UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

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

EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2021

OR

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

EXCHANGE ACT OF 1934

For the transition period from to 

Commission file number: 0-50231

Federal National Mortgage Association

(Exact name of registrant as specified in its charter) 

Fannie Mae

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

Washington, DC 20005

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

(Address of principal executive 

offices, including zip code)

(Registrant’s telephone number, 

including area code)

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

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

None N/A N/A

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

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

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

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

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

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

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

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

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

Large accelerated filer ☑ Accelerated filer ☐

Non-accelerated filer ☐ Smaller reporting company ☐

Emerging growth company ☐

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

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

Act. ☐

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

As of October 15, 2021, there were 1,158,087,567 shares of common stock of the registrant outstanding.
TABLE OF CONTENTS

Page

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

Item 1. Financial Statements

Condensed Consolidated Balance Sheets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80

Condensed Consolidated Statements of Operations and Comprehensive Income . . . . . . . . . . . . . . . . . . . . . . 81

Condensed Consolidated Statements of Cash Flows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82

Condensed Consolidated Statements of Changes in Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83

Note 1—Summary of Significant Accounting Policies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85

Note 2—Consolidations and Transfers of Financial Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90

Note 3—Mortgage Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93

Note 4—Allowance for Loan Losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101

Note 5—Investments in Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105

Note 6—Financial Guarantees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 108

Note 7—Short-Term and Long-Term Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 109

Note 8—Derivative Instruments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 111

Note 9—Segment Reporting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 116

Note 10—Concentrations of Credit Risk . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 118

Note 11—Netting Arrangements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 122

Note 12—Fair Value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 124

Note 13—Commitments and Contingencies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 136

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

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

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

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

Liquidity Provided in the First Nine Months of 2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

Legislation and Regulation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

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

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

Consolidated Balance Sheet Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26

Retained Mortgage Portfolio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27

Guaranty Book of Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29

Business Segments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30

Single-Family Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31

Single-Family Mortgage Market . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31

Single-Family Market Activity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31

Single-Family Business Metrics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32

Single-Family Business Financial Results . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33

Single-Family Mortgage Credit Risk Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35

Multifamily Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56

Multifamily Mortgage Market . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57

Multifamily Business Metrics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57

Multifamily Business Financial Results . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59

Multifamily Mortgage Credit Risk Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59

Liquidity and Capital Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66

Off-Balance Sheet Arrangements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71

Risk Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72

Institutional Counterparty Credit Risk Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72

Market Risk Management, including Interest-Rate Risk Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73

Critical Accounting Policies and Estimates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75

Impact of Future Adoption of New Accounting Guidance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76

Forward-Looking Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76

Fannie Mae Third Quarter 2021 Form 10-Q i
Item 3. Quantitative and Qualitative Disclosures about Market Risk . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 138

Item 4. Controls and Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 138

PART II—Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 140

Item 1. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 140

Item 1A. Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 141

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 147

Item 3. Defaults Upon Senior Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 148

Item 4. Mine Safety Disclosures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 148

Item 5. Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 148

Item 6. Exhibits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 149

Fannie Mae Third Quarter 2021 Form 10-Q ii
PART I—FINANCIAL INFORMATION

Item 2. Management’s Discussion and Analysis of Financial 

Condition and Results of Operations

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

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

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

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

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

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

conservator. 

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

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

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

conservatorship. Members of Congress and the Administration continue to express the importance of housing finance 

system reform. 

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

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

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

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

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

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

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

“Legislation and Regulation” in this report and in our Form 10-Q for the quarter ended June 30, 2021 (“Second Quarter 

2021 Form 10-Q”)

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

notes in this report and the more detailed information in our 2020 Form 10-K. You can find a “Glossary of Terms Used in 

This Report” in our 2020 Form 10-K. 

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

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

and our future results may differ materially from those reflected in our forward-looking statements due to a variety of 

factors, including those discussed in “Risk Factors” and elsewhere in this report and in our 2020 Form 10-K. 

Introduction

Fannie Mae is a leading source of financing for mortgages in the United States, with $4.2 trillion in assets as of 

September 30, 2021. Organized as a government-sponsored entity, Fannie Mae is a shareholder-owned corporation. 

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

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

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

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

primarily with lenders who originate loans to borrowers. We securitize those loans into Fannie Mae mortgage-backed 

securities that we guarantee (which we refer to as Fannie Mae MBS or our MBS). 

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

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

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

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

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

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

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

in our book of business.

MD&A | Introduction

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

Summary of Our Financial Performance

Quarterly Condensed Consolidated Results

(Dollars in billions)

$6.7 $7.1

$4.2

$4.8

$4.2

$4.8

Net revenues Net income Comprehensive income

Q3 2020 Q3 2021

• Net revenues increased $334 million in the third quarter of 2021 compared with the third quarter of 2020,

primarily due to higher base guaranty fees due to an increase in the size of our guaranty book of business, 

partially offset by a decrease in amortization income as a result of lower prepayment volumes and a decrease 

in net interest income from portfolios in the third quarter of 2021 compared with the third quarter of 2020. 

• Net income increased $613 million in the third quarter of 2021 compared with the third quarter of 2020, driven 

primarily by an increase in credit-related income, an increase in net revenues and lower fair value losses, 

partially offset by lower investment gains.

◦ Credit-related income in the third quarter of 2021 was primarily driven by strong actual and forecasted 

home price growth and a reduction in our estimate of losses we expect to incur as a result of the 

COVID-19 pandemic. 

◦ The increase in net revenues is discussed above.

◦ The decrease in fair value losses was driven by lower losses on commitments to sell mortgage-related 

securities in the third quarter of 2021 than in the third quarter of 2020. In the third quarter of 2021, 

commitment pricing remained relatively stable, whereas prices increased during the third quarter of 

2020, driving fair value losses during the commitment period in 2020.

◦ The decrease in investment gains was due to lower reperforming loan sales volume in the third quarter

of 2021 compared with the third quarter of 2020.

• Net worth increased to $42.2 billion as of September 30, 2021 from $37.3 billion as of June 30, 2021. The 

increase is attributable to $4.8 billion of comprehensive income for the third quarter of 2021.

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

Fannie Mae Third Quarter 2021 Form 10-Q 2
Year-to-Date Condensed Consolidated Results

(Dollars in billions)

$18.1

$22.3

$7.2

$17.0

$7.2

$16.9

Net revenues Net income Comprehensive income

YTD 2020 YTD 2021

• Net revenues increased $4.2 billion in the first nine months of 2021 compared with the first nine months of 

2020, primarily due to an increase in net amortization income as a result of high prepayment volumes from loan 

refinancings in the first nine months of 2021 driven by the low interest-rate environment, as well as higher base 

guaranty fees due to an increase in the size of our guaranty book of business. The increase in net revenues 

was partially offset by a decrease in net interest income from portfolios in the first nine months of 2021

compared with the first nine months of 2020.

• Net income increased $9.8 billion in the first nine months of 2021 compared with the first nine months of 2020, 

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

the first nine months of 2021 and higher net revenues as discussed above. Credit-related expense in the first 

nine months of 2020 was driven by economic dislocation caused by the COVID-19 pandemic. Credit-related 

income in the first nine months of 2021 was primarily driven by strong actual and forecasted home price growth, 

a benefit from the redesignation of certain nonperforming and reperforming loans and a reduction in our 

estimate of losses we expect to incur as a result of the COVID-19 pandemic, partially offset by a provision for 

higher actual and projected interest rates. An additional driver of increased net income included a shift from fair 

value losses in the first nine months of 2020 to fair value gains in the first nine months of 2021 primarily related 

to commitments to sell mortgage-related securities.

• Net worth increased to $42.2 billion as of September 30, 2021 from $25.3 billion as of December 31, 2020. The 

increase is attributable to $16.9 billion of comprehensive income for the first nine months of 2021. 

