Third-Quarter 2011 Results 1

Resource Center: 1-800-732-6643 

Contact: Katherine Constantinou 

202-752-5403 

Number: 5552a 

 

Date: November 8, 2011 

Fannie Mae Reports Third-Quarter 2011 Results 

Company Focused on Providing Liquidity to the Mortgage Market, 

Reducing Losses on its Legacy Book, and Growing a Strong New Book 

WASHINGTON, DC – Fannie Mae (FNMA/OTC) today reported a net loss of $5.1 billion in the third 

quarter of 2011, compared to a net loss of $2.9 billion in the second quarter of the year. The company’s 

third-quarter loss was driven primarily by two factors: $4.9 billion in credit-related expenses, the 

substantial majority of which were related to its legacy (pre-2009) book of business; and $4.5 billion in 

fair value losses driven primarily by losses on risk management derivatives due to a significant decline 

in swap interest rates during the quarter. These losses were partially offset by $5.5 billion in net 

revenues. 

The decline in interest rates during the third quarter had a significant impact on the company’s 

derivative losses. However, these losses were mostly offset by fair value gains in the period related to 

the company’s hedged mortgage investments, only a portion of which are recorded at fair value in its 

financial statements. 

“Our results in the third quarter were significantly affected by continued weakness in the housing 

market and the economy overall. Despite these challenges, we are making solid progress. We are 

growing a strong new book of business that now accounts for nearly half of our overall single-family 

guaranty book of business,” said Michael J. Williams, president and chief executive officer. “We help 

homeowners to avoid foreclosure and provide liquidity to enable working families to buy a home or 

secure quality affordable rental housing. We are committed to building a stronger housing finance 

system for the future, and strengthening Fannie Mae to deliver value to customers, families, taxpayers, 

and the industry.” 

“Fannie Mae is working to reduce losses on our legacy book and limit taxpayer exposure,” said Susan 

McFarland, executive vice president and chief financial officer. “Through efforts like the Servicing 

Alignment Initiative, we have created a consistent and transparent set of standards for servicing our 

loans. Our goal is to get to borrowers early in the delinquency process and to find a solution that fits 

their needs. We believe these standards are good for the borrower, good for the industry, and good for 

our company.” 

 

The company’s net worth deficit of $7.8 billion as of September 30, 2011 reflects the recognition of its 

total comprehensive loss of $5.3 billion and its payment to Treasury of $2.5 billion in senior preferred 

stock dividends during the third quarter of 2011. The Acting Director of the Federal Housing Finance 
Third-Quarter 2011 Results 2

Agency (“FHFA”) will submit a request to Treasury on Fannie Mae’s behalf for $7.8 billion to 

eliminate the company’s net worth deficit. Upon receipt of those funds, the company’s total obligation 

to Treasury for its senior preferred stock, which will require an annualized dividend payment of $11.3 

billion, will be $112.6 billion. The table below shows the amount of Fannie Mae’s requested draws 

from Treasury and dividend payments to Treasury since entering into conservatorship on September 6, 

2008. 

Treasury Draw Requests and Dividend Payments 

$ in Billions 

Cumulative 

Total 

Treasury Draw Requests(1) $111.6 

Dividend Payments $17.2 

Cumulative percentage of 

dividends to Treasury Draw 15.4% 

(1) Treasury draw requests do not include the initial $1.0 billion liquidation preference of Fannie Mae's senior preferred stock, 

for which we did not receive any cash proceeds. 

(2) Fannie Mae paid dividends of $31 million in the fourth quarter of 2008 and $25 million in the first quarter of 2009. 

(3) Represents the draw required and requested based on Fannie Mae's net worth deficit for the quarters presented. Draw 

requests were funded in the quarter following each quarterly net worth deficit. 

(4) Represents quarterly cash dividends paid during the quarters presented by Fannie Mae to Treasury, based on an annual rate 

of 10% per year on the aggregate liquidation preference of the senior preferred stock. 

$15.2

$19.0

$10.7

$15.0 $15.3

$8.4

$1.5

$2.5 $2.6

$8.5

$5.1

$7.8

$0.0 $0.0 $0.4 $0.9 $1.2 $1.5 $1.9 $2.1 $2.2 $2.2 $2.3 $2.5

Q4 2008 Q1 2009 Q2 2009 Q3 2009 Q4 2009 Q1 2010 Q2 2010 Q3 2010 Q4 2010 Q1 2011 Q2 2011 Q3 2011

Draw Request from Treasury Dividend Payment to Treasury

(2) (2)

(3) (4)
Third-Quarter 2011 Results 3

PROVIDING LIQUIDITY AND SUPPORT TO THE MARKET

Fannie Mae has continued to provide liquidity and support to the U.S. mortgage market in a number of 

important ways: 

The company served as a stable source of liquidity for purchases of homes and multifamily rental 

housing, as well as for refinancing existing mortgages. Fannie Mae provided approximately $2.1 

trillion in liquidity to the mortgage market from January 1, 2009 through September 30, 2011 through 

its purchases and guarantees of mortgage loans, including more than 7.6 million single-family 

mortgage loans, which enabled borrowers to purchase homes or refinance mortgages, and multifamily 

loans that financed nearly 967,000 units of multifamily housing. 

