on accrual status and nonaccrual loans. For more information on TDRs and nonaccrual 

loans see “Note 3, Mortgage Loans.” 

We have elected to account for eligible COVID-19-related loss mitigation activities as permitted under the CARES Act, which 

provides relief from TDR accounting and disclosure requirements for our forbearance plans and loan modifications. See “Note 

1, Summary of Significant Accounting Policies” for additional information on our accounting for TDRs and nonaccrual loans. 

Multifamily TDRs on Accrual Status and Nonaccrual Loans

As of 

June 30, 2020 December 31, 2019

(Dollars in millions)

TDRs on accrual status $ 33 $ 66 

Nonaccrual loans(1) 320 439 

Total TDRs on accrual status and nonaccrual loans $ 353 $ 505 

Accruing on-balance sheet loans past due 90 days or more(1) $ 1,447 $ — 

MD&A | Multifamily Business

Fannie Mae Second Quarter 2020 Form 10-Q 56
For the Six Months Ended June 30,

2020 2019

(Dollars in millions)

Interest related to on-balance sheet TDRs on accrual status and nonaccrual 

loans:

Interest income forgone(2) $ 4 $ 12 

Interest income recognized(3) 2 1 

(1) As of January 1, 2020, we place a multifamily loan on nonaccrual status when the loan becomes two months or more past due according 

to its contractual terms unless the loan is well secured such that collectability of principal and accrued interest is reasonably assured. As a 

result, the population of loans classified as nonaccrual declined as a substantial amount of these loans were current and had been 

previously individually impaired, but were not two months or more past due, contributing to the decrease in loans on nonaccrual status. In 

the second quarter of 2020, we updated our application of our nonaccrual accounting policy for those loans negatively impacted by the 

COVID-19 pandemic. For loans that were current as of March 1, 2020 and subsequently become delinquent, we will continue to accrue 

interest income according to our updated policy. These loans are not classified as nonaccrual. See “Note 1, Summary of Significant 

Accounting Policies” for more information about our nonaccrual policy.

(2) Represents the amount of interest income we did not recognize, but would have recognized during the period for nonaccrual loans and 

TDRs on accrual status as of the end of each period had the loans performed according to their original contractual terms.

(3) Represents interest income recognized during the period, including the amortization of any deferred cost basis adjustments, for loans 

classified as either nonaccrual loans or TDRs on accrual status as of the end of each period. Primarily includes amounts accrued while the 

loans were performing.

Liquidity and Capital Management

Liquidity Management

This section supplements and updates information regarding liquidity management in our 2019 Form 10-K. See “MD&A—

Liquidity and Capital Management—Liquidity Management” in our 2019 Form 10-K for additional information, including 

discussions of our primary sources and uses of funds, our liquidity and funding risk management practices and contingency 

planning, factors that influence our debt funding activity, factors that may impact our access to or the cost of our debt funding 

and factors that could adversely affect our liquidity and funding. Also see “Risk Factors—Liquidity and Funding Risk” in our 

2019 Form 10-K and “Risk Factors” in this report for a discussion of liquidity and funding risks, including potential impacts of 

the COVID-19 pandemic.

Liquidity and Funding Risk Management Practices and Contingency Planning

We conduct liquidity contingency planning to prepare for an event in which our access to the unsecured debt markets

becomes limited. Our liquidity management framework and practices require that we maintain: 

• a portfolio of highly liquid securities to cover a minimum of 30 calendar days of expected net cash needs, assuming 

no access to the short- and long-term unsecured debt markets; 

• within our other investments portfolio a daily balance of U.S. Treasury securities and/or cash with the Federal 

Reserve Bank of New York that has a redemption amount of at least 50% of our average projected 30-day cash 

needs over the previous three months; and 

• a liquidity profile that meets or exceeds our projected 365-day net cash needs with liquidity holdings and 

unencumbered agency mortgage securities. 

In June 2020, FHFA directed that we and Freddie Mac comply with updated prescriptive liquidity requirements. We expect the 

effective date for this new guidance to be September 1, 2020. FHFA’s directive requires us to hold more liquid assets than are 

required under our current metrics. While we estimate that our liquidity position as of June 30, 2020 meets these new 

requirements, we will in the future be required to hold more liquidity than we would have under our current framework, which 

we expect will negatively impact our net interest income. 

The guidance has four components we must meet:

• a 30-day cash flow stress test that assumes we continue to provide liquidity to the market while holding a $10 billion 

buffer above outflows;

• a 365-day metric that requires us to hold liquidity to meet our expected cash outflows over 365 days and to continue 

to provide liquidity to the market under certain stress conditions. This metric is also more prescriptive regarding the 

types of liquid assets we hold; 

MD&A | Multifamily Business

Fannie Mae Second Quarter 2020 Form 10-Q 57
• a specified minimum long-term debt to less-liquid asset ratio. Less-liquid assets are those that are not eligible to be 

pledged as collateral to the Fixed Income Clearing Corporation; and

• a requirement that we fund our assets with liabilities that have a specified minimum term relative to the term of the 

assets. 

Debt Funding

Outstanding Debt 

Total outstanding debt of Fannie Mae includes short-term and long-term debt and excludes debt of consolidated trusts. Shortterm debt of Fannie Mae consists of borrowings with an original contractual maturity of one year or less and, therefore, does 

not include the current portion of long-term debt. Long-term debt of Fannie Mae consists of borrowings with an original 

contractual maturity of greater than one year. 

The following chart and table display information on our outstanding short-term and long-term debt based on original 

contractual maturity. The increase in our short-term and long-term debt from December 31, 2019 to June 30, 2020 was 

primarily to support refinancing activity and in anticipation of future potential liquidity needs as a result of market dislocations 

caused by the COVID-19 pandemic, as discussed below. The increase in long-term debt also anticipates a future increase in 

the volume of delinquent loans that will need to be purchased out of trust.

Debt of Fannie Mae(1)

(Dollars in billions)

$26.7 $42.2

$47.4

$43.0

$108.1

$190.4

$182.2

$275.6

Short-term debt

Long-term debt maturing within one year

Long-term debt, excluding portion maturing within one year

12/31/2019 6/30/2020

MD&A | Liquidity and Capital Management

Fannie Mae Second Quarter 2020 Form 10-Q 58
Selected Debt Information

As of

June 30, 2020 December 31, 2019

(Dollars in billions)

Selected Weighted-Average Interest Rates(1)

Interest rate on short-term debt 0.28 % 1.56 %

Interest rate on long-term debt, including portion maturing within one year 1.68 % 2.86 %

Interest rate on callable long-term debt 2.81 % 3.39 %

Selected Maturity Data

Weighted-average maturity of debt maturing within one year (in days) 163 137 

Weighted-average maturity of debt maturing in more than one year (in months) 45 66 

Other Data

Outstanding callable long-term debt $ 27.4 $ 38.5 

Connecticut Avenue Securities debt(2) $ 17.8 $ 21.4 

(1) Outstanding debt amounts and weighted-average interest rates reported in this chart and table include the effects of discounts, premiums, 

other cost basis and fair value adjustments associated with debt that we elected to carry at fair value. Reported amounts include 

unamortized cost basis adjustments and fair value adjustments of $447 million and $28 million as of June 30, 2020 and December 31, 

2019, respectively.

(2) Represents CAS debt issued prior to November 2018. See “Single-Family Business—Single-Family Mortgage Credit Risk Management—

Single-Family Credit Enhancement and Transfer of Mortgage Credit Risk—Credit Risk Transfer Transactions” in our 2019 Form 10-K and 

in this report for information regarding our Connecticut Avenue Securities.

We intend to repay our short-term and long-term debt obligations as they become due primarily through proceeds from the 

issuance of additional debt securities and cash from business operations.

Debt Funding Activity

The market dislocations relating to the COVID-19 pandemic have affected both our debt funding needs and debt funding 

activity. We significantly increased our debt issuances in the first half of 2020 due to increased volume in the whole loan 

conduit driven by a significant increase in refinance activity in the first half of the year, to pay off callable debt, and in 

anticipation of potential future liquidity needs. Adverse market conditions in March limited our ability to issue debt with a 

maturity greater than two years. As a result, most of the debt we issued in the first quarter of 2020 had terms from three to 

twenty-four months. Market conditions improved in the second quarter of 2020 and we were able to issue notes with maturities 

greater than 24 months. If market conditions deteriorate again and limit our ability to issue longer-term debt, we may need to 

fund longer-term assets with short-term debt, which would increase the roll-over risk on our outstanding debt. See “Risk 

Factors” for additional information on the impact of the COVID-19 pandemic on our liquidity risk.

We expect our debt funding needs to increase in future periods. We expect the impact of the COVID-19 pandemic and 

significantly higher rates of loan delinquencies, forbearances and other loss mitigation activity will require us to fund:

• greater amounts of tax and insurance payments and, for loans in forbearance that back MBS trusts, principal and 

interest payments to the MBS trusts, after borrowers have missed four months of payments;

• purchases of a larger volume of delinquent loans from MBS trusts; 

• whole loan conduit activity, which may remain at a high volume; and

• greater holdings of liquid assets to comply with the new liquidity requirements recently issued by FHFA.

See “Single-Family Business—Single-Family Mortgage Credit Risk Management—Single-Family Problem Loan Management

—Principal and Interest Payments while Loans are in Forbearance” for information on advances of scheduled principal and 

interest payments to MBS trusts while loans are in forbearance. 

Pursuant to the terms of our senior preferred stock purchase agreement with Treasury, our aggregate indebtedness may not 

exceed $300 billion and our mortgage assets may not exceed $250 billion without Treasury’s prior written consent. FHFA has 

directed that we further cap our mortgage assets at $225 billion, as described in “Business—Conservatorship, Treasury 

Agreements and Housing Finance Reform—Treasury Agreements” in our 2019 Form 10-K. As described above, we expect our 

debt funding needs to increase. Depending on the extent of these funding needs, including the amount of mortgage loans we 

purchase from MBS trusts, we may be required to obtain FHFA’s and Treasury’s prior written consent to increase our current 

debt limit and mortgage asset limit. Depending on the extent of our funding needs and the amount, if any, by which Treasury 

MD&A | Liquidity and Capital Management

Fannie Mae Second Quarter 2020 Form 10-Q 59
and FHFA agree to any request we make for an increase in our debt limit, our business activities and our ability to meet our 

objectives may be constrained.

The table below displays activity in debt of Fannie Mae. This activity excludes the debt of consolidated trusts and intraday 

loans. Activity in short-term debt of Fannie Mae relates to borrowings with an original contractual maturity of one year or less 

while activity in long-term debt of Fannie Mae relates to borrowings with an original contractual maturity of greater than one 

year. The reported amounts of debt issued and paid off during each period represent the face amount of the debt at issuance 

and redemption.

The decrease in short-term debt issued and paid off during the second quarter and first half of 2020 compared with the second 

quarter and first half of 2019 was primarily driven by a reduction in the utilization of short-term notes including short-term notes 

with overnight maturities. The increase in long-term debt issued during the second quarter and first half of 2020 compared with 

the second quarter and first half of 2019 was due to increased volume in the whole loan conduit driven by a significant 

increase in refinance activity and in anticipation of potential future liquidity needs. The increase in long-term debt that was paid 

off during the second quarter and first half of 2020 compared with the second quarter and first half of 2019 was driven by 

increased redemptions of callable debt due to a lower interest rate environment as well as an increase in maturities of noncallable debt. 

Activity in Debt of Fannie Mae

For the Three Months 

Ended June 30,

For the Six Months 

Ended June 30,

2020 2019 2020 2019

(Dollars in millions)

Issued during the period:

Short-term:

Amount $ 7,938 $ 134,858 $ 167,961 $ 256,768 

Weighted-average interest rate 0.12 % 2.37 % 1.19 % 2.36 %

Long-term:(1)

Amount $ 82,913 $ 4,800 $ 122,231 $ 11,395 

Weighted-average interest rate 0.40 % 2.42 % 0.49 % 2.54 %

Total issued:

Amount $ 90,851 $ 139,658 $ 290,192 $ 268,163 

Weighted-average interest rate 0.37 % 2.38 % 0.90 % 2.37 %

Paid off during the period:(2)

Short-term:

Amount $ 24,069 $ 134,902 $ 152,861 $ 258,628 

Weighted-average interest rate 0.93 % 2.24 % 1.43 % 2.17 %

Long-term:(1)

Amount $ 19,799 $ 9,100 $ 43,963 $ 24,910 

Weighted-average interest rate 1.75 % 1.83 % 1.83 % 1.78 %

Total paid off:

Amount $ 43,868 $ 144,002 $ 196,824 $ 283,538 

Weighted-average interest rate 1.30 % 2.22 % 1.52 % 2.14 %

(1) Includes credit risk-sharing securities issued as CAS debt prior to November 2018. For information on our credit risk transfer transactions, 

see “Single-Family Business—Single-Family Mortgage Credit Risk Management—Single-Family Credit Enhancement and Transfer of 

Mortgage Credit Risk—Credit Risk Transfer Transactions” in our 2019 Form 10-K and in this report.

(2) Consists of all payments on debt, including regularly scheduled principal payments, payments at maturity, payments resulting from calls 

and payments for any other repurchases. Repurchases of debt and early retirements of zero-coupon debt are reported at original face 

value, which does not equal the amount of actual cash payment.

MD&A | Liquidity and Capital Management

Fannie Mae Second Quarter 2020 Form 10-Q 60
Other Investments Portfolio

The chart below displays information on the composition of our other investments portfolio. The balance of our other 

investments portfolio fluctuates as a result of changes in our cash flows, liquidity in the fixed-income markets, and our liquidity 

risk management framework and practices.

Our other investments portfolio increased significantly during the six months ended June 30, 2020 due primarily to an increase 

in our investment in U.S. Treasury securities and in cash and cash equivalents driven by proceeds from increased debt 

issuances to support higher refinance activity in the whole loan conduit and potential future liquidity needs as described above, 

as well as proceeds from loan payoffs. 

Other Investments Portfolio

(Dollars in billions)

$21.2

$13.6 $54.5

$25.5

$39.5

$96.0

$74.3

$176.0

12/31/2019 6/30/2020

Cash and cash equivalents(1)

Federal funds sold and securities purchased under agreements to resell or similar arrangements

U.S. Treasury securities

(1) Cash equivalents are comprised of overnight repurchase agreements and U.S. Treasuries that have a maturity at the date of acquisition of 

three months or less.

Cash Flows

Six Months Ended June 30, 2020. Cash, cash equivalents and restricted cash increased from $61.4 billion as of December 31, 

2019 to $120.2 billion as of June 30, 2020. The increase was primarily driven by cash inflows from (1) proceeds from 

repayments and sales of loans, (2) the sale of Fannie Mae MBS to third parties, and (3) the issuance of funding debt, which 

outpaced redemptions, primarily for the reasons described above.

Partially offsetting these cash inflows were cash outflows primarily from (1) payments on outstanding debt of consolidated 

trusts and (2) purchases of loans held for investment.

Six Months Ended June 30, 2019. Cash, cash equivalents and restricted cash increased from $49.4 billion as of December 31, 

2018 to $61.0 billion as of June 30, 2019. The increase was primarily driven by cash inflows from the sale of Fannie Mae MBS 

to third parties and the net decrease in federal funds sold and securities purchased under agreements to resell or similar 

agreements.

Partially offsetting these cash inflows were cash outflows from purchases of loans held for investment and the redemption of 

funding debt, which outpaced issuances, due to lower funding needs.

Credit Ratings

Our credit ratings from the major credit ratings organizations, as well as the credit ratings of the U.S. government, are primary 

factors that could affect our ability to access the capital markets and our cost of funds. In addition, our credit ratings are 

important when we seek to engage in certain long-term transactions, such as derivative transactions. Standard & Poor’s 

Global Ratings (“S&P”), Moody’s Investors Services (“Moody’s”) and Fitch Ratings Limited (“Fitch”) have all indicated that, if 

they were to lower the sovereign credit ratings on the U.S., they would likely lower their ratings on the debt of Fannie Mae and 

certain other government-related entities. In addition, actions by governmental entities impacting Treasury’s support for our 

business or our debt securities could adversely affect the credit ratings of our senior unsecured debt. See “Risk Factors—

MD&A | Liquidity and Capital Management

Fannie Mae Second Quarter 2020 Form 10-Q 61
Liquidity and Funding Risk” in our 2019 Form 10-K for a discussion of the risks to our business relating to a decrease in our 

credit ratings, which could include an increase in our borrowing costs, limits on our ability to issue debt, and additional 

collateral requirements under our derivatives contracts.

The table below displays the credit ratings issued by the three major credit rating agencies.

Fannie Mae Credit Ratings

June 30, 2020

S&P Moody's Fitch

Long-term senior debt AA+ Aaa AAA

Short-term senior debt A-1+ P-1 F1+

Preferred stock D Ca C/RR6

Outlook Stable Stable Stable

(for Long-Term Senior Debt) (for AAA rated Long-Term 

Issuer Default Ratings)

We have no covenants in our existing debt agreements that would be violated by a downgrade in our credit ratings. However, 

in connection with certain derivatives counterparties, we could be required to provide additional collateral to or terminate 

transactions with certain counterparties in the event that our senior unsecured debt ratings are downgraded.

Capital Management

Regulatory Capital

The deficit of our core capital over statutory minimum capital was $131.2 billion as of June 30, 2020 and $128.8 billion as of 

December 31, 2019. For information on our current capital requirements, see “Note 12, Regulatory Capital Requirements” in 

our 2019 Form 10-K. For information on our proposed capital requirements, see “Legislation and Regulation—Proposed 

Capital Framework” in this report.

Capital Activity

Under the terms governing the senior preferred stock, we will not owe dividends to Treasury until we have accumulated over 

$25 billion in net worth. Accordingly, no dividends were payable to Treasury for the second quarter of 2020 and none are 

payable for the third quarter of 2020. The aggregate liquidation preference of the senior preferred stock increases at the end of 

each quarter by the increase, if any, in our net worth during the immediately prior fiscal quarter, until the liquidation preference 

has increased by $22 billion pursuant to this provision. The aggregate liquidation preference of the senior preferred stock was 

$135.4 billion as of June 30, 2020, unchanged from March 31, 2020 as a result of the decrease in our net worth during the first 

quarter of 2020. The aggregate liquidation preference of the senior preferred stock will increase to $138.0 billion as of 

September 30, 2020 due to the $2.5 billion increase in our net worth during the second quarter of 2020. As of June 30, 2020, 

our net worth was $16.5 billion. 

See “Business—Conservatorship, Treasury Agreements and Housing Finance Reform—Treasury Agreements” in our 2019

Form 10-K for more information on the terms of our senior preferred stock and our senior preferred stock purchase agreement 

with Treasury. See “Risk Factors—GSE and Conservatorship Risk” in our 2019 Form 10-K for a discussion of the risks 

associated with the limit on our capital reserves.

Off-Balance Sheet Arrangements

Our off-balance sheet arrangements result primarily from the following: 

• our guaranty of mortgage loan securitization and resecuritization transactions, and other guaranty commitments, over 

which we do not have control; 

• liquidity support transactions; and 

• partnership interests. 

Since we began issuing UMBS in June 2019, some of the securities we issue are structured securities backed, in whole or in 

part, by Freddie Mac securities. When we issue a structured security, we provide a guaranty that we will supplement amounts 

received from the underlying mortgage-related security as required to permit timely payment of principal and interest on the 

certificates related to the resecuritization trust. Accordingly, when we issue structured securities backed in whole or in part by 

Freddie Mac securities, we extend our guaranty to the underlying Freddie Mac security included in the structured security. Our 

issuance of structured securities backed in whole or in part by Freddie Mac securities creates additional off-balance sheet 

exposure as we do not have control over the Freddie Mac mortgage loan securitizations. Because we do not have the power 

to direct matters (primarily the servicing of mortgage loans) that impact the credit risk to which we are exposed, which 

MD&A | Liquidity and Capital Management

Fannie Mae Second Quarter 2020 Form 10-Q 62
constitute control of these securitization trusts, we do not consolidate these trusts in our condensed consolidated balance 

sheet, giving rise to off-balance sheet exposure. 

The total amount of our off-balance sheet exposure related to unconsolidated Fannie Mae MBS net of any beneficial interest 

that we retain, and other financial guarantees was $118.8 billion as of June 30, 2020. Approximately $79.8 billion of this 

amount consisted of the unpaid principal balance of Freddie Mac-issued UMBS backing Fannie Mae-issued Supers. 

Additionally, off-balance sheet exposure includes approximately $21.6 billion of the unpaid principal balance of Freddie Mac 

securities backing Fannie Mae-issued REMICs; however, a portion of these Freddie Mac securities may be backed in whole or 

in part by Fannie Mae MBS. Therefore, our total exposure to Freddie Mac securities included in Fannie Mae REMIC collateral 

is likely lower. We expect our off-balance sheet exposure to Freddie Mac securities to increase as we issue more structured 

securities backed by Freddie Mac securities in the future. The total amount of our off-balance sheet exposure related to 

unconsolidated Fannie Mae MBS and other financial guarantees was $68.6 billion as of December 31, 2019. Approximately 

$37.8 billion of this amount consisted of the unpaid principal balance of Freddie Mac-issued UMBS backing Fannie Maeissued Supers and $12.3 billion of this amount consisted of the unpaid principal balance of Freddie Mac securities backing 

Fannie Mae-issued REMICs. See “Note 6, Financial Guarantees” for more information regarding our maximum exposure to 

loss on unconsolidated Fannie Mae MBS and Freddie Mac securities.

We also have off-balance sheet exposure to losses from liquidity support transactions and partnership interests.

• Our total outstanding liquidity commitments to advance funds for securities backed by multifamily housing revenue 

bonds totaled $6.8 billion as of June 30, 2020 and $7.2 billion as of December 31, 2019. These commitments require 

us to advance funds to third parties that enable them to repurchase tendered bonds or securities that are unable to be 

remarketed. We hold cash and cash equivalents in our other investments portfolio in excess of these commitments to 

advance funds.

• We make investments in various limited partnerships and similar legal entities, which consist of low-income housing 

tax credit investments, community investments and other entities. When we do not have a controlling financial interest 

in those entities, our condensed consolidated balance sheets reflect only our investment rather than the full amount of 

the partnership’s assets and liabilities. See “Note 2, Consolidations and Transfers of Financial Assets— 

Unconsolidated VIEs” for information regarding our limited partnerships and similar legal entities.

Risk Management

Our business activities expose us to the following major categories of risk: credit risk (including mortgage credit risk and 

institutional counterparty credit risk), market risk (including interest-rate risk), liquidity and funding risk, and operational risk 

(including cyber/information security risk, third-party risk and model risk), as well as strategic risk, compliance risk and 

reputational risk. See “MD&A—Risk Management” in our 2019 Form 10-K for a discussion of our management of these risks. 

This section supplements and updates that discussion but does not repeat all of the risk management categories described in 

our 2019 Form 10-K. 

Institutional Counterparty Credit Risk Management

This section supplements and updates our discussion of institutional counterparty credit risk management in our 2019 Form 

10-K. See “MD&A—Risk Management—Institutional Counterparty Credit Risk Management” and “Risk Factors—Credit Risk” 

in our 2019 Form 10-K for a discussion of our exposure to institutional counterparty credit risk and our strategy for managing 

this risk. As described in “Risk Factors” in this report, the COVID-19 pandemic has increased our counterparty credit risk. Also 

see “Note 10, Concentrations of Credit Risk” in this report for an update on our counterparty credit risk exposure.

Change in Non-Depository Seller and Servicer Liquidity Requirement as a 

Result of COVID-19 Forbearances

We have previously established minimum liquidity requirements for single-family non-depository servicers to maintain eligibility 

with Fannie Mae. With the expected increase in delinquent loans in forbearance plans as a result of the unprecedented

circumstances of the COVID-19 pandemic and the CARES Act, we have temporarily modified our minimum liquidity 

requirement for single-family non-depository servicers to maintain eligibility with Fannie Mae. Beginning with the second 

quarter of 2020, when calculating the minimum liquidity requirement for seriously delinquent mortgage loans for non-depository 

servicers, an adjustment will be included for mortgage loans in a COVID-19-related forbearance plan that are 90 days or more 

delinquent and were current at the inception of the plan. The adjustment will provide partial relief to these servicers for the 

impacted loans.

MD&A | Off-Balance Sheet Arrangements

Fannie Mae Second Quarter 2020 Form 10-Q 63
Change in Private Mortgage Insurer Eligibility Requirements 

Mortgage insurers must meet and maintain compliance with private mortgage insurer eligibility requirements (“PMIERs”) to be 

eligible to write mortgage insurance on loans acquired by Fannie Mae. The PMIERs are designed to ensure that mortgage 

insurers have sufficient liquid assets to pay all claims under a hypothetical future stress scenario. At FHFA’s direction, on June 

30, 2020, we and Freddie Mac published revisions to the PMIERs, which became effective immediately. The revisions include 

(1) a temporary adjustment when calculating required risk-based assets for nonperforming mortgage loans that became newly 

delinquent after the onset of the COVID-19 crisis, and (2) through March 31, 2021, a requirement for private mortgage insurers 

to secure prior approval from Fannie Mae to enable payment of dividends or certain new transfers of cash. The adjustment will 

provide partial relief to mortgage insurers’ capital requirements for the impacted loans.

Market Risk Management, Including Interest-Rate Risk Management

This section supplements and updates information regarding market risk management in our 2019 Form 10-K. See “MD&A—

Risk Management—Market Risk Management, Including Interest-Rate Risk Management” and “Risk Factors” in our 2019

Form 10-K for additional information, including our sources of interest-rate risk exposure, business risks posed by changes in 

interest rates, and our strategy for managing interest-rate risk. As described in “Risk Factors” in this report, the COVID-19 

pandemic has increased our market risk.

Measurement of Interest-Rate Risk

The table below displays the pre-tax market value sensitivity of our net portfolio to changes in the level of interest rates and the 

slope of the yield curve as measured on the last day of each period presented. The table below also provides the daily 

average, minimum, maximum and standard deviation values for duration gap and for the most adverse market value impact on 

the net portfolio to changes in the level of interest rates and the slope of the yield curve for the three months ended June 30, 

2020 and 2019. Our practice is to allow interest rates to go below zero in the downward shock models unless otherwise 

prevented through contractual floors.

For information on how we measure our interest-rate risk, see our 2019 Form 10-K in “MD&A—Risk Management—Market 

Risk Management, Including Interest-Rate Risk Management.”

Interest-Rate Sensitivity of Net Portfolio to Changes in Interest-Rate Level 

and Slope of Yield Curve

As of (1)(2)

June 30, 2020 December 31, 2019

(Dollars in millions)

Rate level shock:

-100 basis points $ (68) $ 57 

-50 basis points (42) 11 

+50 basis points 54 51 

+100 basis points 142 160 

Rate slope shock:

-25 basis points (flattening) (24) (20) 

+25 basis points (steepening) 21 22 

For the Three Months Ended June 30, (1)(3)

2020 2019

Duration 

Gap

Rate Slope 

Shock 25 bps

Rate Level 

Shock 50 bps

Duration 

Gap

Rate Slope 

Shock 25 bps

Rate Level 

Shock 50 bps

Market Value Sensitivity Market Value Sensitivity

(In years) (Dollars in millions) (In years) (Dollars in millions)

Average (0.01) $ (23) $ (47) 0.01 $ (14) $ (18) 

Minimum (0.09) (35) (136) (0.03) (24) (73) 

Maximum 0.05 (12) — 0.07 (3) 10 

Standard deviation 0.03 6 27 0.02 6 17 

(1) Computed based on changes in U.S. LIBOR interest-rates swap curve. Changes in the level of interest-rates assume a parallel shift in all 

maturities of the U.S. LIBOR interest-rate swap curve. Changes in the slope of the yield curve assume a constant 7-year rate, a shift of 

MD&A | Risk Management

Fannie Mae Second Quarter 2020 Form 10-Q 64
16.7 basis points for the 1-year rate (and shorter tenors) and an opposite shift of 8.3 basis points for the 30-year rate. Rate shocks for 

remaining maturity points are interpolated.

(2) Measured on the last business day of each period presented. 

(3) Computed based on daily values during the period presented.

The market value sensitivity of our net portfolio varies across a range of interest-rate shocks depending upon the duration and 

convexity profile of our net portfolio. 

We use derivatives to help manage the residual interest-rate risk exposure between our assets and liabilities. Derivatives have 

enabled us to keep our interest-rate risk exposure at consistently low levels in a wide range of interest-rate environments. The 

table below displays an example of how derivatives impacted the net market value exposure for a 50 basis point parallel 

interest-rate shock.

Derivative Impact on Interest-Rate Risk (50 Basis Points)

As of (1)

June 30, 2020 December 31, 2019

(Dollars in millions)

Before derivatives $ (278) $ (197) 

After derivatives (42) 51 

Effect of derivatives 236 248 

(1) Measured on the last business day of each period presented.

Critical Accounting Policies and Estimates

The preparation of financial statements in accordance with GAAP requires management to make a number of judgments, 

estimates and assumptions that affect the reported amount of assets, liabilities, income and expenses in our condensed 

consolidated financial statements. Understanding our accounting policies and the extent to which we use management 

judgment and estimates in applying these policies is integral to understanding our financial statements. We describe our most 

significant accounting policies in “Note 1, Summary of Significant Accounting Policies” in this report and in our 2019 Form 10-

K.

We evaluate our critical accounting estimates and judgments required by our policies on an ongoing basis and update them as 

necessary based on changing conditions. We have identified one of our accounting policies, allowance for loan losses, as 

critical because it involves significant judgments and assumptions about highly complex and inherently uncertain matters, and 

the use of reasonably different estimates and assumptions could have a material impact on our reported results of operations 

or financial condition. 

Allowance for Loan Losses and Adoption of the CECL Standard

The CECL standard is effective for our fiscal year beginning January 1, 2020 and impacts the measurement of our allowance 

for loan losses. The CECL standard reflects lifetime expected credit losses on the loans in our book of business and requires 

consideration of a range of reasonable and supportable forecast information to develop that estimate. We have changed our 

accounting policies and implemented system, model and process changes to adopt the standard.

Our allowance for loan losses is a valuation account that is deducted from the amortized cost basis of HFI loans to present the 

net amount expected to be collected on the loans. The allowance for loan losses reflects an estimate of expected credit losses 

on single-family and multifamily HFI loans held by Fannie Mae and by consolidated Fannie Mae MBS trusts. Upon adoption, 

we used a discounted cash flow method to measure expected credit losses on our single-family mortgage loans and an 

undiscounted loss method to measure expected credit losses on our multifamily mortgage loans. The models used reasonable 

and supportable forecasts for key economic drivers, such as home prices (single-family), rental income (multifamily) and 

capitalization rates (multifamily). Our modeled loan performance is based on our historical experience of loans with similar risk 

characteristics adjusted to reflect current conditions and reasonable and supportable forecasts. Our historical loss experience 

and our credit loss estimates capture the possibility of remote events that could result in credit losses on loans that are 

considered low risk. Our credit loss models, including the forecast data used as key inputs, are subject to our model oversight 

and review processes as well as other established governance and controls. 

Changes to our estimate of expected credit losses, including changes due to the passage of time, are recorded through the 

benefit (provision) for credit losses. When calculating our allowance for loan losses, we consider only our amortized cost in the 

loans at the balance sheet date. We record write-offs as a reduction to the allowance for loan losses when losses are 

confirmed through the receipt of assets in satisfaction of a loan, such as the underlying collateral upon foreclosure or cash 

upon completion of a short sale. Additionally, we record write-offs as a reduction to our allowance for loan losses when a loan 

is determined to be uncollectible and upon the redesignation of a seriously delinquent loan from HFI to HFS. We include 

MD&A | Risk Management

Fannie Mae Second Quarter 2020 Form 10-Q 65
expected recoveries of amounts previously written off and expected to be written off in determining our allowance for loan 

losses.

Our process for determining the impact of the adoption as well as the measurement of expected credit losses for the period 

under the new standard is complex and involves significant management judgment, including a reliance on historical loss 

information and current economic forecasts that may not be representative of credit losses we ultimately realize. For example, 

uncertainty regarding the expected impacts of the COVID-19 pandemic required significant management judgment in 

assessing our allowance for loan losses as of June 30, 2020.

We provide more detailed information on our accounting for the allowance for loan losses and impact of adopting the CECL 

standard in “Note 1, Summary of Significant Accounting Policies.” See “Risk Factors” in our 2019 Form 10-K and in this report 

for a discussion of the risks associated with the need for management to make judgments and estimates in applying our 

accounting policies and methods.

Impact of Future Adoption of New Accounting Guidance

We identify and discuss the expected impact on our condensed consolidated financial statements of recently issued 

accounting guidance in “Note 1, Summary of Significant Accounting Policies.”

