Second-Quarter 2010 Results 1 

Resource Center: 1-800-732-6643 

Contacts: Todd Davenport 

 202-752-5115 

Number: 5116a 

Date: August 5, 2010 

Fannie Mae Reports Second-Quarter 2010 Results 

2009-2010 Loan Book Performing Well; Single-Family Loans Have Lowest 

Early Serious Delinquency Rates in Last Decade 

Net Loss of $1.2 Billion in Second Quarter as Credit Performance Improves 

WASHINGTON, DC – Fannie Mae (FNMA/OTC) reported today a net loss of $1.2 billion in the second quarter of 2010, 

compared to a net loss of $11.5 billion in the first quarter of the year. During the quarter, loans from Fannie Mae’s 2009-

2010 book of business continued to perform solidly while credit-related expenses on the overall book of business 

decreased by more than $7 billion. 

 New Book of Business: Beginning in 2008, Fannie Mae raised its underwriting standards and sharply reduced its 

acquisitions of higher-risk loans to support sustainable homeownership. The impact of these changes is shown in the 

2009 and 2010 vintages of Fannie Mae’s single-family loans, which have the lowest early serious delinquency rates of 

any loans the company has acquired in the last 10 years. The company currently anticipates that these loans will be 

profitable. Fannie Mae’s Loan Quality Initiative seeks to ensure that its future acquisitions are the same high caliber 

as its 2009 and 2010 acquisitions. 

 Credit Losses: Almost all of the company’s realized credit losses in 2009 and 2010 on single-family loans are 

attributable to single-family loans that it purchased or guaranteed from 2005 through 2008. While these loans will 

give rise to additional credit losses that it has not yet realized, the company estimates that it has reserved for the 

substantial majority of these losses. 

 Housing Forecast: Based on preliminary data, Fannie Mae estimates that home prices on a national basis improved 

by 2.2 percent in the second quarter of 2010, and have declined 16.9 percent from their peak in the third quarter of 

2006. The company expects home prices to decline slightly for the balance of 2010 and into 2011 before stabilizing, 

and that home sales will be basically flat for all of 2010. Residential mortgage debt outstanding is expected to decline 

for the third year in a row. 
Second-Quarter 2010 Results 2 

 Providing Liquidity to the Market: As part of its ongoing effort to support mortgage lending, Fannie Mae continues 

to serve as a leading source of liquidity. During the first half of 2010, the company purchased or guaranteed an 

estimated $423 billion in loans, which includes approximately $170 billion in delinquent loans the company 

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

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

single-family mortgage-related securities of 39.1 percent, compared with 40.7 percent in the first quarter of 2010. 

Since January 2009, Fannie Mae has provided about $1.2 trillion in liquidity to the market through loan purchases and 

guarantees, including approximately $205 billion in delinquent loans the company purchased from its single-family 

MBS trusts, financing approximately 4,151,000 conventional single-family loans and approximately 487,000 

multifamily units. 

 Homeowner Assistance: Fannie Mae also continues its effort to help struggling homeowners find solutions that 

enable them to avoid foreclosure and, whenever possible, stay in their homes. In the second quarter of 2010, the 

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

than 132,000 loans with an aggregate unpaid principal balance of $27.0 billion. On a loan count basis, this represented 

a 26 percent increase over home retention workouts completed in the first quarter of 2010. Details include: 

o Loan modifications, including permanent HAMP modifications, of 121,693, compared with 93,756 in the first 

quarter of 2010. This figure does not include HAMP modifications in trial periods. 

o Repayment plans/forbearances completed of 8,716, compared with 8,682 in the first quarter of 2010. 

o Preforeclosure sales and deeds-in-lieu of foreclosure of 21,515, compared with 17,326 in the first quarter of 

2010. 

o During the second quarter of 2010, Fannie Mae acquired or guaranteed approximately 354,000 loans that were 

refinances. 

“We are focused on sustainable homeownership, and our higher underwriting and eligibility standards reflect that,” said 

Fannie Mae President and CEO Mike Williams. “Across our industry, we are seeing a more realistic approach to housing 

and lending that bodes well for the future. At Fannie Mae, we are committed to maintaining appropriate standards while 

also supporting affordable housing for low- and middle-income families. We will also continue to support a variety of 

programs to reach borrowers who need help, so that whenever possible, they can avoid foreclosure and stay in their 

homes.” 

