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 March 31, 2021

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 April 15, 2021, 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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71

Condensed Consolidated Statements of Operations and Comprehensive Income . . . . . . . . . . . . . . . . . . . . 72

Condensed Consolidated Statements of Cash Flows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73

Condensed Consolidated Statements of Changes in Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74

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

Note 2—Consolidations and Transfers of Financial Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80

Note 3—Mortgage Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82

Note 4—Allowance for Loan Losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89

Note 5—Investments in Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91

Note 6—Financial Guarantees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94

Note 7—Short-Term and Long-Term Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95

Note 8—Derivative Instruments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97

Note 9—Segment Reporting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100

Note 10—Concentrations of Credit Risk . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102

Note 11—Netting Arrangements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 106

Note 12—Fair Value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 108

Note 13—Commitments and Contingencies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 118

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

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

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

Summary of Our Financial Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

Liquidity Provided in the First Quarter of 2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

Legislation and Regulation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

Key Market Economic Indicators . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

Consolidated Results of Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

Consolidated Balance Sheet Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18

Retained Mortgage Portfolio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19

Guaranty Book of Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21

Business Segments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23

Single-Family Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23

Single-Family Mortgage Market . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23

Single-Family Market Activity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24

Single-Family Business Metrics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24

Single-Family Business Financial Results . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26

Single-Family Mortgage Credit Risk Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27

Multifamily Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47

Multifamily Mortgage Market . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47

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

Multifamily Business Financial Results . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50

Multifamily Mortgage Credit Risk Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50

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

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

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

Institutional Counterparty Credit Risk Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63

Market Risk Management, including Interest-Rate Risk Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64

Critical Accounting Policies and Estimates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66

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

Forward-Looking Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67

Fannie Mae First Quarter 2021 Form 10-Q i
Item 3. Quantitative and Qualitative Disclosures about Market Risk . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 120

Item 4. Controls and Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 120

PART II—Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 123

Item 1. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 123

Item 1A. Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 124

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 126

Item 3. Defaults Upon Senior Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 128

Item 4. Mine Safety Disclosures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 128

Item 5. Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 128

Item 6. Exhibits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 128

Fannie Mae First Quarter 2021 Form 10-Q ii
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. FHFA established 2021 performance objectives for us that included preparing for our eventual exit from 

conservatorship. Congress and the Administration continue to consider options for reform of the housing finance system, 

including Fannie Mae. 

We are not currently permitted to pay dividends or other distributions to stockholders. Our agreements with the U.S. 

Department of the Treasury (“Treasury”) include a commitment from Treasury to provide us with funds to maintain a 

positive net worth under specified conditions; however, the U.S. government does not guarantee our securities or other 

obligations. Our agreements with Treasury also include covenants that significantly restrict our business activities. For 

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

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

Finance Reform” and “Risk Factors” in our Form 10-K for the year ended December 31, 2020 (“2020 Form 10-K”).

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 2020 Form 10-K. You can find a “Glossary of Terms Used in 

This Report” in our 2020 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 2020 Form 10-K. 

Introduction

Fannie Mae is a leading source of financing for mortgages in the United States, with $4.1 trillion in assets as of March 

31, 2021. Organized as a government-sponsored entity, Fannie Mae is a shareholder-owned corporation. Our charter is 

an act of Congress, and we have a mission under that charter to provide liquidity and stability to the residential 

mortgage market and to promote access to mortgage credit. We were initially established in 1938.

Our revenues are primarily driven by guaranty fees we receive for assuming the credit risk on loans underlying the 

mortgage-backed securities we issue. We do not originate loans or lend money directly to borrowers. Rather, we 

primarily work with lenders who originate loans to borrowers. We securitize those loans into Fannie Mae mortgagebacked securities that we guarantee (which we refer to as Fannie Mae MBS or our MBS). 

Effectively managing credit risk is key to our business. In exchange for assuming credit risk on the loans we acquire, we 

receive guaranty fees. These fees take into account the credit risk characteristics of the loans we acquire and consist of 

two primary components: 

• Loan-level pricing adjustments, which are upfront fees received when we acquire single-family loans.

• Base guaranty fees, which we receive monthly over the life of the loan.

Guaranty fees are set at the time we acquire loans and do not change over the life of the loan. How long a loan remains 

in our guaranty book is heavily dependent on interest rates. When interest rates decrease, a larger portion of our book 

of business turns over as more loans refinance. On the other hand, as interest rates increase, fewer loans refinance and 

our book turns over more slowly. Since guaranty fees are set at the time a loan is originated, the impact of any change 

in guaranty fees on future revenues is dependent on the rate at which newly originated loans replace the existing loans 

in our book of business. 

MD&A | Introduction

Fannie Mae First Quarter 2021 Form 10-Q 1
Executive Summary

Summary of Our Financial Performance

Condensed Consolidated Results

(Dollars in billions)

$5.5

$6.8

$0.5

$5.0

$0.5

$5.0

$13.9

$30.2

Net revenues Net income Comprehensive income Net worth

Q1 2020 Q1 2021

Q1 2021 vs. Q1 2020

• Net revenues increased $1.4 billion in the first quarter of 2021, compared with the first quarter of 2020, primarily 

due to an increase in net amortization income as a result of continued high prepayment volumes from loan 

refinancings in the first quarter of 2021 driven by the low interest-rate environment. High prepayments result in 

accelerated amortization of cost basis adjustments, including risk-based pricing adjustments and other upfront 

fees we received at the time of loan acquisition. We anticipate net revenues from prepayment activity will begin 

to slow in the second half of 2021, as we expect mortgage interest rates are likely to rise, resulting in fewer 

borrowers who can benefit from a refinancing. Lower levels of refinancing will likely slow the accelerated 

amortization of cost basis adjustments for loans in our book of business as loans remain outstanding for longer, 

and therefore will likely result in lower amortization income in any one period.

• Net income increased $4.5 billion in the first quarter of 2021 compared with the first quarter of 2020, primarily 

driven by a shift from credit-related expense in the first quarter of 2020 to credit-related income in the first 

quarter of 2021. Credit-related expense in the first quarter of 2020 was driven by economic dislocation caused 

by the COVID-19 pandemic. Credit-related income in the first quarter of 2021 was driven by a benefit for credit 

losses primarily due to higher actual and forecasted home prices, partially offset by higher actual and projected 

interest rates. Additional drivers of increased net income include the increase in net revenues from higher net 

amortization income discussed above and a shift from fair value losses to gains in the first quarter of 2021 

primarily driven by our implementation of hedge accounting in January 2021. 

• Net worth increased to $30.2 billion as of March 31, 2021 from $25.3 billion as of December 31, 2020. The 

increase is attributable to $5.0 billion of comprehensive income for the first quarter of 2021. 

Long-term 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 population growth, 

household formation and housing supply; 

• borrower performance, the guaranty fees we charge, and changes in macroeconomic factors, including home 

prices and interest rates; and

MD&A | Executive Summary | Summary of Our Financial Performance

Fannie Mae First Quarter 2021 Form 10-Q 2
• actions by FHFA, the Administration and Congress relating to our business and housing finance reform, 

including our capital requirements, our ongoing financial obligations to Treasury, restrictions on our activities 

and our business footprint, our competitive environment, requirements to support borrowers or the mortgage 

market, and actions we take in light of these conditions.

We discuss recent measures to address the economic impact of COVID-19 in the American Rescue Plan Act of 2021 

(the “American Rescue Plan”) that may impact us in “Legislation and Regulation” and recent economic conditions in 

“Key Market Economic Indicators” in this report. 

Liquidity Provided in the First Quarter of 2021

Through our single-family and multifamily business segments, we provided $422 billion in liquidity to the mortgage 

market in the first quarter of 2021, including $211 billion through our whole loan conduit that primarily supports small- to 

medium-sized lenders, enabling the financing of approximately 1.7 million home purchases, refinancings or rental units. 

Fannie Mae Provided $422 Billion in Liquidity in the First Quarter of 2021

Unpaid Principal Balance Units

$99B 340K

Single-Family Home Purchases

$301B 1.1M

Single-Family Refinancings

$22B 217K

Multifamily Rental Units

We continued our commitment to green financing in the first quarter of 2021, issuing a total of $6.4 billion in multifamily 

green MBS, $37.4 million in single-family green MBS and $715.4 million in multifamily green resecuritizations. We also 

issued $3.1 billion in multifamily social MBS and $314.8 million in multifamily social resecuritizations in the first quarter

of 2021. These social bonds represent our first issuance of social bonds and were issued in alignment with our 

Sustainable Bond Framework, which guides our issuances of sustainable debt bonds and sustainable MBS that support 

housing affordability and green financing. For information about our green bonds and our Sustainable Bond Framework, 

see “Directors, Executive Officers and Corporate Governance—ESG Matters” in our 2020 Form 10-K.

Legislation and Regulation

The information in this section updates and supplements information regarding legislative, regulatory, conservatorship 

and other developments affecting our business set forth in “Business—Conservatorship, Treasury Agreements and 

Housing Finance Reform” and “Business—Legislation and Regulation” in our 2020 Form 10-K. Also see “Risk Factors” 

in our 2020 Form 10-K for discussions of risks relating to legislative and regulatory matters.

American Rescue Plan

In March 2021, Congress enacted and the President signed the American Rescue Plan to address the economic 

dislocation and other burdens resulting from the COVID-19 pandemic. The act follows enactment of the Coronavirus 

Aid, Relief, and Economic Security Act (the “CARES Act”) in March 2020 and the Consolidated Appropriations Act of 

2021 in December 2020. The American Rescue Plan contains many provisions designed to mitigate the negative 

economic impact of the COVID-19 pandemic, including direct cash payments to eligible taxpayers below specified 

income limits, extended unemployment insurance benefits, and additional relief designed to prevent layoffs and 

business closures at small businesses. It also includes emergency rental assistance, emergency housing vouchers and 

funds to assist struggling homeowners with mortgage payments, property taxes, property insurance, utilities and other 

housing-related costs. We expect the funding provided under the American Rescue Plan will improve the ability of some 

single-family and multifamily borrowers to make payments on their loans.

Proposed CFPB Rule Regarding Foreclosure

On April 5, 2021, the Consumer Financial Protection Bureau (the “CFPB”) issued a proposed rule that, if finalized, would 

generally prohibit servicers from initiating any new foreclosure on a mortgage loan secured by the borrower’s principal 

residence until after December 31, 2021. The CFPB is considering providing limited exceptions from this prohibition if 

the servicer has completed its loss mitigation review and determined the borrower is not eligible for any non-foreclosure 

MD&A | Executive Summary | Summary of Our Financial Performance

Fannie Mae First Quarter 2021 Form 10-Q 3
option or if the borrower has been unresponsive to servicer outreach. The proposed effective date of the rule is 

August 31, 2021 and public comments are due May 10, 2021. Fannie Mae has already suspended foreclosures and 

certain foreclosure-related activities for single-family properties, other than for vacant or abandoned properties, through 

at least June 30, 2021. If the period before foreclosures can be initiated is extended, it may impact the timing of when 

we realize credit losses from foreclosures and foreclosure-related activities. It could also increase our expected credit 

loss reserves, which could adversely affect our credit-related expenses.

Federal Eviction Moratorium

In March 2021, the Centers for Disease Control and Prevention (the “CDC”) extended through June 30, 2021 its order 

prohibiting the eviction of any tenant, lessee or resident of a residential property for nonpayment of rent, if such person 

provides a specified declaration attesting that they meet the requirements to obtain the protection of the order. The 

requirements to obtain the protection of the order include a specified income cap and an inability to pay full rent. 

Challenges to the CDC’s eviction moratorium order have been brought in a number of jurisdictions, and the validity of 

the CDC’s order remains subject to further litigation. While the CDC order does not impose any obligations on Fannie 

Mae or its servicers to ensure compliance by borrowers, a borrower’s income may be impacted by tenants who do not 

pay their rent while under the protection of the CDC order. As a result and as described in “Risk Factors” in our 2020 

Form 10-K, these eviction moratoriums could adversely affect the ability of some of our borrowers to make payments on 

their loans. 

New Refinance Option

On April 28, 2021, FHFA announced that it is directing Fannie Mae and Freddie Mac to implement a new refinance 

option targeting low-income borrowers with single-family mortgages backed by Fannie Mae and Freddie Mac. The 

initiative is intended to encourage eligible borrowers to take advantage of the current low interest-rate environment to 

refinance and lower both their interest rates and their monthly mortgage payments.

2020 Housing Goals Performance

We are subject to housing goals, which establish specified requirements for our mortgage acquisitions relating to 

affordability or location. We believe we met all of our single-family and multifamily housing goals for 2020. Final 

performance results will be determined and published by FHFA sometime after the release later this year of 2020 data 

reported by primary mortgage market originators under the Home Mortgage Disclosure Act. For more information on our 

housing goals, see “Business—Legislation and Regulation—GSE Act and Other Legislative and Regulatory Matters—

Housing Goals” in our 2020 Form 10-K.

The Qualified Mortgage Patch

In December 2020, the CFPB published a final rule that eliminates the qualified mortgage patch and replaces the 43% 

debt-to-income (“DTI”) ratio limit and certain other requirements for a standard qualified mortgage with a pricing and 

underwriting framework. The final qualified mortgage rule went into effect in March 2021, with lenders required to 

comply beginning in July 2021. In April 2021, the CFPB published a final rule extending the mandatory compliance date 

to October 2022 and thereby also extending the qualified mortgage patch. The CFPB has indicated that it will consider 

changes to the final rule during the extended implementation timeframe. Although the rule’s implementation is delayed, 

the terms of our senior preferred stock purchase agreement with Treasury require that after July 2021 most single-family 

loans we purchase be qualified mortgages under the terms of the final rule that went into effect in March 2021. We do 

not expect the final qualified mortgage rule, as published, to impact our business significantly, but it may increase 

competition. See “Risk Factors—GSE and Conservatorship Risk” and “Risk Factors—Legal and Regulatory Risk” in our 

2020 Form 10-K for more information on risks presented by regulatory changes in the financial services industry.

MD&A | Legislation and Regulation

Fannie Mae First Quarter 2021 Form 10-Q 4
Key Market Economic Indicators

Below we discuss how varying macroeconomic conditions can influence our financial results across different business 

and economic environments. 

The COVID-19 pandemic has had a significant adverse effect on both the U.S. and global economies. Our forecasts 

and expectations are subject to many uncertainties, including the impact of the COVID-19 pandemic, and may change, 

perhaps substantially, from our current expectations.

Selected Benchmark Interest Rates

2.60%

1.45%

0.19%

2.65%

0.01%

0.01%

2.41%

0.72%

1.78%

2.41%

0.67%

1.74%

3.11%

1.80%

2.04%

4.06%

3.50%

3.17%

3-month London Inter-Bank Offered Rate (LIBOR)1

Secured Overnight Financing Rate (SOFR)1

10-year swap rate1

10-year Treasury rate1

30-year Fannie Mae MBS par coupon rate1

30-year FRM rate2

03/31/19 06/30/19 09/30/19 12/31/19 03/31/20 06/30/20 09/30/20 12/31/20 03/31/21

(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. We 

amortize various cost basis adjustments over the life of the mortgage loan, including those relating to loan-level 

pricing adjustments we receive as upfront fees at the time we acquire single-family loans. As a result, any 

prepayment of a loan results in an accelerated realization of those upfront fees as income. Therefore, as loan 

prepayments slow, the accelerated realization of amortization income also slows. Conversely, in a declining 

interest-rate environment, our mortgage loans tend to prepay faster, typically resulting in the opposite trends of 

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. 

• 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 First Quarter 2021 Form 10-Q 5
• In January 2021, we began applying fair value hedge accounting to reduce the impact of changes in interest 

rates, or the interest-rate effect, on our financial results. For additional information on how hedge accounting

supports our interest-rate risk management strategy and our fair value hedge accounting policy, see 

“Consolidated Results of Operations—Hedge Accounting Impact,” “Risk Management—Market Risk 

Management, including Interest-Rate Risk Management—Earnings Exposure to Interest-Rate Risk” and “Note 

1, Summary of Significant Accounting Policies.”

Single-Family Quarterly Home Price Growth Rate(1)

1.5%

2.6%

2.9%

3.2% 3.4%

Fannie Mae national home price index

1Q20 2Q20 3Q20 4Q20 1Q21

(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 becomes available.

Home prices and how they 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. Declines in 

home prices increase the losses we incur on defaulted loans.

• Home prices also impact the growth and size of our guaranty book of business. As home prices rise, the 

principal balance of loans associated with purchase-money mortgages may increase, which affects the size of 

our book. Additionally, rising home prices can increase the amount of equity borrowers have in their home, 

which may lead to an increase in origination volumes for cash-out refinance loans with higher principal 

balances than the existing loan. Replacing existing loans with newly acquired cash-out refinances can affect 

the growth and size of our book.

• Home price growth in the first quarter of 2021 was unseasonably strong, driven by continued low interest rates 

and low levels of housing supply relative to the level of demand.

• We currently expect home price growth on a national basis in 2021 of 8.8%, which is a significant increase 

compared with our prior forecast but lower than the exceptionally strong home price growth of 10.6% in 2020. 

However, a higher-than-expected supply of homes available for sale or weaker-than-expected demand could 

lead to slower growth in home prices. We also expect significant regional variation in the timing and rate of 

home price growth.

• Our forecasts and expectations are subject to many uncertainties and may change, perhaps substantially, from 

our current forecasts and expectations, including any continued impact from the COVID-19 pandemic. For 

example, home price growth could slow if GDP growth is weaker than we currently expect, if 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 First Quarter 2021 Form 10-Q 6
New Housing Starts

(1)

1,485

1,079

1,432

1,584 1,613

968

766

1,037 1,227 1,155

517

313

395

357 458

0.4%

(20.8)%

35.4%

18.4%

(5.9)%

10.2%

(39.4)%

26.3%

(9.7)%

28.3%

Single-family starts (in thousands)

Multifamily starts (in thousands)

% quarterly change in single-family housing starts

% quarterly change in multifamily housing starts

1Q20 2Q20 3Q20 4Q20 1Q21

(1) According to U.S. Census Bureau and subject to revision. New housing starts for the first quarter of 2021 are based on Fannie Mae’s 

forecast.

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 rates of household formation and 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, 

weakening prior to a slowdown in U.S. economic activity and accelerating prior to a recovery, which contributes 

to the growth of GDP and employment. However, the housing sector’s performance may vary from its historical 

precedent due to the many uncertainties surrounding future economic or housing policy as well as the 

continued impact of the COVID-19 pandemic on the economy and the housing market.

• With regard to housing construction, a decline in housing starts results in fewer new homes being available for 

purchase and potentially a lower volume of mortgage originations. Construction activity can also affect credit 

losses through its impact on home prices. If the growth of demand exceeds the growth of supply, prices will 

appreciate and impact the risk profile of newly originated home purchase mortgages, depending on where in 

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

slowdown and may signal expected increases in delinquency and losses on defaulted loans. 

• Home sales fell in the first quarter of 2021, declining from the high pace seen at the end of 2020. We expect a 

continued lack of new and existing homes available for sale will likely continue to constrain sales into the 

second quarter. 

• Strong pricing, given both the current strength in demand and low supply of existing and new homes available 

for sale, should support construction and we expect single-family housing starts in 2021 to exceed 2020 levels 

by 23.8%. We also expect housing activity to remain strong throughout 2021. 

• Construction demand in the multifamily sector strengthened at the beginning of 2021, with multifamily starts 

posting a solid increase in the first quarter. We expect a modest pullback in the second quarter before 

multifamily starts remain mostly flat for the second half of 2021; we project multifamily starts to edge up about 

1.0% on an annual basis in 2021. 

MD&A | Key Market Economic Indicators

Fannie Mae First Quarter 2021 Form 10-Q 7
GDP, Unemployment Rate and Personal Consumption

1.8% 3.7% 2.7% 1.6%

(6.9)%

(33.2)%

41.0%

2.3%

10.7%

2.9%

1.5%

2.6% 2.4%

(5.0)%

(31.4)%

33.4%

4.3% 6.4%

3.8% 3.6% 3.5% 3.6% 4.4%

11.1%

7.8%

6.7% 6.0%

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

1Q19 2Q19 3Q19 4Q19 1Q20 2Q20 3Q20 4Q20 1Q21

(1) GDP growth (decline) and personal consumption growth (decline) are based on the quarterly series calculated by the Bureau of Economic 

Analysis and are subject to revision.

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

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

financial results

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

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

which in turn can lead to credit losses.

• 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 and moving to another home, and renters to consider becoming 

homeowners. Homebuilding typically increases to meet the rise in demand. Mortgage delinquencies typically 

fall in an expanding economy, thereby decreasing credit losses.

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

reduced economic activity. Typically, as an economic slowdown intensifies, households reduce their spending. 

This reduction in consumption then accelerates the slowdown. An economic slowdown can lead to employment 

losses, impairing the ability of borrowers and renters to meet mortgage and rental payments, thus causing loan 

delinquencies to rise. Home sales and mortgage originations also typically fall in a slowing economy.

• The economic recovery from the impact of the COVID-19 pandemic began in the second half of 2020 and 

continued its momentum in the first quarter of 2021 as additional government stimulus measures were passed 

with the American Rescue Plan, vaccination rates increased, and many lockdown measures began to be lifted. 

This led to strong consumer spending and GDP growth. The pace and strength of economic recovery remains 

uncertain and will depend on a number of factors, including consumers’ eagerness to return to previously 

restricted activities, recovery of economic activity outside the U.S., global supply chain disruptions, the path of 

the COVID-19 pandemic, and the potential for higher inflation.

See “Risk Factors—Market and Industry Risk” in this report and in our 2020 Form 10-K for further discussion of risks to 

our business and financial results associated with interest rates, home prices, housing activity and economic conditions.

MD&A | Key Market Economic Indicators

Fannie Mae First Quarter 2021 Form 10-Q 8
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 March 31,

2021 2020 Variance

(Dollars in millions)

Net interest income(1) $ 6,742 $ 5,347 $ 1,395 

Fee and other income 87 120 (33) 

Net revenues 6,829 5,467 1,362 

Investment gains (losses), net 45 (158) 203 

Fair value gains (losses), net(1) 784 (276) 1,060 

Administrative expenses (748) (749) 1 

Credit-related income (expenses):

Benefit (provision) for credit losses 765 (2,583) 3,348 

Foreclosed property income (expense) 5 (80) 85 

Total credit-related income (expenses) 770 (2,663) 3,433 

TCCA fees (731) (637) (94) 

Credit enhancement expense(2) (284) (376) 92 

Change in expected credit enhancement recoveries(3) (31) 188 (219) 

Other expenses, net(4) (319) (218) (101) 

Income before federal income taxes 6,315 578 5,737 

Provision for federal income taxes (1,322) (117) (1,205) 

Net income $ 4,993 $ 461 $ 4,532 

Total comprehensive income $ 4,966 $ 476 $ 4,490 

(1) In January 2021, we began applying fair value hedge accounting. For qualifying hedging relationships, fair value changes attributable to 

movements in the designated benchmark interest rates for hedged mortgage loans and funding debt and the fair value change of the 

designated portion of the paired interest-rate swaps are recognized in “Net interest income.” In prior years, all fair value changes for 

interest-rate swaps were recognized in “Fair value gains (losses), net.” See “Hedge Accounting Impact” below and “Note 1, Summary of 

Significant Accounting Policies” for more information about our hedge accounting program.

(2) Consists of costs associated with our freestanding credit enhancements, which primarily include our Connecticut Avenue Securities®

(“CAS”) and Credit Insurance Risk TransferTM (“CIRTTM”) programs, enterprise-paid mortgage insurance (“EPMI”), and certain lender risksharing programs. 

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

(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. 

Hedge Accounting Impact

Our earnings can experience volatility due to interest-rate changes and differing accounting treatments that apply to

certain financial instruments on our balance sheet. Specifically, we have exposure to earnings volatility that is driven by 

changes in interest rates in two primary areas: our net portfolio and our consolidated MBS trusts. The exposure in the 

net portfolio is primarily driven by changes in the fair value of risk management derivatives, mortgage commitments, and 

certain assets, primarily securities, that are carried at fair value. The exposure related to our consolidated MBS trusts 

primarily relates to changes in our credit loss reserves driven by changes in interest rates.

To help address this volatility, we began applying fair value hedge accounting in January 2021 to reduce the currentperiod impact on our earnings related to changes in interest rates, particularly the London Inter-bank Offered Rate 

(“LIBOR”) and the Secured Overnight Financing Rate (“SOFR”). Hedge accounting aligns the timing of when we 

recognize fair value changes in hedged items attributable to these benchmark interest-rate movements with fair value 

changes in the hedging instrument. 

MD&A | Consolidated Results of Operations

Fannie Mae First Quarter 2021 Form 10-Q 9
Under our hedge accounting program, we establish fair value hedging relationships between risk management

derivatives, specifically interest-rate swaps, and qualifying portfolios of mortgage loans or funding debt. For hedging 

relationships that are highly effective, we recognize changes in the fair value of the hedged mortgage loans or funding 

debt attributable to movements in the benchmark interest rate in net interest income. We then offset that impact with the 

changes in fair value of the designated interest-rate swap. This has the effect of deferring the recognition of gains and 

losses on the hedging instrument to future periods by recognizing the offsetting gain or loss on the hedged item as a 

cost basis adjustment on the underlying loans or funding debt at the end of the hedge term. The cost basis adjustment 

is then subsequently amortized back into earnings. Accordingly, for the first quarter of 2021 we deferred $1.2 billion in 

fair value losses as cost basis adjustments on our hedged loans and funding debt that will be amortized through “Net 

interest income” over the contractual life of the respective hedged items. 

Although hedge accounting reduces the earnings volatility related to benchmark interest rate movements in any given 

period, it does not impact the amount of interest-rate-driven gains or losses we will ultimately recognize through 

earnings.

While we expect the earnings volatility related to benchmark interest rate movements to be meaningfully reduced as a 

result of our adoption of hedge accounting, earnings variability driven by other factors, such as spreads, remains. In 

addition, hedge accounting is not designed to address earnings volatility driven by changes in cost basis amortization 

recognized in net interest income, which can be influenced by interest rate changes. 

See “Note 1, Summary of Significant Accounting Policies” and “Note 8, Derivative Instruments” for additional discussion 

of our fair value hedge accounting policy and related disclosures.

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. 

Guaranty fees from these loans overwhelmingly account for the difference between the interest income on loans in 

consolidated trusts and the interest expense on the debt of consolidated trusts.

The timing of when we recognize amortization income can vary based on a number of factors, the most significant of 

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

more slowly, which typically results in lower net amortization income. Conversely, in a declining interest-rate 

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

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

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

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

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

As discussed above, beginning in January 2021, we recognize fair value changes attributable to movements in 

benchmark interest rates for hedged mortgage loans and funding debt and total fair value changes for designated 

interest-rate swaps, as well as the amortization of hedge-related basis adjustments on the associated mortgage loans or 

funding debt and any related interest accrual on the swap, as a component of net interest income. The income or 

expense associated with this activity is presented in the hedge accounting line item in the table below. 

MD&A | Consolidated Results of Operations

Fannie Mae First Quarter 2021 Form 10-Q 10
The table below displays the components of our net interest income from our guaranty book of business, which we 

discuss in “Guaranty Book of Business,” and from our portfolios, as well as from hedge accounting.

Components of Net Interest Income

For the Three Months 

Ended March 31,

2021 2020 Variance

(Dollars in millions)

Net interest income from guaranty book of business:

Base guaranty fee income(1) $ 3,197 $ 2,600 $ 597 

Base guaranty fee income related to TCCA(2) 731 637 94 

Net amortization income(3) 2,526 1,506 1,020 

Total net interest income from guaranty book of business 6,454 4,743 1,711 

Net interest income from portfolios 266 604 (338) 

Income from hedge accounting(4) 22 — 22 

Total net interest income $ 6,742 $ 5,347 $ 1,395 

(1) Excludes revenues generated by the 10 basis point guaranty fee increase we implemented pursuant to the TCCA which is remitted to 

Treasury and not retained by us.

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

revenue from which is remitted to Treasury and not retained by us. See “Note 1, Summary of Significant Accounting Policies” for more 

information on guidance we received from FHFA regarding TCCA fee amounts that we are not required to accrue or remit to Treasury with 

respect to delinquent loans backing MBS trusts.

(3) Net amortization income refers to the amortization of premiums and discounts on mortgage loans and debt of consolidated trusts. These 

cost basis adjustments represent the difference between the initial fair value and the carrying value of these instruments as well upfront 

fees we receive at the time of loan acquisition. It does not include the amortization of cost basis adjustments resulting from hedge 

accounting, which is included in income from hedge accounting.

(4) For the first quarter of 2021, income from hedge accounting includes contractual interest accruals and fair value losses for designated 

interest-rate swaps of $1,124 million offset by $1,146 million of gains from hedged mortgage loans and funding debt, net of $13 million in 

hedge-related amortization expense.

Net interest income increased in the first quarter of 2021 compared with the first quarter of 2020, driven by higher net 

amortization income and higher base guaranty fee income, partially offset by lower income from portfolios. 

• Higher net amortization income. A continued low interest-rate environment in the first quarter of 2021 led to 

elevated prepayment volumes as loans refinanced, which accelerated the amortization of cost basis 

adjustments, including upfront fees we recognize over the contractual life of the loans, on mortgage loans of 

consolidated trusts and the related debt. 

• Higher base guaranty fee income. An increase in the size of our guaranty book of business was the primary 

driver of the increase in base guaranty fee income in the first quarter of 2021. 

• Lower income from portfolios. Lower yields in the first quarter of 2021 on mortgage loans and assets in our 

other investments portfolio, partially offset by a decrease in interest expense on our funding debt due to a 

decrease in average borrowing costs, contributed to a decline in income from portfolios in the first quarter of 

2021. We discuss the impact of COVID-19 on our funding needs and funding activity in “Liquidity and Capital 

Management—Liquidity Management—Debt Funding.” 

Though mortgage rates modestly increased over the first quarter of 2021, we continued to be in a historically low 

interest-rate environment, contributing to continued 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 this historically low 

interest-rate environment, we anticipate that refinancing activity will begin to slow in the second half of 2021 as fewer 

borrowers can benefit from a refinancing as we expect interest rates will likely rise. Lower levels of refinancing in the 

future will likely slow the rate at which we amortize cost basis adjustments and therefore will likely result in lower 

amortization income in any one period as the average life of our outstanding book of business may extend as our book 

of business turns over more slowly. In addition, a slower turnover rate would limit the impact that changes in our 

guaranty fees have on our future revenues as any changes would take longer to meaningfully impact the average 

charged guaranty fee on our total book of business.

For loans negatively impacted by the COVID-19 pandemic, we continue to recognize interest income for up to six 

months of delinquency provided that the loans were either current at March 1, 2020 or originated after March 1, 2020, 

and collection of principal and interest is reasonably assured. For those loans where we have provided relief beyond six 

MD&A | Consolidated Results of Operations

Fannie Mae First Quarter 2021 Form 10-Q 11
months of delinquency, we continue to accrue interest income provided that the loan remains in a forbearance 

arrangement and collection of principal and interest continues to be reasonably assured. This resulted in a large portion 

of delinquent loans, including those in a forbearance arrangement, remaining on accrual status as of March 31, 2021. 

See “Note 3, Mortgage Loans” for more information about our nonaccrual accounting policy and “Single-Family 

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

“Multifamily Business—Multifamily Mortgage Credit Risk Management—Multifamily Problem Loan Management and 

Foreclosure Prevention” for details about loans in forbearance, as well as on-balance sheet loans past due 90 days or 

more and continuing to accrue interest. 

Analysis of Net Interest Income

The table below displays an analysis of our net interest income, average balances, and related yields earned on assets 

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

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

such as for mortgage loans, we use monthly averages. For the first quarter of 2021, net interest income was impacted 

by the application of fair value hedge accounting beginning in January 2021. 

Analysis of Net Interest Income and Yield(1)

For the Three Months Ended March 31,

2021 2020

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(2) $ 109,537 $ 825 3.01 % $ 101,765 $ 1,016 3.99 %

Mortgage loans of consolidated 

trusts(2) 3,600,116 22,528 2.50 3,259,557 27,922 3.43 

Total mortgage loans(3) 3,709,653 23,353 2.52 3,361,322 28,938 3.44 

Mortgage-related securities 7,403 42 2.27 10,875 99 3.64 

Non-mortgage-related securities(4) 164,404 117 0.28 64,806 248 1.51 

Federal funds sold and securities 

purchased under agreements to 

resell or similar arrangements 60,103 8 0.05 29,335 107 1.44 

Advances to lenders 10,965 42 1.53 6,416 34 2.10 

Total interest-earning assets $ 3,952,528 23,562 2.38 % $ 3,472,754 29,426 3.39 %

Interest-bearing liabilities:

Short-term funding debt $ 9,779 (3) 0.12 % $ 31,842 (102) 1.27 %

Long-term funding debt(2) 259,737 (760) 1.17 135,415 (787) 2.32 

Connecticut Avenue Securities® 

(“CAS”) debt 14,804 (153) 4.13 20,536 (289) 5.63 

Total debt of Fannie Mae 284,320 (916) 1.29 187,793 (1,178) 2.51 

Debt securities of consolidated 

trusts held by third parties 3,643,848 (15,904) 1.75 3,281,716 (22,901) 2.79 

Total interest-bearing liabilities $ 3,928,168 (16,820) 1.71 % $ 3,469,509 (24,079) 2.78 %

Net interest income/net interest yield $ 6,742 0.68 % $ 5,347 0.62 %

(1) Includes the effects of discounts, premiums and other cost basis adjustments. For the first quarter of 2021, includes cost basis adjustments 

related to hedge accounting.

(2) Includes income of $22 million from hedged funding debt, hedged mortgage loans and paired interest-rate swaps for the first quarter of 

2021. Substantially all of this amount is related to the hedged funding debt and paired interest-rate swaps. There was no income or 

expense from hedge accounting for the first quarter of 2020. 

(3) 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 $2.5 billion and $1.6 billion for the first quarter of 2021 and 2020, 

respectively.

MD&A | Consolidated Results of Operations

Fannie Mae First Quarter 2021 Form 10-Q 12
(4) Consists of cash, cash equivalents and U.S. Treasury securities.

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 net 

interest income in future periods. 