 The company has been a consistent market presence as it continued to provide liquidity to the 

mortgage market even when other sources of capital exited the market, as evidenced by the 

events of the last few years. It is estimated that Fannie Mae, Freddie Mac, and Ginnie Mae 

collectively guaranteed more than 80 percent of single-family mortgages originated in the 

United States since January 1, 2009. 

 The company has strengthened its underwriting and eligibility standards to support sustainable 

homeownership, enabling borrowers to have access to a variety of conforming mortgage 

products, including long-term, fixed-rate mortgages, such as the prepayable 30-year fixed-rate 

mortgage that protects homeowners from interest rate swings. 

 The company helped more than 960,000 homeowners struggling to pay their mortgages work 

out their loans from January 1, 2009 through September 30, 2011, which helped to support 

neighborhoods, home prices, and the housing market. Workouts refer to home retention 

solutions, such as modifications, repayment plans, and forbearances, as well as foreclosure 

alternatives, such as preforeclosure sales and deeds-in-lieu of foreclosure. 

 The company continued to support affordability in the multifamily rental market. More than 85 

percent of the multifamily units it financed during 2009 and 2010 were affordable to families 

earning at or below the median income in their area. 

 The company remained the largest single issuer of mortgage-related securities in the secondary 

market in the third quarter of 2011, with an estimated market share of new single-family 

mortgage-related securities issuances of 43.3 percent, compared to 43.2 percent in the second 

quarter of 2011 and 44.5 percent in the third quarter of 2010. Fannie Mae also remained a 

constant source of liquidity in the multifamily market. As of June 30, 2011 (the latest date for 

which information was available), the company owned or guaranteed approximately 20 percent 

of the outstanding debt on multifamily properties. 

In the first nine months of 2011, Fannie Mae purchased or guaranteed approximately $445 billion in 

loans, measured by unpaid principal balance, which included approximately $51 billion in delinquent 

loans purchased from its single-family mortgage-backed securities (“MBS”) trusts. Excluding 

delinquent loans purchased from its MBS trusts, Fannie Mae’s purchases and guarantees during the 

first nine months of 2011 enabled its lender customers to finance approximately 1,826,000 singlefamily conventional loans and loans for approximately 289,000 units in multifamily properties. 
Third-Quarter 2011 Results 4

CREDIT QUALITY

New Single-Family Book of Business: 49 percent of Fannie Mae’s single-family guaranty book of 

business as of September 30, 2011 consisted of loans it had purchased or guaranteed since the 

beginning of 2009. The company’s new single-family book of business has a strong overall credit 

profile and is performing well. While it is too early to know how loans in its new single-family book 

of business will ultimately perform, the company expects that these loans will be profitable over their 

lifetime, meaning the company’s fee income on these loans will exceed the company’s credit losses 

and administrative costs for them. If future macroeconomic conditions turn out to be more adverse than 

the company’s expectations, these loans could become unprofitable. 

Conventional single-family loans added to Fannie Mae’s book of business since January 1, 2009 have 

a weighted average loan-to-value ratio at origination of 68 percent, and a weighted average credit score 

at origination of 761. For more information on the expected lifetime profitability of the company’s new 

single-family book of business, please refer to the discussion around Table 2 in the company’s 

quarterly report on Form 10-Q for the quarter ended September 30, 2011.

2005 – 2008 Single-Family Book of Business: The single-family credit losses the company realized 

from January 1, 2009 through September 30, 2011, combined with the amounts the company has 

reserved for single-family credit losses as of September 30, 2011, total approximately $135 billion. 

The substantial majority of these losses were attributable to single-family loans the company 

purchased or guaranteed from 2005 through 2008. The company expects that future defaults on loans 

in its legacy book and the resulting charge-offs will occur over a period of years. 

The 2005 to 2008 acquisitions are becoming a smaller percentage of the company’s single-family 

guaranty book of business, having decreased from 39 percent of its single-family guaranty book of 

business as of December 31, 2010 to 33 percent as of September 30, 2011. 