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

macroeconomic trends, including unemployment, the economy, and home prices. For a complete discussion of the 

company’s credit performance, see the Executive Summary of its quarterly report on Form 10-Q for the quarter ended 

June 30, 2010, which was filed today with the Securities and Exchange Commission. 
Second-Quarter 2010 Results 3 

SUMMARY OF SECOND-QUARTER RESULTS

Including $1.9 billion of dividends paid on its senior preferred stock held by Treasury, the company’s net loss attributable 

to common stockholders was $3.1 billion, or ($0.55) per diluted share, compared with a loss of $13.1 billion, or ($2.29) 

per diluted share, in the first quarter of 2010. The net worth deficit of $1.4 billion as of June 30, 2010 takes into account 

the company’s net loss, dividends paid on senior preferred stock held by Treasury, and a reduction in unrealized losses on 

available-for-sale securities during the second quarter. 

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

Net interest income 4,207 $ 2,789$ 1,418$ 4,207$ 3,735$ $ 472

Guaranty fee income 52 54 (2) 1,659 52 (1,607)

Fee and other income 242 179 63 242 197 45

Net revenues 4,501 3,022 1,479 4,501 5,591 (1,090)

Investment gains (losses), net 23 166 (143) 23 (45) 68

Net other-than-temporary impairments (137) (236) 99 (137) (753) 616

Fair value gains (losses), net 303 (1,705) 2,008 303 823 (520)

Losses from partnership investments (26) (58) 32 (26) (571) 545

Administrative expenses (670) (605) (65) (670) (510) (160)

Credit-related expenses (2) (4,851) (11,884) 7,033 (4,851) (18,784) 13,933

Other non-interest expenses (357) (296) (61) (357) (508) 151

Net losses and expenses (5,715) (14,618) 8,903 (5,715) (20,348) 14,633

Loss before federal income taxes (1,214) (11,596) 10,382 (1,214) (14,757) 13,543

(Provision) benefit for federal income taxes (9) 67 (76) (9) (23) 14

Net loss (1,223) (11,529) 10,306 (1,223) (14,780) 13,557

Less: Net (income) loss attributable to the noncontrolling interest 5 (1) 6 5 26 (21)

Net loss attributable to Fannie Mae $ (1,218) $ (11,530) $ 10,312 $ (1,218) $ (14,754) $ 13,536

Preferred stock dividends (1,907) (1,527) (380) (1,907) (411) (1,496)

Net loss attributable to common stockholders $ (3,125) $ (13,057) $ 9,932 $ (3,125) $ (15,165) $ 12,040

Loss per share - basic and diluted $ (0.55) $ (2.29) $ 1.74 $ (0.55) $ (2.67) $ 2.12

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

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

Net revenue was $4.5 billion in the second quarter of 2010, up 49 percent from $3.0 billion in the first quarter of 2010, 

due primarily to an increase in net interest income. Net interest income was $4.2 billion, up 51 percent from $2.8 billion in 

the first quarter of 2010. The increase was due almost entirely to the purchase from single-family MBS trusts of the 

substantial majority of the loans that are four or more monthly payments delinquent, as the cost of holding these loans in 

the company’s portfolio is less than the cost of advancing delinquent payments to MBS certificateholders. 

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

$2.2 billion, compared with $2.7 billion in the first quarter of 2010. 
Second-Quarter 2010 Results 4 

Credit-related expenses, which are the total provision for credit losses plus foreclosed property expense, were $4.9 

billion, down from $11.9 billion in the first quarter of 2010. The reduction in credit-related expenses reflected (1) a 

decrease in the rate of seriously delinquent loans in the second quarter of 2010 to 4.99 percent as of June 30, 2010, from 

5.47 percent as of March 31, 2010, which was due partly to the home retention and foreclosure alternative workouts that 

the company completed, as well as a higher volume of foreclosures; (2) a decrease in average loss severities; and (3) an 

update to the company’s loan-loss allowance model to use mark-to-market loan-to-value ratios rather than loan-to-value 

ratios at origination in its severity calculations, which resulted in a change in estimate and a decrease in the allowance for 

loan losses of approximately $1.6 billion. These factors were partially offset by an out-of-period adjustment of $1.1 

billion related to an additional provision for losses on preforeclosure property taxes and insurance receivables. 

The company expects its financial results will continue to be negatively affected by losses primarily on a subset of loans it 

acquired between 2005 and 2008. The company expects that its credit-related expenses will remain high in 2010. 

However, the company expects that, if current trends continue, its credit-related expenses will be lower in 2010 than in 

2009. 

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

fair-value losses, increased to $7.0 billion from $5.1 billion in the first quarter of 2010. The increase was due to increases 

in the number of defaults and the number of properties in the company’s real estate owned inventory. The company’s 

2009 and 2010 vintages accounted for less than one percent of its single-family credit losses. Typically, credit losses on 

mortgage loans do not peak until the third through fifth years following origination. 

Combined loss reserves as of June 30, 2010 remained at the same level as compared with March 31, 2010, at $60.8 

billion, or 1.99 percent of the company’s guaranty book of business. Total nonperforming loans in the company’s 

guaranty book of business were $218.2 billion, compared with $223.9 billion as of March 31, 2010. 