Deferred Income Represented by Net Premium Position

on Debt of Consolidated Trusts

(Dollars in billions)

$33.0 $28.5 $28.3

3/31/2020 12/31/2020 3/31/2021

Fair Value Gains (Losses), Net

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

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

spreads and implied volatility, as well as activity related to these financial instruments.

As discussed above in “Hedge Accounting Impact,” we began applying fair value hedge accounting in January 2021 to 

reduce earnings volatility in our financial statements driven by changes in interest rates. Accordingly, we now recognize 

the fair value gains and losses and the contractual interest income and expense associated with risk management 

derivatives in qualifying hedging relationships in net interest income. Prior to the implementation of our hedge 

accounting program, these fair value changes were included in fair value gains (losses), net. Derivatives not designated 

in hedging relationships are unaffected by this change. 

The table below displays the components of our fair value gains and losses.

Fair Value Gains (Losses), Net

For the Three Months 

Ended March 31,

2021 2020

(Dollars in millions)

Risk management derivatives fair value gains (losses) attributable to:

Net contractual interest income (expense) on interest-rate swaps $ 43 $ (106) 

Net change in fair value during the period (1,011) (255) 

Impact on risk management derivatives fair value losses, net due to the reclassification of 

hedged amounts to net interest income(1) 1,124 — 

Risk management derivatives fair value gains (losses), net 156 (361) 

Mortgage commitment derivatives fair value gains (losses), net 1,082 (993) 

Credit enhancement derivatives fair value losses, net (90) (11) 

Total derivatives fair value gains (losses), net 1,148 (1,365) 

Trading securities gains (losses), net (758) 647 

CAS debt fair value gains (losses), net (1) 637 

Other, net(2) 395 (195) 

Fair value gains (losses), net $ 784 $ (276) 

(1) Consists of the reclassification of $1,178 million in fair value losses and $54 million of contractual interest income for designated interestrate swaps as a result of fair value hedge accounting. 

MD&A | Consolidated Results of Operations

Fannie Mae First Quarter 2021 Form 10-Q 13
(2) Consists of fair value gains and losses on non-CAS debt and mortgage loans held at fair value.

Fair value gains in the first quarter of 2021 were primarily driven by:

• the application of hedge accounting resulting in a reclassification of fair value losses on designated interest-rate 

swaps to “net interest income;”

• increases in the fair value of mortgage commitment derivatives due to gains on commitments to sell mortgagerelated securities as prices decreased during the commitment period as interest rates increased; and

• decreases in the fair value of long-term debt of consolidated trusts held at fair value, which are included in 

“Other, net,” due to increases in interest rates.

These gains were partially offset by losses on trading securities due to increases in U.S. Treasury yields during the 

period, which resulted in losses on fixed-rate securities held in our other investments portfolio. 

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

• decreases in the fair value of mortgage commitment derivatives due to losses on commitments to sell 

mortgage-related 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; 

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

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

increases in the fair value of receive-fixed risk management derivatives; and

• 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.

These losses were partially offset by fair value gains in the first quarter 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.

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 forbearances and loan modifications, the volume of foreclosures completed and the 

redesignation of loans from held for investment (“HFI”) to held for sale (“HFS”). 

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. As described below, since the onset of the 

COVID-19 pandemic in early 2020, our credit-related income or expense and our loss reserves have been significantly 

affected by our estimates of the impact of the COVID-19 pandemic, which require significant management judgment. 

Changes in our expectations regarding the length of time borrowers remain in forbearance, and even more significantly, 

the loss mitigation outcomes of affected borrowers after the forbearance period ends, remain uncertain and can affect 

the amount of credit-related income or expense we recognize. Although we believe the estimates underlying our 

allowance 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 relating to this unprecedented event. 

MD&A | Consolidated Results of Operations

Fannie Mae First Quarter 2021 Form 10-Q 14
Benefit (Provision) for Credit Losses

The table below provides a quantitative analysis of the drivers of our single-family and multifamily benefit or provision for 

credit losses and the change in expected credit enhancement recoveries. The benefit or provision for credit losses 

includes our benefit or provision for loan losses, accrued interest receivable losses and our guaranty loss reserves, and 

excludes credit losses on our available-for-sale (“AFS”) securities. It also excludes the transition impact of adopting 

Accounting Standards Update (“ASU”) 2016-13, Financial Instruments—Credit Losses, Measurement of Credit Losses 

on Financial Instruments, (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 benefit or provision for credit losses overlap or are 

interdependent. The attribution shown below is based on internal allocation estimates. 

Components of Benefit (Provision) for Credit Losses and Change in Expected Credit 

Enhancement Recoveries

For the Three Months 

Ended March 31,

2021 2020

(Dollars in millions)

Single-family benefit (provision) for credit losses:

Changes in loan activity(1)(2) $ (63) $ 3 

Redesignation of loans from HFI to HFS 307 175 

Actual and forecasted home prices 1,179 (921) 

Actual and projected interest rates (892) 1,257 

Changes in assumptions regarding COVID-19 forbearance and change in actual and expected 

loan delinquencies(1)(3) 127 (2,587) 

Other(5) 4 (97) 

Single-family benefit (provision) for credit losses 662 (2,170) 

Multifamily benefit (provision) for credit losses:

Changes in loan activity(2) (119) (22) 

Actual and projected interest rates (19) 216 

Actual and projected economic data(4) 315 — 

Estimated impact of the COVID-19 pandemic 54 (636) 

Other(5) (128) 32 

Multifamily benefit (provision) for credit losses 103 (410) 

Total benefit (provision) for credit losses $ 765 $ (2,580) 

Change in expected credit enhancement recoveries:(6)

Single-family $ (16) $ 58 

Multifamily (22) 127 

Total change in expected credit enhancement recoveries $ (38) $ 185 

(1) Prior-period amounts have been adjusted to conform to the current-year presentation to include changes in the allowance due to loan 

delinquency.

(2) Primarily consists of loan liquidations, 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, 

which is used to assess loan credit quality.

(3) Includes changes in the allowance due to assumptions regarding loss mitigation when loans exit forbearance, as well as adjustments to 

modeled results.

(4) For the three months ended March 31, 2020, the impact of actual and projected economic data is grouped with “Estimated impact of the 

COVID-19 pandemic” as these impacts were driven by the pandemic.

(5) Includes provision for allowance for accrued interest receivable. For single-family, also includes changes in the reserve for guaranty losses 

that are not separately included in the other components. For multifamily, also includes the impact of credit model enhancements 

implemented in the first quarter of 2021. 

MD&A | Consolidated Results of Operations

Fannie Mae First Quarter 2021 Form 10-Q 15
(6) Includes changes in expected credit enhancement recoveries only for active loans. Recoveries received after foreclosure, which are 

included in “Change in expected credit enhancement recoveries” in “Summary of Condensed Consolidated Results of Operations,” are not 

included.

Single-Family Benefit (Provision) for Credit Losses 

The primary factors that contributed to our single-family benefit for credit losses in the first quarter of 2021 were:

• Benefit from actual and expected home price growth. During the first quarter of 2021, home price growth was 

unseasonably strong. We also increased our expectations for home price growth on a national basis for fullyear 2021. 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. See “Key Market Economic Indicators” for additional information about how 

home prices affect our credit loss estimates, including a discussion of home price appreciation in the first 

quarter of 2021 and our home price forecast. 

• Benefit from the redesignation of certain reperforming single-family loans from HFI to HFS. After a temporary 

pause in sales of nonperforming and reperforming loans, we resumed our plans for sales late in the first quarter

of 2021. As a result, we redesignated 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 write-off against the allowance for loan losses. 

Amounts recorded in the allowance related to these loans exceeded the amounts written off, resulting in a 

benefit for credit losses.

• Benefit from changes in assumptions regarding COVID-19 forbearance and change in actual and expected 

loan delinquencies. Management continues to apply its judgment and supplement model results as of March 

31, 2021, due to continued uncertainty regarding the loss mitigation outcomes of borrowers in forbearance, and 

uncertainty regarding the future impact of the pandemic, including the efficacy of the COVID-19 vaccines on 

new strains of the virus and its effect on the economy. Although uncertainty remains, our expected credit losses 

as a result of the COVID-19 pandemic decreased in the first quarter of 2021, driven by the passage of the 

American Rescue Plan, which provides additional economic stimulus and helps support the continued 

economic recovery. In addition, decreased political uncertainty compared with the end of 2020 combined with 

the increased progression of the COVID-19 vaccines rollout lessened expectations of credit losses. Based on 

these factors in the first quarter of 2021, management used its judgment to reduce the non-modeled adjustment 

that was previously applied to the loss projections developed by our credit loss model.

The impact of these factors was partially offset by the impact of the following factor, which reduced our single-family 

benefit for credit losses recognized in the first quarter of 2021:

• Provision from higher actual and projected interest rates. Although we continue to be in a historically low 

interest-rate environment, actual and projected interest rates rose in the first quarter of 2021. As mortgage 

interest rates increase, we expect a decrease in future prepayments on single-family loans, including modified 

loans. Lower expected prepayments extend the expected lives of modified loans, which increases the expected 

impairment relating to term and interest-rate concessions provided on these loans, resulting in a provision for 

credit losses. 

The primary factors that impacted our single-family provision for credit losses in the first quarter of 2020 were:

• Expected credit losses as a result of the COVID-19 pandemic. Given the rapidly changing and deteriorating 

market conditions in the first quarter of 2020 as a result of the unprecedented COVID-19 pandemic, we 

believed our model used to estimate single-family credit losses as of March 31, 2020 did not capture the 

entirety of losses we expected 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 expectations at that time relating 

to COVID-19’s impact. These judgments included adjusting our modeled results for (1) the expected impact of 

widespread forbearance programs, including the rate of borrower participation, and the volume and type of loan 

modifications as a result thereof, (2) the effect of troubled debt restructuring (“TDR”) accounting relief from the 

CARES Act, and (3) lower expected prepayment volumes given the sharp rise in unemployment rates that were 

expected to stay elevated over the near term. In developing the model adjustment, management considered 

the credit risk profile of our single-family loan book of business at that time, as well as relevant historical credit 

loss experience during rare or stressful economic environments.

• A decrease in our expectations for home price growth. In the first quarter of 2020, we revised our forecast to 

reflect near zero home price appreciation on a national basis for 2020 due to COVID-19 market disruptions. 

Lower home prices increase the likelihood that loans will default and increase the amount of credit loss on 

MD&A | Consolidated Results of Operations

Fannie Mae First Quarter 2021 Form 10-Q 16
loans that do default, which impacts our estimate of losses and ultimately increases our loss reserves and 

provision for credit losses.

• These factors were partially offset by lower actual and projected mortgage interest rates. As mortgage interest 

rates declined, we expected an increase in future prepayments on single-family loans, including modified loans. 

As noted above, we adjusted downward our modeled expectation of prepayment volumes due to the COVID-19 

pandemic, which reduced this modeled benefit from interest rates.

Multifamily Benefit (Provision) for Credit Losses

The primary factors that impacted our multifamily benefit for credit losses in the first quarter of 2021 were: 

• Benefit from actual and projected economic data. In the first quarter of 2021, property value forecasts increased 

due to continued demand for multifamily housing. In addition, improved job growth led to an increase in 

projected average property net operating income, which reduced the probability of loan defaults resulting in a 

benefit for credit losses for the quarter.

• Benefit from changes in expected credit losses as a result of the COVID-19 pandemic. Similar to our singlefamily provision for credit losses described above, management continues to apply its judgment and 

supplement model results as of March 31, 2021, due to continued uncertainty regarding the future impact of the 

pandemic, including the efficacy of the COVID-19 vaccines on new strains of the virus and its effect on the 

economy. Although uncertainty remains, our expected credit losses as a result of the COVID-19 pandemic 

decreased in the first quarter of 2021 driven by positive economic growth and the passage of the American 

Rescue Plan, which provided additional economic stimulus. Based on these factors in the first quarter of 2021, 

management used its judgment to reduce the non-modeled adjustment that was previously applied to the loss 

projections developed by our credit loss model.

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

• Expected credit losses as a result of the COVID-19 pandemic. Consistent with the 2020 single-family provision 

for credit losses discussed above, we believed our model used to estimate multifamily credit losses as of March 

31, 2020 did not capture the entirety of losses we expected to incur relating to the economic dislocation caused 

by the COVID-19 pandemic. As a result, management used its judgment to increase the loss projections 

developed by our credit loss model to reflect our expectations at that time relating to COVID-19’s impact. 

Accordingly, our multifamily provision for credit losses was primarily driven by higher expected unemployment 

rates, which we expected would increase the number of loans in forbearance and reduce property net operating 

income in the near term, thereby decreasing forecasted property values and increasing the probability of loan 

default. In developing these adjustments, management considered the credit risk profile of our multifamily loan 

book of business at that time, as well as relevant historical credit loss experience during rare or stressful 

economic environments.

MD&A | Consolidated Results of Operations

Fannie Mae First Quarter 2021 Form 10-Q 17
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

March 31, 

2021

December 31, 

2020 Variance

(Dollars in millions)

Assets

Cash and cash equivalents and federal funds sold and securities purchased 

under agreements to resell or similar arrangements $ 81,475 $ 66,537 $ 14,938 

Restricted cash and cash equivalents 87,803 77,286 10,517 

Investments in securities 112,758 138,239 (25,481) 

Mortgage loans:

Of Fannie Mae 111,097 117,911 (6,814) 

Of consolidated trusts 3,638,411 3,546,533 91,878 

Allowance for loan losses (9,628) (10,552) 924 

Mortgage loans, net of allowance for loan losses 3,739,880 3,653,892 85,988 

Deferred tax assets, net 12,516 12,947 (431) 

Other assets 35,671 36,848 (1,177) 

Total assets $ 4,070,103 $ 3,985,749 $ 84,354 

Liabilities and equity

Debt:

Of Fannie Mae $ 273,442 $ 289,572 $ (16,130) 

Of consolidated trusts 3,740,538 3,646,164 94,374 

Other liabilities 25,898 24,754 1,144 

Total liabilities 4,039,878 3,960,490 79,388 

Fannie Mae stockholders’ equity:

Senior preferred stock 120,836 120,836 — 

Other net deficit (90,611) (95,577) 4,966 

Total equity 30,225 25,259 4,966 

Total liabilities and equity $ 4,070,103 $ 3,985,749 $ 84,354 

Cash and Cash Equivalents and Federal Funds Sold and Securities Purchased 

under Agreements to Resell or Similar Arrangements, Restricted Cash and Cash 

Equivalents and Investments in Securities

The increase in cash and cash equivalents and federal funds sold and securities purchased under agreements to resell 

or similar arrangements from December 31, 2020 to March 31, 2021 was offset by a decrease in investments in 

securities, driven by a shift to investments in federal funds sold and securities purchased under agreements to resell 

and similar arrangements as of March 31, 2021 as compared with investments in U.S. Treasury securities at December 

31, 2020. The overall net amount decreased primarily driven by a decrease in funding debt issuances during the period 

resulting in net cash outflows for the quarter, which we discuss in “Liquidity and Capital Management—Cash Flows.”

Mortgage Loans, Net of Allowance

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

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

Mortgage loans, net of allowance for loan losses increased as of March 31, 2021 compared with December 31, 2020, 

primarily driven by an increase in mortgage loans due to acquisitions, primarily from continued high refinancing activity, 

outpacing liquidations and sales.

For additional information on our mortgage loans, see “Note 3, Mortgage Loans,” and for additional information on 

changes in our allowance for loan losses, see “Note 4, Allowance for Loan Losses.” 

MD&A | Consolidated Balance Sheet Analysis

Fannie Mae First Quarter 2021 Form 10-Q 18
Debt

The decrease in debt of Fannie Mae from December 31, 2020 to March 31, 2021 was primarily due to decreased 

funding needs. The increase in debt of consolidated trusts from December 31, 2020 to March 31, 2021 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 March 31, 2021 compared with December 31, 2020 by the amount of our comprehensive 

income recognized during the first quarter of 2021. 

The aggregate liquidation preference of the senior preferred stock increased to $146.8 billion as of March 31, 2021 and 

will further increase to $151.7 billion as of June 30, 2021 due to the $5.0 billion increase in our net worth during the first 

quarter of 2021. 

Retained Mortgage Portfolio

We use our retained mortgage portfolio primarily to provide liquidity to the mortgage market through our whole loan 

conduit and to support our loss mitigation activities, particularly in times of economic stress when other sources of 

liquidity to the mortgage market may decrease or withdraw. Previously, we also used our retained mortgage portfolio for 

investment purposes.

Our retained mortgage portfolio consists of mortgage loans and mortgage-related securities that we own, including 

Fannie Mae MBS and non-Fannie Mae mortgage-related securities. Assets held by consolidated MBS trusts that back 

mortgage-related securities owned by third parties are not included in our retained mortgage portfolio. 

The chart below separates the instruments within our retained mortgage portfolio, measured by unpaid principal 

balance, into three categories based on each instrument’s use:

• Lender liquidity, which includes balances related to our whole loan conduit activity, supports our efforts to 

provide liquidity to the single-family and multifamily mortgage markets.

• Loss mitigation supports our loss mitigation efforts through the purchase of delinquent loans from our MBS 

trusts. 

• Other represents assets that were previously purchased for investment purposes. The majority of the balance 

of “Other” as of March 31, 2021 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)

$80.8 $80.0

$56.3 $53.3

$25.6 $23.9

$162.7 $157.2

Lender liquidity Loss mitigation Other

12/31/2020 3/31/2021

The modest decrease in our retained mortgage portfolio as of March 31, 2021 compared with December 31, 2020 was 

primarily due to payoffs during the first quarter of 2021 in our loss mitigation loans driven by mortgage refinance activity.

MD&A | Consolidated Balance Sheet Analysis

Fannie Mae First Quarter 2021 Form 10-Q 19
The table below displays the components of our retained mortgage portfolio, measured by unpaid principal balance. 

Based on the nature of the asset, these balances are included in either “Investments in securities” or “Mortgage loans of 

Fannie Mae” in our Summary of Condensed Consolidated Balance Sheets.

Retained Mortgage Portfolio

As of

March 31, 2021 December 31, 2020

(Dollars in millions)

Lender liquidity:

Agency securities(1) $ 34,849 $ 34,810 

Mortgage loans 45,194 45,895 

Total lender liquidity 80,043 80,705 

Loss mitigation mortgage loans(2) 53,267 56,315 

Other:

Reverse mortgage loans 11,618 12,388 

Mortgage loans 4,079 4,881 

Reverse mortgage securities(3) 7,118 7,185 

Private-label and other securities 450 473 

Fannie Mae-wrapped private-label securities 510 521 

Mortgage revenue bonds 162 182 

Total other 23,937 25,630 

Total retained mortgage portfolio $ 157,247 $ 162,650 

Retained mortgage portfolio by segment:

Single-family mortgage loans and mortgage-related securities $ 150,397 $ 154,943 

Multifamily mortgage loans and mortgage-related securities $ 6,850 $ 7,707 

(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 $26.1 billion and $29.4 billion as of March 31, 2021 and 

December 31, 2020, respectively, and single-family loans on nonaccrual status of $19.6 billion as of March 31, 2021 and December 31, 

2020. Includes multifamily loans classified as TDRs that were on accrual status of $24 million and $20 million as of March 31, 2021 and 

December 31, 2020, respectively, and multifamily loans on nonaccrual status of $533 million and $536 million as of March 31, 2021 and 

December 31, 2020, 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 and will decrease to $225 billion on 

December 31, 2022 under the terms of our senior preferred stock purchase agreement with Treasury. We are currently 

managing our business to a $225 billion cap pursuant to instructions from FHFA. See “Business—Conservatorship, 

Treasury Agreements and Housing Finance Reform” in our 2020 Form 10-K for additional information on our portfolio 

cap.

We include 10% of the notional value of interest-only securities in calculating the size of the retained portfolio for the 

purpose of determining compliance with the senior preferred stock purchase agreement retained portfolio limits and 

associated FHFA guidance. As of March 31, 2021, 10% of the notional value of our interest-only securities was $2.2 

billion, which is not included in the table above.

Under the terms of our MBS trust documents, we have the option or, in some instances, the obligation, to purchase 

mortgage loans that meet specific criteria from an MBS trust. The purchase price for these loans is the unpaid principal 

balance of the loan plus accrued interest. If a delinquent loan remains in a single-family MBS trust, the servicer is 

responsible for advancing the borrower’s missed scheduled principal and interest payments to the MBS holders for up 

to four months, after which time we must make these missed payments. In addition, we must reimburse servicers for 

advanced principal and interest payments. The cost of purchasing most delinquent loans from a single-family Fannie 

Mae MBS trust and holding them in our retained mortgage portfolio is currently less than the cost of advancing 

delinquent payments to security holders. 

Except for loans that are in forbearance or that have been granted certain other types of loss mitigation options (such as 

a repayment plan or payment deferral), we have historically purchased loans from single-family MBS trusts when they 

become four consecutive monthly payments delinquent. In September 2020, FHFA instructed both us and Freddie Mac 

MD&A | Retained Mortgage Portfolio

Fannie Mae First Quarter 2021 Form 10-Q 20
to extend the timeframe for our single-family delinquent loan buyout policy to 24 consecutively missed monthly 

payments (that is, loans that are 24 months past due) effective January 1, 2021. We expect that in most cases we 

nevertheless will purchase delinquent loans from single-family MBS trusts prior to the 24-month deadline under one of 

the exceptions to the FHFA directive, which includes loans that are permanently modified, loans subject to a short-sale 

or deed-in-lieu of foreclosure, loans that are paid in full and loans referred to foreclosure.

In support of our loss mitigation strategies, we purchased $1.5 billion of loans from our single-family MBS trusts in the 

first quarter of 2021, the substantial majority of which were delinquent, compared with $3.0 billion of loans purchased 

from single-family MBS trusts in the first quarter of 2020. We expect the amount of loans we buy out of trusts may 

increase, particularly in 2022, compared with 2020 as a result of COVID-19-related loan delinquencies and loss 

mitigation strategies, which may increase the size of our retained mortgage portfolio. However, the magnitude of any 

increase in our retained mortgage portfolio will depend on 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. These factors are highly 

uncertain and depend on a number of things, including the length of time loans remain in forbearance, the duration of 

foreclosure suspensions, and the nature and success of our loss mitigation activities, including payment deferrals and 

repayment plans, which do not require us to purchase loans out of trust. Because of our mortgage asset limit, our 

business activities may be constrained. 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 issue single-family uniform mortgage-backed securities, or “UMBS®.” In this report, we use the 

term “Fannie Mae-issued UMBS” to refer to single-family Fannie Mae MBS that are directly backed by fixed-rate 

mortgage loans and generally eligible for trading in the to-be-announced (“TBA”) market. We use the term “Fannie Mae 

MBS” or “our MBS” to refer to any type of mortgage-backed security that we issue, including UMBS, Supers®, Real 

Estate Mortgage Investment Conduit securities (“REMICs”) and other types of single-family or multifamily mortgagebacked 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.

MD&A | Retained Mortgage Portfolio

Fannie Mae First Quarter 2021 Form 10-Q 21
The table below displays the composition of our guaranty book of business based on unpaid principal balance. Our 

single-family guaranty book of business accounted for 89% and 90% of our guaranty book of business as of March 31, 

2021 and December 31, 2020, respectively. 

Composition of Fannie Mae Guaranty Book of Business

As of

March 31, 2021 December 31, 2020

SingleFamily Multifamily TotalSingleFamily Multifamily Total

(Dollars in millions)

Conventional guaranty book of business(1) $ 3,380,576 $ 399,596 $ 3,780,172 $ 3,305,030 $ 386,379 $ 3,691,409 

Government guaranty book of business(2) 19,659 2,180 21,839 20,777 2,268 23,045 

Guaranty book of business 3,400,235 401,776 3,802,011 3,325,807 388,647 3,714,454 

Freddie Mac securities guaranteed by Fannie Mae(3) 154,623 — 154,623 137,316 — 137,316 

Total Fannie Mae guarantees $ 3,554,858 $ 401,776 $ 3,956,634 $ 3,463,123 $ 388,647 $ 3,851,770 

(1) Refers to mortgage loans and mortgage-related securities that are not guaranteed or insured, in whole or in part, by the U.S. government.

(2) Refers to mortgage loans and mortgage-related securities guaranteed or insured, in whole or in part, by the U.S. government.

(3) Consists of approximately (i) $126.0 billion and $110.7 billion in unpaid principal balance of Freddie Mac-issued UMBS backing Fannie 

Mae-issued Supers as of March 31, 2021 and December 31, 2020, respectively; and (ii) $28.7 billion and $26.6 billion in unpaid principal 

balance of Freddie Mac securities backing Fannie Mae-issued REMICs as of March 31, 2021 and December 31, 2020, respectively.

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 March 2021, we paid $603 million to the funds based on our new business purchases in 2020. For the first 

quarter of 2021, we recognized an expense of $177 million related to this obligation based on $422.2 billion in new 

business purchases during the period. We expect to pay this amount to the funds in 2022, plus additional amounts to be 

accrued based on our new business purchases in the remaining nine months of 2021. See “Business—Legislation and 

Regulation—GSE Act and Other Legislative and Regulatory Matters—Affordable Housing Allocations” in our 2020 Form 

10-K for more information regarding this obligation.

MD&A | Guaranty Book of Business

Fannie Mae First Quarter 2021 Form 10-Q 22
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 quarter of 

2020 compared with the first quarter of 2021. Net revenues consist of net interest income and fee and other income.

Business Segment Net Revenues and Net Income

(Dollars in billions) 

$4.6

$5.9

$0.1

$4.4

Single-Family net revenues

Single-Family net income

Q1 2020 Q1 2021

$0.8 $0.9

$0.4 $0.6

Multifamily net revenues

Multifamily net income

Q1 2020 Q1 2021

In the following sections, we describe each segment’s business metrics, financial results and credit performance. For an 

overview of how we are compensated for and manage the risk of credit losses through the life cycle of our loans and 

how we measure our credit risk, see "Business—Managing Mortgage Credit Risk” in our 2020 Form 10-K.

Single-Family Business

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 2020 Form 10-

K. See “MD&A—Single-Family Business” in our 2020 Form 10-K for additional information regarding the primary 

business activities, customers and competition of our Single-Family business.

Single-Family Mortgage Market

Housing activity slowed modestly in the first quarter of 2021 compared with the fourth quarter of 2020. Total home sales 

and single-family housing starts moderated due to near record-low inventory of available homes for sale, inclement 

weather in February, and construction capacity constraints. However, we expect solid gains in total home sales and 

single-family housing starts for full-year 2021 compared with 2020. Mortgage rates increased in the first quarter of 2021, 

MD&A | Business Segments

Fannie Mae First Quarter 2021 Form 10-Q 23
and we expect additional increases this year, which will likely lead to a decline in total refinance originations for 2021 

compared with 2020. 

Total existing home sales averaged 6.3 million units annualized in the first quarter of 2021, compared with 6.7 million

units in the fourth quarter of 2020, according to data from the National Association of REALTORS®. According to the 

U.S. Census Bureau, new single-family home sales increased during the first quarter of 2021, averaging an annualized 

rate of 959,000 units, compared with 924,000 units in the fourth quarter of 2020. 

The 30-year fixed mortgage rate averaged 3.08% in March 2021, compared with 2.68% in December 2020, according to 

Freddie Mac’s Primary Mortgage Market Survey®.

We forecast that total originations in the U.S. single-family mortgage market in 2021 will decrease from 2020 levels by 

approximately 12%, from an estimated $4.54 trillion in 2020 to $4.00 trillion in 2021, and that the amount of refinance 

originations in the U.S. single-family mortgage market will decrease from an estimated $2.89 trillion in 2020 to $2.11 

trillion in 2021. Declining origination volume reduces the number of mortgages available for us to acquire, which affects 

our business volume. See “Key Market Economic Indicators” for additional discussion of how housing activity can affect 

our financial results and the uncertainties that may affect our forecasts and expectations. 

Single-Family Market Activity

Single-Family Mortgage-Related Securities Issuances Share

Our single-family Fannie Mae MBS issuances were $403.7 billion for the first quarter of 2021, compared with $185.7 

billion for the first quarter of 2020. This increase was driven by a high volume of refinance activity in the first quarter of 

2021 due to historically low mortgage rates. Based on the latest data available, the chart below displays our estimated 

share of single-family mortgage-related securities issuances in the first quarter of 2021 as compared with that of our 

primary competitors for the issuance of single-family mortgage-related securities. 

Single-Family Mortgage-Related Securities Issuances Share

First Quarter 2021

Fannie Mae: 40%

Freddie Mac: 35%

Ginnie Mae: 23%

Private-label securities: 2%

We estimate our share of single-family mortgage-related securities issuances was 41% in the fourth quarter of 2020 and 

37% in the first quarter of 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 or instances where we have advanced missed borrower payments on mortgage loans to make required 

distributions to related MBS holders. As measured for purposes of the information reported below, our single-family 

conventional guaranty book of business was $3,272.0 billion as of March 31, 2021 and $3,200.9 billion as of December 

31, 2020.

MD&A | Single-Family Business | Single-Family Mortgage Market

Fannie Mae First Quarter 2021 Form 10-Q 24
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 singlefamily conventional guaranty book of business. Our business volume and growth in our guaranty book of business is 

affected by the rate of growth in total U.S. residential mortgage debt outstanding, the size of the U.S. residential 

mortgage market and our share of mortgage acquisitions. The guaranty fees we charge are based on the characteristics 

of the loans we acquire. We may adjust our guaranty fees in light of market conditions and to achieve return targets. As 

a result, the average charged guaranty fee on new acquisitions may fluctuate based on the credit quality and product 

mix of loans acquired, as well as market conditions and other factors. 

We implemented an adverse market refinance fee effective December 1, 2020. The fee is intended to help us offset 

some of the higher projected expenses and risk due to COVID-19. For every $1 billion in eligible refinance loans we 

acquire, we will collect $5 million in adverse market refinance fees, which will be amortized into net interest income over 

the contractual life of the loans as a cost basis adjustment. See “Executive Summary—COVID-19 Impact” in our 2020 

Form 10-K for additional information on the adverse market refinance fee.

The charts below display our average charged guaranty fees, net of TCCA fees, on our single-family conventional 

guaranty book of business and on new single-family conventional loan acquisitions, along with our average single-family 

conventional guaranty book of business and our single-family conventional loan acquisitions for the periods presented. 

Select Single-Family Business Metrics

(Dollars in billions)

43.8 bps

44.9 bps

49.4 bps

48.0 bps

Q1 2020 Q1 2021

$2,964.3

$3,236.5

$190.5

$400.5

Q1 2020 Q1 2021

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.

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

Fannie Mae First Quarter 2021 Form 10-Q 25
Average charged guaranty fee on newly acquired conventional single-family loans is a metric management uses to 

measure the price we earn as compensation for the credit risk we manage and to assess our return. Average charged 

guaranty fee represents, on an annualized basis, the sum of the base guaranty fees charged during the period for our 

new single-family conventional guaranty arrangements, which we will receive monthly over the life of the loan, plus the 

recognition of any upfront cash payments, including loan-level price adjustments and the recently implemented adverse 

market refinance fee, based on an estimated average life at the time of acquisition. We use loan-level price 

adjustments, including various upfront risk-based fees, to price for the credit risk we assume in providing our guaranty. 

FHFA must approve changes to the national loan-level price adjustments we charge and can direct us to make other 

changes to our single-family guaranty fee pricing. 

Our average charged guaranty fee on newly acquired conventional single-family loans, net of TCCA fee decreased in 

the first quarter of 2021 compared with the first quarter of 2020. The decrease in average charged guaranty fee on new 

acquisitions was primarily due to an increase in our estimated average life of loans acquired in the first quarter of 2021 

compared with the first quarter of 2020. Due to an increase in actual and projected mortgage rates in the first quarter of 

2021 and as a result of a large portion of our book of business being originated in this historically low interest-rate 

environment, we expect slower prepayments in the future as fewer borrowers can benefit from refinancing as rates rise. 

Lower expected prepayments increases the estimated lives of the loans we acquire, thereby decreasing the rate at 

which we recognize upfront cash payments as income in our calculation of average charged guaranty fee. The impact of 

the change in estimated life was partially offset by the increase in guaranty fee from the implementation of the adverse 

market refinance fee in December 2020.

Single-Family Business Financial Results(1)

For the Three Months 

Ended March 31,

2021 2020 Variance

(Dollars in millions)

Net interest income(2) $ 5,894 $ 4,541 $ 1,353 

Fee and other income 62 94 (32) 

Net revenues 5,956 4,635 1,321 

Investment gains (losses), net 64 (152) 216 

Fair value gains (losses), net 740 (460) 1,200 

Administrative expenses (623) (629) 6 

Credit-related income (expense)(3) 679 (2,250) 2,929 

TCCA fees(2) (731) (637) (94) 

Credit enhancement expense (226) (316) 90 

Change in expected credit enhancement recoveries(4) (16) 58 (74) 

Other expenses, net(5) (287) (163) (124) 

Income before federal income taxes 5,556 86 5,470 

Provision for federal income taxes (1,162) (18) (1,144) 

Net income $ 4,394 $ 68 $ 4,326 

(1) See “Note 9, Segment Reporting” for information about our segment allocation methodology.

(2) Reflects the impact of a 10 basis point guaranty fee increase implemented pursuant to the TCCA, the incremental revenue from which is 

remitted to Treasury. The resulting revenue is included in net interest income and the expense is recognized as “TCCA fees.” 

(3) Consists of the benefit or provision for credit losses and foreclosed property income or expense. 

(4) Consists of change in benefits recognized from our single-family freestanding credit enhancements, which primarily relate to our CAS and 

CIRT programs. 

(5) Consists primarily of debt extinguishment gains and losses, housing trust fund expenses, servicer fees paid in connection with certain loss 

mitigation activities, and loan subservicing costs.

Net Interest Income

Single-family net interest income increased in the first quarter of 2021 compared with the first quarter of 2020, driven by 

higher net amortization income and higher base guaranty fee income, partially offset by lower 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.” 

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

Fannie Mae First Quarter 2021 Form 10-Q 26
Fair Value Gains (Losses), Net

Fair value gains, net in the first quarter of 2021 were largely impacted by the implementation of our hedge accounting 

program resulting in a reclassification of fair value losses on designated interest-rate swaps to “net interest income.” 

Fair value gains, net were also driven by gains as a result of increases in the fair value of mortgage commitment 

derivatives, which were partially offset by losses on trading securities.

