First-Quarter 2010 Results 1 

Resource Center: 1-800-732-6643 

Contacts: Todd Davenport 

 202-752-5115 

Number: 5024a 

Date: May 10, 2010 

Fannie Mae Reports First-Quarter 2010 Results 

WASHINGTON, DC – Fannie Mae (FNM/NYSE) reported a net loss of $11.5 billion in the first quarter of 2010, 

compared with a net loss of $15.2 billion in the fourth quarter of 2009. Including $1.5 billion of dividends on our senior 

preferred stock held by the U.S. Department of Treasury, the net loss attributable to common stockholders was $13.1 

billion, or ($2.29) per diluted share, compared with a loss of $16.3 billion, or ($2.87) per diluted share, in the fourth 

quarter of 2009. Our first-quarter results were driven primarily by credit-related expenses, which remain at elevated levels 

due to weaknesses in the economy and the housing market. 

The first-quarter loss resulted in a net worth deficit of $8.4 billion as of March 31, 2010, taking into account a $3.3 billion

reduction in our deficit related to the adoption of new accounting standards, as well as unrealized gains on available-forsale securities during the first quarter. The Acting Director of the Federal Housing Finance Agency has therefore asked 

Treasury to provide us $8.4 billion on or prior to June 30, 2010. 

“In the first quarter we continued to serve as a leading source of liquidity to the mortgage market, and we made solid 

progress in our ongoing efforts to keep people in their homes,” said Fannie Mae President and CEO Mike Williams. 

“Working with our lender partners, we completed 94,000 loan modifications in the quarter, more than half of which were 

conversions of trial modifications under the Obama Administration’s Home Affordable Modification Program.” 

During the first quarter of 2010, Fannie Mae purchased or guaranteed an estimated $191.4 billion in loans, measured by 

unpaid principal balance, including approximately $40 billion in delinquent loans purchased in March from our mortgagebacked securities trusts (see “Purchase of Delinquent Loans from MBS Trusts” below). Not including the delinquent-loan 

purchases, our purchases and guarantees financed approximately 516,000 conventional single-family loans, and 

approximately 61,000 multifamily units. Our estimated market share of new single-family mortgage-related securities 

issuances was 40.8 percent in the first quarter of 2010, compared with 38.9 percent in the fourth quarter of 2009. Our 

mortgage credit book of business was $3.18 trillion as of March 31, 2010, compared with $3.23 trillion as of December 

31, 2009. 
First-Quarter 2010 Results 2 

We have maintained pricing and eligibility standards that promote sustainable homeownership and stability in the housing 

market, and the risk profile of the loans we acquired remained strong. For single-family loan acquisitions in the first 

quarter of 2010, the weighted average original loan-to-value ratio was 69 percent and the weighted average FICO credit 

score was 758. That was consistent with our 2009 single-family loan acquisitions, which had a weighted average original 

loan-to-value ratio of 67 percent and a weighted average FICO credit score of 761. The ultimate performance of these and 

all our loans will be affected by macroeconomic trends, including unemployment, the economy, and home prices. 

“Promoting sustainable homeownership and maintaining ready access to liquidity are our guiding principles in serving the 

residential markets,” said Williams. “The strong credit characteristics of our acquisitions during the quarter are evidence 

that we continue to strike an appropriate balance in providing liquidity while also applying the lessons of the recent credit 

cycle.” 

MBS CONSOLIDATION 

The Financial Accounting Standards Board last year issued new accounting standards that govern the transfer of financial 

assets and the consolidation of variable interest entities. We prospectively adopted these new accounting standards and are 

reporting under them for the first time in our first-quarter 2010 condensed consolidated financial statements. 

Implementation of these standards constitutes a fundamental change in the basis of presentation of Fannie Mae’s 

consolidated financial statements, primarily because the standards require us to consolidate the substantial majority of our 

MBS trusts. As a result, the trusts’ underlying assets (principally mortgage loans) and liabilities held by third parties 

(principally MBS certificates issued by the trusts) are now recorded on our condensed consolidated balance sheets. These 

new accounting standards do not change the economic risk to our business, specifically our exposure to liquidity, credit, 

and interest rate risks. We refer to January 1, 2010 as the “transition date” for our adoption of these new standards. 

Balance Sheets

Our balance sheets reflect several changes related to the new accounting standards, including: 

 A significant increase in loans and debt and a decrease in trading and available-for-sale securities. 

 Separate presentation of the elements of the consolidated MBS trusts (such as mortgage loans, debt, accrued 

interest receivable and payable) on the face of our condensed consolidated balance sheets. 

 Significant increase in allowance for loan losses and significant decrease in reserve for guaranty losses. 

 Elimination of substantially all previously recorded guaranty assets and guaranty obligations. 
First-Quarter 2010 Results 3 

Statements of Operations

Our statements of operations reflect several changes related to the new accounting standards, including: 

 A significant increase in interest income and interest expense attributable to the assets and liabilities of the 

consolidated MBS trusts, and a separate presentation of the elements of the consolidated MBS trusts (interest 

income and interest expense) on the face of our condensed consolidated statements of operations. 

 Reclassification of the substantial majority of guaranty fee income and trust management income to interest 

income. 

 A decrease to the provision for credit losses (which consists of the provision for loan losses and provision for 

guaranty losses) and a corresponding decrease in net interest income due to recognizing interest expense on the 

debt of consolidated MBS trusts and not accruing interest income on underlying nonperforming consolidated 

loans. 

 Elimination of fair value losses on credit-impaired loans acquired from MBS trusts we have consolidated, as the 

underlying loans in our MBS trusts are already recognized in our condensed consolidated balance sheets. 