Forward-Looking Statements

This report includes statements that constitute forward-looking statements within the meaning of Section 21E of the Securities 

Exchange Act of 1934 (the “Exchange Act”). In addition, we and our senior management may from time to time make forwardlooking statements in our other filings with the SEC, our other publicly available written statements, and orally to analysts, 

investors, the news media and others. Forward-looking statements often include words such as “expect,” “anticipate,” “intend,” 

“plan,” “believe,” “seek,” “estimate,” “forecast,” “project,” “would,” “should,” “could,” “likely,” “may,” “will” or similar words. 

Examples of forward-looking statements in this report include, among others, statements relating to our expectations regarding 

the following matters:

• our future financial performance, financial condition and net worth, and the factors that will affect them;

• the impact of the COVID-19 pandemic on our business, financial results, financial condition, business plans and 

strategies, and on mortgage market and economic conditions, and the factors that will affect the pandemic’s impact;

• expectations for, and the impact of fluctuations in our acquisition volumes, market share, guaranty fees, or acquisition 

credit characteristics;

• our business plans and strategies and the impact of such plans and strategies;

• our plans regarding and work toward exiting conservatorship; 

• the impact of FHFA’s re-proposed capital framework on our business and results;

• our dividend payments to Treasury and the liquidation preference of the senior preferred stock; 

• volatility in our future financial results and efforts we may make to address volatility, including our expectations 

relating to our implementation of a hedge accounting program and its impact on the volatility of our financial results; 

• the size and composition of our retained mortgage portfolio;

• the amount and timing of our purchases of loans from MBS trusts;

• the volume of whole loan conduit activity;

• the impact of legislation and regulation on our business or financial results;

• our payments to HUD and Treasury funds under the GSE Act;

• our plans relating to future credit risk transfer transactions and risk-sharing arrangements with lenders, and the 

effects of our credit risk transfer transactions and credit risk-sharing arrangements;

• factors that could affect or mitigate our credit risk exposure;

• mortgage market and economic conditions (including U.S. GDP, unemployment rates, interest rates, home price 

growth, multifamily property valuation growth, housing activity, housing starts, home sales, rent growth, multifamily 

vacancy rates, and the future volume of and characteristics of mortgage originations) and the impact of mortgage 

market and economic conditions on our business and financial results;

• our future off-balance sheet exposure to Freddie Mac securities;

• the risks to our business;

MD&A | Critical Accounting Policies and Estimates

Fannie Mae Second Quarter 2020 Form 10-Q 66
• future delinquency rates, default rates, forbearances and other loss mitigation activity, substandard loan amounts and 

credit losses relating to the loans in our guaranty book of business and the factors that will affect them, including the 

impact of the COVID-19 pandemic and our expectations regarding the future behavior of borrowers;

• our expectations relating to our TDRs;

• the performance of loans in our book of business and the factors that will affect such performance;

• our loan acquisitions, the credit risk profile of such acquisitions, and the factors that will affect them;

• our future liquidity, liquidity planning, debt funding needs and factors that will affect our ability to meet our debt 

obligations; and 

• our response to legal and regulatory proceedings and their impact on our business or financial condition.

Forward-looking statements reflect our management’s current expectations, forecasts or predictions of future conditions, 

events or results based on various assumptions and management’s estimates of trends and economic factors in the markets in 

which we are active and that otherwise impact our business plans. Forward-looking statements are not guarantees of future 

performance. By their nature, forward-looking statements are subject to significant risks and uncertainties and changes in 

circumstances. Our actual results and financial condition may differ, possibly materially, from the anticipated results and 

financial condition indicated in these forward-looking statements. 

There are a number of factors that could cause actual conditions, events or results to differ materially from those described in 

our forward-looking statements, including, among others, the following: 

• the uncertainty of our future and our exit from conservatorship; 

• uncertainty surrounding the duration, spread and severity of the COVID-19 pandemic; the actions taken to contain the 

virus or treat its impact, including government actions to mitigate the economic impact of the pandemic; the extent to 

which consumers, workers and families feel safe resuming business activities and school; the nature, extent and 

success of the forbearance and modification options borrowers affected by the pandemic obtain from us; accounting 

elections and estimates relating to the impact of the COVID-19 pandemic; borrower and renter behavior in response 

to the pandemic and its economic impact; how quickly and to what extent normal economic and operating conditions 

can resume, including whether any future pandemics interrupt economic recovery; and how quickly and to what 

extent affected borrowers, renters and counterparties can recover from the negative economic impact of the 

pandemic; 

• the market and regulatory changes we anticipate and our readiness for them, including changes relating to an 

eventual exit from conservatorship, the competitive landscape, and the need to attract private investment;

• future legislative and regulatory requirements or changes affecting us, such as the enactment of housing finance 

reform legislation (including all or any portion of the Treasury plan), including changes that limit our business activities 

or our footprint; 

• actions by FHFA, Treasury, HUD, the Consumer Financial Protection Bureau or other regulators, Congress, or state 

or local governments that affect our business, including new capital requirements that become applicable to us or 

changes in the ability-to-repay rule to replace the qualified mortgage patch for government-sponsored enterpriseeligible loans;

• changes in the structure and regulation of the financial services industry; 

• the timing and level of, as well as regional variation in, home price changes; 

• future interest rates and credit spreads; 

• developments that may be difficult to predict, including: market conditions that result in changes in our net 

amortization income from our guaranty book of business, fluctuations in the estimated fair value of our derivatives and 

other financial instruments that we mark to market through our earnings; and developments that affect our loss 

reserves, such as changes in interest rates, home prices or accounting standards, or events such as natural disasters 

or the emergence of widespread health emergencies or pandemics;

• uncertainties relating to the discontinuance of LIBOR, or other market changes that could impact the loans we own or 

guarantee or our MBS; 

• credit availability; 

• disruptions or instability in the housing and credit markets;

• the size and our share of the U.S. mortgage market and the factors that affect them, including population growth and 

household formation;

• growth, deterioration and the overall health and stability of the U.S. economy, including U.S. GDP, unemployment 

rates, personal income and other indicators thereof;

• changes in the fiscal and monetary policies of the Federal Reserve; 

MD&A | Forward-Looking Statements

Fannie Mae Second Quarter 2020 Form 10-Q 67
• our and our competitors’ future guaranty fee pricing and the impact of that pricing on our competitive environment and 

guaranty fee revenues; 

• the volume of mortgage originations;

• the size, composition, quality and performance of our guaranty book of business and retained mortgage portfolio; 

• the competitive environment in which we operate, including the impact of legislative, regulatory or other developments 

on levels of competition in our industry and other factors affecting our market share; 

• how long loans in our guaranty book of business remain outstanding; 

• challenges we face in retaining and hiring qualified executives and other employees; 

• the effectiveness of our business resiliency plans and systems;

• changes in the demand for Fannie Mae MBS, in general or from one or more major groups of investors;

• our conservatorship, including any changes to or termination (by receivership or otherwise) of the conservatorship 

and its effect on our business; 

• the investment by Treasury, including potential changes to the terms of the senior preferred stock purchase 

agreement or senior preferred stock, and its effect on our business, including restrictions imposed on us by the terms 

of the senior preferred stock purchase agreement, the senior preferred stock, and Treasury’s warrant, as well as the 

possibility that these or other restrictions on our business and activities may be applied to us through other 

mechanisms even if we cease to be subject to these agreements and instruments; 

• adverse effects from activities we undertake to support the mortgage market and help borrowers, renters, lenders and 

servicers; 

• actions we may be required to take by FHFA, in its role as our conservator or as our regulator, such as actions in 

response to the COVID-19 pandemic, changes in the type of business we do, or actions relating to UMBS or our 

resecuritization of Freddie Mac-issued securities; 

• limitations on our business imposed by FHFA, in its role as our conservator or as our regulator; 

• our future objectives and activities in support of those objectives, including actions we may take to reach additional 

underserved creditworthy borrowers; 

• the possibility that future changes in leadership at FHFA or the Administration may result in changes in FHFA’s or 

Treasury’s willingness to pursue the administrative reform recommendations in the Treasury plan;

• our reliance on Common Securitization Solutions, LLC (“CSS”) and the common securitization platform for a majority 

of our single-family securitization activities, our reduced influence over CSS as a result of recent changes to the CSS 

limited liability company agreement, and any additional changes FHFA may require in our relationship with or in our 

support of CSS;

• a decrease in our credit ratings; 

• limitations on our ability to access the debt capital markets; 

• constraints on our entry into new credit risk transfer transactions;

• significant changes in forbearance, modification and foreclosure activity; 

• the volume and pace of future nonperforming and reperforming loan sales and their impact on our results and serious 

delinquency rates; 

• changes in borrower behavior; 

• actions we may take to mitigate losses, and the effectiveness of our loss mitigation strategies, management of our 

REO inventory and pursuit of contractual remedies; 

• defaults by one or more institutional counterparties; 

• resolution or settlement agreements we may enter into with our counterparties; 

• our need to rely on third parties to fully achieve some of our corporate objectives; 

• our reliance on mortgage servicers; 

• changes in GAAP, guidance by the Financial Accounting Standards Board and changes to our accounting policies; 

• changes in the fair value of our assets and liabilities; 

• the stability and adequacy of the systems and infrastructure that impact our operations, including ours and those of 

CSS, our other counterparties and other third parties; 

• the impact of increasing interdependence between the single-family mortgage securitization programs of Fannie Mae 

and Freddie Mac in connection with UMBS;

• operational control weaknesses; 

• our reliance on models and future updates we make to our models, including the assumptions used by these models; 

MD&A | Forward-Looking Statements

Fannie Mae Second Quarter 2020 Form 10-Q 68
• domestic and global political risks and uncertainties; 

• natural disasters, environmental disasters, terrorist attacks, widespread health emergencies or pandemics, or other 

major disruptive events; 

• cyber attacks or other information security breaches or threats; and 

• the other factors described in “Risk Factors” in this report and in our 2019 Form 10-K.

Readers are cautioned not to unduly rely on the forward-looking statements we make and to place these forward-looking 

statements into proper context by carefully considering the factors discussed in “Risk Factors” in our 2019 Form 10-K and in 

this report. These forward-looking statements are representative only as of the date they are made, and we undertake no 

obligation to update any forward-looking statement as a result of new information, future events or otherwise, except as 

required under the federal securities laws. 

MD&A | Forward-Looking Statements

Fannie Mae Second Quarter 2020 Form 10-Q 69
Item 1. Financial Statements

FANNIE MAE

(In conservatorship)

Condensed Consolidated Balance Sheets — (Unaudited)

(Dollars in millions)

As of

June 30, 

2020

December 31, 

2019

ASSETS

Cash and cash equivalents $ 54,510 $ 21,184 

Restricted cash (includes $58,581 and $33,294, respectively, related to consolidated trusts) 65,714 40,223 

Federal funds sold and securities purchased under agreements to resell or similar arrangements 25,450 13,578 

Investments in securities:

Trading, at fair value (includes $5,727 and $3,037, respectively, pledged as collateral) 106,744 48,123 

Available-for-sale, at fair value (with an amortized cost of $1,990, net of allowance for credit losses of 

 $3 as of June 30, 2020) 2,120 2,404 

Total investments in securities 108,864 50,527 

Mortgage loans:

Loans held for sale, at lower of cost or fair value 7,580 6,773 

Loans held for investment, at amortized cost:

Of Fannie Mae 107,771 94,911 

Of consolidated trusts 3,356,950 3,241,494 

Total loans held for investment (includes $7,303 and $7,825, respectively, at fair value) 3,464,721 3,336,405 

Allowance for loan losses (12,966) (9,016) 

Total loans held for investment, net of allowance 3,451,755 3,327,389 

Total mortgage loans 3,459,335 3,334,162 

Advances to lenders 7,983 6,453 

Deferred tax assets, net 13,119 11,910 

Accrued interest receivable, net (includes $9,451 and $8,172, respectively, related to consolidated trusts

 and net of an allowance of $172 as of June 30, 2020) 9,679 8,604 

Acquired property, net 1,844 2,366 

Other assets 14,178 14,312 

Total assets $ 3,760,676 $ 3,503,319 

LIABILITIES AND EQUITY

Liabilities:

Accrued interest payable (includes $9,312 and $9,361, respectively, related to consolidated trusts) $ 10,054 $ 10,228 

Debt:

Of Fannie Mae (includes $4,546 and $5,687, respectively, at fair value) 275,637 182,247 

Of consolidated trusts (includes $23,883 and $21,880, respectively, at fair value) 3,444,338 3,285,139 

Other liabilities (includes $1,638 and $376, respectively, related to consolidated trusts) 14,170 11,097 

Total liabilities 3,744,199 3,488,711 

Commitments and contingencies (Note 13) — — 

Fannie Mae stockholders’ equity:

Senior preferred stock (liquidation preference of $135,444 and $131,178, respectively) 120,836 120,836 

Preferred stock, 700,000,000 shares are authorized—555,374,922 shares issued and outstanding 19,130 19,130 

Common stock, no par value, no maximum authorization—1,308,762,703 shares issued and 

 1,158,087,567 shares outstanding 687 687 

Accumulated deficit (116,909) (118,776) 

Accumulated other comprehensive income 133 131 

Treasury stock, at cost, 150,675,136 shares (7,400) (7,400) 

Total stockholders’ equity (See Note 1: Senior Preferred Stock Purchase Agreement and Senior 

Preferred Stock for information on the related dividend obligation and liquidation preference) 16,477 14,608 

Total liabilities and equity $ 3,760,676 $ 3,503,319 

See Notes to Condensed Consolidated Financial Statements

 Financial Statements | Condensed Consolidated Balance Sheets

Fannie Mae (In conservatorship) Second Quarter 2020 Form 10-Q 70
FANNIE MAE

(In conservatorship)

Condensed Consolidated Statements of Operations and 

Comprehensive Income — (Unaudited)

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

For the Three Months 

Ended June 30,

For the Six Months 

Ended June 30,

2020 2019 2020 2019

Interest income:

Trading securities $ 219 $ 432 $ 535 $ 859 

Available-for-sale securities 26 45 57 98 

Mortgage loans 27,007 29,511 55,945 59,373 

Federal funds sold and securities purchased under agreements to resell or similar 

arrangements 14 257 121 520 

Other 25 41 59 73 

Total interest income 27,291 30,286 56,717 60,923 

Interest expense:

Short-term debt (54) (119) (156) (244) 

 Long-term debt (21,460) (24,940) (45,437) (50,656) 

Total interest expense (21,514) (25,059) (45,593) (50,900) 

Net interest income 5,777 5,227 11,124 10,023 

Benefit (provision) for credit losses (12) 1,225 (2,595) 1,875 

Net interest income after benefit (provision) for credit losses 5,765 6,452 8,529 11,898 

Investment gains (losses), net 149 461 (9) 594 

Fair value losses, net (1,018) (754) (1,294) (1,585) 

Fee and other income 90 113 210 247 

Non-interest loss (779) (180) (1,093) (744) 

Administrative expenses:

Salaries and employee benefits (382) (376) (775) (762) 

Professional services (231) (233) (443) (458) 

Other administrative expenses (141) (135) (285) (268) 

Total administrative expenses (754) (744) (1,503) (1,488) 

Foreclosed property expense (10) (128) (90) (268) 

Temporary Payroll Tax Cut Continuation Act of 2011 (“TCCA”) fees (660) (600) (1,297) (1,193) 

Credit enhancement expense (360) (276) (736) (492) 

Change in expected credit enhancement recoveries 273 — 461 — 

Other expenses, net (261) (203) (479) (365) 

Total expenses (1,772) (1,951) (3,644) (3,806) 

Income before federal income taxes 3,214 4,321 3,792 7,348 

Provision for federal income taxes (669) (889) (786) (1,516) 

Net income 2,545 3,432 3,006 5,832 

Other comprehensive income (loss):

Changes in unrealized gains (losses) on available-for-sale securities, net of 

reclassification adjustments and taxes (11) (65) 7 (101) 

Other, net of taxes (2) (2) (5) (5) 

Total other comprehensive income (loss) (13) (67) 2 (106) 

Total comprehensive income $ 2,532 $ 3,365 $ 3,008 $ 5,726 

Net income $ 2,545 $ 3,432 $ 3,006 $ 5,832 

Dividends distributed or amounts attributable to senior preferred stock (2,532) (3,365) (3,008) (5,726) 

Net income (loss) attributable to common stockholders $ 13 $ 67 $ (2) $ 106 

Earnings per share:

Basic $ 0.00 $ 0.01 $ 0.00 $ 0.02 

Diluted 0.00 0.01 0.00 0.02 

Weighted-average common shares outstanding:

Basic 5,867 5,762 5,867 5,762 

Diluted 5,893 5,893 5,867 5,893 

See Notes to Condensed Consolidated Financial Statements

 Financial Statements | Condensed Consolidated Statements of Operations and Comprehensive Income

Fannie Mae (In conservatorship) Second Quarter 2020 Form 10-Q 71
FANNIE MAE

(In conservatorship)

Condensed Consolidated Statements of Cash Flows — 

(Unaudited)

(Dollars in millions)

For the Six Months 

Ended June 30,

2020 2019

Net cash provided by (used in) operating activities $ (39,322) $ 2,180 

Cash flows provided by (used in) investing activities:

Proceeds from maturities and paydowns of trading securities held for investment 23 28 

Proceeds from sales of trading securities held for investment — 49 

Proceeds from maturities and paydowns of available-for-sale securities 189 268 

Proceeds from sales of available-for-sale securities 121 376 

Purchases of loans held for investment (293,666) (90,612) 

Proceeds from repayments of loans acquired as held for investment of Fannie Mae 4,634 5,557 

Proceeds from sales of loans acquired as held for investment of Fannie Mae 427 5,821 

Proceeds from repayments and sales of loans acquired as held for investment of consolidated trusts 448,375 211,956 

Advances to lenders (123,805) (54,440) 

Proceeds from disposition of acquired property and preforeclosure sales 3,239 3,870 

Net change in federal funds sold and securities purchased under agreements to resell or similar arrangements (11,872) 13,376 

Other, net (937) (743) 

Net cash provided by investing activities 26,728 95,506 

Cash flows provided by (used in) financing activities:

Proceeds from issuance of debt of Fannie Mae 393,641 374,284 

Payments to redeem debt of Fannie Mae (299,933) (389,779) 

Proceeds from issuance of debt of consolidated trusts 401,749 158,970 

Payments to redeem debt of consolidated trusts (423,582) (224,145) 

Payments of cash dividends on senior preferred stock to Treasury — (5,601) 

Other, net (464) 132 

Net cash provided by (used in) financing activities 71,411 (86,139) 

Net increase in cash, cash equivalents and restricted cash 58,817 11,547 

Cash, cash equivalents and restricted cash at beginning of period 61,407 49,423 

Cash, cash equivalents and restricted cash at end of period $ 120,224 $ 60,970 

Cash paid during the period for:

Interest $ 57,733 $ 57,637 

Income taxes — 700 

See Notes to Condensed Consolidated Financial Statements

 Financial Statements | Condensed Consolidated Statements of Cash Flows

Fannie Mae (In conservatorship) Second Quarter 2020 Form 10-Q 72
FANNIE MAE

(In conservatorship)

Condensed Consolidated Statements of Changes in 

Equity (Deficit) — (Unaudited)

(Dollars and shares in millions)

Fannie Mae Stockholders’ Equity (Deficit)

Shares Outstanding

Senior

Preferred 

Stock

Preferred

Stock

Common

Stock

Accumulated

Deficit

Accumulated 

Other

Comprehensive

Income

Treasury

Stock

Total

Equity

Senior

Preferred Preferred Common

Balance as of March 31, 2020 1 556 1,158 $ 120,836 $ 19,130 $ 687 $ (119,454) $ 146 $ (7,400) $ 13,945 

Senior preferred stock dividends paid — — — — — — — — — — 

Comprehensive income:

Net income — — — — — — 2,545 — — 2,545 

Other comprehensive income, net of tax effect:

Changes in net unrealized gains on available- 

 for-sale securities (net of taxes of $3) — — — — — — — (11) — (11) 

Reclassification adjustment for gains included 

 in net income (net of taxes of $0) — — — — — — — — — — 

Other (net of taxes of $0) — — — — — — — (2) — (2) 

Total comprehensive income 2,532 

Balance as of June 30, 2020 1 556 1,158 $ 120,836 $ 19,130 $ 687 $ (116,909) $ 133 $ (7,400) $ 16,477 

Fannie Mae Stockholders’ Equity (Deficit)

Shares Outstanding

Senior

Preferred 

Stock

Preferred

Stock

Common

Stock

Accumulated

Deficit

Accumulated 

Other

Comprehensive

Income

Treasury

Stock

Total

Equity

Senior

Preferred Preferred Common

Balance as of December 31, 2019 1 556 1,158 $ 120,836 $ 19,130 $ 687 $ (118,776) $ 131 $ (7,400) $ 14,608 

Transition impact, net of tax, from the adoption of

 the current expected credit loss standard — — — — — — (1,139) — — (1,139) 

Balance as of January 1, 2020, adjusted 1 556 1,158 120,836 19,130 687 (119,915) 131 (7,400) 13,469 

Senior preferred stock dividends paid — — — — — — — — — — 

Comprehensive income:

Net income — — — — — — 3,006 — — 3,006 

Other comprehensive income, net of tax effect:

Changes in net unrealized gains on available-

 for-sale securities (net of taxes of $1) — — — — — — — 4 — 4 

Reclassification adjustment for gains included

 in net income (net of taxes of $1) — — — — — — — 3 — 3 

Other (net of taxes of $1) — — — — — — — (5) — (5) 

Total comprehensive income 3,008 

Balance as of June 30, 2020 1 556 1,158 $ 120,836 $ 19,130 $ 687 $ (116,909) $ 133 $ (7,400) $ 16,477 

See Notes to Condensed Consolidated Financial Statements

Financial Statements | Condensed Consolidated Statements of Changes in Equity (Deficit)

Fannie Mae (In conservatorship) Second Quarter 2020 Form 10-Q 73
FANNIE MAE

(In conservatorship)

Condensed Consolidated Statements of Changes in 

Equity (Deficit) — (Unaudited)

(Dollars and shares in millions)

Fannie Mae Stockholders’ Equity (Deficit)

Shares Outstanding

Senior

Preferred 

Stock

Preferred

Stock

Common

Stock

Accumulated

Deficit

Accumulated 

Other

Comprehensive

Income

Treasury

Stock

Total

Equity

Senior

Preferred Preferred Common

Balance as of March 31, 2019 1 556 1,158 $ 120,836 $ 19,130 $ 687 $ (128,175) $ 283 $ (7,400) $ 5,361 

Senior preferred stock dividends paid — — — — — — (2,361) — — (2,361) 

Comprehensive income:

Net income — — — — — — 3,432 — — 3,432 

Other comprehensive income, net of tax effect:

Changes in net unrealized gains on available-

 for-sale securities (net of taxes of $3) — — — — — — — 9 — 9 

Reclassification adjustment for gains included

 in net income (net of taxes of $19) — — — — — — — (74) — (74) 

Other (net of taxes of $0) — — — — — — — (2) — (2) 

Total comprehensive income 3,365 

Balance as of June 30, 2019 1 556 1,158 $ 120,836 $ 19,130 $ 687 $ (127,104) $ 216 $ (7,400) $ 6,365 

Fannie Mae Stockholders’ Equity (Deficit)

Shares Outstanding

Senior

Preferred 

Stock

Preferred

Stock

Common

Stock

Accumulated

Deficit

Accumulated 

Other

Comprehensive

Income

Treasury

Stock

Total

Equity

Senior

Preferred Preferred Common

Balance as of December 31, 2018 1 556 1,158 $ 120,836 $ 19,130 $ 687 $ (127,335) $ 322 $ (7,400) $ 6,240 

Senior preferred stock dividends paid — — — — — — (5,601) — — (5,601) 

Comprehensive income:

Net income — — — — — — 5,832 — — 5,832 

Other comprehensive income, net of tax effect:

Changes in net unrealized gains on available-

 for-sale securities (net of taxes of $5) — — — — — — — 17 — 17 

Reclassification adjustment for gains included

 in net income (net of taxes of $31) — — — — — — — (118) — (118) 

Other (net of taxes of $1) — — — — — — — (5) — (5) 

Total comprehensive income 5,726 

Balance as of June 30, 2019 1 556 1,158 $ 120,836 $ 19,130 $ 687 $ (127,104) $ 216 $ (7,400) $ 6,365 

See Notes to Condensed Consolidated Financial Statements

Financial Statements | Condensed Consolidated Statements of Changes in Equity (Deficit)

Fannie Mae (In conservatorship) Second Quarter 2020 Form 10-Q 74
FANNIE MAE

(In conservatorship)

Notes to Condensed Consolidated Financial Statements

(Unaudited)

1. Summary of Significant Accounting Policies

We are a stockholder-owned corporation organized and existing under the Federal National Mortgage Association Charter Act 

(the “Charter Act” or our “charter”). We are a government-sponsored enterprise (“GSE”), and we are subject to government 

oversight and regulation. Our regulators include the Federal Housing Finance Agency (“FHFA”), the U.S. Department of 

Housing and Urban Development (“HUD”), the U.S. Securities and Exchange Commission (“SEC”), and the U.S. Department 

of the Treasury (“Treasury”). The U.S. government does not guarantee our securities or other obligations. 

We have been under conservatorship, with FHFA acting as conservator, since September 6, 2008. See below and “Note 1, 

Summary of Significant Accounting Policies” in our annual report on Form 10-K for the year ended December 31, 2019 (“2019

Form 10-K”) for additional information on our conservatorship and the impact of U.S. government support of our business.

The unaudited interim condensed consolidated financial statements as of and for the six months ended June 30, 2020 and 

related notes, should be read in conjunction with our audited consolidated financial statements and related notes included in 

our 2019 Form 10-K.

Basis of Presentation 

The accompanying unaudited interim condensed consolidated financial statements have been prepared in accordance with 

generally accepted accounting principles in the United States of America (“GAAP”) for interim financial information and with the 

SEC’s instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and 

note disclosures required by GAAP for complete consolidated financial statements. In the opinion of management, all 

adjustments of a normal recurring nature considered necessary for a fair presentation have been included. The accompanying 

condensed consolidated financial statements include our accounts as well as the accounts of other entities in which we have a 

controlling financial interest. All intercompany accounts and transactions have been eliminated. To conform to our current 

period presentation, we have reclassified certain amounts reported in our prior period condensed consolidated financial 

statements. Results for the three and six months ended June 30, 2020 may not necessarily be indicative of the results for the 

year ending December 31, 2020.

Presentation of Advances to Lenders 

Advances to lenders represent our payments of cash in exchange for the receipt of mortgage loans from lenders in a transfer 

that is accounted for as a secured lending arrangement. These transfers primarily occur when we provide early funding to 

lenders for loans that they will subsequently either sell to us or securitize into a Fannie Mae MBS that they will deliver to us. 

Early lender funding advances have terms up to 60 days and earn a short-term market rate of interest. Advances to lenders 

has been presented as a separate line item for all periods presented as increased mortgage refinance activity resulted in a 

higher balance at period end. In prior periods, advances to lenders were recorded in “Other assets.” 

Presentation of Freestanding Credit Enhancement Expense and Recoveries

Freestanding credit enhancements primarily include our Connecticut Avenue Securities® (“CAS”) and Credit Insurance Risk 

TransferTM (“CIRTTM”) programs, enterprise-paid mortgage insurance (“EPMI”), and certain lender risk-sharing arrangements, 

including our multifamily Delegated Underwriting and Servicing (“DUS®”) program. We have revised our presentation of the 

expenses and recoveries associated with these programs as described below.

Credit Enhancement Expense

Credit enhancement expense consists of costs associated with our freestanding credit enhancements. We exclude from this 

expense costs related to our CAS transactions accounted for as debt instruments and credit risk transfer programs accounted 

for as derivative instruments. Credit enhancement expense has been presented as a separate line item for all periods 

presented as these expenses have become a more significant driver of our results of operations. In prior periods, credit 

enhancement expenses were recorded in “Other expenses, net.” 

Change in Expected Credit Enhancement Recoveries 

Change in expected credit enhancement recoveries consists of the change in benefits recognized from our freestanding credit 

enhancements, including any realized amounts. Benefits, if any, from our CAS, CIRT and EPMI programs previously recorded 

in “Fee and other income” have been reclassified to “Change in expected credit enhancement recoveries” for all periods 

Notes to Condensed Consolidated Financial Statements | Summary of Significant Accounting Policies

Fannie Mae (In conservatorship) Second Quarter 2020 Form 10-Q 75
presented. Benefits from other lender risk-sharing programs, including our multifamily DUS program, were recorded as a 

reduction of credit-related expense in periods prior to 2020. However, with our adoption of the CECL standard on January 1, 

2020, benefits from freestanding credit enhancements are no longer recorded as a reduction of credit-related expenses. These 

benefits from lender risk-sharing have been reclassified into “Change in expected credit enhancement recoveries” on a 

prospective basis beginning January 1, 2020.

Presentation of Yield Maintenance Fees 

Prior period multifamily yield maintenance fees have been reclassified to conform to the current period presentation. 

Multifamily yield maintenance fees, or prepayment premiums, are fees that a borrower pays when they prepay their loan. For 

multifamily loans held in a consolidated trust, a portion of the yield maintenance fee is typically passed through to the holders 

of the trust certificate. As of January 1, 2020, we classify all yield maintenance fees as interest income. For consolidated loans, 

the portion of the fee passed through to the certificate holders of the trust is classified as interest expense. Previously, we 

classified multifamily yield maintenance fees as interest income only when the fee was associated with a loan refinancing, 

otherwise the fee was classified as fee and other income. The portion of the fees passed through to the certificate holders of 

the trust were previously classified as interest expense only when the fee was associated with a loan refinancing, otherwise 

the fee was classified as other expense. The changes in presentation have been applied retrospectively to all periods 

presented and were immaterial for prior periods.

Use of Estimates

Preparing condensed consolidated financial statements in accordance with GAAP requires management to make estimates 

and assumptions that affect our reported amounts of assets and liabilities, disclosure of contingent assets and liabilities as of 

the dates of our condensed consolidated financial statements, as well as our reported amounts of revenues and expenses 

during the reporting periods. Management has made significant estimates in a variety of areas including, but not limited to, the 

allowance for loan losses. For example, significant uncertainty regarding the expected impacts of the COVID-19 pandemic 

required substantial management judgment in assessing our allowance for loan losses as of June 30, 2020. Actual results 

could differ from these estimates.

Conservatorship

On September 7, 2008, the Secretary of the Treasury and the Director of FHFA announced several actions taken by Treasury 

and FHFA regarding Fannie Mae, which included: (1) placing us in conservatorship and (2) the execution of a senior preferred 

stock purchase agreement by our conservator, on our behalf, and Treasury, pursuant to which we issued to Treasury both 

senior preferred stock and a warrant to purchase common stock.

Under the Federal Housing Enterprises Financial Safety and Soundness Act of 1992, as amended, including by the Federal 

Housing Finance Regulatory Reform Act of 2008 (together, the “GSE Act”), the conservator immediately succeeded to (1) all 

rights, titles, powers and privileges of Fannie Mae, and of any stockholder, officer or director of Fannie Mae with respect to 

Fannie Mae and its assets, and (2) title to the books, records and assets of any other legal custodian of Fannie Mae. The 

conservator subsequently issued an order that provided for our Board of Directors to exercise specified authorities. The 

conservator also provided instructions regarding matters for which conservator decision or notification is required. The 

conservator retains the authority to amend or withdraw its order and instructions at any time.

The conservator has the power to transfer or sell any asset or liability of Fannie Mae (subject to limitations and post-transfer 

notice provisions for transfers of qualified financial contracts) without any approval, assignment of rights or consent of any 

party. However, mortgage loans and mortgage-related assets that have been transferred to a Fannie Mae MBS trust must be 

held by the conservator for the beneficial owners of the Fannie Mae MBS and cannot be used to satisfy the general creditors 

of Fannie Mae. Neither the conservatorship nor the terms of our agreements with Treasury change our obligation to make 

required payments on our debt securities or perform under our mortgage guaranty obligations.

On September 5, 2019, Treasury released a plan to reform the housing finance system. The Treasury Housing Reform Plan 

(the “Treasury plan”) is far-reaching in scope and could have a significant impact on our structure, our role in the secondary 

mortgage market, our capitalization, our business and our competitive environment. The Treasury plan includes 

recommendations relating to ending our conservatorship, amending our senior preferred stock purchase agreement with 

Treasury, considering additional restrictions and requirements on our business, and many other matters. The Treasury plan 

recommends that Treasury’s commitment to provide funding under the senior preferred stock purchase agreement should be 

replaced with legislation that authorizes an explicit, paid-for guarantee backed by the full faith and credit of the Federal 

Government that is limited to the timely payment of principal and interest on qualifying MBS. The Treasury plan further 

recommends that, pending legislation, even after conservatorship Treasury should maintain its ongoing commitment to support 

our single-family and multifamily mortgage-backed securities through the senior preferred stock purchase agreement, as 

amended as contemplated by the plan.