Fair value losses, net in the first quarter of 2020 were primarily driven by decreases in the fair value of our mortgage 

commitments and risk management derivatives, partially offset by fair value gains on trading securities and CAS debt.

The drivers of fair value gains (losses), net for the Single-Family segment are consistent with the drivers of fair value 

gains, net in our condensed consolidated statements of operations and comprehensive income, which we discuss in 

“Consolidated Results of Operations—Fair Value Gains (Losses), Net.” 

For information on the implementation of our hedge accounting program and its impact on our financial statements, see 

“Consolidated Results of Operations—Hedge Accounting Impact” and “Consolidated Results of Operations—Fair Value 

Gains (Losses), Net.”

Credit-Related Income (Expense)

Credit-related income for the first quarter of 2021 was driven by a benefit for credit losses due primarily to higher actual 

and forecasted home prices, partially offset by higher actual and projected interest rates. 

Credit-related expense for the first quarter of 2020 was primarily driven by an increase in our allowance for loan losses 

due to losses we expected 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 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 2020 Form 10-K. For an 

overview of key elements of our mortgage credit risk management, see “Business—Managing Mortgage Credit Risk” in 

our 2020 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 2020 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 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. 

Temporary policy flexibilities and updates to our Selling Guide requirements have been designed to mitigate the 

operational impact of COVID-19 on loan underwriting and originations. These flexibilities have included: 

• purchasing certain loans through February 28, 2021 that originated in 2020 and were subject to a COVID-19-

related payment 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 for loans with application 

dates through April 30, 2021;

• allowing alternative property valuation methods; and

• expanding guidelines for the use of a power of attorney for loans with application dates through April 30, 2021.

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

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

Fannie Mae First Quarter 2021 Form 10-Q 27
• 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 as instructed by FHFA to implement temporary policies in response to the 

COVID-19 pandemic to enable our single-family 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 or extensions of our temporary policies are appropriate.

These temporary policies include: 

• authorizing servicers to offer up to 12 months of 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; for loans already in a COVID-19-related forbearance as of February 28, 2021, servicers may grant an 

extension of forbearance for up to an additional six months, to a total of up to 18 months, provided that the 

forbearance does not result in the loan becoming greater than 18 months delinquent; 

• beginning July 1, 2020, offering a payment deferral workout option to eligible borrowers who have resolved a 

COVID-19-related financial hardship but cannot afford to bring the loan current by reinstating the loan (that is, 

repaying all the missed payments at one time) or through a repayment plan (that is, repaying the missed 

payments over time). The payment deferral workout option allows the borrower to defer up to 18 months of 

past-due payments, without interest, to the end of the loan term (or when the loan is refinanced, the property is 

sold or the loan is otherwise paid off before the end of the loan term). All other terms of the loan remain 

unchanged;

• suspending foreclosures and certain foreclosure-related activities for single-family properties through at least 

June 30, 2021, other than for vacant or abandoned properties; and 

• reporting as current to the credit bureaus 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 CARES Act covered period if the borrower 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.

Certain states and localities have implemented COVID-19-related borrower and renter protections that are more 

extensive than our Servicing Guide requirements. States and localities may continue to consider such proposals in the 

future or extend the time period of existing protections. In addition, the CFPB issued a proposed rule prohibiting most 

new single-family foreclosures on mortgage loans secured by the borrower’s principal residence until after December 

31, 2021, as we discuss in “Legislation and Regulation.” Our servicers must comply with all applicable laws.

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

Fannie Mae First Quarter 2021 Form 10-Q 28
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 Securities and Exchange Commission (the “SEC”) with current 

reports on Form 8-K and make available on our website. Information in our quarterly financial supplements is not 

incorporated by reference into this report.

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 

March 31,

2021 2020 March 31, 2021 December 31, 2020

Original loan-to-value (“LTV”) ratio:(4)

<= 60% 34 % 21 % 24 % 23 %

60.01% to 70% 17 15 15 14 

70.01% to 80% 30 36 35 35 

80.01% to 90% 9 13 11 11 

90.01% to 95% 8 12 10 11 

95.01% to 100% 2 3 4 4 

Greater than 100% * * 1 2 

Total 100 % 100 % 100 % 100 %

Weighted average 68 % 74 % 73 % 74 %

Average loan amount $ 282,561 $ 274,345 $ 188,447 $ 185,047 

Estimated mark-to-market LTV ratio:(5)

<= 60% 53 % 52 %

60.01% to 70% 18 17 

70.01% to 80% 18 18 

80.01% to 90% 8 9 

90.01% to 100% 3 4 

Greater than 100% * *

Total 100 % 100 %

Weighted average 57 % 58 %

FICO credit score at origination:

< 620 — % * % 1 % 1 %

620 to < 660 2 3 4 4 

660 to < 680 2 3 4 4 

680 to < 700 5 6 7 7 

700 to < 740 17 22 19 20 

>= 740 74 66 65 64 

Total 100 % 100 % 100 % 100 %

Weighted average 761 753 751 750 

Debt-to-income (“DTI”) ratio at origination:(6)

<= 43% 80 % 75 % 77 % 77 %

43.01% to 45% 8 9 9 9 

Greater than 45% 12 16 14 14 

Total 100 % 100 % 100 % 100 %

Weighted average 33 % 35 % 35 % 35 %

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

Fannie Mae First Quarter 2021 Form 10-Q 29
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 

March 31,

2021 2020 March 31, 2021 December 31, 2020

Product type:

Fixed-rate:(7)

Long-term 84 % 87 % 84 % 85 %

Intermediate-term 16 12 15 14 

Total fixed-rate 100 99 99 99 

Adjustable-rate * 1 1 1 

Total 100 % 100 % 100 % 100 %

Number of property units:

1 unit 98 % 98 % 97 % 97 %

2-4 units 2 2 3 3 

Total 100 % 100 % 100 % 100 %

Property type:

Single-family homes 91 % 91 % 91 % 91 %

Condo/Co-op 9 9 9 9 

Total 100 % 100 % 100 % 100 %

Occupancy type: 

Primary residence 91 % 92 % 90 % 90 %

Second/vacation home 3 3 4 4 

Investor 6 5 6 6 

Total 100 % 100 % 100 % 100 %

Loan purpose:

Purchase 25 % 36 % 36 % 38 %

Cash-out refinance 20 24 20 20 

Other refinance 55 40 44 42 

Total 100 % 100 % 100 % 100 %

Geographic concentration:(8)

Midwest 12 % 13 % 14 % 14 %

Northeast 14 12 17 17 

Southeast 21 21 22 22 

Southwest 18 21 18 19 

West 35 33 29 28 

Total 100 % 100 % 100 % 100 %

Origination year:

2015 and prior 27 % 30 %

2016 7 8 

2017 6 7 

2018 4 6 

2019 9 11 

2020 38 38 

2021 9 — 

Total 100 % 100 %

* Represents less than 0.5% of single-family conventional business volume or guaranty book of business.

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

Fannie Mae First Quarter 2021 Form 10-Q 30
(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) Excludes loans for which this information is not readily available.

(7) 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.

(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 first quarter of 2021 compared with the first quarter of 2020, 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 15% in the first quarter of 2020 to 10% in the first quarter of 2021. The historically low 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 66% in the first quarter of 2020 to 74% in the first quarter of 2021. 

Our share of acquisitions of loans with DTI ratios above 45% decreased in the first quarter of 2021 compared with the 

first quarter of 2020. This decrease was driven by a higher volume of refinance loan acquisitions, which tend to have 

lower DTI ratios than home purchase loans. 

For a discussion of factors that may impact the volume and credit characteristics of loans we acquire in the future, see 

“MD&A—Single-Family Business—Single-Family Mortgage Credit Risk Management—Single-Family Portfolio 

Diversification and Monitoring” in our 2020 Form 10-K. In this section of our 2020 Form 10-K, we also provide more 

information on the credit characteristics of loans in our single-family conventional guaranty book of business, including

high-balance loans, reverse mortgages and mortgage products with rate resets. 

In January 2021, the terms of our senior preferred stock purchase agreement were amended through a letter agreement 

FHFA entered into on our behalf with Treasury. The letter agreement includes restrictive covenants that impact our 

single-family business and is described in “Business—Conservatorship, Treasury Agreements and Housing Finance 

Reform” in our 2020 Form 10-K. We are not currently in compliance with the new covenants that restrict our acquisitions 

of purchase money single-family loans with higher-risk characteristics and our acquisitions of single-family loans backed 

by investment properties and second homes. We are taking steps to ensure we comply with these covenants and 

continue to work with FHFA and our lender customers on our implementation efforts.

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

Fannie Mae First Quarter 2021 Form 10-Q 31
Single-Family Credit Enhancement and Transfer of Mortgage Credit Risk

Our charter generally requires credit enhancement on any single-family conventional mortgage loan that we purchase or 

securitize if it has an LTV ratio over 80% at the time of purchase. We generally achieve this through primary mortgage 

insurance. We also enter into various other types of transactions in which we transfer mortgage credit risk to third 

parties.

Our approved monoline mortgage insurers’ financial ability and willingness to pay claims is an important determinant of 

our overall credit risk exposure. For a discussion of our exposure to and management of the institutional counterparty 

credit risk associated with the providers of these credit enhancements, see “MD&A—Risk Management—Institutional 

Counterparty Credit Risk Management” and “Note 13, Concentrations of Credit Risk” in our 2020 Form 10-K and “Note 

10, Concentrations of Credit Risk” in this report. Also see “Risk Factors” in our 2020 Form 10-K.

Single-Family Loans without Credit Enhancement

The following table displays the primary characteristics of loans in our single-family conventional guaranty book of 

business currently without credit enhancement.

Single-Family Loans without Credit Enhancement

As of

March 31, 2021 December 31, 2020

Unpaid 

Principal 

Balance

Percentage of 

Single-Family 

Conventional 

Guaranty Book 

of Business

Unpaid 

Principal 

Balance

Percentage of 

Single-Family 

Conventional 

Guaranty Book 

of Business

(Dollars in billions)

Low LTV ratio or short-term(1) $ 1,014 31 % $ 938 29 %

Pre-credit risk transfer program inception(2) 424 13 462 14 

Recently acquired(3) 1,119 34 934 29 

Other(4) 302 9 286 9 

Less: Loans in multiple categories (829) (25) (751) (23) 

Total single-family loans currently without credit 

enhancement $ 2,030 62 % $ 1,869 58 %

(1) Represents loans with an LTV ratio less than or equal to 60% or loans with an original maturity of 20 years or less.

(2) Represents loans that were acquired before the inception of our credit risk transfer programs. Also includes Refi PlusTM loans.

(3) Represents loans that were recently acquired and have not been included in a reference pool.

(4) Includes adjustable-rate mortgage loans, loans with a combined LTV ratio greater than 97%, non-Refi Plus loans acquired after the 

inception of our credit risk transfer programs that became 30 or more days delinquent prior to inclusion in a credit risk transfer transaction, 

and loans that were delinquent as of March 31, 2021 or December 31, 2020.

We have not entered into new credit risk transfer transactions since the first quarter of 2020 as we discuss below in 

“Transfer of Mortgage Credit Risk.” As a result, the percentage of loans in our single-family conventional guaranty book 

of business without credit enhancement has increased in recent periods. The percentage of our loans without credit 

enhancement was 62% and 58% as of March 31, 2021 and December 31, 2020, respectively.

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

Fannie Mae First Quarter 2021 Form 10-Q 32
Single-Family Loans with Credit Enhancement

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 2020 Form 10-K.

Single-Family Loans with Credit Enhancement

As of

March 31, 2021 December 31, 2020

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 $ 677 21 % $ 681 21 %

Connecticut Avenue Securities 525 16 608 19 

Credit Insurance Risk Transfer 189 6 216 7 

Lender risk-sharing 108 3 131 4 

Less: Loans covered by multiple credit enhancements (257) (8) (304) (9) 

Total single-family loans with credit enhancement $ 1,242 38 % $ 1,332 42 %

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 domestic and international investors and reinsurers in the 

private market. Our credit risk transfer transactions have been designed to transfer a portion of the losses we expect 

would be incurred in an economic downturn or a stressed credit environment. 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 2020 Form 10-K, we have used primarily three singlefamily credit risk transfer programs: Connecticut Avenue Securities® (“CAS”), Credit Insurance Risk TransferTM (“CIRT”), 

and lender risk-sharing. At FHFA’s direction, we have discontinued entering into new lender risk-sharing transactions as 

of the end of 2020. We continually evaluate our credit risk transfer transactions, which, in addition to managing our 

credit risk, also affect our returns on capital.

We have not entered into any new credit risk transfer transactions since the first quarter of 2020 as we continue to 

evaluate their costs and benefits, including a reduction in the capital relief these transactions provide under FHFA’s 

enterprise regulatory capital framework. As a result, the percentage of our book that is covered by these transactions 

has declined. The structure of and extent to which we engage in any additional credit risk transfer transactions in the 

future will be affected by the enterprise regulatory capital framework, our risk appetite, the strength of future market 

conditions, including the cost of these transactions, and the review of our overall business and capital plan. See “Risk 

Factors” in our 2020 Form 10-K for additional information on the risks associated with the constraints on new credit risk 

transfer transactions and “Business—Legislation and Regulation—GSE Act and Other Legislative and Regulatory 

Matters” in our 2020 Form 10-K for more information on FHFA’s enterprise regulatory capital framework.

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

Fannie Mae First Quarter 2021 Form 10-Q 33
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. The risk in force of these transactions, which refers to the maximum 

amount of losses that could be absorbed by credit risk transfer investors, was approximately $39 billion as of March 31, 

2021. 

Outstanding as of March 31, 2021

(Dollars in billions)

Senior Fannie Mae(1)

$833

Outstanding 

Reference 

Pool(4)(6)

$882

Mezzanine Fannie Mae(1)

$1

CIRT(2)(3)

$10

CAS(2)

$16

Lender RiskSharing(2)

$4

First Loss Fannie Mae(1)

$9

CAS(2)(5)

$6

Lender RiskSharing(2)

$3

(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 $2.0 billion outstanding as 

of March 31, 2021. 

(4) For CIRT and some lender risk-sharing transactions, “Reference Pool” reflects a pool of covered loans. 

(5) For CAS transactions, “First Loss” represents all B tranche balances.

(6) For CAS and some lender risk-sharing transactions, represents outstanding reference pools, not the outstanding unpaid principal balance 

of the underlying loans. The outstanding unpaid principal balance for all loans covered by credit risk transfer programs, including all loans 

on which risk has been transferred in lender risk-sharing transactions, was $822.0 billion as of March 31, 2021.

The following table displays the approximate cash paid or transferred to investors for credit risk transfer transactions 

outstanding. The cash represents the portion of guaranty fee paid to investors as compensation for taking on a share of 

the credit risk.

Credit Risk Transfer Transactions

For the Three Months Ended March 31,

2021 2020

Cash paid or transferred for: (Dollars in millions)

CAS transactions(1) $ 206 $ 261 

CIRT transactions 72 102 

Lender risk-sharing transactions 74 81 

(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. 

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

Fannie Mae First Quarter 2021 Form 10-Q 34
Single-Family Problem Loan Management

Our problem loan management strategies focus primarily on reducing defaults to avoid losses that would otherwise 

occur and pursuing foreclosure alternatives to mitigate the severity of the losses we incur. See “MD&A—Single-Family 

Business—Single-Family Mortgage Credit Risk Management—Single-Family Problem Loan Management” in our 2020

Form 10-K for a discussion of delinquency statistics on our problem loans, efforts undertaken to manage our problem 

loans, metrics regarding our loan workout activities, real estate owned (“REO”) management and other single-family 

credit-related information. The discussion below updates some of that information. We also provide ongoing credit 

performance information on loans underlying single-family Fannie Mae MBS and loans covered by single-family credit 

risk transfer transactions. For loans backing Fannie Mae MBS, see the “Forbearance and Delinquency Dashboard” 

available in the MBS section of our Data Dynamics® tool, which is available at www.fanniemae.com/datadynamics. For 

loans covered by credit risk transfer transactions, see the “Deal Performance Data” report available in the CAS and 

CIRT sections of the tool. Information on our website is not incorporated into this report. Information in Data Dynamics 

may differ from similar measures presented in our financial statements and other public disclosures for a variety of 

reasons, including as a result of variations in the loan population covered, timing differences in reporting and other 

factors.

Delinquency

The tables below display the delinquency status of loans and changes in the volume of seriously delinquent loans in our 

single-family conventional guaranty book of business based on the number of loans. Single-family seriously delinquent 

loans are loans that are 90 days or more past due or in the foreclosure process, expressed as a percentage of our 

single-family conventional guaranty book of business based on loan count. Management monitors the single-family 

serious delinquency rate as an indicator of potential future credit losses and loss mitigation activities. Serious 

delinquency rates are reflective of our performance in assessing and managing credit risk associated with single-family 

loans in our guaranty book of business. Typically, higher serious delinquency rates result in a higher allowance for loan 

losses. 

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. 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 during the covered period, 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. 

Delinquency Status and Activity of Single-Family Conventional Loans

As of

March 31, 2021

December 31, 

2020 March 31, 2020

Delinquency status:

30 to 59 days delinquent 0.71 % 1.02 % 1.31 %

60 to 89 days delinquent 0.26 0.36 0.32 

Seriously delinquent (“SDQ”) 2.58 2.87 0.66 

Percentage of SDQ loans that have been delinquent for more 

than 180 days 74 67 51 

Percentage of SDQ loans that have been delinquent for more 

than two years 4 3 11 

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

Fannie Mae First Quarter 2021 Form 10-Q 35
For the Three Months 

Ended March 31,

2021 2020

Single-family SDQ loans (number of loans):

Beginning balance 495,806 112,434 

Additions 84,685 47,756 

Removals:

Modifications and other loan workouts (80,967) (9,714) 

Liquidations and sales (16,179) (9,634) 

Cured or less than 90 days delinquent (35,316) (29,087) 

Total removals (132,462) (48,435) 

Ending balance 448,029 111,755 

Our single-family serious delinquency rate decreased as of March 31, 2021 compared with December 31, 2020 due to 

the on-going economic recovery and the decline in the number of our single-family loans in a COVID-19 forbearance 

plan. Our single-family serious delinquency rate increased as of March 31, 2021 compared with March 31, 2020 due to 

the economic dislocation caused by the COVID-19 pandemic, which increased borrower participation in forbearance 

plans. As of March 31, 2021, single-family loans in forbearance comprised 75% of our single-family seriously delinquent 

loans. The percentage of seriously delinquent loans that have been delinquent for more than 180 days increased as of 

March 31, 2021 compared with March 31, 2020 primarily due to loans that continue to remain in a COVID-19-related 

forbearance and have become more delinquent.

Our single-family serious delinquency rate excluding loans in forbearance was 0.66% as of March 31, 2021 and 

December 31, 2020. We monitor the single-family serious delinquency rate excluding loans that received a forbearance 

to better understand the impact that forbearance activity has had on the rate and to monitor loans that are seriously 

delinquent not as a result of COVID-19. We expect the COVID-19 pandemic to result in a continued higher single-family 

serious delinquency rate over the next several quarters compared with pre-pandemic levels.

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

Fannie Mae First Quarter 2021 Form 10-Q 36
The table below displays the serious delinquency rates for, and the percentage of our seriously delinquent single-family 

conventional loans represented by, the specified loan categories. Percentage of book amounts 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. The reported categories are not mutually exclusive.

Single-Family Conventional Seriously Delinquent Loan Concentration Analysis

As of

March 31, 2021 December 31, 2020 March 31, 2020

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 % 12 % 2.31 % 19 % 12 % 2.62 % 19 % 7 % 0.33 %

Florida 6 9 3.60 6 9 4.17 6 8 0.83 

Illinois 3 5 3.02 3 5 3.10 4 6 0.91 

New Jersey 4 5 4.04 3 5 4.57 3 5 1.13 

New York 5 7 4.34 5 7 4.79 5 8 1.19 

All other states 63 62 2.34 64 62 2.59 63 66 0.64 

Product type:

Alt-A(2) 1 5 8.85 1 5 9.32 1 9 2.95 

Vintages:

2004 and prior 2 9 5.66 2 9 5.88 2 20 2.48 

2005-2008 2 15 9.65 2 15 9.98 3 32 4.11 

2009-2021 96 76 2.13 96 76 2.39 95 48 0.35 

Estimated mark-tomarket LTV ratio:

<= 60% 53 59 2.36 52 56 2.52 53 52 0.53 

60.01% to 70% 18 18 3.27 17 18 3.73 17 17 0.80 

70.01% to 80% 18 13 2.67 18 14 3.05 17 14 0.74 

80.01% to 90% 8 8 3.23 9 9 4.17 8 9 0.96 

90.01% to 100% 3 1 1.49 4 2 1.85 5 4 0.85 

Greater than 100% * 1 21.81 * 1 22.43 * 4 10.06 

Credit enhanced:(3)

Primary MI & other(4) 21 27 4.06 21 27 4.36 22 26 0.95 

Credit risk transfer(5) 25 36 3.65 30 37 3.69 46 17 0.29 

Non-credit enhanced 62 51 2.06 58 51 2.36 47 65 0.77 

* 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 2020 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 March 31, 2021 was 38%. 

(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 | Single-Family Mortgage Credit Risk Management

Fannie Mae First Quarter 2021 Form 10-Q 37
Single-Family Loans in Forbearance

As a part of our relief programs, we have authorized our servicers to permit payment forbearance to borrowers 

experiencing a COVID-19-related financial hardship for up to 12 months without regard to the delinquency status of the 

loan, and for borrowers already in forbearance as of February 28, 2021, for a total of up to 18 months, provided that the 

forbearance does not result in the loan becoming greater than 18 months delinquent. We estimate that, through March 

31, 2021, approximately 8% of the single-family loans, based on loan count of our conventional guaranty book of 

business as of March 31, 2020, have been in a COVID-19-related forbearance at some point between then and March 

31, 2021 (referred to as our “single-family cumulative forbearance take-up rate”). Based on our expectations regarding 

the economic recovery, which we discuss in “Key Market Economic Indicators,“ we believe that the substantial majority 

of borrowers who will ultimately request COVID-19-related relief have already done so.

As shown in the tables below, many of the loans that entered forbearance have since exited; therefore, the percentage 

of loans in our single-family conventional guaranty book of business in forbearance as of March 31, 2021 has declined 

to 2.5%. Some borrowers whose loans are in forbearance continue to make payments according to the original 

contractual terms of the loan notwithstanding the forbearance arrangement; we expect some of these borrowers will 

continue to do so and therefore remain current. The table below provides information on the delinquency and accrual 

status of our single-family loans in forbearance. We expect many of the loans in forbearance will resolve their 

delinquency through a payment deferral or other form of loan workout. As discussed below, servicers are required to 

contact borrowers prior to the end of forbearance to evaluate them for loan workout options that can support their 

successful transition out of forbearance. 

We continue to accrue interest income on a majority of our single-family loans in forbearance because we have 

determined that collection of principal and interest on these loans is reasonably assured. For information on our 

nonaccrual policy for loans negatively impacted by the COVID-19 pandemic, see “Note 3, Mortgage Loans.”

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

Fannie Mae First Quarter 2021 Form 10-Q 38
Delinquency and Accrual Status of Single-Family Loans in Forbearance

March 31, 2021

Number of 

Loans

Unpaid 

Principal 

Balance(1)

Percentage of 

Loans in 

Forbearance(2) 

Percentage 

of Loans on 

Accrual 

Status(2)

(Dollars in millions)

Delinquency status:

Current 44,195 $ 8,128 10 % 100 %

30 to 59 days delinquent 25,301 4,886 6 94 

60 to 89 days delinquent 24,529 4,802 6 85 

Seriously delinquent:

90 to 180 days delinquent 86,337 16,767 20 82 

180+ days delinquent 249,230 53,471 58 70 

Total seriously delinquent 335,567 70,238 78 73 

Total loans in forbearance(3) 429,592 $ 88,054 100 % 77 

Percentage of single-family conventional guaranty book of 

business 2.5 % 2.7 %

December 31, 2020

Number of 

Loans

Unpaid

Principal 

Balance(1)

Percentage of 

Loans in 

Forbearance(2) 

Percentage 

of Loans on 

Accrual 

Status(2)

Delinquency status: (Dollars in millions)

Current 64,159 $ 12,110 12 % 100 %

30 to 59 days delinquent 40,653 7,672 8 97 

60 to 89 days delinquent 35,107 6,658 7 85 

Seriously delinquent:

90 to 180 days delinquent 126,611 24,961 24 85 

180+ days delinquent 258,025 56,379 49 82 

Total seriously delinquent 384,636 81,340 73 83 

Total loans in forbearance(3) 524,555 $ 107,780 100 % 86 

Percentage of single-family conventional guaranty book of 

business 3.0 % 3.4 %

(1) Does not reflect a valuation allowance recorded on the unpaid principal balance of loans in forbearance of $1.5 billion and $1.8 billion as of 

March 31, 2021 and December 31, 2020, respectively.

(2) Based on loan count.

(3) Amortized cost of these loans was $90.3 billion and $110.4 billion as of March 31, 2021 and December 31, 2020, respectively.

As of March 31, 2021, the vast majority of our single-family conventional loans in forbearance was due to borrowers 

experiencing a COVID-19-related financial hardship. As a result of the economic dislocation caused by the pandemic, 

we expect the number of single-family loans in forbearance to remain elevated through 2021 compared with prepandemic levels.

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

Fannie Mae First Quarter 2021 Form 10-Q 39
The table below provides information on the credit profile of our single-family loans in forbearance with select higher-risk 

characteristics. While the credit profile of our single-family loans in forbearance is weaker than the overall credit profile 

of our single-family conventional guaranty book of business, only 1% of our single-family loans in forbearance with a 

mark-to-market LTV ratio over 80% are not covered by mortgage insurance. 

Select Higher-Risk Characteristics of Single-Family Loans in Forbearance

As of March 31, 2021 As of December 31, 2020

Number of 

Loans

Percentage 

of Unpaid 

Principal 

Balance in 

Forbearance

Number of 

Loans

Percentage 

of Unpaid 

Principal 

Balance in 

Forbearance

Loans in forbearance with certain higher-risk 

characteristics:(1)

Estimated mark-to-market LTV ratio > 80% 41,355 12 % 62,144 15 %

Estimated mark-to-market LTV ratio > 80% without mortgage 

insurance 4,946 1 6,811 2 

DTI > 43% 166,350 41 201,354 41 

FICO credit score at origination < 680 134,474 27 159,017 26 

(1) The higher-risk categories are not mutually exclusive.

As a part of our loss mitigation efforts, servicers must attempt to contact the borrower 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 payment deferral (where the borrower defers the missed payments to the end of the loan term, or to when the 

loan is refinanced, the property is sold or the loan is otherwise paid off before the end of the loan term); or 

• a modification of the loan terms so that the borrower may be brought current, which typically results in the 

borrower making reduced monthly contractual payments over a longer period of time.

Unlike a loan modification, repayment plans and payment deferrals do not require us to purchase the loan out of trust.

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

Fannie Mae First Quarter 2021 Form 10-Q 40
The table below displays the status as of the current period-end of the single-family loans in our guaranty book of 

business that received a forbearance in 2020 or 2021. The vast majority of these forbearance arrangements were 

offered to borrowers who experienced a COVID-19-related financial hardship. Many of these borrowers have 

successfully resolved their forbearance arrangement, primarily through payment deferral or reinstatement. We expect 

the percentage of loans that receive a modification upon transitioning out of forbearance to increase throughout 2021. 

See “Loan Workout Metrics” for additional information about actions taken by us to help reinstate a loan to current 

status.

Status of Single-Family Forbearance Loans 

As of March 31, 2021

Number of 

Loans

Percentage of 

Loans with 

Forbearance 

by Category

Loans that received a forbearance, by status:

Active forbearance 429,592 32 %

Payment deferral(1) 274,704 20 

Modification(2) 20,985 2 

Reinstated(3) 337,332 25 

Other(4) 42,335 3 

Total loans that received a forbearance in our single-family guaranty book of business 1,104,948 82 

Loans that have received a forbearance, but paid off 244,561 18 

Total loans that have received a forbearance(5) 1,349,509 100 %

(1) As of March 31, 2021, 96% of loans that received a forbearance and subsequently received a payment deferral were current.

(2) Includes loans that are in trial modifications. As of March 31, 2021, 89% of loans that received a forbearance and subsequently received a 

completed modification were current.

(3) Represents loans that are no longer in forbearance but are current according to the original terms of the loan. Also includes loans that 

remained current throughout the forbearance arrangement and continue to perform.

(4) Includes loans that were delinquent upon the expiration of the forbearance arrangement as well as loans that exited forbearance through a 

repayment plan.

(5) Includes 5,415 loans that were in forbearance as of January 1, 2020.

The table below displays the status as of December 31, 2020 for single-family loans in our guaranty book of business 

that received a forbearance in 2020.

Status of Single-Family Forbearance Loans 

As of December 31, 2020

Number of 

Loans

Percentage of 

Loans with 

Forbearance 

by Category

Loans that received a forbearance, by status:

Active forbearance 524,555 40 %

Payment deferral(1) 220,414 17 

Modification(2) 13,277 1 

Reinstated(3) 337,086 26 

Other(4) 45,655 3 

Total loans that received a forbearance in our single-family guaranty book of business 1,140,987 87 

Loans that have received a forbearance, but paid off 167,388 13 

Total loans that have received a forbearance(5) 1,308,375 100 %

(1) As of December 31, 2020, 96% of loans that received a forbearance and subsequently received a payment deferral were current.

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

Fannie Mae First Quarter 2021 Form 10-Q 41
(2) Includes loans that are in trial modifications. As of December 31, 2020, 83% of loans that received a forbearance and subsequently 

received a completed modification were current.

(3) Represents loans that are no longer in forbearance but are current according to the original terms of the loan. Also includes loans that 

remained current throughout the forbearance arrangement and continue to perform.

(4) Includes loans that were delinquent upon the expiration of the forbearance arrangement as well as loans that exited forbearance through a 

repayment plan.

(5) Includes 5,415 loans that were in forbearance as of January 1, 2020.

Accrued Interest Receivable, Net on Single-Family Loans in Forbearance

For loans negatively impacted by the COVID-19 pandemic, we continue to recognize interest income for up to six 

months of delinquency provided that the loan was either current at March 1, 2020 or originated after March 1, 2020 and 

collection of principal and interest is reasonably assured. For those loans where we have provided relief beyond six 

months of delinquency, we continue to accrue interest income provided that the loan remains in a forbearance 

arrangement and collection of principal and interest continues to be reasonably assured according to our nonaccrual 

policy. Our evaluation of whether the collection of principal and interest is reasonably assured considers the probability 

of default and the current value of the collateral. 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. We 

then measure an allowance for expected credit losses on the unpaid accrued interest receivable balances such that the 

balance sheet reflects the net amount of interest we expect to collect. Accordingly, the application of our nonaccrual 

policy for loans negatively impacted by the COVID-19 pandemic has resulted in a large portion of delinquent loans, 

including those in forbearance, remaining on accrual status. See “Note 1, Summary of Significant Accounting Policies” 

in our 2020 Form 10-K and “Note 3, Mortgage Loans” in this report for additional information about our nonaccrual 

accounting policy. See also "Risk Factors—COVID-19 Pandemic Risk" in our 2020 Form 10-K for a discussion of credit 

risk and the COVID-19 pandemic.

Under our nonaccrual accounting policy for loans negatively impacted by the COVID-19 pandemic, our allowance for 

accrued interest receivable considers both the loan’s principal and accrued interest receivable balances as well as any 

proceeds that are expected from contractually attached mortgage insurance when assessing collectability. Our 

assessment of collectability requires significant management judgment; as a result, our allowance for accrued interest 

receivable is subject to the same review processes, as well as other established governance and controls, used for our 

allowance for loan losses. The table below displays an aging analysis of our accrued interest receivable, net of 

allowance on single-family loans that are in a forbearance plan.

Aging of Accrued Interest Receivable, Net of Allowance on Single-Family Loans in 

Forbearance

As of March 31, 2021 As of December 31, 2020

(Dollars in millions)

Aging analysis of accrued interest receivable:

Current $ 22 $ 32 

30 to 59 days delinquent 28 46 

60 to 89 days delinquent 39 55 

Seriously delinquent:

90 to 180 days delinquent 239 377 

180+ days delinquent 1,518 1,427 

Total accrued interest receivable 1,846 1,937 

Allowance for accrued interest receivable (179) (173) 

Total accrued interest receivable, net $ 1,667 $ 1,764 

Principal and Interest Payments while Loans are in Forbearance

While a loan is in forbearance and remains in 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. 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, including the portion of interest that represents guaranty fees owed 

to us. 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. Beginning August 2020, at FHFA’s instruction, 

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

Fannie Mae First Quarter 2021 Form 10-Q 42
we reduced our single-family servicers’ obligations to advance these missed borrower payments and 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 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. For the quarter ended March 31, 2021, we 

advanced $622 million in missed borrower principal and interest payments to MBS trusts for payment to MBS holders. 

Since FHFA’s instruction in August of 2020 through March 31, 2021, we have advanced $1.8 billion in missed borrower 

principal and interest payments. See “Retained Mortgage Portfolio” for a description of when we purchase loans from 

single-family MBS trusts. 

Loan Workout Metrics

As a part of our credit risk management efforts, loan workouts represent actions taken by us to help reinstate a loan to 

current status and help homeowners stay in their home or to otherwise avoid foreclosure. Our loan workouts reflect 

various types of home retention solutions, including repayment plans, payment deferrals, and loan modifications. Our 

loan workouts also include foreclosure alternatives, such as short sales and deeds-in-lieu of foreclosure. 

The chart below displays the unpaid principal balance of our completed single-family loan workouts by type, as well as 

the number of loan workouts, for the first quarter of 2020 compared with the first quarter of 2021. This table does not 

include loans in an active forbearance arrangement or that exited a forbearance arrangement but were not seriously 

delinquent upon exit, trial modifications, loans to certain borrowers who have received bankruptcy relief that are 

classified as troubled debt restructurings, and repayment plans that have been initiated but not completed. 

Completed Loan Workout Activity

(Dollars in billions )

$1.7 $1.5

$0.3 $0.4

$17.1

$2.0

$19.0

12,000

92,000

Modifications1

Other2

Payment deferrals

Number of loan workouts

Q1 2020 Q1 2021

(1) There were approximately 16,700 loans and 18,100 loans in a trial modification period that was not complete as of March 31, 2021 and 

2020, respectively.