 Our portfolio securitization transactions that reflect transfers of assets to consolidated MBS trusts do not qualify 

as sales, thereby reducing the amount we recognize as portfolio securitization gains and losses. We also no longer 

recognize gains or losses on the sale from our portfolio of available-for-sale MBS securities that were issued by 

consolidated MBS trusts, because these securities are eliminated in consolidation. 

 We no longer recognize fair value gains or losses on trading MBS that were issued by consolidated MBS trusts, 

which reduces the amount of securities subject to recognition of changes in fair value in our condensed 

consolidated statements of operations. 

SUMMARY OF FIRST-QUARTER RESULTS
First-Quarter 2010 Results 4 

Net revenue was $3.0 billion in the first quarter of 2010, down 48 percent from $5.8 billion in the fourth quarter of 2009, 

due primarily to the adoption of the new accounting standards. 

• Net interest income was $2.8 billion, down 25 percent from $3.7 billion in the fourth quarter of 2009. The assets and 

liabilities of our newly consolidated trusts increased both our interest income and our interest expense, but our net 

interest income decreased because we do not recognize interest income on the mortgage loans of consolidated trusts 

that have been placed on nonaccrual status. In the first quarter of 2010, interest income that we did not recognize for 

nonaccrual mortgage loans was $2.7 billion. 

• Guaranty fee income was $54 million, down substantially from $1.9 billion in the fourth quarter of 2009. Under the 

new accounting standards, we now recognize both contractual guaranty fees and the amortization of deferred cash fees 

received after December 31, 2009 through interest income, thereby reducing guaranty fee income to only those 

amounts related to unconsolidated trusts and other credit enhancement arrangements, such as our long-term standby 

commitments. 

Credit-related expenses, which are the total provision for credit losses plus foreclosed property expense, were $11.9 

billion in the first quarter. As of the consolidation transition date, we no longer recognize fair value losses on creditimpaired loans newly acquired from MBS trusts that we consolidated. However, during the first quarter of 2010 we 

recognized a higher level of impairments as compared with the fourth quarter of 2009 because loan modifications, which 

result in the loans being treated as individually impaired, increased substantially. In aggregate, the increase in individual 

impairment, as well as the high level of nonperforming loans, delinquencies, and defaults due to the general deterioration 

in our guaranty book of business, resulted in a provision for credit losses that was in line with the provision for credit 

losses in the fourth quarter of 2009 despite the reduction in fair-value losses on credit-impaired loans acquired from MBS 

trusts. 

Credit losses increased to $5.1 billion in the first quarter of 2010 from $4.1 billion in the fourth quarter of 2009, reflecting 

the increase in the number of defaults, which was partially offset by a slight reduction in loss severity. Credit losses 

remained substantially lower than our credit-related expenses during the first quarter of 2010 due partly to our home 

retention and foreclosure alternative efforts and partly to changes in the foreclosure process in a number of states and 

foreclosure processing backlogs in some jurisdictions. 

Our single-family serious delinquency rate increased to 5.47 percent as of March 31, 2010 from 5.38 percent as of 

December 31, 2009, but grew at a slower pace than in each quarter of 2009 as we continued to work with our servicers to 

reduce delays in completing workouts and more modifications and foreclosure alternatives are being pursued. We believe 

that growth in our serious delinquency rate during the first quarter was also slowed by improved employment trends in the 

economy. The period of time that loans remain seriously delinquent continues to remain extended. 
First-Quarter 2010 Results 5 

Combined loss reserves were $60.8 billion, or 1.99 percent of our guaranty book of business, as of March 31, 2010, 

compared with $64.4 billion, or 2.08 percent of our guaranty book of business, as of December 31, 2009. The decrease 

was primarily due to a difference in the methodology used to estimate incurred losses under our allowance for loan losses 

versus under our reserve for guaranty losses. Our guaranty reserve considers not only the principal and interest due on a 

loan at the current balance sheet date, but also an estimate of any interest payments that we expect to be missed between 

the balance sheet date and loan acquisition or foreclosure. However, our loan loss allowance considers only our net 

recorded investment in the loan at the balance sheet date, which includes interest income only while the loan was on 

accrual status. 

When we consolidated trusts at the transition date, we decreased our reserve for guaranty losses by $54.1 billion and 

increased our allowance for loan losses by $43.6 billion. In addition to recognizing mortgage loans held by newly 

consolidated trusts at the transition date, we also recognized the accrued interest receivable associated with them, which 

included delinquent interest that we previously considered in estimating our reserve for guaranty losses. As a result, we 

reclassified $7.0 billion from “Reserve for guaranty losses” to a valuation allowance within “Accrued interest receivable, 

net” in our condensed consolidated balance sheet. 

Total nonperforming loans in our guaranty book of business were $223.9 billion as of March 31, 2010, compared with 

$216.5 billion as of December 31, 2009. 

Net fair value losses were $1.7 billion in the first quarter, compared with $638 million in the fourth quarter of 2009. We 

recognized $2.8 billion of fair value losses on our derivatives in the first quarter of 2010 due to declining interest rates that 

led to a decrease in the fair value of our pay-fixed derivatives, partially offset by an increase in the fair value of receivefixed swap derivatives; a decrease in implied interest rate volatility that reduced the fair value of our pay-fixed options; 

and time decay on our purchased options. The losses on our derivatives were partially offset by $1.1 billion of fair value 

gains on our trading securities due to declining mortgage interest rates and narrowing spreads on CMBS during the 

quarter. 

Net other-than-temporary impairment was $236 million in the first quarter, compared with $2.5 billion in the fourth 

quarter of 2009. The level of impairments fell sharply from the fourth quarter due primarily to a smaller decline in the 

present value of projected cash flows on Alt-A and subprime securities in our portfolio. 