Fannie Mae’s single-family serious delinquency rate has decreased each quarter since the first quarter 

of 2010. This decrease is primarily the result of home retention solutions, as well as foreclosure 

alternatives and completed foreclosures. The decrease also is attributable to the company’s acquisition 

of loans with a stronger credit profile since the beginning of 2009, as these loans have become an 

increasingly larger portion of the single-family guaranty book of business, resulting in a smaller 

percentage of the company’s loans becoming seriously delinquent. The company expects serious 

delinquency rates will continue to be affected in the future by home price changes, changes in other 

macroeconomic conditions, the length of the foreclosure process, the volume of loan modifications, 

and the extent to which borrowers with modified loans continue to make timely payments. In addition, 

due to circumstances in the foreclosure environment, foreclosures are proceeding at a slow pace, which 

has resulted in loans remaining seriously delinquent in the company’s book of business for a longer 

time. This has caused the company’s serious delinquency rate to decrease more slowly in the last year 

than it would have if the pace of foreclosures had been faster. 
Third-Quarter 2011 Results 5

STRATEGIES TO REDUCE CREDIT LOSSES ON THE LEGACY BOOK

To reduce the credit losses Fannie Mae ultimately incurs on its legacy book of business, the company 

has been focusing its efforts on several strategies, including reducing defaults by offering home 

retention solutions, such as loan modifications. Successful modifications allow borrowers who were 

having problems making their pre-modification mortgage payments to remain in their homes. While 

loan modifications contribute to higher credit-related expenses in the near term, the company believes 

that successful modifications will ultimately reduce the company’s credit losses over the long term 

from what they otherwise would have been if the company had foreclosed on the loans. Fannie Mae 

completed approximately 161,000 loan modifications in the first nine months of 2011, bringing the 

total number of loan modifications the company has completed since January 2009 to more than 

660,000. The ultimate long-term success of the company’s current modification efforts is uncertain 

and will be highly dependent on economic factors, such as unemployment rates, household wealth and 

income, and home prices. 

As the company works to reduce credit losses, it also seeks to assist distressed borrowers, help stabilize 

communities, and support the housing market. In dealing with distressed borrowers, Fannie Mae first 

seeks home retention solutions that enable them to keep their homes before turning to foreclosure 

alternatives. When there is no viable home retention solution or foreclosure alternative that can be 

applied, the company seeks to move to foreclosure expeditiously. The goal of these efforts is to help 

minimize delinquencies that can adversely impact local home values and destabilize communities, as 

well as lower costs to Fannie Mae. 

Improving servicing standards and execution is another key aspect of the company’s strategy to reduce 

its credit losses. The performance of the company’s mortgage servicers is critical to its success in 

reducing defaults, completing foreclosure alternatives, and managing workout and foreclosure 

timelines efficiently, because servicers are the primary point of contact with borrowers. Fannie Mae 

has taken a number of steps to improve the servicing of its delinquent loans. 

 In June 2011, the company issued new standards for mortgage servicers under FHFA’s 

Servicing Alignment Initiative. The Initiative is aimed at establishing consistency in the 

servicing of delinquent loans owned or guaranteed by Fannie Mae and Freddie Mac. Among 

other things, the new servicing standards, which became effective October 1, 2011, are 

designed to result in earlier, more frequent, and more effective contact with borrowers, and to 

improve servicer performance by providing servicers monetary incentives for exceeding loan 

workout benchmarks and by imposing fees on servicers for failing to meet loan workout 

benchmarks or foreclosure timelines. 

 In some cases, Fannie Mae transfers servicing on loan populations that include loans with 

higher-risk characteristics to special servicers with whom the company has worked to develop 

high-touch protocols for servicing these loans. These protocols include lowering the ratio of 

loans per servicer employee, prescribing borrower outreach strategies to be used at earlier 

stages of delinquency, and providing distressed borrowers a single point of contact to resolve 

issues. Transferring servicing on higher-risk loans enables the borrowers (and loans) to benefit 

from these high-touch protocols while increasing the original servicer’s capacity to service the 

remaining loans, creating an opportunity to improve service to the remaining borrowers. 
Third-Quarter 2011 Results 6

 In September 2011, Fannie Mae issued its first ratings of servicers’ performance under its 

Servicer Total Achievement and Rewards (“STAR”) program. The STAR program is designed 

to encourage improvements in customer service and foreclosure prevention outcomes for 

homeowners by rating servicers on their performance in these areas. 

While Fannie Mae believes these steps will improve the servicing on its loans, ultimately the company 

is dependent on servicers’ willingness, efficiency, and ability to implement its home retention solutions 

and foreclosure alternatives, and to manage timelines for workouts and foreclosures. For more 

information on the company’s strategies to reduce credit losses on its legacy book, please refer to the 

company’s quarterly report on Form 10-Q for the quarter ended September 30, 2011. 

The company believes that home retention solutions are most effective in preventing defaults when 

completed at an early stage of delinquency. Similarly, the company’s foreclosure alternatives are more 

likely to be successful in reducing its loss severity if they are executed expeditiously. Accordingly, 

providing potential home retention solutions to delinquent borrowers early in the delinquency and, 

where no home retention solutions are available, reducing delays in proceeding to foreclosure is a 

fundamental component of the company’s strategy to reduce its credit losses and help stabilize the 

housing market. 