(2) Includes repayment plans and foreclosure alternatives. Repayment plans reflect only those plans associated with loans that were 60 days 

or more delinquent. For the first quarter of 2021, the table excludes completed forbearance arrangements. For the first quarter of 2020, the 

table includes $17 million of completed forbearance arrangements that involve loans that were 90 days or more delinquent. 

The increase in home retention solutions in the first quarter of 2021 compared with the first quarter of 2020 was driven 

by completed COVID-19-related payment deferrals, which have been the primary loan workout solution for borrowers 

exiting COVID-19-related forbearance. The total amount of principal and interest deferred to the end of the loan term for 

single-family loans that received a payment deferral was $783 million for the first quarter of 2021.

Given the continuing impact of the pandemic, we expect higher loan workout activity to continue in 2021. 

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

Fannie Mae First Quarter 2021 Form 10-Q 43
REO Management

If a loan defaults, we may acquire the property through foreclosure or a deed-in-lieu of foreclosure. The table below 

displays our REO activity by region. Regional REO acquisition trends generally follow a pattern that is similar to, but 

lags, that of regional delinquency trends.

Single-Family REO Properties

For the Three Months Ended March 31,

2021 2020

Single-family REO properties (number of properties):

Beginning of period inventory of single-family REO properties(1) 7,973 17,501 

Acquisitions by geographic area:(2)

Midwest 250 944 

Northeast 232 890 

Southeast 292 1,148 

Southwest 115 545 

West 51 248 

Total REO acquisitions(1) 940 3,775 

Dispositions of REO (1,995) (4,987) 

End of period inventory of single-family REO properties(1) 6,918 16,289 

Carrying value of single-family REO properties (dollars in millions) $ 995 $ 2,129 

Single-family foreclosure rate(3) 0.02 % 0.09 %

REO net sales price to unpaid principal balance(4) 107 % 82 %

Short sales net sales price to unpaid principal balance(5) 82 % 79 %

(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 quarter of 2021 compared with the first quarter of 2020 was due 

to the suspension of foreclosures that began in March 2020 as a result of the COVID-19 pandemic. In response to the 

pandemic and with instruction from FHFA, we have prohibited our servicers from completing foreclosures on our singlefamily loans through at least June 30, 2021, except in the case of vacant or abandoned properties. 

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 or losses we 

realized on our single-family loans during the periods presented. The amount of these gains or 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 single-family credit loss metrics we present are not defined terms and may not be 

calculated in the same manner as similarly titled measures reported by other companies. Management uses these 

measures to evaluate the effectiveness of our single-family credit risk management strategies in conjunction with 

leading indicators such as serious delinquency and forbearance rates, which are potential indicators of future realized 

single-family credit losses. We believe these measures provide useful information about our single-family credit 

performance and the factors that impact our credit performance.

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

Fannie Mae First Quarter 2021 Form 10-Q 44
The table below displays the components of our single-family credit loss metrics and loan sale performance.

Single-Family Credit Gains (Loss) Metrics and Loan Sale Performance

For the Three Months Ended March 31,

2021 2020

Amount Ratio(1) Amount Ratio(1)

(Dollars in millions)

Write-offs $ (19) $ (65) 

Recoveries 5 14 

Foreclosed property income (expense) 17 (78) 

Credit gains (losses) and related ratios 3 * bps (129) 1.7 bps

Write-offs on the redesignation of mortgage loans from HFI to HFS(2) (54) (9) 

Gains (losses) on sales and other valuation adjustments(3) 31 (167) 

Net credit gains (losses), write-offs on redesignations, and gains (losses) 

on sales and other valuation adjustments, and related ratios $ (20) 0.2 bps $ (305) 4.1 bps

* Represents credit gains ratio of less than 0.05 basis points.

(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 the lower of cost or fair value adjustment at time of redesignation.

(3) Consists of gains or losses realized on the sales of nonperforming and reperforming mortgage loans during the period and temporary 

lower-of-cost-or-market adjustments on HFS loans, which are recognized in “Investment gains (losses), net” in our condensed 

consolidated statements of operations and comprehensive income.

We had modest single-family credit gains in the first quarter of 2021 compared with single-family credit losses in the first 

quarter of 2020. Single-family credit gains in the first quarter of 2021 were primarily due to sales of existing foreclosed 

properties partially offset by reduced foreclosures driven by the COVID-19-related foreclosure moratorium. 

Our single-family write-offs on redesignation increased in the first quarter of 2021 compared with the first quarter of 

2020 primarily due to an increase in the volume of reperforming loans redesignated from HFI to HFS in the first quarter

of 2021.

We had gains on sales and other valuation adjustments in the first quarter of 2021 primarily due to gains on lower-ofcost-or-market adjustments driven by price increases on our HFS loans compared with lower-of-cost-or-market losses in 

the first quarter of 2020 driven by price declines on our HFS loans as a result of the onset of the COVID-19 pandemic.

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 18 months of forbearance to eligible single-family borrowers suffering financial hardship 

relating to the pandemic and because we have suspended foreclosures and certain foreclosure-related activities for 

single-family properties through at least June 30, 2021. Over the longer term, we expect the COVID-19 pandemic will 

result in higher realized single-family credit losses as loans default. See “Risk Factors” in our 2020 Form 10-K for 

additional information on the potential credit risk impact of the COVID-19 pandemic and "Legislation and Regulation" in 

this report for information on the CFPB's proposal to generally prohibit servicers from initiating any new foreclosure on a 

mortgage loan secured by the borrower’s principal residence until after December 31, 2021.

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 | Single-Family Mortgage Credit Risk Management

Fannie Mae First Quarter 2021 Form 10-Q 45
Single-Family Loss Reserves

Our single-family loss reserves, which include our allowance for loan losses and the related accrued interest receivable, 

and our reserve for guaranty losses, provide for an estimate of credit losses in our single-family guaranty book of 

business.

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 single-family benefit or provision for credit losses see “Consolidated 

Results of Operations—Credit-Related Income (Expense).”

For the Three Months Ended March 31,

2021 2020

(Dollars in millions)

Changes in loss reserves:

Beginning balance $ (9,573) $ (8,779) 

Transition impact of the adoption of the CECL standard — (1,231) 

Benefit (provision) for credit losses 662 (2,170) 

Write-offs 73 74 

Recoveries (5) (14) 

Other 57 28 

Ending balance $ (8,786) $ (12,092) 

Write-offs, net of recoveries annualized, as a percentage of the average singlefamily conventional guaranty book of business (in bps) 0.8 0.8

As of

March 31, 2021 December 31, 2020

Loss reserves as a percentage of single-family:

Conventional guaranty book of business 0.27 % 0.30 %

Nonaccrual loans at amortized cost 24.75 34.63 

Single-Family Loss Reserves

Troubled Debt Restructurings and Nonaccrual Loans

We continue to account for eligible COVID-19-related loss mitigation activities as permitted under the CARES Act and 

the Consolidated Appropriations Act of 2021, which provide relief from TDR accounting and disclosure requirements for 

our forbearance plans and loan modifications. See “Note 1, Summary of Significant Accounting Policies” in our 2020

Form 10-K for more information on the relief from TDR accounting and disclosure requirements.

The table below displays the single-family loans classified as TDRs that were on accrual status and single-family loans 

on nonaccrual status. The table includes 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.”

Single-Family TDRs on Accrual Status and Nonaccrual Loans

As of

March 31, 2021 December 31, 2020

(Dollars in millions)

TDRs on accrual status $ 66,561 $ 69,503 

Nonaccrual loans 35,498 27,643 

Total TDRs on accrual status and nonaccrual loans $ 102,059 $ 97,146 

Accruing on-balance sheet loans past due 90 days or more(1) $ 58,426 $ 77,181 

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

Fannie Mae First Quarter 2021 Form 10-Q 46
For the Three Months Ended March 31,

2021 2020

(Dollars in millions)

Interest related to on-balance sheet TDRs on accrual status and 

nonaccrual loans:

Interest income forgone(2) $ 480 $ 406 

Interest income recognized(3) 815 1,068 

(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 March 31, 2021

and December 31, 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 held 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, including the amortization of any deferred cost basis adjustments, 

and cash payments received on nonaccrual loans held as of the end of each period.

As of March 31, 2021, there was an increase in loans on nonaccrual status and a corresponding decrease in loans 

accruing on-balance sheet that were past due 90 days or more compared with December 31, 2020. This was primarily 

attributed to loans that continue to remain in a COVID-19-related forbearance and have become more delinquent. As a 

result, a greater portion of these loans have entered nonaccrual status, as collection of principal and interest is no 

longer reasonably assured.

Under our nonaccrual policy for loans negatively impacted by the COVID-19 pandemic, we continue to recognize 

interest income for up to six months of delinquency provided that the loan was either current at March 1, 2020 or 

originated after March 1, 2020 and collection of principal and interest is reasonably assured. For those loans where we 

have provided relief beyond six months of delinquency, we continue to accrue interest income provided that the loan 

remains in a forbearance arrangement and collection of principal and interest continues to be reasonably assured 

according to our nonaccrual policy. This has resulted in a large portion of loans in forbearance remaining on accrual 

status. For additional information on our accounting policy for nonaccrual loans, see “Note 3, Mortgage Loans.”

We have established a valuation allowance of $219 million as of March 31, 2021 on the total single-family accrued 

interest receivable balance based on our assessment of collectability. For single-family loans negatively impacted by the 

pandemic that are six or more months delinquent as of March 31, 2021, we have recorded a total accrued interest 

receivable balance of $1.8 billion, for which we have established a valuation allowance of $185 million. 

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 2020 Form 10-K. 

See “MD&A—Multifamily Business” in our 2020 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, improved during the first 

quarter of 2021, due to a rebounding economy, increasing job growth, and continued demand for multifamily housing. 

• Vacancy rates. Based on preliminary third-party data, the estimated national multifamily vacancy rate for 

institutional investment-type apartment properties as of March 31, 2021 remained unchanged at 6.0%, the 

same as of December 31, 2020, but higher than the estimated 5.8% as of March 31, 2020. The estimated 

national multifamily vacancy rate remains in line with its estimated average rate of about 6.0% over the last ten 

years. We believe that elevated levels of new supply delivered during the quarter, especially in higher cost 

metros and submarkets, kept the estimated national vacancy level from declining by increasing the number of 

units available despite the improvement in market fundamentals. 

• Rents. Effective rents are estimated to have reversed recent trends and increased by 0.5% during the first 

quarter of 2021 compared with a decrease of 0.5% during the fourth quarter of 2020 and an increase of 0.5%

during the first quarter of 2020. 

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 

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

Fannie Mae First Quarter 2021 Form 10-Q 47
increase property values in most metropolitan areas. Based on current multifamily property sales data, transaction 

volumes in the first quarter of 2021 trended lower than in previous years yet capitalization rates remained low. We 

believe this is due to property owners choosing to retain their multifamily properties, especially as demand trends are 

improving, as well as commercial real estate investors remaining interested in multifamily rather than other sectors that 

were hit hard by the pandemic, such as hospitality and retail, thus keeping overall property values relatively stable. 

Multifamily construction underway remains elevated, with more than 500,000 units expected to be delivered in 2021, 

compared with the estimated 396,000 new multifamily units that were completed in 2020. We believe this additional 

supply is one reason for elevated concession rates. 

While significant uncertainty remains, we currently expect the multifamily sector to benefit from an improving economy 

and subsequent job growth over the coming months, leading to positive rent growth and a slightly lower vacancy rate by 

year end.

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 first 

quarter of 2021 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)

$14.1

$21.5

159,000

217,000

Multifamily new business volume1 Multifamily units financed from new business volume

Q1 2020 Q1 2021

(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 established a 2021 multifamily volume cap of $70 billion in new business volume over the four-quarter period from 

January 1, 2021 through December 31, 2021. FHFA also announced the requirement that at least 50% of our 2021 

multifamily business volume must be mission-driven, focused on certain affordable and underserved market segments, 

which consists of loans on properties affordable for residents who earn 80% of area median income or below, with 

special provisions for rural housing and for manufactured housing communities. Furthermore, FHFA’s 2021 multifamily 

volume cap requires that a minimum of 20% of our multifamily business volume in 2021 must be affordable to residents 

at 60% of area median income or below. Multifamily business that meets the minimum 20% requirement also counts as 

meeting the minimum 50% requirement.

The January 2021 amendment to the senior preferred stock purchase agreement contains certain restrictions on Fannie 

Mae’s business activities, including our multifamily business volume. We may not acquire more than $80 billion in 

multifamily mortgage assets in any 52-week period. FHFA will adjust the dollar amount of this limitation up or down at 

the end of each calendar year based on changes in the consumer price index. Additionally, at least 50% of our 

multifamily acquisitions in any calendar year must, at the time of acquisition, be classified as mission-driven, consistent 

with FHFA guidelines. We understand that the $70 billion multifamily volume cap and related requirements established 

by FHFA in the fourth quarter of 2020 remain in effect for calendar year 2021, and that the $80 billion limit established 

under the senior preferred stock purchase agreement operates as an independent limit on our multifamily business 

volume. We continue to discuss certain interpretive questions about the new covenants with FHFA and to assess their 

operational and business impacts. For information on how conservatorship may affect our business activities, see “Risk 

Factors” in our 2020 Form 10-K.

MD&A | Multifamily Business | Multifamily Mortgage Market

Fannie Mae First Quarter 2021 Form 10-Q 48
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. 

Multifamily Guaranty Book of Business

(Dollars in billions) 

$345.4

$399.1

71.9

75.9

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

3/31/2020 3/31/2021

(1) Our multifamily guaranty book of business primarily consists of multifamily mortgage loans underlying Fannie Mae MBS outstanding, 

multifamily mortgage loans of Fannie Mae held in our retained mortgage portfolio, and other credit enhancements that we provide on 

multifamily mortgage assets. It does not include non-Fannie Mae multifamily mortgage-related securities held in our retained mortgage 

portfolio for which we do not provide a guaranty.

Average charged guaranty fee represents our effective revenue rate relative to the size of our multifamily guaranty book 

of business. Management uses this metric to assess the return we earn as compensation for the multifamily credit risk 

we manage. Average charged guaranty fee increased in the first quarter of 2021 compared with the first quarter of 2020 

due to increased pricing on new multifamily business. While our multifamily guaranty fee pricing is primarily based on 

the individual credit risk characteristics of the loans we acquire, it is also influenced by market forces such as the 

availability of other sources of liquidity, our mission-related goals, the FHFA volume cap and the management of our 

overall portfolio composition.

MD&A | Multifamily Business | Multifamily Business Metrics

Fannie Mae First Quarter 2021 Form 10-Q 49
Multifamily Business Financial Results(1)

For the Three Months 

Ended March 31,

2021 2020 Variance

(Dollars in millions)

Net interest income $ 848 $ 806 $ 42 

Fee and other income 25 26 (1) 

Net revenues 873 832 41 

Fair value gains, net 44 184 (140) 

Administrative expenses (125) (120) (5) 

Credit-related income (expense)(2) 91 (413) 504 

Credit enhancement expense (58) (60) 2 

Change in expected credit enhancement recoveries(3) (15) 130 (145) 

Other expense, net(4) (51) (61) 10 

Income before federal income taxes 759 492 267 

Provision for federal income taxes (160) (99) (61) 

Net income $ 599 $ 393 $ 206 

(1) See “Note 9, Segment Reporting” for information about our segment allocation methodology.

(2) Consists of the benefit or provision for credit losses and foreclosed property income or expense. 

(3) Consists of change in benefits recognized from our freestanding credit enhancements that primarily relates to our Delegated Underwriting 

and Servicing (“DUS®”) lender risk-sharing. 

(4) Consists of investment gains or losses, gains or losses from partnership investments, debt extinguishment gains or loss, and other income 

or expenses.

Net Interest Income

Net interest income increased in the first quarter of 2021 compared with the first quarter of 2020 due to higher guaranty 

fee income due to an increase in our multifamily guaranty book of business and an increase in average charged 

guaranty fees, partially offset by lower yield maintenance fees.

Credit-Related Income (Expense)

Credit-related income for the first quarter of 2021 was primarily driven by a benefit from actual and projected economic 

data and lower expected losses resulting from the COVID-19 pandemic.

Credit-related expense for the first quarter of 2020 was primarily driven by an increase in our allowance for loan losses 

due to losses we expected to incur as a result of the COVID-19 pandemic.

See “Consolidated Results of Operations—Credit-Related Income (Expense)” in this report for more information on our 

multifamily benefit (provision) for credit losses.

Change in Expected Credit Enhancement Recoveries 

Expected credit enhancement recoveries, which are impacted by changes in our allowance, decreased in the first 

quarter of 2021 compared with the first quarter of 2020 primarily due to lower expected losses.

Multifamily Mortgage Credit Risk Management

This section updates our discussion of multifamily mortgage credit risk management in our 2020 Form 10-K in “MD&A—

Multifamily Business—Multifamily Mortgage Credit Risk Management.” For an overview of key elements of our 

mortgage credit risk management, see "Business—Managing Mortgage Credit Risk" in our 2020 Form 10-K.

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 

MD&A | Multifamily Business | Multifamily Business Financial Results

Fannie Mae First Quarter 2021 Form 10-Q 50
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 in 2020 for certain new multifamily loan acquisitions depending on the product type, 

LTV ratio and DSCR.

Key Risk Characteristics of Multifamily Guaranty Book of Business 

As of

March 31, 2021 December 31, 2020 March 31, 2020

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 10 10 11 

Full term interest-only loans 31 30 27 

Partial term interest-only loans(1) 52 51 51 

(1) Consists of mortgage loans that were underwritten with an interest-only term, regardless of whether the loan is currently in its interest-only 

period.

We provide additional information on the credit characteristics of our multifamily loans in quarterly financial 

supplements, which we furnish to the SEC with current reports on Form 8-K. Information in our quarterly financial 

supplements is not incorporated by reference into this report. 

Transfer of Multifamily Mortgage Credit Risk

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. We monitor the capital resources and loss sharing capacity of our DUS lenders on an 

ongoing basis.

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. Lenders in the DUS program may also share in loan-level credit losses up to the first 5% of 

the unpaid principal balance of the loan and then share with us any remaining losses up to a prescribed limit. Loans 

serviced by DUS lenders and their affiliates represented substantially all of our multifamily guaranty book of business as 

of March 31, 2021 and December 31, 2020. In certain situations, to effectively manage our counterparty risk, we do not 

allow the lender to fully share in one-third of the credit risk, but have them share in a smaller portion. 

While not a large portion of our multifamily guaranty book of business, our non-DUS lenders typically also have lender 

risk-sharing, where the lenders typically share or absorb losses based on a negotiated percentage of the loan or the 

pool balance.

To complement our front-end lender-risk sharing program, we have engaged in back-end credit risk transfer transactions 

through our Multifamily CIRT (“MCIRTTM”) and Multifamily CAS (“MCASTM”) transactions. Through these transactions, 

we have transferred a portion of credit risk associated with Fannie Mae losses on a reference pool of multifamily

mortgage loans.

Our back-end multifamily credit-risk sharing transactions were primarily designed to further reduce the capital 

requirements associated with loans in the reference pool with the associated benefit of additional credit risk protection in 

the event of a stress environment. We have transferred multifamily credit risk through lender risk-sharing at the time of 

acquisition, but our multifamily back-end credit risk transfer activity has occurred later, typically up to a year or more 

after acquisition.

We have not entered into any new credit risk transfer transactions since the first quarter of 2020 as we evaluate their 

costs and benefits, including a reduction in the capital relief these transactions provide under FHFA’s enterprise 

regulatory capital framework. We may engage in credit risk transfer transactions in the future, which could help us 

manage capital and manage within our risk appetite. The structure of and extent to which we engage in any additional 

credit risk transfer transactions will be affected by the enterprise regulatory capital framework, our risk appetite, the 

strength of future market conditions, including the cost of these transactions, and the review of our overall business and 

capital plan.

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

Fannie Mae First Quarter 2021 Form 10-Q 51
The table below displays the total unpaid principal balance of multifamily loans and the percentage of our multifamily 

guaranty book of business, based on unpaid principal balance, that 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

As of

March 31, 2021 December 31, 2020

Unpaid 

Principal 

Balance

Percentage of 

Multifamily 

Guaranty Book 

of Business

Unpaid 

Principal 

Balance

Percentage of 

Multifamily 

Guaranty Book 

of Business

(Dollars in millions)

MCIRT $ 71,302 18 % $ 72,166 19 %

MCAS 28,711 7 28,968 7 

Total $ 100,013 25 % $ 101,134 26 %

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 

March 31, 2021 and December 31, 2020. 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. Accordingly, the financial information we have received from borrowers may not reflect the most recent 

impacts of the COVID-19 pandemic.

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.

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

Fannie Mae First Quarter 2021 Form 10-Q 52
Multifamily Problem Loan Management and Foreclosure Prevention

In addition to the credit performance information on our multifamily loans provided below, we provide information about 

multifamily loans in a COVID-19-related forbearance that back MBS and whole loan REMICs in a “Multifamily MBS 

COVID-19 Forbearance List” in the “Data Collections” section of our DUS Disclose® tool, available at 

www.fanniemae.com/dusdisclose. Information on our website is not incorporated into this report.

Delinquency Statistics on our Problem Loans

The percentage of our multifamily loans classified as substandard in our guaranty book of business increased as of 

March 31, 2021 compared with December 31, 2020, due to the continued impact of COVID-19. 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.” 

Our multifamily serious delinquency rate decreased to 0.66% as of March 31, 2021 compared with 0.98% as of 

December 31, 2020, primarily driven by loans that received forbearance that are now in a forbearance repayment plan 

or have been modified or otherwise reinstated. This rate increased from 0.05% as of March 31, 2020 due to the 

economic dislocation caused by the COVID-19 pandemic, which increased borrower participation in forbearance plans 

since the start of the pandemic. Our multifamily serious delinquency rate consists of multifamily loans that were 60 days 

or more past due based on unpaid principal balance, expressed as a percentage of our multifamily guaranty book of 

business. Our multifamily serious delinquency rate includes 0.32% and 0.50% of multifamily loans that were 180 days or 

more past due as of March 31, 2021 and December 31, 2020, respectively. Management monitors the multifamily 

serious delinquency rate as an indicator of potential future credit losses and loss mitigation activities. Serious 

delinquency rates are reflective of our performance in assessing and managing credit risk associated with multifamily 

loans in our guaranty book of business. Typically, higher serious delinquency rates result in a higher allowance for loan 

losses. 

Our multifamily serious delinquency rate, excluding loans that received a forbearance, was 0.03% as of March 31, 2021

and December 31, 2020. We monitor this rate to better understand the impact that forbearance activity has had on 

multifamily serious delinquency and the performance of loans that are seriously delinquent not as a result of COVID-19. 

COVID-19 Forbearance and Multifamily Eviction Moratorium 

In response to the COVID-19 pandemic and its impact, we have broadly offered forbearance to affected multifamily 

borrowers, as we describe in “MD&A—Multifamily Business—Multifamily Credit Risk Management—Multifamily Problem 

Loan Management and Foreclosure Prevention” in our 2020 Form 10-K.” Since 2020, we have delegated to our lenders 

the ability to provide forbearance for up to six monthly payments for most loan types through June 30, 2021. For any 

forbearance request extending beyond six months, we do not delegate the decision and we will determine whether to 

extend relief based on the borrower’s circumstances. For delegated forbearances, borrowers are required to bring their 

loans current within a time period determined by multiplying the number of months of forbearance by four. For example, 

a three-month forbearance would translate into a twelve-month repayment period. In exchange for receiving 

forbearance, 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 payments.

In March 2021, the CDC extended its moratorium on evictions through June 30, 2021, as described in “Legislation and 

Regulation” in this report and in “Business—Legislation and Regulation—U.S. Government Response to COVID-19” in 

our 2020 Form 10-K. 

Multifamily Loan Forbearance 

We estimate that 1.6% of our multifamily book of business as of March 31, 2020, based on unpaid principal balance, 

has been in a COVID-19-related forbearance at some point in time through March 31, 2021. As shown in the table 

below, some of these loans have exited forbearance into a repayment plan, have reinstated, have defaulted, or have 

since liquidated. 

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

Fannie Mae First Quarter 2021 Form 10-Q 53
The table below displays the status as of March 31, 2021 of the multifamily loans in our guaranty book of business that 

have received a forbearance since the start of the pandemic, as well as the serious delinquency rate of such loans. As 

of March 31, 2021, nearly all of our multifamily loans in forbearance were associated with a COVID-19-related financial 

hardship. Seniors housing loans, which constituted 4.3% of our multifamily guaranty book of business as of March 31, 

2021, comprised approximately 40% of the total unpaid principal balance of multifamily loans that received a 

forbearance and remained in our multifamily guaranty book as of March 31, 2021. Of those multifamily senior housing 

loans that received a forbearance as of the end of the period, based on unpaid principal balance, 56% were in a 

repayment plan, 33% were reinstated, 8% have defaulted on their forbearance arrangement and the remaining 3% were 

in active forbearance.

Status and SDQ Rate of Multifamily Forbearance Loans Outstanding(1)

As of March 31, 2021

Number of 

Loans

Unpaid 

Principal 

Balance

Percentage 

of Unpaid 

Principal 

Balance in 

Book of 

Business

Percentage 

of Unpaid 

Principal 

Balance 

with 

Forbearance 

by Category

Percentage 

of Loans on 

Accrual 

Status

Serious 

Delinquency 

Rate

(Dollars in millions)

Loans that received a forbearance, by 

status:

Active forbearance(2) 64 $ 917 0.2 % 18 % 31 % 99 %

Repayment plan 188 2,736 0.7 53 80 48 

Reinstated(3) 65 1,168 0.3 23 52 — 

Defaulted(4) 40 325 0.1 6 — 96 

Total loans that received a 

forbearance 357 5,146 1.3 100 % 61 49 

Loans that have not received a 

forbearance 29,127 393,947 98.7 — 100 0.03 

Total multifamily guaranty book of 

business 29,484 $ 399,093 100 % 1.3 % 99 % 0.66 %

As of December 31, 2020

Number of 

Loans

Unpaid 

Principal 

Balance

Percentage 

of Unpaid 

Principal 

Balance in 

Book of 

Business

Percentage 

of Unpaid 

Principal 

Balance 

with 

Forbearance 

by Category

Percentage 

of Loans on 

Accrual 

Status

Serious 

Delinquency 

Rate

(Dollars in millions)

Loans that received a forbearance, by 

status:

Active forbearance(2) 88 $ 1,689 0.4 % 32 % 32 % 100 %

Repayment plan 183 2,707 0.8 52 82 61 

Reinstated(3) 56 491 0.1 10 100 — 

Defaulted(4) 33 325 0.1 6 — 100 

Total loans that received a 

forbearance 360 5,212 1.4 100 % 63 71 

Loans that have not received a 

forbearance 28,285 379,335 98.6 — 100 0.03 

Total multifamily guaranty book of 

business 28,645 $ 384,547 100 % 1.4 % 99 % 0.98 %

(1) Excludes $275 million as of March 31, 2021 and $123 million as of December 31, 2020 in multifamily loans that received a forbearance, 

but liquidated prior to period end.

(2) Includes loans that are in the process of extending their forbearance. 

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

Fannie Mae First Quarter 2021 Form 10-Q 54
(3) Represents loans that are no longer in forbearance but are current according to the original terms of the loan or have been modified and 

are performing under the modification. 

(4) Includes loans that are no longer in forbearance and are not on a repayment plan. Loans in this population may proceed to other loss 

mitigation activities, such as foreclosure or modification. As of March 31, 2021, the serious delinquency rate was less than 100% due to 

one loan having made a recent payment.

Under our nonaccrual accounting policy for loans negatively impacted by the COVID-19 pandemic, we continue to 

accrue interest income for up to six months provided that the loans were current as of March 1, 2020. Multifamily loans 

that are in a forbearance plan beyond six months past due are placed on nonaccrual status unless the loan is both well 

secured and in the process of collection. See Note 1, Summary of Significant Accounting Policies” in our 2020 Form 10-

K and “Note 3, Mortgage Loans” in this report for additional information about our nonaccrual accounting policy.

For multifamily loans that received forbearance and were in our book of business as of March 31, 2021, we have 

recorded a total accrued interest receivable balance of $66 million, for which we have established a valuation allowance 

of $7 million.

REO Management

The number of multifamily foreclosed properties held for sale was 19 properties with a carrying value of $189 million as 

of March 31, 2021, compared with 14 properties with a carrying value of $114 million as of December 31, 2020. The 

increase was primarily driven by a seniors housing portfolio that defaulted on its forbearance arrangement.

We expect a continued increase in our multifamily foreclosed properties due to loans that received a COVID-19 

forbearance but are unable to successfully cure their delinquency through a repayment plan or other modification.

Other Multifamily Credit Information 

Multifamily Credit Loss Performance Metrics

The amount of multifamily credit loss or income we realize in a given period is driven by foreclosures, pre-foreclosure 

sales, REO activity and write-offs, net of recoveries. Our multifamily credit loss performance metrics are not defined 

terms and may not be calculated in the same manner as similarly titled measures reported by other companies. We 

believe our multifamily credit losses and our multifamily credit losses, net of freestanding loss-sharing benefit, may be 

useful to stakeholders because they display our credit losses in the context of our multifamily guaranty book of 

business, including the benefit we receive from loss-sharing arrangements. Management views multifamily credit 

losses, net of freestanding loss-sharing benefit as a key metric related to our multifamily business model and our 

strategy to share multifamily credit risk. 

The table below displays the components of our multifamily credit loss performance metrics, as well as our multifamily 

initial write-off severity rate. 

Multifamily Credit Loss Performance Metrics

For the Three Months Ended March 31,

2021 2020

(Dollars in millions)

Write-offs(1) $ (34) $ (20) 

Recoveries(2) 1 1 

Foreclosed property expense (12) (2) 

Credit losses (45) (21) 

Freestanding loss-sharing benefit(3) 15 3 

Credit losses, net of freestanding loss-sharing benefit $ (30) $ (18) 

Credit loss ratio (in bps)(4) 4.6 2.5 

Credit loss ratio, net of freestanding loss-sharing benefit (in bps)(3)(4) 3.1 2.1 

Multifamily initial write-off severity rate(5) 13.8 % 23.3 %

Multifamily loan write-off count 9 3 

(1) Includes loan write-offs pursuant to the Advisory Bulletin. Write-offs associated with non-REO sales are net of loss sharing.

(2) Excludes a decrease of $13 million and an increase of $2 million in estimated recoveries for the first quarter of 2021 and 2020, 

respectively, relating to amounts previously written off pursuant to the Advisory Bulletin. Under the CECL standard we adopted on January 

1, 2020, estimated recoveries of amounts previously written off due to improved valuations are recorded as a component of “Benefit 

(provision) for credit losses” in our condensed consolidated statements of operations and comprehensive income and are adjusted over 

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

Fannie Mae First Quarter 2021 Form 10-Q 55
time as expectations change. The changes in expected loss-sharing benefit associated with these recoveries are included in “Freestanding 

loss-sharing benefit.”

(3) Represents expected benefits that we receive upon foreclosure as a result of certain freestanding credit enhancements, primarily 

multifamily DUS lender risk-sharing transactions, as well as the expected loss-sharing benefit from write-offs pursuant to the Advisory 

Bulletin. These benefits are recorded in “Change in expected credit enhancement recoveries” in our condensed consolidated statements of 

operations and comprehensive income. 

(4) Calculated based on the annualized amount of “Credit losses” and “Credit losses, net of freestanding loss-sharing benefit,” divided by the 

average multifamily guaranty book of business during the period. 

(5) Rate is calculated as the initial write-off amount divided by the average defaulted unpaid principal balance. The rate excludes write-offs 

pursuant to the provisions of the Advisory Bulletin and any costs, gains or losses associated with REO after initial acquisition through final 

disposition. Write-offs are net of lender loss-sharing agreements. 

Although we saw a small amount of credit losses as a result of the COVID-19 pandemic in the first quarter of 2021 and 

our expectation for losses related to the pandemic has improved, we expect our realized multifamily credit losses will be 

higher over the long term as loans that have been materially impacted by COVID-19 are ultimately unable to reperform. 

See “Risk Factors” in our 2020 Form 10-K for additional information on the potential credit risk impact of the COVID-19 

pandemic.

Multifamily Loss Reserves

Our multifamily loss reserves, which include our allowance 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. 

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 multifamily benefit or provision for credit losses, see “Consolidated Results of 

Operations—Credit-Related Income (Expense).”

Multifamily Loss Reserves

For the Three Months Ended March 31,

2021 2020

(Dollars in millions)

Changes in loss reserves:

Beginning balance $ (1,225) $ (268) 

Transition impact of the adoption of the CECL standard(1)

 — (490) 

Benefit (provision) for credit losses 103 (410) 

Write-offs 34 20 

Recoveries (1) (1) 

Ending balance $ (1,089) $ (1,149) 

Expected benefit of freestanding credit enhancements on multifamily loans not 

netted against loss reserves as of the end of the period $ 336 $ 347 

As of

March 31, 2021 December 31, 2020

Loss reserves as a percentage of multifamily guaranty book of business 0.27 % 0.32 %

(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” in our condensed consolidated balance sheets on January 1, 2020.

Troubled Debt Restructurings and Nonaccrual Loans

We continue to account for eligible COVID-19-related loss mitigation activities as permitted under the CARES Act and 

the Consolidated Appropriations Act of 2021, which provide relief from TDR accounting and disclosure requirements for 

our forbearance plans and loan modifications. See “Note 1, Summary of Significant Accounting Policies” in our 2020

Form 10-K for more information on the relief from TDR accounting and disclosure requirements.

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

Fannie Mae First Quarter 2021 Form 10-Q 56
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 multifamily 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.” 

Multifamily TDRs on Accrual Status and Nonaccrual Loans

As of 

March 31, 2021 December 31, 2020

(Dollars in millions)

TDRs on accrual status $ 32 $ 29 

Nonaccrual loans 2,153 2,073 

Total TDRs on accrual status and nonaccrual loans $ 2,185 $ 2,102 

Accruing on-balance sheet loans past due 90 days or more $ 404 $ 610 

For the Three Months Ended March 31,

2021 2020

(Dollars in millions)

Interest related to on-balance sheet TDRs on accrual status and nonaccrual 

loans:

Interest income forgone(1) $ 14 $ 1 

Interest income recognized(2) 9 1 

(1) 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 held as of the end of each period had the loans performed according to their original contractual terms.