Financial Performance Outlook

Our financial results benefited significantly in the third quarter and first nine months of 2021 from high refinance 

volumes, which contributed to our net amortization income, and the high pace of home price growth, which contributed 

to our credit-related income. We expect the pace of both refinance volumes and home price growth to moderate from 

recent quarters. Specifically, we expect modest increases in mortgage interest rates and the large number of borrowers 

who have refinanced recently will result in fewer borrowers who can benefit from a refinancing in the future, leading to 

lower amortization income from prepayment activity. In addition, we expect lower home price growth will likely reduce 

the amount of positive benefit, if any, to credit-related income (provision) in the near future related to home price 

changes. See “Key Market Economic Indicators” for a discussion of how home prices, interest rates and other 

macroeconomic factors can affect our financial results.

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

Fannie Mae Third Quarter 2021 Form 10-Q 3
Liquidity Provided in the First Nine Months of 2021

Through our single-family and multifamily business segments, we provided $1.1 trillion in liquidity to the mortgage 

market in the first nine months of 2021, enabling the financing of approximately 4.3 million home purchases, 

refinancings or rental units.

Fannie Mae Provided $1.1 Trillion in Liquidity in the First Nine Months of 2021

Unpaid Principal Balance Units

$344B 1.1M

Single-Family Home Purchases

$726B 2.7M

Single-Family Refinancings

$49B 511K

Multifamily Rental Units

We continued our commitment to green financing in the first nine months of 2021, issuing a total of $10.6 billion in 

multifamily green MBS, $319 million in single-family green MBS and $2.4 billion in multifamily green resecuritizations. 

We also issued $8.2 billion in multifamily social MBS and $315 million in multifamily social resecuritizations in the first 

nine months of 2021. These green and social bonds were issued in alignment with our Sustainable Bond Framework, 

which guides our issuances of sustainable debt bonds and sustainable MBS that support energy and water efficiency 

and housing affordability. For information about our green bonds and our Sustainable Bond Framework, see “Directors, 

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

Legislation and Regulation

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

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

Housing Finance Reform” and “Business—Legislation and Regulation” in our 2020 Form 10-K, as well as in “MD&A—

Legislation and Regulation” in our Form 10-Q for the quarter ended March 31, 2021 (“First Quarter 2021 Form 10-Q”) 

and our Second Quarter 2021 Form 10-Q. Also see “Risk Factors” in our 2020 Form 10-K and in this report for 

discussions of risks relating to legislative and regulatory matters.

Letter Agreement with Treasury

On September 14, 2021, Fannie Mae, through FHFA acting in its capacity as Fannie Mae’s conservator, entered into a 

letter agreement with Treasury temporarily suspending certain provisions of the senior preferred stock purchase 

agreement. Specifically, the letter agreement temporarily suspends certain business restrictions that were added in the 

January 14, 2021 letter agreement amending the senior preferred stock purchase agreement. These restrictions include 

the following:

• Section 5.12(c)—Single Counterparty Volume Cap on Single-Family Acquisitions for Cash. Under this provision, 

beginning on January 1, 2022, we may not acquire more than $1.5 billion in single-family loans for cash 

consideration from any single seller (including its affiliates) during any period comprising four calendar quarters. 

Loan acquisitions through lender swap securitization transactions are not subject to this limitation.

• Section 5.13—Multifamily Volume Cap. Under this provision, we may not acquire more than $80 billion in 

multifamily mortgage assets calculated in any 52-week period. This multifamily volume cap must be adjusted 

up or down by FHFA at the end of each calendar year based on changes to the consumer price index. 

Additionally, at least 50% of our multifamily acquisitions in any calendar year must be classified as missiondriven at the time of acquisition, consistent with FHFA guidelines. 

• Section 5.14(a)—Limit on Specified Higher-Risk Single-Family Acquisitions. Under this provision, we may not 

acquire a single-family mortgage loan if, following the acquisition, more than 3% of our single-family loans that 

result from a refinancing or 6% of our single-family loans that do not result from a refinancing would have two or 

MD&A | Executive Summary | Liquidity Provided in First Nine Months of 2021

Fannie Mae Third Quarter 2021 Form 10-Q 4
more of the higher-risk characteristics listed below at origination. The 3% and 6% measurements are each 

based on loans we have acquired during the preceding 52-week period. The higher-risk characteristics are:

• a combined loan-to-value ratio greater than 90%; 

• a debt-to-income ratio greater than 45%; and 

• a FICO credit score (or equivalent credit score) less than 680. 

• Section 5.14(b)—Limit on Acquisitions of Single-Family Mortgage Loans Backed by Second Homes and 

Investment Properties. Under this provision, we must limit our acquisitions of single-family mortgage loans 

secured by either second homes or investment properties to not more than 7% of the single-family mortgage 

loans we have acquired during the preceding 52-week period.

The September 2021 letter agreement provides that the suspension of these provisions will terminate on the later of one 

year after the date of the agreement and six months after Treasury notifies us. While the September 2021 letter 

agreement temporarily suspended restrictions on these activities, in the ordinary course of business these and other 

business activities are subject to constraints from a variety of sources, including board- and management-approved risk 

limits, capital considerations and FHFA instructions. In addition, other restrictions in the senior preferred stock purchase 

agreement continue to apply.

We describe the terms of the senior preferred stock and the related senior preferred stock purchase agreement with 

Treasury, prior to the suspensions described above, in our 2020 Form 10-K under the heading “Business—

Conservatorship, Treasury Agreements and Housing Finance Reform—Treasury Agreements.”

Enterprise Regulatory Capital Framework Notice of Proposed Rulemaking

On September 15, 2021, FHFA published a notice of proposed rulemaking seeking comment on amendments to the 

enterprise regulatory capital framework. FHFA’s notice requests comments on possible amendments to the prescribed 

leverage buffers amount and the capital treatment of credit risk transfer transactions. Even if the amendments are 

adopted as proposed, the senior preferred stock purchase agreement with Treasury currently includes a covenant that 

requires us to comply with the terms of the enterprise regulatory capital framework as it became effective in February 

2021, disregarding any subsequent amendments or modifications. Comments on the proposed rule are due in 

November 2021. 

In our 2020 Form 10-K we stated that we measured our risk and returns on our current business against the 

conservatorship capital framework, and that we expected to cease using the conservatorship capital framework to make 

business and risk decisions sometime in 2021 and to use instead the new enterprise capital regulatory framework and 

certain risk measures. We now expect our transition to the enterprise regulatory capital framework will continue into 

2022. For more information on the framework, see “Business—Legislation and Regulation—GSE Act and Other 

Legislative and Regulatory Matters—Capital—Enterprise Regulatory Capital Framework” in our 2020 Form 10-K and 

“Liquidity and Capital Management—Capital Management—Capital Requirements” in this report.

Stress Testing

Pursuant to an FHFA rule implementing a provision of the Dodd-Frank Wall Street Reform and Consumer Protection 

Act, each year we are required to conduct a stress test, based on our data as of the prior December 31, using two 

different scenarios of financial conditions provided by FHFA—baseline and severely adverse—and to publish a 

summary of our stress test results for the severely adverse scenario by August 15. We publish our stress test results on 

our website. In 2020, FHFA issued a waiver to delay publication of our 2020 stress test results so that we could include 

alternative scenarios in light of uncertainty posed by the COVID-19 pandemic. On August 13, 2021, we and FHFA 

published our 2020 and 2021 stress test results for the severely adverse scenario. 

Credit Risk Transfers

In October 2021, we entered into new credit risk transfer transactions, transferring single-family mortgage credit risk via 

both our Connecticut Avenue Securities® (“CAS”) and Credit Insurance Risk TransferTM (“CIRTTM”) programs, and 

multifamily mortgage credit risk via our Multifamily CIRTTM (“MCIRTTM”) program. These transactions were the first new 

credit risk transfer transactions we have entered into since the first quarter of 2020, when we stopped entering into them 

due to adverse market conditions. While market conditions subsequently improved, we did not enter into any new 

transactions until October 2021 as we evaluated their costs and benefits, including a reduction in the capital relief these 

transactions provide under FHFA’s enterprise regulatory capital framework. The structure of and extent to which we 

engage in any additional credit risk transfer transactions in the future may be affected by our capital requirements, the 

degree of regulatory capital relief provided by the transactions, our risk appetite, the strength of future market 

conditions, the cost of these transactions, FHFA guidance, and the review of our overall business and capital plan. 