We provide further discussion of our financial results and condition, credit performance, fair value balance sheets and 

other matters in our quarterly report on Form 10-Q for the quarter ended March 31, 2010, which was filed today with the 

Securities and Exchange Commission. Further information about our credit performance, the characteristics of our 

guaranty book of business, the drivers of our credit losses, our foreclosure-prevention efforts, and other measures is 

contained in the “First Quarter 2010 Credit Supplement” on Fannie Mae’s Web site, www.fanniemae.com. 
First-Quarter 2010 Results 6 

NET WORTH AND U.S. TREASURY FUNDING

As noted above, the Acting Director of FHFA has requested $8.4 billion of funds from Treasury on our behalf under the 

terms of the senior preferred stock purchase agreement between Fannie Mae and Treasury to eliminate our net worth 

deficit as of March 31, 2010. 

On March 31, 2010, Treasury provided to us $15.3 billion to cure our net worth deficit as of December 31, 2009. As a 

result of this draw, the aggregate liquidation preference of the senior preferred stock increased from $60.9 billion to $76.2 

billion as of March 31, 2010. It will increase to $84.6 billion upon the receipt of funds from Treasury to eliminate our 

first-quarter 2010 net worth deficit. 

Due to current trends in the housing and financial markets, we continue to expect to have a net worth deficit in future 

periods, and therefore will be required to obtain additional funding from Treasury pursuant to the senior preferred stock 

purchase agreement. 

FAIR VALUE UPDATE

The fair value of our net assets, including the impact of adopting the new accounting standards and capital transactions, 

decreased by $46.4 billion from December 31, 2009, which resulted in a fair value net deficit of $145.2 billion as of 

March 31, 2010. Included in this decrease was $52.3 billion primarily associated with recording delinquent loans 

underlying consolidated MBS trusts and eliminating our net guaranty obligations related to MBS trusts that were 

consolidated on January 1, 2010 as a result of adopting the new accounting standards. The fair value of our guaranty 

obligations is a measure of the credit risk related to mortgage loans underlying Fannie Mae MBS that we assume through 

our guaranty. With consolidation of MBS trusts and the elimination of our guaranty obligation, we no longer valued our 

credit risk associated with delinquent loans in consolidated MBS trusts using our guaranty obligation models and began 

valuing those delinquent loans based on nonperforming loan prices. The estimated fair value of our net assets presented in 

our non-GAAP consolidated fair value balance sheets does not represent an estimate of our net realizable value, 

liquidation value or our market value as a whole; nor does it represent an estimate of the value we expect to receive from 

operating the company or what we expect to draw from the Treasury under the terms of our senior preferred stock 

purchase agreement. 

Had we continued to value our credit risk associated with delinquent loans in consolidated MBS trusts using our guaranty 

obligation models rather than valuing those loans based on nonperforming loan prices, the fair value of our net assets at 

March 31, 2010 would have been a net deficit of approximately $104 billion, a $5 billion increase to our December 31, 

2009 net deficit of $99 billion. For more information on the change in our fair value net deficit, please refer to 

“Supplemental Non-GAAP Information—Fair Value Balance Sheets” in our quarterly report on Form 10-Q for the period 

ended March 31, 2010, which was filed today with the SEC. 
First-Quarter 2010 Results 7 

HOMEOWNER ASSISTANCE INITIATIVES

During 2009 and continuing through the first quarter of 2010, the prolonged economic stress and high levels of 

unemployment hindered the efforts of many delinquent borrowers to bring their loans current. In the first quarter of 2010, 

we completed home retention workouts (modifications, repayment plans, forbearances, and HomeSaver AdvanceTM loans) 

for over 105,000 loans with an aggregate unpaid principal balance of $20.3 billion. On a loan count basis, this represented 

a 111 percent increase over home retention workouts completed in the fourth quarter of 2009. 

If we are unable to provide a viable home retention solution for a problem loan, we seek to offer foreclosure alternatives, 

primarily preforeclosure sales and deeds-in-lieu of foreclosure. We have increasingly relied on foreclosure alternatives as 

a growing number of borrowers have faced longer-term economic hardships that cannot be solved through a home 

retention solution, and we expect the volume of our foreclosure alternatives to increase in 2010. 

In the first quarter of 2010, Fannie Mae, in conjunction with our servicing partners, took the following home retention and 

foreclosure prevention actions: 

 Loan modifications, including permanent HAMP modifications, of 93,756, compared with 41,759 in the fourth 

quarter of 2009. This figure does not include HAMP modifications in trial periods. 

 Repayment plans/forbearances completed of 8,682, compared with 5,353 in the fourth quarter of 2009. 

 HomeSaver Advance loans of 2,588, compared with 2,759 in the fourth quarter of 2009. 

 Preforeclosure sales and deeds-in-lieu of foreclosure of 17,326, compared with 13,459 in the fourth quarter of 

2009. 

During the first quarter of 2010, as in the fourth quarter of 2009, we acquired or guaranteed approximately 417,000 loans 

that were refinances. 

Home Affordable Modification Program

As of the March 31, 2010 reporting period, approximately 296,000 Fannie Mae loans were in trial modification periods 

under the Home Affordable Modification Program, as reported by servicers to the system of record for the program, 

compared with 291,000 as of the December 31, 2009 reporting period. In addition to participating in the Home Affordable 

Modification Program, Fannie Mae serves as the program administrator on behalf of Treasury. 