HOME RETENTION SOLUTIONS AND FORECLOSURE ALTERNATIVES

Loan Workouts: During the third quarter of 2011, Fannie Mae completed more than 87,000 singlefamily loan workouts, including more than 68,000 home-retention solutions (modifications, repayment 

plans, and forbearances). Details of the company’s home-retention solutions and foreclosure 

alternatives include: 

 Loan modifications, which consist of permanent modifications under the Treasury 

Department’s Home Affordable Modification Program and Fannie Mae’s own modification 

options, increased in the third quarter of 2011 to 60,025 from 50,336 in the second quarter of 

2011. These figures do not include modifications in trial periods. 

 Repayment plans/forbearances of 8,202 in the third quarter of 2011, compared with 8,683 in 

the second quarter of 2011. 

 Preforeclosure sales and deeds-in-lieu of foreclosure of 19,306 in the third quarter of 2011, 

compared with 21,176 in the second quarter of 2011. 

Homeowner Initiatives: In the third quarter of 2011, Fannie Mae continued to develop programs and 

invest in initiatives designed to help keep people in homes, assist prospective homeowners, and 

support the mortgage and housing markets overall. As of September 30, 2011, Fannie Mae had 

established eleven Mortgage Help Centers across the nation to accelerate the response time for 

struggling borrowers with loans owned by Fannie Mae. In the first nine months of 2011, these centers 

helped borrowers obtain nearly 4,100 home retention plans. The company also uses direct mail and 

phone calls to encourage homeowners to pursue home retention solutions and foreclosure alternatives, 

and has established partnerships with counseling agencies in ten states across the country to provide 

similar services. 
Third-Quarter 2011 Results 7

Refinancing Initiatives: Through the company’s Refi PlusTM initiative, which provides expanded 

refinance opportunities for eligible Fannie Mae borrowers, and includes Home Affordable Refinance 

Program (“HARP”) loans, the company acquired or guaranteed approximately 536,000 loans in the 

first nine months of 2011 that helped borrowers obtain more affordable monthly payments or a more 

stable mortgage product. Loans refinanced through the Refi Plus initiative in the first nine months of 

2011 reduced borrowers’ monthly mortgage payments by an average of $171. The company may incur 

additional credit-related expenses as a result of recently announced changes to HARP. However, these 

refinancing activities may help prevent future delinquencies and defaults because loans refinanced 

under the program reduce the borrowers’ monthly payments or otherwise should provide more 

sustainability than the borrowers’ old loans (for example, by having a fixed rate instead of an 

adjustable rate). At this time, Fannie Mae does not know how many of these refinances it will acquire. 

For more information on the recently announced HARP changes, please refer to the company’s 

quarterly report on Form 10-Q for the quarter ended September 30, 2011. 

 

FORECLOSURES AND REO

Fannie Mae acquired 45,194 single-family real-estate owned (“REO”) properties, primarily through 

foreclosure, in the third quarter of 2011, compared with 53,697 in the second quarter of 2011. Fannie 

Mae disposed of 58,297 single-family REO in the third quarter of 2011, compared with 71,202 in the 

second quarter of 2011. As of September 30, 2011, the company’s inventory of single-family REO 

properties was 122,616, compared with 135,719 as of June 30, 2011. The carrying value of the 

company’s single-family REO was $11.0 billion as of September 30, 2011, compared with $12.5 

billion as of June 30, 2011. 

The company’s single-family foreclosure rate was 1.15 percent on an annualized basis in the first nine 

months of 2011, compared with 1.20 percent in the first six months of 2011 and 1.61 percent in the 

first nine months of 2010. This reflects the annualized number of single-family properties acquired 

through foreclosure as a percentage of the total number of loans in Fannie Mae’s conventional singlefamily guaranty book of business. 

The changing foreclosure environment has significantly lengthened the time it takes to foreclose on a 

mortgage loan in many states, which has slowed the pace of Fannie Mae’s REO property acquisitions. 

The increase in foreclosure timelines also has increased Fannie Mae’s credit-related expenses and 

negatively affected its single-family serious delinquency rates. Moreover, Fannie Mae believes these 

changes in the foreclosure environment will delay the recovery of the housing market because it will 

take longer to clear the housing market’s supply of distressed homes, which typically sell at a discount 

to non-distressed homes and therefore negatively affect overall home prices. 