Net fair value gains were $303 million in the second quarter, compared to losses of $1.7 billion in the first quarter of 

2010, due primarily to lower fair value losses on the company’s derivatives, which were partially offset by lower fair 

value gains on its trading securities. 

Net other-than-temporary impairment was $137 million in the second quarter, down from $236 million in the first 

quarter of 2010, primarily as a result of lower impairment of subprime securities. 

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

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

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

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

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

Fannie Mae’s Web site, www.fanniemae.com. 
Second-Quarter 2010 Results 5 

NET WORTH AND U.S. TREASURY FUNDING

The Acting Director of the Federal Housing Finance Agency has requested $1.5 billion of funds from Treasury on the 

company’s behalf under the terms of the senior preferred stock purchase agreement between Fannie Mae and Treasury to 

eliminate the company’s net worth deficit as of June 30, 2010. 

On June 30, 2010, Treasury provided to us $8.4 billion to cure the company’s net worth deficit as of March 31, 2010. As a 

result of this draw, the aggregate liquidation preference of the senior preferred stock increased from $76.2 billion to $84.6 

billion as of June 30, 2010. It will increase to $86.1 billion upon the receipt of funds from Treasury to eliminate the 

company’s second-quarter 2010 net worth deficit. 

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

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

excess of its annual dividend obligation to Treasury for the indefinite future. 

FAIR VALUE UPDATE

The fair value of the company’s net assets increased by $7.2 billion from March 31, 2010, which resulted in a fair value 

net deficit of $138.0 billion as of June 30, 2010. The increase was due to the receipt of $8.4 billion of capital from 

Treasury under the senior preferred stock purchase agreement, offset by a decrease in fair value due to credit-related 

items, principally related to a general increase in estimated severity rates based on recent experience, particularly for loans

with a high mark-to-market LTV ratio, as well as increased default estimates for loans with higher-risk profiles. 

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

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

value. The fair value of the company’s net assets is not a measure defined within GAAP and may not be comparable to 

similarly titled measures reported by other companies. It is not intended as a substitute for the company’s stockholders’ 

deficit or for the total deficit reported in its GAAP condensed consolidated balance sheets, which represents the net worth 

measure that is used to determine whether it is necessary to request additional funds from Treasury under the senior 

preferred stock purchase agreement. Instead, the fair value of Fannie Mae’s net assets reflects a point in time estimate of 

the fair value of the company’s existing assets and liabilities. 

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

Information—Fair Value Balance Sheets” in the company’s quarterly report on Form 10-Q for the period ended June 30, 

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

and “Explanation and Reconciliation of Non-GAAP Measures to GAAP Measures” later in this release for a 

reconciliation of the company’s fair value balance sheets to its GAAP condensed consolidated balance sheets. 
Second-Quarter 2010 Results 6 

FORECLOSURE ACTIVITY

The company acquired 68,838 single-family real estate owned properties through foreclosure in the second quarter of 

2010, compared with 61,929 in the first quarter of 2010. As of June 30, 2010, the company’s inventory of single-family 

real estate owned properties was 129,310, compared with 109,989 as of March 31, 2010. The carrying value of the 

company’s single-family REO was $13.0 billion, compared with $11.4 billion as of March 31, 2010. 

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

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

of June 30, 2010, approximately 36 percent of the company’s properties that it is unable to market for sale were in 

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

Additionally, as of June 30, 2010, approximately 36 percent of the company’s properties that it is unable to market for 

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

months. 

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

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

business, was 1.52 percent on an annualized basis in the second quarter, compared with 1.36 percent in the first quarter of 

2010. 

Although the company has expanded its loan workout initiatives to help borrowers keep their homes, it expects 

foreclosures to increase during the remainder of 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 SINGLE-FAMILY MBS TRUSTS

Under accounting standards adopted earlier this year, the cost of purchasing most delinquent loans from Fannie Mae 

single-family MBS trusts and holding them in the company’s portfolio is less than the cost of advancing delinquent 

payments to holders of the Fannie Mae single-family MBS. The company began to significantly increase its purchases of 

delinquent loans from single-family MBS trusts in the first quarter of 2010, and through June 30, 2010 it had purchased 

the substantial majority of its delinquent loan population, which resulted in an increase in the company’s Capital Market’s 

mortgage portfolio. The company purchased approximately 858,000 delinquent loans with an unpaid principal balance of 

approximately $170 billion from single-family MBS trusts in the first six months of 2010, including the purchase of 

approximately 570,000 delinquent loans with an unpaid principal balance of approximately $114 billion in the second 

quarter of 2010. 
Second-Quarter 2010 Results 7 

The company expects to continue to purchase loans from single-family MBS trusts as they become four or more 

consecutive monthly payments delinquent subject to market conditions, servicer capacity, and other constraints including 

the limit on the mortgage assets that it may own pursuant to the senior preferred stock purchase agreement with Treasury. 