Home Affordable Refinance Program

In the first quarter, approximately 142,000 Fannie Mae loans were refinanced through our Refi Plus initiative, compared 

with 109,000 in the fourth quarter. Included in those totals were approximately 54,000 loans that were refinanced under 

the Home Affordable Refinance Program during the first quarter and 42,000 in the fourth quarter. 
First-Quarter 2010 Results 8 

On average, borrowers who refinanced during the first quarter through our Refi Plus initiatives reduced their monthly 

mortgage payments by $145, or $1,740 annually. In addition, borrowers refinancing under the Home Affordable 

Refinance Program were able to benefit from lower levels of mortgage insurance and higher loan-to-value ratios than 

those that would be allowed under our traditional standards. 

Additional information about the Home Affordable Modification Program and the Home Affordable Refinance Program, 

including a description of eligibility requirements, is available at www.MakingHomeAffordable.gov. 

Alternative ModificationTM Option

We recently announced an Alternative Modification option for Fannie Mae borrowers who were eligible for and accepted 

a HAMP trial modification plan, stayed current during their trial period, but were subsequently denied a permanent 

modification because they were unable to demonstrate compliance with the eligibility requirements for a permanent 

modification. Alternative Modifications are available only for borrowers who were in a HAMP trial modification that was 

initiated by March 1, 2010, and who made all required payments during their HAMP trial period. 

FORECLOSURE ACTIVITY

We acquired 61,929 single-family real estate-owned properties through foreclosure in the first quarter of 2010, compared 

with 47,189 in the fourth quarter of 2009. As of March 31, 2010, our inventory of single-family real estate owned 

properties was 109,989, compared with 86,155 as of December 31, 2009. The carrying value of our single-family REO 

was $11.4 billion, compared with $8.5 billion as of December 31, 2009. 

Our single-family foreclosure rate, which reflects the annualized number of single-family properties acquired through 

foreclosure as a percentage of the total number of loans in our conventional single-family mortgage credit book of 

business, was 1.36 percent on an annualized basis in the first quarter, compared with 1.03 percent in the fourth quarter of 

2009. 

Despite the increase in our foreclosure rate during the first quarter of 2010, foreclosure levels were lower than what they 

otherwise would have been due to our directive to servicers to delay foreclosure sales until the loan servicer verifies that 

the borrower is ineligible for a HAMP modification and that all other foreclosure prevention alternatives have been 

exhausted. The continued weak economy and high unemployment rates, as well as the prolonged decline in home prices 

on a national basis, continue to result in an increase in the percentage of our mortgage loans that transition from 

delinquent to foreclosure status and significantly reduced the values of our foreclosed single-family properties. Further, 

we have seen an increase in the percentage of our properties that we are unable to market for sale in the first quarter of 

2010. The most common reasons we are unable to market properties for sale are: (1) properties are within the period 

during which state law allows the original owner to redeem the property by paying the past due balance; (2) properties are 

still occupied and the eviction process is not yet complete; or (3) properties are being repaired. As we are unable to 

market a higher portion of our inventory, it slows the pace at which we can dispose of our properties. 
First-Quarter 2010 Results 9 

Although we have expanded our loan workout initiatives to keep borrowers in their homes, we expect our foreclosures to 

increase during 2010 as a result of the adverse impact that the weak economy and high unemployment have had and are 

expected to have on the financial condition of borrowers. 

PURCHASE OF DELINQUENT LOANS FROM MBS TRUSTS

As discussed in “MBS Consolidation” above, as of the transition date, we no longer recognize fair value losses on creditimpaired loans newly acquired from MBS trusts we have consolidated, as the underlying loans in our MBS trusts are 

already recognized in our condensed consolidated balance sheets. Without these fair value losses, the cost of purchasing 

most delinquent loans from Fannie Mae MBS trusts and holding them in our portfolio is less than the cost of advancing 

delinquent payments to holders of the Fannie Mae MBS. As a result, we have significantly increased our purchases of 

loans from single-family MBS trusts that are delinquent as to four or more consecutive monthly payments. In March 

2010, we purchased approximately 216,000 delinquent loans with an unpaid principal balance of approximately $40 

billion from MBS trusts. As of March 31, 2010, the total unpaid principal balance of all loans in single-family MBS trusts 

that were delinquent four or more months was approximately $94 billion. In April 2010, we purchased approximately 

229,000 delinquent loans with an unpaid principal balance of approximately $46 billion from our MBS trusts. We expect 

to continue to purchase a significant portion of the remaining delinquent population within a few months subject to market 

conditions, servicer capacity, and other constraints including the limit on the mortgage assets that we may own pursuant to 

our senior preferred stock purchase agreement with Treasury. 

BUSINESS SEGMENT RESULTS

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

Community Development (HCD), and Capital Markets. Our Single-Family Credit Guaranty business works with our 

lender customers to securitize single-family mortgage loans into Fannie Mae MBS and to facilitate the purchase of singlefamily mortgage loans for our mortgage portfolio. HCD works with our lender customers to securitize multifamily 

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

portfolio. Our HCD business also makes debt and equity investments to increase the supply of affordable housing. Our 

Capital Markets group manages our investment activity in mortgage loans, mortgage-related securities and other 

investments. 

Although we continue to manage Fannie Mae based on these business segments, we have changed the presentation of 

segment financial information that is currently evaluated by management. While some line items in our segment results 

were not impacted by either the change from the new accounting standards or changes to our segment presentation, others 

were impacted materially, which reduces the comparability of our segment results with prior periods. Under the current 

segment reporting structure, the sum of the results for our three business segments does not equal our condensed 

consolidated results of operations as we separate the activity related to our consolidated trusts from the results generated 

by our three segments. 
First-Quarter 2010 Results 10 

Single-Family Credit Guaranty book of business was $2.88 trillion as of March 31, 2010, compared with $2.91 trillion 

on December 31, 2009. Single-family guaranty fee income was $1.8 billion, compared with $2.1 billion for the fourth 

quarter of 2009. The Single-Family business lost $12.6 billion in the first quarter of 2010 due primarily to credit-related 

expenses of $11.9 billion. We also did not recognize $2.7 billion of interest income on nonaccrual loans primarily due to 

our adoption of the new accounting standards. The Single-Family business lost $9.6 billion in the fourth quarter of 2009. 