(2) Represents interest income recognized during the period, including the amortization of any deferred cost basis adjustments, for loans 

classified as TDRs on accrual status or nonaccrual loans held as of the end of each period. Primarily includes amounts accrued while the 

loans were performing. Cash received on nonaccrual loans in a forbearance plan are applied as a reduction of accrued interest receivable 

until the receivable has been reduced to zero, and then recognized as interest income.

For loans that were negatively impacted by the COVID-19 pandemic, we continue to accrue interest income for up to six 

months of delinquency provided that the loan was either current as of March 1, 2020 or originated after March, 1 2020 

according to our nonaccrual policy. Multifamily loans in a forbearance plan beyond six months past due are placed on 

nonaccrual status unless the loan is both well secured and in the process of collection. The increase in nonaccrual 

loans and corresponding decrease in loans on accrual status 90 days or more past due in the first quarter of 2021 were 

primarily attributed to an increase in loans in forbearance that were beyond six months past due and were not well 

secured or in the process of collection. For additional information on our accounting policy for nonaccrual loans, see 

“Note 3, Mortgage Loans.”

Liquidity and Capital Management

Liquidity Management

This section supplements and updates information regarding liquidity management in our 2020 Form 10-K. See “MD&A

—Liquidity and Capital Management—Liquidity Management” in our 2020 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 2020 Form 10-K for a discussion of liquidity and funding risks, including potential impacts of 

the COVID-19 pandemic. 

Debt Funding

We are currently subject to a $300 billion debt limit under our senior preferred stock purchase agreement with Treasury, 

which will decrease to $270 billion as of December 31, 2022. The unpaid principal balance of our aggregate 

indebtedness was $275.1 billion as of March 31, 2021. Pursuant to the terms of the senior preferred stock purchase 

agreement, we are prohibited from issuing debt without the prior consent of Treasury if it would result in our aggregate 

indebtedness exceeding our outstanding debt limit. The calculation of our indebtedness for purposes of complying with 

our debt limit reflects the unpaid principal balance and excludes debt basis adjustments and debt of consolidated trusts. 

Due to our debt limit, our business activities may be constrained.

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

Fannie Mae First Quarter 2021 Form 10-Q 57
Outstanding Debt 

Total outstanding debt of Fannie Mae includes short-term and long-term debt and excludes debt of consolidated trusts. 

Short-term debt of Fannie Mae consists of borrowings with an original contractual maturity of one year or less and, 

therefore, does not include the current portion of long-term debt. Long-term debt of Fannie Mae consists of borrowings 

with an original contractual maturity of greater than one year. 

The following chart and table display information on our outstanding short-term and long-term debt based on original 

contractual maturity. The primary driver for the decrease in short-term and long-term debt from December 31, 2020 to 

March 31, 2021 was decreased funding needs compared with the prior year, in which we had unusually high liquidity 

demands driven by the pandemic as well as historically high loan acquisition volumes through our whole loan conduit. 

As a result, we did not issue new debt to replace all of our debt that paid off during first quarter of 2021.

Debt of Fannie Mae(1)

(Dollars in billions)

$289.6

$273.4

$12.2 $2.9

$66.6 $80.9

$210.8 $189.6

Short-term debt

Long-term debt maturing within one year

Long-term debt, excluding portion maturing within one year

12/31/2020 3/31/2021

(1) Outstanding debt balance consists of the unpaid principal balance, premiums and discounts, fair value adjustments, hedge-related basis 

adjustments and other cost basis adjustments. Reported amounts include net discount unamortized cost basis adjustments and fair value 

adjustments of $1.6 billion and $393 million as of March 31, 2021 and December 31, 2020, respectively.

MD&A | Liquidity and Capital Management

Fannie Mae First Quarter 2021 Form 10-Q 58
Selected Debt Information

As of

March 31, 2021 December 31, 2020

(Dollars in billions)

Selected Weighted-Average Interest Rates(1)

Interest rate on short-term debt 0.06 % 0.18 %

Interest rate on long-term debt, including portion maturing within one year 1.34 1.34 

Interest rate on callable long-term debt 1.38 1.40 

Selected Maturity Data

Weighted-average maturity of debt maturing within one year (in days) 179 196 

Weighted-average maturity of debt maturing in more than one year (in months) 53 52 

Other Data

Outstanding callable long-term debt $ 57.4 $ 57.5 

Connecticut Avenue Securities debt(2) 14.5 15.0 

(1) Excludes the effects of fair value adjustments and hedge-related basis adjustments.

(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 2020 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.

For information on the maturity profile of our outstanding long-term debt, see “Note 7, Short-Term and Long-Term Debt.”

MD&A | Liquidity and Capital Management

Fannie Mae First Quarter 2021 Form 10-Q 59
Debt Funding Activity

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 and long-term debt issued and paid off during the first quarter of 2021 compared with the 

first quarter of 2020 was primarily due to decreased funding needs as discussed above. As a result, we did not issue 

new debt to replace all of our debt that paid off during first quarter of 2021.

Activity in Debt of Fannie Mae

For the Three Months Ended 

March 31,

2021 2020

(Dollars in millions)

Issued during the period:

Short-term:

Amount $ 5,142 $ 160,023 

Weighted-average interest rate(1) * 1.25 %

Long-term:(2)

Amount $ 2,815 $ 39,319 

Weighted-average interest rate 0.59 % 0.70 %

Total issued:

Amount $ 7,957 $ 199,342 

Weighted-average interest rate 0.21 % 1.14 %

Paid off during the period:(3)

Short-term:

Amount $ 14,459 $ 128,792 

Weighted-average interest rate 0.10 % 1.52 %

Long-term:(2)

Amount $ 8,450 $ 24,164 

Weighted-average interest rate 1.04 % 1.88 %

Total paid off:

Amount $ 22,909 $ 152,956 

Weighted-average interest rate 0.45 % 1.58 %

* Represents a weighted-average interest rate of less than 0.005%. 

(1) Includes income generated from repurchase agreements, which offset our short-term funding costs. Consequently, market conditions may 

result in weighted-average interest rates that are negative or at zero.

(2) 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 2020 Form 10-K and in this report.

(3) Consists of all payments on debt, including regularly scheduled principal payments, payments at maturity, payments resulting from calls 

and payments for any other repurchases. Repurchases of debt and early retirements of zero-coupon debt are reported at original face 

value, which does not equal the amount of actual cash payment.

MD&A | Liquidity and Capital Management

Fannie Mae First Quarter 2021 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 decreased during the first quarter of 2021 primarily due to a decrease in U.S. Treasury 

securities and federal funds sold and securities purchased under agreements to resell. In the first quarter of 2021, we 

began to invest funds held by consolidated trusts directly in eligible short-term third-party investments. As the funds 

underlying these investments are restricted per the trust agreements, these securities are not considered in our sources 

of liquidity and are excluded from our other investments portfolio. Prior to this change, funds held by consolidated trusts 

were invested in Fannie Mae short-term debt, as allowed by the trust agreements. We then invested those proceeds in 

unrestricted short-term investments, which were included in our other investments portfolio. This change did not 

materially alter our liquidity position.

Other Investments Portfolio

(Dollars in billions)

$38.3 $26.5

$28.2

$14.1

$130.5

$105.6

$197.0

$146.2

12/31/2020 3/31/2021

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

Three Months Ended March 31, 2021. Cash, cash equivalents and restricted cash and cash equivalents decreased from 

$115.6 billion as of December 31, 2020 to $114.3 billion as of March 31, 2021. The decrease was primarily driven by 

cash outflows from (1) payments on outstanding debt of consolidated trusts, (2) purchases of loans held for investment, 

and (3) the redemption of funding debt, which outpaced issuances, primarily for the reasons described above.

Partially offsetting these cash outflows were cash inflows primarily from (1) the sale of Fannie Mae MBS to third parties 

and (2) proceeds from repayments and sales of loans.

Three Months Ended March 31, 2020. Cash, cash equivalents and restricted cash and cash equivalents increased from 

$61.4 billion as of December 31, 2019 to $128.7 billion as of March 31, 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) purchases of loans held for investment and 

(2) payments on outstanding debt of consolidated trusts.

MD&A | Liquidity and Capital Management

Fannie Mae First Quarter 2021 Form 10-Q 61
Credit Ratings

As of March 31, 2021, our credit ratings have not changed since we filed our 2020 Form 10-K. For information on our 

credit ratings, see “MD&A—Liquidity and Capital Management—Liquidity Management—Credit Ratings” in our 2020 

Form 10-K. 

Capital Management

Capital Requirements

The deficit of our core capital over statutory minimum capital established in the GSE Act was $119.5 billion as of March 

31, 2021 and $124.3 billion as of December 31, 2020. As we discuss in “Business—Legislation and Regulation—GSE 

Act and Other Legislative and Regulatory Matters—Capital” in our 2020 Form 10-K, FHFA has established a new 

enterprise regulatory capital framework, which went into effect in February 2021. The dates on which we must comply 

with the quantitative requirements of the new capital framework are staggered and largely dependent on whether we 

remain in conservatorship. We estimate that, had the new framework’s requirements been applicable to us as of March 

31, 2021, we would have been required to hold approximately $190 billion in adjusted total capital, of which 

approximately $140 billion must be in the form of common equity tier 1 capital. Prescribed buffers drive approximately 

$75 billion of the total requirements. See “Note 12, Regulatory Capital Requirements” in our 2020 Form 10-K for more 

information on our statutory capital measures under the GSE Act.

Capital Activity

Under the dividend provisions of the senior preferred stock, we are permitted to retain increases in our net worth until 

our net worth exceeds the amount of adjusted total capital necessary for us to meet the capital requirements and buffers 

under the enterprise regulatory capital framework discussed in “Business—Legislation and Regulation—GSE Act and 

Other Legislative and Regulatory Matters—Capital” in our 2020 Form 10-K. The aggregate liquidation preference of the 

senior preferred stock increased to $146.8 billion as of March 31, 2021 and will further increase to $151.7 billion as of 

June 30, 2021 due to the $5.0 billion increase in our net worth during the first quarter of 2021. 

See “Business—Conservatorship, Treasury Agreements and Housing Finance Reform—Treasury Agreements” in our 

2020 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 2020 Form 10-K for a discussion 

of the risks associated with the limit on our capital reserves.

Treasury Funding Commitment 

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

certain circumstances if we have a net worth deficit. As of March 31, 2021, the remaining amount of Treasury’s funding 

commitment to us was $113.9 billion. See “Note 11, Equity” in our 2020 Form 10-K for more information on the funding 

commitment provided by Treasury under the senior preferred stock purchase agreement.

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. 

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 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. 

MD&A | Liquidity and Capital Management

Fannie Mae First Quarter 2021 Form 10-Q 62
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 $170.2 billion as of March 31, 2021. Approximately $126.0 

billion of this amount consisted of the unpaid principal balance of Freddie Mac-issued UMBS backing Fannie Maeissued Supers. Additionally, off-balance sheet exposure includes approximately $28.7 billion of the unpaid principal 

balance of Freddie Mac securities backing Fannie Mae-issued REMICs. 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 net of any 

beneficial interest that we retain, and other financial guarantees was $153.6 billion as of December 31, 2020. 

Approximately $110.7 billion of this amount consisted of the unpaid principal balance of Freddie Mac-issued UMBS 

backing Fannie Mae-issued Supers and $26.6 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 $6.1 billion as of March 31, 2021 and $6.4 billion as of December 31, 2020. 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 2020 Form 10-K for a discussion of our management of 

these risks. This section supplements and updates that discussion but does not address all of the risk management 

categories described in our 2020 Form 10-K. 

Institutional Counterparty Credit Risk Management

This section supplements and updates our discussion of institutional counterparty credit risk management in our 2020

Form 10-K. See “MD&A—Risk Management—Institutional Counterparty Credit Risk Management” and “Risk Factors—

Credit Risk” in our 2020 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 our 2020 Form 10-K, 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 increase in delinquent loans in forbearance plans as a result of the unprecedented 

circumstances of the COVID-19 pandemic and the CARES Act, we temporarily modified our minimum liquidity 

requirements 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 is 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 provides partial relief of the 

minimum liquidity requirements for the servicers of these impacted loans. 

In June 2020, FHFA announced that it would re-propose the minimum financial eligibility requirements for Fannie Mae 

and Freddie Mac sellers and servicers due to market volatility driven by the COVID-19 pandemic.

MD&A | Off-Balance Sheet Arrangements

Fannie Mae First Quarter 2021 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. Under FHFA 

guidance, we and Freddie Mac published several revisions to the PMIERs in 2020, which initially became effective June 

30, 2020. The revisions include (1) a temporary adjustment when calculating risk-based required assets for 

nonperforming mortgage loans that became newly delinquent after the onset of the COVID-19 crisis or that are subject 

to a forbearance plan granted in response to a financial hardship related to COVID-19, and (2) through June 30, 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 provides partial relief to mortgage insurers’ capital requirements under 

the PMIERs for the impacted loans. 

Market Risk Management, including Interest-Rate Risk Management

We are subject to market risk, which includes interest-rate risk and spread risk. Interest-rate risk is the risk that 

movements in benchmark interest rates could adversely affect the fair value of our assets or liabilities. Spread risk 

represents the change in an instrument’s fair value that relates to factors other than changes in the benchmark interest 

rate. The primary source of our interest-rate risk is the composition of our net portfolio. Our net portfolio consists of: our

retained mortgage portfolio assets; other investments portfolio; outstanding debt of Fannie Mae used to fund the 

retained mortgage portfolio assets and other investments portfolio; and mortgage commitments and risk management 

derivatives. Risk management derivatives, along with our debt instruments, are used to manage interest-rate risk. For 

the impact of market risk on our GAAP earnings, see “Earnings Exposure to Interest-Rate Risk.”

This section supplements and updates information regarding market risk management in our 2020 Form 10-K. See 

“MD&A—Risk Management—Market Risk Management, including Interest-Rate Risk Management” and “Risk Factors” 

in our 2020 Form 10-K for additional information, including our sources of interest-rate risk exposure, business risks 

posed by changes in interest rates, and our strategy for managing interest-rate risk. 

Measurement of Interest-Rate Risk

The table below displays the pre-tax market value sensitivity of our net portfolio to changes in the level of interest rates 

and the slope of the yield curve as measured on the last day of each period presented. The table below also provides 

the daily average, minimum, maximum and standard deviation values for duration gap and for the most adverse market 

value impact on the net portfolio to changes in the level of interest rates and the slope of the yield curve for the three 

months ended March 31, 2021 and 2020. 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 2020 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)

March 31, 2021 December 31, 2020

(Dollars in millions)

Rate level shock:

-100 basis points $ (142) $ (179) 

-50 basis points (1) 8 

+50 basis points (54) (111) 

+100 basis points (81) (154) 

Rate slope shock:

-25 basis points (flattening) (14) (9) 

+25 basis points (steepening) 11 4 

MD&A | Risk Management | Institutional Counterparty Credit Risk Management

Fannie Mae First Quarter 2021 Form 10-Q 64
For the Three Months Ended March 31, (1)(3)

2021 2020

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 0.02 $ (13) $ (70) (0.02) $ (20) $ (32) 

Minimum (0.04) (23) (140) (0.10) (33) (144) 

Maximum 0.10 (5) (36) 0.12 (7) 20 

Standard deviation 0.02 5 23 0.04 6 31 

(1) Computed based on changes in U.S. LIBOR interest-rates swap curve. Changes in the level of interest-rates assume a parallel shift in all 

maturities of the U.S. LIBOR interest-rate swap curve. Changes in the slope of the yield curve assume a constant 7-year rate, a shift of 

16.7 basis points for the 1-year rate (and shorter tenors) and an opposite shift of 8.3 basis points for the 30-year rate. Rate shocks for 

remaining maturity points are interpolated.

(2) Measured on the last business day of each period presented. 

(3) Computed based on daily values during the period presented.

The market value sensitivity of our net portfolio varies across a range of interest-rate shocks depending upon the 

duration and convexity profile of our net portfolio. 

We use derivatives to help manage the residual interest-rate risk exposure between our assets and liabilities. 

Derivatives have enabled us to keep our economic interest-rate risk exposure, at consistently low levels in a wide range 

of interest-rate environments. The table below displays an example of how derivatives impacted the net market value 

exposure for a 50 basis point parallel interest-rate shock.

Derivative Impact on Interest-Rate Risk (50 Basis Points)

As of (1)

March 31, 2021 December 31, 2020

(Dollars in millions)

Before derivatives $ (899) $ (613) 

After derivatives (1) 8 

Effect of derivatives 898 621 

(1) Measured on the last business day of each period presented.

Earnings Exposure to Interest-Rate Risk 

While we manage the interest-rate risk of our net portfolio with the objective of remaining neutral to movements in 

interest rates and volatility on an economic basis, our earnings can experience volatility due to interest-rate changes 

and differing accounting treatments that apply to certain financial instruments on our balance sheet. Specifically, we 

have exposure to earnings volatility that is driven by changes in interest rates in two primary areas: our net portfolio and 

our consolidated MBS trusts. The exposure in the net portfolio is primarily driven by changes in the fair value of risk 

management derivatives, mortgage commitments, and certain assets, primarily securities, that are carried at fair value. 

The exposure related to our consolidated MBS trusts primarily relates to changes in our credit loss reserves driven by 

changes in interest rates.

In January 2021, we began applying fair value hedge accounting to address some of the exposure to interest rates, 

particularly the earnings volatility related to changes in benchmark interest rates, including LIBOR and SOFR. Although 

we expect the earnings volatility related to changes in the benchmark interest rates to continue to be meaningfully 

reduced as a result of our adoption of hedge accounting, earnings variability driven by other factors, such as spreads or 

changes in cost basis amortization recognized in net interest income, remains. In addition, when the shape of the yield 

curve shifts significantly from period to period, hedge accounting may be less effective. In our current program, we 

establish new hedging relationships daily to provide flexibility in our overall risk management strategy. 

See “Consolidated Results of Operations—Hedge Accounting Impact,” “Note 1, Summary of Significant Accounting 

Policies” and “Note 8, Derivative Instruments” for additional information on our fair value hedge accounting policy and 

related disclosures.

MD&A | Risk Management | Market Risk Management, including Interest-Rate Risk Management

Fannie Mae First Quarter 2021 Form 10-Q 65
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 2020 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

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. We use a discounted cash flow method to measure expected credit losses on our single-family mortgage 

loans and an undiscounted loss method to measure expected credit losses on our multifamily mortgage loans. The 

models use reasonable and supportable forecasts for key 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 nonperforming or 

reperforming 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.

Our process for determining the measurement of expected credit losses for the period under the expected credit loss 

model 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 March 31, 2021.

We provide more detailed information on our accounting for the allowance for loan losses in “Note 1, Summary of 

Significant Accounting Policies” in our 2020 Form 10-K. See “Note 4, Allowance for Loan Losses” in this report for 

additional information about our current-period benefit or provision for loan losses, including a discussion of the 

estimates used in measuring the impact of the COVID-19 pandemic on our allowance. See “Risk Factors” in our 2020

Form 10-K for a discussion of the risks associated with the need for management to make judgments and estimates in 

applying our accounting policies and methods.

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, if any, in “Note 1, Summary of Significant Accounting Policies.” No applicable guidance was 

identified during the first quarter of 2021.

MD&A | Critical Accounting Policies and Estimates

Fannie Mae First Quarter 2021 Form 10-Q 66
Forward-Looking Statements

This report includes statements that constitute forward-looking statements within the meaning of Section 21E of the 

Securities Exchange Act of 1934 (the “Exchange Act”). In addition, we and our senior management may from time to 

time make forward-looking statements in our other filings with the SEC, our other publicly available written statements, 

and orally to analysts, investors, the news media and others. Forward-looking statements often include words such as 

“expect,” “anticipate,” “intend,” “plan,” “believe,” “seek,” “estimate,” “forecast,” “project,” “would,” “should,” “could,” 

“likely,” “may,” “will” or similar words. Examples of forward-looking statements in this report include, among others, 

statements relating to our expectations regarding the following matters:

• our future financial performance, financial condition and net worth, and the factors that will affect them, 

including our expectations regarding our future net revenues and amortization income;

• our expectations regarding our business plans and strategies and their impact, including plans to become well 

capitalized;

• our expectations for, and the impact of fluctuations in, our acquisition volumes, market share, guaranty fees, 

acquisition credit characteristics; or the pace at which loans in our book of business turn over;

• our plans relating to and the effects of our credit risk transfer transactions, as well as the factors that will affect 

our engagement in future transactions;

• our expectations for economic and mortgage market conditions, the factors that will affect conditions, and the 

impact of those conditions on our business and financial results;

• our expectations regarding the impact of actions that we and federal, state and local governments are taking in 

response to the COVID-19 pandemic and the pandemic’s economic impact, and our expectations regarding the 

impact of those actions on our business, financial results, financial condition and business plans, and on 

mortgage market and economic conditions;

• our loss mitigation activity and its impact;

• the impact on our business of the CFPB’s final rule eliminating the qualified mortgage patch and the related 

requirement in our senior preferred stock purchase agreement with Treasury;

• volatility in our future financial results and our expectations relating to our hedge accounting program and its 

impact; 

• the size and composition of our retained mortgage portfolio;

• the amount and timing of our purchases of loans from MBS trusts;

• the impact on our business or financial results and the timing of legislation and regulation;

• our payments to HUD and Treasury funds under the GSE Act;

• our future off-balance sheet exposure to Freddie Mac-issued securities;

• the risks to our business;

• future delinquency rates, default rates, forbearances and other loss mitigation activity, foreclosures, 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;

• 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 requirements, the amount of our outstanding debt, and expectations for how we will 

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. 

MD&A | Forward-Looking Statements

Fannie Mae First Quarter 2021 Form 10-Q 67
There are a number of factors that could cause actual conditions, events or results to differ materially from those 

described in our forward-looking statements, including, among others, the following: 

• uncertainty regarding our future, our exit from conservatorship and our ability to raise or earn the capital 

needed to meet our capital requirements; 

• uncertainty surrounding the duration and severity of COVID-19 pandemic; the actions taken to contain the virus 

or treat its impact, including government actions to mitigate the economic impact of the pandemic and the 

widespread availability and public acceptance of COVID-19 vaccines; the extent to which consumers, workers 

and families feel safe resuming pre-pandemic activities; the nature, extent and success of the forbearance, 

payment deferrals, modifications and other loss mitigation options we provide to borrowers affected by the 

pandemic; accounting elections and estimates relating to the impact of the COVID-19 pandemic; borrower and 

renter behavior in response to the pandemic and its economic impact; how quickly and to what extent normal 

economic and operating conditions can resume, including whether any future outbreaks or increases in the 

daily number of new COVID-19 cases 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;

• the impact of the senior preferred stock purchase agreement and the enterprise regulatory capital framework, 

as well as future legislative and regulatory requirements or changes, governmental initiatives, or executive 

orders affecting us, such as the enactment of housing finance reform legislation, including changes that limit 

our business activities or our footprint; 

• actions by FHFA, Treasury, HUD, the CFPB or other regulators, Congress, the Executive Branch, or state or 

local governments that affect our business, including our new capital requirements and recent changes or 

potential further changes in the ability-to-repay rule that eliminates the qualified mortgage patch for GSEeligible loans;

• changes in the structure and regulation of the financial services industry; 

• the potential impact of a change in the corporate income tax rate, which would affect our capital requirements 

and net income in the quarter of enactment as a result of changes in the value of our deferred tax assets and 

our net income in subsequent quarters as a result of the change in our effective federal income tax rate;

• 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; 

• 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; 

MD&A | Forward-Looking Statements

Fannie Mae First Quarter 2021 Form 10-Q 68
• 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 the impact of recent changes or potential future changes to the terms of 

the senior preferred stock purchase agreement, 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 extent that these or other restrictions on our business and activities are 

applied to us through other mechanisms even if we cease to be subject to these agreements and instruments; 

• adverse effects from activities we undertake to support the mortgage market and help borrowers, renters, 

lenders and servicers; 

• actions we may be required to take by FHFA, in its role as our conservator or as our regulator, such as actions 

in response to the COVID-19 pandemic, changes in the type of business we do, or actions relating to UMBS or 

our resecuritization of Freddie Mac-issued securities; 

• limitations on our business imposed by FHFA, in its role as our conservator or as our regulator; 

• our future objectives and activities in support of those objectives, including actions we may take to reach 

additional underserved creditworthy borrowers; 

• the possibility that changes in leadership at FHFA or the Administration may result in changes in FHFA’s or 

Treasury’s willingness to pursue our exit from conservatorship;

• 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 Board, 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 First Quarter 2021 Form 10-Q 69
• domestic and global political risks and uncertainties; 

• natural disasters, environmental disasters, terrorist attacks, widespread health emergencies or pandemics, or 

other major disruptive events; 

• severe weather events, fires, floods or other climate change events for which we may be uninsured or underinsured or that may affect our counterparties, and other risks resulting from climate change and efforts to 

address climate change;

• cyber attacks or other information security breaches or threats; and 

• the other factors described in “Risk Factors” in this report and in our 2020 Form 10-K.

Readers are cautioned not to unduly rely on the forward-looking statements we make and to place these forwardlooking statements into proper context by carefully considering the factors discussed in “Risk Factors” in our 2020 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 First Quarter 2021 Form 10-Q 70
Item 1. Financial Statements

FANNIE MAE

(In conservatorship)

Condensed Consolidated Balance Sheets — (Unaudited)

(Dollars in millions)

As of

March 31, 

2021

December 31, 

2020

ASSETS

Cash and cash equivalents $ 26,538 $ 38,337 

Restricted cash and cash equivalents (includes $80,899 and $68,308, respectively, related to 

consolidated trusts) 87,803 77,286 

Federal funds sold and securities purchased under agreements to resell or similar arrangements 

(includes $40,837 and $0, respectively, related to consolidated trusts) 54,937 28,200 

Investments in securities:

Trading, at fair value (includes $6,658 and $6,544, respectively, pledged as collateral) 111,256 136,542 

Available-for-sale, at fair value (with an amortized cost of $1,440 and $1,606, net of allowance for 

credit losses of $3 as of March 31, 2021 and December 31, 2020) 1,502 1,697 

Total investments in securities 112,758 138,239 

Mortgage loans:

Loans held for sale, at lower of cost or fair value 7,824 5,197 

Loans held for investment, at amortized cost:

Of Fannie Mae 103,310 112,726 

Of consolidated trusts 3,638,374 3,546,521 

 Total loans held for investment (includes $6,048 and $6,490, respectively, at fair value) 3,741,684 3,659,247 

Allowance for loan losses (9,628) (10,552) 

Total loans held for investment, net of allowance 3,732,056 3,648,695 

Total mortgage loans 3,739,880 3,653,892 

Advances to lenders 10,572 10,449 

Deferred tax assets, net 12,516 12,947 

Accrued interest receivable, net (includes $9,732 and $9,635, respectively, related to consolidated trusts 

and net of allowance of $226 and $216 as of March 31, 2021 and December 31, 2020, respectively) 9,993 9,937 

Acquired property, net 1,183 1,261 

Other assets 13,923 15,201 

Total assets $ 4,070,103 $ 3,985,749 

LIABILITIES AND EQUITY

Liabilities:

Accrued interest payable (includes $8,768 and $8,955, respectively, related to consolidated trusts) $ 9,585 $ 9,719 

Debt:

Of Fannie Mae (includes $3,336 and $3,728, respectively, at fair value) 273,442 289,572 

Of consolidated trusts (includes $23,601 and $24,586, respectively, at fair value) 3,740,538 3,646,164 

Other liabilities (includes $1,375 and $1,523, respectively, related to consolidated trusts) 16,313 15,035 

Total liabilities 4,039,878 3,960,490 

Commitments and contingencies (Note 13) — — 

Fannie Mae stockholders’ equity:

Senior preferred stock (liquidation preference of $146,758 and $142,192, 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 (103,117) (108,110) 

Accumulated other comprehensive income 89 116 

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) 30,225 25,259 

Total liabilities and equity $ 4,070,103 $ 3,985,749 

See Notes to Condensed Consolidated Financial Statements

 Financial Statements | Condensed Consolidated Balance Sheets

Fannie Mae (In conservatorship) First Quarter 2021 Form 10-Q 71
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 

March 31,

2021 2020

Interest income:

Trading securities $ 140 $ 316 

Available-for-sale securities 19 31 

Mortgage loans 23,353 28,938 

Federal funds sold and securities purchased under agreements to resell or similar arrangements 8 107 

Other 42 34 

Total interest income 23,562 29,426 

Interest expense:

Short-term debt (3) (102) 

Long-term debt (16,817) (23,977) 

Total interest expense (16,820) (24,079) 

Net interest income 6,742 5,347 

Benefit (provision) for credit losses 765 (2,583) 

Net interest income after benefit (provision) for credit losses 7,507 2,764 

Investment gains (losses), net 45 (158) 

Fair value gains (losses), net 784 (276) 

Fee and other income 87 120 

Non-interest income (loss) 916 (314) 

Administrative expenses:

Salaries and employee benefits (387) (393) 

Professional services (214) (212) 

Other administrative expenses (147) (144) 

Total administrative expenses (748) (749) 

Foreclosed property income (expense) 5 (80) 

Temporary Payroll Tax Cut Continuation Act of 2011 (“TCCA”) fees (731) (637) 

Credit enhancement expense (284) (376) 

Change in expected credit enhancement recoveries (31) 188 

Other expenses, net (319) (218) 

Total expenses (2,108) (1,872) 

Income before federal income taxes 6,315 578 

Provision for federal income taxes (1,322) (117) 

Net income 4,993 461 

Other comprehensive income (loss):

Changes in unrealized gains (losses) on available-for-sale securities, net of reclassification 

adjustments and taxes (23) 18 

Other, net of taxes (4) (3) 

Total other comprehensive income (loss) (27) 15 

Total comprehensive income $ 4,966 $ 476 

Net income $ 4,993 $ 461 

Dividends distributed or amounts attributable to senior preferred stock (4,966) (476) 

Net income (loss) attributable to common stockholders $ 27 $ (15) 

Earnings per share:

Basic $ 0.00 $ 0.00 

Diluted 0.00 0.00 

Weighted-average common shares outstanding:

Basic 5,867 5,867 

Diluted 5,893 5,867 

See Notes to Condensed Consolidated Financial Statements

 Financial Statements | Condensed Consolidated Statements of Operations and Comprehensive Income

Fannie Mae (In conservatorship) First Quarter 2021 Form 10-Q 72
FANNIE MAE

(In conservatorship)

Condensed Consolidated Statements of Cash Flows — 

(Unaudited)

(Dollars in millions)

For the Three Months 

Ended March 31,

2021 2020

Net cash provided by operating activities $ 24,883 $ 2,174 

Cash flows provided by (used in) investing activities:

Proceeds from maturities and paydowns of trading securities held for investment 13 13 

Proceeds from sales of trading securities held for investment 97 — 

Proceeds from maturities and paydowns of available-for-sale securities 69 96 

Proceeds from sales of available-for-sale securities 115 50 

Purchases of loans held for investment (214,402) (86,307) 

Proceeds from repayments of loans acquired as held for investment of Fannie Mae 2,889 2,308 

Proceeds from repayments and sales of loans acquired as held for investment of consolidated trusts 337,028 169,656 

Advances to lenders (114,805) (45,248) 

Proceeds from disposition of acquired property and preforeclosure sales 1,064 1,832 

Net change in federal funds sold and securities purchased under agreements to resell or similar arrangements (26,737) 5,803 

Other, net 228 (539) 

Net cash provided by (used in) investing activities (14,441) 47,664 

Cash flows provided by (used in) financing activities:

Proceeds from issuance of debt of Fannie Mae 54,780 254,559 

Payments to redeem debt of Fannie Mae (69,735) (207,818) 

Proceeds from issuance of debt of consolidated trusts 339,056 135,918 

Payments to redeem debt of consolidated trusts (335,896) (164,726) 

Other, net 71 (470) 

Net cash provided by (used in) financing activities (11,724) 17,463 

Net increase (decrease) in cash, cash equivalents and restricted cash and cash equivalents (1,282) 67,301 

Cash, cash equivalents and restricted cash and cash equivalents at beginning of period 115,623 61,407 

Cash, cash equivalents and restricted cash and cash equivalents at end of period $ 114,341 $ 128,708 

Cash paid during the period for:

Interest $ 27,019 $ 28,867 

Income taxes — — 

See Notes to Condensed Consolidated Financial Statements

 Financial Statements | Condensed Consolidated Statements of Cash Flows

Fannie Mae (In conservatorship) First Quarter 2021 Form 10-Q 73
FANNIE MAE

(In conservatorship)

Condensed Consolidated Statements of Changes in 

Equity — (Unaudited)

(Dollars and shares in millions)

Fannie Mae Stockholders’ Equity

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, 2020 1 556 1,158 $ 120,836 $ 19,130 $ 687 $ (108,110) $ 116 $ (7,400) $ 25,259 

Comprehensive income:

Net income — — — — — — 4,993 — — 4,993 

Other comprehensive income, net of tax effect:

Changes in net unrealized gains on availablefor-sale securities (net of taxes of $3) — — — — — — — (12) — (12) 

Reclassification adjustment for gains included 

in net income (net of taxes of $3) — — — — — — — (11) — (11) 

Other (net of taxes of $(1)) — — — — — — — (4) — (4) 

Total comprehensive income 4,966 

Balance as of March 31, 2021 1 556 1,158 $ 120,836 $ 19,130 $ 687 $ (103,117) $ 89 $ (7,400) $ 30,225 

Fannie Mae Stockholders’ Equity

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 

Comprehensive income:

Net income — — — — — — 461 — — 461 

Other comprehensive income, net of tax effect:

Changes in net unrealized gains on availablefor-sale securities (net of taxes of $5) — — — — — — — 18 — 18 

Reclassification adjustment for gains included 

in net income (net of taxes of $0) — — — — — — — — — — 

Other (net of taxes of $1) — — — — — — — (3) — (3) 

Total comprehensive income 476 

Balance as of March 31, 2020 1 556 1,158 $ 120,836 $ 19,130 $ 687 $ (119,454) $ 146 $ (7,400) $ 13,945 

See Notes to Condensed Consolidated Financial Statements

Financial Statements | Condensed Consolidated Statements of Changes in Equity

Fannie Mae (In conservatorship) First Quarter 2021 Form 10-Q 74
FANNIE MAE

(In conservatorship)

Notes to Condensed Consolidated Financial Statements

(Unaudited)

1. Summary of Significant Accounting Policies

Fannie Mae is a leading source of financing for mortgages in the United States. We are a shareholder-owned

corporation organized as a government-sponsored entity (“GSE”) and existing under the Federal National Mortgage 

Association Charter Act (the “Charter Act” or our “charter”). Our charter is an act of Congress, and we have a mission 

under that charter to provide liquidity and stability to the residential mortgage market and to promote access to 

mortgage credit. As a result, 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, 

2020 (“2020 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 three months ended March 31, 

2021 and related notes should be read in conjunction with our audited consolidated financial statements and related 

notes included in our 2020 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 months ended March 31, 2021 may not 

necessarily be indicative of the results for the year ending December 31, 2021.