MD&A | Legislation and Regulation

Fannie Mae Third Quarter 2021 Form 10-Q 5
Fair Lending

The Federal Housing Enterprises Financial Safety and Soundness Act of 1992, as amended, including by the Housing 

and Economic Recovery Act of 2008 (together, the “GSE Act”) requires the Secretary of the U.S. Department of Housing 

and Urban Development (“HUD”) to assure that Fannie Mae and Freddie Mac meet their fair lending obligations. In July 

2021, FHFA issued a Policy Statement on Fair Lending describing its statutory authority and policies for supervisory 

oversight and enforcement of fair lending matters with respect to Fannie Mae and Freddie Mac. In August 2021, FHFA 

and HUD entered into a memorandum of understanding regarding fair housing and fair lending coordination. Among 

other things, the memorandum of understanding allows HUD and FHFA to coordinate on investigations, compliance 

reviews, and ongoing monitoring of Fannie Mae and Freddie Mac to ensure compliance with the Fair Housing Act. 

Equitable Housing Finance Plan

On September 7, 2021, FHFA instructed Fannie Mae and Freddie Mac to submit Equitable Housing Finance Plans to 

FHFA by the end of 2021. In our plan, we must identify and address barriers to sustainable housing opportunities, 

including our goals and action plan to advance equity in housing finance for the next three years. FHFA is also requiring 

Fannie Mae and Freddie Mac to submit annual progress reports on the actions undertaken during the prior year to 

implement their plans. 

As contemplated by the instruction, the goals and action plans established by the equitable housing plan should 

address identified sustainable housing barriers, including:

• Reducing the homeownership gap for a racial or ethnic group with a significant homeownership rate disparity; 

and

• Reducing underinvestment or undervaluation in racially or ethnically concentrated areas of poverty, areas with 

significant disparities in opportunity, or formerly redlined areas that remain racially or ethnically concentrated 

areas of poverty or otherwise underserved or undervalued.

Legislation Extending Guaranty Fee Payments to Treasury

As described in our 2020 Form 10-K, in December 2011, Congress enacted the Temporary Payroll Tax Cut Continuation 

Act of 2011 (“TCCA”) under which, at the direction of FHFA, we increased the guaranty fee on all single-family 

residential mortgages delivered to us by 10 basis points effective April 1, 2012. The revenue generated by this fee 

increase is paid to Treasury and helps offset the cost of a two-month extension of the payroll tax cut in early 2012. In 

2012, FHFA advised us to remit this fee increase to Treasury with respect to all single-family loans acquired by us on or 

after April 1, 2012 and before January 1, 2022, and to continue to remit these amounts to Treasury on and after January 

1, 2022 with respect to loans we acquired before this date until those loans are paid off or otherwise liquidated.

On August 10, 2021, the Senate passed legislation that would extend our obligation to pay these fees to Treasury 

beyond our current obligation. If enacted in the form already passed by the Senate, the Infrastructure Investment and 

Jobs Act would extend until October 1, 2032, the current requirement that we collect an additional 10 basis points in 

guaranty fees on single-family residential mortgages delivered to us and pay the associated revenue to Treasury. The 

revenue generated by this fee extension would help offset the cost of infrastructure spending by the federal government.

Housing Goals

Proposed Housing Goals for 2022-2024

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

affordability or location. Our housing goals are set by FHFA in accordance with the GSE Act. In August 2021, FHFA 

published a proposed rule that would establish new single-family and multifamily housing goals for Fannie Mae and 

Freddie Mac for 2022 through 2024. Comments on the proposed rule were due in October 2021. FHFA will issue a final 

rule after considering the comments.

Proposed Single-Family Housing Goals

Under FHFA’s proposed rule, FHFA would continue to evaluate our performance against the single-family housing goals 

using a two-part approach that compares the goals-qualifying share of our single-family mortgage acquisitions against 

both a benchmark level and a market level. To meet a single-family housing goal or subgoal, the percentage of our 

mortgage acquisitions that meet each goal or subgoal must equal or exceed either the benchmark level set in advance 

by FHFA or the market level for that year. The market level is determined retrospectively each year based on actual 

goals-qualifying originations in the primary mortgage market as measured by FHFA based on Home Mortgage 

Disclosure Act data for that year. Typically, this data is made available before the third quarter of the following year.

MD&A | Legislation and Regulation

Fannie Mae Third Quarter 2021 Form 10-Q 6
In the proposed rule, FHFA is proposing two new single-family home purchase subgoals to replace the existing lowincome areas subgoal. The new minority census tracts subgoal would target borrowers with income at or below area 

median income (“AMI”) who reside in minority census tracts (defined as census tracts with a minority population of at 

least 30% and a median income below AMI). The new low-income census tracts subgoal would target (1) borrowers 

who reside in low-income census tracts that are not minority census tracts, regardless of income, and (2) borrowers with 

income greater than AMI who reside in low-income census tracts that are minority census tracts. Consistent with current 

practice, FHFA would continue to set the overall low-income areas goal on an annual basis to take account of mortgage 

loans made to borrowers who reside in designated disaster areas.

Current and Proposed Single-Family Goals

(percentage of overall qualified single-family purchases)

Current Benchmark Level Proposed Benchmark Level

Single-Family Goals 2018-2021 2022-2024

Low-Income Home Purchase Goal 24% 28%

Very Low-Income Home Purchase Goal 6% 7%

Minority Census Tracts Subgoal (New) N/A 10%

Low-Income Census Tracts Subgoal (New) N/A 4%

Low-Income Refinance Goal 21% 26%

Proposed Multifamily Housing Goals

Under FHFA's proposed rule, FHFA would evaluate our performance for 2022 through 2024 against the following 

multifamily goals and subgoals.

Current and Proposed Multifamily Goals

(number of multifamily units)

Current Benchmark Level Proposed Benchmark Level

Multifamily Goals 2018-2021 2022-2024

Low-Income Goal 315,000 415,000

Very Low-Income Subgoal 60,000 88,000

Small Multifamily (5-50 Units) Low-Income Subgoal 10,000 23,000

The 2022 to 2024 goals proposed by FHFA are at higher levels than our 2018 to 2021 goals, particularly for the small 

multifamily low-income subgoal. See “Risk Factors—GSE and Conservatorship Risk” in our 2020 Form 10-K for a 

discussion of how pursuing our housing goals may adversely affect our business or financial results or condition.

2020 Housing Goals Performance

In August 2021, FHFA notified us that it had preliminarily determined that we met all of our single-family and multifamily 

housing goals for 2020. See “Business—Legislation and Regulation—GSE Act and Other Legislative and Regulatory 

Matters—Housing Goals” in our 2020 Form 10-K for more information regarding our housing goals.

2021 Scorecard Update

In February 2021, FHFA released the 2021 Scorecard for Fannie Mae, Freddie Mac, and Common Securitization 

Solutions (the “2021 Scorecard”), which establishes corporate performance objectives for Fannie Mae, Freddie Mac, 

and Common Securitization Solutions for 2021. In August 2021, FHFA notified us that it had removed the following two 

objectives from the 2021 Scorecard: (1) Roadmap Toward End of Conservatorships: Continue to provide support to 

FHFA as needed to develop a roadmap with milestones for exiting conservatorship, including the development of any 

capital restoration plans; and (2) Housing Market Reform and Alignment: Conduct such activities as directed by FHFA 

related to housing market reform. More information on the 2021 Scorecard is provided in our current report on Form 8-K 

filed on February 18, 2021.