Housing and Community Development’s multifamily guaranty book of business was $186.1 billion as of March 31, 

2010, compared with $185.3 billion as of December 31, 2009. HCD recorded a net benefit of $42 million from creditrelated expenses in the first quarter of 2010, compared with $977 million of expenses in the fourth quarter of 2009. HCD 

earned $99 million in the first quarter of 2010, compared with a loss of $6.2 billion in the fourth quarter of 2009, which 

was driven by losses on our low-income housing tax credit partnership investments. 

Capital Markets’ net interest income was $3.1 billion in the first quarter of 2010, compared with $3.7 billion in the 

fourth quarter of 2009. Fair value losses were $1.2 billion in the first quarter of 2010, compared with $638 million in the 

fourth quarter of 2009. Net other-than-temporary impairment was $236 million in the first quarter of 2010, compared with 

$2.5 billion in the fourth quarter of 2009. The net mortgage investment portfolio balance was $764.8 billion, compared 

with $772.7 billion on January 1, 2010, resulting from purchases of $99.7 billion, liquidations of $27.9 billion, and sales 

of $79.8 billion during the quarter. Capital Markets earned $2.1 billion in the first quarter of 2010, compared with $572 

million in the fourth quarter of 2009. 

# # # 

Certain statements in this news release may be considered forward-looking statements within the meaning of the federal securities laws, including 

those relating to future market conditions; our future performance, including net worth; our receipt of funds from Treasury under the senior 

preferred stock purchase agreement; our future purchases of delinquent loans; our future plans; and our future business activities, including the 

volume of foreclosures and foreclosure alternatives. Although Fannie Mae believes that the expectations set forth in these statements are based upon 

reasonable assumptions, future conditions and events may differ materially from what is indicated in any forward-looking statements. Factors that 

could cause actual conditions or events to differ materially from those described in these forward-looking statements include, but are not limited to, 

legislative or other governmental actions relating to our business or the financial markets; our ability to manage our business to a positive net 

worth; adverse effects from activities we undertake to support the mortgage market and help borrowers; the investment by Treasury and its effect on 

our business; changes in the structure and regulation of the financial services industry, including government efforts to improve economic 

conditions; the conservatorship and its effect on our business (including our business strategies and practices); the depth and duration of weakness 

in the housing market and economic conditions, including the extent of home price declines and unemployment rates; the level and volatility of 

interest rates and credit spreads; the accuracy of subjective estimates used in critical accounting policies; and other factors described in Fannie 

Mae’s quarterly report on Form 10-Q for the quarter ended March 31, 2010, and Fannie Mae’s annual report on Form 10-K for the year ended 

December 31, 2009, including the “Risk Factors” and “Forward-Looking Statements” sections of these reports. 

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

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

to mortgage bankers and other lenders so that they may lend to home buyers. Our job is to help those who house America. 
First-Quarter 2010 Results 11 

ANNEX I

FANNIE MAE 

(In conservatorship)

Condensed Consolidated Balance Sheets

(Dollars in millions, except share amounts) 

(Unaudited) 

 As of

 March 31, December 31, 

 2010 2009 

ASSETS 

Cash and cash equivalents (includes cash of consolidated trusts of $446 and $2,092, respectively) $ 30,477 $ 6,812 

Restricted cash (includes restricted cash of consolidated trusts of $42,731 and $-, respectively) 45,479 3,070 

Federal funds sold and securities purchased under agreements to resell or similar arrangements 62,446 53,684 

Investments in securities: 

 Trading, at fair value (includes securities of consolidated trusts of $32 and $5,599, respectively) 72,529 111,939 

 Available-for-sale, at fair value (includes securities of consolidated trusts of $624 and $10,513, respectively, 

 and securities pledged as collateral that may be sold or repledged of $- and $1,148, respectively) 108,667 237,728 

 Total investments in securities 181,196 349,667 

Mortgage loans: 

 Loans held for sale, at lower of cost or fair value 980 18,462 

 Loans held for investment, at amortized cost 

 Of Fannie Mae 309,991 256,434 

 Of consolidated trusts (includes loans pledged as collateral that may be sold or repledged 

 of $2,895 and $1,947, respectively) 2,679,336 129,590 

 Total loans held for investment 2,989,327 386,024 

 Allowance for loan losses (60,569) (9,925)

 Total loans held for investment, net of allowance 2,928,758 376,099 

 Total mortgage loans 2,929,738 394,561 

Advances to lenders 4,151 5,449 

Accrued interest receivable: 

 Of Fannie Mae 4,333 3,774 

 Of consolidated trusts 13,939 519 

 Allowance for accrued interest receivable (7,611) (536)

 Total accrued interest receivable, net of allowance 10,661 3,757 

Acquired property, net 12,369 9,142 

Derivative assets, at fair value 435 1,474 

Guaranty assets 473 8,356 

Deferred tax assets, net 1,906 909 

Partnership investments 1,853 2,372 

Servicer and MBS trust receivable 679 18,329 

Other assets 11,892 11,559 

 Total assets $ 3,293,755 $ 869,141 

LIABILITIES AND EQUITY (DEFICIT)

Liabilities: 

 Accrued interest payable: 

 Of Fannie Mae $ 5,006 $ 4,951 

 Of consolidated trusts 10,558 29 

 Federal funds purchased and securities sold under agreements to repurchase 180 - 

 Short-term debt: 