Presentation of Restricted Cash and Cash Equivalents

Restricted cash and cash equivalents includes funds held by consolidated MBS trusts that have not yet been remitted to 

MBS certificateholders under the terms of our servicing guide and the related trust agreements. In the first quarter of 

2021, Fannie Mae, in its role as trustee, began to invest funds held by consolidated trusts directly in eligible short-term 

third-party investments, which may include investments in cash equivalents that are comprised of overnight repurchase 

agreements and U.S. Treasuries that have a maturity at the date of acquisition of three months or less. The funds 

underlying these short-term investments are restricted per the trust agreements. Accordingly, any investment in cash 

equivalents should be classified as restricted and is presented as “Restricted cash and cash equivalents” in our 

condensed consolidated balance sheets to reflect the investment of funds related to MBS trusts.

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 and 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 March 31, 2021. Actual results could be different from these estimates.

Notes to Condensed Consolidated Financial Statements | Summary of Significant Accounting Policies

Fannie Mae (In conservatorship) First Quarter 2021 Form 10-Q 75
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, with FHFA acting as our 

conservator, 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 posttransfer 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.

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 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, 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.

Senior Preferred Stock Purchase Agreement and Senior Preferred 

Stock

Under our senior preferred stock purchase agreement with Treasury, in September 2008 we issued Treasury one million

shares of senior preferred stock and a warrant to purchase shares of our common stock. The senior preferred stock 

purchase agreement and the dividend and liquidation provisions of the senior preferred stock were amended in January 

2021 pursuant to a letter agreement between us, through FHFA in its capacity as conservator, and Treasury. These 

changes included the following:

• The dividend provisions of the senior preferred stock were amended to permit us to retain increases in our net 

worth until our net worth exceeds the amount of adjusted total capital necessary for us to meet the capital 

requirements and buffers under the enterprise regulatory capital framework discussed in “Note 12, Regulatory 

Capital Requirements” in our 2020 Form 10-K. After the “capital reserve end date,” which is defined as the last 

day of the second consecutive fiscal quarter during which we have maintained capital equal to, or in excess of, 

all of the capital requirements and buffers under the enterprise regulatory capital framework, the amount of 

quarterly dividends to Treasury will be equal to the lesser of any quarterly increase in our net worth and a 10% 

annual rate on the then-current liquidation preference of the senior preferred stock. 

• At the end of each fiscal quarter, through and including the capital reserve end date, the liquidation preference 

of the senior preferred stock will be increased by an amount equal to the increase in our net worth, if any, 

during the immediately prior fiscal quarter. 

Notes to Condensed Consolidated Financial Statements | Summary of Significant Accounting Policies

Fannie Mae (In conservatorship) First Quarter 2021 Form 10-Q 76
• We may issue and retain up to $70 billion in proceeds from the sale of common stock without Treasury’s prior 

consent, provided that (1) Treasury has already exercised its warrant in full, and (2) all currently pending 

significant litigation relating to the conservatorship and to an amendment to the senior preferred stock purchase 

agreement made in August 2012 has been resolved, which may require Treasury’s assent.

• FHFA may release us from conservatorship without Treasury’s consent after (1) all currently pending significant 

litigation relating to the conservatorship and to the August 2012 amendment to the senior preferred stock 

purchase agreement has been resolved, and (2) our common equity tier 1 capital, together with any other 

common stock that we may issue in a public offering, equals or exceeds 3% of our “adjusted total assets” under 

our enterprise regulatory capital framework. 

• New restrictive covenants were added that will impact both our single-family and multifamily business activities.

The amendment has been accounted for as a modification of the existing arrangement. As a result, there is no change 

in the carrying value of the 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 March 31, 2021, and the amount of remaining funding 

available to us under the agreement is $113.9 billion. We have not received any funding from Treasury under this 

commitment since the first quarter of 2018.

Dividend provisions of the senior preferred stock permit us to retain increases in our net worth until our net worth 

exceeds the amount of adjusted total capital necessary for us to meet the capital requirements and buffers under the 

enterprise regulatory capital framework established by FHFA in November 2020. The aggregate liquidation preference 

of the senior preferred stock increased to $146.8 billion as of March 31, 2021 and will further increase to $151.7 billion

as of June 30, 2021 due to the $5.0 billion increase in our net worth during the first quarter of 2021.

See “Note 11, Equity” in our 2020 Form 10-K for additional information about the senior preferred stock purchase 

agreement and the senior preferred stock.

Statutory Capital

We submit capital reports to FHFA, which monitors our capital levels. The deficit of core capital over statutory minimum 

capital was $119.5 billion as of March 31, 2021 and $124.3 billion as of December 31, 2020. 

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 March 31, 2021, Treasury 

held an investment in our senior preferred stock with an aggregate liquidation preference of $146.8 billion. See “Senior 

Preferred Stock Purchase Agreement and Senior Preferred Stock” above for additional information on transactions 

under this agreement and the modifications made in the January 2021 letter 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 a result, 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.

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. Some of the structured securities we issue are backed in whole or in part by Freddie Mac securities. Fannie 

Mae and Freddie Mac each have agreed to indemnify the other party 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; its failure to meet its obligations under the customer services agreement; its violations of laws; or 

with respect to material misstatements or omissions in offering documents, ongoing disclosures and related materials 

relating to the underlying resecuritized securities. Additionally, we make regular income tax payments to and receive tax 

refunds from the Internal Revenue Service (“IRS”), a bureau of Treasury.

Notes to Condensed Consolidated Financial Statements | Summary of Significant Accounting Policies

Fannie Mae (In conservatorship) First Quarter 2021 Form 10-Q 77
Transactions with Treasury

Our administrative expenses were reduced by $4 million and $5 million for the three months ended March 31, 2021 and 

2020, respectively, 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. In 2012, FHFA and Treasury advised us to remit this fee increase to Treasury with respect to all 

loans acquired by us on or after April 1, 2012 and before January 1, 2022, and to continue to remit these amounts to 

Treasury on and after January 1, 2022 with respect to loans we acquired before this date until those loans are paid off 

or otherwise liquidated. The resulting fee revenue and expense are recorded in “Interest income: Mortgage loans” and 

“TCCA fees,” respectively, in our condensed consolidated statements of operations and comprehensive income. 

In 2020, FHFA provided guidance that we are not required to accrue or remit TCCA fees to Treasury with respect to 

loans backing MBS trusts that have been delinquent for four months or longer. Once payments on such loans resume, 

we will resume accrual and remittance to Treasury of the associated TCCA fees on the loans.

We recognized $731 million and $637 million in TCCA fees during the three months ended March 31, 2021 and 2020, 

respectively, of which $727 million had not been remitted to Treasury as of March 31, 2021.

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, were 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 $62 million and $30 million in “Other expenses, net” in connection with 

Treasury’s Capital Magnet Fund for the three months ended March 31, 2021 and 2020, respectively, of which $62 

million has not been remitted as of March 31, 2021.

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 $37 million and $32 million for the 

three months ended March 31, 2021 and 2020, respectively.

Transactions with CSS and Freddie Mac

We contributed capital to CSS, the company we jointly own with Freddie Mac, of $27 million and $29 million for the 

three months ended March 31, 2021 and 2020, respectively.

Derivatives

We recognize our derivatives as either assets or liabilities in our condensed consolidated balance sheets at their fair 

value on a trade date basis. Changes in fair value and interest accruals on derivatives not in qualifying fair value 

hedging relationships are recorded as “fair value gains (losses), net” in our condensed consolidated statements of 

operations and comprehensive income. We offset the carrying amounts of certain derivatives that are in gain positions 

and loss positions as well as cash collateral receivables and payables associated with derivative positions pursuant to 

the terms of enforceable master netting arrangements. We offset these amounts only when we have the legal right to 

offset under the contract and we have met all the offsetting conditions. For our over-the-counter (“OTC”) derivative 

positions, our master netting arrangements allow us to net derivative assets and liabilities with the same counterparty. 

For our cleared derivative contracts, our master netting arrangements allow us to net our exposure by clearing 

organization and by clearing member.

After offsetting, we report derivatives in a gain position in “Other assets” and derivatives in a loss position in “Other 

liabilities” in our condensed consolidated balance sheets.

We evaluate financial instruments that we purchase or issue and other financial and non-financial contracts for 

embedded derivatives. To identify embedded derivatives that we must account for separately, we determine whether: (1) 

the economic characteristics of the embedded derivative are not clearly and closely related to the economic 

characteristics of the financial instrument or other contract (i.e., the host contract); (2) the financial instrument or other 

contract itself is not already measured at fair value with changes in fair value included in earnings; and (3) a separate 

Notes to Condensed Consolidated Financial Statements | Summary of Significant Accounting Policies

Fannie Mae (In conservatorship) First Quarter 2021 Form 10-Q 78
instrument with the same terms as the embedded derivative would meet the definition of a derivative. If the embedded 

derivative meets all three of these conditions, we elect to carry the hybrid contract in its entirety at fair value with 

changes in fair value recorded in earnings.

Fair value hedge accounting

In January 2021, to reduce earnings volatility related to changes in benchmark interest rates, we began applying fair 

value hedge accounting to certain pools of single-family mortgage loans and certain issuances of our funding debt by 

designating such instruments as the hedged item in hedging relationships with interest-rate swaps. In these 

relationships, we have designated the change in the benchmark interest rate, either the London Inter-bank Offered Rate 

(“LIBOR”) or Secured Overnight Financing Rate (“SOFR”), as the risk being hedged. We have elected to use the last-oflayer method to hedge certain pools of single-family mortgage loans. This election involves establishing fair value 

hedging relationships on the portion of each loan pool that is not expected to be affected by prepayments, defaults and 

other events that affect the timing and amount of cash flows. The term of each hedging relationship is generally one 

business day and we establish hedging relationships daily to align our hedge accounting with our risk management 

practices. 

We apply hedge accounting to qualifying hedging relationships. A qualifying hedging relationship exists when changes 

in the fair value of a derivative hedging instrument are expected to be highly effective in offsetting changes in the fair 

value of the hedged item attributable to the risk being hedged during the term of the hedging relationship. We assess 

hedge effectiveness using statistical regression analysis. A hedging relationship is considered highly effective if the total 

change in fair value of the hedging instrument and the change in the fair value of the hedged item due to changes in the 

benchmark interest rate offset each other within a range of 80% to 125% and certain other statistical tests are met.

If a hedging relationship qualifies for hedge accounting, the change in the fair value of the interest-rate swaps and the 

change in the fair value of the hedged item for the risk being hedged are recorded through net interest income. A 

corresponding basis adjustment is recorded against the hedged item, either the pool of mortgage loans or the debt, for 

the changes in the fair value attributable to the risk being hedged. For hedging relationships that hedge pools of singlefamily mortgage loans, basis adjustments are allocated to individual single-family loans based on the relative unpaid 

principal balance of each loan at the termination of the hedging relationship. The cumulative basis adjustments on the 

hedged item are amortized into earnings using the effective interest method over the contractual life of the hedged item, 

with amortization beginning upon termination of the hedging relationship.

All changes in fair value of the designated portion of the derivative hedging instrument (i.e., interest-rate swap), 

including interest accruals, are recorded in the same line item in the condensed consolidated statements of operations 

and comprehensive income used to record the earnings effect of the hedged item. Therefore, changes in the fair value 

of the hedged mortgage loans and debt attributable to the risk being hedged are recognized in “Interest income” or 

“Interest expense,” along with the changes in the fair value of the respective derivative hedging instruments.

The recognition of basis adjustments on the hedged item and the subsequent amortization are noncash activities and 

are reported in “Net cash provided by operating activities” in our condensed consolidated statements of cash flows. 

Cash on derivative instruments paid or received while the derivative is designated in a hedging relationship is reported 

as “Net cash provided by operating activities” in the condensed consolidated statement of cash flows.

See “Note 3, Mortgage Loans,” “Note 7, Short-Term and Long-Term Debt” and “Note 8, Derivative Instruments” for 

additional information on our fair value hedge accounting policy and related disclosures. 

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 shares for the periods ended March 31, 

2021 and 2020 that would have been issued upon the full exercise of the warrant issued to Treasury from the date the 

warrant was issued through March 31, 2021 and 2020.

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 shares 

issuable upon the conversion of convertible preferred stock as of March 31, 2021. For the three months ended March 

Notes to Condensed Consolidated Financial Statements | Summary of Significant Accounting Policies

Fannie Mae (In conservatorship) First Quarter 2021 Form 10-Q 79
31, 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.

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 uniform mortgage-backed securities (“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.

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

March 31, 2021 December 31, 2020

(Dollars in millions)

Assets and liabilities recorded in our condensed consolidated balance sheets 

related to unconsolidated mortgage-backed trusts:

Assets:

Trading securities:

Fannie Mae $ 1,243 $ 1,611 

Non-Fannie Mae 3,598 3,608 

Total trading securities 4,841 5,219 

Available-for-sale securities:

Fannie Mae 1,036 1,168 

Non-Fannie Mae 279 318 

Total available-for-sale securities 1,315 1,486 

Other assets 39 41 

Other liabilities (65) (67) 

Net carrying amount $ 6,130 $ 6,679 

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. Our maximum exposure to loss related to 

Notes to Condensed Consolidated Financial Statements | Summary of Significant Accounting Policies

Fannie Mae (In conservatorship) First Quarter 2021 Form 10-Q 80
unconsolidated securitization and resecuritization trusts, which includes but is not limited to our exposure to these 

Freddie Mac securities, was approximately $164 billion and $146 billion as of March 31, 2021 and December 31, 2020, 

respectively. The total assets of our unconsolidated securitization and resecuritization trusts were approximately $230 

billion and $180 billion as of March 31, 2021 and December 31, 2020, respectively.

The maximum exposure to loss for our unconsolidated limited partnerships and similar legal entities, which consist of 

low-income housing tax credit investments (“LIHTC”), community investments and other entities, was $169 million and 

the related net carrying value was $163 million as of March 31, 2021. As of December 31, 2020, the maximum exposure 

to loss was $126 million and the related net carrying value was $121 million. The total assets of these limited 

partnership investments were $2.5 billion as of March 31, 2021 and $2.6 billion as of December 31, 2020.

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 $10.4 billion and $11.4 billion as of March 31, 2021 and December 31, 2020, respectively. 

The total assets related to these unconsolidated SPVs were $10.5 billion and $11.4 billion as of March 31, 2021 and 

December 31, 2020, respectively.

The unpaid principal balance of our multifamily loan portfolio was $388.6 billion as of March 31, 2021. 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” 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 

mortgage-related 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 March 31, 2021 and 2020, the unpaid principal balance of portfolio securitizations was $216.7 billion and 

$89.0 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 multiclass portfolio securitization trusts. As of March 31, 2021, the unpaid principal balance of retained interests was $1.4 

billion and its related fair value was $2.5 billion. As of December 31, 2020, the unpaid principal balance of retained 

interests was $1.7 billion and its related fair value was $2.9 billion. For the three months ended March 31, 2021 and 

2020, the principal, interest and other fees received on retained interests was $143 million and $181 million, 

respectively.

Notes to Condensed Consolidated Financial Statements | Consolidations and Transfers of Financial Assets

Fannie Mae (In conservatorship) First Quarter 2021 Form 10-Q 81
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 held for 

investment (“HFI”) or held for sale (“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, hedge-related basis 

adjustments, other cost basis adjustments, and accrued interest receivable, net. For purposes of our condensed 

consolidated balance sheets, 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. See “Note 1, Summary of Significant Accounting Policies” and “Note 8, Derivative Instruments” 

for additional information on hedge-related basis adjustments and on implementation of our fair value hedge accounting 

program in January 2021.

For purposes of the single-family mortgage loan disclosures below, we display loans by class of financing receivable 

type. Financing receivable classes used for disclosure 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. 

The following table displays the carrying value of our mortgage loans and allowance for loan losses.

As of

March 31, 2021 December 31, 2020

(Dollars in millions)

Single-family $ 3,286,381 $ 3,216,146 

Multifamily 388,591 373,722 

Total unpaid principal balance of mortgage loans 3,674,972 3,589,868 

Cost basis and fair value adjustments, net 74,536 74,576 

Allowance for loan losses for HFI loans (9,628) (10,552) 

Total mortgage loans(1) $ 3,739,880 $ 3,653,892 

(1) Excludes $9.9 billion and $9.8 billion of accrued interest receivable, net of allowance as of March 31, 2021 and December 31, 2020, 

respectively.

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 March 31,

2021 2020

(Dollars in millions)

Single-family loans redesignated from HFI to HFS:

Amortized cost $ 3,112 $ 1,637 

Lower of cost or fair value adjustment at time of redesignation(1) (54) (9) 

Allowance reversed at time of redesignation 361 184 

Single-family loans sold:

Unpaid principal balance $ 208 $ — 

Realized gains, net 2 — 

(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 $4.7 

billion and $5.0 billion as of March 31, 2021 and December 31, 2020, 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. In addition, in response to the COVID-19 pandemic, we have prohibited our 

servicers from completing foreclosures on our single-family loans through at least June 30, 2021, except in the case of 

vacant or abandoned properties.

Notes to Condensed Consolidated Financial Statements | Mortgage Loans

Fannie Mae (In conservatorship) First Quarter 2021 Form 10-Q 82
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 during the covered period, 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.

As of March 31, 2021

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 $ 17,400 $ 7,024 $ 79,349 $ 103,773 $ 2,688,967 $ 2,792,740 $ 51,671 $ 6,461 

15-year or less, 

amortizing 

fixed-rate 1,742 492 4,275 6,509 475,960 482,469 3,424 210 

Adjustable-rate 180 63 993 1,236 26,549 27,785 735 116 

Other(2) 801 317 4,494 5,612 45,188 50,800 2,132 860 

Total single-family 20,123 7,896 89,111 117,130 3,236,664 3,353,794 57,962 7,647 

Multifamily(3) 1,495 N/A 2,531 4,026 387,841 391,867 404 183 

Total $ 21,618 $ 7,896 $ 91,642 $ 121,156 $ 3,624,505 $ 3,745,661 $ 58,366 $ 7,830 

As of December 31, 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 $ 24,928 $ 9,414 $ 88,276 $ 122,618 $ 2,619,585 $ 2,742,203 $ 68,526 $ 6,028 

15-year or less, 

amortizing 

fixed-rate 1,987 601 5,028 7,616 449,443 457,059 4,292 240 

Adjustable-rate 268 97 1,143 1,508 29,933 31,441 907 114 

Other(2) 1,150 458 5,037 6,645 47,937 54,582 2,861 771 

Total single-family 28,333 10,570 99,484 138,387 3,146,898 3,285,285 76,586 7,153 

Multifamily(3) 1,140 N/A 3,688 4,828 372,598 377,426 610 302 

Total $ 29,473 $ 10,570 $ 103,172 $ 143,215 $ 3,519,496 $ 3,662,711 $ 77,196 $ 7,455 

(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. 

Notes to Condensed Consolidated Financial Statements | Mortgage Loans

Fannie Mae (In conservatorship) First Quarter 2021 Form 10-Q 83
(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.

Credit Quality Indicators

The following tables display 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 

loan-to-value (“LTV”) ratio is a primary factor we consider when estimating our allowance for loan losses for singlefamily 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 March 31, 2021, by Year of Origination(1)

2021 2020 2019 2018 2017 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% $ 187,046 $ 848,710 $ 216,806 $ 124,252 $ 158,591 $ 885,994 $ 2,421,399 

Greater than 80% and less than or equal to 90% 23,830 180,295 51,499 10,692 2,706 5,552 274,574 

Greater than 90% and less than or equal to 100% 25,159 66,092 1,710 578 157 1,556 95,252 

Greater than 100% — 25 6 24 58 1,402 1,515 

Total 20- and 30-year or more, amortizing fixed-rate 236,035 1,095,122 270,021 135,546 161,512 894,504 2,792,740 

15-year or less, amortizing fixed-rate:

Less than or equal to 80% 48,003 187,390 35,975 13,779 28,112 161,802 475,061 

Greater than 80% and less than or equal to 90% 1,137 4,953 292 19 9 19 6,429 

Greater than 90% and less than or equal to 100% 356 587 4 2 3 9 961 

Greater than 100% — — — 2 3 13 18 

Total 15-year or less, amortizing fixed-rate 49,496 192,930 36,271 13,802 28,127 161,843 482,469 

Adjustable-rate:

Less than or equal to 80% 111 2,757 1,608 2,006 3,982 16,940 27,404 

Greater than 80% and less than or equal to 90% 11 189 79 35 15 13 342 

Greater than 90% and less than or equal to 100% 6 29 2 — — 1 38 

Greater than 100% — — — — — 1 1 

Total adjustable-rate 128 2,975 1,689 2,041 3,997 16,955 27,785 

Other:

Less than or equal to 80% — — 39 318 779 34,761 35,897 

Greater than 80% and less than or equal to 90% — — 1 15 31 1,000 1,047 

Greater than 90% and less than or equal to 100% — — 2 5 11 456 474 

Greater than 100% — — — 3 5 485 493 

Total other — — 42 341 826 36,702 37,911 

Total $ 285,659 $ 1,291,027 $ 308,023 $ 151,730 $ 194,462 $ 1,110,004 $ 3,340,905 

Total for all classes by LTV ratio:(2)

Less than or equal to 80% $ 235,160 $ 1,038,857 $ 254,428 $ 140,355 $ 191,464 $ 1,099,497 $ 2,959,761 

Greater than 80% and less than or equal to 90% 24,978 185,437 51,871 10,761 2,761 6,584 282,392 

Greater than 90% and less than or equal to 100% 25,521 66,708 1,718 585 171 2,022 96,725 

Greater than 100% — 25 6 29 66 1,901 2,027 

Total $ 285,659 $ 1,291,027 $ 308,023 $ 151,730 $ 194,462 $ 1,110,004 $ 3,340,905 

Notes to Condensed Consolidated Financial Statements | Mortgage Loans

Fannie Mae (In conservatorship) First Quarter 2021 Form 10-Q 84
As of December 31, 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% $ 794,156 $ 233,994 $ 135,849 $ 183,315 $ 221,172 $ 775,636 $ 2,344,122 

Greater than 80% and less than or equal to 90% 157,500 85,227 23,440 5,270 1,592 5,958 278,987 

Greater than 90% and less than or equal to 100% 109,743 4,186 820 250 124 1,994 117,117 

Greater than 100% 28 7 28 77 81 1,756 1,977 

Total 20- and 30-year or more, amortizing fixed-rate 1,061,427 323,414 160,137 188,912 222,969 785,344 2,742,203 

15-year or less, amortizing fixed-rate:

Less than or equal to 80% 181,418 41,374 15,768 31,497 46,088 132,596 448,741 

Greater than 80% and less than or equal to 90% 6,105 811 35 14 8 20 6,993 

Greater than 90% and less than or equal to 100% 1,274 9 3 4 3 10 1,303 

Greater than 100% — — 3 3 3 13 22 

Total 15-year or less, amortizing fixed-rate 188,797 42,194 15,809 31,518 46,102 132,639 457,059 

Adjustable-rate:

Less than or equal to 80% 2,935 1,839 2,412 4,765 2,678 16,248 30,877 

Greater than 80% and less than or equal to 90% 234 152 79 19 5 12 501 

Greater than 90% and less than or equal to 100% 56 3 1 — — 2 62 

Greater than 100% — — — — — 1 1 

Total adjustable-rate 3,225 1,994 2,492 4,784 2,683 16,263 31,441 

Other:

Less than or equal to 80% — 41 328 811 1,028 36,216 38,424 

Greater than 80% and less than or equal to 90% — 2 20 43 30 1,298 1,393 

Greater than 90% and less than or equal to 100% — 2 8 16 10 602 638 

Greater than 100% — — 4 8 9 631 652 

Total other — 45 360 878 1,077 38,747 41,107 

Total $ 1,253,449 $ 367,647 $ 178,798 $ 226,092 $ 272,831 $ 972,993 $ 3,271,810 

Total for all classes by LTV ratio:(2)

Less than or equal to 80% $ 978,509 $ 277,248 $ 154,357 $ 220,388 $ 270,966 $ 960,696 $ 2,862,164 

Greater than 80% and less than or equal to 90% 163,839 86,192 23,574 5,346 1,635 7,288 287,874 

Greater than 90% and less than or equal to 100% 111,073 4,200 832 270 137 2,608 119,120 

Greater than 100% 28 7 35 88 93 2,401 2,652 

Total $ 1,253,449 $ 367,647 $ 178,798 $ 226,092 $ 272,831 $ 972,993 $ 3,271,810 

(1) Excludes $12.9 billion and $13.5 billion as of March 31, 2021 and December 31, 2020, 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. 

Notes to Condensed Consolidated Financial Statements | Mortgage Loans

Fannie Mae (In conservatorship) First Quarter 2021 Form 10-Q 85
The following tables display the total amortized cost in 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 March 31, 2021, by Year of Origination

2021 2020 2019 2018 2017 Prior Total

(Dollars in millions)

Internally assigned credit risk rating:

Non-classified(1) $ 11,295 $ 81,647 $ 67,630 $ 61,280 $ 49,903 $ 108,429 $ 380,184 

Classified(2)

 — 204 1,185 1,673 2,882 5,739 11,683 

Total $ 11,295 $ 81,851 $ 68,815 $ 62,953 $ 52,785 $ 114,168 $ 391,867 

As of December 31, 2020, by Year of Origination

2020 2019 2018 2017 2016 Prior Total

(Dollars in millions)

Internally assigned credit risk rating:

Non-classified(1) $ 71,977 $ 68,296 $ 62,087 $ 50,907 $ 43,174 $ 70,933 $ 367,374 

Classified(2) 37 1,041 1,529 2,616 1,579 3,250 10,052 

Total $ 72,014 $ 69,337 $ 63,616 $ 53,523 $ 44,753 $ 74,183 $ 377,426 

(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 March 31, 2021 and December 31, 2020, we had loans with 

an amortized cost of $4 million and less than $1 million, respectively, classified as doubtful.

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 troubled debt restructuring (“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 loss 

mitigation activities under the COVID-19 Relief granted pursuant to the CARES Act and the Consolidated Appropriations 

Act of 2021. See “Note 1, Summary of Significant Accounting Policies” in our 2020 Form 10-K for more information on 

the relief from TDR accounting and disclosure requirements.

The substantial majority of the loan modifications accounted for as a TDR result in term extensions, interest rate 

reductions or a combination of both. During the three months ended March 31, 2021 and 2020, the average term 

extension of a single-family modified loan was 138 months and 168 months, respectively, and the average interest rate 

reduction was 0.52 and 0.32 percentage points, respectively.

Notes to Condensed Consolidated Financial Statements | Mortgage Loans

Fannie Mae (In conservatorship) First Quarter 2021 Form 10-Q 86
The following table displays the number of loans and amortized cost of loans classified as a TDR during the period.

For the Three Months Ended March 31,

2021 2020

Number of 

Loans

Amortized 

Cost

Number of 

Loans

Amortized 

Cost

(Dollars in millions)

Single-family:

20- and 30-year or more, amortizing fixed-rate 2,989 $ 471 10,856 $ 1,909 

15-year or less, amortizing fixed-rate 369 28 1,073 98 

Adjustable-rate 41 6 144 24 

Other 154 18 537 68 

Total single-family 3,553 523 12,610 2,099 

Multifamily — — — — 

Total TDRs 3,553 $ 523 12,610 $ 2,099 

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 March 31,

2021 2020

Number of 

Loans

Amortized 

Cost

Number of 

Loans

Amortized 

Cost

(Dollars in millions)

Single-family:

20- and 30-year or more, amortizing fixed-rate 7,172 $ 1,327 3,175 $ 521 

15-year or less, amortizing fixed-rate 152 11 50 3 

Adjustable-rate 11 2 7 1 

Other 633 112 327 51 

Total single-family 7,968 1,452 3,559 576 

Multifamily — — 2 2 

Total TDRs that subsequently defaulted 7,968 $ 1,452 3,561 $ 578 

Nonaccrual Loans

For loans not subject to the COVID-19-related nonaccrual policy, we discontinue accruing interest when we believe 

collectability of principal and 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 such loans is reversed through interest income at the 

date the 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 when the 

borrower brings the loan current. We return a modified single-family loan to accrual status at the point when the 

borrower has successfully made all required payments during the trial period (generally three to four months) and the 

modification is made permanent. 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. 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.

Notes to Condensed Consolidated Financial Statements | Mortgage Loans

Fannie Mae (In conservatorship) First Quarter 2021 Form 10-Q 87
For loans negatively impacted by the COVID-19 pandemic, we continue to recognize interest income at the current 

contractual yield for up to six months of delinquency provided that the loan was either current at March 1, 2020 or 

originated after March 1, 2020, and collection of principal and interest is reasonably assured. For single-family loans 

where we have provided relief beyond six months of delinquency, we continue to accrue interest income provided that 

the loan remains in a forbearance arrangement and collection of principal and interest continues to be reasonably 

assured. Multifamily loans that are in a forbearance arrangement are placed on nonaccrual status when the borrower is 

six months past due unless the loan is both well secured and in the process of collection. Loans that have been placed 

in a repayment plan or that have been brought current through a modification or a payment deferral are returned to 

accrual status once the borrower has made six consecutive contractual payments under the terms of the repayment 

plan or the modified loan. For loans in a forbearance arrangement that are placed on nonaccrual status, cash payments 

for interest are applied as a reduction of accrued interest receivable until the receivable has been reduced to zero, and 

then recognized as interest income. If a loan is modified, any capitalized interest that has not been previously 

recognized as interest income is recorded as a discount to the loan and amortized over the life of the loan. See “Note 1, 

Summary of Significant Accounting Policies” in our 2020 Form 10-K for more information on our nonaccrual policy, 

including a discussion of regulatory guidance on interest income issued in response to COVID-19, and additional 

information on our policies for determining if the collection of principal and interest is reasonably assured, as well as our 

policy for establishing a valuation allowance for expected credit losses on the accrued interest receivable balance for 

loans negatively impacted by COVID-19. 

The table below displays the forgone interest and the accrued interest receivable written off through the reversal of 

interest income for nonaccrual loans.

For the Three Months Ended March 31,

2021 2020

(Dollars in millions)

Single-family:

Interest income forgone(1) $ 307 $ 182 

Accrued interest receivable written off through the reversal of interest income 108 87 

Multifamily:

Interest income forgone(1) $ 14 $ 1 

Accrued interest receivable written off through the reversal of interest income — — 

(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 recognized 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 For the Three Months Ended March 31,

March 31, 2021 December 31, 2020 2021 2020

Amortized Cost Total Interest Income Recognized(1)

(Dollars in millions)

Single-family:

20- and 30-year or more, amortizing 

fixed-rate $ 30,173 $ 22,907 $ 64 $ 101 

15-year or less, amortizing fixed-rate 945 853 2 2 

Adjustable-rate 284 270 1 1 

Other 2,583 2,475 4 13 

Total single-family 33,985 26,505 71 117 

Multifamily 2,153 2,069 8 — 

Total nonaccrual loans $ 36,138 $ 28,574 $ 79 $ 117 

(1) Single-family interest income recognized includes amounts accrued while the loans were performing, including the amortization of any 

deferred cost basis adjustments, as well as payments received on nonaccrual loans for nonaccrual 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 period end.

Notes to Condensed Consolidated Financial Statements | Mortgage Loans

Fannie Mae (In conservatorship) First Quarter 2021 Form 10-Q 88
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 and reperforming loans 

from HFI to HFS or when a loan is determined to be uncollectible.

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 Accounting Standards Update (“ASU”) 2016-13, “Financial 

Instruments—Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments,” which was later 

amended by ASU 2019-04, ASU 2019-05 and ASU 2019-1 (collectively, the “CECL standard”), on January 1, 2020. See 

“Note 1, Summary of Significant Accounting Policies” in our 2020 Form 10-K for additional information on changes to 

our allowance for loan losses resulting from our adoption of the CECL standard. 

The benefit or provision for loan losses excludes provision for accrued interest receivable losses, guaranty loss reserves 

and credit losses on available-for-sale (“AFS”) debt securities. Cumulatively, these expenses are recognized as “Benefit 

(provision) for credit losses” in our condensed consolidated statements of operations and comprehensive income. 

For the Three Months Ended March 31,

2021 2020

(Dollars in millions)

Single-family allowance for loan losses:

Beginning balance $ (9,344) $ (8,759) 

Transition impact of the adoption of the CECL standard — (1,229) 

Benefit (provision) for loan losses 671 (2,177) 

Write-offs 71 70 

Recoveries (2) (3) 

Other 57 28 

Ending Balance $ (8,547) $ (12,070) 

Multifamily allowance for loan losses:

Beginning balance $ (1,208) $ (257) 

Transition impact of the adoption of the CECL standard — (493) 

Benefit (provision) for loan losses 95 (407) 

Write-offs 33 19 

Recoveries (1) (1) 

Ending Balance $ (1,081) $ (1,139) 

Total allowance for loan losses:

Beginning balance $ (10,552) $ (9,016) 

Transition impact of the adoption of the CECL standard — (1,722) 

Benefit (provision) for loan losses 766 (2,584) 

Write-offs 104 89 

Recoveries (3) (4) 

Other 57 28 

Ending Balance $ (9,628) $ (13,209) 

Our benefit or 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. Our benefit or provision can also be impacted by updates to the models, 

assumptions, and data used in determining our allowance for loan losses. As described below, our benefit or provision 

for loan losses and our loss reserves have been significantly affected by our estimates of the impact of the COVID-19 

Notes to Condensed Consolidated Financial Statements | Allowance for Loan Losses

Fannie Mae (In conservatorship) First Quarter 2021 Form 10-Q 89
pandemic, which require significant management judgment. Changes in our estimates of borrowers that will ultimately 

receive forbearance and even more significantly, the loss mitigation outcomes of affected borrowers after the 

forbearance period ends, remain uncertain and can affect the amount of benefit or provision for loan losses we 

recognize. 