Changes to Common Securitization Solutions Board Structure

We rely on the common securitization platform operated by Common Securitization Solutions, LLC (“CSS”), a limited 

liability company we own jointly with Freddie Mac, for the operation of a majority of our single-family securitization 

activities. In October 2021, FHFA announced its determination, after a nearly two-year review, that CSS should focus on 

maintaining the resiliency of Fannie Mae’s and Freddie Mac’s mortgage-backed securities platform instead of expanding 

MD&A | Legislation and Regulation

Fannie Mae Third Quarter 2021 Form 10-Q 7
its role to serve a broader market. FHFA noted in the announcement that the decision allows CSS to stay focused on 

the safety and soundness of the housing finance market and reduce unnecessary expenses as Fannie Mae and Freddie 

Mac rebuild capital. As a result, the independent members of the CSS Board of Managers brought on as part of the 

CSS market expansion activity have left the CSS Board of Managers. In addition, FHFA appointed a new Chair to the 

CSS Board who serves with the remaining five Board members: CSS’s Chief Executive Officer, two members 

designated by Fannie Mae and two members designated by Freddie Mac. Under the limited liability agreement for CSS, 

while Fannie Mae and Freddie Mac remain in conservatorship, the Board may not take any actions absent the Chair’s 

consent. We discuss risks posed by our reliance on CSS in “Risk Factors—GSE and Conservatorship Risk” in our 2020 

Form 10-K. 

Transition from LIBOR and Alternative Reference Rates

We are actively seeking to facilitate an orderly transition from the London Inter-bank Offered Rate (“LIBOR”). During 

2021, we transitioned our method of interest-rate discounting for our derivatives positions, which we use in measuring 

our future interest-rate risk, from LIBOR to the Secured Overnight Financing Rate (“SOFR”).

The transition from LIBOR will require action by many market participants and leadership from organizations such as 

the Alternative Reference Rates Committee (the “ARRC”) member firms, FHFA, our advisors, and other regulators and 

may involve action by one or more legislatures in the U.S and abroad. Federal legislation is currently being considered 

by Congress that is aimed at providing a fair and orderly transition from LIBOR to alternative rates. We cannot predict 

the likelihood that any legislation is passed or the impact thereof. In October 2021, the ARRC announced that it will 

develop any and all remaining final details of the ARRC’s recommended fallback rates for LIBOR consumer products no 

later than one year before the date when LIBOR is expected to cease (that is, by June 30, 2022). This timeline is meant 

to provide market participants sufficient time to prepare for an orderly transition. For additional information, see 

“Business—Legislation and Regulation—The Future of LIBOR and Alternative Reference Rates” in our 2020 Form 10-K.

MD&A | Legislation and Regulation

Fannie Mae Third Quarter 2021 Form 10-Q 8
Key Market Economic Indicators

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

and economic environments. Our forecasts and expectations are subject to many uncertainties, including the pace and 

nature of economic growth, and may change, perhaps substantially, from our current forecasts and expectations. For 

example, home price growth could be adversely affected if growth in gross domestic product (“GDP”) is weaker than we 

currently expect, if unemployment, particularly among existing homeowners and potential new home buyers, is higher 

than we expect, or if the housing market is more sensitive to economic and labor-market weaknesses than we expect. 

For further discussion on housing activity, see “Single-Family Business—Single-Family Mortgage Market” and 

“Multifamily Business—Multifamily Mortgage Market.” 

Selected Benchmark Interest Rates

3.64%

2.90% 3.01%

2.61%

1.40%

1.97%

1.66%

0.68%

1.56% 1.49%

0.71%

1.51%

2.09%

0.23%

0.13%

2.35%

0.08% 0.05%

30-year FRM rate1

30-year Fannie Mae MBS par coupon rate2

10-year Treasury rate2

10-year swap rate2

3-month London Inter-Bank Offered Rate (LIBOR)2

Secured Overnight Financing Rate (SOFR)3

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

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

. These rates are 

reported using the latest available data for a given period.

(2) According to Bloomberg.

(3) Refers to the daily rate per the Federal Reserve Bank of New York.

How interest rates can affect our financial results

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

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

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

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

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

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

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

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

rates, primarily through our mortgage commitment derivatives and risk management derivatives, which we 

mark to market through earnings. Fair value gains and losses on our mortgage commitment derivatives 

fluctuate depending on how interest rates and prices move between the time a commitment is opened and 

when it settles. The net position and composition across the yield curve of our risk management derivatives 

changes over time. As a result, interest rate changes (increases or decreases) and yield curve changes 

(parallel, steepening or flattening shifts) will generate varying amounts of fair value gains or losses in a given 

period. 

MD&A | Key Market Economic Indicators

Fannie Mae Third Quarter 2021 Form 10-Q 9
• Credit-related income (expense). Increases in mortgage interest rates tend to lengthen the expected lives of 

our loans, which generally increases the expected impairment and provision for credit losses on loans, 

particularly those modified in troubled debt restructuring arrangements. Decreases in mortgage interest rates 

tend to shorten the expected lives of our loans, which reduces the impairment and provision for credit losses on 

such loans.

• In January 2021, we began applying fair value hedge accounting to reduce the impact of changes in interest 

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

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

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

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

1, Summary of Significant Accounting Policies.”

Single-Family Quarterly Home Price Growth Rate(1)

2.8% 3.1%

3.9%

6.9%

4.5%

Fannie Mae national home price index

3Q20 4Q20 1Q21 2Q21 3Q21

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

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

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

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

Home prices and how they can affect our financial results

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

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

equity typically have higher delinquency and default rates.

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

decreases because the amount we can recover from the properties securing the loans increases. Declines in 

home prices increase the losses we incur on defaulted loans.

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

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

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

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

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

the growth and size of our book.

• Home price growth in the first nine months of 2021 was 16.0% on a national basis, the highest nine-month 

home price growth rate in the history of the Fannie Mae national home price index, driven by continued low 

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

• We currently expect home price growth on a national basis in 2021 of 18.4%, which exceeds our prior forecast 

for the year and home price growth realized in 2020 of 10.5%. We expect significant regional variation in the 

timing and rate of home price growth. 

• The pace of rapid home price growth that we have experienced over the last year is not expected to continue. 

We expect home price growth to moderate to an annual growth rate of just below 8% in 2022, with slower 

growth expected thereafter. As home price growth slows, we expect the amount of positive benefit, if any, to our 

credit-related income (provision) to moderate as well. 

MD&A | Key Market Economic Indicators

Fannie Mae Third Quarter 2021 Form 10-Q 10
New Housing Starts

(1)

1,440

1,576 1,599 1,589 1,566

1,041

1,220 1,156 1,107 1,091

399

356 443 482 475

34.6%

17.2%

(5.2)% (4.2)%

28.0% (1.4)%

(10.9)%

24.6%

8.6%

(1.4)%

% quarterly change in multifamily housing starts

% quarterly change in single-family housing starts

Multifamily starts (in thousands)

Single-family starts (in thousands)

3Q20 4Q20 1Q21 2Q21 3Q21

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

How housing activity can affect our financial results

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

lending are the rates of household formation and housing construction.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

• We expect a continued lack of inventory for both new and existing homes will likely continue to constrain sales 

into the fourth quarter. Due to the current strength in housing demand and low supply of homes for sale, we 

expect single-family housing starts to be higher in 2021 than in 2020. Similarly, despite the constraints on home 

sales, we continue to expect housing activity to remain solid throughout the remainder of 2021 and into 2022.

• Construction demand in the multifamily sector strengthened in the first nine months of 2021, with multifamily 

starts posting a solid increase during the period. While we expect multifamily starts to moderate in the 

remainder of 2021, we expect that, on an annual basis, they will be higher overall in 2021 than in 2020.