SUMMARY OF THIRD-QUARTER 2011 RESULTS

Fannie Mae reported a net loss of $5.1 billion for the third quarter of 2011, compared to a net loss of 

$2.9 billion in the second quarter of 2011. The net worth deficit of $7.8 billion as of September 30, 

2011 takes into account dividends paid on senior preferred stock held by Treasury. 
Third-Quarter 2011 Results 8

 

(Dollars in millions, except per share amounts)(1) 3Q11 2Q11 Variance 3Q11 3Q10 Variance

 

Net interest income $ 5,186 $ 4,972 $ 214 $ 5,186 $ 4,776 $ 410 

Fee and other income 291 265 26 291 304 (13)

Net revenues 5,477 5,237 240 5,477 5,080 397 

Investment gains, net 73 171 (98) 73 82 (9)

Net other-than-temporary impairments (262) (56) (206) (262) (326) 64 

Fair value (losses) gains, net (4,525) (1,634) (2,891) (4,525) 525 (5,050)

Administrative expenses (591) (569) (22) (591) (730) 139 

Credit-related expenses(2) (4,884) (6,059) 1,175 (4,884) (5,561) 677 

Other non-interest expenses(3) (373) (75) (298) (373) (410) 37 

Net losses and expenses (10,562) (8,222) (2,340) (10,562) (6,420) (4,142)

Loss before federal income taxes (5,085) (2,985) (2,100) (5,085) (1,340) (3,745)

Benefit for federal income taxes - 93 (93) - 9 (9)

Net loss (5,085) (2,892) (2,193) (5,085) (1,331) (3,754)

Less: Net income attributable to the 

noncontrolling interest - (1) 1 - (8) 8 

Net loss attributable to Fannie Mae $ (5,085) $ (2,893) $ (2,192) $ (5,085) $ (1,339) $ (3,746)

 

Total comprehensive loss 

attributable to Fannie Mae $ (5,282) $ (2,891) $ (2,391) $ (5,282) $ (437) $ (4,845) 

Preferred stock dividends $ (2,494) $ (2,282) $ (212) $ (2,494) $ (2,116) $ (378) 

(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 (income).

(3) Consists of debt extinguishment losses, net and other expenses.

 

Net revenues were $5.5 billion in the third quarter of 2011, up 5 percent from $5.2 billion in the 

second quarter of 2011, due primarily to an increase in net interest income. Net interest income was 

$5.2 billion, up 4 percent from $5.0 billion in the second quarter of 2011. 

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

expense, were $4.9 billion in the third quarter of 2011, down from $6.1 billion in the second quarter of 

2011. The decrease in the company’s credit-related expenses in the third quarter of 2011 was driven by 

a lower provision on individually impaired loans as the continued lower interest rate environment 

improved the company’s expected cash flow projections on these loans, therefore reducing the 

company’s estimated impairment. 

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

expense, excluding the effect of certain fair-value losses, were $4.5 billion in the third quarter of 2011, 

compared with $3.9 billion in the second quarter of 2011. The increase in credit losses was primarily 

due to an increase in foreclosed property expense. 
Third-Quarter 2011 Results 9

Total loss reserves, which reflect an estimate of the probable losses the company has incurred in its 

guaranty book of business, increased to $75.6 billion as of September 30, 2011, compared with $74.8 

billion as of June 30, 2011. The total loss reserve coverage to total nonperforming loans was 37.07 

percent as of September 30, 2011, compared with 36.91 percent as of June 30, 2011, and 30.85 percent 

as of December 31, 2010. The continued stress on a broad segment of borrowers from persistent high 

levels of unemployment and underemployment, and the prolonged decline in home prices have caused 

the company’s total loss reserves to remain high for the past few years. 

Net fair value losses were $4.5 billion in the third quarter of 2011, driven primarily by fair value 

losses on Fannie Mae’s risk management derivatives due to a significant decline in swap interest rates 

during the quarter, compared with net fair value losses of $1.6 billion in the second quarter of 2011. 

NET WORTH AND U.S. TREASURY FUNDING

The Acting Director of FHFA will request $7.8 billion of funds from Treasury on the company’s 

behalf under the terms of the senior preferred stock purchase agreement between Fannie Mae and 

Treasury to eliminate the company’s net worth deficit as of September 30, 2011. Fannie Mae’s thirdquarter dividend of $2.5 billion on its senior preferred stock held by Treasury was declared by FHFA 

and paid by the company on September 30, 2011. 

In September 2011, Treasury provided to the company $5.1 billion to cure its net worth deficit as of 

June 30, 2011. As a result of this draw, the aggregate liquidation preference of the senior preferred 

stock increased from $99.7 billion to $104.8 billion as of September 30, 2011. It will increase to 

$112.6 billion upon the receipt of funds from Treasury to eliminate the company’s third-quarter 2011 

net worth deficit, which will require an annualized dividend payment of $11.3 billion. This amount 

exceeds the company’s reported annual net income for any year since its inception. 

Through September 30, 2011, Fannie Mae has paid an aggregate of $17.2 billion to Treasury in 

dividends on the senior preferred stock. 