The conservatorship has no specified termination date and there continues to be significant uncertainty regarding our future, 

including how long we will continue to exist in our current form, the extent of our role in the market, the level of government 

Notes to Condensed Consolidated Financial Statements | Summary of Significant Accounting Policies

Fannie Mae (In conservatorship) Second Quarter 2020 Form 10-Q 76
support of our business, how long we will be in conservatorship, what form we will have and what ownership interest, if any, 

our current common and preferred stockholders will hold in us after the conservatorship is terminated and whether we will 

continue to exist following conservatorship. Under the GSE Act, FHFA must place us into receivership if the Director of FHFA 

makes a written determination that our assets are less than our obligations or if we have not been paying our debts, in either 

case, for a period of 60 days. In addition, the Director of FHFA may place us into receivership at his discretion at any time for 

other reasons set forth in the GSE Act, including if we are critically undercapitalized or if we are undercapitalized and have no 

reasonable prospect of becoming adequately capitalized. Should we be placed into receivership, different assumptions would 

be required to determine the carrying value of our assets, which could lead to substantially different financial results. Treasury 

has made a commitment under the senior preferred stock purchase agreement to provide funding to us under certain 

circumstances if we have a net worth deficit. We are not aware of any plans of FHFA (1) to fundamentally change our business 

model, other than changes that might result from recommendations in the Treasury plan, if implemented, or (2) to reduce the 

aggregate amount available to or held by the company under our capital structure, which includes the senior preferred stock 

purchase agreement.

As described above, the Treasury plan contemplates FHFA ending the conservatorships of each of Fannie Mae and Freddie 

Mac (the “GSEs”) when the GSE has met specified preconditions. During the second quarter of 2020, FHFA and we took key

steps in connection with these preconditions through FHFA’s proposal of a new regulatory capital framework for the GSEs and 

our hiring a financial advisor to assist us in planning the company’s recapitalization and exit from conservatorship.

Senior Preferred Stock Purchase Agreement and Senior Preferred 

Stock

Treasury has made a commitment under the senior preferred stock purchase agreement to provide funding to us under certain 

circumstances if we have a net worth deficit. Pursuant to the senior preferred stock purchase agreement, we have received a 

total of $119.8 billion from Treasury as of June 30, 2020, and the amount of remaining funding available to us under the 

agreement was $113.9 billion.

Pursuant to the senior preferred stock purchase agreement, we issued shares of senior preferred stock in 2008. The current 

dividend provisions of the senior preferred stock provide for quarterly dividends consisting of the amount, if any, by which our 

net worth as of the end of the immediately preceding fiscal quarter exceeds a $25 billion capital reserve amount. We refer to 

this as a “net worth sweep” dividend. Because we had a net worth of $13.9 billion as of March 31, 2020, no dividends were 

payable for the second quarter of 2020. And because we had a net worth of $16.5 billion as of June 30, 2020, no dividends are 

payable for the third quarter of 2020.

The aggregate liquidation preference of the senior preferred stock was $135.4 billion as of June 30, 2020, unchanged from 

March 31, 2020 as a result of the decrease in our net worth during the first quarter of 2020. The aggregate liquidation 

preference of the senior preferred stock will increase to $138.0 billion as of September 30, 2020 due to the $2.5 billion

increase in our net worth during the second quarter of 2020.

See “Note 11, Equity” in our 2019 Form 10-K for additional information about the senior preferred stock purchase agreement 

and the senior preferred stock.

Regulatory Capital

We submit capital reports to FHFA, which monitors our capital levels. The deficit of core capital over statutory minimum capital 

was $131.2 billion as of June 30, 2020 and $128.8 billion as of December 31, 2019.

Related Parties

Because Treasury holds a warrant to purchase shares of Fannie Mae common stock equal to 79.9% of the total number of 

shares of Fannie Mae common stock, we and Treasury are deemed related parties. As of June 30, 2020, Treasury held an 

investment in our senior preferred stock with an aggregate liquidation preference of $135.4 billion. See “Senior Preferred Stock 

Purchase Agreement and Senior Preferred Stock” above for additional information on transactions under this agreement.

FHFA’s control of both Fannie Mae and Freddie Mac has caused Fannie Mae, FHFA and Freddie Mac to be deemed related 

parties. Additionally, Fannie Mae and Freddie Mac jointly own Common Securitization Solutions, LLC (“CSS”), a limited liability 

company created to operate a common securitization platform; as such, CSS is deemed a related party. As a part of our joint 

ownership, Fannie Mae, Freddie Mac and CSS are parties to a limited liability company agreement that sets forth the overall 

framework for the joint venture, including Fannie Mae’s and Freddie Mac’s rights and responsibilities as members of CSS. 

Fannie Mae, Freddie Mac and CSS are also parties to a customer services agreement that sets forth the terms under which 

CSS provides mortgage securitization services to us and Freddie Mac, including the operation of the common securitization 

platform as well as an administrative services agreement. CSS operates as a separate company from us and Freddie Mac, 

with all funding and limited administrative support services and other resources provided to it by us and Freddie Mac through 

our capital contributions.

Notes to Condensed Consolidated Financial Statements | Summary of Significant Accounting Policies

Fannie Mae (In conservatorship) Second Quarter 2020 Form 10-Q 77
In the ordinary course of business, Fannie Mae may purchase and sell securities issued by Treasury and Freddie Mac. These 

transactions occur on the same terms as those prevailing at the time for comparable transactions with unrelated parties. With 

our implementation of the Single Security Initiative in June 2019, some of the structured securities we issue are backed in 

whole or in part by Freddie Mac securities. Additionally, we make regular income tax payments to and receive tax refunds from 

the Internal Revenue Service (“IRS”), a bureau of Treasury.

Transactions with Treasury

Our administrative expenses were reduced by $4 million and $5 million for the three months ended June 30, 2020 and 2019, 

respectively, and $9 million and $10 million for the six months ended June 30, 2020 and 2019, due to reimbursements from 

Treasury and Freddie Mac for expenses incurred as program administrator for Treasury’s Home Affordable Modification 

Program and other initiatives under Treasury’s Making Home Affordable Program. 

In December 2011, Congress enacted the Temporary Payroll Cut Continuation Act of 2011 (“TCCA”) which, among other 

provisions, required that we increase our single-family guaranty fees by at least 10 basis points and remit this increase to 

Treasury. Effective April 1, 2012, we increased the guaranty fee on all single-family residential mortgages delivered to us by 10 

basis points. The resulting fee revenue and expense are recorded in “Mortgage loans interest income” and “TCCA fees,” 

respectively, in our condensed consolidated statements of operations and comprehensive income. We recognized $660 million

and $600 million in TCCA fees during the three months ended June 30, 2020 and 2019, respectively, and $1.3 billion and $1.2 

billion for the six months ended June 30, 2020 and 2019, respectively, of which $660 million had not been remitted to Treasury 

as of June 30, 2020.

The GSE Act requires us to set aside certain funding obligations, a portion of which is attributable to Treasury’s Capital Magnet 

Fund. These funding obligations, recognized in “Other expenses, net” in our condensed consolidated statements of operations 

and comprehensive income, are measured as the product of 4.2 basis points and the unpaid principal balance of our total new 

business purchases for the respective period, and 35% of this amount is payable to Treasury’s Capital Magnet Fund. We 

recognized a total of $55 million and $21 million in “Other expenses, net” for the three months ended June 30, 2020 and 2019, 

respectively, and $85 million and $36 million for the six months ended June 30, 2020 and 2019, respectively, in connection with 

Treasury’s Capital Magnet Fund, of which $85 million has not been remitted as of June 30, 2020. 

Transactions with FHFA

The GSE Act authorizes FHFA to establish an annual assessment for regulated entities, including Fannie Mae, which is 

payable on a semi-annual basis (April and October), for FHFA’s costs and expenses, as well as to maintain FHFA’s working 

capital. We recognized FHFA assessment fees, which are recorded in “Administrative expenses” in our condensed 

consolidated statements of operations and comprehensive income, of $35 million and $29 million for the three months ended 

June 30, 2020 and 2019, respectively, and $67 million and $59 million for the six months ended June 30, 2020 and 2019, 

respectively.

Transactions with CSS and Freddie Mac

We contributed capital to CSS, the company we jointly own with Freddie Mac, of $19 million and $26 million for the three

months ended June 30, 2020 and 2019, respectively, and $48 million and $62 million for the six months ended June 30, 2020

and 2019, respectively.

Principles of Consolidation

Our condensed consolidated financial statements include our accounts as well as the accounts of the other entities in which 

we have a controlling financial interest. All intercompany balances and transactions have been eliminated. The typical 

condition for a controlling financial interest is ownership of a majority of the voting interests of an entity. A controlling financial 

interest may also exist in entities through arrangements that do not involve voting interests, such as a variable interest entity 

(“VIE”).

Investments in Securities

Impairment of Available-for-Sale Debt Securities 

An available-for-sale (“AFS”) debt security is impaired if the fair value of the investment is less than its amortized cost basis. 

Credit losses (benefits) on impaired AFS debt securities are recognized through an allowance for credit losses. Credit losses 

are evaluated on an individual security basis and are limited to the difference between the fair value of the debt security and its 

amortized cost basis. If we intend to sell a debt security or it is more likely than not that we will be required to sell the debt 

security before recovery, any allowance for credit losses on the debt security is reversed and the amortized cost basis of the 

debt security is written down to its fair value.

Notes to Condensed Consolidated Financial Statements | Summary of Significant Accounting Policies

Fannie Mae (In conservatorship) Second Quarter 2020 Form 10-Q 78
Mortgage Loans

Loans Held for Sale

When we acquire mortgage loans that we intend to sell or securitize via trusts that will not be consolidated, we classify the 

loans as held for sale (“HFS”). We report the carrying value of HFS loans at the lower of cost or fair value. Any excess of an 

HFS loan’s cost over its fair value is recognized as a valuation allowance, with changes in the valuation allowance recognized 

as “Investment gains (losses), net” in our condensed consolidated statements of operations and comprehensive income. We 

recognize interest income on HFS loans on an accrual basis, unless we determine that the ultimate collection of contractual 

principal or interest payments in full is not reasonably assured. Purchased premiums, discounts and other cost basis 

adjustments on HFS loans are deferred upon loan acquisition, included in the cost basis of the loan, and not amortized. We 

determine any lower of cost or fair value adjustment on HFS loans at an individual loan level.

For nonperforming loans transferred from held for investment (“HFI”) to HFS, based upon a change in our intent, we record the 

loans at the lower of cost or fair value on the date of transfer. When the fair value of the nonperforming loan is less than its 

amortized cost, we record a write-off against the allowance for loan losses in an amount equal to the difference between the 

amortized cost basis and the fair value of the loan. If the amount written off upon transfer exceeds the allowance related to the 

transferred loan, we record the excess in provision for credit losses. If the amounts written off are less than the allowance 

related to the loans, we recognize a benefit for credit losses. 

Nonperforming loans include both seriously delinquent and reperforming loans, which are loans that were previously 

delinquent but are performing again because payments on the mortgage loan have become current with or without the use of a 

loan modification plan. Single-family seriously delinquent loans are loans that are 90 days or more past due or in the 

foreclosure process. Multifamily seriously delinquent loans are loans that are 60 days or more past due. 

In the event that we reclassify a performing loan from HFI to HFS, based upon a change in our intent, the allowance for loan 

losses previously recorded on the HFI mortgage loan is reversed through earnings at the time of reclassification. The 

mortgage loan is reclassified into HFS at its amortized cost basis and a valuation allowance is established to the extent that 

the amortized cost basis of the loan exceeds its fair value. The initial recognition of the valuation allowance and any 

subsequent changes are recorded as a gain or loss in “Investment gains (losses), net.”

Loans Held for Investment

When we acquire mortgage loans that we have the ability and the intent to hold for the foreseeable future or until maturity, we 

classify the loans as HFI. When we consolidate a securitization trust, we recognize the loans underlying the trust in our 

condensed consolidated balance sheets. The trusts do not have the ability to sell mortgage loans and the use of such loans is 

limited exclusively to the settlement of obligations of the trusts. Therefore, mortgage loans acquired when we have the intent to 

securitize via consolidated trusts are generally classified as HFI in our condensed consolidated balance sheets both prior to 

and subsequent to their securitization.

We report the carrying value of HFI loans at the unpaid principal balance net of unamortized premiums and discounts, other 

cost basis adjustments, and allowance for loan losses. We define the amortized cost of HFI loans as unpaid principal balance 

and accrued interest receivable, net, including any unamortized premiums, discounts, and other cost basis adjustments. For 

purposes of our condensed consolidated balance sheets, we present accrued interest receivable separately from the 

amortized cost of our loans held for investment. We recognize interest income on HFI loans on an accrual basis using the 

effective yield method over the contractual life of the loan, including the amortization of any deferred cost basis adjustments, 

such as the premium or discount at acquisition, unless we determine that the ultimate collection of contractual principal or 

interest payments in full is not reasonably assured.

Nonaccrual Loans

For loans that were current as of March 1, 2020 and subsequently went delinquent and/or requested forbearance during the 

COVID-19 pandemic, see the changes to our application of our nonaccrual guidance in the section on New Accounting 

Guidance below. 

For loans not subject to the COVID-19-related nonaccrual guidance, we discontinue accruing interest on loans when we 

believe collectability of principal or interest is not reasonably assured, which for a single-family loan we have determined, 

based on our historical experience, to be when the loan becomes two months or more past due according to its contractual 

terms. Interest previously accrued but not collected on loans is reversed through interest income at the date a loan is placed 

on nonaccrual status. For single-family loans on nonaccrual status, we recognize income when cash payments are received. 

We return a non-modified single-family loan to accrual status at the point that the borrower brings the loan current. We return a 

modified single-family loan to accrual status at the point that the borrower successfully makes all required payments during the 

trial period (generally three to four months) and the modification is made permanent. As of January 1, 2020, we place a 

multifamily loan on nonaccrual status when the loan becomes two months or more past due according to its contractual terms 

unless the loan is well secured such that collectability of principal and accrued interest is reasonably assured. For multifamily 

loans on nonaccrual status, we apply any payment received on a cost recovery basis to reduce principal on the mortgage loan. 

We return a multifamily loan to accrual status when the borrower cures the delinquency of the loan. Transactions related to the 

Notes to Condensed Consolidated Financial Statements | Summary of Significant Accounting Policies

Fannie Mae (In conservatorship) Second Quarter 2020 Form 10-Q 79
multifamily nonaccrual policy have been immaterial historically. Single-family and multifamily loans are reported past due if a 

full payment of principal and interest is not received within one month of its due date.

Allowance for Loan Losses

Our allowance for loan losses is a valuation account that is deducted from the amortized cost basis of HFI loans to present the 

net amount expected to be collected on the loans. The allowance for loan losses reflects an estimate of expected credit losses 

on single-family and multifamily HFI loans held by Fannie Mae and by consolidated Fannie Mae MBS trusts. Estimates of 

credit losses are based on expected cash flows derived from internal models that estimate loan performance under simulated 

ranges of economic environments. Our modeled loan performance is based on our historical experience of loans with similar 

risk characteristics adjusted to reflect current conditions and reasonable and supportable forecasts. Our historical loss 

experience and our credit loss estimates capture the possibility of remote events that could result in credit losses on loans that 

are considered low risk. The allowance for loans losses does not consider benefits from freestanding credit enhancements, 

such as our CAS and CIRT programs and multifamily DUS lender risk-sharing arrangements, which are recorded in “Other 

assets” in our condensed consolidated balance sheets. For loans that were current as of March 1, 2020 and subsequently 

became delinquent or entered into forbearance during the COVID-19 pandemic, see changes to our allowance for loan losses 

in the section on New Accounting Guidance below. For loans not subject to the COVID-19 related guidance, we have elected 

not to measure an allowance for credit losses on accrued interest receivable balances as we have a nonaccrual policy to 

ensure the timely reversal of unpaid accrued interest. See “Note 4, Allowance for Loan Losses” for additional information about 

our current period provision for loan losses, including a discussion of the estimates used in measuring the impact of the 

COVID-19 pandemic on our allowance.

Changes to our estimate of expected credit losses, including changes due to the passage of time, are recorded through the 

benefit (provision) for credit losses. When calculating our allowance for loan losses, we consider only our amortized cost in the 

loans at the balance sheet date. We record write-offs as a reduction to the allowance for loan losses when losses are 

confirmed through the receipt of assets in satisfaction of a loan, such as the underlying collateral upon foreclosure or cash 

upon completion of a short sale. Additionally, we record write-offs as a reduction to our allowance for loan losses when a loan 

is determined to be uncollectible and upon the transfer of a nonperforming loan from HFI to HFS. We include expected 

recoveries of amounts previously written off and expected to be written off in determining our allowance for loan losses.

Single-Family Loans

We estimate the amount expected to be collected on our single-family loans using a discounted cash flow approach. Our 

allowance for loan losses is calculated as the difference between the amortized cost basis of the loan and the present value of 

expected cash flows on the loan. Expected cash flows include payments from the borrower, net of servicing fees, contractually 

attached credit enhancements and proceeds from the sale of the underlying collateral, net of selling costs.

When foreclosure of a single-family loan is probable, the allowance for loan losses is calculated as the difference between the 

amortized cost basis of the loan and the fair value of the collateral as of the reporting date, adjusted for the estimated costs to 

sell the property and the amount of expected recoveries from contractually attached credit enhancements or other proceeds 

we expect to receive. 

Expected cash flows are developed using internal models that capture market and loan characteristic inputs. Market inputs 

include information such as actual and forecasted home prices, interest rates, volatility, and spreads, while loan characteristic 

inputs include information such as mark-to-market loan-to-value (“LTV”) ratios, delinquency status, geography, and borrower 

FICO credit scores. The model assigns a probability to borrower events including contractual payment, loan payoff and default 

under various economic environments based on historical data, current conditions, and reasonable and supportable forecasts.

The two primary drivers of our forecasted economic environments are interest rates and home prices. Our model projects the 

range of possible interest rate scenarios over the life of the loan based on actual interest rates and observed option pricing 

volatility in the capital markets. We develop regional forecasts based on Metropolitan Statistical Area data for single-family 

home prices using a multi-path simulation that captures home price projections over a five-year period, the period for which we 

can develop reasonable and supportable forecasts. After the five-year period, the home price forecast immediately reverts to a 

historical long-term growth rate.

Expected cash flows on the loan are discounted at the effective interest rate on the loan, adjusted for expected prepayments. 

For single-family loans that have not been modified in a troubled debt restructuring (“TDR”), the discount rate is updated each 

reporting period to reflect changes in expected prepayments. Expected cash flows do not include expected extensions of the 

contractual term unless such extension is the result of a reasonably expected TDR.

We consider the effects of actual and reasonably expected TDRs in our estimate of credit losses. These effects include any 

economic concession provided or expected to be provided to a borrower experiencing financial difficulty. We consider our 

current servicing practices and our historical experience to estimate reasonably expected TDRs. When a loan is contractually 

modified in a TDR, to capture the concession, the discount rate on the loan is locked to the rate in effect just prior to the 

modification and is no longer updated for changes in expected prepayments.

Notes to Condensed Consolidated Financial Statements | Summary of Significant Accounting Policies

Fannie Mae (In conservatorship) Second Quarter 2020 Form 10-Q 80
Multifamily Loans

Our allowance for loan losses on multifamily loans is calculated based on estimated probabilities of default and loss severities 

to derive expected loss ratios, which are then applied to the amortized cost basis of the loans. Our probabilities of default and 

severity are estimated using internal models based on historical loss experience of loans with similar risk characteristics that 

affect credit performance, such as debt service coverage ratio (“DSCR”), mark-to-market LTV ratio, collateral type, age, loan 

size, geography, prepayment penalty term, and note type. Our models simulate a range of possible future economic scenarios, 

which are used to estimate probabilities of default and loss severities. Key inputs to our models include rental income, which 

drives expected DSCRs for our loans, and capitalization rates, which project future property values. Our reasonable and 

supportable forecasts for multifamily rental income and capitalization rates, which are projected based on Metropolitan 

Statistical Area data, extend through the contractual maturity of the loans. For TDRs, we use a discounted cash flow approach 

to estimate expected credit losses.

When foreclosure of a multifamily loan is probable, the allowance for loan losses is calculated as the difference between the 

amortized cost basis of the loan and the fair value of the collateral as of the reporting date, adjusted for the estimated costs to 

sell the property and the amount of expected recoveries from contractually attached credit enhancements or other proceeds 

we expect to receive.

Earnings per Share 

Earnings per share (“EPS”) is presented for basic and diluted EPS. We compute basic EPS by dividing net income attributable 

to common stockholders by the weighted-average number of shares of common stock outstanding during the period. However, 

as a result of our conservatorship status and the terms of the senior preferred stock, no amounts would be available to 

distribute as dividends to common or preferred stockholders (other than to Treasury as the holder of the senior preferred 

stock). Net income (loss) attributable to common stockholders excludes amounts attributable to the senior preferred stock. 

Weighted average common shares include 4.7 billion and 4.6 billion shares for the periods ended June 30, 2020 and 2019, 

respectively, that would be issued upon the full exercise of the warrant issued to Treasury from the date the warrant was 

issued through June 30, 2020 and 2019, respectively. 

The calculation of diluted EPS includes all the components of basic earnings per share, plus the dilutive effect of common 

stock equivalents such as convertible securities and stock options. Weighted average shares outstanding is increased to 

include the number of additional common shares that would have been outstanding if the dilutive potential common shares had 

been issued. Our diluted EPS weighted-average shares outstanding includes 26 million and 131 million shares issuable upon 

the conversion of convertible preferred stock as of June 30, 2020 and 2019, respectively. For the six months ended June 30, 

2020, convertible preferred stock is not included in the calculation because a net loss attributable to common shareholders 

was incurred and it would have an anti-dilutive effect. 

New Accounting Guidance 

The CARES Act and Interagency Regulatory Guidance 

Section 4013 of the Coronavirus Aid, Relief, and Economic Security Act, referred to as the CARES Act, which was enacted in 

March 2020, provides temporary relief from the accounting and reporting requirements for TDRs regarding certain loan 

modifications related to COVID-19. The CARES Act provides that a financial institution may elect to suspend the TDR 

requirements under GAAP for loan modifications related to the COVID-19 pandemic that occur between March 1, 2020 

through the earlier of December 31, 2020 or 60 days after the date on which the COVID-19 national emergency terminates 

(the “Applicable Period”), as long as the loan was not more than 30 days delinquent as of December 31, 2019. Loan 

modifications are defined in this section of the CARES Act to include forbearance arrangements, repayment plans, interest rate 

modifications, and any similar arrangement that defer or delay the payment of principal or interest.

We have elected to account for eligible loan modifications under Section 4013 of the CARES Act. Therefore, the initial relief 

(i.e., the forbearance arrangement) and the subsequent agreements (i.e., repayment plans and loan modifications) that are 

necessary to allow the borrower to repay the past due amounts (collectively, the “COVID-19 Relief”), will not be subject to the 

specialized accounting or disclosures that are required for TDRs if the initial relief related to COVID-19 is granted during the 

Applicable Period and the borrower was no more than 30 days past due as of December 31, 2019. 

In addition to the CARES Act, the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance 

Corporation, National Credit Union Administration, Office of the Comptroller of the Currency, Consumer Financial Protection 

Bureau and the State Banking Regulators (collectively, the “Banking Agencies”) issued an Interagency Statement on Loan 

Modifications and Reporting for Financial Institutions Working with Customers Affected by the Coronavirus (the “Interagency 

Statement”) in April 2020. The Interagency Statement primarily provides incremental guidance related to the nonaccrual of 

interest income. It indicates that financial institutions may continue to accrue interest income on loans that are granted shortterm payment delays, such as forbearance, if the delay is in response to COVID-19 and the loan was less than 30 days past 

due at the time the delay was granted. 

Notes to Condensed Consolidated Financial Statements | Summary of Significant Accounting Policies

Fannie Mae (In conservatorship) Second Quarter 2020 Form 10-Q 81
Pursuant to the Interagency Statement, we will continue to recognize interest income at the current contractual yield for up to 

six months on loans that were current at March 1, 2020 and have been negatively impacted by COVID-19. For loans that are 

in a forbearance plan beyond six months of delinquency, we will continue to accrue interest income provided collection of 

principal and interest continues to be reasonably assured.

Our evaluation of whether the collection of principal and interest is reasonably assured will consider the probability of default, 

the current value of the collateral, and any proceeds that are expected from contractually attached mortgage insurance. Once 

the forbearance period has ended, we will also consider the extent to which the borrower and the servicer have agreed to any 

of the loss mitigation options that are available. For single-family loans placed on nonaccrual status, cash payments are 

applied as a reduction of accrued interest receivable until the receivable has been reduced to zero, and then we recognize 

income on a cash basis when payments are received.

For multifamily loans on nonaccrual status, we apply any payment received on a cost recovery basis to reduce accrued 

interest receivable to zero and then reduce principal on the mortgage loan. Multifamily loans will not be placed on nonaccrual 

status while the loan is well secured and in the process of collection.

For loans that have been negatively impacted by COVID-19, we establish a valuation allowance for expected credit losses on 

the accrued interest receivable balance applying the process that we have established for both single-family and multifamily 

loans. The credit expense related to this valuation allowance is classified as a component of the provision for credit losses. 

This receivable is written off when the amount is deemed to be uncollectible, in accordance with our write-off policy for 

mortgage loans. 

As a result of this update to the application of our nonaccrual policy for loans negatively impacted by COVID-19, we 

recognized $1.5 billion in interest income for the three and six months ended June 30, 2020. We also recognized $172 million

of provision for loan losses on the related accrued interest receivable as of June 30, 2020.

The Current Expected Credit Loss Standard

The Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) 2016-13, Financial 

Instruments—Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments in June 2016, which was 

later amended by ASU 2019-04, ASU 2019-05 and ASU 2019-11. These ASUs (the “CECL standard”) replaced the existing 

incurred loss impairment methodology for loans that are collectively evaluated for impairment with a methodology that reflects 

lifetime expected credit losses and requires consideration of a broader range of reasonable and supportable forecast 

information to develop a lifetime credit loss estimate. The CECL standard also requires credit losses related to AFS debt 

securities to be recorded through an allowance for credit losses. Our adoption of this standard on January 1, 2020 did not have 

a material impact on our portfolio of AFS debt securities.

The CECL standard became effective for our fiscal year beginning January 1, 2020. We have changed our accounting policies 

as described above and implemented system, model and process changes to adopt the standard. Upon adoption, we used a 

discounted cash flow method to measure expected credit losses on our single-family mortgage loans and an undiscounted 

loss method to measure expected credit losses on our multifamily mortgage loans. The models used to estimate credit losses 

incorporated our historical credit loss experience, adjusted for current economic forecasts and the current credit profile of our 

loan book of business. The models used reasonable and supportable forecasts for key economic drivers, such as home prices 

(single-family), rental income (multifamily) and capitalization rates (multifamily).

The adoption of the CECL standard on January 1, 2020 reduced our retained earnings by $1.1 billion on an after-tax basis. 

The adoption of this guidance increased our overall credit loss reserves primarily as the result of an increase in our singlefamily loan loss reserves that were previously evaluated on a collective basis for impairment. This increase was partially offset 

by a decrease in estimated credit losses on loans that were previously considered individually impaired (our TDRs).

The increase in our single-family loan loss reserves that were previously evaluated on a collective basis was primarily driven 

by the migration from an incurred-loss approach, which allowed us to consider only default events and economic conditions 

that already existed as of each financial reporting date, to an estimate that incorporates both expected default events over the 

expected life of each mortgage loan and a forecast of home prices in different economic environments over a reasonable and 

supportable period. The increase in loss reserves for this portion of our book was low relative to its size due to the credit 

quality of these loans and because as of the date of adoption our current model forecasted home price growth.

The allowance for loan losses on the TDR book was already measured using an expected lifetime credit loss estimate. The 

credit losses on this portion of our single-family book decreased upon the adoption of the CECL standard because the new 

guidance required us to exclude from our estimate of credit losses all pre-foreclosure and post-foreclosure costs that are 

expected to be advanced after the balance sheet date. Prior to the adoption of the CECL standard, we incorporated these 

costs in our estimate of credit losses for this book.

Notes to Condensed Consolidated Financial Statements | Summary of Significant Accounting Policies

Fannie Mae (In conservatorship) Second Quarter 2020 Form 10-Q 82
Impacts on Key Balance Sheet Line Items upon Implementation of the CECL Standard 

The following table discloses the impact of adopting the CECL standard on key balance sheet line items.

Balance as of

December 31, 2019

Transition Impact of 

Adoption of the

CECL Standard 

Balance as of

January 1, 2020

(Dollars in millions) 

Mortgage loans held for sale $ 6,773 $ 50 $ 6,823 

Allowance for loan losses (9,016) (1,722) (10,738) 

Other assets(1) 14,312 230 14,542 

Deferred tax assets, net 11,910 303 12,213 

Accumulated deficit (beginning retained earnings) (118,776) (1,139) (119,915) 

(1) Transition adjustment primarily represents the reclassification and recognition of freestanding credit enhancements not contractually 

attached to the loan.

For a discussion of the current period measurement of our allowance for loan losses under the CECL standard, including the 

expected impact of the COVID-19 pandemic, see “Note 4, Allowance for Loan Losses.”

Reference Rate Reform

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference 

Rate Reform on Financial Reporting (“ASU 2020-04”), which provides optional temporary relief to ease the potential burden of 

transitioning away from LIBOR and other discontinued interest rates. Specifically, ASU 2020-04 provides optional practical 

expedients and exceptions under GAAP related to contract modifications and hedging relationships that reference LIBOR or 

another reference rate expected to be discontinued. Qualifying for the accounting relief provided by ASU 2020-04 is subject to 

meeting certain criteria and is generally only available to contract modifications made and hedging relationships entered into or 

evaluated prospectively from March 12, 2020 through December 31, 2022. 

In May 2020, we modified trust agreements governing our Fannie Mae REMIC and other multi-class transactions issued prior 

to July 2013 that are backed by floating rate or reverse floating rate securities to include fallback provisions in order to ease 

the potential burden of transitioning away from LIBOR. The update to the fallback language in the Omnibus Trust Supplement 

qualified for the accounting relief provided by ASU 2020-04, and we accounted for the update as a modification to the existing 

agreements. The impact of the May 2020 agreement modifications governing Fannie Mae REMIC and multi-class transactions 

issued prior to July 2013 was not material to Fannie Mae. We had no hedge accounting relationships between March 12, 2020 

and June 30, 2020. We will continue to evaluate ASU 2020-04 to determine the timing and extent to which we will apply the 

provided accounting relief.

2. Consolidations and Transfers of Financial Assets

We have interests in various entities that are considered to be variable interest entities (“VIEs”). The primary types of entities 

are securitization and resecuritization trusts, limited partnerships and special purpose vehicles (“SPVs”). These interests 

include investments in securities issued by VIEs, such as Fannie Mae MBS created pursuant to our securitization transactions 

and our guaranty to the entity. We consolidate the substantial majority of our single-class securitization trusts because our role 

as guarantor and master servicer provides us with the power to direct matters (primarily the servicing of mortgage loans) that 

impact the credit risk to which we are exposed. In contrast, we do not consolidate single-class securitization trusts when other 

organizations have the power to direct these activities unless we have the unilateral ability to dissolve the trust. We also do not 

consolidate our resecuritization trusts unless we have the unilateral ability to dissolve the trust. Historically, the vast majority of 

underlying assets of our resecuritization trusts were limited to Fannie Mae securities that were collateralized by mortgage 

loans held in consolidated trusts. However, with our issuance of UMBS, we include securities issued by Freddie Mac in some 

of our resecuritization trusts. The mortgage loans that serve as collateral for Freddie Mac-issued securities are not held in 

trusts that are consolidated by Fannie Mae.

Notes to Condensed Consolidated Financial Statements | Summary of Significant Accounting Policies

Fannie Mae (In conservatorship) Second Quarter 2020 Form 10-Q 83
Unconsolidated VIEs

We do not consolidate VIEs when we are not deemed to be the primary beneficiary. Our unconsolidated VIEs include 

securitization and resecuritization trusts, limited partnerships, and certain SPVs designed to transfer credit risk. The following 

table displays the carrying amount and classification of our assets and liabilities that relate to our involvement with 

unconsolidated securitization and resecuritization trusts.

As of

June 30, 2020 December 31, 2019

(Dollars in millions)

Assets and liabilities recorded in our condensed consolidated balance sheets 

related to unconsolidated mortgage-backed trusts:

Assets:

Trading securities:

Fannie Mae $ 6,224 $ 2,543 

Non-Fannie Mae 3,581 5,100 

Total trading securities 9,805 7,643 

Available-for-sale securities:

Fannie Mae 1,395 1,524 

Non-Fannie Mae 452 574 

Total available-for-sale securities 1,847 2,098 

Other assets 43 56 

Other liabilities (69) (78) 

Net carrying amount $ 11,626 $ 9,719 

Our maximum exposure to loss generally represents the greater of our carrying value in the entity or the unpaid principal 

balance of the assets covered by our guaranty. Our involvement in unconsolidated resecuritization trusts may give rise to 

additional exposure to loss depending on the type of resecuritization trust. Fannie Mae non-commingled resecuritization trusts 

are backed entirely by Fannie Mae MBS. These non-commingled single-class and multi-class resecuritization trusts are not 

consolidated and do not give rise to any additional exposure to loss as we already consolidate the underlying collateral. 