As of June 30, 2010, the total unpaid principal balance of all loans in single-family MBS trusts that were delinquent four 

or more months was approximately $9 billion. In July 2010, the company purchased approximately 50,000 delinquent 

loans with an unpaid principal balance of approximately $9 billion from its MBS trusts. 

The purchase of delinquent loans from its MBS trusts contributed to the increase of the company’s total outstanding debt, 

excluding debt of consolidated trusts, to $842.6 billion as of June 30, 2010, from $784.3 billion as of March 31, 2010. 

The company has experienced strong demand for its long-term debt securities. 

BUSINESS SEGMENT RESULTS

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

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

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

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

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

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

Single-Family Credit Guaranty book of business was $2.87 trillion as of June 30, 2010, compared with $2.88 trillion as 

of March 31, 2010. Single-family guaranty fee income for the second quarter of 2010, as in the first quarter of 2010, was 

$1.8 billion. The Single-Family business lost $5.1 billion in the second quarter of 2010 due primarily to credit-related 

expenses of $4.9 billion. The Single-Family business lost $12.6 billion in the first quarter of 2010. 

Housing and Community Development multifamily guaranty book of business as of June 30, 2010 was $186.1 billion, 

unchanged from March 31, 2010. HCD recorded a net benefit of $20 million from credit-related expenses in the second 

quarter of 2010, compared with a net benefit of $42 million in the first quarter of 2010. HCD earned $119 million in the 

second quarter of 2010, compared with $99 million in the first quarter of 2010. 

Capital Markets’ net interest income was $3.5 billion in the second quarter of 2010, compared with $3.1 billion in the 

first quarter of 2010. Fair value gains were $631 million, compared with losses of $1.2 billion in the first quarter of 2010. 

Net other-than-temporary impairment was $137 million in the second quarter of 2010, compared with $236 million in the 

first quarter of 2010. The net mortgage investment portfolio balance was $817.8 billion, compared with $764.8 billion on 

March 31, 2010, resulting from purchases of $134.7 billion, liquidations of $46.1 billion, and sales of $35.6 billion during 

the quarter. Capital Markets earned $4.4 billion in the second quarter of 2010, compared with $2.1 billion in the first 

quarter of 2010. 
Second-Quarter 2010 Results 8 

# # # 

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

company’s future financial results, the profitability of its loans, its future credit losses and credit-related expenses, its draws from and dividends to 

be paid to Treasury, the performance and caliber of loans it has acquired and will acquire, foreclosures, residential mortgage market conditions, 

industry underwriting and eligibility standards, and its future purchases of loans from MBS trusts. These estimates, forecasts, expectations, and 

statements are forward-looking statements and are based on the company’s current assumptions regarding numerous factors, including assumptions 

about future home prices and the future performance of its loans. The company’s future estimates of these amounts, as well as the actual amounts, 

may differ materially from its current estimates as a result of home price changes, interest rate changes, unemployment, government policy matters, 

changes in generally accepted accounting principles, credit availability, social behaviors, other macroeconomic variables, the volume of loans it 

modifies, the effectiveness of its loss mitigation strategies, management of its real estate owned inventory and pursuit of contractual remedies, 

multifamily vacancy rates, changes in the fair value of its assets and liabilities, impairments of its assets, or many other factors. Changes in the 

company’s underlying assumptions and actual outcomes, which could be affected by the economic environment, government policy, and many other 

factors, including those discussed in the “Risk Factors” section of the company’s quarterly report on Form 10-Q for the period ended June 30, 2010 

and its annual report on Form 10-K for the year ended December 31, 2009, and elsewhere in this release, could result in actual results being 

materially different from what is set forth in the forward-looking statements. 

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

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

to mortgage bankers and other lenders so that they may lend to home buyers. Our job is to help those who house America. 
Second-Quarter 2010 Results 9 

ANNEX I 

FANNIE MAE 

(In conservatorship) 

Condensed Consolidated Balance Sheets

(Dollars in millions, except share amounts) 

(Unaudited) 

 As of

 June 30, December 31, 

 2010 2009 

ASSETS 

Cash and cash equivalents (includes cash of consolidated trusts of $526 and $2,092, respectively) $ 27,844 $ 6,812 

Restricted cash (includes restricted cash of consolidated trusts of $35,376 and $-, respectively) 38,855 3,070 

Federal funds sold and securities purchased under agreements to resell or similar arrangements 37,608 53,684 

Investments in securities: 

 Trading, at fair value (includes securities of consolidated trusts of $23 and $5,599, respectively) 77,353 111,939 