The primary factors that contributed to our single-family benefit for loan losses in the first quarter of 2021 were:

• Benefit from actual and expected home price growth. During the first quarter of 2021, home price growth was 

unseasonably strong. We also increased our expectations for home price growth on a national basis for full 

year 2021. 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 loan losses.

• Benefit from the redesignation of certain reperforming single-family loans from HFI to HFS. After a temporary 

pause in sales of nonperforming and reperforming loans, we resumed our plans for sales late in the first quarter

of 2021. As a result, we redesignated 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 write-off against the allowance for loan losses. 

Amounts recorded in the allowance related to these loans exceeded the amounts written off, resulting in a 

benefit for loan losses.

• Benefit from changes in assumptions regarding COVID-19 forbearance and change in actual and expected 

loan delinquencies. Management continues to apply its judgment and supplement model results as of March 

31, 2021, due to continued uncertainty regarding the loss mitigation outcomes of borrowers in forbearance, and 

uncertainty regarding the future impact of the pandemic, including the efficacy of the COVID-19 vaccines on 

new strains of the virus and its effect on the economy. Although uncertainty remains, our expected loan losses 

as a result of the COVID-19 pandemic decreased in the first quarter of 2021, driven by the passage of the 

American Rescue Plan, which provides additional economic stimulus and helps support the continued 

economic recovery. In addition, decreased political uncertainty compared with the end of 2020 combined with 

the increased progression of the COVID-19 vaccines rollout lessened expectations of loan losses. Based on 

these factors in the first quarter of 2021, management used its judgment to reduce the non-modeled adjustment 

that was previously applied to the loss projections developed by our credit loss model.

The impact of these factors was partially offset by the impact of the following factor which reduced our single-family 

benefit for loan losses recognized in the first quarter of 2021.

• Provision from higher actual and projected interest rates. Although we continue to be in a historically low 

interest-rate environment, actual and projected interest rates rose in the first quarter of 2021. As mortgage 

interest rates increase, we expect a decrease in future prepayments on single-family loans, including modified 

loans. Lower expected prepayments extend the expected lives of modified loans, which increases the expected 

impairment relating to term and interest-rate concessions provided on these loans resulting in a provision for 

loan losses. 

The primary factors that impacted our single-family provision for loan losses in the first quarter of 2020 were:

• Expected loan losses as a result of the COVID-19 pandemic. Given the rapidly changing and deteriorating 

market conditions in the first quarter of 2020 as a result of the unprecedented COVID-19 pandemic, we 

believed our model used to estimate single-family credit losses as of March 31, 2020 did not capture the 

entirety of losses we expected 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 expectations at that time relating 

to COVID-19’s impact. These judgments included adjusting our modeled results for (1) the expected impact of 

widespread forbearance programs, including the rate of borrower participation, and the volume and type of loan 

modifications as a result thereof, (2) the effect of TDR accounting relief from the CARES Act, and (3) lower 

expected prepayment volumes given the sharp rise in unemployment rates that were expected to stay elevated 

over the near term. In developing this model adjustment, management considered the credit risk profile of our 

single-family loan book of business at that time, as well as relevant historical credit loss experience during rare 

or stressful economic environments.

• A decrease in our expectations for home price growth. In the first quarter of 2020, we revised our forecast to 

reflect near zero home price appreciation on a national basis for 2020 due to COVID-19 market disruptions. 

Lower home prices increase the likelihood that loans will default and increase the amount of credit loss on 

loans that do default, which impacts our estimate of losses and ultimately increases our loss reserves and 

provision for credit losses.

Notes to Condensed Consolidated Financial Statements | Allowance for Loan Losses

Fannie Mae (In conservatorship) First Quarter 2021 Form 10-Q 90
• These factors were partially offset by lower actual and projected mortgage interest rates. As mortgage interest 

rates declined, we expected an increase in future prepayments on single-family loans, including modified loans. 

As noted above, we adjusted downward our modeled expectation of prepayment volumes due to the COVID-19 

pandemic, which reduced this modeled benefit from interest rates.

The primary factors that impacted our multifamily benefit for loan losses in the first quarter of 2021 were:

• Benefit from actual and projected economic data. In the first quarter of 2021, property value forecasts increased 

due to continued demand for multifamily housing. In addition, improved job growth led to an increase in 

projected average property net operating income, which reduced the probability of loan default, resulting in a 

benefit for loan losses for the quarter.

• Benefit from changes in expected loan losses as a result of the COVID-19 pandemic. Similar to our singlefamily provision for loan losses described above, management continues to apply its judgment and supplement 

model results as of March 31, 2021, due to continued uncertainty regarding the future impact of the pandemic, 

including the efficacy of the COVID-19 vaccines on new strains of the virus and its effect on the economy. 

Although uncertainty remains, our expected loan losses as a result of the COVID-19 pandemic decreased in 

the first quarter of 2021 driven by positive economic growth and the passage of the American Rescue Plan, 

which provided additional economic stimulus. Based on these factors in the first quarter of 2021, management 

used its judgment to reduce the non-modeled adjustment that was previously applied to the loss projections 

developed by our credit loss model.

Our multifamily provision for loan losses in the first quarter 2020 was primarily driven by higher expected losses as a 

result of the economic dislocation caused by the COVID-19 pandemic. Consistent with the 2020 single-family provision 

for loan losses discussed above, we believed our model used to estimate multifamily loan losses as of March 31, 2020 

did not capture the entirety of losses we expected 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 expectations at that time 

relating to COVID-19’s impact. Accordingly, our multifamily provision for loan losses was primarily driven by higher 

expected unemployment rates, which we expected would increase the number of loans in forbearance and reduce 

property net operating income in the near term, thereby decreasing forecasted property values and increasing the 

probability of loan default. In developing these adjustments, management considered the credit risk profile of our 

multifamily loan book of business at that time, as well as relevant historical credit loss experience during rare or 

stressful economic environments.

5. Investments in Securities

Trading Securities

Trading securities are recorded at fair value with subsequent changes in fair value recorded as “Fair value gains 

(losses), net” in our condensed consolidated statements of operations and comprehensive income. The following table 

displays our investments in trading securities.

As of

March 31, 

2021

December 31, 

2020

(Dollars in millions)

Mortgage-related securities:

Fannie Mae $ 1,985 $ 2,404 

Other agency(1) 3,440 3,451 

Private-label and other mortgage securities 157 158 

Total mortgage-related securities (includes $741 million and $793 million, respectively, 

related to consolidated trusts) 5,582 6,013 

Non-mortgage-related securities:

U.S. Treasury securities 105,601 130,456 

Other securities 73 73 

Total non-mortgage-related securities 105,674 130,529 

Total trading securities $ 111,256 $ 136,542 

(1) Consists of Freddie Mac and Ginnie Mae mortgage-related securities.

Notes to Condensed Consolidated Financial Statements | Allowance for Loan Losses

Fannie Mae (In conservatorship) First Quarter 2021 Form 10-Q 91
The following table displays information about our net trading gains (losses).

For the Three Months 

Ended March 31,

2021 2020

(Dollars in millions)

Net trading gains (losses) $ (758) $ 647 

Net trading gains (losses) recognized in the period related to securities still held at period end (759) 591 

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. 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.

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 March 31, 2021

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 $ 988 $ — $ 59 $ (11) $ 1,036 

Other agency(2) 32 — 2 — 34 

Alt-A and subprime private-label securities 3 — 2 — 5 

Mortgage revenue bonds 187 (3) 7 — 191 

Other mortgage-related securities 230 — 6 — 236 

Total $ 1,440 $ (3) $ 76 $ (11) $ 1,502 

As of December 31, 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 $ 1,094 $ — $ 86 $ (12) $ 1,168 

Other agency(2) 59 — 6 — 65 

Alt-A and subprime private-label securities 4 — 2 — 6 

Mortgage revenue bonds 211 (3) 8 — 216 

Other mortgage-related securities 238 — 4 — 242 

Total $ 1,606 $ (3) $ 106 $ (12) $ 1,697 

(1) We exclude from amortized cost and fair value accrued interest of $5 million and $6 million as of March 31, 2021 and December 31, 2020,

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.

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 

Notes to Condensed Consolidated Financial Statements | Investments in Securities

Fannie Mae (In conservatorship) First Quarter 2021 Form 10-Q 92
mortgage-related securities are all indicators that there are currently no 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 March 31, 2021, 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.

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

March 31, 2021 December 31, 2020

Less Than 12 

Consecutive Months

12 Consecutive 

Months or Longer

Less Than 12 

Consecutive Months

12 Consecutive 

Months or Longer

Gross 

Unrealized 

Losses in 

AOCI

Fair 

Value

Gross 

Unrealized 

Losses in 

AOCI

Fair 

Value

Gross 

Unrealized 

Losses in 

AOCI

Fair 

Value

Gross 

Unrealized 

Losses in 

AOCI

Fair 

Value

(Dollars in millions)

Fannie Mae $ — $ — $ (11) $ 131 $ (1) $ 40 $ (11) $ 94 

Total $ — $ — $ (11) $ 131 $ (1) $ 40 $ (11) $ 94 

The following table displays the gross realized gains and proceeds on sales of AFS securities.

For the Three Months Ended 

March 31,

2021 2020

(Dollars in millions)

 Gross realized gains $ 13 $ 21 

 Total proceeds (excludes initial sale of securities from new portfolio securitizations) 115 50 

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 

March 31, 2021 December 31, 2020

(Dollars in millions)

 Net unrealized gains on AFS securities for which we have not recorded an 

allowance for credit losses $ 51 $ 74 

Other 38 42 

Accumulated other comprehensive income $ 89 $ 116 

Notes to Condensed Consolidated Financial Statements | Investments in Securities

Fannie Mae (In conservatorship) First Quarter 2021 Form 10-Q 93
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 March 31, 2021

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 $ 988 $ 1,036 $ — $ — $ 4 $ 4 $ 98 $ 109 $ 886 $ 923 

Other agency 32 34 — — — — 1 1 31 33 

Alt-A and subprime 

private-label securities 3 5 — — — — 2 2 1 3 

Mortgage revenue bonds 184 191 1 1 26 27 18 19 139 144 

Other mortgage-related 

securities 230 236 — — — — 18 20 212 216 

Total $ 1,437 $ 1,502 $ 1 $ 1 $ 30 $ 31 $ 137 $ 151 $ 1,269 $ 1,319 

(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. 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. Accordingly, we exclude from the following table Freddie 

Mac securities backing unconsolidated Fannie Mae-issued structured securities of approximately $154.6 billion and 

$137.3 billion as of March 31, 2021 and December 31, 2020, respectively.

Notes to Condensed Consolidated Financial Statements | Investments in Securities

Fannie Mae (In conservatorship) First Quarter 2021 Form 10-Q 94
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

March 31, 2021 December 31, 2020

Maximum 

Exposure

Guaranty 

Obligation

Maximum 

Recovery(1)

Maximum 

Exposure

Guaranty 

Obligation

Maximum 

Recovery(1)

(Dollars in millions)

Unconsolidated Fannie Mae MBS $ 4,232 $ 17 $ 4,047 $ 4,424 $ 18 $ 4,226 

Other guaranty arrangements(2) 11,392 103 2,295 11,828 109 2,438 

Total $ 15,624 $ 120 $ 6,342 $ 16,252 $ 127 $ 6,664 

(1) Recoverability of such credit enhancements and recourse is subject to, among other factors, the ability of our mortgage insurers and the 

U.S. government, as a financial guarantor, to meet their obligations to us. For information on our mortgage insurers, “Note 10, 

Concentrations of Credit Risk.”

(2) Primarily consists of credit enhancements and long-term standby commitments.

7. Short-Term and Long-Term Debt

In January 2021, we began applying fair value hedge accounting to certain debt issuances. The objective of our fair 

value hedges is to reduce GAAP earnings volatility related to changes in benchmark interest rates. See “Note 1, 

Summary of Significant Accounting Policies” and “Note 8, Derivative Instruments” for additional information on our fair 

value hedge accounting policy and related disclosures.

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

March 31, 2021 December 31, 2020

Outstanding

WeightedAverage 

Interest Rate(1) Outstanding

WeightedAverage 

Interest Rate(1)

(Dollars in millions)

Short-term debt of Fannie Mae $ 2,857 0.06 % $ 12,173 0.18 %

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

Notes to Condensed Consolidated Financial Statements | Financial Guarantees

Fannie Mae (In conservatorship) First Quarter 2021 Form 10-Q 95
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

March 31, 2021 December 31, 2020

Maturities Outstanding(1)

WeightedAverage 

Interest 

Rate(2) Maturities Outstanding

WeightedAverage 

Interest 

Rate(2)

(Dollars in millions)

Senior fixed: 

Benchmark notes and bonds 2021 - 2030 $ 102,683 2.09 % 2021 - 2030 $ 106,691 2.03 %

Medium-term notes(3) 2021 - 2031 47,693 0.61 2021 - 2030 48,524 0.63 

Other(4) 2021 - 2038 7,195 3.77 2021 - 2038 6,701 3.90 

Total senior fixed 157,571 1.72 161,916 1.69 

Senior floating:

Medium-term notes(3) 2021 - 2022 98,095 0.28 2021 - 2022 100,089 0.35 

Connecticut Avenue Securities(5) 2023 - 2031 14,537 4.13 2023 - 2031 14,978 4.16 

Other(6) 2037 382 7.69 2037 416 7.75 

Total senior floating 113,014 0.79 115,483 0.86 

Total long-term debt of Fannie Mae(7) 270,585 1.34 277,399 1.34 

Debt of consolidated trusts 2021 - 2060 3,740,538 1.72 2021 - 2060 3,646,164 1.88 

 Total long-term debt $ 4,011,123 1.70 % $ 3,923,563 1.85 %

(1) Outstanding debt balance consists of the unpaid principal balance, premiums and discounts, fair value adjustments, hedge-related basis 

adjustments, and other cost basis adjustments.

(2) Excludes the effects of fair value adjustments and hedge-related basis adjustments.

(3) Includes long-term debt with an original contractual maturity of greater than 1 year and up to 10 years, excluding zero-coupon debt.

(4) Includes other long-term debt with an original contractual maturity of greater than 10 years and foreign exchange bonds. 

(5) 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 2020 Form 10-K for more information about our CAS structures issued beginning November 

2018.

(6) Consists of structured debt instruments that are reported at fair value.

(7) Includes unamortized discounts and premiums, fair value adjustments, hedge-related cost basis adjustments, and other cost basis 

adjustments in a net discount position of $1.6 billion and $392 million as of March 31, 2021 and December 31, 2020, respectively.

Notes to Condensed Consolidated Financial Statements | Short-Term and Long-Term Debt

Fannie Mae (In conservatorship) First Quarter 2021 Form 10-Q 96
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 2020 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 mortgagerelated 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.

Fair Value Hedge Accounting

As discussed in “Note 1, Summary of Significant Accounting Policies,” we implemented a fair value hedge accounting 

program in January 2021. Pursuant to this program, we may designate certain interest-rate swaps as hedging 

instruments in hedges of the change in fair value attributable to the designated benchmark interest rate for certain 

closed pools of fixed-rate, single-family mortgage loans or our funding debt. For hedged items in qualifying fair value 

hedging relationships, changes in fair value attributable to the designated risk are recognized as a basis adjustment to 

the hedged item. We also report changes in the fair value of the derivative hedging instrument in the same condensed 

consolidated statements of operations and comprehensive income line item used to recognize the earnings effect of the 

hedged item’s basis adjustment. The objective of our fair value hedges is to reduce GAAP earnings volatility related to 

changes in benchmark interest rates.

Notes to Condensed Consolidated Financial Statements | Derivative Instruments

Fannie Mae (In conservatorship) First Quarter 2021 Form 10-Q 97
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, including derivative instruments designated as hedges.

As of March 31, 2021 As of December 31, 2020

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 

designated as fair value hedges:

Swaps:

Pay-fixed $ 2,804 $ — $ 75 $ (7) $ — $ — $ — $ — 

Receive-fixed 39,754 2 — — — — — — 

Accrued interest receivable — 1 — — — — — — 

Total risk management derivatives 

designated as hedges 42,558 3 75 (7) — — — — 

Risk management derivatives not 

designated as fair value hedges:

Swaps:

Pay-fixed 68,674 — 9,636 (482) 88,361 — 11,461 (595) 

Receive-fixed 45,635 167 46,039 (1,035) 92,315 233 33,919 (123) 

Basis 250 146 — — 250 192 — — 

Foreign currency 238 43 241 (52) 237 57 239 (58) 

Swaptions:

Pay-fixed 5,690 124 375 (16) 5,530 37 2,025 (118) 

Receive-fixed 1,455 96 1,110 (42) 3,355 346 700 (16) 

Futures(1) 1,602 — — — 64,398 — — — 

Total gross risk management 

derivatives 123,544 576 57,401 (1,627) 254,446 865 48,344 (910) 

Accrued interest receivable (payable) — 91 — (86) — 97 — (105) 

Total risk management derivatives 

not designated as hedges 123,544 667 57,401 (1,713) 254,446 962 48,344 (1,015) 

Netting adjustment(2) — (655) — 1,632 — (905) — 995 

Total risk management derivatives 

portfolio 166,102 15 57,476 (88) 254,446 57 48,344 (20) 

Mortgage commitment derivatives:

Mortgage commitments to 

purchase whole loans 9,456 5 22,709 (237) 35,292 145 51 — 

Forward contracts to purchase 

mortgage-related securities 26,155 57 145,335 (1,689) 144,215 844 607 — 

Forward contracts to sell 

mortgage-related securities 220,063 2,534 31,765 (46) 199 — 227,828 (1,426) 

Total mortgage commitment 

derivatives 255,674 2,596 199,809 (1,972) 179,706 989 228,486 (1,426) 

Credit enhancement derivatives 14,079 61 10,410 (46) 16,829 179 11,368 (49) 

Derivatives at fair value $ 435,855 $ 2,672 $ 267,695 $ (2,106) $ 450,981 $ 1,225 $ 288,198 $ (1,495) 

(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 $1.0 billion and 

$658 million as of March 31, 2021 and December 31, 2020, respectively. Cash collateral received was $35 million and $568 million as of 

March 31, 2021 and December 31, 2020, respectively.

Notes to Condensed Consolidated Financial Statements | Derivative Instruments

Fannie Mae (In conservatorship) First Quarter 2021 Form 10-Q 98
We record all gains and losses, including accrued interest, on derivatives while they are not in a qualifying designated 

hedging relationship in “Fair value gains (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 March 31,

2021 2020

(Dollars in millions)

Risk management derivatives:

Swaps:

Pay-fixed $ 2,207 $ (4,029) 

Receive-fixed (1,855) 3,343 

Basis (46) 56 

Foreign currency (8) (38) 

Swaptions:

Pay-fixed 107 (148) 

Receive-fixed (239) 632 

Futures 1 (71) 

Net contractual interest expense on interest-rate swaps (11) (106) 

Total risk management derivatives fair value gains (losses), net 156 (361) 

Mortgage commitment derivatives fair value gains (losses), net 1,082 (993) 

Credit enhancement derivatives fair value losses, net (90) (11) 

Total derivatives fair value gains (losses), net $ 1,148 $ (1,365) 

Effect of Fair Value Hedge Accounting 

The following table displays the effect of fair value hedge accounting on our condensed consolidated statements of 

operations and comprehensive income, including gains and losses recognized on fair value hedging relationships.

For the Three Months Ended March 31, 2021

Interest Income: 

Mortgage Loans

Interest Expense: 

Long-Term Debt

(Dollars in millions)

Total amounts presented in our condensed consolidated statements of 

operations and comprehensive income $ 23,353 $ (16,817) 

Gains (losses) from fair value hedging relationships: 

Mortgage loans HFI and related interest-rate contracts:

Hedged items (36) — 

Derivatives designated as hedging instruments 36 — 

Debt of Fannie Mae and related interest-rate contracts:

Hedged items — 1,195 

Discontinued hedge-related basis adjustment amortization — (13) 

Derivatives designated as hedging instruments — (1,214) 

Interest accruals on derivative hedging instruments — 54 

Total effect of fair value hedges $ — $ 22 

Notes to Condensed Consolidated Financial Statements | Derivative Instruments

Fannie Mae (In conservatorship) First Quarter 2021 Form 10-Q 99
Hedged Items in Fair Value Hedging Relationships

The following table displays the carrying amounts of the hedged items that have been in qualifying fair value hedges 

recorded in our condensed consolidated balance sheets, including the hedged item's cumulative basis adjustments and 

the closed portfolio balances under the last-of-layer method. The hedged item carrying amounts and total basis 

adjustments include both open and discontinued hedges. The amortized cost and designated UPB consists of open 

hedges only.

As of March 31, 2021

Carrying 

Amount Assets 

(Liabilities)

Cumulative Amount of Fair Value 

Hedging Basis Adjustments 

Included in the Carrying Amount

Closed Portfolio of Mortgage Loans 

Under Last-of-Layer Method

Total Basis 

Adjustments(1)

Remaining 

Adjustments - 

Discontinued 

Hedge

Total Amortized 

Cost Designated UPB

(Dollars in millions)

Mortgage loans HFI $ 83,521 $ (36) $ (36) $ 55,819 $ 2,879 

Debt of Fannie Mae (55,345) 1,182 1,182 — — 

(1) Based on the unamortized balance of the hedge-related cost basis.

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 March 31, 2021

and December 31, 2020. 

9. Segment Reporting

We have two reportable business segments, which are based on the type of business activities each perform: SingleFamily and Multifamily. Results of our two business segments are intended to reflect each segment as if it were a standalone business. The sum of the results for our two business segments equals our condensed consolidated results of 

operations. For additional information related to our business segments, including basis of organization and other 

segment activities, see “Note 10, Segment Reporting” in our 2020 Form 10-K.

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, including the impact of 

hedge accounting, are allocated to our Single-Family business segment.

Notes to Condensed Consolidated Financial Statements | Derivative Instruments

Fannie Mae (In conservatorship) First Quarter 2021 Form 10-Q 100
The following table displays our segment results.

For the Three Months Ended March 31,

2021 2020

SingleFamily Multifamily TotalSingleFamily Multifamily Total

(Dollars in millions)

Net interest income(1) $ 5,894 $ 848 $ 6,742 $ 4,541 $ 806 $ 5,347 

Fee and other income(2) 62 25 87 94 26 120 

Net revenues 5,956 873 6,829 4,635 832 5,467 

Investment gains (losses), net(3) 64 (19) 45 (152) (6) (158) 

Fair value gains (losses), net(4) 740 44 784 (460) 184 (276) 

Administrative expenses (623) (125) (748) (629) (120) (749) 

Credit-related income (expense):(5)

Benefit (provision) for credit losses 662 103 765 (2,172) (411) (2,583) 

Foreclosed property income (expense) 17 (12) 5 (78) (2) (80) 

Total credit-related income (expense) 679 91 770 (2,250) (413) (2,663) 

TCCA fees(6) (731) — (731) (637) — (637) 

Credit enhancement expense(7) (226) (58) (284) (316) (60) (376) 

Change in expected credit enhancement 

recoveries(8) (16) (15) (31) 58 130 188 

Other expenses, net (287) (32) (319) (163) (55) (218) 

Income before federal income taxes 5,556 759 6,315 86 492 578 

Provision for federal income taxes (1,162) (160) (1,322) (18) (99) (117) 

Net income $ 4,394 $ 599 $ 4,993 $ 68 $ 393 $ 461 

(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. Also includes 

yield maintenance fees we recognized on the prepayment of multifamily loans. 

(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. 

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

mortgage insurance (“EPMI”) programs. Multifamily credit enhancement expense primarily consists of costs associated with our Multifamily 

CIRTTM (“MCIRTTM”) and Multifamily Connecticut Avenue SecuritiesTM (“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” in our 2020 Form 10-K for more information on our change in presentation.

Notes to Condensed Consolidated Financial Statements | Segment Reporting

Fannie Mae (In conservatorship) First Quarter 2021 Form 10-Q 101
10. Concentrations of Credit Risk

Risk Characteristics of our Guaranty Book of Business

One of the measures by which we gauge our credit 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 other economic 

data, 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 

single-family conventional guaranty book of business.

As of

March 31, 2021 December 31, 2020

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 0.62 % 0.24 % 2.72 % 0.88 % 0.33 % 3.10 %

Percentage of single-family conventional 

loans based on loan count 0.71 0.26 2.58 1.02 0.36 2.87 

As of

March 31, 2021 December 31, 2020

Percentage of 

Single-Family

Conventional

Guaranty Book of 

Business

Based on UPB

Serious 

Delinquency 

Rate(1)

Percentage of 

Single-Family

Conventional

Guaranty Book of 

Business

Based on UPB

Serious 

Delinquency 

Rate(1)

Estimated mark-to-market LTV ratio:

Greater than 100% * 21.81 % * 22.43 %

Geographical distribution:

California 19 % 2.31 19 % 2.62 

Florida 6 3.60 6 4.17 

Illinois 3 3.02 3 3.10 

New Jersey 4 4.04 3 4.57 

New York 5 4.34 5 4.79 

All other states 63 2.34 64 2.59 

Product distribution:

Alt-A 1 8.85 1 9.32 

Vintages:

2004 and prior 2 5.66 2 5.88 

2005-2008 2 9.65 2 9.98 

2009-2021 96 2.13 96 2.39 

* 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) First Quarter 2021 Form 10-Q 102
(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 

March 31, 2021 or December 31, 2020. 

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 loans with other higher risk characteristics to 

determine 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

March 31, 2021(1) December 31, 2020(1)

30 Days 

Delinquent

Seriously 

Delinquent(2)

30 Days 

Delinquent

Seriously 

Delinquent(2)

Percentage of multifamily guaranty book of business 0.37 % 0.66 % 0.29 % 0.98 %

As of

March 31, 2021 December 31, 2020

Percentage of 

Multifamily 

Guaranty Book 

of Business(1)

Serious 

Delinquency 

Rate(2)(3)

Percentage of 

Multifamily 

Guaranty Book 

of Business(1)

Serious 

Delinquency 

Rate(2)(3)

Original LTV ratio:

Greater than 80% 1 % 0.86 % 1 % 1.04 %

Less than or equal to 80% 99 0.66 99 0.98 

Current DSCR below 1.0(4) 2 18.51 2 21.19 

(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 information we have received from borrowers to date may not reflect the most recent 

impacts 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 

risk-in-force mortgage insurance coverage as a percentage of the single-family conventional guaranty book of business.

As of

March 31, 2021 December 31, 2020

Risk in Force

Percentage of 

Single-Family 

Conventional 

Guaranty Book 

of Business Risk in Force

Percentage of 

Single-Family 

Conventional 

Guaranty Book 

of Business

(Dollars in millions)

Mortgage insurance risk in force:

Primary mortgage insurance $ 169,582 $ 170,890 

Pool mortgage insurance 285 291 

Total mortgage insurance risk in force $ 169,867 5% $ 171,181 5%

Notes to Condensed Consolidated Financial Statements | Concentrations of Credit Risk

Fannie Mae (In conservatorship) First Quarter 2021 Form 10-Q 103
Mortgage insurance does not protect us from all losses on covered loans. For example, mortgage insurance does not 

cover property damage that is not covered by the hazard insurance we require, and such damage may result in a 

reduction to, or a denial of, mortgage insurance benefits. 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 loss 

event not covered by hazard insurance.

The table below displays our mortgage insurer counterparties that provided approximately 10% or more of the risk-inforce 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

March 31, 2021 December 31, 2020

Counterparty:(1)

Arch Capital Group Ltd. 20 % 21 %

Mortgage Guaranty Insurance Corp. 18 18 

Radian Guaranty, Inc. 18 19 

Genworth Mortgage Insurance Corp. 17 16 

Essent Guaranty, Inc. 16 16 

Others 11 10 

Total 100 % 100 %

(1) Insurance coverage amounts provided for each counterparty may include coverage provided by affiliates and subsidiaries of the 

counterparty.

Three of our mortgage insurer counterparties that are currently not approved to write new business—PMI Mortgage 

Insurance Co. (“PMI”), Triad Guaranty Insurance Corporation (“Triad”) and Republic Mortgage Insurance Company 

(“RMIC”)—are currently in run-off. A mortgage insurer that is in run-off continues to collect renewal premiums and 

process claims on its existing insurance business, but no longer writes new insurance, which increases the risk that the 

mortgage insurer will fail to pay claims fully. Entering run-off may limit sources of profits and liquidity for the mortgage 

insurer and could also cause the quality and speed of its claims processing to deteriorate. These three mortgage 

insurers provided a combined $2.2 billion, or 1%, of the risk-in-force mortgage insurance coverage of our single-family 

conventional guaranty book of business as of March 31, 2021. 

PMI and Triad have been paying only a portion of policyholder claims and deferring the remaining portion. PMI is 

currently paying 77.5% of claims under its mortgage insurance policies in cash and is deferring the remaining 22.5%, 

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 their deferred policyholder claims or increase or decrease the amount of cash 

they pay on claims. RMIC is no longer deferring payments on policyholder claims, but remains in run-off. 

We have counterparty credit risk relating to the potential insolvency of, or non-performance by, monoline 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 March 31, 2021 and December 31, 2020, our estimated benefit from mortgage insurance, which 

is based on estimated credit losses as of period end, reduced our loss reserves by $1.2 billion and $1.4 billion, 

respectively. 

Notes to Condensed Consolidated Financial Statements | Concentrations of Credit Risk

Fannie Mae (In conservatorship) First Quarter 2021 Form 10-Q 104
As of March 31, 2021 and December 31, 2020, we had outstanding receivables of $542 million and $560 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 March 31, 2021 and December 31, 2020, we 

assessed these outstanding receivables for collectability, and established a valuation allowance of $480 million and 

$497 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, 

including loss mitigation, 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 nondepository single-family mortgage servicers (i.e., servicers that are not insured depository institutions), and identifies 

one depository 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

March 31, 2021 December 31, 2020

Wells Fargo Bank, N.A. (together with its affiliates) 12 % 13 %

Remaining top five depository servicers 10 11 

Top five non-depository servicers 23 24 

Total 45 % 48 %

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

March 31, 2021 December 31, 2020

Walker & Dunlop, Inc. 13 % 12 %

Wells Fargo Bank, N.A. (together with its affiliates) 11 12 

Remaining top five servicers 24 24 

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 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;

Notes to Condensed Consolidated Financial Statements | Concentrations of Credit Risk

Fannie Mae (In conservatorship) First Quarter 2021 Form 10-Q 105
• 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.

Derivatives Counterparties. For information on credit risk associated with our derivative transactions and repurchase 

agreements see “Note 8, Derivative Instruments” and “Note 11, Netting Arrangements.”

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 March 31, 2021

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 $ 670 $ (661) $ 9 $ — $ — $ 9 

Cleared risk management derivatives — 6 6 — — 6 

Mortgage commitment derivatives 2,596 — 2,596 (801) (85) 1,710 

Total derivative assets 3,266 (655) 2,611 (4) (801) (85) 1,725 

Securities purchased under agreements to 

resell or similar arrangements(5) 66,437 — 66,437 — (66,437) — 

Total assets $ 69,703 $ (655) $ 69,048 $ (801) $ (66,522) $ 1,725 

Liabilities:

OTC risk management derivatives $ (1,720) $ 1,646 $ (74) $ — $ — $ (74) 

Cleared risk management derivatives — (14) (14) — 14 — 

Mortgage commitment derivatives (1,972) — (1,972) 801 159 (1,012) 

Total derivative liabilities (3,692) 1,632 (2,060) (4) 801 173 (1,086) 

Total liabilities $ (3,692) $ 1,632 $ (2,060) $ 801 $ 173 $ (1,086) 

Notes to Condensed Consolidated Financial Statements | Concentrations of Credit Risk

Fannie Mae (In conservatorship) First Quarter 2021 Form 10-Q 106
As of December 31, 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 $ 962 $ (952) $ 10 $ — $ — $ 10 

Cleared risk management derivatives — 47 47 — — 47 

Mortgage commitment derivatives 989 — 989 (406) (53) 530 

Total derivative assets 1,951 (905) 1,046 (4) (406) (53) 587 

Securities purchased under agreements to 

resell or similar arrangements(5) 46,644 — 46,644 — (46,644) — 

Total assets $ 48,595 $ (905) $ 47,690 $ (406) $ (46,697) $ 587 

Liabilities:

OTC risk management derivatives $ (1,015) $ 999 $ (16) $ — $ — $ (16) 

Cleared risk management derivatives — (4) (4) — 2 (2) 

Mortgage commitment derivatives (1,426) — (1,426) 406 1,017 (3) 

Total derivative liabilities (2,441) 995 (1,446) (4) 406 1,019 (21) 

Total liabilities $ (2,441) $ 995 $ (1,446) $ 406 $ 1,019 $ (21) 

(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 $4.7 billion as of March 31, 2021 and December 31, 2020. The fair value of non-cash collateral received was $66.5 billion

and $46.6 billion, of which $65.4 billion and $46.6 billion could be sold or repledged as of March 31, 2021 and December 31, 2020, 

respectively. None of the underlying collateral was sold or repledged as of March 31, 2021 or December 31, 2020. 

(4) Excludes derivative assets of $61 million and $179 million as of March 31, 2021 and December 31, 2020, respectively, and derivative 

liabilities of $46 million and $49 million recognized in our condensed consolidated balance sheets as of March 31, 2021 and December 31, 

2020, respectively, that are not subject to enforceable master netting arrangements.

(5) Includes $6.1 billion and $18.4 billion in securities purchased under agreements to resell classified as “Cash and cash equivalents” in our 

condensed consolidated balance sheets as of March 31, 2021 and December 31, 2020, respectively. Includes $5.4 billion in securities 

purchased under agreements to resell classified as “Restricted cash and cash equivalents” in our condensed consolidated balance sheets 

as of March 31, 2021. There were no securities purchased under agreements to resell classified as “Restricted cash and cash equivalents” 

as of December 31, 2020.

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 2020 Form 10-K.