Fannie Mae commingled resecuritization trusts are backed in whole or in part by Freddie Mac securities. The guaranty that we 

provide to these commingled resecuritization trusts may increase our exposure to loss to the extent that we are providing a 

guaranty for the timely payment and interest on the underlying Freddie Mac securities that we have not previously guaranteed. 

Our maximum exposure to loss for these unconsolidated trusts is measured by the amount of Freddie Mac securities that are 

held in these resecuritization trusts. However, a portion of these Freddie Mac securities may be backed in whole or in part by 

Fannie Mae MBS. To the extent that these Freddie Mac securities are backed by Fannie Mae MBS, our guarantee to the 

resecuritization trust does not subject us to any additional exposure to credit risk. Thus, our actual exposure to credit risk from 

Freddie Mac securities held in our resecuritization trusts is likely lower than the disclosed maximum exposure to loss. Our 

maximum exposure to loss related to unconsolidated securitization and resecuritization trusts was approximately $111 billion

and $62 billion as of June 30, 2020 and December 31, 2019, respectively. The total assets of our unconsolidated securitization 

and resecuritization trusts were approximately $170 billion and $130 billion as of June 30, 2020 and December 31, 2019, 

respectively.

The maximum exposure to loss for our unconsolidated limited partnerships and similar legal entities, which consist of lowincome housing tax credit investments (“LIHTC”), community investments and other entities, was $94 million and the related 

net carrying value was $87 million as of June 30, 2020. As of December 31, 2019, the maximum exposure to loss was $98 

million and the related net carrying value was $79 million. The total assets of these limited partnership investments were $1.6 

billion as of June 30, 2020 and $2.0 billion as of December 31, 2019.

The maximum exposure to loss related to our involvement with unconsolidated SPVs that transfer credit risk represents the 

unpaid principal balance and accrued interest payable of obligations issued by the Connecticut Avenue Securities (“CAS”) and 

Multifamily Connecticut Avenue Securities (“MCAS”) SPVs. The maximum exposure to loss related to these unconsolidated 

SPVs was $11.2 billion and $9.5 billion as of June 30, 2020 and December 31, 2019, respectively. The total assets related to 

these unconsolidated SPVs were $11.2 billion and $9.5 billion as of June 30, 2020 and December 31, 2019, respectively.

The unpaid principal balance of our multifamily loan portfolio was $346.9 billion as of June 30, 2020. As our lending 

relationship does not provide us with a controlling financial interest in the borrower entity, we do not consolidate these 

borrowers regardless of their status as either a VIE or a voting interest entity. We have excluded these entities from our VIE 

disclosures. However, the disclosures we have provided in “Note 3, Mortgage Loans,” “Note 4, Allowance for Loan Losses” 

Notes to Condensed Consolidated Financial Statements | Consolidations and Transfers of Financial Assets

Fannie Mae (In conservatorship) Second Quarter 2020 Form 10-Q 84
and “Note 6, Financial Guarantees” with respect to this population are consistent with the FASB’s stated objectives for the 

disclosures related to unconsolidated VIEs.

Transfers of Financial Assets

We issue Fannie Mae MBS through portfolio securitization transactions by transferring pools of mortgage loans or mortgagerelated securities to one or more trusts or special purpose entities. We are considered to be the transferor when we transfer 

assets from our own retained mortgage portfolio in a portfolio securitization transaction. For the three months ended June 30, 

2020 and 2019, the unpaid principal balance of portfolio securitizations was $202.9 billion and $57.3 billion, respectively. For 

the six months ended June 30, 2020 and 2019, the unpaid principal balance of portfolio securitizations was $291.9 billion and

$98.7 billion, respectively. The substantial majority of these portfolio securitization transactions generally do not qualify for sale 

treatment. Portfolio securitization trusts that do qualify for sale treatment primarily consist of loans that are guaranteed or 

insured, in whole or in part, by the U.S. government.

We retain interests from the transfer and sale of mortgage-related securities to unconsolidated single-class and multi-class 

portfolio securitization trusts. As of June 30, 2020, the unpaid principal balance of retained interests was $2.7 billion and its 

related fair value was $4.0 billion. As of December 31, 2019, the unpaid principal balance of retained interests was $2.9 billion

and its related fair value was $4.0 billion. For the three months ended June 30, 2020 and 2019, the principal, interest and other

fees received on retained interests was $170 million and $122 million, respectively. For the six months ended June 30, 2020

and 2019, the principal, interest and other fees received on retained interests was $351 million and $238 million, respectively.

3. Mortgage Loans

We own single-family mortgage loans, which are secured by four or fewer residential dwelling units, and multifamily mortgage 

loans, which are secured by five or more residential dwelling units. We classify these loans as either HFI or HFS. We report 

the amortized cost of HFI loans for which we have not elected the fair value option at the unpaid principal balance, net of 

unamortized premiums and discounts, other cost basis adjustments, and accrued interest receivable, net. For purposes of our 

condensed consolidated balance sheet, we present accrued interest receivable, net separately from the amortized cost of our 

loans held for investment. We report the carrying value of HFS loans at the lower of cost or fair value and record valuation 

changes in “Investment gains (losses), net” in our condensed consolidated statements of operations and comprehensive 

income.

For purposes of the single-family mortgage loan disclosures below, we display loans by class of financing receivable type. In 

the current period, we revised the financing receivable classes used for disclosure to consist of: “20- and 30-year or more, 

amortizing fixed-rate,” “15-year or less, amortizing fixed-rate,” “Adjustable-rate,” and “Other.” The “Other” class primarily 

consists of reverse mortgage loans, interest-only loans, negative-amortizing loans and second liens. We believe the revised 

classifications are more aligned with how we assess and manage the credit risk of our loans. We have revised the 

presentation of certain loan disclosures for prior periods to conform with the revised current period classes of financing 

receivables. 

The following table displays the carrying value of mortgage loans and our allowance for loan losses.

As of

June 30, 2020 December 31, 2019

(Dollars in millions)

Single-family $ 3,070,902 $ 2,972,361 

Multifamily 346,932 327,593 

Total unpaid principal balance of mortgage loans 3,417,834 3,299,954 

Cost basis and fair value adjustments, net 54,467 43,224 

Allowance for loan losses (12,966) (9,016) 

Total mortgage loans(1) $ 3,459,335 $ 3,334,162 

(1) Excludes $9.5 billion and $8.4 billion of accrued interest receivable, net of allowance on mortgage loans as of June 30, 2020 and 

December 31, 2019, respectively.

Notes to Condensed Consolidated Financial Statements | Consolidations and Transfers of Financial Assets

Fannie Mae (In conservatorship) Second Quarter 2020 Form 10-Q 85
The following tables display information about our redesignation of loans from HFI to HFS and the sales of mortgage loans 

during the period.

For the Three Months Ended 

June 30,

For the Six Months Ended 

June 30,

2020 2019 2020 2019

(Dollars in millions)

Single family loans redesignated from HFI to HFS:

Amortized cost $ — $ 7,188 $ 1,637 $ 10,133 

Lower of cost or fair value adjustment at time of redesignation(1) — (479) (9) (719) 

Allowance reversed at time of redesignation — 902 184 1,369 

Single-family loans sold:

Unpaid principal balance $ 495 $ 6,498 $ 495 $ 6,556 

Realized gains, net 40 284 40 320 

(1) Consists of the write-off against the allowance at the time of redesignation.

The amortized cost of single-family mortgage loans for which formal foreclosure proceedings were in process was $6.6 billion

and $7.6 billion as of June 30, 2020 and December 31, 2019, respectively. As a result of our various loss mitigation and 

foreclosure prevention efforts, we expect that a portion of the loans in the process of formal foreclosure proceedings will not 

ultimately foreclose. 

Aging Analysis

The following tables display an aging analysis of the total amortized cost of our HFI mortgage loans by portfolio segment and 

class, excluding loans for which we have elected the fair value option.

Pursuant to the CARES Act, for purposes of reporting to the credit bureaus, servicers must report a borrower receiving a 

COVID-19-related payment accommodation, such as a forbearance plan or loan modification, as current if the borrower was 

current prior to receiving the accommodation and the borrower makes all required payments in accordance with the 

accommodation. For purposes of our disclosures regarding delinquency status, we report loans receiving COVID-19-related 

payment forbearance as delinquent according to the contractual terms of the loan. The increase in loans classified as 

delinquent as of June 30, 2020 compared with December 31, 2019 was primarily attributable to the economic dislocation 

caused by the COVID-19 pandemic.

As of June 30, 2020

30 - 59 

Days 

Delinquent

60 - 89 

Days 

Delinquent

Seriously 

Delinquent(1)

Total 

Delinquent Current Total

Loans 90 

Days or 

More 

Delinquent 

and 

Accruing 

Interest

Nonaccrual 

Loans with 

No 

Allowance

(Dollars in millions)

Single-family:

20- and 30-year 

or more, 

amortizing 

fixed-rate $ 39,079 $ 50,701 $ 81,322 $ 171,102 $ 2,440,848 $ 2,611,950 $ 63,592 $ 7,709 

15-year or less, 

amortizing 

fixed-rate 3,048 4,164 4,784 11,996 389,389 401,385 4,175 554 

Adjustable-rate 523 829 1,084 2,436 37,138 39,574 879 149 

Other(2) 1,870 1,727 5,009 8,606 54,920 63,526 2,813 799 

Total singlefamily 44,520 57,421 92,199 194,140 2,922,295 3,116,435 71,459 9,211 

Multifamily(3) 1,160 N/A 3,614 4,774 345,870 350,644 1,447 35 

Total $ 45,680 $ 57,421 $ 95,813 $ 198,914 $ 3,268,165 $ 3,467,079 $ 72,906 $ 9,246 

Notes to Condensed Consolidated Financial Statements | Mortgage Loans

Fannie Mae (In conservatorship) Second Quarter 2020 Form 10-Q 86
As of December 31, 2019

30 - 59 Days 

Delinquent

60 - 89 Days 

Delinquent

Seriously 

Delinquent(1)

Total 

Delinquent Current Total

Loans 90 

Days or More 

Delinquent 

and Accruing 

Interest

(Dollars in millions)

Single-family:

20- and 30-year or 

more, 

amortizing fixedrate $ 26,882 $ 7,126 $ 13,082 $ 47,090 $ 2,470,457 $ 2,517,547 $ 28 

15-year or less, 

amortizing fixedrate 1,616 286 445 2,347 371,740 374,087 — 

Adjustable-rate 412 85 167 664 44,244 44,908 — 

Other(2) 2,323 829 1,891 5,043 64,726 69,769 136 

Total single-family 31,233 8,326 15,585 55,144 2,951,167 3,006,311 164 

Multifamily(3) 7 N/A 115 122 330,496 330,618 — 

Total $ 31,240 $ 8,326 $ 15,700 $ 55,266 $ 3,281,663 $ 3,336,929 $ 164 

(1) Single-family seriously delinquent loans are loans that are 90 days or more past due or in the foreclosure process. Multifamily seriously 

delinquent loans are loans that are 60 days or more past due. 

(2) Reverse mortgage loans included in “Other” are not aged due to their nature and are included in the current column. 

(3) Multifamily loans 60-89 days delinquent are included in the seriously delinquent column.

Notes to Condensed Consolidated Financial Statements | Mortgage Loans

Fannie Mae (In conservatorship) Second Quarter 2020 Form 10-Q 87
Credit Quality Indicators

The following table displays the total amortized cost of our single-family HFI loans by class, year of origination and credit 

quality indicator, excluding loans for which we have elected the fair value option. The estimated mark-to-market LTV ratio is a 

primary factor we consider when estimating our allowance for loan losses for single-family loans. As LTV ratios increase, the 

borrower's equity in the home decreases, which may negatively affect the borrower's ability to refinance or to sell the property 

for an amount at or above the outstanding balance of the loan.

As of June 30, 2020, by Year of Origination(1)

2020 2019 2018 2017 2016 Prior Total

(Dollars in millions)

Estimated mark-to-market LTV ratio:(2)

20- and 30-year or more, amortizing fixed-rate:

Less than or equal to 80% $ 294,252 $ 292,692 $ 161,857 $ 235,568 $ 288,585 $ 960,619 $ 2,233,573 

Greater than 80% and less than or equal to 90% 58,979 102,702 58,330 21,836 5,206 10,422 257,475 

Greater than 90% and less than or equal to 100% 58,649 49,724 4,377 808 255 3,749 117,562 

Greater than 100% 10 55 62 130 134 2,949 3,340 

Total 20 and 30-year or more, amortizing fixedrate 411,890 445,173 224,626 258,342 294,180 977,739 2,611,950 

15-year or less, amortizing fixed-rate:

Less than or equal to 80% 66,148 52,825 20,646 39,058 55,074 160,012 393,763 

Greater than 80% and less than or equal to 90% 3,234 2,578 287 35 16 35 6,185 

Greater than 90% and less than or equal to 100% 1,093 269 6 8 5 16 1,397 

Greater than 100% — — 5 7 6 22 40 

Total 15-year or less, amortizing fixed-rate 70,475 55,672 20,944 39,108 55,101 160,085 401,385 

Adjustable-rate:

Less than or equal to 80% 1,834 2,390 3,428 6,818 3,706 20,340 38,516 

Greater than 80% and less than or equal to 90% 163 287 319 101 14 32 916 

Greater than 90% and less than or equal to 100% 67 55 9 5 — 5 141 

Greater than 100% — — — — — 1 1 

Total adjustable-rate 2,064 2,732 3,756 6,924 3,720 20,378 39,574 

Other:

Less than or equal to 80% — 43 347 859 1,112 41,160 43,521 

Greater than 80% and less than or equal to 90% — 3 29 65 48 2,101 2,246 

Greater than 90% and less than or equal to 100% — 1 14 28 22 1,011 1,076 

Greater than 100% — 1 8 16 15 1,015 1,055 

Total other — 48 398 968 1,197 45,287 47,898 

Total $ 484,429 $ 503,625 $ 249,724 $ 305,342 $ 354,198 $ 1,203,489 $ 3,100,807 

Total for all classes by LTV ratio:(2)

Less than or equal to 80% $ 362,234 $ 347,950 $ 186,278 $ 282,303 $ 348,477 $ 1,182,131 $ 2,709,373 

Greater than 80% and less than or equal to 90% 62,376 105,570 58,965 22,037 5,284 12,590 266,822 

Greater than 90% and less than or equal to 100% 59,809 50,049 4,406 849 282 4,781 120,176 

Greater than 100% 10 56 75 153 155 3,987 4,436 

Total $ 484,429 $ 503,625 $ 249,724 $ 305,342 $ 354,198 $ 1,203,489 $ 3,100,807 

Notes to Condensed Consolidated Financial Statements | Mortgage Loans

Fannie Mae (In conservatorship) Second Quarter 2020 Form 10-Q 88
As of December 31, 2019(1)

20- and 30-

Year or More, 

Amortizing 

Fixed-Rate

15-Year or 

Less, 

Amortizing 

Fixed-Rate

AdjustableRate Other Total

(Dollars in millions)

Estimated mark-to-market LTV ratio:(2)

Less than or equal to 80% $ 2,145,018 $ 368,181 $ 43,415 $ 47,005 $ 2,603,619 

Greater than 80% and less than or equal to 90% 237,623 4,556 1,275 2,872 246,326 

Greater than 90% and less than or equal to 100% 130,152 1,284 215 1,398 133,049 

Greater than 100% 4,754 66 3 1,365 6,188 

Total $ 2,517,547 $ 374,087 $ 44,908 $ 52,640 $ 2,989,182 

(1) Excludes $15.6 billion and $17.1 billion as of June 30, 2020 and December 31, 2019, respectively, of mortgage loans guaranteed or 

insured, in whole or in part, by the U.S. government or one of its agencies, which represents primarily reverse mortgages for which we do 

not calculate an estimated mark-to-market LTV ratio.

(2) The aggregate estimated mark-to-market LTV ratio is based on the unpaid principal balance of the loan divided by the estimated current 

value of the property as of the end of each reported period, which we calculate using an internal valuation model that estimates periodic 

changes in home value. 

The following table displays the total amortized cost of our multifamily HFI loans by year of origination and credit-risk rating, 

excluding loans for which we have elected the fair value option. Property rental income and property valuations are key inputs 

to our internally assigned credit risk ratings.

As of June 30, 2020, by Year of Origination

2020 2019 2018 2017 2016 Prior Total

(Dollars in millions)

Internally assigned credit risk rating:

Non-classified(1) $ 29,922 $ 69,049 $ 63,048 $ 52,321 $ 45,235 $ 81,098 $ 340,673 

Classified(2) 6 707 1,361 2,665 1,642 3,590 9,971 

Total $ 29,928 $ 69,756 $ 64,409 $ 54,986 $ 46,877 $ 84,688 $ 350,644 

As of December 31, 

2019

(Dollars in millions)

Internally assigned credit risk rating:

Non-classified(1) $ 323,773 

Classified(2) 6,845 

Total $ 330,618 

(1) A loan categorized as “Non-classified” is current or adequately protected by the current financial strength and debt service capability of the 

borrower. 

(2) Represents loans classified as “Substandard” or “Doubtful.” Loans classified as “Substandard” have a well-defined weakness that 

jeopardizes the timely full repayment. “Doubtful” refers to a loan with a weakness that makes collection or liquidation in full highly 

questionable and improbable based on existing conditions and values. As of June 30, 2020 and December 31, 2019, we had loans with an 

amortized cost of $14 million and $5 million, respectively, classified as doubtful.

Notes to Condensed Consolidated Financial Statements | Mortgage Loans

Fannie Mae (In conservatorship) Second Quarter 2020 Form 10-Q 89
Troubled Debt Restructurings

A modification to the contractual terms of a loan that results in granting a concession to a borrower experiencing financial 

difficulties is considered a TDR. In addition to formal loan modifications, we also engage in other loss mitigation activities with 

troubled borrowers, which include repayment plans and forbearance arrangements, both of which represent informal 

agreements with the borrower that do not result in the legal modification of the loan’s contractual terms. We account for these

informal restructurings as a TDR if we defer more than three missed payments. We also classify loans to certain borrowers 

who have received bankruptcy relief as TDRs. However, our current TDR accounting described herein is temporarily impacted 

by our election to account for certain eligible loan modifications under the COVID-19 Relief granted pursuant to the CARES 

Act. See “Note 1, Summary of Significant Accounting Policies” for more information on the impact of the CARES Act.

The substantial majority of the loan modifications accounted for as a TDR result in term extensions, interest rate reductions or 

a combination of both. The average term extension of a single-family modified loan was 168 months and 160 months for the 

three months ended June 30, 2020 and 2019, respectively. The average interest rate reduction was 0.34 and 0.10 percentage 

points, for the three months ended June 30, 2020 and 2019, respectively. During the six months ended June 30, 2020 and 

2019, the average term extension of a single-family modified loan was 168 months and 158 months, respectively, and the 

average interest rate reduction was 0.33 and 0.10 percentage points, respectively.

The following tables display the number of loans and amortized cost in loans classified as a TDR.

For the Three Months Ended June 30,

2020 2019

Number of 

Loans

Amortized 

Cost

Number of 

Loans

Amortized 

Cost

(Dollars in millions)

Single-family:

20- and 30-year or more, amortizing fixed-rate 8,511 $ 1,497 10,402 $ 1,706 

15-year or less, amortizing fixed-rate 796 68 1,181 106 

Adjustable-rate 142 22 213 31 

Other 556 70 799 109 

Total single-family 10,005 1,657 12,595 1,952 

Multifamily — — 3 20 

Total TDRs 10,005 $ 1,657 12,598 $ 1,972 

For the Six Months Ended June 30,

2020 2019

Number of 

Loans

Amortized 

Cost

Number of 

Loans

Amortized 

Cost

(Dollars in millions)

Single-family:

20- and 30-year or more, amortizing fixed-rate 19,367 $ 3,406 21,847 $ 3,532 

15-year or less, amortizing fixed-rate 1,869 166 2,476 220 

Adjustable-rate 286 46 430 63 

Other 1,093 138 1,735 236 

Total single-family 22,615 3,756 26,488 4,051 

Multifamily — — 6 33 

Total TDRs 22,615 $ 3,756 26,494 $ 4,084 

Notes to Condensed Consolidated Financial Statements | Mortgage Loans

Fannie Mae (In conservatorship) Second Quarter 2020 Form 10-Q 90
For loans that defaulted in the period presented and that were classified as a TDR in the twelve months prior to the default, the 

following table displays the number of loans and the amortized cost of these loans at the time of payment default. For 

purposes of this disclosure, we define loans that had a payment default as: single-family and multifamily loans with completed 

TDRs that liquidated during the period, either through foreclosure, deed-in-lieu of foreclosure, or a short sale; single-family 

loans with completed modifications that are two or more months delinquent during the period; or multifamily loans with 

completed modifications that are one or more months delinquent during the period.

For the Three Months Ended June 30,

2020 2019

Number of 

Loans

Amortized 

Cost

Number of 

Loans

Amortized 

Cost

(Dollars in millions)

Single-family:

20- and 30-year or more, amortizing fixed-rate 5,398 $ 1,066 3,913 $ 594 

15-year or less, amortizing fixed-rate 35 3 119 10 

Adjustable-rate 5 1 15 2 

Other 548 94 499 81 

Total single-family 5,986 1,164 4,546 687 

Multifamily 2 14 1 6 

Total TDRs that subsequently defaulted 5,988 $ 1,178 4,547 $ 693 

For the Six Months Ended June 30,

2020 2019

Number of 

Loans

Amortized 

Cost

Number of 

Loans

Amortized 

Cost

(Dollars in millions)

Single-family:

20- and 30-year or more, amortizing fixed-rate 8,573 $ 1,587 8,289 $ 1,258 

15-year or less, amortizing fixed-rate 85 6 251 18 

Adjustable-rate 12 2 23 3 

Other 875 145 1,142 185 

Total single-family 9,545 1,740 9,705 1,464 

Multifamily 4 16 1 6 

Total TDRs that subsequently defaulted 9,549 $ 1,756 9,706 $ 1,470 

Notes to Condensed Consolidated Financial Statements | Mortgage Loans

Fannie Mae (In conservatorship) Second Quarter 2020 Form 10-Q 91
Nonaccrual Loans

The table below displays the forgone interest and the accrued interest receivable written off through the reversal of interest 

income for loans. For updates to our application of our nonaccrual policy for loans negatively impacted by the COVID-19 

pandemic, see “Note 1, Summary of Significant Accounting Policies.” 

For the Three 

Months Ended 

June 30, 2020

For the Six 

Months Ended 

June 30, 2020

(Dollars in millions)

Single-family:

Total forgone interest(1) $ 246 $ 420 

Accrued interest receivable written off through the reversal of interest income 45 132

Multifamily:

Total forgone interest(1) $ 3 $ 3 

Accrued interest receivable written off through the reversal of interest income 2 2

(1) For loans on nonaccrual status held as of period end, represents the amount of interest income we did not recognize but would have 

recognized if the loans had performed in accordance with their original contractual terms.

The table below includes the amortized cost of and interest income on our HFI single-family and multifamily loans on 

nonaccrual status by class, excluding loans for which we have elected the fair value option. 

As of

June 30, 2020 March 31, 2020

December 31, 

2019

For the Three 

Months Ended 

June 30, 2020

For the Six 

Months Ended 

June 30, 2020

Amortized Cost Total Interest Income Recognized(1)

(Dollars in millions)

Single-family:

20- and 30-year or more, 

 amortizing fixed-rate $ 23,783 $ 23,212 $ 23,427 $ 75 $ 221 

15-year or less, amortizing 

 fixed-rate 844 856 858 2 6 

Adjustable-rate 275 279 288 1 2 

Other 2,851 2,827 2,973 10 27 

Total single-family 27,753 27,174 27,546 88 256 

Multifamily 316 91 435 — 1 

Total $ 28,069 $ 27,265 $ 27,981 $ 88 $ 257 

(1) Single-family interest income recognized includes payments received while the loans were performing as well as while on nonaccrual 

status, for loans held as of period end. Multifamily interest income recognized includes amounts accrued while the loans were performing 

and the amortization of any deferred cost basis adjustments, for nonaccrual loans held as of the end of each period.

Notes to Condensed Consolidated Financial Statements | Mortgage Loans

Fannie Mae (In conservatorship) Second Quarter 2020 Form 10-Q 92
Individually Impaired Loans

Prior to the adoption of the CECL standard, we recorded a specific loss reserve for individually impaired loans and a collective 

loss reserve for all other loans. Individually impaired loans include TDRs, acquired credit-impaired loans and multifamily loans 

that we have assessed as probable that we will not collect all contractual amounts due, regardless of whether we are currently 

accruing interest, excluding loans classified as HFS and loans for which we have elected the fair value option. The following 

tables display the unpaid principal balance, total amortized cost, related allowance as of December 31, 2019 and average 

amortized cost, total interest income recognized, and interest income recognized on a cash basis for individually impaired 

loans for the three and six months ended June 30, 2019.

As of December 31, 2019

Unpaid 

Principal 

Balance

Total 

Amortized Cost

Related 

Allowance for 

Loan Losses

(Dollars in millions)

Individually impaired loans:

With related allowance recorded:

Single-family:

20- and 30-year or more, amortizing fixed-rate $ 63,091 $ 61,033 $ (5,851) 

15-year or less, amortizing fixed-rate 954 960 (24) 

Adjustable-rate 156 157 (9) 

Other 15,181 14,078 (2,291) 

Total single-family 79,382 76,228 (8,175) 

Multifamily 314 315 (45) 

Total individually impaired loans with related allowance recorded 79,696 76,543 (8,220) 

With no related allowance recorded:(1)

Single-family:

20- and 30-year or more, amortizing fixed-rate 18,372 17,578 — 

15-year or less, amortizing fixed-rate 410 407 — 

Adjustable-rate 265 265 — 

Other 3,014 2,718 — 

Total single-family 22,061 20,968 — 

Multifamily 363 365 — 

Total individually impaired loans with no related allowance recorded 22,424 21,333 — 

Total individually impaired loans(2) $ 102,120 $ 97,876 $ (8,220) 

(1) The discounted cash flows or collateral value equals or exceeds the carrying value of the loan and, as such, no valuation allowance is 

required.

(2) Includes single-family loans restructured in a TDR with an amortized cost of $96.9 billion as of December 31, 2019. Includes multifamily 

loans restructured in a TDR with an amortized cost of $102 million as of December 31, 2019.

Notes to Condensed Consolidated Financial Statements | Mortgage Loans

Fannie Mae (In conservatorship) Second Quarter 2020 Form 10-Q 93
For the Three Months Ended June 30, 2019

Average 

Amortized Cost

Total Interest 

Income 

Recognized

Interest Income 

Recognized on 

a Cash Basis

(Dollars in millions)

Individually impaired loans:

With related allowance recorded:

Single-family:

20- and 30-year or more, amortizing fixed-rate $ 72,782 $ 762 $ 71 

15-year or less, amortizing fixed-rate 1,250 11 1 

Adjustable-rate 130 1 — 

Other 18,139 189 14 

Total single-family 92,301 963 86 

Multifamily 321 3 — 

Total individually impaired loans with related allowance recorded 92,622 966 86 

With no related allowance recorded:(1)

Single-family:

20- and 30-year or more, amortizing fixed-rate 14,803 241 34 

15-year or less, amortizing fixed-rate 308 4 1 

Adjustable-rate 359 4 1 

Other 2,870 55 6 

Total single-family 18,340 304 42 

Multifamily 397 6 — 

Total individually impaired loans with no related allowance recorded 18,737 310 42 

Total individually impaired loans $ 111,359 $ 1,276 $ 128 

Notes to Condensed Consolidated Financial Statements | Mortgage Loans

Fannie Mae (In conservatorship) Second Quarter 2020 Form 10-Q 94
For the Six Months Ended June 30, 2019

Average 

Amortized Cost

Total Interest 

Income 

Recognized

Interest Income 

Recognized on 

a Cash Basis

(Dollars in millions)

Individually impaired loans:

With related allowance recorded:

Single-family:

20- and 30-year or more, amortizing fixed-rate $ 74,478 $ 1,566 $ 149 

15-year or less, amortizing fixed-rate 1,286 22 2 

Adjustable-rate 124 3 — 

Other 18,999 393 30 

Total single-family 94,887 1,984 181 

Multifamily 279 5 — 

Total individually impaired loans with related allowance recorded 95,166 1,989 181 

With no related allowance recorded:(1)

Single-family:

20- and 30-year or more, amortizing fixed-rate 14,640 453 61 

15-year or less, amortizing fixed-rate 313 7 2 

Adjustable-rate 379 9 1 

Other 2,934 103 9 

Total single-family 18,266 572 73 

Multifamily 380 8 — 

Total individually impaired loans with no related allowance recorded 18,646 580 73 

Total individually impaired loans $ 113,812 $ 2,569 $ 254 

(1) The discounted cash flows or collateral value equals or exceeds the carrying value of the loan and, as such, no valuation allowance is 

required.

Notes to Condensed Consolidated Financial Statements | Mortgage Loans

Fannie Mae (In conservatorship) Second Quarter 2020 Form 10-Q 95
4. Allowance for Loan Losses

We maintain an allowance for loan losses for HFI loans held by Fannie Mae and by consolidated Fannie Mae MBS trusts, 

excluding loans for which we have elected the fair value option. When calculating our allowance for loan losses, we consider 

the unpaid principal balance, net of unamortized premiums and discounts, and other cost basis adjustments of HFI loans at the 

balance sheet date. We record write-offs as a reduction to our allowance for loan losses at the point of foreclosure, completion 

of a short sale, upon the redesignation of nonperforming loans from HFI to HFS or when a loan is determined to be 

uncollectible. See “Note 1, Summary of Significant Accounting Policies” for additional information and accounting policy 

changes resulting from our adoption of the CECL standard.

The following table displays changes in our allowance for single-family loans, multifamily loans and total allowance for loan 

losses, including the transition impact of adopting the CECL standard.

For the Three Months 

Ended June 30, 2020

For the Six Months 

Ended June 30, 2020

(Dollars in millions)

Single-family allowance for loan losses:

Beginning balance $ (12,070) $ (8,759) 

Transition impact of the adoption of the CECL standard — (1,229) 

Benefit (provision) for loan losses 389 (1,788) 

Write-offs 46 116 

Recoveries (3) (6) 

Other 40 68 

Ending Balance $ (11,598) $ (11,598) 

Multifamily allowance for loan losses:

Beginning balance $ (1,139) $ (257) 

Transition impact of the adoption of the CECL standard — (493) 

Provision for loan losses (228) (635) 

Write-offs (1) 18 

Recoveries — (1) 

Ending Balance $ (1,368) $ (1,368) 

Total allowance for loan losses:

Beginning balance $ (13,209) $ (9,016) 

Transition impact of the adoption of the CECL standard — (1,722) 

Benefit (provision) for loan losses 161 (2,423) 

Write-offs 45 134 

Recoveries (3) (7) 

Other 40 68 

Ending Balance $ (12,966) $ (12,966) 

Our benefit (provision) for loan losses can vary substantially from period to period based on a number of factors, such as 

changes in actual and forecasted home prices or property valuations, fluctuations in actual and forecasted interest rates, 

borrower payment behavior, events such as natural disasters or pandemics, the types and volume of our loss mitigation 

activities, including forbearance and loan modifications, the volume of foreclosures completed, and the redesignation of loans 

from HFI to HFS. 

Estimating the impact of the COVID-19 pandemic on our expected credit loss reserves required significant management 

judgment as we continue to observe uncertainty in our economic forecast caused by elevated levels of unemployment, the 

impact of fiscal stimulus, and variability surrounding the continued spread of COVID-19; thereby impacting projected borrower 

behavior. We applied management judgment in estimating the number of single-family borrowers who will receive forbearance 

and any resulting repayment plans, deferrals, or loan modifications that will be provided once the forbearance period ends. 

Under our CECL methodology, depending on the type of loan modification granted, loss severity estimates vary. Our provision 

can also be impacted by updates to the models, assumptions, and data used in determining our allowance for loan losses.

Notes to Condensed Consolidated Financial Statements | Allowance for Loan Losses

Fannie Mae (In conservatorship) Second Quarter 2020 Form 10-Q 96
The primary factors that impacted our single-family benefit (provision) for loan losses for the three and six months ended June 

30, 2020 were:

• Expected loan losses as a result of the COVID-19 pandemic, which includes adjustments to modeled results. In the 

first quarter of 2020, the rapidly changing conditions as a result of the unprecedented COVID-19 pandemic caused us 

to believe our model used to estimate single-family credit losses does not capture the entirety of losses we expect to 

incur relating to COVID-19, which includes our expectations surrounding loan forbearance and borrower behavior 

once the forbearance period ends. As a result, management used its judgment to significantly increase the loss 

projections developed by our credit loss model in the first quarter of 2020, contributing to the provision for loan losses 

for the six months ended June 30, 2020.