 Of Fannie Mae 207,822 200,437 

 Of consolidated trusts 6,343 - 

 Long-term debt: 

 Of Fannie Mae (includes debt at fair value of $3,258 and $3,274, respectively) 576,307 567,950 

 Of consolidated trusts (includes debt at fair value of $310 and $-, respectively) 2,472,192 6,167 

 Derivative liabilities, at fair value 957 1,029 

 Reserve for guaranty losses (includes $33 and $4,772, respectively, related to Fannie Mae MBS included in Investments in securities) 233 54,430 

 Guaranty obligations 827 13,996 

 Partnership liabilities 2,020 2,541 

 Servicer and MBS trust payable 9,799 25,872 

 Other liabilities 9,882 7,020 

 Total liabilities 3,302,126 884,422 

Commitments and contingencies (Note 17) - - 

Fannie Mae stockholders' equity (deficit): 

 Senior preferred stock, 1,000,000 shares issued and outstanding 76,200 60,900 

 Preferred stock, 700,000,000 shares are authorized—578,598,631 and 579,735,457 shares issued 

 and outstanding, respectively 20,291 20,348 

 Common stock, no par value, no maximum authorization—1,267,426,377 and 1,265,674,761 shares 

 issued, respectively; 1,115,813,353 and 1,113,358,051 shares outstanding, respectively 665 664 

 Additional paid-in capital 604 2,083 

 Accumulated deficit (95,061) (90,237)

 Accumulated other comprehensive loss (3,754) (1,732)

 Treasury stock, at cost, 151,613,024 and 152,316,710 shares, respectively (7,396) (7,398)

 Total Fannie Mae stockholders’ deficit (8,451) (15,372)

Noncontrolling interest 80 91 

 Total deficit (8,371) (15,281)

Total liabilities and equity (deficit) $ 3,293,755 $ 869,141 

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

FANNIE MAE

(In conservatorship)

Condensed Consolidated Statements of Operations

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

 (Unaudited) 

 For the 

 Three Months Ended

 March 31,

 2010 2009 

Interest income: 

Trading securities $ 315 $ 990 

 Available-for-sale securities 1,473 3,721 

 Mortgage loans: 

 Of Fannie Mae 3,298 4,707 

 Of consolidated trusts 34,321 891 

 Other 39 127 

 Total interest income 39,446 10,436 

Interest expense: 

 Short-term debt: 

 Of Fannie Mae 116 1,107 

 Of consolidated trusts 2 - 

 Long-term debt: 

 Of Fannie Mae 5,081 5,992 

 Of consolidated trusts 31,458 89 

 Total interest expense 36,657 7,188 

Net interest income 2,789 3,248 

Provision for loan losses (11,939) (2,509)

Net interest income (loss) after provision for loan losses (9,150) 739 

Guaranty fee income (includes imputed interest of $29 and $150 for the three months ended 

 March 31, 2010 and 2009, respectively) 54 1,752 

Investment gains, net 166 223 

Other-than-temporary impairments (186) (5,653)

Noncredit portion of other-than-temporary impairments recognized in other comprehensive loss (50) - 

Net other-than-temporary impairments (236) (5,653)

Fair value losses, net (1,705) (1,460)

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

 consolidated trusts of $69 for the three months ended March 31, 2010) (124) (79)

Losses from partnership investments (58) (357)

Fee and other income 179 192 

 Non-interest loss (1,724) (5,382)

Administrative expenses: 

 Salaries and employee benefits 324 293 

 Professional services 194 143 

 Occupancy expenses 41 48 

 Other administrative expenses 46 39 

 Total administrative expenses 605 523 

Provision (benefit) for guaranty losses (36) 17,825 

Foreclosed property expense (income) (19) 538 

Other expenses 172 279 

 Total expenses 722 19,165 

Loss before federal income taxes (11,596) (23,808)

Benefit for federal income taxes (67) (623)

Net loss (11,529) (23,185)

 Less: Net (income) loss attributable to the noncontrolling interest (1) 17 

Net loss attributable to Fannie Mae (11,530) (23,168)

Preferred stock dividends (1,527) (29)

Net loss attributable to common stockholders $ (13,057) $ (23,197)

 

Loss per share - Basic and Diluted $ (2.29) $ (4.09)

Weighted-average common shares outstanding - Basic and Diluted 5,692 5,666 

 

 

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

FANNIE MAE

(In conservatorship)

Condensed Consolidated Statements of Cash Flows

(Dollars in millions) 

(Unaudited) 

 For the Three Months Ended March 31, 

 2010 2009 

Cash flows used in operating activities: 

Net loss $ (11,529) $ (23,185)

 Amortization of debt of Fannie Mae cost basis adjustments 364 1,326 

 Amortization of debt of consolidated trusts cost basis adjustments (68) (2)

 Provision for loan and guaranty losses 11,903 20,334 

 Valuation (gains) losses (990) 5,403 

 Current and deferred federal income taxes (67) (1,713)

 Derivatives fair value adjustments 891 (3)

 Purchases of loans held for sale (17) (33,332)

 Proceeds from repayments of loans held for sale 9 295 

 Net change in trading securities, excluding non-cash transfers (31,679) 1,949 

 Other, net (1,720) (1,417)

Net cash used in operating activities (32,903) (30,345)

Cash flows provided by investing activities:

 Purchases of trading securities held for investment (6,695) - 

 Proceeds from maturities of trading securities held for investment 805 2,656 

 Proceeds from sales of trading securities held for investment 15,068 38 

 Purchases of available-for-sale securities (107) (22,697)

 Proceeds from maturities of available-for-sale securities 4,120 9,731 

 Proceeds from sales of available-for-sale securities 6,154 53,972 

 Purchases of loans held for investment (19,863) (9,859)