MD&A | Key Market Economic Indicators

Fannie Mae Third Quarter 2021 Form 10-Q 11
GDP, Unemployment Rate and Personal Consumption

3.2% 1.7%

(6.9)%

(33.4)%

41.4%

3.4%

11.4% 12.0%

2.8% 1.9% 1.6%

(5.1)%

(31.2)%

33.8%

4.5% 6.3% 6.7%

2.0%

3.5% 3.6% 4.4%

11.1%

7.8%

6.7% 6.0% 5.9% 4.8%

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

Growth (decline) in GDP, annualized percentage change1

U.S. unemployment rate, as of period end2

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

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

Economic Analysis and are subject to revision. 

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

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

financial results

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

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

which in turn can lead to credit losses.

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

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

existing homeowners to consider purchasing and moving to another home, and renters to consider becoming 

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

fall in an expanding economy, thereby decreasing credit losses.

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

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

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

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

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

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

continued its momentum through the first nine months of 2021, with the second quarter 2021 GDP number 

pushing GDP above its pre-pandemic level. In the third quarter of 2021, GDP growth slowed due to reduced 

consumer spending, particularly driven by the Delta variant of the coronavirus, global supply chain disruptions 

and decreased service and travel sector spending. The pace and strength of economic expansion remains 

uncertain and will depend on a number of factors, including the continuance of supply chain disruptions and 

related inflationary pressures, recovery of economic activity outside the U.S., current labor market shortages, 

the impact of the emergence of new, more infectious variants of the coronavirus and COVID-19 vaccination 

MD&A | Key Market Economic Indicators

Fannie Mae Third Quarter 2021 Form 10-Q 12
rates.

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

results associated with interest rates, home prices, housing activity and economic conditions, as well as the COVID-19 

pandemic.

Consolidated Results of Operations

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

condensed consolidated financial statements and the accompanying notes.

Summary of Condensed Consolidated Results of Operations

For the Three Months 

Ended September 30,

For the Nine Months 

Ended September 30,

2021 2020 Variance 2021 2020 Variance

(Dollars in millions)

Net interest income(1) $ 6,972 $ 6,656 $ 316 $ 22,000 $ 17,780 $ 4,220 

Fee and other income 111 93 18 301 303 (2) 

Net revenues 7,083 6,749 334 22,301 18,083 4,218 

Investment gains, net 243 653 (410) 934 644 290 

Fair value gains (losses), net(1) (17) (327) 310 321 (1,621) 1,942 

Administrative expenses (745) (762) 17 (2,239) (2,265) 26 

Credit-related income (expense):

Benefit (provision) for credit losses 937 501 436 4,290 (2,094) 6,384 

Foreclosed property expense (69) (71) 2 (105) (161) 56 

Total credit-related income (expense) 868 430 438 4,185 (2,255) 6,440 

TCCA fees (781) (679) (102) (2,270) (1,976) (294) 

Credit enhancement expense(2) (233) (325) 92 (791) (1,061) 270 

Change in expected credit enhancement 

recoveries(3) (42) (48) 6 (117) 413 (530) 

Other expenses, net(4) (268) (313) 45 (867) (792) (75) 

Income before federal income taxes 6,108 5,378 730 21,457 9,170 12,287 

Provision for federal income taxes (1,266) (1,149) (117) (4,470) (1,935) (2,535) 

Net income $ 4,842 $ 4,229 $ 613 $ 16,987 $ 7,235 $ 9,752 

Total comprehensive income $ 4,828 $ 4,216 $ 612 $ 16,914 $ 7,224 $ 9,690 

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

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

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

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

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

(2) Consists of costs associated with our freestanding credit enhancements, which primarily include our CAS and CIRTTM programs, 

enterprise-paid mortgage insurance (“EPMI”), and certain lender risk-sharing programs. 

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

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

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

Hedge Accounting Impact

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

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

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

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

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

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

MD&A | Key Market Economic Indicators

Fannie Mae Third Quarter 2021 Form 10-Q 13
To help address this volatility, we began applying fair value hedge accounting in January 2021 to reduce the currentperiod impact on our earnings related to changes in interest rates, particularly the London Inter-bank Offered Rate 

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

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

changes in the hedging instrument. 

Under our hedge accounting program, we establish fair value hedging relationships between risk management

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

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

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

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

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

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

is then subsequently amortized back into earnings. Accordingly, we deferred $194 million and $1.1 billion in net fair 

value losses as cost basis adjustments in the third quarter and first nine months of 2021, respectively, on our hedged 

loans and funding debt that will be amortized through “Net interest income” over the contractual life of the respective 

hedged items. 

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

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

earnings.

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

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

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

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

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

of our fair value hedge accounting policy and related disclosures.

Net Interest Income

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

Fannie Mae MBS held by third parties.

Guaranty fees consist of two primary components: 

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

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

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

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

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

majority of loans underlying our Fannie Mae MBS in consolidated trusts in our condensed consolidated balance sheets. 

Guaranty fees from these loans account for nearly all of the difference between the interest income on loans in 

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

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

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

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

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

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

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

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

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

Beginning in January 2021, we recognize fair value changes attributable to movements in benchmark interest rates for 

hedged mortgage loans and funding debt and total fair value changes for designated interest-rate swaps, as well as the 

amortization of hedge-related basis adjustments on the associated mortgage loans or funding debt and any related 

interest accrual on the swap, as a component of net interest income. The income or expense associated with this 

activity is presented in the “Income from hedge accounting” line item in the table below. 

MD&A | Consolidated Results of Operations

Fannie Mae Third Quarter 2021 Form 10-Q 14
The table below displays the components of our net interest income from our guaranty book of business, which we 

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

Components of Net Interest Income

For the Three Months 

Ended September 30,

For the Nine Months 

Ended September 30,

2021 2020 Variance 2021 2020 Variance

(Dollars in millions)

Net interest income from guaranty book of 

business:

Base guaranty fee income(1) $ 3,643 $ 2,842 $ 801 $ 10,260 $ 8,119 $ 2,141 

Base guaranty fee income related to TCCA(2) 781 679 102 2,270 1,976 294 

Net amortization income(3) 2,338 2,713 (375) 8,600 6,174 2,426 

Total net interest income from guaranty 

book of business 6,762 6,234 528 21,130 16,269 4,861 

Net interest income from portfolios 170 422 (252) 742 1,511 (769) 

Income from hedge accounting(4) 40 — 40 128 — 128 

Total net interest income $ 6,972 $ 6,656 $ 316 $ 22,000 $ 17,780 $ 4,220 

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

Treasury and not retained by us.

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

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

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

respect to delinquent loans backing MBS trusts.

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

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

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

accounting, which is included in income from hedge accounting.

(4) Consists of gains and losses from fair value hedging relationships that have been presented in net interest income. See “Note 8, Derivative 

Instruments” for additional information on the effect of our fair value hedge accounting program and related disclosures.

Net interest income increased modestly in the third quarter of 2021 compared with the third quarter of 2020, primarily 

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

portfolios. The increase in net interest income for the first nine months of 2021 compared with the first nine months of 

2020 was primarily driven by higher net amortization income and higher base guaranty fee income, partially offset by 

lower income from portfolios.

• Higher base guaranty fee income. An increase in the size of our guaranty book of business over the prior year 

was the primary driver of the increase in base guaranty fee income in the third quarter and first nine months of 

2021.

• Net amortization income. Throughout the first nine months of 2021 we continued to be in a low interest-rate 

environment and observed higher volumes of refinancings compared to the first nine months of 2020, during 

which refinancing volumes did not increase sharply until the second quarter when mortgage rates began to 

decline to historical lows. As a result, in the first nine months of 2021 we had higher prepayment volumes, 

which accelerated the amortization of cost basis adjustments, including upfront fees we recognize over the 

contractual life of the loans, on mortgage loans of consolidated trusts and the related debt. 

Although interest rates remained low in the third quarter of 2021, amortization income was lower as there were 

fewer borrowers who could benefit from refinancing compared with the third quarter of 2020, contributing to a 

decline in net amortization income. 