During the second quarter of 2020 our credit loss model consumed data from the initial months of the pandemic, 

including loan delinquencies, updated profile data for loans in forbearance, and an updated home price forecast. As 

more of this data was consumed by our credit loss model, we reduced our non-modeled adjustment. However, 

management continued to apply its judgment and supplement model results as of June 30, 2020, taking into account 

uncertainty regarding the type and extent of loss mitigation that may be needed when loans complete their 

forbearance period and the continued high degree of uncertainty regarding the future course of the pandemic and its 

effect on the economy, including the continued availability of fiscal stimulus to support borrowers. 

For the second quarter of 2020, our estimate of expected losses due to the pandemic, which includes both modeled 

and non-modeled adjustments, remained relatively flat compared with the first quarter. A reduction in overall expected 

forbearance volumes was offset by a weaker credit profile for loans entering forbearance. Furthermore, the positive 

impact of higher-than-initially-expected borrower prepayment activity was offset by heightened uncertainty as noted 

above.

• Changes in our expectations for home price growth. In the first quarter, we significantly reduced our expectations for 

home price growth to near-zero for 2020, which contributed to our provision for loan losses for the period. However, 

the negative impact from the first quarter was partially reduced in the second quarter as we revised our home price 

forecast to reflect an increase in home price appreciation on a national basis for 2020 based on strong home sales 

data for the period. This improvement in the 2020 home price forecast was partially offset by our updated long-term 

projected home price growth estimate, which was lowered as a result of a longer projected economic recovery period. 

Higher home prices decrease the likelihood that loans will default and decrease the amount of credit loss on loans 

that do default, which impacts our estimate of losses and ultimately decreases our loss reserves and provision for 

loan losses. Conversely, lower home prices increase the likelihood that loans will default, thereby increasing loss 

reserves and provision for loan losses.

• Credit benefit from lower actual and projected mortgage interest rates. As mortgage interest rates decline, we expect 

an increase in future prepayments on single-family loans, including modified loans. Higher expected prepayments 

shorten the expected lives of modified loans, which decreases the expected impairment relating to term and interestrate concessions provided on these loans and results in a benefit for loan losses.

The primary factor that contributed to a decrease in single-family write-offs for the three and six months ended June 30, 2020 

compared with the three and six months ended June 30, 2019 was a reduction in the number of reperforming loans 

redesignated from HFI to HFS.

The multifamily provision for loan losses for the three and six months ended June 30, 2020 was primarily driven by:

• Actual and projected economic data and expected loan losses as a result of the COVID-19 pandemic. Similar to the 

single-family provision for loan losses discussed above, we believe our model used to estimate multifamily loan 

losses as of June 30, 2020 does not capture the entirety of losses we expect to incur relating to COVID-19. As a 

result, management used its judgment to increase the loss projections developed by our credit loss model to reflect 

our current expectations relating to the impact of the pandemic. Accordingly, our multifamily provision for loan losses 

was primarily driven by elevated unemployment rates compared with pre-COVID-19 levels. We expect higher 

unemployment rates will reduce the operating income of multifamily properties in the near term, resulting in an 

increase in the number of loans in forbearance. Additionally, property values are expected to decrease, increasing the 

probability of loan defaults.

In the second quarter, we increased our expected loan losses as a result of significant economic uncertainty and 

worsened forecasted capitalization rates. We also increased our expected loan losses on senior housing loans to 

reflect that these properties have been disproportionately impacted by the pandemic, which has resulted in increased 

operating expenses and has limited these borrowers’ ability to attract new tenants. These increases in expected loan 

losses were partially offset by a reduction in our overall estimated forbearance volumes and lower actual and 

projected interest rates. In developing these adjustments, management considered the current credit risk profile of 

our multifamily loan book of business, as well as relevant historical credit loss experience during rare or stressful 

economic environments.

Notes to Condensed Consolidated Financial Statements | Allowance for Loan Losses

Fannie Mae (In conservatorship) Second Quarter 2020 Form 10-Q 97
The following tables display prior period changes in single-family and multifamily allowance for loan losses and the prior period 

amortized cost in our HFI loans by impairment or allowance methodology and portfolio segment prior to the adoption of the 

CECL standard. For a description of our previous allowance and impairment methodology refer to “Note 1, Summary of 

Significant Accounting Policies” in our 2019 Form 10-K.

For the Three Months 

Ended June 30, 2019

For the Six Months 

Ended June 30, 2019

(Dollars in millions)

Single-family allowance for loan losses:

Beginning balance $ (12,985) $ (13,969) 

Benefit (provision) for loan losses 1,239 1,886 

Write-offs 558 939 

Recoveries (15) (60) 

Other (7) (6) 

Ending Balance $ (11,210) $ (11,210) 

Multifamily allowance for loan losses:

Beginning balance $ (247) $ (234) 

Benefit (provision) for loan losses (27) (40) 

Write-offs 4 4 

Recoveries (2) (2) 

Ending Balance $ (272) $ (272) 

Total allowance for loan losses:

Beginning balance $ (13,232) $ (14,203) 

Benefit (provision) for loan losses 1,212 1,846 

Write-offs 562 943 

Recoveries (17) (62) 

Other (7) (6) 

Ending Balance $ (11,482) $ (11,482) 

As of December 31, 2019

Single-Family Multifamily Total

(Dollars in millions)

Allowance for loan losses by segment:

Individually impaired loans $ (8,175) $ (45) $ (8,220) 

Collectively reserved loans (584) (212) (796) 

Total allowance for loan losses $ (8,759) $ (257) $ (9,016) 

Amortized cost in loans by segment:

Individually impaired loans $ 97,196 $ 680 $ 97,876 

Collectively reserved loans 2,909,115 329,938 3,239,053 

Total amortized cost in loans $ 3,006,311 $ 330,618 $ 3,336,929 

Notes to Condensed Consolidated Financial Statements | Allowance for Loan Losses

Fannie Mae (In conservatorship) Second Quarter 2020 Form 10-Q 98
5. Investments in Securities

Trading Securities

Trading securities are recorded at fair value with subsequent changes in fair value recorded as “Fair value losses, net” in our 

condensed consolidated statements of operations and comprehensive income. The following table displays our investments in 

trading securities.

As of

June 30, 

2020

December 31, 

2019

(Dollars in millions)

Mortgage-related securities:

Fannie Mae $ 7,053 $ 3,424 

Other agency(1) 3,122 4,490 

Private-label and other mortgage securities 459 629 

Total mortgage-related securities (includes $829 million and $896 million, respectively, 

related to consolidated trusts) 10,634 8,543 

Non-mortgage-related securities:

U.S. Treasury securities 96,037 39,501 

Other securities 73 79 

Total non-mortgage-related securities 96,110 39,580 

Total trading securities $ 106,744 $ 48,123 

(1) Consists of Freddie Mac and Ginnie Mae mortgage-related securities.

The following table displays information about our net trading gains.

For the Three Months 

Ended June 30,

For the Six Months 

Ended June 30,

2020 2019 2020 2019

(Dollars in millions)

Net trading gains $ 135 $ 183 $ 782 $ 275 

Net trading gains recognized in the period related to securities still held 

at period end 70 147 525 227 

Available-for-Sale Securities

We record AFS securities at fair value with unrealized gains and losses, recorded net of tax, as a component of “Other 

comprehensive income (loss)” and we recognize realized gains and losses from the sale of AFS securities in “Investment gains 

(losses), net” in our condensed consolidated statements of operations and comprehensive income. We define the amortized 

cost basis of our AFS securities as unpaid principal balance, net of unamortized premiums and discounts, and other cost basis 

adjustments. Pursuant to the CECL standard, we record an allowance for credit losses for AFS securities that reflects the 

impairment for credit losses, which are limited to the amount that fair value is less than the amortized cost. Impairment due to 

non-credit losses are recorded as unrealized losses within other comprehensive income.

Notes to Condensed Consolidated Financial Statements | Investments in Securities

Fannie Mae (In conservatorship) Second Quarter 2020 Form 10-Q 99
The following tables display the amortized cost, allowance for credit losses, gross unrealized gains and losses in accumulated 

other comprehensive income (loss) (“AOCI”), and fair value by major security type for AFS securities.

As of June 30, 2020

Total 

Amortized 

Cost(1)

Allowance 

for Credit 

Losses

Gross 

Unrealized 

Gains in 

AOCI

Gross 

Unrealized 

Losses in 

AOCI

Total Fair 

Value(1)

(Dollars in millions)

Fannie Mae $ 1,296 $ — $ 112 $ (14) $ 1,394 

Other agency(2) 161 — 19 — 180 

Alt-A and subprime private-label securities 4 — 3 — 7 

Mortgage revenue bonds 272 (3) 9 — 278 

Other mortgage-related securities 257 — 4 — 261 

Total $ 1,990 $ (3) $ 147 $ (14) $ 2,120 

As of December 31, 2019

Total 

Amortized 

Cost(1)(3)

Gross 

Unrealized 

Gains

Gross 

Unrealized 

Losses

Total Fair 

Value(1)

(Dollars in millions)

Fannie Mae $ 1,445 $ 85 $ (10) $ 1,520 

Other agency(2) 183 15 — 198 

Alt-A and subprime private-label securities 34 23 — 57 

Mortgage revenue bonds 309 9 (3) 315 

Other mortgage-related securities 310 5 (1) 314 

Total $ 2,281 $ 137 $ (14) $ 2,404 

(1) We exclude from amortized cost and fair value accrued interest of $8 million and $10 million as of June 30, 2020 and December 31, 2019,

respectively, which we record in “Other assets” in our condensed consolidated balance sheets.

(2) Other agency securities consist of securities issued by Freddie Mac and Ginnie Mae.

(3) Prior to our adoption of the CECL standard, total amortized cost represented the unpaid principal balance, unamortized premiums, 

discounts and other cost basis adjustments, as well as temporary impairments recognized in “Investment gains, net” in our consolidated 

statements of operations and comprehensive income.

Fannie Mae and Other Agency Securities

Our Fannie Mae and other agency AFS securities consist of securities issued by us, Freddie Mac, or Ginnie Mae. The principal 

and interest on these securities are guaranteed by the issuing agency. We believe that the guaranty provided by the issuing 

agency, the support provided to the agencies by the U.S. government, the importance of the agencies to the liquidity and 

stability in the secondary mortgage market, and the long history of zero credit losses on agency mortgage-related securities 

are all indicators that there are not currently credit losses on these securities, even if the security is in an unrealized loss 

position. In addition, we generally hold these securities that are in an unrealized loss position to recovery. As a result, unless 

we intend to sell the security, we do not recognize an allowance for credit losses on agency mortgage-related securities. 

Non-Agency Mortgage-Related Securities

As of June 30, 2020, substantially all of our non-agency mortgage-related securities were in an unrealized gain position. As a 

result, we have not recognized an allowance for credit losses on these securities.

Notes to Condensed Consolidated Financial Statements | Investments in Securities

Fannie Mae (In conservatorship) Second Quarter 2020 Form 10-Q 100
The following tables display additional information regarding gross unrealized losses and fair value by major security type for 

AFS securities in an unrealized loss position, excluding allowance for credit losses. 

As of June 30, 2020

Less Than 12 

Consecutive Months

12 Consecutive 

Months or Longer

Gross 

Unrealized 

Losses in 

AOCI

Fair 

Value

Gross 

Unrealized 

Losses in 

AOCI

Fair 

Value

(Dollars in millions)

Fannie Mae $ (2) $ 74 $ (12) $ 92 

Mortgage revenue bonds — — — — 

Other mortgage-related securities — — — — 

Total $ (2) $ 74 $ (12) $ 92 

As of December 31, 2019

Less Than 12 

Consecutive Months

12 Consecutive 

Months or Longer

Gross 

Unrealized 

Losses

Fair 

Value

Gross 

Unrealized 

Losses

Fair 

Value

(Dollars in millions)

Fannie Mae $ — $ — $ (10) $ 337 

Mortgage revenue bonds — — (3) 3 

Other mortgage-related securities (1) 130 — — 

Total $ (1) $ 130 $ (13) $ 340 

The following table displays the gross realized gains and proceeds on sales of AFS securities.

For the Three Months 

Ended June 30,

For the Six Months 

Ended June 30,

2020 2019 2020 2019

(Dollars in millions)

 Gross realized gains $ 9 $ 110 $ 30 $ 171 

 Total proceeds (excludes initial sale of securities from new portfolio 

securitizations) 71 245 121 376 

The following tables display net unrealized gains on AFS securities and other amounts accumulated within our accumulated 

other comprehensive income, net of tax.

As of 

June 30, 2020

(Dollars in millions)

Net unrealized gains on AFS securities for which we have not recorded an allowance for credit 

losses $ 104 

Other 29 

Accumulated other comprehensive income $ 133 

As of 

December 31, 2019

(Dollars in millions)

Net unrealized gains on AFS securities for which we have not recorded OTTI $ 97 

Other 34 

Accumulated other comprehensive income $ 131 

Prior to our adoption of the CECL standard on January 1, 2020, we evaluated AFS securities for other-than-temporary 

impairment. The balance of the unrealized credit-loss component of AFS securities held by us and recognized in our 

consolidated statements of operations and comprehensive income was $36 million as of December 31, 2019.

Notes to Condensed Consolidated Financial Statements | Investments in Securities

Fannie Mae (In conservatorship) Second Quarter 2020 Form 10-Q 101
Maturity Information

The following table displays the amortized cost and fair value of our AFS securities by major security type and remaining 

contractual maturity, assuming no principal prepayments. The contractual maturity of mortgage-backed securities is not a 

reliable indicator of their expected life because borrowers generally have the right to prepay their obligations at any time.

As of June 30, 2020

Total 

Carrying 

Amount (1)

Total

Fair 

Value

One Year or Less

After One Year 

Through Five Years

After Five Years 

Through Ten Years After Ten Years

Net 

Carrying 

Amount (1)

Fair 

Value

Net 

Carrying 

Amount (1)

Fair 

Value

Net 

Carrying 

Amount (1)

Fair 

Value

Net 

Carrying 

Amount (1)

Fair 

Value

(Dollars in millions)

Fannie Mae $ 1,296 $ 1,394 $ — $ — $ 12 $ 13 $ 93 $ 105 $ 1,191 $ 1,276 

Other agency 161 180 — — 14 15 22 24 125 141 

Alt-A and subprime 

private-label securities 4 7 — — — — 3 3 1 4 

Mortgage revenue bonds 269 278 2 2 31 33 24 25 212 218 

Other mortgage-related 

securities 257 261 — — — — 21 23 236 238 

Total $ 1,987 $ 2,120 $ 2 $ 2 $ 57 $ 61 $ 163 $ 180 $ 1,765 $ 1,877 

(1) Net carrying amount consists of book value, net of allowance for credit losses on AFS debt securities.

6. Financial Guarantees

We recognize a guaranty obligation for our obligation to stand ready to perform on our guarantees to unconsolidated trusts and 

other guaranty arrangements. These off-balance sheet guarantees expose us to credit losses primarily relating to the unpaid 

principal balance of our unconsolidated Fannie Mae MBS and other financial guarantees. The maximum remaining contractual 

term of our guarantees is 32 years; however, the actual term of each guaranty may be significantly less than the contractual 

term based on the prepayment characteristics of the related mortgage loans. With our adoption of the CECL standard on 

January 1, 2020, we measure our guaranty reserve for estimated credit losses for off-balance sheet exposures over the 

contractual period for which they are exposed to the credit risk, unless that obligation is unconditionally cancellable by the 

issuer.

As the guarantor of structured securities backed in whole or in part by Freddie Mac-issued securities, we extend our guaranty 

to the underlying Freddie Mac securities in our resecuritization trusts. However, Freddie Mac continues to guarantee the 

payment of principal and interest on the underlying Freddie Mac securities that we have resecuritized. We do not charge an 

incremental guaranty fee to include Freddie Mac securities in the structured securities that we issue. When we began issuing 

UMBS in June 2019, we entered into an indemnification agreement under which Freddie Mac agreed to indemnify us for 

losses caused by its failure to meet its payment or other specified obligations under the trust agreements pursuant to which the 

underlying resecuritized securities were issued. As a result, and due to the funding commitment available to Freddie Mac 

through its senior preferred stock purchase agreement with Treasury, we have concluded that the associated credit risk is 

negligible. As such, we exclude from the following table Freddie Mac securities backing unconsolidated Fannie Mae-issued 

structured securities of approximately $101.4 billion and $50.1 billion as of June 30, 2020 and December 31, 2019, 

respectively.

The following table displays our off-balance sheet maximum exposure, guaranty obligation recognized in our condensed 

consolidated balance sheets and the potential maximum recovery from third parties through available credit enhancements 

and recourse related to our financial guarantees.

As of

June 30, 2020 December 31, 2019

Maximum 

Exposure

Guaranty 

Obligation

Maximum 

Recovery(1)

Maximum 

Exposure

Guaranty 

Obligation

Maximum 

Recovery(1)

(Dollars in millions)

Unconsolidated Fannie Mae MBS $ 5,167 $ 18 $ 4,939 $ 5,801 $ 26 $ 5,545 

Other guaranty arrangements(2) 12,163 115 2,455 12,670 128 2,553 

Total $ 17,330 $ 133 $ 7,394 $ 18,471 $ 154 $ 8,098 

(1) Recoverability of such credit enhancements and recourse is subject to, among other factors, our mortgage insurers’ and financial 

guarantors’ ability to meet their obligations to us. For information on our mortgage insurers, see “Note 10, Concentrations of Credit Risk.”

(2) Primarily consists of credit enhancements and long-term standby commitments.

Notes to Condensed Consolidated Financial Statements | Investments in Securities

Fannie Mae (In conservatorship) Second Quarter 2020 Form 10-Q 102
7. Short-Term and Long-Term Debt

Short-Term Debt

The following table displays our outstanding short-term debt (debt with an original contractual maturity of one year or less) and 

weighted-average interest rates of this debt.

As of

June 30, 2020 December 31, 2019

Outstanding

WeightedAverage 

Interest Rate(1) Outstanding

WeightedAverage 

Interest Rate(1)

(Dollars in millions)

Federal funds purchased and securities sold under 

agreements to repurchase(2) $ — — % $ 478 1.67 %

Short-term debt of Fannie Mae 42,250 0.28 26,662 1.56 

(1) Includes the effects of discounts, premiums and other cost basis adjustments.

(2) Represents agreements to repurchase securities for a specified price, with repayment generally occurring on the following day, reported as 

“Other liabilities” in our condensed consolidated balance sheets.

Intraday Lines of Credit

We use secured intraday funding lines of credit provided by large financial institutions. We post collateral which, in some 

circumstances, the secured party has the right to repledge to third parties. As these lines of credit are uncommitted intraday 

loan facilities, we may be unable to draw on them if and when needed. The lines of credit under these facilities was up to $20.0 

billion as of June 30, 2020 and $15.0 billion as of December 31, 2019.

Long-Term Debt

Long-term debt represents debt with an original contractual maturity of greater than one year. The following table displays our 

outstanding long-term debt.

As of

June 30, 2020 December 31, 2019

Maturities Outstanding

WeightedAverage 

Interest 

Rate(1) Maturities Outstanding

WeightedAverage 

Interest 

Rate(1)

(Dollars in millions)

Senior fixed: 

Benchmark notes and bonds 2020 - 2030 $ 91,587 2.53 % 2020 - 2030 $ 86,114 2.66 %

Medium-term notes(2) 2020 - 2027 19,263 1.26 2020 - 2026 32,590 1.57 

Other(3) 2020 - 2038 3,736 6.10 2020 - 2038 5,254 5.01 

Total senior fixed 114,586 2.44 123,958 2.47 

Senior floating:

Medium-term notes(2) 2020 - 2022 100,556 0.34 2020 - 2021 9,774 1.66 

Connecticut Avenue Securities(4) 2023 - 2031 17,789 4.31 2023 - 2031 21,424 5.61 

Other(5) 2037 433 5.09 2020 - 2037 398 6.27 

Total senior floating 118,778 0.95 31,596 4.40 

Secured borrowings(6) 2021 - 2022 23 2.80 2021 - 2022 31 2.31 

Total long-term debt of Fannie Mae(7) 233,387 1.68 155,585 2.86 

Debt of consolidated trusts 2020 - 2059 3,444,338 2.34 2020 - 2059 3,285,139 2.78 

Total long-term debt $ 3,677,725 2.30 % $ 3,440,724 2.78 %

(1) Includes the effects of discounts, premiums and other cost basis adjustments.

(2) Includes long-term debt with an original contractual maturity of greater than 1 year and up to 10 years, excluding zero-coupon debt.

(3) Includes other long-term debt with an original contractual maturity of greater than 10 years and foreign exchange bonds.

Notes to Condensed Consolidated Financial Statements | Short-Term and Long-Term Debt

Fannie Mae (In conservatorship) Second Quarter 2020 Form 10-Q 103
(4) Credit risk-sharing securities that transfer a portion of the credit risk on specified pools of single-family mortgage loans to the investors in 

these securities, a portion of which is reported at fair value. Represents CAS issued prior to November 2018. See “Note 2, Consolidations 

and Transfers of Financial Assets” in our 2019 Form 10-K for more information about our CAS structures issued beginning November 

2018.

(5) Consists of structured debt instruments that are reported at fair value.

(6) Represents our remaining liability resulting from the transfer of financial assets from our condensed consolidated balance sheets that did 

not qualify as a sale under the accounting guidance for the transfer of financial instruments.

(7) Includes unamortized discounts and premiums, other cost basis adjustments and fair value adjustments of $430 million and $2 million as 

of June 30, 2020 and December 31, 2019, respectively.

8. Derivative Instruments

Derivative instruments are an integral part of our strategy in managing interest-rate risk. Derivative instruments may be 

privately-negotiated, bilateral contracts, or they may be listed and traded on an exchange. We refer to our derivative 

transactions made pursuant to bilateral contracts as our over-the-counter (“OTC”) derivative transactions and our derivative 

transactions accepted for clearing by a derivatives clearing organization as our cleared derivative transactions. We typically do 

not settle the notional amount of our risk management derivatives; rather, notional amounts provide the basis for calculating 

actual payments or settlement amounts. The derivative contracts we use for interest-rate risk management purposes consist 

primarily of interest-rate swaps and interest-rate options. See “Note 8, Derivative Instruments” in our 2019 Form 10-K for 

additional information on interest-rate risk management.

We account for certain forms of credit risk transfer transactions as derivatives. In our credit risk transfer transactions, a portion 

of the credit risk associated with losses on a reference pool of mortgage loans is transferred to a third party. We enter into 

derivative transactions that are associated with some of our credit risk transfer transactions, whereby we manage investment 

risk to guarantee that certain unconsolidated VIEs have sufficient cash flows to pay their contractual obligations.

We enter into forward purchase and sale commitments that lock in the future delivery of mortgage loans and mortgage-related 

securities at a fixed price or yield. Certain commitments to purchase mortgage loans and purchase or sell mortgage-related 

securities meet the criteria of a derivative. We typically settle the notional amount of our mortgage commitments that are 

accounted for as derivatives.

We recognize all derivatives as either assets or liabilities in our condensed consolidated balance sheets at their fair value on a 

trade date basis. Fair value amounts, which are (1) netted to the extent a legal right of offset exists and is enforceable by law 

at the counterparty level and (2) inclusive of the right or obligation associated with the cash collateral posted or received, are 

recorded in “Other assets” or “Other liabilities” in our condensed consolidated balance sheets. See “Note 12, Fair Value” for 

additional information on derivatives recorded at fair value. We present cash flows from derivatives as operating activities in 

our condensed consolidated statements of cash flows.

Notes to Condensed Consolidated Financial Statements | Short-Term and Long-Term Debt

Fannie Mae (In conservatorship) Second Quarter 2020 Form 10-Q 104
Notional and Fair Value Position of our Derivatives

The following table displays the notional amount and estimated fair value of our asset and liability derivative instruments.

As of June 30, 2020 As of December 31, 2019

Asset Derivatives Liability Derivatives Asset Derivatives Liability Derivatives

Notional 

Amount

Estimated 

Fair Value

Notional 

Amount

Estimated 

Fair Value

Notional 

Amount

Estimated 

Fair Value

Notional 

Amount

Estimated 

Fair Value

(Dollars in millions)

Risk management derivatives:

Swaps:

Pay-fixed $ 98,953 $ — $ 28,553 $ (1,747) $ 41,052 $ — $ 29,178 $ (970) 

Receive-fixed 131,314 1,143 4,851 (3) 73,579 816 26,382 (62) 

Basis 250 222 — — 273 149 — — 

Foreign currency 215 32 217 (91) 229 39 232 (65) 

Swaptions:

Pay-fixed 4,600 6 5,875 (340) 4,600 18 6,375 (219) 

Receive-fixed 6,625 648 350 (134) 2,875 106 4,600 (232) 

Futures(1) 15,982 — — — 20,507 — — — 

Total gross risk management 

derivatives 257,939 2,051 39,846 (2,315) 143,115 1,128 66,767 (1,548) 

Accrued interest receivable 

 (payable) — 109 — (193) — 226 — (250) 

Netting adjustment(2) — (2,108) — 2,396 — (1,288) — 1,694 

Total net risk management 

derivatives $ 257,939 $ 52 $ 39,846 $ (112) $ 143,115 $ 66 $ 66,767 $ (104) 

Mortgage commitment derivatives:

Mortgage commitments to 

purchase whole loans $ 41,032 $ 175 $ 1,141 $ (1) $ 7,115 $ 15 $ 1,787 $ (1) 

Forward contracts to purchase 

mortgage-related securities 106,225 571 13,080 (21) 55,531 137 9,560 (28) 

Forward contracts to sell 

mortgage-related securities 12,131 21 212,592 (1,202) 9,282 13 109,066 (277) 

Total mortgage commitment 

derivatives 159,388 767 226,813 (1,224) 71,928 165 120,413 (306) 

Credit enhancement derivatives 24,334 85 11,159 (44) 28,432 40 9,486 (25) 

Derivatives at fair value $ 441,661 $ 904 $ 277,818 $ (1,380) $ 243,475 $ 271 $ 196,666 $ (435) 

(1) Futures have no ascribable fair value because the positions are settled daily.

(2) The netting adjustment represents the effect of the legal right to offset under legally enforceable master netting arrangements to settle with 

the same counterparty on a net basis, including cash collateral posted and received. Cash collateral posted was $1.2 billion and $1.0 

billion as of June 30, 2020 and December 31, 2019, respectively. Cash collateral received was $906 million and $635 million as of June 30, 

2020 and December 31, 2019, respectively.

Notes to Condensed Consolidated Financial Statements | Derivative Instruments

Fannie Mae (In conservatorship) Second Quarter 2020 Form 10-Q 105
We record all derivative gains and losses, including accrued interest, in “Fair value losses, net” in our condensed consolidated 

statements of operations and comprehensive income. The following table displays, by type of derivative instrument, the fair 

value gains and losses, net on our derivatives. 

For the Three Months 

Ended June 30,

For the Six Months Ended 

June 30,

2020 2019 2020 2019

(Dollars in millions)

Risk management derivatives:

Swaps:

Pay-fixed $ (94) $ (2,164) $ (4,123) $ (3,499) 

Receive-fixed 191 1,884 3,534 3,165 

Basis 17 27 73 51 

Foreign currency 4 (17) (34) 2 

Swaptions:

Pay-fixed (13) (143) (161) (320) 

Receive-fixed 25 93 657 100 

Futures (4) 195 (75) 254 

Net contractual interest expense on interest-rate swaps (64) (242) (170) (508) 

 Total risk management derivatives fair value gains (losses), net 62 (367) (299) (755) 

Mortgage commitment derivatives fair value losses, net (662) (469) (1,655) (769) 

Credit enhancement derivatives fair value gains (losses), net 31 (17) 20 (24) 

Total derivatives fair value losses, net $ (569) $ (853) $ (1,934) $ (1,548) 

Derivative Counterparty Credit Exposure

Our derivative counterparty credit exposure relates principally to interest-rate derivative contracts. We are exposed to the risk 

that a counterparty in a derivative transaction will default on payments due to us, which may require us to seek a replacement 

derivative from a different counterparty. This replacement may be at a higher cost, or we may be unable to find a suitable 

replacement. We manage our derivative counterparty credit exposure relating to our risk management derivative transactions 

mainly through enforceable master netting arrangements, which allow us to net derivative assets and liabilities with the same 

counterparty or clearing organization and clearing member. For our OTC derivative transactions, we require counterparties to 

post collateral, which may include cash, U.S. Treasury securities, agency debt and agency mortgage-related securities.

See “Note 11, Netting Arrangements” for information on our rights to offset assets and liabilities as of June 30, 2020 and 

December 31, 2019.

Notes to Condensed Consolidated Financial Statements | Derivative Instruments

Fannie Mae (In conservatorship) Second Quarter 2020 Form 10-Q 106
9. Segment Reporting

We have two reportable business segments, which are based on the type of business activities each perform: Single-Family 

and Multifamily. Results of our two business segments are intended to reflect each segment as if it were a stand-alone 

business. The sum of the results for our two business segments equals our condensed consolidated results of operations. 

Segment Allocations and Results

The majority of our revenues and expenses are directly associated with each respective business segment and are included in 

determining its operating results. Those revenues and expenses that are not directly attributable to a particular business 

segment are allocated based on the size of each segment’s guaranty book of business. The substantial majority of the gains 

and losses associated with our risk management derivatives are allocated to our Single-Family business segment.

The following tables display our segment results.

For the Three Months Ended June 30,

2020 2019

SingleFamily Multifamily TotalSingleFamily Multifamily Total

(Dollars in millions)

Net interest income(1) $ 4,939 $ 838 $ 5,777 $ 4,419 $ 808 $ 5,227 

Fee and other income(2) 71 19 90 88 25 113 

Net revenues 5,010 857 5,867 4,507 833 5,340 

Investment gains, net(3) 96 53 149 417 44 461 

Fair value gains (losses), net(4) (1,030) 12 (1,018) (758) 4 (754) 

Administrative expenses (625) (129) (754) (634) (110) (744) 

Credit-related income (expense)(5)

Benefit (provision) for credit losses 219 (231) (12) 1,252 (27) 1,225 

Foreclosed property expense (3) (7) (10) (126) (2) (128) 

Total credit-related income (expense) 216 (238) (22) 1,126 (29) 1,097 

TCCA fees(6) (660) — (660) (600) — (600) 

Credit enhancement expense(7) (307) (53) (360) (229) (47) (276) 

Change in expected credit enhancement 

recoveries(8) 208 65 273 — — — 

Other expenses, net (252) (9) (261) (189) (14) (203) 

Income before federal income taxes 2,656 558 3,214 3,640 681 4,321 

Provision for federal income taxes (556) (113) (669) (769) (120) (889) 

Net income $ 2,100 $ 445 $ 2,545 $ 2,871 $ 561 $ 3,432 

Notes to Condensed Consolidated Financial Statements | Segment Reporting

Fannie Mae (In conservatorship) Second Quarter 2020 Form 10-Q 107
For the Six Months Ended June 30,

2020 2019

SingleFamily Multifamily TotalSingleFamily Multifamily Total

(Dollars in millions)

Net interest income(1) $ 9,480 $ 1,644 $ 11,124 $ 8,458 $ 1,565 $ 10,023 

Fee and other income(2) 165 45 210 194 53 247 

Net revenues 9,645 1,689 11,334 8,652 1,618 10,270 

Investment gains (losses), net(3) (56) 47 (9) 511 83 594 

Fair value gains (losses), net(4) (1,490) 196 (1,294) (1,645) 60 (1,585) 

Administrative expenses (1,254) (249) (1,503) (1,265) (223) (1,488) 

Credit-related income (expense)(5)

Benefit (provision) for credit losses (1,953) (642) (2,595) 1,913 (38) 1,875 

Foreclosed property income (expense) (81) (9) (90) (269) 1 (268) 

Total credit-related income (expense) (2,034) (651) (2,685) 1,644 (37) 1,607 

TCCA fees(6) (1,297) — (1,297) (1,193) — (1,193) 

Credit enhancement expense(7) (623) (113) (736) (399) (93) (492) 

Change in expected credit enhancement 

recoveries(8) 266 195 461 — — — 

Other expenses, net (415) (64) (479) (356) (9) (365) 

Income before federal income taxes 2,742 1,050 3,792 5,949 1,399 7,348 

Provision for federal income taxes (574) (212) (786) (1,253) (263) (1,516) 

Net income $ 2,168 $ 838 $ 3,006 $ 4,696 $ 1,136 $ 5,832 

(1) Net interest income primarily consists of guaranty fees received as compensation for assuming and managing the credit risk on loans 

underlying Fannie Mae MBS held by third parties for the respective business segment, and the difference between the interest income 

earned on the respective business segment’s mortgage assets in our retained mortgage portfolio and the interest expense associated with 

the debt funding those assets. Revenues from single-family guaranty fees include revenues generated by the 10 basis point increase in 

guaranty fees pursuant to the TCCA, the incremental revenue from which is remitted to Treasury and not retained by us.