 Proceeds from repayments of loans held for investment of Fannie Mae 3,250 10,974 

 Proceeds from repayments of loans held for investment of consolidated trusts 130,226 3,020 

Net change in restricted cash 3,174 -

 Advances to lenders (10,338) (22,877)

 Proceeds from disposition of acquired property 7,678 4,554 

 Reimbursements to servicers for loan advances (11,748) (4,434)

 Net change in federal funds sold and securities purchased under agreements to resell or similar arrangements (9,135) 13,405 

 Other, net (382) (195)

Net cash provided by investing activities 112,207 38,288 

Cash flows used in financing activities:

 Proceeds from issuance of short-term debt of Fannie Mae 192,421 360,173 

 Proceeds from issuance of short-term debt of consolidated trusts 3,332 - 

 Payments to redeem short-term debt of Fannie Mae (185,156) (417,553)

 Payments to redeem short-term debt of consolidated trusts (9,513) - 

 Proceeds from issuance of long-term debt of Fannie Mae 100,604 105,057 

 Proceeds from issuance of long-term debt of consolidated trusts 83,692 - 

 Payments to redeem long-term debt of Fannie Mae (92,355) (65,290)

 Payments to redeem long-term debt of consolidated trusts (162,617) (127)

 Proceeds from senior preferred stock purchase agreement with Treasury 15,300 15,200 

 Net change in federal funds purchased and securities sold under agreements to repurchase 180 (65)

 Other, net (1,527) (25)

Net cash used in financing activities (55,639) (2,630)

Net increase in cash and cash equivalents 23,665 5,313 

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

Cash and cash equivalents at end of period $ 30,477 $ 23,246 

Cash paid during the period for:

Interest $ 40,660 $ 7,806 

Income taxes - 848 

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

Mortgage loans acquired by assuming debt $ 130,042 $ 13 

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

 investment of Fannie Mae 55,604 - 

Transfers from loans held for investment to restricted cash 28,265 - 

Transfers from advances to lenders to investments in securities - 13,131 

Transfers from advances to lenders to loans held for investment of consolidated trusts 11,012 - 

Net transfers from mortgage loans to acquired property 2,233 916 

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

FANNIE MAE

(In conservatorship) 

Condensed Consolidated Statements of Changes in Equity (Deficit)

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

(Unaudited) 

See Notes to Condensed Consolidated Financial Statements 

 Fannie Mae Stockholders’ Equity 

 Retained Accumulated 

 Shares Outstanding Additional Earnings Other Non Total 

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

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

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

Change in investment in noncontrolling 

 interest - - - - - - - - - - (3) (3)

 Comprehensive loss: 

 Net loss - - - - - - - (23,168) - - (17) (23,185)

 Other comprehensive loss, net of tax effect: 

 Changes in net unrealized losses on 

 available-for sale securities 

 (net of tax of $271) - - - - - - - - 505 - - 505 

 Reclassification adjustment for other-than- 

 temporary impairments recognized 

 in net loss (net of tax of $1,979) - - - - - - - - 3,674 3,674 

 Reclassification adjustment for gains 

 included in net loss (net of tax of $17) - - - - - - - - 32 - - 32 

 Unrealized gains on guaranty assets and 

 guaranty fee buy-ups - - - - - - - - 29 - - 29 

 Prior service cost and actuarial gains, 

 net of amortization for defined 

 benefit plans - - - - - - - - 15 - - 15 

 Total comprehensive loss (18,930)

 Senior preferred stock dividends - - - - - - (25) - - - - (25)

 Increase to senior preferred liquidation 

 preference - - - 15,200 - - - - - - - 15,200 

 Conversion of convertible preferred stock 

 into common stock - (12) 19 - (593) 10 583 - - - - - 

 Other - - 1 - - - 19 1 - (34) - (14)

Balance as of March 31, 2009 1 585 1,105 $ 16,200 $ 20,629 $ 660 $ 4,198 $ (49,957) $ (3,418) $ (7,378) $ 137 $ (18,929)

 

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

 Cumulative effect from the adoption of 

 the accounting standards on transfers of 

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

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

 Change in investment in noncontrolling 

 interest - - - - - - - - - - 2 2 

 Comprehensive loss: 

 Net income (loss) - - - - - - - (11,530) - - 1 (11,529)

 Other comprehensive loss, net of tax effect: 

 Changes in net unrealized losses on 

 available-for-sale securities, (net of tax 

 of $710) - - - - - - - - 1,318 - - 1,318 

 Reclassification adjustment for other-than- 

 temporary impairments recognized 

 in net loss (net of tax of $81) - - - - - - - - 155 - - 155 

 Reclassification adjustment for losses 

 included in net loss (net of tax of $56) - - - - - - - - (103) - - (103)

 Prior service cost and actuarial gains, net of 

 amortization for defined benefit plans - - - - - - - - 2 - - 2 

 Total comprehensive loss (10,157)

 Senior preferred stock dividends - - - - - - (1,527) - - - - (1,527)

 Increase to senior preferred liquidation 

 preference - - - 15,300 - - - - - - - 15,300 

 Conversion of convertible preferred stock 

 into common stock - (1) 2 - (57) 1 56 - - - - - 

 Other - - 1 - - - (8) - - 2 - (6)

Balance as of March 31, 2010 1 579 1,116 $ 76,200 $ 20,291 $ 665 $ 604 $ (95,061) $ (3,754) $ (7,396) $ 80 $ (8,371)
First-Quarter 2010 Results 15 

Supplemental Non-GAAP Consolidated Fair Value Balance Sheets 

 As of March 31, 2010 As of December 31, 2009(1) 