• Lower income from portfolios. Lower income from portfolios for the first nine months of 2021 was primarily due 

to lower yields on our mortgage loans and assets in our other investments portfolio as a result of a lower 

interest-rate environment throughout the first nine months of 2021. This was partially offset by a decrease in 

interest expense on our funding debt due to a decrease in average borrowing costs.

Lower income from portfolios in the third quarter of 2021 was primarily due to a decrease in the average 

balance of our lender liquidity portfolio driven by a decline in mortgage refinance activity, primarily in the second 

and third quarters of 2021, leading to lower acquisition volumes through the whole loan conduit. See “Retained 

Mortgage Portfolio” for more information.

MD&A | Consolidated Results of Operations

Fannie Mae Third Quarter 2021 Form 10-Q 15
Over half of our single-family guaranty book of business has been originated since the beginning of 2020, as borrowers 

took advantage of the historically low rate environment. However, refinancing activity began to taper in the second 

quarter of 2021 and declined further in the third quarter of 2021. We expect refinancing activity to be significantly lower 

in 2022 compared to 2021 levels as fewer borrowers may benefit from refinancing. We expect that lower levels of 

refinancing in the future will continue to slow the rate at which we amortize cost basis adjustments. Slower turnover in 

our book of business will likely result in lower amortization income as the average life of our outstanding book of 

business may extend. In addition, a slower turnover rate would limit the impact that changes in our guaranty fees have 

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

our total book of business.

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

delinquency provided that the loans were either current at March 1, 2020 or originated after March 1, 2020. We continue 

to accrue interest income beyond six months of delinquency provided that the collection of principal and interest 

continues to be reasonably assured. This resulted in a large portion of delinquent loans, including those in a 

forbearance arrangement, remaining on accrual status as of September 30, 2021 and September 30, 2020. See “Note 

3, Mortgage Loans” for more information about our nonaccrual accounting policy and “Single-Family Business—SingleFamily Mortgage Credit Risk Management—Single-Family Problem Loan Management” and “Multifamily Business—

Multifamily Mortgage Credit Risk Management—Multifamily Problem Loan Management and Foreclosure Prevention” 

for details about loans in forbearance, as well as on-balance sheet loans past due 90 days or more and continuing to 

accrue interest. 

MD&A | Consolidated Results of Operations

Fannie Mae Third Quarter 2021 Form 10-Q 16
Analysis of Net Interest Income

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

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

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

such as for mortgage loans, we use monthly averages. For the third quarter and first nine months of 2021, net interest 

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

Analysis of Net Interest Income and Yield(1)

For the Three Months Ended September 30,

2021 2020

Average 

Balance 

Interest 

Income/ 

(Expense)

Average 

Rates 

Earned/

Paid

Average 

Balance

Interest 

Income/ 

(Expense)

Average 

Rates 

Earned/

Paid

(Dollars in millions)

Interest-earning assets:

Mortgage loans of Fannie Mae(2) $ 81,999 $ 673 3.28 % $ 118,270 $ 959 3.24 %

Mortgage loans of consolidated 

trusts(2) 3,800,970 24,125 2.54 3,401,660 24,851 2.92 

Total mortgage loans(3) 3,882,969 24,798 2.55 3,519,930 25,810 2.93 

Mortgage-related securities 5,975 34 2.28 9,582 63 2.63 

Non-mortgage-related securities(4) 184,325 111 0.24 152,229 133 0.34 

Federal funds sold and securities 

purchased under agreements to 

resell or similar arrangements 36,839 5 0.05 47,200 14 0.12 

Advances to lenders 8,522 33 1.55 8,845 33 1.46 

Total interest-earning assets $ 4,118,630 24,981 2.43 % $ 3,737,786 26,053 2.79 %

Interest-bearing liabilities:

Short-term funding debt $ 4,324 * * $ 33,349 (19) 0.22 %

Long-term funding debt(2) 225,568 (659) 1.17 % 237,020 (806) 1.36 

CAS debt 13,855 (144) 4.16 16,932 (188) 4.44 

Total debt of Fannie Mae 243,747 (803) 1.32 287,301 (1,013) 1.41 

Debt securities of consolidated 

trusts held by third parties 3,829,882 (17,206) 1.80 3,439,484 (18,384) 2.14 

Total interest-bearing liabilities $ 4,073,629 (18,009) 1.77 % $ 3,726,785 (19,397) 2.08 %

Net interest income/net interest yield $ 6,972 0.66 % $ 6,656 0.71 %

MD&A | Consolidated Results of Operations

Fannie Mae Third Quarter 2021 Form 10-Q 17
For the Nine Months Ended September 30,

2021 2020

Average 

Balance 

Interest 

Income/ 

(Expense)

Average 

Rates 

Earned/

Paid

Average 

Balance

Interest 

Income/ 

(Expense)

Average 

Rates 

Earned/

Paid

(Dollars in millions)

Interest-earning assets:

Mortgage loans of Fannie Mae(2) $ 96,249 $ 2,280 3.16 % $ 111,752 $ 3,003 3.58 %

Mortgage loans of consolidated 

trusts(2) 3,704,361 70,803 2.55 3,326,312 78,752 3.16 

Total mortgage loans(3) 3,800,610 73,083 2.56 3,438,064 81,755 3.17 

Mortgage-related securities 6,667 118 2.36 10,474 278 3.54 

Non-mortgage-related securities(4) 160,623 326 0.27 107,155 510 0.63 

Federal funds sold and securities 

purchased under agreements to 

resell or similar arrangements 52,705 17 0.04 41,030 135 0.43 

Advances to lenders 9,135 106 1.53 7,726 92 1.56 

Total interest-earning assets $ 4,029,740 73,650 2.44 % $ 3,604,449 82,770 3.06 %

Interest-bearing liabilities:

Short-term funding debt $ 5,944 (4) 0.09 % $ 38,637 (175) 0.60 %

Long-term funding debt(2) 243,659 (2,092) 1.14 187,628 (2,370) 1.68 

CAS debt 14,323 (446) 4.15 18,813 (696) 4.93 

Total debt of Fannie Mae 263,926 (2,542) 1.28 245,078 (3,241) 1.76 

Debt securities of consolidated 

trusts held by third parties 3,739,575 (49,108) 1.75 3,357,411 (61,749) 2.45 

Total interest-bearing liabilities $ 4,003,501 (51,650) 1.72 % $ 3,602,489 (64,990) 2.41 %

Net interest income/net interest yield $ 22,000 0.73 % $ 17,780 0.66 %

* Represents less than $0.5 million of interest expense and less than 0.005% of average yield.

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

cost basis adjustments related to hedge accounting.

(2) Includes income of $40 million and $128 million from hedged funding debt, hedged mortgage loans and paired interest-rate swaps for the 

third quarter and first nine months of 2021, respectively. Substantially all of this amount is related to the hedged funding debt and paired 

interest-rate swaps. There was no income or expense from hedge accounting for the third quarter or first nine months of 2020.

(3) Average balance includes mortgage loans on nonaccrual status. Interest income from the amortization of loan fees, primarily consisting of 

upfront cash fees and yield maintenance fees, was $2.5 billion and $7.3 billion, respectively, for the third quarter and first nine months of 

2021, compared to $2.6 billion and $6.6 billion, respectively, for the third quarter and first nine months of 2020.

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

MD&A | Consolidated Results of Operations

Fannie Mae Third Quarter 2021 Form 10-Q 18
Analysis of Deferred Amortization Income

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

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

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

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

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

income we will recognize in our condensed consolidated statements of operations and comprehensive income as net 

interest income in future periods. 

Deferred Income Represented by Net Premium Position

on Debt of Consolidated Trusts

(Dollars in billions)

$30.6 $28.5 $27.3

9/30/2020 12/31/2020 9/30/2021

Investment Gains, Net

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

securities, sale of loans, gains and losses recognized on the consolidation and deconsolidation of securities, and lower 

of cost or fair value adjustments on held-for-sale (“HFS”) loans. 