(2) Single-Family fee and other income primarily consists of compensation for engaging in structured transactions and providing other lender 

services. Multifamily fee and other income consists of fees associated with Multifamily business activities.

(3) Single-Family investment gains and losses primarily consist of gains and losses on the sale of mortgage assets. Multifamily investment 

gains and losses primarily consists of gains and losses on resecuritization activity. 

(4) Single-Family fair value gains and losses primarily consist of fair value gains and losses on risk management and mortgage commitment 

derivatives, trading securities, fair value option debt, and other financial instruments associated with our single-family guaranty book of 

business. Multifamily fair value gains and losses primarily consist of fair value gains and losses on MBS commitment derivatives, trading 

securities and other financial instruments associated with our multifamily guaranty book of business. 

(5) Credit-related income or expense is based on the guaranty book of business of the respective business segment and consists of the 

applicable segment’s benefit or provision for credit losses and foreclosed property income or expense on loans underlying the segment’s 

guaranty book of business. The presentation of our credit-related income or expense for the three and six months ended June 30, 2019

represents amounts recognized prior to our transition to the lifetime loss model prescribed by the CECL standard.

(6) Consists of the portion of our single-family guaranty fees that is remitted to Treasury pursuant to the TCCA.

(7) Single-family credit enhancement expense consists of costs associated with our freestanding credit enhancements, which include primarily 

costs associated with our CIRT, CAS and EPMI programs. Multifamily credit enhancement expense primarily consists of costs associated 

with our MCIRT and MCAS programs as well as amortization expense for certain lender risk-sharing programs. Excludes CAS transactions 

accounted for as debt instruments and credit risk transfer programs accounted for as derivative instruments.

(8) Consists of change in benefits recognized from our freestanding credit enhancements, primarily from our CAS and CIRT programs as well 

as certain lender risk-sharing arrangements, including our multifamily DUS program. See “Note 1, Summary of Significant Accounting 

Policies” for more information about our change in presentation.

Notes to Condensed Consolidated Financial Statements | Segment Reporting

Fannie Mae (In conservatorship) Second Quarter 2020 Form 10-Q 108
10. Concentrations of Credit Risk

Risk Characteristics of our Guaranty Book of Business

One of the measures by which we gauge our performance risk is the delinquency status of the mortgage loans in our guaranty 

book of business. 

For single-family and multifamily loans, we use this information, in conjunction with housing market and economic conditions, 

to structure our pricing and our eligibility and underwriting criteria to reflect the current risk of loans with higher-risk 

characteristics, and in some cases we decide to significantly reduce our participation in riskier loan product categories. 

Management also uses this data together with other credit risk measures to identify key trends that guide the development of 

our loss mitigation strategies.

We report the delinquency status of our single-family and multifamily guaranty book of business below. We report loans 

receiving COVID-19-related payment forbearance as delinquent according to the contractual terms of the loans.

Single-Family Credit Risk Characteristics

For single-family loans, management monitors the serious delinquency rate, which is the percentage of single-family loans, 

based on the number of loans that are 90 days or more past due or in the foreclosure process, and loans that have higher risk 

characteristics, such as high mark-to-market LTV ratios.

The following tables display the delinquency status and serious delinquency rates for specified loan categories of our singlefamily conventional guaranty book of business.

As of

June 30, 2020 December 31, 2019

30 Days 

Delinquent

60 Days 

Delinquent

Seriously 

Delinquent(1)

30 Days 

Delinquent

60 Days 

Delinquent

Seriously 

Delinquent(1)

Percentage of single-family 

conventional guaranty book of 

business based on UPB 1.45 % 1.85 % 3.04 % 1.07 % 0.29 % 0.59 %

Percentage of single-family 

conventional loans based on 

loan count 1.47 1.60 2.65 1.27 0.35 0.66 

As of

June 30, 2020 December 31, 2019

Percentage of 

Single-Family

Conventional

Guaranty Book 

of Business

Based on UPB

Seriously 

Delinquent 

Rate(1)

Percentage of 

Single-Family

Conventional

Guaranty Book 

of Business

Based on UPB

Seriously 

Delinquent 

Rate(1)

Estimated mark-to-market LTV ratio:

Greater than 100% * 18.12 % * 10.14 %

Geographical distribution:

California 19 % 2.54 19 % 0.32 

Florida 6 3.98 6 0.84 

Illinois 4 2.71 4 0.91 

New Jersey 3 4.81 3 1.13 

New York 5 4.96 5 1.18 

All other states 63 2.30 63 0.64 

Product distribution:

Alt-A 1 8.07 2 2.95 

Vintages:

2004 and prior 2 5.00 2 2.48 

2005-2008 3 8.37 4 4.11 

2009-2020 95 2.21 94 0.35 

* Represents less than 0.5% of single-family conventional guaranty book of business.

Notes to Condensed Consolidated Financial Statements | Concentrations of Credit Risk

Fannie Mae (In conservatorship) Second Quarter 2020 Form 10-Q 109
(1) Based on loan count, consists of single-family conventional loans that were 90 days or more past due or in the foreclosure process as of 

June 30, 2020 or December 31, 2019. 

Multifamily Credit Risk Characteristics

For multifamily loans, management monitors the serious delinquency rate, which is the percentage of multifamily loans, based 

on unpaid principal balance, that are 60 days or more past due, and other loans that have higher risk characteristics, to assess 

the overall credit quality of our multifamily book of business. Higher risk characteristics include, but are not limited to, current 

DSCR below 1.0 and original LTV ratios greater than 80%. We stratify multifamily loans into different internal risk categories 

based on the credit risk inherent in each individual loan.

The following tables display the delinquency status and serious delinquency rates for specified loan categories of our 

multifamily guaranty book of business.

As of

June 30, 2020(1) December 31, 2019(1)

30 Days 

Delinquent

Seriously 

Delinquent(2)

30 Days 

Delinquent

Seriously 

Delinquent(2)

Percentage of multifamily guaranty book of business 0.32% 1.00 % 0.02 % 0.04 %

As of

June 30, 2020 December 31, 2019

Percentage of 

Multifamily 

Guaranty Book 

of Business(1)

Percentage 

Seriously 

Delinquent(2)(3)

Percentage of 

Multifamily 

Guaranty Book 

of Business(1)

Percentage 

Seriously 

Delinquent(2)(3)

Original LTV ratio:

Greater than 80% 1 % 0.39 % 1 % — %

Less than or equal to 80% 99 1.01 99 0.04 

Current DSCR below 1.0(4) 2 22.91 2 0.48 

(1) Calculated based on the aggregate unpaid principal balance of multifamily loans for each category divided by the aggregate unpaid 

principal balance of loans in our multifamily guaranty book of business.

(2) Consists of multifamily loans that were 60 days or more past due as of the dates indicated.

(3) Calculated based on the unpaid principal balance of multifamily loans that were seriously delinquent divided by the aggregate unpaid 

principal balance of multifamily loans for each category included in our multifamily guaranty book of business.

(4) Our estimates of current DSCRs are based on the latest available income information for these properties. Although we use the most 

recently available results of our multifamily borrowers, there is a lag in reporting, which typically can range from 3 to 6 months but in some 

cases may be longer. As a result, the financial statements we have received from borrowers to date have largely not reflected the impact of 

COVID-19. For certain properties, we do not receive updated financial information. 

Other Concentrations

Mortgage Insurers. Mortgage insurance “risk in force” refers to our maximum potential loss recovery under the applicable 

mortgage insurance policies in force and is generally based on the loan-level insurance coverage percentage and, if 

applicable, any aggregate pool loss limit, as specified in the policy.

The following table displays our total mortgage insurance risk in force by primary and pool insurance, as well as the total riskin-force mortgage insurance coverage as a percentage of the single-family conventional guaranty book of business.

As of

June 30, 2020 December 31, 2019

Risk in Force

Percentage of 

Single-Family 

Guaranty Book 

of Business Risk in Force

Percentage of 

Single-Family 

Guaranty Book 

of Business

(Dollars in millions)

Mortgage insurance risk in force:

Primary mortgage insurance $ 165,871 $ 162,855 

Pool mortgage insurance 301 339 

Total mortgage insurance risk in force $ 166,172 5% $ 163,194 6%

Notes to Condensed Consolidated Financial Statements | Concentrations of Credit Risk

Fannie Mae (In conservatorship) Second Quarter 2020 Form 10-Q 110
Mortgage insurance does not protect us from all losses on covered loans. For example, mortgage insurance does not cover us 

from default risk for properties that suffered damages that were not covered by the hazard insurance we require. Specifically, a 

property damaged by a flood that was outside a Federal Emergency Management Agency (“FEMA”)-identified Special Flood 

Hazard Area, where we require coverage, or a property damaged by an earthquake are the most likely scenarios where 

property damage may result in a default not covered by hazard insurance.

The table below displays our mortgage insurer counterparties that provided approximately 10% or more of the risk-in-force 

mortgage insurance coverage on mortgage loans in our single-family conventional guaranty book of business. 

Percentage of Risk-in-Force Coverage

by Mortgage Insurer

As of

June 30, 2020 December 31, 2019

Counterparty:(1)

Arch Capital Group Ltd. 22 % 23 %

Radian Guaranty, Inc. 20 20 

Mortgage Guaranty Insurance Corp. 18 18 

Genworth Mortgage Insurance Corp.(2) 16 15 

Essent Guaranty, Inc. 14 14 

Others 10 10 

Total 100 % 100 %

(1) Insurance coverage amounts provided for each counterparty may include coverage provided by affiliates and subsidiaries of the 

counterparty.

(2) Genworth Financial, Inc., the ultimate parent company of Genworth Mortgage Insurance Corp., is in the process of being acquired by 

China Oceanwide Holdings Group Co., Ltd. Upon acquisition, Genworth Mortgage Insurance Corp. will continue to be subject to our 

ongoing review of financial and operational eligibility requirements.

Three of our mortgage insurer counterparties that are currently not approved to write new business are in run-off: PMI 

Mortgage Insurance Co. (“PMI”), Triad Guaranty Insurance Corporation (“Triad”) and Republic Mortgage Insurance Company 

(”RMIC”). Entering run-off may close off a source of profits and liquidity that may have otherwise assisted a mortgage insurer in 

paying claims under insurance policies, and could also cause the quality and speed of its claims processing to deteriorate. 

These three mortgage insurers provided a combined $2.9 billion, or 2%, of the risk-in-force mortgage insurance coverage of 

our single-family conventional guaranty book of business as of June 30, 2020. 

PMI and Triad have been paying only a portion of policyholder claims and deferring the remaining portion. PMI is currently 

paying 76.5% of claims under its mortgage insurance policies in cash and is deferring the remaining 23.5%, and Triad is 

currently paying 75% of claims in cash and deferring the remaining 25%. It is uncertain whether PMI or Triad will be permitted 

in the future to pay any remaining deferred policyholder claims and/or increase or decrease the amount of cash they pay on 

claims. RMIC is no longer deferring payments on policyholder claims and has paid us its previously outstanding deferred 

payment obligations as well as interest on those obligations; however, RMIC remains in run-off.

We have counterparty credit risk relating to the potential insolvency of, or non-performance by, mortgage insurers that insure 

single-family loans we purchase or guarantee. There is risk that these counterparties may fail to fulfill their obligations to pay 

our claims under insurance policies. On at least a quarterly basis, we assess our mortgage insurer counterparties’ respective 

abilities to fulfill their obligations to us. Our assessment includes financial reviews and analyses of the insurers’ portfolios and 

capital adequacy. If we determine that it is probable that we will not collect all of our claims from one or more of our mortgage 

insurer counterparties, it could increase our loss reserves, which could adversely affect our results of operations, liquidity, 

financial condition and net worth.

When we estimate the credit losses that are inherent in our mortgage loans and under the terms of our guaranty obligations, 

we also consider the recoveries that we will receive on primary mortgage insurance, as mortgage insurance recoveries would 

reduce the severity of the loss associated with defaulted loans. We evaluate the financial condition of our mortgage insurer 

counterparties and adjust the contractually due recovery amounts to ensure that expected credit losses as of the balance 

sheet date are included in our loss reserve estimate. As a result, if our assessment of one or more of our mortgage insurer 

counterparties’ ability to fulfill their respective obligations to us worsens, it could increase our loss reserves. As of June 30, 

2020 and December 31, 2019, our estimated benefit from mortgage insurance, which is based on estimated credit losses as of 

period end, reduced our loss reserves by $2.0 billion and $410 million, respectively. 

As of June 30, 2020 and December 31, 2019, we had outstanding receivables of $578 million and $654 million, respectively, 

recorded in “Other assets” in our condensed consolidated balance sheets related to amounts claimed on insured, defaulted 

loans excluding government-insured loans. As of June 30, 2020 and December 31, 2019, we assessed these outstanding 

Notes to Condensed Consolidated Financial Statements | Concentrations of Credit Risk

Fannie Mae (In conservatorship) Second Quarter 2020 Form 10-Q 111
receivables for collectability, and established a valuation allowance of $500 million and $541 million, respectively, which 

reduced our claim receivable to the amount considered probable of collection.

Mortgage Servicers and Sellers. Mortgage servicers collect mortgage and escrow payments from borrowers, pay taxes and 

insurance costs from escrow accounts, monitor and report delinquencies, and perform other required activities on our behalf. 

Our mortgage servicers and sellers may also be obligated to repurchase loans or foreclosed properties, reimburse us for 

losses or provide other remedies under certain circumstances, such as if it is determined that the mortgage loan did not meet 

our underwriting or eligibility requirements, if certain loan representations and warranties are violated or if mortgage insurers 

rescind coverage. Our representation and warranty framework does not require repurchase for loans that have breaches of 

certain selling representations and warranties if they have met specified criteria for relief.

Our business with mortgage servicers is concentrated. The table below displays the percentage of our single-family guaranty 

book of business serviced by our top five depository single-family mortgage servicers and top five non-depository single-family 

mortgage servicers (i.e., servicers that are not insured depository institutions), and identifies one servicer that serviced more 

than 10% of our single-family guaranty book of business based on unpaid principal balance.

Percentage of Single-Family

Guaranty Book of Business

As of

June 30, 2020 December 31, 2019

Wells Fargo Bank, N.A. (together with its affiliates) 16 % 17 %

Remaining top five depository servicers 13 15 

Top five non-depository servicers 27 27 

Total 56 % 59 %

Compared with depository financial institutions, our non-depository servicers pose additional risks because they may not have 

the same financial strength or operational capacity, or be subject to the same level of regulatory oversight as depository 

financial institutions.

The table below displays the percentage of our multifamily guaranty book of business serviced by our top five multifamily 

mortgage servicers, and identifies two servicers that serviced 10% or more of our multifamily guaranty book of business based 

on unpaid principal balance. 

Percentage of Multifamily

Guaranty Book of Business

As of

June 30, 2020 December 31, 2019

Wells Fargo Bank, N.A. (together with its affiliates) 13 % 13 %

Walker & Dunlop, Inc. 12 12 

Remaining top five servicers 23 23 

Total 48 % 48 %

If a significant mortgage servicer or seller counterparty, or a number of mortgage servicers or sellers, fails to meet their 

obligations to us, it could adversely affect our results of operations and financial condition. We mitigate these risks in several 

ways, including: 

• establishing minimum standards and financial requirements for our servicers;

• monitoring financial and portfolio performance as compared with peers and internal benchmarks; and

• for our largest mortgage servicers, conducting periodic on-site and financial reviews to confirm compliance with 

servicing guidelines and servicing performance expectations.

We may take one or more of the following actions to mitigate our credit exposure to mortgage servicers that present a higher 

risk:

• require a guaranty of obligations by higher-rated entities;

• transfer exposure to third parties;

• require collateral;

• establish more stringent financial requirements;

• work with underperforming major servicers to improve operational processes; and

• suspend or terminate the selling and servicing relationship if deemed necessary.

Derivative Counterparties. For information on credit risk associated with our derivative transactions and repurchase 

agreements see “Note 8, Derivative Instruments” and “Note 11, Netting Arrangements.”

Notes to Condensed Consolidated Financial Statements | Concentrations of Credit Risk

Fannie Mae (In conservatorship) Second Quarter 2020 Form 10-Q 112
11. Netting Arrangements

We use master netting arrangements, which allow us to offset certain financial instruments and collateral with the same 

counterparty, to minimize counterparty credit exposure. The tables below display information related to derivatives, securities 

purchased under agreements to resell or similar arrangements, and securities sold under agreements to repurchase or similar 

arrangements, which are subject to an enforceable master netting arrangement or similar agreement that are either offset or 

not offset in our condensed consolidated balance sheets.

As of June 30, 2020

Gross 

Amount 

Offset(1)

Net Amount 

Presented in 

our Condensed 

Consolidated 

Balance Sheets

Amounts Not Offset in our 

Condensed Consolidated 

Balance Sheets

Gross 

Amount

Financial 

Instruments(2) Collateral(3)

Net 

Amount

(Dollars in millions)

Assets:

OTC risk management derivatives $ 2,160 $ (2,156) $ 4 $ — $ — $ 4 

Cleared risk management derivatives — 48 48 — — 48 

Mortgage commitment derivatives 767 — 767 (268) (28) 471 

Total derivative assets 2,927 (2,108) 819 (4) (268) (28) 523 

Securities purchased under agreements to 

resell or similar arrangements(5) 38,725 — 38,725 — (38,725) — 

Total assets $ 41,652 $ (2,108) $ 39,544 $ (268) $ (38,753) $ 523 

Liabilities:

OTC risk management derivatives $ (2,508) $ 2,400 $ (108) $ — $ — $ (108) 

Cleared risk management derivatives — (4) (4) — 4 — 

Mortgage commitment derivatives (1,224) — (1,224) 268 934 (22) 

Total derivative liabilities (3,732) 2,396 (1,336) (4) 268 938 (130) 

Total liabilities $ (3,732) $ 2,396 $ (1,336) $ 268 $ 938 $ (130) 

As of December 31, 2019

Gross 

Amount 

Offset(1)

Net Amount 

Presented in 

our Condensed 

Consolidated 

Balance Sheets

Amounts Not Offset in our 

Condensed Consolidated 

Balance Sheets

Gross 

Amount

Financial 

Instruments(2) Collateral(3)

Net 

Amount

(Dollars in millions)

Assets:

OTC risk management derivatives $ 1,354 $ (1,334) $ 20 $ — $ — $ 20 

Cleared risk management derivatives — 46 46 — — 46 

Mortgage commitment derivatives 165 — 165 (101) (1) 63 

Total derivative assets 1,519 (1,288) 231 (4) (101) (1) 129 

Securities purchased under agreements to 

resell or similar arrangements(5) 24,928 — 24,928 — (24,928) — 

Total assets $ 26,447 $ (1,288) $ 25,159 $ (101) $ (24,929) $ 129 

Liabilities:

OTC risk management derivatives $ (1,798) $ 1,695 $ (103) $ — $ — $ (103) 

Cleared risk management derivatives — (1) (1) — 1 — 

Mortgage commitment derivatives (306) — (306) 101 181 (24) 

Total derivative liabilities (2,104) 1,694 (410) (4) 101 182 (127) 

Securities sold under agreements to 

repurchase or similar arrangements (478) — (478) — 475 (3) 

Total liabilities $ (2,582) $ 1,694 $ (888) $ 101 $ 657 $ (130) 

Notes to Condensed Consolidated Financial Statements | Netting Arrangements

Fannie Mae (In conservatorship) Second Quarter 2020 Form 10-Q 113
(1) Represents the effect of the right to offset under legally enforceable master netting arrangements to settle with the same counterparty on a 

net basis, including cash collateral posted and received and accrued interest.

(2) Mortgage commitment derivative amounts reflect where we have recognized both an asset and a liability with the same counterparty under 

an enforceable master netting arrangement but we have not elected to offset the related amounts in our condensed consolidated balance 

sheets.

(3) Represents collateral received that has not been recognized and not offset in our condensed consolidated balance sheets as well as 

collateral posted which has been recognized but not offset in our condensed consolidated balance sheets. Does not include collateral held 

or posted in excess of our exposure. The fair value of non-cash collateral we pledged which the counterparty was permitted to sell or 

repledge was $4.9 billion and $2.3 billion as of June 30, 2020 and December 31, 2019, respectively. The fair value of non-cash collateral 

received was $38.7 billion and $24.7 billion, of which $38.0 billion and $23.8 billion could be sold or repledged as of June 30, 2020 and 

December 31, 2019, respectively. None of the underlying collateral was sold or repledged as of June 30, 2020 or December 31, 2019. 

(4) Excludes derivative assets of $85 million and $40 million as of June 30, 2020 and December 31, 2019, respectively, and derivative 

liabilities of $44 million and $25 million recognized in our condensed consolidated balance sheets as of June 30, 2020 and December 31, 

2019, respectively, that are not subject to enforceable master netting arrangements.

(5) Includes $13.3 billion and $11.4 billion in securities purchased under agreements to resell classified as “Cash and cash equivalents” in our 

condensed consolidated balance sheets as of June 30, 2020 and December 31, 2019, respectively.

Derivative instruments are recorded at fair value and securities purchased under agreements to resell or similar arrangements 

are recorded at amortized cost in our condensed consolidated balance sheets. For how we determine our rights to offset the 

assets and liabilities presented above with the same counterparty, including collateral posted or received, see “Note 14, 

Netting Arrangements” in our 2019 Form 10-K.

12. Fair Value

We use fair value measurements for the initial recording of certain assets and liabilities and periodic remeasurement of certain 

assets and liabilities on a recurring or nonrecurring basis. 

Fair Value Measurement

Fair value measurement guidance defines fair value, establishes a framework for measuring fair value, and sets forth 

disclosures around fair value measurements. This guidance applies whenever other accounting guidance requires or permits 

assets or liabilities to be measured at fair value. The guidance establishes a three-level fair value hierarchy that prioritizes the 

inputs into the valuation techniques used to measure fair value. The hierarchy gives the highest priority, Level 1, to 

measurements based on unadjusted quoted prices in active markets for identical assets or liabilities. The next highest priority, 

Level 2, is given to measurements of assets and liabilities based on limited observable inputs or observable inputs for similar 

assets and liabilities. The lowest priority, Level 3, is given to measurements based on unobservable inputs. 

Notes to Condensed Consolidated Financial Statements | Netting Arrangements

Fannie Mae (In conservatorship) Second Quarter 2020 Form 10-Q 114
Recurring Changes in Fair Value 

The following tables display our assets and liabilities measured in our condensed consolidated balance sheets at fair value on 

a recurring basis subsequent to initial recognition, including instruments for which we have elected the fair value option. 

Fair Value Measurements as of June 30, 2020

Quoted Prices in 

Active Markets for 

Identical Assets 

(Level 1)

Significant 

Other 

Observable 

Inputs

(Level 2)

Significant 

Unobservable 

Inputs

(Level 3)

Netting 

Adjustment(1)

Estimated 

Fair Value

(Dollars in millions)

Recurring fair value measurements:

Assets:

Cash equivalents(2) $ 7,667 $ — $ — $ — $ 7,667 

Trading securities:

Mortgage-related securities:

Fannie Mae — 7,015 38 — 7,053 

Other agency — 3,122 — — 3,122 

Private-label and other mortgage securities — 361 98 — 459 

Non-mortgage-related securities:

U.S. Treasury securities 96,037 — — — 96,037 

Other securities — 73 — — 73 

Total trading securities 96,037 10,571 136 — 106,744 

Available-for-sale securities:

Mortgage-related securities:

Fannie Mae — 948 446 — 1,394 

Other agency — 180 — — 180 

Alt-A and subprime private-label securities — 5 2 — 7 

Mortgage revenue bonds — — 278 — 278 

Other — 7 254 — 261 

Total available-for-sale securities — 1,140 980 — 2,120 

Mortgage loans — 6,506 797 — 7,303 

Other assets:

Risk management derivatives:

Swaps — 1,277 229 — 1,506 

Swaptions — 654 — — 654 

Netting adjustment — — — (2,108) (2,108) 

Mortgage commitment derivatives — 767 — — 767 

Credit enhancement derivatives — — 85 — 85 

Total other assets — 2,698 314 (2,108) 904 

Total assets at fair value $ 103,704 $ 20,915 $ 2,227 $ (2,108) $ 124,738 

Liabilities:

Long-term debt:

Of Fannie Mae:

Senior floating $ — $ 4,113 $ 433 $ — $ 4,546 

Total of Fannie Mae — 4,113 433 — 4,546 

Of consolidated trusts — 23,794 89 — 23,883 

Total long-term debt — 27,907 522 — 28,429 

Other liabilities:

Risk management derivatives:

Swaps — 2,033 1 — 2,034 

Swaptions — 474 — — 474 

Netting adjustment — — — (2,396) (2,396) 

Mortgage commitment derivatives — 1,224 — — 1,224 

Credit enhancement derivatives — — 44 — 44 

Total other liabilities — 3,731 45 (2,396) 1,380 

Total liabilities at fair value $ — $ 31,638 $ 567 $ (2,396) $ 29,809 

Notes to Condensed Consolidated Financial Statements | Fair Value

Fannie Mae (In conservatorship) Second Quarter 2020 Form 10-Q 115
Fair Value Measurements as of December 31, 2019

Quoted Prices in 

Active Markets for 

Identical Assets 

(Level 1)

Significant 

Other 

Observable 

Inputs

(Level 2)

Significant 

Unobservable 

Inputs 

(Level 3)

Netting 

Adjustment(1)

Estimated 

Fair Value

(Dollars in millions)

Recurring fair value measurements:

Assets:

Trading securities:

Mortgage-related securities:

Fannie Mae $ — $ 3,379 $ 45 $ — $ 3,424 

Other agency — 4,489 1 — 4,490 

Private-label and other mortgage securities — 629 — — 629 

Non-mortgage-related securities:

U.S. Treasury securities 39,501 — — — 39,501 

Other securities — 79 — — 79 

Total trading securities 39,501 8,576 46 — 48,123 

Available-for-sale securities:

Mortgage-related securities:

Fannie Mae — 1,349 171 — 1,520 

Other agency — 198 — — 198 

Alt-A and subprime private-label securities — 57 — — 57 

Mortgage revenue bonds — — 315 — 315 

Other — 8 306 — 314 

Total available-for-sale securities — 1,612 792 — 2,404 

Mortgage loans — 7,137 688 — 7,825 

Other assets:

Risk management derivatives:

Swaps — 1,071 159 — 1,230 

Swaptions — 124 — — 124 

Netting adjustment — — — (1,288) (1,288) 

Mortgage commitment derivatives — 165 — — 165 

Credit enhancement derivatives — — 40 — 40 

Total other assets — 1,360 199 (1,288) 271 

Total assets at fair value $ 39,501 $ 18,685 $ 1,725 $ (1,288) $ 58,623 

Liabilities:

Long-term debt:

Of Fannie Mae:

Senior floating $ — $ 5,289 $ 398 $ — $ 5,687 

Total of Fannie Mae — 5,289 398 — 5,687 

Of consolidated trusts — 21,805 75 — 21,880 

Total long-term debt — 27,094 473 — 27,567 

Other liabilities:

Risk management derivatives:

Swaps — 1,346 1 — 1,347 

Swaptions — 440 11 — 451 

Netting adjustment — — — (1,694) (1,694) 

Mortgage commitment derivatives — 306 — — 306 

Credit enhancement derivatives — — 25 — 25 

Total other liabilities — 2,092 37 (1,694) 435 

Total liabilities at fair value $ — $ 29,186 $ 510 $ (1,694) $ 28,002 

(1) Derivative contracts are reported on a gross basis by level. The netting adjustment represents the effect of the legal right to offset under 

legally enforceable master netting arrangements to settle with the same counterparty on a net basis, including cash collateral posted and 

received.

(2) Cash equivalents are comprised of U.S. Treasuries that have a maturity at the date of acquisition of three months or less.

Notes to Condensed Consolidated Financial Statements | Fair Value

Fannie Mae (In conservatorship) Second Quarter 2020 Form 10-Q 116
The following tables display a reconciliation of all assets and liabilities measured at fair value on a recurring basis using 

significant unobservable inputs (Level 3). The tables also display gains and losses due to changes in fair value, including 

realized and unrealized gains and losses, recognized in our condensed consolidated statements of operations and 

comprehensive income for Level 3 assets and liabilities. 