 Available-for-sale, at fair value (includes securities of consolidated trusts of $611 and $10,513, respectively, 

 and securities pledged as collateral that may be sold or repledged of $- and $1,148, respectively) 105,660 237,728 

 Total investments in securities 183,013 349,667 

Mortgage loans: 

 Loans held for sale, at lower of cost or fair value 1,025 18,462 

 Loans held for investment, at amortized cost 

 Of Fannie Mae 405,998 256,434 

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

 of $2,846 and $1,947, respectively) 2,574,018 129,590 

 Total loans held for investment 2,980,016 386,024 

 Allowance for loan losses (60,582) (9,925)

 Total loans held for investment, net of allowance 2,919,434 376,099 

 Total mortgage loans 2,920,459 394,561 

Advances to lenders 4,849 5,449 

Accrued interest receivable: 

 Of Fannie Mae 6,793 3,774 

 Of consolidated trusts 9,851 519 

 Allowance for accrued interest receivable (4,784) (536)

 Total accrued interest receivable, net of allowance 11,860 3,757 

Acquired property, net 14,021 9,142 

Derivative assets, at fair value 1,224 1,474 

Guaranty assets 427 8,356 

Deferred tax assets, net 1,012 909 

Partnership investments 1,820 2,372 

Servicer and MBS trust receivable 991 18,329 

Other assets 12,284 11,559 

 Total assets $ 3,256,267 $ 869,141 

LIABILITIES AND EQUITY (DEFICIT)

Liabilities: 

 Accrued interest payable: 

 Of Fannie Mae $ 4,517 $ 4,951 

 Of consolidated trusts 9,956 29 

 Federal funds purchased and securities sold under agreements to repurchase 142 - 

 Short-term debt: 

 Of Fannie Mae 256,066 200,437 

 Of consolidated trusts 5,987 - 

 Long-term debt: 

 Of Fannie Mae (includes debt at fair value of $3,264 and $3,274, respectively) 586,437 567,950 

 Of consolidated trusts (includes debt at fair value of $311 and $-, respectively) 2,376,774 6,167 

 Derivative liabilities, at fair value 1,693 1,029 

 Reserve for guaranty losses (includes $29 and $4,772, respectively, related to Fannie Mae MBS included in Investments in securities) 246 54,430 

 Guaranty obligations 765 13,996 

 Partnership liabilities 1,884 2,541 

 Servicer and MBS trust payable 4,420 25,872 

 Other liabilities 8,791 7,020 

 Total liabilities 3,257,678 884,422 

Commitments and contingencies (Note 17) - - 

Fannie Mae stockholders' equity (deficit): 

 Senior preferred stock, 1,000,000 shares issued and outstanding 84,600 60,900 

 Preferred stock, 700,000,000 shares are authorized—578,389,726 and 579,735,457 shares both issued 

 and outstanding, respectively 20,280 20,348 

 Common stock, no par value, no maximum authorization—1,267,748,253 and 1,265,674,761 shares 

 issued, respectively; 1,116,149,329 and 1,113,358,051 shares outstanding, respectively 666 664 

 Additional paid-in capital - 2,083 

 Accumulated deficit (97,544) (90,237)

 Accumulated other comprehensive loss (2,084) (1,732)

 Treasury stock, at cost, 151,598,924 and 152,316,710 shares, respectively (7,400) (7,398)

 Total Fannie Mae stockholders’ deficit (1,482) (15,372)

Noncontrolling interest 71 91 

 Total deficit (1,411) (15,281)

Total liabilities and equity (deficit) $ 3,256,267 $ 869,141 

See Notes to Condensed Consolidated Financial Statements 
Second-Quarter 2010 Results 10 

FANNIE MAE

(In conservatorship)

Condensed Consolidated Statements of Operations

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

(Unaudited) 

 For the For the 

 Three Months Ended Six Months Ended

 June 30, June 30,

 2010 2009 2010 2009 

Interest income: 

 Trading securities $ 330 $ 923 $ 645 $ 1,913 

 Available-for-sale securities 1,389 3,307 2,862 7,028 

 Mortgage loans: 

 Of Fannie Mae 3,950 4,392 7,248 9,099 

 Of consolidated trusts 33,682 1,219 68,003 2,110 

 Other 41 139 80 266 

 Total interest income 39,392 9,980 78,838 20,416 

Interest expense: 

 Short-term debt: 

 Of Fannie Mae 164 600 280 1,707 

 Of consolidated trusts 3 - 5 - 

 Long-term debt: 

 Of Fannie Mae 4,975 5,560 10,056 11,552 

 Of consolidated trusts 30,043 85 61,501 174 

 Total interest expense 35,185 6,245 71,842 13,433 

Net interest income 4,207 3,735 6,996 6,983 

Provision for loan losses (4,295) (2,615) (16,234) (5,124)