The decrease in net investment gains in the third quarter of 2021 compared with the third quarter of 2020 was primarily 

driven by a decrease in the volume of sales of single-family HFS loans. The increase in net investment gains in the first 

nine months of 2021 compared with the first nine months of 2020 was primarily driven by a significant increase in the 

volume of sales of single-family HFS loans.

Fair Value Gains (Losses), Net

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

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

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

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

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

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

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

hedge accounting program, these fair value changes were included in “Fair value gains (losses), net.” Derivatives not 

designated in hedging relationships are unaffected by this change. 

MD&A | Consolidated Results of Operations

Fannie Mae Third Quarter 2021 Form 10-Q 19
The table below displays the components of our fair value gains and losses.

Fair Value Gains (Losses), Net

For the Three Months 

Ended September 30,

For the Nine Months 

Ended September 30,

2021 2020 2021 2020

(Dollars in millions)

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

Net contractual interest income (expense) on interest-rate swaps $ 59 $ (46) $ 163 $ (216) 

Net change in fair value during the period (97) 44 (734) (85) 

Impact of the presentation of fair value losses in net interest income for risk 

management derivatives designated in fair value hedges(1) 131 — 884 — 

Risk management derivatives fair value gains (losses), net 93 (2) 313 (301) 

Mortgage commitment derivatives fair value gains (losses), net (25) (672) 504 (2,327) 

Credit enhancement derivatives fair value gains (losses), net (55) 380 (163) 400 

Total derivatives fair value gains (losses), net 13 (294) 654 (2,228) 

Trading securities gains (losses), net (129) (91) (726) 691 

CAS debt fair value gains (losses), net 1 (9) (25) 465 

Other, net(2) 98 67 418 (549) 

Fair value gains (losses), net $ (17) $ (327) $ 321 $ (1,621) 

(1) Consists of the presentation of $192 million in fair value losses and $61 million in contractual interest income for the three months ended

September 30, 2021 and $1.1 billion in fair value losses and $169 million in contractual interest income for the nine months ended 

September 30, 2021 in net interest income, for designated interest-rate swaps as a result of fair value hedge accounting. 

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

Fair value losses, net in the third quarter of 2021 were primarily impacted by losses on trading securities due to 

increases in U.S. Treasury yields during the third quarter of 2021, which resulted in losses on fixed-rate securities held 

in our other investments portfolio as prices declined. These losses were offset by the application of hedge accounting, 

which resulted in the presentation in “Net interest income” of fair value losses on designated interest-rate swaps, and 

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

due to rising interest rates.

Fair value gains, net in the first nine months of 2021 were primarily driven by:

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

swaps in “Net interest income;”

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

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

“Other, net,” due to rising interest rates.

These gains were partially offset by fair value losses in the first nine months of 2021 on trading securities, primarily 

driven by increases in interest rates during the first quarter, which resulted in losses on fixed-rate securities held in our 

other investments portfolio.

Fair value losses, net in the third quarter of 2020 were primarily driven by: 

• decreases in the fair value of mortgage commitment derivatives due to losses on commitments to sell mortgagerelated securities as prices increased during the commitment period due to tightening spreads between current 

coupon yields and treasury yields, which were partially offset by gains on commitments to buy mortgage-related 

securities; and

• losses on trading securities due to increases in U.S. Treasury yields during the period, which resulted in losses on

fixed-rate securities held in our other investments portfolio.

These losses were partially offset by fair value gains in the third quarter of 2020 on credit enhancement derivatives, 

primarily driven by higher projected default rates on our lender risk-sharing securities as delinquencies increased on the 

underlying loans, thus increasing the value of the securities to us.

Fair value losses, net in the first nine months of 2020 were primarily driven by: 

MD&A | Consolidated Results of Operations

Fannie Mae Third Quarter 2021 Form 10-Q 20
• decreases in the fair value of mortgage commitment derivatives due to losses on commitments to sell 

mortgage-related securities as prices increased during the commitment period due to tightening spreads between 

current coupon yields and treasury yields, which were partially offset by gains on commitments to buy 

mortgage-related securities; 

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

“Other, net,” due to declines in interest rates; and

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

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

of receive-fixed risk management derivatives.

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

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

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

Credit-Related Income (Expense)

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

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

rates, borrower payment behavior, events such as natural disasters or pandemics, the types, volume and effectiveness 

of our loss mitigation activities, including forbearances and loan modifications, the volume of foreclosures completed 

and the redesignation of loans from held-for-investment (“HFI”) to HFS. 

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

assumptions and data used in determining our allowance for loan losses. As described below, since the onset of the 

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

affected by our estimates of the impact of the pandemic and the pace and strength of the economy’s subsequent 

recovery, which require significant management judgment. Although we believe the estimates underlying our allowance 

are reasonable, we may observe future volatility in these estimates as we continue to observe actual loan performance 

data and update our models and assumptions relating to this unprecedented event.

MD&A | Consolidated Results of Operations

Fannie Mae Third Quarter 2021 Form 10-Q 21
Benefit (Provision) for Credit Losses

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

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

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

excludes credit losses on our AFS securities. It also excludes the transition impact of adopting Accounting Standards 

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

Instruments, (the “CECL standard”), which was recorded as an adjustment to retained earnings as of January 1, 2020. 

Many of the drivers that contribute to our benefit or provision for credit losses overlap or are interdependent. The 

attribution shown below is based on internal allocation estimates. 

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

Enhancement Recoveries

For the Three Months 

Ended September 30,

For the Nine Months 

Ended September 30,

2021 2020 2021 2020

(Dollars in millions)

Single-family benefit (provision) for credit losses:

Changes in loan activity(1) $ 185 $ (18) $ 155 $ (85) 

Redesignation of loans from HFI to HFS 118 510 1,103 685 

Actual and forecasted home prices 584 939 2,887 355 

Actual and projected interest rates (86) 25 (674) 1,366 

Changes in assumptions regarding COVID-19 forbearance and loan 

delinquencies(2) 214 (537) 551 (3,127) 

Other(3)(4) (130) (377) 78 (603) 

Single-family benefit (provision) for credit losses 885 542 4,100 (1,409) 

Multifamily benefit (provision) for credit losses:

Changes in loan activity(1) (40) (32) (180) (106) 

Actual and projected interest rates (7) (48) 15 226 

Actual and projected economic data(5) 68 — 389 — 

Estimated impact of the COVID-19 pandemic 42 49 119 (825) 

Other(4) (13) (11) (155) 22 

Multifamily benefit (provision) for credit losses 50 (42) 188 (683) 

Total benefit (provision) for credit losses $ 935 $ 500 $ 4,288 $ (2,092) 

Change in expected credit enhancement recoveries:(6)

Single-family $ (28) $ (48) $ (101) $ 218 

Multifamily (15) (4) (30) 188 

Total change in expected credit enhancement recoveries $ (43) $ (52) $ (131) $ 406 

(1) Primarily consists of loan acquisitions, liquidations and amortization of modification concessions granted to borrowers and write-offs of 

amounts determined to be uncollectible. For multifamily, changes in loan activity also includes changes in the allowance due to loan 

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

which is used to assess loan credit quality.

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

modeled results.

(3) Prior-period amounts have been adjusted to conform to the current-year presentation to include provision for allowance on accrued interest 

receivable.

(4) Includes provision for allowance on accrued interest receivable. For single-family, also includes the impact of changes in assumptions as 

well as changes in the reserve for guaranty losses that are not separately included in the other components. For multifamily, also includes 

the impact of model enhancements implemented in the first nine months of 2021. 

(5) For the three and nine months ended September 30, 2020, the impact of actual and projected economic data is grouped with “Estimated 

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

(6) Includes increase (decrease) in expected credit enhancement recoveries only for active loans. Recoveries received after foreclosure, 

which are included in “Change in expected credit enhancement recoveries” in “Summary of Condensed Consolidated Results of 

Operations,” are not included.