Fair Value Measurements Using Significant Unobservable Inputs (Level 3)

For the Three Months Ended June 30, 2020

Total Gains (Losses)

(Realized/Unrealized) 

Net 

Unrealized 

Gains 

(Losses) 

Included in 

Net Income 

Related to 

Assets and 

Liabilities 

Still Held as 

of June 30, 

2020(4)(5)

Net 

Unrealized 

Gains 

(Losses) 

Included in 

OCI Related 

to Assets and 

Liabilities 

Still Held as 

of June 30, 

2020(1)

Balance, 

March 31, 

2020

Included 

in Net 

Income

Included 

in Total 

OCI Gain/

(Loss)(1) Purchases(2) Sales(2) Issues(3) Settlements(3)

Transfers 

out of 

Level 3

Transfers 

into 

Level 3

Balance, 

June 30, 

2020

(Dollars in millions)

Trading securities:

Mortgage-related:

Fannie Mae $ 68 $ — $ — $ — $ — $ — $ — $ (34) $ 4 $ 38 $ — $ — 

Private-label and 

other mortgage 

securities 94 7 — — — — (3) — — 98 5 — 

Total trading securities $ 162 $ 7 (5)(6) $ — $ — $ — $ — $ (3) $ (34) $ 4 $ 136 $ 5 $ — 

Available-for-sale 

securities:

Mortgage-related:

Fannie Mae $ 188 $ — $ (4) $ — $ — $ — $ (2) $ — $ 264 $ 446 $ — $ (3) 

Alt-A and 

subprime 

private-label 

securities — — — — — — — — 2 2 — — 

Mortgage revenue 

bonds 296 — 1 — — — (19) — — 278 — 1 

Other 284 (3) — — — — (27) — — 254 — — 

Total available-for-sale 

securities $ 768 $ (3) 

(5)(6)

$ (3) $ — $ — $ — $ (48) $ — $ 266 $ 980 $ — $ (2) 

Mortgage loans $ 638 $ 15 (5)(6) $ — $ — $ — $ — $ (25) $ (21) $ 190 $ 797 $ 12 $ — 

Net derivatives 217 49 (5) — — — — 3 — — 269 52 — 

Long-term debt:

Of Fannie Mae:

Senior floating (432) (24) (5) — — — — 23 — — (433) (24) — 

Of consolidated 

trusts (83) (3) 

(5)(6)

 — — — — 4 1 (8) (89) (2) — 

Total long-term debt $ (515) $ (27) $ — $ — $ — $ — $ 27 $ 1 $ (8) $ (522) $ (26) $ — 

Notes to Condensed Consolidated Financial Statements | Fair Value

Fannie Mae (In conservatorship) Second Quarter 2020 Form 10-Q 117
Fair Value Measurements Using Significant Unobservable Inputs (Level 3)

For the Six Months Ended June 30, 2020

Total Gains (Losses)

(Realized/Unrealized) 

Net 

Unrealized 

Gains 

(Losses) 

Included in 

Net Income 

Related to 

Assets and 

Liabilities 

Still Held as 

of June 30, 

2020(4)(5)

Net 

Unrealized 

Gains 

(Losses) 

Included in 

OCI Related 

to Assets 

and 

Liabilities 

Still Held as 

of June 30, 

2020(1)

Balance, 

December 31, 

2019

Included 

in Net 

Income

Included 

in Total 

OCI Gain/

(Loss)(1) Purchases(2) Sales(2) Issues(3) Settlements(3)

Transfers 

out of 

Level 3

Transfers 

into 

Level 3

Balance, 

June 30, 

2020

(Dollars in millions)

Trading securities:

Mortgage-related:

Fannie Mae $ 45 $ (9) $ — $ — $ — $ — $ — $ (45) $ 47 $ 38 $ (8) $ — 

Other agency 1 — — — — — — (1) — — — — 

Private-label and 

other mortgage 

securities — 7 — — — — (3) — 94 98 — — 

Total trading securities $ 46 $ (2) (5)(6) $ — $ — $ — $ — $ (3) $ (46) $ 141 $ 136 $ (8) $ — 

Available-for-sale 

securities:

Mortgage-related:

Fannie Mae $ 171 $ — $ — $ — $ — $ — $ (3) $ — $ 278 $ 446 $ — $ — 

Alt-A and 

subprime 

private-label 

securities — — — — — — — — 2 2 — — 

Mortgage revenue 

bonds 315 (3) 3 74 (74) — (37) — — 278 — 5 

Other 306 (14) (1) 268 (268) — (37) — — 254 — (1) 

Total available-for-sale 

securities $ 792 $ (17) 

(6)(7)

$ 2 $ 342 $ (342) $ — $ (77) $ — $ 280 $ 980 $ — $ 4 

Mortgage loans $ 688 $ (9) (5)(6) $ — $ — $ — $ — $ (54) $ (44) $ 216 $ 797 $ (14) $ — 

Net derivatives 162 90 (5) — — — — (1) 18 — 269 96 — 

Long-term debt:

Of Fannie Mae:

Senior floating (398) (58) (5) — — — — 23 — — (433) (58) — 

Of consolidated 

trusts (75) 1 

(5)(6)

 — — — — 7 1 (23) (89) 2 — 

Total long-term debt $ (473) $ (57) $ — $ — $ — $ — $ 30 $ 1 $ (23) $ (522) $ (56) $ — 

Notes to Condensed Consolidated Financial Statements | Fair Value

Fannie Mae (In conservatorship) Second Quarter 2020 Form 10-Q 118
Fair Value Measurements Using Significant Unobservable Inputs (Level 3)

For the Three Months Ended June 30, 2019

Total Gains (Losses)

(Realized/Unrealized) 

Net 

Unrealized 

Gains 

(Losses) 

Included in 

Net Income 

Related to 

Assets and 

Liabilities 

Still Held as 

of June 30, 

2019(4)(5)

Net 

Unrealized 

Gains 

(Losses) 

Included in 

OCI Related 

to Assets and 

Liabilities 

Still Held as 

of June 30, 

2019(1)

Balance, 

March 31, 

2019

Included 

in Net 

Income

Included 

in Total 

OCI Gain/

(Loss)(1) Purchases(2) Sales(2) Issues(3) Settlements(3)

Transfers 

out of 

Level 3

Transfers 

into 

Level 3

Balance, 

June 30, 

2019

(Dollars in millions)

Trading securities:

Mortgage-related:

Fannie Mae $ 67 $ 1 $ — $ — $ (14) $ — $ (16) $ — $ 36 $ 74 $ 2 $ — 

Total trading securities $ 67 $ 1 (5)(6) $ — $ — $ (14) $ — $ (16) $ — $ 36 $ 74 $ 2 $ — 

Available-for-sale 

securities:

Mortgage-related:

Fannie Mae $ 199 $ — $ 2 $ — $ — $ — $ (7) $ (62) $ — $ 132 $ — $ 3 

Alt-A and 

subprime 

private-label 

securities 23 5 (5) — (23) — — — — — — — 

Mortgage revenue 

bonds 425 — (1) — (4) — (56) — — 364 — — 

Other 337 5 (5) — — — (9) (2) — 326 — (3) 

Total available-for-sale 

securities $ 984 $ 10 

(6)(7)

$ (9) $ — $ (27) $ — $ (72) $ (64) $ — $ 822 $ — $ — 

Mortgage loans $ 934 $ 17 (5)(6) $ — $ — $ (13) $ — $ (36) $ (159) $ 27 $ 770 $ 14 $ — 

Net derivatives 203 20 (5) — — — — (31) (9) — 183 18 — 

Long-term debt:

Of Fannie Mae:

Senior floating (376) (22) (5) — — — — — — — (398) (22) — 

Of consolidated 

trusts (224) (1) 

(5)(6)

 — — — — 5 120 (2) (102) (1) — 

Total long-term debt $ (600) $ (23) $ — $ — $ — $ — $ 5 $ 120 $ (2) $ (500) $ (23) $ — 

Notes to Condensed Consolidated Financial Statements | Fair Value

Fannie Mae (In conservatorship) Second Quarter 2020 Form 10-Q 119
Fair Value Measurements Using Significant Unobservable Inputs (Level 3)

For the Six Months Ended June 30, 2019

Total Gains (Losses)

(Realized/Unrealized) 

Net 

Unrealized 

Gains 

(Losses) 

Included in 

Net Income 

Related to 

Assets and 

Liabilities 

Still Held as 

of June 30, 

2019(4)(5)

Net 

Unrealized 

Gains 

(Losses) 

Included in 

OCI Related 

to Assets and 

Liabilities 

Still Held as 

of June 30, 

2019(1)

Balance, 

December 31, 

2018

Included 

in Net 

Income

Included 

in Total 

OCI Gain/

(Loss)(1) Purchases(2) Sales(2) Issues(3) Settlements(3)

Transfers 

out of 

Level 3

Transfers 

into 

Level 3

Balance, 

June 30, 

2019

(Dollars in millions)

Trading securities:

Mortgage-related:

Fannie Mae $ 32 $ 3 $ — $ — $ (14) $ — $ (16) $ — $ 69 $ 74 $ 3 $ — 

Private-label and 

other mortgage 

securities 1 — — — — — (1) — — — — — 

Total trading securities $ 33 $ 3 (5)(6) $ — $ — $ (14) $ — $ (17) $ — $ 69 $ 74 $ 3 $ — 

Available-for-sale 

securities:

Mortgage-related:

Fannie Mae $ 152 $ — $ 6 $ — $ — $ — $ (7) $ (103) $ 84 $ 132 $ — $ 5 

Alt-A and 

subprime 

private-label 

securities 24 5 (5) — (23) — (1) — — — — — 

Mortgage revenue 

bonds 434 — (1) — (4) — (65) — — 364 — (1) 

Other 342 12 (10) — — — (17) (2) 1 326 — (7) 

Total available-for-sale 

securities $ 952 $ 17 

(6)(7)

$ (10) $ — $ (27) $ — $ (90) $ (105) $ 85 $ 822 $ — $ (3) 

Mortgage loans $ 937 $ 31 (5)(6) $ — $ — $ (13) $ — $ (70) $ (187) $ 72 $ 770 $ 22 $ — 

Net derivatives 194 118 (5) — — — — (120) (9) — 183 24 — 

Long-term debt:

Of Fannie Mae:

Senior floating (351) (47) (5) — — — — — — — (398) (47) — 

Of consolidated 

trusts (201) (4) 

(5)(6)

 — — — — 10 169 (76) (102) (2) — 

Total long-term debt $ (552) $ (51) $ — $ — $ — $ — $ 10 $ 169 $ (76) $ (500) $ (49) $ — 

(1) Gains (losses) included in other comprehensive loss are included in “Changes in unrealized gains (losses) on available-for-sale securities, 

net of reclassification adjustments and taxes” in our condensed consolidated statements of operations and comprehensive income.

(2) Purchases and sales include activity related to the consolidation and deconsolidation of assets of securitization trusts.

(3) Issues and settlements include activity related to the consolidation and deconsolidation of liabilities of securitization trusts.

(4) Amount represents temporary changes in fair value. Amortization, accretion and the impairment of credit losses are not considered 

unrealized and are not included in this amount.

(5) Gains (losses) are included in “Fair value losses, net” in our condensed consolidated statements of operations and comprehensive 

income.

(6) Gains (losses) are included in “Net interest income” in our condensed consolidated statements of operations and comprehensive income.

(7) Gains (losses) are included in “Investment gains (losses), net” in our condensed consolidated statements of operations and 

comprehensive income.

Notes to Condensed Consolidated Financial Statements | Fair Value

Fannie Mae (In conservatorship) Second Quarter 2020 Form 10-Q 120
The following tables display valuation techniques and the range and the weighted average of significant unobservable inputs 

for our Level 3 assets and liabilities measured at fair value on a recurring basis, excluding instruments for which we have 

elected the fair value option. Changes in these unobservable inputs can result in significantly higher or lower fair value 

measurements of these assets and liabilities as of the reporting date.

Fair Value Measurements as of June 30, 2020

Fair 

Value

Significant Valuation 

Techniques

Significant 

Unobservable

Inputs(1) Range(1)

Weighted - 

Average(1)(2)

(Dollars in millions)

Recurring fair value measurements:

Trading securities:

Mortgage-related securities:

Agency(3) $ 38 Various

 Private-label securities and other 

mortgage securities 98 Various

Total trading securities $ 136 

Available-for-sale securities:

Mortgage-related securities:

Agency(3) $ 388 Consensus

 58 Various

Total agency 446 

Alt-A and subprime private-label 

securities 2 Various

Mortgage revenue bonds 186 Single Vendor Spreads (bps) 35.0 - 318.3 92.3

 92 Various

Total mortgage revenue bonds 278 

Other 220 Discounted Cash Flow Spreads (bps) 485.0 - 510.0 497.7

 34 Various

Total other 254 

Total available-for-sale securities $ 980 

Net derivatives $ 228 Dealer Mark

 41 Various

Total net derivatives $ 269 

Notes to Condensed Consolidated Financial Statements | Fair Value

Fannie Mae (In conservatorship) Second Quarter 2020 Form 10-Q 121
Fair Value Measurements as of December 31, 2019

Fair 

Value

Significant Valuation 

Techniques

Significant 

Unobservable

Inputs(1) Range(1)

Weighted - 

Average(1)(2)

(Dollars in millions)

Recurring fair value measurements:

Trading securities:

Mortgage-related securities:

Agency(3) $ 46 Various

Available-for-sale securities:

Mortgage-related securities:

Agency(3) $ 107 Consensus

 64 Various

Total agency 171 

Available-for-sale securities:

Mortgage-related securities:

Mortgage revenue bonds $ 222 Single Vendor Spreads(bps) 23.0 - 205.1 76.1

 93 Various

Total mortgage revenue bonds 315 

Other 267 Discounted Cash Flow Spreads(bps) 300.0 300.0

 39 Various

Total other 306 

Total available-for-sale securities $ 792 

Net derivatives $ 147 Dealer Mark

 15 Various

Total net derivatives $ 162 

(1) Valuation techniques for which no unobservable inputs are disclosed generally reflect the use of third-party pricing services or dealers, 

and the range of unobservable inputs applied by these sources is not readily available or cannot be reasonably estimated. Where we 

have disclosed unobservable inputs for consensus and single vendor techniques, those inputs are based on our validations performed 

at the security level using discounted cash flows.

(2) Unobservable inputs were weighted by the relative fair value of the instruments. 

(3) Includes Fannie Mae and Freddie Mac securities.

Notes to Condensed Consolidated Financial Statements | Fair Value

Fannie Mae (In conservatorship) Second Quarter 2020 Form 10-Q 122
In our condensed consolidated balance sheets, certain assets and liabilities are measured at fair value on a nonrecurring 

basis; that is, the instruments are not measured at fair value on an ongoing basis but are subject to fair value adjustments in 

certain circumstances (for example, when we evaluate loans for impairment). We had no Level 1 assets or liabilities held as of 

June 30, 2020 or December 31, 2019 that were measured at fair value on a nonrecurring basis. We held $15 million and $274 

million in Level 2 assets as of June 30, 2020 and December 31, 2019, respectively, comprised of mortgage loans held for sale 

and mortgage loans held for investment that were impaired. We had no Level 2 liabilities that were measured at fair value on a 

nonrecurring basis as of June 30, 2020 or December 31, 2019.

The following table displays valuation techniques for our Level 3 assets measured at fair value on a nonrecurring basis. The 

significant unobservable inputs related to these techniques primarily relate to collateral dependent valuations. The related 

ranges and weighted averages are not meaningful when aggregated as they vary significantly from property to property. 

Fair Value Measurements 

as of

Valuation 

Techniques

June 30, 

2020

December 31, 

2019

(Dollars in millions)

Nonrecurring fair value measurements:

Mortgage loans held for sale, at lower of cost or fair value Consensus $ 1,311 $ 471 

Single Vendor 720 605 

Total mortgage loans held for sale, at lower of cost or fair value 2,031 1,076 

 Single-family mortgage loans held for investment, at amortized cost Internal Model 759 555 

 Multifamily mortgage loans held for investment, at amortized cost

Asset Manager 

Estimate — 24 

Various 75 16 

Total multifamily mortgage loans held for investment, at amortized cost 75 40 

Acquired property, net:(1)

Single-family Accepted Offers 105 101 

Appraisals 204 362 

Walk Forwards 186 240 

Internal Model 92 164 

Various 35 51 

Total single-family 622 918 

Multifamily Various 24 9 

Total nonrecurring assets at fair value $ 3,511 $ 2,598 

(1) The most commonly used techniques in our valuation of acquired property are a proprietary home price model and third-party valuations 

(both current and walk forward). Based on the number of properties measured as of June 30, 2020, these methodologies comprised 

approximately 75% of our valuations, while accepted offers comprised approximately 21% of our valuations. Based on the number of 

properties measured as of December 31, 2019, these methodologies comprised approximately 85% of our valuations, while accepted 

offers comprised approximately 12% of our valuations.

We use valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs. See 

“Note 15, Fair Value” in our 2019 Form 10-K for information on the valuation control processes and the valuation techniques 

we use for fair value measurement and disclosure as well as our basis for classifying these measurements as Level 1, Level 2 

or Level 3 of the valuation hierarchy in more specific situations. We made no material changes to the valuation control 

processes or the valuation techniques for the six months ended June 30, 2020.

Notes to Condensed Consolidated Financial Statements | Fair Value

Fannie Mae (In conservatorship) Second Quarter 2020 Form 10-Q 123
Fair Value of Financial Instruments

The following table displays the carrying value and estimated fair value of our financial instruments. The fair value of financial 

instruments we disclose includes commitments to purchase multifamily and single-family mortgage loans that we do not record 

in our condensed consolidated balance sheets. The fair values of these commitments are included as “Mortgage loans held for 

investment, net of allowance for loan losses.” The disclosure excludes all non-financial instruments; therefore, the fair value of 

our financial assets and liabilities does not represent the underlying fair value of our total consolidated assets and liabilities.

As of June 30, 2020

Carrying 

Value

Quoted 

Prices in 

Active 

Markets for 

Identical 

Assets 

(Level 1)

Significant 

Other 

Observable 

Inputs 

(Level 2)

Significant 

Unobservable 

Inputs 

(Level 3) 

Netting 

Adjustment

Estimated 

Fair Value

(Dollars in millions)

Financial assets:

Cash and cash equivalents and 

restricted cash $ 120,224 $ 106,949 $ 13,275 $ — $ — $ 120,224 

Federal funds sold and securities 

purchased under agreements to 

resell or similar arrangements 25,450 — 25,450 — — 25,450 

Trading securities 106,744 96,037 10,571 136 — 106,744 

Available-for-sale securities 2,120 — 1,140 980 — 2,120 

Mortgage loans held for sale 7,580 — 110 7,892 — 8,002 

Mortgage loans held for investment, 

net of allowance for loan losses 3,451,755 — 3,400,773 195,726 — 3,596,499 

Advances to lenders 7,983 — 7,982 1 — 7,983 

Derivative assets at fair value 904 — 2,698 314 (2,108) 904 

Guaranty assets and buy-ups 120 — — 260 — 260 

Total financial assets $ 3,722,880 $ 202,986 $ 3,461,999 $ 205,309 $ (2,108) $ 3,868,186 

Financial liabilities:

Short-term debt:

Of Fannie Mae $ 42,250 $ — $ 42,269 $ — $ — $ 42,269 

Long-term debt:

Of Fannie Mae 233,387 — 244,967 860 — 245,827 

Of consolidated trusts 3,444,338 — 3,565,283 31,733 — 3,597,016 

Derivative liabilities at fair value 1,380 — 3,731 45 (2,396) 1,380 

Guaranty obligations 133 — — 85 — 85 

Total financial liabilities $ 3,721,488 $ — $ 3,856,250 $ 32,723 $ (2,396) $ 3,886,577 

Notes to Condensed Consolidated Financial Statements | Fair Value

Fannie Mae (In conservatorship) Second Quarter 2020 Form 10-Q 124
As of December 31, 2019

Carrying 

Value

Quoted 

Prices in 

Active 

Markets for 

Identical 

Assets 

(Level 1)

Significant 

Other 

Observable 

Inputs 

(Level 2)

Significant 

Unobservable 

Inputs 

(Level 3)

Netting 

Adjustment

Estimated 

Fair Value

(Dollars in millions)

Financial assets:

Cash and cash equivalents and 

restricted cash $ 61,407 $ 50,057 $ 11,350 $ — $ — $ 61,407 

Federal funds sold and securities 

purchased under agreements to 

resell or similar arrangements 13,578 — 13,578 — — 13,578 

Trading securities 48,123 39,501 8,576 46 — 48,123 

Available-for-sale securities 2,404 — 1,612 792 — 2,404 

Mortgage loans held for sale 6,773 — 229 7,054 — 7,283 

Mortgage loans held for investment, 

net of allowance for loan losses 3,327,389 — 3,270,535 127,650 — 3,398,185 

Advances to lenders 6,453 — 6,451 2 — 6,453 

Derivative liabilities at fair value 271 — 1,360 199 (1,288) 271 

Guaranty assets and buy-ups 142 — — 305 — 305 

Total financial assets $ 3,466,540 $ 89,558 $ 3,313,691 $ 136,048 $ (1,288) $ 3,538,009 

Financial liabilities:

Federal funds purchased and 

securities sold under agreements 

to repurchase $ 478 $ — $ 478 $ — $ — $ 478 

Short-term debt:

Of Fannie Mae 26,662 — 26,667 — — 26,667 

Long-term debt:

Of Fannie Mae 155,585 — 164,144 401 — 164,545 

Of consolidated trusts 3,285,139 — 3,312,763 31,827 — 3,344,590 

Derivative liabilities at fair value 435 — 2,092 37 (1,694) 435 

Guaranty obligations 154 — — 97 — 97 

Total financial liabilities $ 3,468,453 $ — $ 3,506,144 $ 32,362 $ (1,694) $ 3,536,812 

For a detailed description and classification of our financial instruments, see “Note 15, Fair Value” in our 2019 Form 10-K.

Fair Value Option

We elected the fair value option for loans and debt that contain embedded derivatives that would otherwise require bifurcation. 

Additionally, we elected the fair value option for our credit risk-sharing securities accounted for as debt of Fannie Mae issued 

under our CAS series prior to January 1, 2016. Under the fair value option, we elected to carry these instruments at fair value 

instead of bifurcating the embedded derivative from such instruments. 

Interest income for the mortgage loans is recorded in “Interest income—Mortgage loans” and interest expense for the debt 

instruments is recorded in “Interest expense—Long-term debt” in our condensed consolidated statements of operations and 

comprehensive income. 

Notes to Condensed Consolidated Financial Statements | Fair Value

Fannie Mae (In conservatorship) Second Quarter 2020 Form 10-Q 125
The following table displays the fair value and unpaid principal balance of the financial instruments for which we have made 

fair value elections.

As of

June 30, 2020 December 31, 2019

Loans(1)

Long-Term 

Debt of 

Fannie Mae

Long-Term Debt 

of Consolidated 

Trusts Loans(1)

Long-Term 

Debt of 

Fannie Mae

Long-Term Debt 

of Consolidated 

Trusts

(Dollars in millions)

Fair value $ 7,303 $ 4,546 $ 23,883 $ 7,825 $ 5,687 $ 21,880 

Unpaid principal balance 6,906 4,466 20,777 7,514 5,200 19,653 

(1) Includes nonaccrual loans with a fair value of $139 million and $129 million as of June 30, 2020 and December 31, 2019, respectively. The 

difference between unpaid principal balance and the fair value of these nonaccrual loans as of June 30, 2020 and December 31, 2019 was 

$19 million and $11 million, respectively. Includes loans that are 90 days or more past due with a fair value of $232 million and $80 million

as of June 30, 2020 and December 31, 2019, respectively. The difference between unpaid principal balance and the fair value of these 90

or more days past due loans as of June 30, 2020 and December 31, 2019 was $34 million and $10 million, respectively.

Changes in Fair Value under the Fair Value Option Election

We recorded losses of $10 million and gains of $141 million for the three and six months ended June 30, 2020, respectively, 

and gains of $126 million and $239 million for the three and six months ended June 30, 2019, respectively, from changes in 

the fair value of loans recorded at fair value in “Fair value losses, net” in our condensed consolidated statements of operations 

and comprehensive income. 

We recorded losses of $574 million and $312 million for the three and six months ended June 30, 2020 respectively, and 

losses of $222 million and $552 million for the three and six months ended June 30, 2019, respectively, from changes in the 

fair value of long-term debt recorded at fair value in “Fair value losses, net” in our condensed consolidated statements of 

operations and comprehensive income.

13. Commitments and Contingencies

We are party to various types of legal actions and proceedings, including actions brought on behalf of various classes of 

claimants. We also are subject to regulatory examinations, inquiries and investigations, and other information gathering 

requests. In some of the matters, indeterminate amounts are sought. Modern pleading practice in the U.S. permits 

considerable variation in the assertion of monetary damages or other relief. Jurisdictions may permit claimants not to specify 

the monetary damages sought or may permit claimants to state only that the amount sought is sufficient to invoke the 

jurisdiction of the trial court. This variability in pleadings, together with our and our counsel’s actual experience in litigating or 

settling claims, leads us to conclude that the monetary relief that may be sought by plaintiffs bears little relevance to the merits 

or disposition value of claims. 

We have substantial and valid defenses to the claims in the proceedings described below and intend to defend these matters 

vigorously. However, legal actions and proceedings of all types are subject to many uncertain factors that generally cannot be 

predicted with assurance. Accordingly, the outcome of any given matter and the amount or range of potential loss at particular 

points in time is frequently difficult to ascertain. Uncertainties can include how fact finders will evaluate documentary evidence 

and the credibility and effectiveness of witness testimony, and how courts will apply the law. Disposition valuations are also 

subject to the uncertainty of how opposing parties and their counsel may view the evidence and applicable law.

On a quarterly basis, we review relevant information about all pending legal actions and proceedings for the purpose of 

evaluating and revising our contingencies, accruals and disclosures. We establish an accrual only for matters when a loss is 

probable and we can reasonably estimate the amount of such loss. We are often unable to estimate the possible losses or 

ranges of losses, particularly for proceedings that are in their early stages of development, where plaintiffs seek indeterminate 

or unspecified damages, where there may be novel or unsettled legal questions relevant to the proceedings, or where 

settlement negotiations have not occurred or progressed. Given the uncertainties involved in any action or proceeding, 

regardless of whether we have established an accrual, the ultimate resolution of certain of these matters may be material to 

our operating results for a particular period, depending on, among other factors, the size of the loss or liability imposed and the 

level of our net income or loss for that period. 

In addition to the matters specifically described below, we are involved in a number of legal and regulatory proceedings that 

arise in the ordinary course of business that we do not expect will have a material impact on our business or financial 

condition. We have also advanced fees and expenses of certain current and former officers and directors in connection with 

various legal proceedings pursuant to our bylaws and indemnification agreements.

Notes to Condensed Consolidated Financial Statements | Fair Value

Fannie Mae (In conservatorship) Second Quarter 2020 Form 10-Q 126
Senior Preferred Stock Purchase Agreements Litigation

A consolidated putative class action (“In re Fannie Mae/Freddie Mac Senior Preferred Stock Purchase Agreement Class Action 

Litigations”) and two non-class action lawsuits, Arrowood Indemnity Company v. Fannie Mae and Fairholme Funds v. FHFA, 

filed by Fannie Mae and Freddie Mac shareholders against us, FHFA as our conservator, and Freddie Mac are pending in the 

U.S. District Court for the District of Columbia. The lawsuits challenge the August 2012 amendment to each company’s senior 

preferred stock purchase agreement with Treasury. 

Plaintiffs filed amended complaints in all three lawsuits on November 1, 2017 alleging that the net worth sweep dividend 

provisions of the senior preferred stock that were implemented pursuant to the August 2012 amendments nullified certain of 

the shareholders’ rights, particularly the right to receive dividends. Plaintiffs seek unspecified damages, equitable and 

injunctive relief, and costs and expenses, including attorneys’ fees. Plaintiffs in the class action seek to represent several 

classes of preferred and/or common shareholders of Fannie Mae and/or Freddie Mac who held stock as of the public 

announcement of the August 2012 amendments. On September 28, 2018, the court dismissed all of the plaintiffs’ claims 

except for their claims for breach of an implied covenant of good faith and fair dealing. 

On May 21, 2018, a plaintiff in a non-class action case, Angel v. Federal Home Loan Mortgage Corporation, filed a complaint 

for declaratory relief and compensatory damages against Fannie Mae (including certain members of its Board of Directors), 

Freddie Mac (including certain members of its Board of Directors) and FHFA, as conservator, in the U.S. District Court for the 

District of Columbia. Plaintiff in that case asserts claims for breach of contract, breach of implied covenants of good faith and 

fair dealing, and aiding and abetting the federal government in avoiding an alleged implicit guarantee of dividend payments. 

On March 6, 2019, the court granted defendants’ motion to dismiss and on March 18, 2019, plaintiff moved to alter or amend 

the judgment and to file an amended complaint. On May 24, 2019, the court denied this motion. On April 24, 2020, the U.S. 

Court of Appeals for the District of Columbia Circuit affirmed the lower court’s judgment.

Given the stage of these lawsuits, the substantial and novel legal questions that remain, and our substantial defenses, we are 

currently unable to estimate the reasonably possible loss or range of loss arising from this litigation.

Notes to Condensed Consolidated Financial Statements | Commitments and Contingencies

Fannie Mae (In conservatorship) Second Quarter 2020 Form 10-Q 127
Item 3. Quantitative and Qualitative Disclosures about 

Market Risk

Information about market risk is set forth in “MD&A—Risk Management—Market Risk Management, Including Interest-Rate 

Risk Management.”

Item 4. Controls and Procedures

Overview

We are required under applicable laws and regulations to maintain controls and procedures, which include disclosure controls 

and procedures as well as internal control over financial reporting, as further described below.

Evaluation of Disclosure Controls and Procedures

Disclosure Controls and Procedures

Disclosure controls and procedures refer to controls and other procedures designed to provide reasonable assurance that 

information required to be disclosed in the reports we file or submit under the Exchange Act is recorded, processed, 

summarized and reported within the time periods specified in the rules and forms of the SEC. Disclosure controls and 

procedures include, without limitation, controls and procedures designed to provide reasonable assurance that information 

required to be disclosed by us in the reports that we file or submit under the Exchange Act is accumulated and communicated 

to management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions 

regarding our required disclosure. In designing and evaluating our disclosure controls and procedures, management 

recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable 

assurance of achieving the desired control objectives, and management was required to apply its judgment in evaluating and 

implementing possible controls and procedures.

Evaluation of Disclosure Controls and Procedures

As required by Rule 13a-15 under the Exchange Act, management has evaluated, with the participation of our Chief Executive 

Officer and Chief Financial Officer, the effectiveness of our disclosure controls and procedures as in effect as of June 30, 2020, 

the end of the period covered by this report. As a result of management’s evaluation, our Chief Executive Officer and Chief 

Financial Officer concluded that our disclosure controls and procedures were not effective at a reasonable assurance level as 

of June 30, 2020 or as of the date of filing this report. 

Our disclosure controls and procedures were not effective as of June 30, 2020 or as of the date of filing this report because 

they did not adequately ensure the accumulation and communication to management of information known to FHFA that is 

needed to meet our disclosure obligations under the federal securities laws. As a result, we were not able to rely upon the 

disclosure controls and procedures that were in place as of June 30, 2020 or as of the date of this filing, and we continue to 

have a material weakness in our internal control over financial reporting. This material weakness is described in more detail 

below under “Description of Material Weakness.” Based on discussions with FHFA and the structural nature of this material 

weakness, we do not expect to remediate this material weakness while we are under conservatorship.

Description of Material Weakness

The Public Company Accounting Oversight Board’s Auditing Standard 2201 defines a material weakness as a deficiency, or a 

combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material 

misstatement of the company’s annual or interim financial statements will not be prevented or detected on a timely basis.

Management has determined that we continued to have the following material weakness as of June 30, 2020 and as of the 

date of filing this report:

• Disclosure Controls and Procedures. We have been under the conservatorship of FHFA since September 6, 2008. 

Under the GSE Act, FHFA is an independent agency that currently functions as both our conservator and our 

regulator with respect to our safety, soundness and mission. Because of the nature of the conservatorship under the 

GSE Act, which places us under the “control” of FHFA (as that term is defined by securities laws), some of the 

information that we may need to meet our disclosure obligations may be solely within the knowledge of FHFA. As our 

conservator, FHFA has the power to take actions without our knowledge that could be material to our shareholders 

and other stakeholders, and could significantly affect our financial performance or our continued existence as an 

ongoing business. Although we and FHFA attempted to design and implement disclosure policies and procedures that 

would account for the conservatorship and accomplish the same objectives as a disclosure controls and procedures 

policy of a typical reporting company, there are inherent structural limitations on our ability to design, implement, test 

or operate effective disclosure controls and procedures. As both our regulator and our conservator under the GSE 

Quantitative and Qualitative Disclosures about Market Risk

Fannie Mae Second Quarter 2020 Form 10-Q 128
Act, FHFA is limited in its ability to design and implement a complete set of disclosure controls and procedures 

relating to Fannie Mae, particularly with respect to current reporting pursuant to Form 8-K. Similarly, as a regulated 

entity, we are limited in our ability to design, implement, operate and test the controls and procedures for which FHFA 

is responsible.

Due to these circumstances, we have not been able to update our disclosure controls and procedures in a manner that 

adequately ensures the accumulation and communication to management of information known to FHFA that is needed to 

meet our disclosure obligations under the federal securities laws, including disclosures affecting our condensed consolidated 

financial statements. As a result, we did not maintain effective controls and procedures designed to ensure complete and 

accurate disclosure as required by GAAP as of June 30, 2020 or as of the date of filing this report. Based on discussions with 

FHFA and the structural nature of this weakness, we do not expect to remediate this material weakness while we are under 

conservatorship.

Mitigating Actions Related to Material Weakness

As described above under “Description of Material Weakness,” we continue to have a material weakness in our internal control 

over financial reporting relating to our disclosure controls and procedures. However, we and FHFA have engaged in the 

following practices intended to permit accumulation and communication to management of information needed to meet our 

disclosure obligations under the federal securities laws:

• FHFA has established the Division of Resolutions, which is intended to facilitate operation of the company with the 

oversight of the conservator.

• We have provided drafts of our SEC filings to FHFA personnel for their review and comment prior to filing. We also 

have provided drafts of external press releases, statements and speeches to FHFA personnel for their review and 

comment prior to release.

• FHFA personnel, including senior officials, have reviewed our SEC filings prior to filing, including this quarterly report 

on Form 10-Q for the quarter ended June 30, 2020 (“Second Quarter 2020 Form 10-Q”), and engaged in discussions 

regarding issues associated with the information contained in those filings. Prior to filing our Second Quarter 2020

Form 10-Q, FHFA provided Fannie Mae management with written acknowledgment that it had reviewed the Second 

Quarter 2020 Form 10-Q, and it was not aware of any material misstatements or omissions in the Second Quarter

2020 Form 10-Q and had no objection to our filing the Second Quarter 2020 Form 10-Q.

• Our senior management meets regularly with senior leadership at FHFA, including, but not limited to, the Director.

• FHFA representatives attend meetings frequently with various groups within the company to enhance the flow of 

information and to provide oversight on a variety of matters, including accounting, credit and market risk 

management, external communications and legal matters.

• Senior officials within FHFA’s Office of the Chief Accountant have met frequently with our senior finance executives 

regarding our accounting policies, practices and procedures.

Changes in Internal Control Over Financial Reporting

Management has evaluated, with the participation of our Chief Executive Officer and Chief Financial Officer, whether any 

changes in our internal control over financial reporting that occurred during our last fiscal quarter have materially affected, or 

are reasonably likely to materially affect, our internal control over financial reporting. There have been no changes in our 

internal control over financial reporting from March 31, 2020 through June 30, 2020 that management believes have materially 

affected, or are reasonably likely to materially affect, our internal control over financial reporting. 

In the ordinary course of business, we review our system of internal control over financial reporting and make changes that we 

believe will improve these controls and increase efficiency, while continuing to ensure that we maintain effective internal 

controls. Changes may include implementing new, more efficient systems, automating manual processes and updating 

existing systems. For example, we are currently implementing changes to various financial system applications in stages 

across the company. As we continue to implement these changes, each implementation may become a significant component 

of our internal control over financial reporting.

Controls and Procedures

Fannie Mae Second Quarter 2020 Form 10-Q 129
PART II—OTHER INFORMATION

Item 1. Legal Proceedings

The information in this item supplements and updates information regarding certain legal proceedings set forth in “Legal 

Proceedings” in our 2019 Form 10-K and our First Quarter 2020 Form 10-Q. We also provide information regarding material 

legal proceedings in “Note 13, Commitments and Contingencies,” which is incorporated herein by reference. In addition to the 

matters specifically described or incorporated by reference in this item, we are involved in a number of legal and regulatory 

proceedings that arise in the ordinary course of business that we do not expect will have a material impact on our business or 

financial condition. However, litigation claims and proceedings of all types are subject to many factors and their outcome and 

effect on our business and financial condition generally cannot be predicted accurately. 

We establish an accrual for legal claims only when a loss is probable and we can reasonably estimate the amount of such 

loss. The actual costs of resolving legal claims may be substantially higher or lower than the amounts accrued for those 

claims. If certain of these matters are determined against us, FHFA or Treasury, it could have a material adverse effect on our 

results of operations, liquidity and financial condition, including our net worth. 