Net interest income (loss) after provision for loan losses (88) 1,120 (9,238) 1,859 

Guaranty fee income (includes imputed interest of $30 and $321 for the three months ended June 30, 2010 and 2009, 

 respectively, and $59 and $471 for the six months ended June 30, 2010 and 2009, respectively) 52 1,659 106 3,411 

Investment gains (losses), net 23 (45) 189 178 

Other-than-temporary impairments (48) (1,097) (234) (6,750)

Noncredit portion of other-than-temporary impairments recognized in other comprehensive loss (89) 344 (139) 344 

Net other-than-temporary impairments (137) (753) (373) (6,406)

Fair value gains (losses), net 303 823 (1,402) (637)

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

 consolidated trusts of $31 and $100 for the three months and six months ended June 30, 2010, respectively) (159) (190) (283) (269)

Losses from partnership investments (26) (571) (84) (928)

Fee and other income 242 197 421 389 

 Non-interest income (loss) 298 1,120 (1,426) (4,262)

Administrative expenses: 

 Salaries and employee benefits 324 245 648 538 

 Professional services 260 180 454 323 

 Occupancy expenses 40 46 81 94 

 Other administrative expenses 46 39 92 78 

 Total administrative expenses 670 510 1,275 1,033 

Provision for guaranty losses 69 15,610 33 33,435 

Foreclosed property expense 487 559 468 1,097 

Other expenses 198 318 370 597 

 Total expenses 1,424 16,997 2,146 36,162 

Loss before federal income taxes (1,214) (14,757) (12,810) (38,565)

Provision (benefit) for federal income taxes 9 23 (58) (600)

Net loss (1,223) (14,780) (12,752) (37,965)

 Less: Net loss attributable to the noncontrolling interest 5 26 4 43 

Net loss attributable to Fannie Mae (1,218) (14,754) (12,748) (37,922)

Preferred stock dividends (1,907) (411) (3,434) (440)

Net loss attributable to common stockholders $ (3,125) $ (15,165) $ (16,182) $ (38,362)

 

Loss per share - Basic and Diluted $ (0.55) $ (2.67) $ (2.84) $ (6.76)

Weighted-average common shares outstanding - Basic and Diluted 5,694 5,681 5,693 5,674 

 

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

FANNIE MAE

(In conservatorship)

Condensed Consolidated Statements of Cash Flows

(Dollars in millions) 

(Unaudited) 

 For the Six Months 

 Ended June 30, 

 2010 2009 

Cash flows used in operating activities: 

Net loss $ (12,752) $ (37,965)

Reconciliation of net loss to net cash used in operating activities 

 Amortization of debt of Fannie Mae cost basis adjustments 776 2,176 

 Amortization of debt of consolidated trusts cost basis adjustments (277) (4)

 Provision for loan and guaranty losses 16,267 38,559 

 Valuation (gains) losses (1,517) 4,537 

 Current and deferred federal income taxes 282 (1,690)

 Derivatives fair value adjustments 1,003 (1,045)

 Purchases of loans held for sale (38) (72,172)

 Proceeds from repayments of loans held for sale 29 1,204 

 Net change in trading securities, excluding non-cash transfers (41,797) 3,165 

 Other, net (11,615) (4,302)

Net cash used in operating activities (49,639) (67,537)

Cash flows provided by investing activities:

 Purchases of trading securities held for investment (7,887) - 

 Proceeds from maturities of trading securities held for investment 1,398 6,076 

 Proceeds from sales of trading securities held for investment 20,442 1,313 

 Purchases of available-for-sale securities (601) (108,105)

 Proceeds from maturities of available-for-sale securities 9,022 23,705 

 Proceeds from sales of available-for-sale securities 8,468 168,933 

 Purchases of loans held for investment (32,769) (19,322)

 Proceeds from repayments of loans held for investment of Fannie Mae 8,491 20,904 

 Proceeds from repayments of loans held for investment of consolidated trusts 229,661 11,523 

 Net change in restricted cash 9,798 - 

 Advances to lenders (23,131) (53,646)

 Proceeds from disposition of acquired property 17,693 9,873 

 Net change in federal funds sold and securities purchased under agreements to resell or similar arrangements 15,618 32,147 

 Other, net (627) (9,380)

Net cash provided by investing activities 255,576 84,021 

Cash flows used in financing activities:

 Proceeds from issuance of short-term debt of Fannie Mae 394,719 747,971 

 Proceeds from issuance of short-term debt of consolidated trusts 5,902 - 

 Payments to redeem short-term debt of Fannie Mae (339,366) (820,868)