BUSINESS SEGMENT RESULTS

Fannie Mae conducts its activities through three complementary businesses: its Single-Family 

business, its Multifamily business, and its Capital Markets group. The company’s Single-Family and 

Multifamily businesses work with Fannie Mae’s lender customers, who deliver mortgage loans that the 

company purchases and securitizes into Fannie Mae MBS. The Capital Markets group manages the 

company’s investment activity in mortgage-related assets, funding investments primarily with 

proceeds received from the issuance of Fannie Mae debt securities in the domestic and international 

capital markets. The Capital Markets group also provides liquidity to the mortgage market through 

short-term financing and other activities. 

Single-Family guaranty book of business was $2.84 trillion as of September 30, 2011 compared with 

$2.88 trillion as of June 30, 2011. Single-Family guaranty fee income for both the second and third 

quarter of 2011 was $1.9 billion. The Single-Family business lost $3.7 billion in the third quarter of 

2011, compared with $5.0 billion in the second quarter of 2011, due primarily to credit-related 

expenses of $4.8 billion, the substantial majority of which were attributable to loans purchased or 

guaranteed prior to 2009. 
Third-Quarter 2011 Results 10

Multifamily guaranty book of business was $193.3 billion as of September 30, 2011, compared with 

$191.5 billion as of June 30, 2011. Multifamily recorded credit-related expenses of $102 million in the 

third quarter of 2011, compared with credit-related expenses of $126 million in the second quarter of 

2011. Multifamily earned $72 million in the third quarter of 2011, compared with $87 million in the 

second quarter of 2011. 

Capital Markets’ net interest income for both the second and third quarter of 2011 was $3.9 billion. 

Fair value losses were $4.7 billion, compared with fair value losses of $1.5 billion in the second 

quarter of 2011. The Capital Markets mortgage investment portfolio balance decreased to $722.2 

billion as of September 30, 2011, compared with $731.8 billion as of June 30, 2011, resulting from 

purchases of $42.1 billion, liquidations of $33.8 billion, and sales of $17.9 billion during the quarter. 

The Capital Markets group lost $711 million in the third quarter of 2011, compared with $2.8 billion 

earned in the second quarter of 2011. Capital Markets’ third-quarter loss was driven by losses on the 

company’s risk management derivatives. 

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

value balance sheets, and other matters in its quarterly report on Form 10-Q for the quarter ended 

September 30, 2011, 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 foreclosure-prevention efforts, and other measures is 

contained in the “2011 Third-Quarter Credit Supplement” on Fannie Mae’s Web site, 

www.fanniemae.com. 

# # # 

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; the impact of successful loan modifications; FHFA’s future requests to Treasury on Fannie Mae’s 

behalf; Fannie Mae’s future serious delinquency rates, credit losses, credit-related expenses, defaults, and charge-offs; its draws from and dividends to be 

paid to Treasury; the performance and caliber of loans it has acquired and will acquire; the impact of the changing foreclosure environment; the impact 

of the company’s actions on its delinquencies, defaults, loss severities, costs and credit losses; the impact of the company’s actions on customers, families, 

taxpayers, communities, home values, the housing market, the housing industry and the housing finance system; the impact of the company’s actions to 

improve the servicing on its loans; and the impact of HARP refinances and other refinancing activities on the company’s future financial results, 

delinquencies and defaults. These estimates, forecasts, expectations, and statements are forward-looking statements and are based on the company’s 

current assumptions regarding numerous factors, including assumptions about future home prices and the future performance of its loans. The company’s 

future estimates of these amounts, as well as the actual amounts, may differ materially from its current estimates as a result of home price changes, 

interest rate changes, unemployment, other macroeconomic variables, government policy matters, changes in generally accepted accounting principles, 

credit availability, social behaviors, the volume of loans it modifies, the effectiveness of its loss mitigation strategies, management of its real estate owned 

inventory and pursuit of contractual remedies, changes in the fair value of its assets and liabilities, impairments of its assets, the adequacy of its loss 

reserves, its ability to maintain a positive net worth, effects from activities the company takes to support the mortgage market and help homeowners, the 

conservatorship and its effect on the company’s business, the investment by Treasury and its effect on the company’s business, changes in the structure 

and regulation of the financial services industry, the company’s ability to access the debt markets, disruptions in the housing, credit, and stock markets, 

government investigations and litigation, the performance of the company’s servicers, conditions in the foreclosure environment, and many other factors. 

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

many other factors, including those discussed in the “Risk Factors” sections of the company’s annual report on Form 10-K for the year ended December 

31, 2010 and quarterly report on Form 10-Q for the quarter ended September 30, 2011 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 provides Web site addresses in its news releases solely for readers’ information. Other content or information appearing on these Web sites is 

not part of this release. 