Senior Preferred Stock Purchase Agreements Litigation 

Between June 2013 and August 2018, preferred and common stockholders of Fannie Mae and Freddie Mac filed lawsuits in 

multiple federal courts against one or more of the United States, Treasury and FHFA, challenging actions taken by the 

defendants relating to the Fannie Mae and Freddie Mac senior preferred stock purchase agreements and the conservatorships 

of Fannie Mae and Freddie Mac. Some of these lawsuits also contain claims against Fannie Mae and Freddie Mac. The legal 

claims being advanced by one or more of these lawsuits include challenges to the net worth sweep dividend provisions of the 

senior preferred stock that were implemented pursuant to August 2012 amendments to the agreements, the payment of 

dividends to Treasury under the net worth sweep dividend provisions, and FHFA’s decision to require Fannie Mae and Freddie 

Mac to draw funds from Treasury in order to pay dividends to Treasury prior to the August 2012 amendments. Some of the 

lawsuits also challenge the constitutionality of FHFA’s structure. The plaintiffs seek various forms of equitable and injunctive 

relief, including rescission of the August 2012 amendments, as well as damages. The cases that remain pending after

March 31, 2020 are as follows:

District of Columbia. Fannie Mae is a defendant in three cases pending in the U.S. District Court for the District of Columbia—a 

consolidated putative class action and two additional cases. In all three cases, Fannie Mae and Freddie Mac stockholders filed 

amended complaints on November 1, 2017 against us, FHFA as our conservator and Freddie Mac. On September 28, 2018, 

the court dismissed all of the plaintiffs’ claims in these cases, except for their claims for breach of an implied covenant of good 

faith and fair dealing. In a fourth case that was filed in the U.S. District Court for the District of Columbia on May 21, 2018, the 

court granted defendants’ motion to dismiss on March 6, 2019, and on March 18, 2019, plaintiff moved to alter or amend the 

judgment and to file an amended complaint. On May 24, 2019, the court denied this motion. On April 24, 2020, the U.S. Court 

of Appeals for the District of Columbia Circuit affirmed the lower court’s judgment. All four cases are described in “Note 13, 

Commitments and Contingencies.”

Southern District of Texas (Collins v. Mnuchin). On October 20, 2016, preferred and common stockholders filed a complaint 

against FHFA and Treasury in the U.S. District Court for the Southern District of Texas. On May 22, 2017, the court dismissed 

the case. On September 6, 2019, the U.S. Court of Appeals for the Fifth Circuit, sitting en banc, affirmed the district court’s 

dismissal of claims against Treasury, but reversed the dismissal of claims against FHFA. The court held that plaintiffs could 

pursue their claim that FHFA exceeded its statutory powers as conservator when it implemented the net worth sweep 

provisions of the senior preferred stock purchase agreements in August 2012. The court also held that the provision of the 

Housing and Economic Recovery Act that insulates the FHFA Director from removal without cause violates constitutional 

separation of powers principles and, thus, that the FHFA Director may be removed by the president for any reason. The court 

held that the appropriate remedy for this violation is to declare the provision severed from the statute. Both the plaintiffs and 

the government filed petitions with the Supreme Court seeking review of the Fifth Circuit’s decision. The Supreme Court 

granted those petitions on July 9, 2020 and will review the case. 

Western District of Michigan. On June 1, 2017, preferred and common stockholders of Fannie Mae and Freddie Mac filed a 

complaint for declaratory and injunctive relief against FHFA and Treasury in the U.S. District Court for the Western District of 

Michigan. FHFA and Treasury moved to dismiss the case on September 8, 2017, and plaintiffs filed a motion for summary 

judgment on October 6, 2017. 

District of Minnesota. On June 22, 2017, preferred and common stockholders of Fannie Mae and Freddie Mac filed a 

complaint for declaratory and injunctive relief against FHFA and Treasury in the U.S. District Court for the District of Minnesota. 

The court dismissed the case on July 6, 2018, and plaintiffs filed a notice of appeal with the U.S. Court of Appeals for the 

Eighth Circuit on July 10, 2018.

Eastern District of Pennsylvania. On August 16, 2018, common stockholders of Fannie Mae and Freddie Mac filed a complaint 

for declaratory and injunctive relief against FHFA and Treasury in the U.S. District Court for the Eastern District of 

Other Information

Fannie Mae Second Quarter 2020 Form 10-Q 130
Pennsylvania. FHFA and Treasury moved to dismiss the case on November 16, 2018, and plaintiffs filed a motion for summary 

judgment on December 21, 2018.

U.S. Court of Federal Claims. Numerous cases are pending against the United States in the U.S. Court of Federal Claims. 

Fannie Mae is a nominal defendant in four of these cases: Fisher v. United States of America, filed on December 2, 2013; 

Rafter v. United States of America, filed on August 14, 2014; Perry Capital LLC v. United States of America, filed on August 15, 

2018; and Fairholme Funds Inc. v. United States, which was originally filed on July 9, 2013, and amended publicly to include 

Fannie Mae as a nominal defendant on October 2, 2018. Plaintiffs in these cases allege that the net worth sweep dividend 

provisions of the senior preferred stock that were implemented pursuant to the August 2012 amendment constitute a taking of 

Fannie Mae’s property without just compensation in violation of the U.S. Constitution. The Fisher plaintiffs are pursuing this 

claim derivatively on behalf of Fannie Mae, while the Rafter, Perry Capital and Fairholme Funds plaintiffs are pursing the claim 

both derivatively and directly against the United States. Plaintiffs in Rafter also allege direct and derivative breach of contract 

claims against the government. The Perry Capital and Fairholme Funds plaintiffs allege similar breach of contract claims, as 

well as direct and derivative breach of fiduciary duty claims against the government. Plaintiffs in Fisher request just 

compensation to Fannie Mae in an unspecified amount. Plaintiffs in Rafter, Perry Capital and Fairholme Funds seek just 

compensation for themselves on their direct claims and payment of damages to Fannie Mae on their derivative claims. The 

United States filed a motion to dismiss the Fisher, Rafter and Fairholme Funds cases on August 1, 2018. On December 6, 

2019, the court entered an order in the Fairholme Funds case that granted the government’s motion to dismiss all the direct 

claims but denied the motion as to all of the derivative claims brought on behalf of Fannie Mae. On June 18, 2020, the U.S. 

Court of Appeals for the Federal Circuit agreed to hear the appeal of the court’s December 6, 2019 order. In the Fisher case, 

the court denied the government’s motion to dismiss on May 8, 2020 and certified the case for appeal on June 11, 2020.

Item 1A. Risk Factors

In addition to the information in this report, you should carefully consider the risks relating to our business that we identify in 

“Risk Factors” in our 2019 Form 10-K. This section supplements and updates that discussion. Also refer to “MD&A—Risk 

Management,” “MD&A—Single-Family Business” and “MD&A—Multifamily Business” in our 2019 Form 10-K and in this report 

for more detailed descriptions of the primary risks to our business and how we seek to manage those risks.

The risks we face could materially adversely affect our business, results of operations, financial condition, liquidity and net 

worth, and could cause our actual results to differ materially from our past results or the results contemplated by any forwardlooking statements we make. We believe the risks described in the sections of this report and our 2019 Form 10-K identified 

above are the most significant we face; however, these are not the only risks we face. We face additional risks and 

uncertainties not currently known to us or that we currently believe are immaterial.

The COVID-19 pandemic has adversely affected our business, financial results and financial condition, and we expect 

that it will continue to do so. The adverse impact of the COVID-19 pandemic on our business, financial results and 

financial condition could be materially greater than we currently anticipate.

The COVID-19 pandemic caused substantial financial market volatility and has significantly adversely affected both the U.S. 

and global economies. While state and local governments throughout the country have taken steps to re-open their 

economies, lifting shut-down and stay-at-home orders to varying degrees, a number of states and local governments are 

slowing or pausing their re-openings, or imposing new shut-down orders, as the daily number of new cases of COVID-19 has 

continued to reach new highs. The extensive shutdowns and other reductions in business activity across the country and 

globally, including those resulting from individuals and households seeking to avoid infection, have substantially increased 

unemployment from pre-pandemic levels. 

The disruption caused by the pandemic differs from previous economic downturns because of the high level of uncertainty 

related to the health and safety of consumers and workers. We expect the path and timing of economic recovery will be 

impacted by the rate of new COVID-19 cases and the associated mortality rates. We believe that economic recovery depends 

on the stable return of consumer spending, increased business activity, and a reduction in unemployment, all of which impact 

the ability of borrowers and renters to make their monthly payments. The federal government has taken many actions to 

reduce the negative economic impact of the pandemic, including providing direct funding to affected households and 

businesses, as described in “Executive Summary—COVID-19 Impact—Economic Impact.” Absent additional government 

action, some of these programs are ending, including the $600 weekly addition to unemployment benefits, which expires at the 

end of July. The ultimate impact of these programs expiring and the extent to which existing and future government actions will 

mitigate the negative impacts of COVID-19 on the U.S. economy and our business is unclear. The pandemic resulted in a 

contraction in U.S. GDP for the first half of 2020 and could result in future declines in or a sustained drop in the level of U.S. 

economic activity. We expect the impact of the COVID-19 pandemic to continue to negatively affect our financial results and 

our returns on capital under FHFA’s conservatorship capital requirements. We expect the pandemic to contribute to lower net 

income in 2020 than in 2019. We could have a net loss in one or more future periods or possibly could have a net worth deficit 

that requires a draw from Treasury under the senior preferred stock purchase agreement. 

Our current forecasts and expectations relating to the impact of the COVID-19 pandemic are subject to many uncertainties and 

may change, perhaps substantially. It is difficult to assess or predict the impact of this unprecedented event on our business, 

Other Information

Fannie Mae Second Quarter 2020 Form 10-Q 131
financial results or financial condition. Factors that will impact the extent to which the COVID-19 pandemic affects our 

business, financial results and financial condition include: the duration, spread and severity of COVID-19 outbreaks; the 

actions taken to contain the virus or treat its impact, including government actions to mitigate the economic impact of the 

pandemic; the extent to which consumers, workers and families feel safe resuming business activities and school; the nature 

and extent of the forbearance, modification, and other loss mitigation options borrowers affected by the pandemic obtain from 

us; accounting elections and estimates relating to the impact of the COVID-19 pandemic; borrower and renter behavior in 

response to the pandemic and its economic impact; how quickly and to what extent normal economic and operating conditions 

can resume, including whether any future outbreaks interrupt economic recovery; and how quickly and to what extent affected 

borrowers, renters and counterparties can recover from the negative economic impact of the pandemic. While we are unable 

to predict the future course of these events or their longer-term effects on our business, key areas we have identified where 

the COVID-19 pandemic is negatively affecting or may negatively affect our business, financial results and financial condition 

are described below:

• Increased borrower credit risk. Among other factors, income growth and unemployment levels affect borrowers’ ability 

to repay their mortgage loans. We expect the economic dislocation caused by the COVID-19 pandemic and resulting 

higher unemployment rates to result in continued higher delinquency rates and possibly in significantly higher defaults 

on the mortgage loans in our guaranty book of business. Because of this expectation, our credit-related expenses 

were substantially higher in the first half of 2020. As there is significant uncertainty associated with the impact of the 

COVID-19 pandemic, we may ultimately experience greater losses than we currently expect and also may have high 

credit-related expenses in future quarters. Moreover, at FHFA's direction and/or as required by the CARES Act, we 

are taking a number of actions to help borrowers affected by the COVID-19 pandemic that we expect will adversely 

affect our financial results and financial condition, including requiring that our servicers:

◦ provide up to 12 months of forbearance to single-family borrowers impacted by COVID-19-related financial 

hardships who request forbearance; 

◦ provide up to six months of forbearance to eligible multifamily borrowers impacted by COVID-19-related 

financial hardships on the condition that such borrowers suspend evictions and other penalties relating to 

late payments during the forbearance period; and

◦ suspend foreclosures and foreclosure-related activities for single-family properties (other than for vacant or 

abandoned properties) through at least August 31, 2020. 

The CARES Act also instituted a temporary moratorium through July 25, 2020 on tenant evictions for nonpayment of 

rent that applied to single-family or multifamily properties that secure a mortgage loan we own or guarantee, which is 

likely to adversely affect the ability of some of our borrowers to make payments on their loans. We discuss the actions 

we have taken and their impact in more in more detail in “MD&A—Single-Family Business—Single-Family Mortgage 

Credit Risk Management” and in “MD&A—Multifamily Business—Multifamily Mortgage Credit Risk Management.”

Our loans in forbearance generally have a weaker credit profile than our overall guaranty book of business. If a large 

number of borrowers cannot repay the amounts owed at the end of their forbearance plans or over time, or fail to 

qualify for modifications, this could result in significantly higher defaults on the mortgage loans in our guaranty book of 

business. Some states and localities have also implemented or are considering borrower and renter protections that 

are more extensive than the CARES Act requirements and our requirements. These additional protections, depending 

on their scope and whether and to what extent they apply to our business, could contribute to a higher number of 

single-family and multifamily borrowers becoming delinquent on their loans or could limit our ability to complete 

foreclosures.

In addition, we expect the economic dislocation resulting from the COVID-19 pandemic will likely continue to 

negatively affect home sales and could lead to declines in home prices and multifamily property valuations. If this 

occurs, it would increase the amount of our loss in the event a borrower defaults on their loan. Lower home prices 

and multifamily property valuations would likely also lead to deterioration in loan performance and changes in 

borrower behavior, and potentially prohibit some borrowers from being able to refinance their loans. The magnitude of 

the impact would likely vary significantly across geographic regions and based on the credit characteristics of the 

loans.

The COVID-19 pandemic may also affect the credit quality of our new loan acquisitions. For example, CARES Act 

provisions prohibiting lenders from reporting previously-current borrowers receiving COVID-19-related payment 

accommodations as delinquent to the credit bureaus may result in our not having accurate data on a borrower’s credit 

history when we are determining the eligibility of the single-family loans we acquire. 

• Increased human capital and business resiliency risk. As of July 26, 2020, according to the U.S. Centers for Disease 

Control and Prevention, there were more than 4.2 million reported cases of COVID-19 in the United States, with over 

60,000 new cases reported that day. While we have succession plans in place, they may not be effective. If a 

significant number of our executives or other employees, or their family members for whom they provide care, 

contract COVID-19 during the same time period, it could materially adversely affect our ability to manage our 

business, which could have a material adverse effect on our results of operations and financial condition. The risk of 

Other Information

Fannie Mae Second Quarter 2020 Form 10-Q 132
executives, other employees or their family members contracting COVID-19 may increase with the resumption of 

business activity and the reopening of workplaces and schools. 

Since mid-March, we have required nearly all of our workforce to work remotely, which we refer to as telework. In 

addition, nearly all of our workforce is located in a geographic region where the state or local government issued a 

stay-at-home order and/or closed schools. While stay-at-home orders and some closures have been lifted, depending 

on the course of the pandemic, they may be reinstated, and schools may continue to be closed, at least partly, when 

the fall semester begins. The strain on our workforce and our business operations caused by this shift in the work and 

home environment, our future efforts to return to the workplace with new measures in place to protect the health of 

our workforce, and the high level of uncertainty surrounding these issues may result in business interruptions, 

significantly reduced productivity and other adverse impacts on our operations. While our technological systems to 

date have continued to function with our workforce working remotely, this telework arrangement increases the risk of 

technological or cybersecurity incidents that negatively affect our business operations. This telework arrangement, as 

well as the risk that a significant number of employees or their family members could contract COVID-19 and our 

reliance on third parties for some functions, also could adversely affect our ability to maintain effective controls and 

procedures, which could result in material errors in our reported results or disclosures that are not complete or 

accurate. 

• Increased counterparty credit and operational risk. The economic dislocation caused by the COVID-19 pandemic 

could lead to default by one or more of our institutional counterparties on their obligations to us. If a counterparty were 

to default on its obligations to us, it could result in significant financial losses. Counterparty defaults could also 

negatively impact our ability to operate our business, as we outsource some of our critical functions to third parties, 

such as mortgage servicing, single-family Fannie Mae MBS issuance and administration, and certain technology 

functions.

For the majority of loans in our single-family guaranty book of business, our Single-Family Servicing Guide has, until 

recently, required servicers to advance missed scheduled principal and interest payments to the MBS trusts for 

payment to MBS holders until the loans were purchased from the MBS trusts. As described in “MD&A—Single-Family 

Business—Single-Family Mortgage Credit Risk Management—Single-Family Problem Loan Management,” effective 

in August 2020, our servicers’ obligations to advance these payments will end after four months of missed borrower 

payments, rather than continuing until the loans are purchased from the MBS trusts. Single-family servicers are also 

required to advance property tax and insurance payments to taxing authorities, hazard insurers and mortgage 

insurers. For nearly all of our multifamily guaranty book of business, when borrowers do not pay their mortgages, our 

Multifamily Selling and Servicing Guide requires lenders to advance the missed scheduled principal and interest 

payments to MBS trusts for payment to MBS holders for up to four months before they are eligible for reimbursement. 

If a large number of single-family or multifamily borrowers do not pay their mortgages as a result of the economic 

dislocation caused by the COVID-19 pandemic, our servicers may not have sufficient liquidity to advance the missed 

payments to MBS trusts. In such case, we would be required to make the payments, which could require us to obtain 

substantial additional funding. See below for a description of our increased liquidity risk. 

In addition, if multiple single-family or multifamily servicers were to fail to meet their obligations to us, it could cause 

substantial disruption to our business, borrowers and the mortgage industry. We may not be able to transfer the 

servicing of loans to new servicers without significant operational disruptions and financial losses, and there may not 

be sufficient industry capacity to take on large servicing transfers. A large portion of our single-family and multifamily 

guaranty books of business are serviced by non-depository servicers. We believe the counterparty risks associated 

with our non-depository servicers are higher than the risks associated with our depository servicers, as our nondepository servicers typically have lower financial strength, liquidity and operational capacity than our depository 

servicers, which may negatively affect their ability to fully satisfy their financial obligations or to properly service the 

loans on our behalf. The actions we have taken to mitigate our credit risk exposure to mortgage servicers may not be 

sufficient to prevent us from experiencing significant financial losses or business interruptions in the event they 

cannot fulfill their obligations to us.

As noted above, the economic dislocation caused by the COVID-19 pandemic could lead to significantly higher 

defaults on mortgage loans. A substantially higher level of mortgage defaults could affect our mortgage insurer 

counterparties' ability to fully meet their payment obligations to us.

• Increased liquidity risk. As described in “MD&A—Liquidity and Capital Management,” while market conditions 

improved in the second quarter of 2020, adverse market conditions in March limited our ability to issue debt with a 

maturity greater than two years. If market conditions deteriorate again and limit our ability to issue longer-term debt, 

we may need to fund longer-term assets with short-term debt, which would increase the roll-over risk on our 

outstanding debt. 

Other Information

Fannie Mae Second Quarter 2020 Form 10-Q 133
If the financial markets experience substantial volatility in the future similar to or more intensely than earlier this year, 

it could significantly adversely affect the amount, mix and cost of funds we obtain, as well as our liquidity position. If 

we are unable to issue both short- and long-term debt securities at attractive rates and in amounts sufficient to 

operate our business and meet our obligations, it likely would interfere with the operation of our business and have a 

material adverse effect on our liquidity, results of operations, financial condition and net worth. If the COVID-19 

pandemic results in a sustained market liquidity crisis, our liquidity contingency plans may be difficult or impossible to 

execute. If we cannot access the unsecured debt markets, our ability to repay maturing indebtedness and fund our 

operations could be eliminated or significantly impaired. In this event, our alternative source of liquidity, our other 

investments portfolio, may not be sufficient to meet our liquidity needs. 

In addition, we expect our debt funding needs to increase. We expect the impact of the COVID-19 pandemic and 

significantly higher rates of loan delinquencies, forbearances and other loss mitigation activity will require us to fund 

greater amounts of tax and insurance payments and, for loans in forbearance that back MBS trusts, principal and 

interest payments to the MBS trusts, after borrowers have missed four months of payments; purchases of a larger 

volume of delinquent loans from MBS trusts; whole loan conduit activity, which may remain at a high volume; and 

greater holdings of liquid assets to comply with new liquidity requirements recently issued by FHFA. Our aggregate 

indebtedness may not exceed $300 billion pursuant to the terms of our senior preferred stock purchase agreement 

with Treasury. Depending on the extent of our funding needs and the amount, if any, by which Treasury and FHFA 

agree to any request we make for an increase in our debt limit, our business activities and our ability to meet our 

objectives may be constrained.

• Increased market risk. Market dislocations relating to the COVID-19 pandemic have made it more challenging to 

manage our interest-rate risk. In addition, the overall decline in rates during the first half of 2020 resulted in declines 

in the fair value of some of the financial instruments that we mark to market through our earnings, which contributed 

to our fair value losses for the period. While we have not generally experienced negative interest rates in the United 

States, some central banks in Europe and Asia have in the past cut interest rates below zero. If the financial markets 

experience substantial volatility in the future similar to or more intensely than earlier this year or if U.S. interest rates 

decline further or fall below zero, it could further negatively affect our ability to manage our interest-rate risk and result 

in additional fair value losses, and negative interest rates could increase our operational risk. Furthermore, with the 

anticipated decline in borrower performance due to impact of the COVID-19 pandemic and increased uncertainty 

regarding the value of mortgage-related assets in the current environment, we may have higher investment losses in 

future periods relating to decreases in the fair value of our loans that are held for sale.

• Constraints on new credit risk transfer transactions. For the last several years we have used credit risk transfer 

transactions as an important tool to manage the credit risk of our loan acquisitions. We have also used them to 

reduce our overall conservatorship capital requirements. We did not enter into new credit risk transfer transactions in 

the second quarter of 2020 due to continuing adverse market conditions resulting from the COVID-19 pandemic. 

Although market conditions have improved, we currently do not have plans to engage in additional credit risk transfer 

transactions as we evaluate FHFA’s re-proposed capital rule, which would reduce the amount of capital relief we 

obtain from these transactions. We will continue to review our plans, which may be affected by our evaluation of the 

proposed capital rule and changes in the rule as it is finalized, our progress in meeting FHFA’s 2020 conservatorship 

scorecard, the strength of future market conditions, and our review of our overall business and capital plan to enable 

us to exit conservatorship. As a result, we may incur increased credit losses in connection with our loan acquisitions 

that are not covered by a credit risk transfer transaction and we expect our capital requirements to increase. See 

“MD&A—Legislation and Regulation” for more information on FHFA’s proposed capital rule.

• Limitations on ability to engage in reperforming and nonperforming loan sales. We suspended new sales of 

nonperforming and reperforming loans in the second quarter of 2020, as investor interest in purchasing these loans 

was severely impacted by the COVID-19 pandemic and its effects. Investor interest in purchasing reperforming loans 

has recently returned, and therefore we are considering resuming sales of reperforming loans. As investor interest in 

purchasing nonperforming loans has not returned, we do not anticipate entering into new contracts for sales of 

nonperforming loans in the near future. To the extent future market conditions are not favorable to sales of 

reperforming and nonperforming loans in our retained mortgage portfolio, we will not be able to use such sales as a 

way to reduce our credit risk, the size of our retained mortgage portfolio and our conservatorship capital 

requirements. 

• Increased model and accounting estimate risk. Given the unprecedented nature and timing of the COVID-19 

pandemic and its uncertain impact, we believe our model results relating to our allowance for loan losses currently 

cannot accurately capture the entirety of loan losses we will ultimately incur relating to COVID-19. For both the first 

and second quarters of 2020, management used its judgment to adjust loss projections developed by our credit loss 

model to reflect our expectations relating to COVID-19’s impact on our loan losses, but these judgments may be 

inaccurate and we may ultimately experience greater losses, perhaps substantially, than we currently expect. The 

unprecedented nature of the COVID-19 pandemic may also negatively affect our ability to rely on models to 

effectively manage the risks to our business. The CARES Act provisions prohibiting lenders from reporting some 

borrowers receiving COVID-19-related payment accommodations as delinquent may also impact the stability of the 

interpretation and predictiveness of borrower credit data and therefore the reliability of our models in the future.

Other Information

Fannie Mae Second Quarter 2020 Form 10-Q 134
• Potential reduced demand for mortgages. The COVID-19 pandemic and its impact on the economy may reduce 

demand for both single-family and multifamily mortgage loans, which could reduce our future loan acquisitions and 

guaranty fee income. In addition, government and business closures relating to COVID-19 are likely delaying or 

preventing some closings on both new purchase loans and refinances.

• Increased risk of additional government action affecting our business. Federal, state and local governments have 

taken many actions that have or that we expect will adversely affect our financial results, such as stay-at-home orders 

and business shut-downs, and the loan forbearance requirements of the CARES Act. The U.S. Congress, Treasury, 

the Federal Reserve, FHFA or other national, state or local government agencies or legislatures may take additional 

steps in response to the COVID-19 pandemic that could adversely affect our business, financial results and financial 

condition, such as expanding or extending our obligations to help borrowers, renters or counterparties affected by the 

pandemic or imposing new or expanded business shut-downs. 

• Increased uncertainty relating to our exit from conservatorship. The COVID-19 pandemic could delay or prevent our 

exit from conservatorship, particularly as it may delay our ability to build and raise sufficient capital to exit 

conservatorship. In addition, as we, FHFA and Treasury focus on responding to the COVID-19 pandemic, it may 

reduce our and their capacity to work toward meeting other preconditions for exiting conservatorship.

• Increased risk of mortgage fraud. In response to the COVID-19 pandemic, we are offering certain temporary 

flexibilities relating to our Single-Family Selling Guide requirements. This could increase the risk of mortgage fraud 

relating to the loans we acquire during the COVID-19 pandemic. In addition, the CARES Act provides that a singlefamily borrower may obtain mortgage payment forbearance with no additional documentation required other than the 

borrower's attestation to a financial hardship caused by COVID-19, which creates the risk that borrowers who are not 

experiencing financial hardship may request a forbearance.

For more information on the risks to our business relating to borrower credit risk, counterparty credit risk, economic conditions, 

market risk, liquidity risk, operational risk, model risk and other types of risks described above, see “Risk Factors” in our 2019 

Form 10-K.

Item 2. Unregistered Sales of Equity Securities and Use of 

Proceeds

Common Stock

Our common stock is traded in the over-the-counter market and quoted on the OTCQB, operated by OTC Markets Group, Inc., 

under the ticker symbol “FNMA.”

Recent Sales of Unregistered Equity Securities

Under the terms of our senior preferred stock purchase agreement with Treasury, we are prohibited from selling or issuing our 

equity interests, other than as required by (and pursuant to) the terms of a binding agreement in effect on September 7, 2008, 

without the prior written consent of Treasury. During the quarter ended June 30, 2020, we did not sell any equity securities.

Information about Certain Securities Issuances by Fannie Mae

Pursuant to SEC regulations, public companies are required to disclose certain information when they incur a material direct 

financial obligation or become directly or contingently liable for a material obligation under an off-balance sheet arrangement. 

The disclosure must be made in a current report on Form 8-K under Item 2.03 or, if the obligation is incurred in connection with 

certain types of securities offerings, in prospectuses for that offering that are filed with the SEC.

Because the securities we issue are exempted securities under the Securities Act of 1933, we do not file registration 

statements or prospectuses with the SEC with respect to our securities offerings. To comply with the disclosure requirements 

of Form 8-K relating to the incurrence of material financial obligations, we report our incurrence of these types of obligations 

either in offering circulars or prospectuses (or supplements thereto) that we post on our website or in a current report on 

Form 8-K that we file with the SEC, in accordance with a “no-action” letter we received from the SEC staff in 2004. In cases 

where the information is disclosed in a prospectus or offering circular posted on our website, the document will be posted on 

our website within the same time period that a prospectus for a non-exempt securities offering would be required to be filed 

with the SEC.

The website address for disclosure about our debt securities is www.fanniemae.com/debtsearch. From this address, investors 

can access the offering circular and related supplements for debt securities offerings under Fannie Mae’s universal debt 

facility, including pricing supplements for individual issuances of debt securities.

Disclosure about our obligations pursuant to the MBS we issue, some of which may be off-balance sheet obligations, can be 

found at www.fanniemae.com/mbsdisclosure. From this address, investors can access information and documents about our 

MBS, including prospectuses and related prospectus supplements.

Other Information

Fannie Mae Second Quarter 2020 Form 10-Q 135
We are providing our website address solely for your information. Information appearing on our website is not incorporated into 

this report.

Our Purchases of Equity Securities

We did not repurchase any of our equity securities during the second quarter of 2020.

Dividend Restrictions 

Our payment of dividends is subject to the following restrictions: 

Restrictions Relating to Conservatorship. Our conservator announced on September 7, 2008 that we would not pay any 

dividends on the common stock or on any series of preferred stock, other than the senior preferred stock. In addition, FHFA’s 

regulations relating to conservatorship and receivership operations prohibit us from paying any dividends while in 

conservatorship unless authorized by the Director of FHFA. The Director of FHFA has directed us to make dividend payments 

on the senior preferred stock on a quarterly basis for every dividend period for which dividends were payable.

Restrictions Under Senior Preferred Stock Purchase Agreement and Senior Preferred Stock. The senior preferred stock 

purchase agreement prohibits us from declaring or paying any dividends on Fannie Mae equity securities (other than the 

senior preferred stock) without the prior written consent of Treasury. In addition, pursuant to the dividend provisions of the 

senior preferred stock and directives from our conservator, we are obligated to pay Treasury each quarter any dividends 

declared consisting of the amount, if any, by which our net worth as of the end of the immediately preceding fiscal quarter 

exceeds $25 billion. As a result, our net income is not available to common stockholders. For more information on the terms of 

the senior preferred stock purchase agreement and senior preferred stock, see “Business—Conservatorship, Treasury 

Agreements and Housing Finance Reform” in our 2019 Form 10-K.

Additional Restrictions Relating to Preferred Stock. Payment of dividends on our common stock is also subject to the prior 

payment of dividends on our preferred stock and our senior preferred stock. Payment of dividends on all outstanding preferred 

stock, other than the senior preferred stock, is also subject to the prior payment of dividends on the senior preferred stock. 

Statutory Restrictions. Under the GSE Act, FHFA has authority to prohibit capital distributions, including payment of dividends, 

if we fail to meet our capital requirements. If FHFA classifies us as significantly undercapitalized, approval of the Director of 

FHFA is required for any dividend payment. Under the Charter Act and the GSE Act, we are not permitted to make a capital 

distribution if, after making the distribution, we would be undercapitalized. The Director of FHFA, however, may permit us to 

repurchase shares if the repurchase is made in connection with the issuance of additional shares or obligations in at least an 

equivalent amount and will reduce our financial obligations or otherwise improve our financial condition. 

Item 3. Defaults Upon Senior Securities

None. 

Item 4. Mine Safety Disclosures

None.

Item 5. Other Information

None.

Other Information

Fannie Mae Second Quarter 2020 Form 10-Q 136
Item 6. Exhibits

The exhibits listed below are being filed or furnished with or incorporated by reference into this report. 

Item Description

3.1 Fannie Mae Charter Act (12 U.S.C. § 1716 et seq.) as amended through July 25, 2019 (Incorporated by 

reference to Exhibit 3.1 to Fannie Mae’s Quarterly Report on Form 10-Q for the quarter ended September 

30, 2019, filed October 31, 2019.)

3.2 Fannie Mae Bylaws, as amended through January 29, 2019 (Incorporated by reference to Exhibit 3.2 to 

Fannie Mae’s Annual Report on Form 10-K for the year ended December 31, 2018, filed February 14, 

2019.)

31.1 Certification of Chief Executive Officer pursuant to Securities Exchange Act Rule 13a-14(a)

31.2 Certification of Chief Financial Officer pursuant to Securities Exchange Act Rule 13a-14(a)

32.1 Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350

32.2 Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350

101. INS Inline XBRL Instance Document* - the instance document does not appear in the Interactive Data File 

because its XBRL tags are embedded within the Inline XBRL document

101. SCH Inline XBRL Taxonomy Extension Schema*

101. CAL Inline XBRL Taxonomy Extension Calculation*

101. DEF Inline XBRL Taxonomy Extension Definition*

101. LAB Inline XBRL Taxonomy Extension Label*

101. PRE Inline XBRL Taxonomy Extension Presentation*

104 Cover Page Interactive Data File* - the cover page interactive data file does not appear in the Interactive 

Data File because its XBRL tags are embedded within the Inline XBRL document included as Exhibit 101

* The financial information contained in these XBRL documents is unaudited.

Other Information

Fannie Mae Second Quarter 2020 Form 10-Q 137
SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed 

on its behalf by the undersigned thereunto duly authorized.

Federal National Mortgage Association

By: /s/ Hugh R. Frater

Hugh R. Frater

Chief Executive Officer

Date: July 30, 2020

By: /s/ Celeste M. Brown

Celeste M. Brown

Executive Vice President and

Chief Financial Officer

Date: July 30, 2020

Signatures

Fannie Mae Second Quarter 2020 Form 10-Q 138