 Payments to redeem short-term debt of consolidated trusts (18,121) - 

 Proceeds from issuance of long-term debt of Fannie Mae 197,771 187,269 

 Proceeds from issuance of long-term debt of consolidated trusts 128,067 8 

 Payments to redeem long-term debt of Fannie Mae (180,058) (153,991)

 Payments to redeem long-term debt of consolidated trusts (394,225) (273)

Payments of cash dividends on senior preferred stock to Treasury (3,436) (434)

 Proceeds from senior preferred stock purchase agreement with Treasury 23,700 34,200 

 Net change in federal funds purchased and securities sold under agreements to repurchase 142 (65)

Net cash used in financing activities (184,905) (6,183)

Net increase in cash and cash equivalents 21,032 10,301 

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

Cash and cash equivalents at end of period $ 27,844 $ 28,234 

Cash paid during the period for:

Interest $ 73,125 $ 15,430 

Income taxes - 848 

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

Mortgage loans acquired by assuming debt $ 199,498 $ 13 

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

 investment of Fannie Mae 142,034 - 

Transfers from advances to lenders to investments in securities - 38,943 

Transfers from advances to lenders to loans held for investment of consolidated trusts 22,441 - 

Net transfers from mortgage loans to acquired property 32,391 2,211 

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

FANNIE MAE

(In conservatorship)

Condensed Consolidated Statements of Changes in Equity (Deficit)

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

(Unaudited) 

 Fannie Mae Stockholders’ Equity (Deficit) 

 Retained Accumulated 

 Shares Outstanding Additional Earnings Other Non Total 

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

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

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

Cumulative effect from the adoption of a

new accounting standard on other-thantemporary

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

Change in investment in noncontrolling 

 interest - - - - - - - - - - (6) (6)

 Comprehensive loss: 

 Net loss - - - - - - - (37,922) - - (43) (37,965)

 Other comprehensive loss, net of tax effect: 

 Changes in net unrealized losses on 

 available-for-sale securities 

 (net of tax of $790) - - - - - - - - 1,467 - - 1,467 

 Reclassification adjustment for other-than- 

 temporary impairments recognized 

 in net loss (net of tax of $2,263) - - - - - - - - 4,142 - - 4,142 

 Reclassification adjustment for losses 

 included in net loss (net of tax of $46) - - - - - - - - 86 - - 86 

 Unrealized gains on guaranty assets and 

 guaranty fee buy-ups - - - - - - - - 79 - - 79 

 Amortization of net cash flow hedging 

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

 Prior service cost and actuarial gains, 

 net of amortization for defined 

 benefit plans - - - - - - - - 17 - - 17 

 Total comprehensive loss (32,165)

 Senior preferred stock dividends - - - - - - (434) - - - - (434)

 Increase to senior preferred liquidation 

 preference - - - 34,200 - - - - - - - 34,200 

 Conversion of convertible preferred stock 

 into common stock - (15) 23 - (736) 12 724 - - - - - 

 Other - - 1 - - - 36 1 - (41) - (4)

Balance as of June 30, 2009 1 582 1,109 $ 35,200 $ 20,486 $ 662 $ 3,947 $ (56,191) $ (7,429) $ (7,385) $ 108 $ (10,602)

 

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 loss - - - - - - - (12,748) - - (4) (12,752)

 Other comprehensive loss, net of tax effect: 

 Changes in net unrealized losses on 

 available-for-sale securities, (net of tax 

 of $1,509) - - - - - - - - 2,802 - - 2,802 

 Reclassification adjustment for other-than- 

 temporary impairments recognized 

 in net loss (net of tax of $126) - - - - - - - - 247 - - 247 

 Reclassification adjustment for gains 

 included in net loss (net of tax of $6) - - - - - - - - (12) - - (12)

 Unrealized gains on guaranty assets and 

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

 Prior service cost and actuarial gains, net of 

 amortization for defined benefit plans - - - - - - - - 4 - - 4 

 Total comprehensive loss (9,710)

 Senior preferred stock dividends - - - - - - (2,171) (1,265) - - - (3,436)

 Increase to senior preferred liquidation 

 preference - - - 23,700 - - - - - - - 23,700 

 Conversion of convertible preferred stock 

 into common stock - (2) 2 - (68) 2 66 - - - - - 

 Other - - 1 - - - 22 - - (2) - 20 

Balance as of June 30, 2010 1 578 1,116 $ 84,600 $ 20,280 $ 666 $ - $ (97,544) $ (2,084) $ (7,400) $ 71 $ (1,411)

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

Supplemental Non-GAAP Consolidated Fair Value Balance Sheets 

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

 GAAP GAAP 

 Carrying Fair Value Estimated Carrying Fair Value Estimated 

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

 (Dollars in millions) 

Assets: 