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 purchasing or guaranteeing 

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

FANNIE MAE

 (In conservatorship)

Condensed Consolidated Balance Sheets— (Unaudited) 

(Dollars in millions, except share amounts) 

Third-Quarter 2011 Results 11 

 As of

 September 30, December 31, 

 2011 2010 

ASSETS

Cash and cash equivalents (includes $3 and $348, respectively, related to consolidated trusts) $ 24,307 $ 17,297 

Restricted cash (includes $51,774 and $59,619, respectively, related to consolidated trusts) 55,961 63,678 

Federal funds sold and securities purchased under agreements to resell or similar arrangements 35,950 11,751 

Investments in securities: 

 Trading, at fair value (includes $20 and $21, respectively, related to consolidated trusts) 68,149 56,856 

 Available-for-sale, at fair value (includes $1,429 and $1,055, respectively, related to consolidated trusts) 82,710 94,392 

 Total investments in securities 150,859 151,248 

Mortgage loans: 

 Loans held for sale, at lower of cost or fair value (includes $53 and $661, respectively, related 

 to consolidated trusts) 309 915 

 Loans held for investment, at amortized cost: 

 Of Fannie Mae 385,247 407,228 

 Of consolidated trusts (includes $3,361 and $2,962, respectively, at fair value and loans pledged as collateral 

 that may be sold or repledged of $6,993 and $2,522, respectively) 2,583,699 2,577,133 

 Total loans held for investment 2,968,946 2,984,361 

 Allowance for loan losses (71,435) (61,556)

 Total loans held for investment, net of allowance 2,897,511 2,922,805 

 Total mortgage loans 2,897,820 2,923,720 

Accrued interest receivable, net (includes $8,451 and $8,910, respectively, related to consolidated trusts) 10,862 11,279 

Acquired property, net 12,195 16,173 

Other assets 25,923 26,826 

 Total assets $ 3,213,877 $ 3,221,972 

LIABILITIES AND DEFICIT

Liabilities:

 Accrued interest payable (includes $9,449 and $9,712, respectively, related to consolidated trusts) $ 12,928 $ 13,764 

 Federal funds purchased and securities sold under agreements to repurchase - 52 

 Debt: 

 Of Fannie Mae (includes $845 and $893, respectively, at fair value) 744,803 780,044 

 Of consolidated trusts (includes $3,840 and $2,271, respectively, at fair value) 2,446,973 2,416,956 

 Other liabilities (includes $674 and $893, respectively, related to consolidated trusts) 16,964 13,673 

 Total liabilities 3,221,668 3,224,489 

Commitments and contingencies (Note 14) - - 

Fannie Mae stockholders' equity (deficit): 

 Senior preferred stock, 1,000,000 shares issued and outstanding 104,787 88,600 

 Preferred stock, 700,000,000 shares are authorized—555,374,922 and 576,868,139 shares issued 

 and outstanding, respectively 19,130 20,204 

 Common stock, no par value, no maximum authorization—1,308,762,703 and 1,270,092,708 shares 

 issued, respectively; 1,157,757,042 and 1,118,504,194 shares outstanding, respectively 687 667 

 Accumulated deficit (123,359) (102,986)

 Accumulated other comprehensive loss (1,696) (1,682)

 Treasury stock, at cost, 151,005,661 and 151,588,514 shares, respectively (7,402) (7,402)

 Total Fannie Mae stockholders’ deficit (7,853) (2,599)

Noncontrolling interest 62 82 

 Total deficit (7,791) (2,517)

Total liabilities and deficit $ 3,213,877 $ 3,221,972 

See Notes to Condensed Consolidated Financial Statements 
FANNIE MAE

(In conservatorship)

Condensed Consolidated Statements of Operations and Comprehensive Loss – (Unaudited) 

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

Third-Quarter 2011 Results 12 

 For the Three For the Nine

 Months Ended Months Ended

 September 30, September 30, 

 2011 2010 2011 2010 

Interest income: 

 Trading securities $ 274 $ 310 $ 822 $ 955 

 Available-for-sale securities 1,160 1,313 3,525 4,175 

 Mortgage loans (includes $30,633 and $32,807, respectively, for the 

 three months ended and $94,111 and $100,810, respectively, 

 for the nine months ended related to consolidated trusts) 34,334 36,666 105,257 111,917 

 Other 26 31 79 111 

 Total interest income 35,794 38,320 109,683 117,158 

Interest expense: 

 Short-term debt (includes $3 and $4, respectively, for the three months ended and $8 

 and $9, respectively, for the nine months ended related to consolidated trusts) 66 194 254 479 

 Long-term debt (includes $27,157 and $28,878, respectively, for the three months 

 ended and $82,928 and $90,379, respectively, for the nine months 

 ended related to consolidated trusts) 30,542 33,350 94,311 104,907 

 Total interest expense 30,608 33,544 94,565 105,386 

Net interest income 5,186 4,776 15,118 11,772 

Provision for loan losses (4,159) (4,696) (20,548) (20,930)

Net interest income (loss) after provision for loan losses 1,027 80 (5,430) (9,158)