Notes to Condensed Consolidated Financial Statements | Netting Arrangements

Fannie Mae (In conservatorship) First Quarter 2021 Form 10-Q 107
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 | Fair Value

Fannie Mae (In conservatorship) First Quarter 2021 Form 10-Q 108
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 March 31, 2021

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) $ 4,050 $ — $ — $ — $ 4,050 

Trading securities:

Mortgage-related securities:

Fannie Mae — 1,876 109 — 1,985 

Other agency — 3,440 — — 3,440 

Private-label and other mortgage securities — 157 — — 157 

Non-mortgage-related securities:

U.S. Treasury securities 105,601 — — — 105,601 

Other securities — 73 — — 73 

Total trading securities 105,601 5,546 109 — 111,256 

Available-for-sale securities:

Mortgage-related securities:

Fannie Mae — 847 189 — 1,036 

Other agency — 34 — — 34 

Alt-A and subprime private-label securities — 4 1 — 5 

Mortgage revenue bonds — — 191 — 191 

Other — 6 230 — 236 

Total available-for-sale securities — 891 611 — 1,502 

Mortgage loans — 5,228 820 — 6,048 

Other assets:

Risk management derivatives:

Swaps — 299 151 — 450 

Swaptions — 220 — — 220 

Netting adjustment — — — (655) (655) 

Mortgage commitment derivatives — 2,596 — — 2,596 

Credit enhancement derivatives — — 61 — 61 

Total other assets — 3,115 212 (655) 2,672 

Total assets at fair value $ 109,651 $ 14,780 $ 1,752 $ (655) $ 125,528 

Liabilities:

Long-term debt:

Of Fannie Mae:

Senior floating $ — $ 2,954 $ 382 $ — $ 3,336 

Total of Fannie Mae — 2,954 382 — 3,336 

Of consolidated trusts — 23,543 58 — 23,601 

Total long-term debt — 26,497 440 — 26,937 

Other liabilities:

Risk management derivatives:

Swaps — 1,662 — — 1,662 

Swaptions — 58 — — 58 

Netting adjustment — — — (1,632) (1,632) 

Mortgage commitment derivatives — 1,972 — — 1,972 

Credit enhancement derivatives — — 46 — 46 

Total other liabilities — 3,692 46 (1,632) 2,106 

Total liabilities at fair value $ — $ 30,189 $ 486 $ (1,632) $ 29,043 

Notes to Condensed Consolidated Financial Statements | Fair Value

Fannie Mae (In conservatorship) First Quarter 2021 Form 10-Q 109
Fair Value Measurements as of December 31, 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) $ 1,120 $ — $ — $ — $ 1,120 

Trading securities:

Mortgage-related securities:

Fannie Mae — 2,310 94 — 2,404 

Other agency — 3,450 1 — 3,451 

Private-label and other mortgage securities — 158 — — 158 

Non-mortgage-related securities:

U.S. Treasury securities 130,456 — — — 130,456 

Other securities — 73 — — 73 

Total trading securities 130,456 5,991 95 — 136,542 

Available-for-sale securities:

Mortgage-related securities:

Fannie Mae — 973 195 — 1,168 

Other agency — 65 — — 65 

Alt-A and subprime private-label securities — 4 2 — 6 

Mortgage revenue bonds — — 216 — 216 

Other — 7 235 — 242 

Total available-for-sale securities — 1,049 648 — 1,697 

Mortgage loans — 5,629 861 — 6,490 

Other assets:

Risk management derivatives:

Swaps — 376 203 — 579 

Swaptions — 383 — — 383 

Netting adjustment — — — (905) (905) 

Mortgage commitment derivatives — 989 — — 989 

Credit enhancement derivatives — — 179 — 179 

Total other assets — 1,748 382 (905) 1,225 

Total assets at fair value $ 131,576 $ 14,417 $ 1,986 $ (905) $ 147,074 

Liabilities:

Long-term debt:

Of Fannie Mae:

Senior floating $ — $ 3,312 $ 416 $ — $ 3,728 

Total of Fannie Mae — 3,312 416 — 3,728 

Of consolidated trusts — 24,503 83 — 24,586 

Total long-term debt — 27,815 499 — 28,314 

Other liabilities:

Risk management derivatives:

Swaps — 881 — — 881 

Swaptions — 134 — — 134 

Netting adjustment — — — (995) (995) 

Mortgage commitment derivatives — 1,426 — — 1,426 

Credit enhancement derivatives — — 49 — 49 

Total other liabilities — 2,441 49 (995) 1,495 

Total liabilities at fair value $ — $ 30,256 $ 548 $ (995) $ 29,809 

(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) First Quarter 2021 Form 10-Q 110
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 March 31, 2021

Total Gains (Losses)

(Realized/Unrealized) 

Net 

Unrealized 

Gains 

(Losses) 

Included in 

Net Income 

Related to 

Assets and 

Liabilities 

Still Held as 

of March 31, 

2021(4)(5)

Net 

Unrealized 

Gains 

(Losses) 

Included in 

OCI Related 

to Assets 

and 

Liabilities 

Still Held as 

of March 31, 

2021(1)

Balance, 

December 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, 

March 31, 

2021

(Dollars in millions)

Trading securities:

Mortgage-related:

Fannie Mae $ 94 $ (1) $ — $ — $ — $ — $ — $ (7) $ 23 $ 109 $ 2 $ — 

Other agency 1 — — — — — — (1) — — — — 

Private-label and 

other mortgage 

securities — — — — — — — — — — — — 

Total trading securities $ 95 $ (1) (5)(6) $ — $ — $ — $ — $ — $ (8) $ 23 $ 109 $ 2 $ — 

Available-for-sale 

securities:

Mortgage-related:

Fannie Mae $ 195 $ — $ (3) $ — $ — $ — $ (3) $ — $ — $ 189 $ — $ (2) 

Alt-A and subprime 

private-label 

securities 2 — (1) — — — — — — 1 — — 

Mortgage revenue 

bonds 216 — (1) — — — (24) — — 191 — — 

Other 235 3 3 — — — (11) — — 230 — 2 

Total available-for-sale 

securities $ 648 $ 3 

(6)(7)

$ (2) $ — $ — $ — $ (38) $ — $ — $ 611 $ — $ — 

Mortgage loans $ 861 $ 8 (5)(6) $ — $ — $ — $ — $ (47) $ (23) $ 21 $ 820 $ 9 $ — 

Net derivatives 333 (132) (5) — — — — (35) — — 166 (167) — 

Long-term debt:

Of Fannie Mae:

Senior floating $ (416) $ 34 (5) $ — $ — $ — $ — $ — $ — $ — $ (382) $ 34 $ — 

Of consolidated trusts (83) 1 

(5)(6)

 — — — — 4 20 — (58) — — 

Total long-term debt $ (499) $ 35 $ — $ — $ — $ — $ 4 $ 20 $ — $ (440) $ 34 $ — 

Notes to Condensed Consolidated Financial Statements | Fair Value

Fannie Mae (In conservatorship) First Quarter 2021 Form 10-Q 111
Fair Value Measurements Using Significant Unobservable Inputs (Level 3)

For the Three Months Ended March 31, 2020

Total Gains (Losses)

(Realized/Unrealized) 

Net 

Unrealized 

Gains 

(Losses) 

Included in 

Net Income 

Related to 

Assets and 

Liabilities 

Still Held as 

of March 31, 

2020(4)(5)

Net 

Unrealized 

Gains 

(Losses) 

Included in 

OCI Related 

to Assets 

and 

Liabilities 

Still Held as 

of March 31, 

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, 

March 31, 

2020

(Dollars in millions)

Trading securities:

Mortgage-related:

Fannie Mae $ 45 $ (9) $ — $ — $ — $ — $ — $ (11) $ 43 $ 68 $ (10) $ — 

Other agency 1 — — — — — — (1) — — — — 

Private-label and 

other mortgage 

securities — — — — — — — — 94 94 — — 

Total trading securities $ 46 $ (9) (5)(6) $ — $ — $ — $ — $ — $ (12) $ 137 $ 162 $ (10) $ — 

Available-for-sale 

securities:

Mortgage-related:

Fannie Mae $ 171 $ — $ 4 $ — $ — $ — $ (1) $ — $ 14 $ 188 $ — $ 3 

Mortgage revenue 

bonds 315 (3) 2 74 (74) — (18) — — 296 — 4 

Other 306 (11) (1) 268 (268) — (10) — — 284 — (1) 

Total available-for-sale 

securities $ 792 $ (14) 

(6)(7)

$ 5 $ 342 $ (342) $ — $ (29) $ — $ 14 $ 768 $ — $ 6 

Mortgage loans $ 688 $ (24) (5)(6) $ — $ — $ — $ — $ (29) $ (23) $ 26 $ 638 $ (26) $ — 

Net derivatives 162 41 (5) — — — — (4) 18 — 217 44 — 

Long-term debt:

Of Fannie Mae:

Senior floating $ (398) $ (34) (5) $ — $ — $ — $ — $ — $ — $ — $ (432) $ (34) $ — 

Of consolidated trusts (75) 4 (5)(6) — — — — 3 — (15) (83) 4 — 

Total long-term debt $ (473) $ (30) $ — $ — $ — $ — $ 3 $ — $ (15) $ (515) $ (30) $ — 

(1) Gains (losses) included in other comprehensive income (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 gains (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) First Quarter 2021 Form 10-Q 112
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 March 31, 2021

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) $ 109 Various

Available-for-sale securities:

Mortgage-related securities:

Agency(3) 93 Consensus

 96 Various

Total agency 189 

Alt-A and subprime private-label securities 1 Various

Mortgage revenue bonds 119 Single Vendor Spreads (bps) 32.5 - 188.5 78.4

 72 Various

Total mortgage revenue bonds 191 

Other 202 Discounted Cash Flow Spreads (bps) 405.0 - 406.0 405.5

 28 Various

Total other 230 

Total available-for-sale securities $ 611 

Net derivatives $ 151 Dealer Mark

 15 Discounted Cash Flow

Total net derivatives $ 166 

Notes to Condensed Consolidated Financial Statements | Fair Value

Fannie Mae (In conservatorship) First Quarter 2021 Form 10-Q 113
Fair Value Measurements as of December 31, 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) $ 95 Various

Available-for-sale securities:

Mortgage-related securities:

Agency(3) 97 Consensus

 98 Various

Total agency 195 

Alt-A and subprime private-label securities 2 Various

Mortgage revenue bonds 144 Single Vendor Spreads (bps) 32.0 - 315.3 93.4

 72 Various

Total mortgage revenue bonds 216 

Other 206 Discounted Cash Flow Spreads (bps) 425.0 - 443.0 434.2

 29 Various

Total other 235 

Total available-for-sale securities $ 648 

Net derivatives $ 203 Dealer Mark

 130 Discounted Cash Flow

Total net derivatives $ 333 

(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) First Quarter 2021 Form 10-Q 114
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 March 31, 2021 or December 31, 2020 that were measured at fair value on a nonrecurring 

basis. We held $672 million and $25 million in Level 2 assets as of March 31, 2021 and December 31, 2020, 

respectively, comprised of mortgage loans held for sale that were impaired. We had no Level 2 liabilities that were 

measured at fair value on a nonrecurring basis as of March 31, 2021 or December 31, 2020. 

The following table displays valuation techniques for our Level 3 assets measured at fair value on a nonrecurring basis. 

Fair Value Measurements 

as of

Valuation 

Techniques

March 31, 

2021

December 31, 

2020

(Dollars in millions)

Nonrecurring fair value measurements:

Mortgage loans held for sale, at lower of cost or fair value Consensus $ 212 $ 754 

Single Vendor 394 333 

Total mortgage loans held for sale, at lower of cost or fair value 606 1,087 

 Single-family mortgage loans held for investment, at amortized cost Internal Model 614 979 

 Multifamily mortgage loans held for investment, at amortized cost Appraisals 166 225 

Internal Model 122 125 

Various 75 40 

Total multifamily mortgage loans held for investment, at amortized cost 363 390 

Acquired property, net:

Single-family Accepted Offers 16 35 

Appraisals 63 89 

Internal Model 26 41 

Walk Forwards 56 85 

Various 10 11 

Total single-family 171 261 

Multifamily Various 5 25 

Total nonrecurring assets at fair value $ 1,759 $ 2,742 

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 2020 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 three months ended March 31, 2021.

Notes to Condensed Consolidated Financial Statements | Fair Value

Fannie Mae (In conservatorship) First Quarter 2021 Form 10-Q 115
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 March 31, 2021

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, 

including restricted cash and cash 

equivalents $ 114,341 $ 102,841 $ 11,500 $ — $ — $ 114,341 

Federal funds sold and securities 

purchased under agreements to 

resell or similar arrangements 54,937 — 54,937 — — 54,937 

Trading securities 111,256 105,601 5,546 109 — 111,256 

Available-for-sale securities 1,502 — 891 611 — 1,502 

Mortgage loans held for sale 7,824 — 3,511 5,122 — 8,633 

Mortgage loans held for investment, 

net of allowance for loan losses 3,732,056 — 3,549,337 245,916 — 3,795,253 

Advances to lenders 10,572 — 10,571 1 — 10,572 

Derivative assets at fair value 2,672 — 3,115 212 (655) 2,672 

Guaranty assets and buy-ups 109 — — 242 — 242 

Total financial assets $ 4,035,269 $ 208,442 $ 3,639,408 $ 252,213 $ (655) $ 4,099,408 

Financial liabilities:

Short-term debt:

Of Fannie Mae $ 2,857 $ — $ 2,857 $ — $ — $ 2,857 

Long-term debt:

Of Fannie Mae 270,585 — 279,208 828 — 280,036 

Of consolidated trusts 3,740,538 — 3,777,011 30,990 — 3,808,001 

Derivative liabilities at fair value 2,106 — 3,692 46 (1,632) 2,106 

Guaranty obligations 120 — — 75 — 75 

Total financial liabilities $ 4,016,206 $ — $ 4,062,768 $ 31,939 $ (1,632) $ 4,093,075 

Notes to Condensed Consolidated Financial Statements | Fair Value

Fannie Mae (In conservatorship) First Quarter 2021 Form 10-Q 116
As of December 31, 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 $ 115,623 $ 97,179 $ 18,444 $ — $ — $ 115,623 

Federal funds sold and securities 

purchased under agreements to 

resell or similar arrangements 28,200 — 28,200 — — 28,200 

Trading securities 136,542 130,456 5,991 95 — 136,542 

Available-for-sale securities 1,697 — 1,049 648 — 1,697 

Mortgage loans held for sale 5,197 — 116 5,502 — 5,618 

Mortgage loans held for investment, 

net of allowance for loan losses 3,648,695 — 3,512,672 255,556 — 3,768,228 

Advances to lenders 10,449 — 10,448 1 — 10,449 

Derivative assets at fair value 1,225 — 1,748 382 (905) 1,225 

Guaranty assets and buy-ups 115 — — 258 — 258 

Total financial assets $ 3,947,743 $ 227,635 $ 3,578,668 $ 262,442 $ (905) $ 4,067,840 

Financial liabilities:

Short-term debt:

Of Fannie Mae $ 12,173 $ — $ 12,177 $ — $ — $ 12,177 

Long-term debt:

Of Fannie Mae 277,399 — 288,414 878 — 289,292 

Of consolidated trusts 3,646,164 — 3,756,673 31,584 — 3,788,257 

Derivative liabilities at fair value 1,495 — 2,441 49 (995) 1,495 

Guaranty obligations 127 — — 82 — 82 

Total financial liabilities $ 3,937,358 $ — $ 4,059,705 $ 32,593 $ (995) $ 4,091,303 

For a detailed description and classification of our financial instruments, see “Note 15, Fair Value” in our 2020 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) First Quarter 2021 Form 10-Q 117
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

March 31, 2021 December 31, 2020

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 $ 6,048 $ 3,336 $ 23,601 $ 6,490 $ 3,728 $ 24,586 

Unpaid principal balance 5,618 3,158 20,828 6,046 3,518 21,408 

(1) Includes nonaccrual loans with a fair value of $144 million and $139 million as of March 31, 2021 and December 31, 2020, respectively. 

The difference between unpaid principal balance and the fair value of these nonaccrual loans as of March 31, 2021 and December 31, 

2020 was $9 million and $8 million, respectively. Includes loans that are 90 days or more past due with a fair value of $228 million and 

$257 million as of March 31, 2021 and December 31, 2020, respectively. The difference between unpaid principal balance and the fair 

value of these 90 or more days past due loans as of March 31, 2021 and December 31, 2020 was $10 million and $14 million, respectively.

Changes in Fair Value under the Fair Value Option Election

We recorded gains of $25 million and $151 million for the three months ended March 31, 2021 and March 31, 2020, 

respectively, from changes in the fair value of loans recorded at fair value in “Fair value gains (losses), net” in our 

condensed consolidated statements of operations and comprehensive income.

We recorded gains of $373 million and $262 million for the three months ended March 31, 2021 and March 31, 2020, 

respectively, from changes in the fair value of long-term debt recorded at fair value in “Fair value gains (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) First Quarter 2021 Form 10-Q 118
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. 

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) First Quarter 2021 Form 10-Q 119
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 InterestRate Risk Management.”

Item 4. Controls and Procedures

Overview

We are required under applicable laws and regulations to maintain controls and procedures, which include disclosure 

controls and procedures as well as internal control over financial reporting, as further described below.

Evaluation of Disclosure Controls and Procedures

Disclosure Controls and Procedures

Disclosure controls and procedures refer to controls and other procedures designed to provide reasonable assurance 

that information required to be disclosed in the reports we file or submit under the Exchange Act is recorded, processed, 

summarized and reported within the time periods specified in the rules and forms of the SEC. Disclosure controls and 

procedures include, without limitation, controls and procedures designed to provide reasonable assurance that 

information required to be disclosed by us in the reports that we file or submit under the Exchange Act is accumulated 

and communicated to management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to 

allow timely decisions regarding our required disclosure. In designing and evaluating our disclosure controls and 

procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can 

provide only reasonable assurance of achieving the desired control objectives, and management was required to apply 

its judgment in evaluating and implementing possible controls and procedures.

Evaluation of Disclosure Controls and Procedures

As required by Rule 13a-15 under the Exchange Act, management has evaluated, with the participation of our Chief 

Executive Officer and Chief Financial Officer, the effectiveness of our disclosure controls and procedures in effect as of 

March 31, 2021, 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 March 31, 2021 or as of the date of filing this report. 

Our disclosure controls and procedures were not effective as of March 31, 2021 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 March 31, 2021 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 March 31, 2021 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 

Quantitative and Qualitative Disclosures about Market Risk

Fannie Mae First Quarter 2021 Form 10-Q 120
disclosure policies and procedures that would account for the conservatorship and accomplish the same 

objectives as a disclosure controls and procedures policy of a typical reporting company, there are inherent 

structural limitations on our ability to design, implement, test or operate effective disclosure controls and 

procedures. As both our regulator and our conservator under the GSE Act, FHFA is limited in its ability to design 

and implement a complete set of disclosure controls and procedures relating to Fannie Mae, particularly with 

respect to current reporting pursuant to Form 8-K. Similarly, as a regulated entity, we are limited in our ability to 

design, implement, operate and test the controls and procedures for which FHFA is responsible.

Due to these circumstances, we have not been able to update our disclosure controls and procedures in a manner that 

adequately ensures the accumulation and communication to management of information known to FHFA that is needed 

to meet our disclosure obligations under the federal securities laws, including disclosures affecting our condensed 

consolidated financial statements. As a result, we did not maintain effective controls and procedures designed to ensure 

complete and accurate disclosure as required by GAAP as of March 31, 2021 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 March 31, 2021 (“First Quarter 2021 Form 10-Q”), and engaged in 

discussions regarding issues associated with the information contained in those filings. Prior to filing our First 

Quarter 2021 Form 10-Q, FHFA provided Fannie Mae management with written acknowledgment that it had 

reviewed the First Quarter 2021 Form 10-Q, and it was not aware of any material misstatements or omissions 

in the First Quarter 2021 Form 10-Q and had no objection to our filing the First Quarter 2021 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. Below we describe 

changes in our internal control over financial reporting from January 1, 2021 through March 31, 2021 that management 

believes have materially affected, or are reasonably likely to materially affect, our internal control over financial 

reporting: 

• Overview. 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.

• Implementation of hedge accounting. In January 2021, we implemented a hedge accounting program, which 

resulted in significant changes to our accounting processes and control environment. The implementation 

Controls and Procedures

Fannie Mae First Quarter 2021 Form 10-Q 121
included the development of a new model and significant modifications to existing applications, including our 

existing accounting systems for loans, debt and derivatives. The hedge accounting program was utilized during 

the first quarter of 2021, and the new processes and controls implemented as part of this program were used to 

prepare our condensed consolidated financial statements for the first quarter of 2021 included in this report. We 

will continue to monitor and test these new and modified controls for adequate design and operating 

effectiveness.

Controls and Procedures

Fannie Mae First Quarter 2021 Form 10-Q 122
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 2020 Form 10-K. 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. 

Amendments to our senior preferred stock purchase agreement made pursuant to the January 2021 letter agreement 

provide that we may take certain actions without Treasury’s prior written consent only when all currently pending 

significant litigation relating to the conservatorship and to the August 2012 amendments to the agreement has been 

resolved. For more information, see “Business—Conservatorship, Treasury Agreements and Housing Finance Reform—

Treasury Agreements” in our 2020 Form 10-K. The cases that remain pending after December 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. All three 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 dividend 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 heard oral argument on December 9, 2020, and we 

expect a decision in that case within the next few months. 

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. On September 8, 2020, the court denied plaintiffs’ motion for 

Other Information

Fannie Mae First Quarter 2021 Form 10-Q 123
summary judgment and granted defendants’ motion to dismiss. The plaintiffs filed a notice of appeal with the U.S. Court 

for the Sixth Circuit on October 27, 2020.

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 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 pursuing the claim both derivatively and directly against the United States. 

Plaintiffs in Rafter also allege direct and derivative breach of contract claims against the government. The Perry Capital 

and Fairholme Funds plaintiffs allege similar breach of contract claims, as well as direct and derivative breach of 

fiduciary duty claims against the government. Plaintiffs in Fisher request just compensation to Fannie Mae in an 

unspecified amount. Plaintiffs in Rafter, Perry Capital and Fairholme Funds seek just compensation for themselves on 

their direct claims and payment of damages to Fannie Mae on their derivative claims. The United States filed a motion 

to dismiss the Fisher, Rafter and Fairholme Funds cases 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, on August 21, 2020, the Federal Circuit denied 

the Fisher plaintiffs’ request for interlocutory appeal.

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 2020 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 2020 Form 

10-K and in this report for more detailed descriptions of the primary risks to our business and how we seek to manage 

those risks.

The risks we face could materially adversely affect our business, results of operations, financial condition, liquidity and 

net worth, and could cause our actual results to differ materially from our past results or the results contemplated by any 

forward-looking statements we make. We believe the risks described in the sections of this report and our 2020 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.

Operational Risk

A breach of the security of our systems or facilities, or those of third parties with which we do business, 

including as a result of cyber attacks, could damage or disrupt our business or result in the disclosure or 

misuse of confidential information, which could damage our reputation, result in regulatory sanctions and/or 

increase our costs and cause losses.

Our operations rely on the secure receipt, processing, storage and transmission of confidential and other information in 

our computer systems and networks and with our business partners, including proprietary, confidential or personal 

information that is subject to privacy laws, regulations or contractual obligations. Information security risks for large 

institutions like us have significantly increased in recent years in part because of the proliferation of new technologies 

and the use of the Internet and telecommunications technologies to conduct or automate financial transactions. A 

number of financial services companies, consumer-based companies and other organizations have reported the 

unauthorized disclosure of client, customer or other confidential information, as well as cyber attacks involving the 

dissemination, theft and destruction of corporate information, intellectual property, cash or other valuable assets. There 

Other Information

Fannie Mae First Quarter 2021 Form 10-Q 124
have also been several highly publicized cases where hackers have requested “ransom” payments in exchange for not 

disclosing stolen customer information or for not disabling the target company’s computer or other systems.

We have been, and likely will continue to be, the target of cyber attacks, computer viruses, malicious code, phishing 

attacks, denial of service attacks and other information security threats. To date, cyber attacks have not had a material 

impact on our financial condition, results or business. However, we could suffer material financial or other losses in the 

future as a result of cyber attacks, and these attacks and their impacts are hard to predict. Our risk and exposure to 

these matters remains heightened because of, among other things:

• the evolving nature of these threats; 

• the current global economic and political environment; 

• our prominent size and scale and our role in the financial services industry; 

• the outsourcing of some of our business operations; 

• the ongoing shortage of qualified cybersecurity professionals; 

• our migration to cloud-based systems; 

• our increased use of employee-owned devices for business communication;

• the large number of our employees working remotely; and 

• the interconnectivity and interdependence of third parties to our systems. 

Despite our efforts to ensure the integrity of our software, computers, systems and information, we may not be able to 

anticipate, detect or recognize threats to our systems and assets, or to implement effective preventive measures against 

all cyber threats, especially because the techniques used are increasingly sophisticated, change frequently, are 

complex, and are often not recognized until launched. In addition, although we have not experienced any material 

impacts from the SolarWinds Orion cyber breach in late 2020, which reportedly affected roughly 18,000 organizations, 

or the Microsoft Exchange cyber attack in early 2021, which reportedly affected over 30,000 organizations, these two 

recent large-scale cyber attacks suggest that the risk of damaging cyberattacks impacting us and/or third-parties with 

whom we do business is increasing. We believe these incidents are likely to continue, and we are unable to predict the 

direct or indirect impact of future attacks or breaches on business operations. We routinely identify cyber threats as well 

as vulnerabilities in our systems and work to address them, but these efforts may be insufficient. Further, these efforts 

involve costs that can be significant as cyber attack methods continue to rapidly evolve. Cyber attacks can originate 

from a variety of sources, including external parties who are affiliated with foreign governments or are involved with 

organized crime or terrorist organizations. Third parties may also attempt to induce employees, customers or other 

users of our systems to disclose sensitive information or provide access to our systems or network, or to our data or that 

of our counterparties or borrowers, and these types of risks may be difficult to detect or prevent.

The occurrence of a cyber attack, breach, unauthorized access, misuse, computer virus or other malicious code or other 

cybersecurity event could jeopardize or result in the unauthorized disclosure, gathering, monitoring, misuse, corruption, 

loss or destruction of confidential and other information that belongs to us, our customers, our counterparties, third-party 

service providers or borrowers that is processed and stored in, and transmitted through, our computer systems and 

networks. The occurrence of such an event could also result in damage to our software, computers or systems, or 

otherwise cause interruptions or malfunctions in our, our customers’, our counterparties’ or third parties’ operations. This 

could result in significant financial losses, loss of customers and business opportunities, reputational damage, litigation, 

regulatory fines, penalties or intervention, reimbursement or other compensatory costs, or otherwise adversely affect 

our business, financial condition or results of operations. 

Cyber attacks can occur and persist for an extended period of time without detection. Investigations of cyber attacks are 

inherently unpredictable, and it takes time to complete an investigation and have full and reliable information. While we 

are investigating a cyber attack, we do not necessarily know the extent of the harm or how best to remediate it, and we 

can repeat or compound certain errors or actions before we discover and remediate them. In addition, announcing that 

a cyber attack has occurred increases the risk of additional cyber attacks, and preparing for this elevated risk can delay 

the announcement of a cyber attack. All or any of these challenges could further increase the costs and consequences 

of a cyber attack. 

In addition, we may be required to expend significant additional resources to modify our protective measures and to 

investigate and remediate vulnerabilities or other exposures arising from operational and security risks. Although we 

maintain insurance coverage relating to cybersecurity risks, our insurance may not be sufficient to provide adequate 

loss coverage in all circumstances. 

Because we are interconnected with and dependent on third-party vendors, exchanges, clearing houses, fiscal and 

paying agents, and other financial intermediaries, including CSS, we could be materially adversely impacted if any of 

Other Information

Fannie Mae First Quarter 2021 Form 10-Q 125
them is subject to a successful cyber attack or other information security event. Third parties with which we do business 

may also be sources of cybersecurity or other technological risks. We outsource certain functions and these 

relationships allow for the external storage and processing of our information, as well as customer, counterparty and 

borrower information, including on cloud-based systems. We also share this type of information with regulatory agencies 

and their vendors. While we engage in actions to mitigate our exposure resulting from our information-sharing activities, 

ongoing threats may result in unauthorized access, loss or destruction of data or other cybersecurity incidents with 

increased costs and consequences to us such as those described above.

We routinely transmit and receive personal, confidential and proprietary information by electronic means. In addition, 

our customers maintain personal, confidential and proprietary information on systems we provide. We have discussed 

and worked with customers, vendors, service providers, counterparties and other third parties to develop secure 

transmission capabilities and protect against cyber attacks, but we do not have, and may be unable to put in place, 

secure capabilities with all of our clients, vendors, service providers, counterparties and other third parties and we may 

not be able to ensure that these third parties have appropriate controls in place to protect the confidentiality of the 

information. An interception, misuse or mishandling of personal, confidential or proprietary information being sent to or 

received from a customer, vendor, service provider, counterparty or other third party could result in legal liability, 

regulatory action and reputational harm. 

Market and Industry Risk

A deterioration in general economic conditions, including home prices and employment trends, or the financial 

markets may materially adversely affect our business and financial condition.

Our business is significantly affected by the status of the U.S. economy, particularly home prices and employment 

trends. A prolonged period of slow growth in the U.S. economy or any deterioration in general economic conditions or 

the financial markets could materially adversely affect our results of operations, net worth and financial condition. Given 

the level of fiscal and monetary policy support for the economy in 2020 and 2021, there is a risk that inflation may 

exceed the level desired by policy makers and currently anticipated in financial markets. This could lead the government 

to adopt various corrective measures designed to restrict the availability of credit and regulate growth to contain 

inflation, including curtailing its purchase of Treasury bonds and mortgage-backed securities or raising the interest the 

Federal Reserve charges financial institutions. Furthermore, interest rates may rise in anticipation of further inflation or a 

shift in monetary policy, which could lead to a rise in mortgage rates, a slowdown in housing demand and negatively 

affect home price appreciation. In general, if home prices decrease, or the unemployment rate increases, it could result 

in significantly higher levels of credit losses and credit-related expense. 

Global economic conditions can also adversely affect our business and financial results. Changes or volatility in market 

conditions resulting from deterioration in or uncertainty regarding global economic conditions can adversely affect the 

value of our assets, which could materially adversely affect our results of operations, net worth and financial condition. 

Differing rates of economic recovery from the COVID-19 pandemic around the world along with continued dislocations 

in supply chains remain a concern for policy makers and financial markets. To the extent global economic conditions 

negatively affect the U.S. economy, they also could negatively affect the credit performance of the loans in our book of 

business. 

Volatility or uncertainty in global or domestic political conditions also can significantly affect economic conditions and the 

financial markets. Global or domestic political unrest also could affect growth and financial markets. We describe in our 

2020 Form 10-K the risks to our business posed by changes in interest rates and changes in spreads. In addition, future 

changes or disruptions in the financial markets could significantly change the amount, mix and cost of funds we obtain, 

as well as our liquidity position.

Item 2. Unregistered Sales of Equity Securities and Use of 

Proceeds

Common Stock

Our common stock is traded in the over-the-counter market and quoted on the OTCQB, operated by OTC Markets 

Group Inc., under the ticker symbol “FNMA.”

Other Information

Fannie Mae First Quarter 2021 Form 10-Q 126
Recent Sales of Unregistered Equity Securities

Under the terms of our senior preferred stock purchase agreement with Treasury, we are prohibited from selling or 

issuing our equity interests without the prior written consent of Treasury except under limited circumstances, which are 

described in “Business—Conservatorship, Treasury Agreements and Housing Finance Reform—Treasury Agreements

—Covenants under Treasury Agreements” in our 2020 Form 10-K. During the quarter ended March 31, 2021, 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.

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 first quarter of 2021.

Dividend Restrictions 

Our payment of dividends is subject to the following restrictions: 

Restrictions Relating to Conservatorship. Our conservator announced on September 7, 2008 that we would not pay any 

dividends on the common stock or on any series of preferred stock, other than the senior preferred stock. In addition, 

FHFA’s regulations relating to conservatorship and receivership operations prohibit us from paying any dividends while 

in conservatorship unless authorized by the Director of FHFA. The Director of FHFA has directed us to make dividend 

payments on the senior preferred stock on a quarterly basis for every dividend period for which dividends were payable.

Restrictions Under Senior Preferred Stock Purchase Agreement and Senior Preferred Stock. The senior preferred stock 

purchase agreement prohibits us from declaring or paying any dividends on Fannie Mae equity securities (other than 

the senior preferred stock) without the prior written consent of Treasury. In addition, the agreement requires us to 

comply with the terms of the enterprise regulatory capital framework published by FHFA in November 2020. That 

requirement, combined with the dividend provisions of the senior preferred stock, result in our net income being 

unavailable 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 2020 Form 10-K. For more information on the enterprise regulatory capital framework, see “Business—

Legislation and Regulation” in our 2020 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 

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Fannie Mae First Quarter 2021 Form 10-Q 127
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.

Item 6. Exhibits

The exhibits listed below are being filed or furnished with or incorporated by reference into this report. 

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.)

4.1 Fourth Amended and Restated Certificate of Designation of Terms of Variable Liquidation Preference Senior 

Preferred Stock, Series 2008-2, dated April 13, 2021 

4.2 Letter Agreement between the United States Department of the Treasury and the Federal National 

Mortgage Association, acting through the Federal Housing Finance Agency as its duly appointed 

conservator, dated January 14, 2021 (Incorporated by reference to Exhibit 10.1 to Fannie Mae’s Current 

Report on Form 8-K, filed January 20, 2021)

10.1 Letter Agreement between the United States Department of the Treasury and the Federal National 

Mortgage Association, acting through the Federal Housing Finance Agency as its duly appointed 

conservator, dated January 14, 2021 (Incorporated by reference to Exhibit 10.1 to Fannie Mae’s Current 

Report on Form 8-K, filed January 20, 2021)

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

Item Description

* The financial information contained in these Inline XBRL documents is unaudited.

Other Information

Fannie Mae First Quarter 2021 Form 10-Q 128
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: April 30, 2021

By: /s/ Celeste M. Brown

Celeste M. Brown

Executive Vice President and

Chief Financial Officer

Date: April 30, 2021

Signatures

Fannie Mae First Quarter 2021 Form 10-Q 129