 GAAP GAAP 

 Carrying Fair Value Estimated Carrying Fair Value Estimated 

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

 (Dollars in millions) 

Assets: 

Cash and cash equivalents $ 75,956 $ - $ 75,956 (3) $ 9,882 $ - $ 9,882 (3)

Federal funds sold and securities purchased 

under agreements to resell 62,446 - 62,446 (3) 53,684 (28) 53,656 (3)

Trading securities 72,529 - 72,529 (3) 111,939 - 111,939 (3)

Available-for-sale securities 108,667 - 108,667 (3) 237,728 - 237,728 (3)

Mortgage loans: 

Mortgage loans held for sale 980 2 982 (3) 18,462 153 18,615 (3)

Mortgage loans held for investment, net of 

 allowance for loan losses: 

 Of Fannie Mae 284,316 (13,532) 270,784 (3) 246,509 (5,209) 241,300 (3)

 Of consolidated trusts 2,644,442 (4,998) (4) 2,639,444 (3) 129,590 (45) 129,545 (3)

Total mortgage loans 2,929,738 (18,528) 2,911,210 394,561 (5,101) 389,460 

Advances to lenders 4,151 (279) 3,872 (3) 5,449 (305) 5,144 (3)

Derivative assets at fair value 435 - 435 (3) 1,474 - 1,474 (3)

Guaranty assets and buy-ups, net 473 337 810 (3) (5) 9,520 5,104 14,624 (3) (5)

Total financial assets 3,254,395 (18,470) 3,235,925 (3) 824,237 (330) 823,907 (3)

Master servicing assets and credit enhancements 573 4,354 4,927 (5) (6) 651 5,917 6,568 (5) (6)

Other assets 38,787 (263) 38,524 (6) 44,253 373 44,626 (6)

Total assets $ 3,293,755 $ (14,379) $ 3,279,376 $ 869,141 $ 5,960 $ 875,101 

Liabilities: 

Federal funds purchased and securities sold 

under agreements to repurchase $ 180 $ - $ 180 (3) $ - $ - $ - (3)

Short-term debt: 

 Of Fannie Mae 207,822 44 207,866 (3) 200,437 56 200,493 (3)

 Of consolidated trusts 6,343 (1) 6,342 (3) - - - (3)

Long-term debt: 

 Of Fannie Mae 576,307 (7) 20,528 596,835 (3) 567,950 (7) 19,473 587,423 (3)

 Of consolidated trusts 2,472,192 (7) 98,762 (4) 2,570,954 (3) 6,167 (7) 143 6,310 (3)

Derivative liabilities at fair value 957 - 957 (3) 1,029 - 1,029 (3)

Guaranty obligations 827 3,497 4,324 (3) 13,996 124,586 138,582 (3)

Total financial liabilities 3,264,628 122,830 3,387,458 (3) 789,579 144,258 933,837 (3)

Other liabilities 37,498 (447) 37,051 (8) 94,843 (54,878) 39,965 (8)

Total liabilities 3,302,126 122,383 3,424,509 884,422 89,380 973,802 

Equity (deficit): 

Fannie Mae stockholders' equity (deficit): 

Senior preferred(9) 76,200 - 76,200 60,900 - 60,900 

Preferred 20,291 (19,485) 806 20,348 (19,629) 719 

Common (104,942) (117,277) (222,219) (96,620) (63,791) (160,411)

Total Fannie Mae stockholders' 

 deficit/non-GAAP fair value of net assets $ (8,451) $ (136,762) $ (145,213) $ (15,372) $ (83,420) $ (98,792)

Noncontrolling interests 80 - 80 91 - 91 

Total deficit (8,371) (136,762) (145,133) (15,281) (83,420) (98,701)

Total liabilities and equity (deficit) $ 3,293,755 $ (14,379) $ 3,279,376 $ 869,141 $ 5,960 $ 875,101 
First-Quarter 2010 Results 16 

Explanation and Reconciliation of Non-GAAP Measures to GAAP Measures 

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

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

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

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

described in “Note 16, Fair Value.” 

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

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

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

component is reflected in the net guarantee obligation, which is included in the consolidated loan fair value, but was presented 

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

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

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

enhancements. On a GAAP basis, our guaranty assets totaled $473 million and $8.4 billion as of March 31, 2010 and December 

31, 2009, respectively. The associated buy-ups totaled $0.6 million and $1.2 billion as of March 31, 2010 and December 31, 

2009, respectively. 

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

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

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

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

totaled $39.4 billion and $46.1 billion as of March 31, 2010 and December 31, 2009, respectively. We deduct the carrying 

value of the buy-ups associated with our guaranty obligation, which totaled $0.6 million and $1.2 billion as of March 31, 2010 

and December 31, 2009, respectively, from “Other assets” reported in our GAAP condensed consolidated balance sheets 

because buy-ups are a financial instrument that we combine with guaranty assets in our disclosure in “Note 16, Fair Value.” We 

have estimated the fair value of master servicing assets and credit enhancements based on our fair value methodologies 

described in Note 16. 

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

sheets of $3.3 billion as of March 31, 2010 and December 31, 2009. 

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

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

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

carrying value of these items in our GAAP condensed consolidated balance sheets together totaled $37.5 billion and 

$94.8 billion as of March 31, 2010 and December 31, 2009, respectively. The GAAP carrying values of these other liabilities 

generally approximate fair value. We assume that certain other liabilities, such as deferred revenues, have no fair value. 

Although we report the “Reserve for guaranty losses” as a separate line item in our condensed consolidated balance sheets, it is 

incorporated into and reported as part of the fair value of our guaranty obligations in our non-GAAP supplemental consolidated 

fair value balance sheets. 

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

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