Investment gains, net 73 82 319 271 

Other-than-temporary impairments (232) (366) (317) (600)

Noncredit portion of other-than-temporary impairments recognized in other 

 comprehensive income (30) 40 (45) (99)

Net other-than-temporary impairments (262) (326) (362) (699)

Fair value (losses) gains, net (4,525) 525 (5,870) (877)

Debt extinguishment losses, net (119) (214) (149) (497)

Fee and other income 291 304 793 831 

 Non-interest (loss) income (4,542) 371 (5,269) (971)

Administrative expenses: 

 Salaries and employee benefits 323 325 953 973 

 Professional services 173 305 531 759 

 Occupancy expenses 46 43 131 124 

 Other administrative expenses 49 57 150 149 

 Total administrative expenses 591 730 1,765 2,005 

(Benefit) provision for guaranty losses (8) 78 694 111 

Foreclosed property expense 733 787 743 1,255 

Other expenses 254 196 638 650 

 Total expenses 1,570 1,791 3,840 4,021 

Loss before federal income taxes (5,085) (1,340) (14,539) (14,150)

Benefit for federal income taxes - 9 91 67 

Net loss (5,085) (1,331) (14,448) (14,083)

Other comprehensive (loss) income: 

 Changes in unrealized losses on available-for-sale securities, net of 

 reclassification adjustments and taxes (198) 901 (20) 3,938 

 Other 1 1 6 6 

 Total other comprehensive (loss) income (197) 902 (14) 3,944 

Total comprehensive loss (5,282) (429) (14,462) (10,139)

 Less: Comprehensive income attributable to the noncontrolling interest - (8) (1) (4)

Total comprehensive loss attributable to Fannie Mae $ (5,282) $ (437) $ (14,463) $ (10,143)

 

Net loss $ (5,085) $ (1,331) $ (14,448) $ (14,083)

 Less: Net income attributable to the noncontrolling interest - (8) (1) (4)

Net loss attributable to Fannie Mae (5,085) (1,339) (14,449) (14,087)

Preferred stock dividends (2,494) (2,116) (6,992) (5,550)

Net loss attributable to common stockholders $ (7,579) $ (3,455) $ (21,441) $ (19,637)

 

Loss per share - Basic and Diluted $ (1.32) $ (0.61) $ (3.74) $ (3.45)

Weighted-average common shares outstanding - Basic and Diluted 5,760 5,695 5,730 5,694 

See Notes to Condensed Consolidated Financial Statements 
FANNIE MAE

(In conservatorship)

Condensed Consolidated Statements of Cash Flows – (Unaudited)

(Dollars in millions) 

Third-Quarter 2011 Results 13 

 For the Nine Months 

 Ended September 30, 

 2011 2010 

 

Net cash used in operating activities $ (6,714) $ (42,447) 

Cash flows provided by investing activities: 

 Purchases of trading securities held for investment (2,483) (7,984) 

 Proceeds from maturities and paydowns of trading securities held for investment 1,672 1,997 

 Proceeds from sales of trading securities held for investment 837 21,488 

 Purchases of available-for-sale securities (44) (262) 

 Proceeds from maturities and paydowns of available-for-sale securities 9,995 12,927 

 Proceeds from sales of available-for-sale securities 2,590 7,096 

 Purchases of loans held for investment (44,276) (52,048) 

 Proceeds from repayments of loans held for investment of Fannie Mae 18,467 14,749 

 Proceeds from repayments of loans held for investment of consolidated trusts 364,500 378,662 

 Net change in restricted cash 7,717 (11,111) 

 Advances to lenders (43,363) (44,951) 

 Proceeds from disposition of acquired property and preforeclosure sales 36,280 28,079 

 Net change in federal funds sold and securities purchased under agreements to resell 

 or similar agreements (24,199) 33,219 

 Other, net 137 (476) 

Net cash provided by investing activities 327,830 381,385 

Cash flows used in financing activities: 

 Proceeds from issuance of debt of Fannie Mae 572,828 890,570 

 Payments to redeem debt of Fannie Mae (609,399) (848,438) 

 Proceeds from issuance of debt of consolidated trusts 157,280 191,665 

 Payments to redeem debt of consolidated trusts (444,160) (587,963) 

 Payments of cash dividends on senior preferred stock to Treasury (6,992) (5,554) 

 Proceeds from senior preferred stock purchase agreement with Treasury 16,187 25,200 

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

 Other, net 150 (33) 

Net cash used in financing activities (314,106) (334,368) 

Net increase in cash and cash equivalents 7,010 4,570 

Cash and cash equivalents at beginning of period 17,297 6,812 

Cash and cash equivalents at end of period $ 24,307 $ 11,382 

Cash paid during the period for interest $ 97,592 $ 107,537 

 

 

 

See Notes to Condensed Consolidated Financial Statements