Cash and cash equivalents $ 66,699 $ - $ 66,699 (3) $ 9,882 $ - $ 9,882 (3)

Federal funds sold and securities purchased 

under agreements to resell or similar arrangements 37,608 - 37,608 (3) 53,684 (28) 53,656 (3)

Trading securities 77,353 - 77,353 (3) 111,939 - 111,939 (3)

Available-for-sale securities 105,660 - 105,660 (3) 237,728 - 237,728 (3)

Mortgage loans: 

Mortgage loans held for sale 1,025 23 1,048 (3) 18,462 153 18,615 (3)

Mortgage loans held for investment, net of 

 allowance for loan losses: 

 Of Fannie Mae 363,154 (43,326) 319,828 (3) 246,509 (5,209) 241,300 (3)

 Of consolidated trusts 2,556,280 74,609 (4) 2,630,889 (3) 129,590 (45) 129,545 (3)

Total mortgage loans 2,920,459 31,306 2,951,765 394,561 (5,101) 389,460 

Advances to lenders 4,849 (265) 4,584 (3) 5,449 (305) 5,144 (3)

Derivative assets at fair value 1,224 - 1,224 (3) 1,474 - 1,474 (3)

Guaranty assets and buy-ups, net 428 382 810 (3) (5) 9,520 5,104 14,624 (3) (5)

Total financial assets 3,214,280 31,423 3,245,703 (3) 824,237 (330) 823,907 (3)

Master servicing assets and credit enhancements 505 3,881 4,386 (5) (6) 651 5,917 6,568 (5) (6)

Other assets 41,482 (254) 41,228 (6) 44,253 373 44,626 (6)

Total assets $ 3,256,267 $ 35,050 $ 3,291,317 $ 869,141 $ 5,960 $ 875,101 

Liabilities: 

Federal funds purchased and securities sold 

under agreements to repurchase $ 142 $ - $ 142 (3) $ - $ - $ - (3)

Short-term debt: 

 Of Fannie Mae 256,066 145 256,211 (3) 200,437 56 200,493 (3)

 Of consolidated trusts 5,987 - 5,987 (3) - - - (3)

Long-term debt: 

 Of Fannie Mae 586,437 (7) 27,664 614,101 (3) 567,950 (7) 19,473 587,423 (3)

 Of consolidated trusts 2,376,774 (7) 140,869 (4) 2,517,643 (3) 6,167 (7) 143 6,310 (3)

Derivative liabilities at fair value 1,693 - 1,693 (3) 1,029 - 1,029 (3)

Guaranty obligations 765 3,239 4,004 (3) 13,996 124,586 138,582 (3)

Total financial liabilities 3,227,864 171,917 3,399,781 (3) 789,579 144,258 933,837 (3)

Other liabilities 29,814 (383) 29,431 (8) 94,843 (54,878) 39,965 (8)

Total liabilities 3,257,678 171,534 3,429,212 884,422 89,380 973,802 

Equity (deficit): 

Fannie Mae stockholders' equity (deficit): 

Senior preferred(9) 84,600 - 84,600 60,900 - 60,900 

Preferred 20,280 (19,982) 298 20,348 (19,629) 719 

Common (106,362) (116,502) (222,864) (96,620) (63,791) (160,411)

Total Fannie Mae stockholders' 

 deficit/non-GAAP fair value of net assets $ (1,482) $ (136,484) $ (137,966) $ (15,372) $ (83,420) $ (98,792)

Noncontrolling interests 71 - 71 91 - 91 

Total deficit (1,411) (136,484) (137,895) (15,281) (83,420) (98,701)

Total liabilities and equity (deficit) $ 3,256,267 $ 35,050 $ 3,291,317 $ 869,141 $ 5,960 $ 875,101 
Second-Quarter 2010 Results 14 

Explanation and Reconciliation of Non-GAAP Measures to GAAP Measures

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

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

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

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

standard as described in “Note 16, Fair Value.” 

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

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

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

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

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

(5) 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 $427 million and $8.4 billion as of June 30, 2010 and 

December 31, 2009, respectively. The associated buy-ups totaled $0.6 million and $1.2 billion as of June 30, 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 $42.0 billion and $46.1 billion as of June 30, 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 June 30, 2010 and December 31, 2009, respectively, from “Other assets” reported in our 

GAAP condensed consolidated balance sheets because buy-ups are a financial instrument that we combine with guaranty 

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

enhancements based on our fair value methodologies described in Note 16. 

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

balance sheets of $3.6 billion and $3.3 billion as of June 30, 2010 and December 31, 2009, respectively. 

(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 $29.8 billion and $94.8 billion as of June 30, 2010 and December 31, 2009, respectively. The GAAP carrying 

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

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

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

obligations in our non-GAAP supplemental consolidated fair value balance sheets. 

(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.