MD&A | Consolidated Results of Operations

Fannie Mae Third Quarter 2021 Form 10-Q 22
Single-Family Benefit (Provision) for Credit Losses 

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

• Benefit from actual and forecasted home price growth. During the third quarter of 2021, actual home price 

growth continued to be strong. We also increased our expectations for home price growth on a national basis 

for full-year 2021. Higher home prices decrease the likelihood that loans will default and reduce the amount of 

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

reserves and provision for credit losses. See “Key Market Economic Indicators” for additional information about 

how home prices affect our credit loss estimates, including a discussion of home price appreciation and our 

home price forecast. 

• Benefit from changes in assumptions regarding COVID-19 forbearance and loan delinquencies. During the third 

quarter of 2021, the benefit was primarily driven by the removal of the remaining non-modeled adjustment 

related to COVID-19 as discussed below.

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

• Benefit from actual and forecasted home price growth, as discussed in “Key Market Economic Indicators,” 

which have been robust throughout 2021.

• Benefit from the redesignation of certain nonperforming and reperforming single-family loans from HFI to HFS. 

We redesignated certain nonperforming and reperforming single-family loans from HFI to HFS, as we no longer 

intend to hold them for the foreseeable future or to maturity. Upon redesignation of these loans, we recorded 

the loans at the lower of cost or fair value with a write-off against the allowance for loan losses. Amounts 

recorded in the allowance related to these loans exceeded the amounts written off, resulting in a net benefit for 

credit losses.

• Benefit from changes in assumptions regarding COVID-19 forbearance and loan delinquencies. During the first 

and second quarters of 2021, management used its judgment to supplement the loss projections developed by 

our credit loss model to account for uncertainty arising from the COVID-19 pandemic that was not represented 

in historical data or otherwise captured by our credit model. As of September 30, 2021, management removed 

the remaining non-modeled adjustment as the effects of the economic stimulus, the vaccine rollout, and the 

effectiveness of COVID-19-related loss mitigation strategies have all become much less uncertain. Specifically, 

the decrease in uncertainty as of September 30, 2021 compared with the end of 2020 was primarily driven by 

the passage of the American Rescue Plan Act of 2021 and the broad implementation of the COVID-19 

vaccination program in the United States, which contributed to a significant increase in business activity and 

helped support continued economic growth. There has also been a steady decline in the number of borrowers 

in a COVID-19-related forbearance, lessening expectations of credit losses. Additionally, we believe the array of 

possible future economic environments included in our credit model, which captures scenarios that may be 

remote, combined with data consumed over the course of the COVID-19 pandemic, have removed the need to 

continue to supplement modeled results.

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

benefit for credit losses recognized in the first nine months of 2021:

• Provision for higher actual and projected interest rates. Actual and projected interest rates were higher as of 

September 30, 2021 compared with December 31, 2020. As mortgage rates increase, we expect a decrease in 

future prepayments on single-family loans, including modified loans. Lower expected prepayments extend the 

expected lives of modified loans, which increases the expected impairment relating to term and interest-rate 

concessions provided on these loans, resulting in a provision for credit losses.

The primary factors that contributed to our single-family provision for credit losses in the first nine months of 2020 were:

• Provision for changes in assumptions regarding COVID-19 forbearance and loan delinquencies, which included 

adjustments to modeled results. Our single-family provision for credit losses for the first nine months of 2020

was driven by the economic dislocation caused by the COVID-19 pandemic, with the majority of the provision 

recognized in the first quarter of 2020. Estimating expected credit losses as a result of the COVID-19 pandemic 

continued to require significant management judgment regarding a number of matters, including our 

expectations surrounding borrower participation in a COVID-19-related forbearance, the type and extent of loss 

mitigation that may be needed when the loan exits forbearance, the high degree of uncertainty regarding the 

future course of the pandemic and its effect on the economy, and expectations regarding the impact of fiscal 

stimulus to support borrowers. As a result, the model used to estimate single-family credit losses did not 

capture the entirety of losses we expected to incur relating to COVID-19 at that time. The model consumed 

data from the initial months of the pandemic, including loan delinquencies, and updated credit profile data for 

MD&A | Consolidated Results of Operations

Fannie Mae Third Quarter 2021 Form 10-Q 23
loans in forbearance. As more of this data was consumed by our credit loss model, we reduced the nonmodeled adjustment initially recorded in the first quarter.

In the third quarter of 2020, management continued to apply its judgment and supplement model results as of 

September 30, 2020, taking into account the continued high degree of uncertainty regarding the future impact 

of the pandemic and its effect on the economy, future economic and housing policy, and extended foreclosure 

moratoriums. These factors, combined with higher loan delinquencies, led to an increase in provision 

attributable to these COVID-19-related factors, which was partially offset by a decrease in our estimated singlefamily cumulative forbearance take-up based on the economic data and forbearance activity observed through 

the third quarter of 2020. 

• Provision for allowance on accrued interest receivable included in Other. In the third quarter of 2020, Other

primarily consisted of provision for allowance on accrued interest receivable. As a result of our update to the 

application of our nonaccrual policy in the second quarter of 2020, we continued to accrue interest for those 

loans that were negatively impacted by the COVID-19 pandemic. This update resulted in a significant portion of 

delinquent loans, which were current as of March 1, 2020 and subsequently became delinquent, remaining on 

accrual status at the end of the third quarter of 2020. Accordingly, we established a valuation allowance for 

expected credit losses on the accrued interest receivable balance based on our evaluation of collectability.

The factors discussed above were offset by the factors below, which contributed to a single-family benefit for credit 

losses for the third quarter of 2020 and reduced the amount of single-family provision for credit losses recognized in the 

first nine months of 2020:

• Benefit from lower actual and projected interest rates. For much of 2020, we continued to be in a historically 

low interest-rate environment. As mortgage interest rates decline, we expect an increase in future prepayments 

on single-family loans, including modified loans. Higher expected prepayments shorten the expected lives of 

modified loans, which decreases the expected impairment relating to term and interest-rate concessions 

provided on these loans and results in a benefit for credit losses. Most of this benefit from lower actual and 

projected mortgage interest rates was recognized in the first half of 2020.

• Benefit from the redesignation of certain reperforming single-family loans from HFI to HFS. In the third quarter

of 2020, we resumed sales of reperforming loans after our suspension of new loan sales in the second quarter 

of 2020. As a result, we redesignated certain reperforming single-family loans from HFI to HFS in the third 

quarter of 2020, as we no longer intended to hold them for the foreseeable future or to maturity. Upon 

redesignation of these loans, we recorded the loans at the lower of cost or fair value with a write-off against the 

allowance for loan losses. Amounts recorded in the allowance related to these loans exceeded the amounts 

written off, which contributed to a net benefit for credit losses for the third quarter and first nine months of 2020

as shown in the table above.

• Benefit from actual and expected home price growth. In the first quarter of 2020, we significantly reduced our 

expectations for home price growth to near-zero for 2020. However, the negative impact from the first quarter of 

2020 was more than offset by an increase in actual home price growth in the second and third quarters. See 

“Key Market Economic Indicators” for additional information about how home prices affect our credit loss 

estimates.

Multifamily Benefit (Provision) for Credit Losses

The primary factors that contributed to our multifamily benefit for credit losses in the third quarter and first nine months

of 2021 were: 

• Benefit from actual and projected economic data. In the third quarter and first nine months of 2021, property 

value forecasts increased due to continued demand for multifamily housing. In addition, improved job growth 

led to an increase in projected average property net operating income, which reduced the probability of loan 

defaults resulting in a benefit for credit losses for the quarter and year-to-date.

• Benefit from lower expected credit losses as a result of the COVID-19 pandemic. Similar to our single-family 

benefit for credit losses described above, for the first and second quarters of 2021 management used its 

judgment to supplement the loss projections developed by our credit loss model to account for uncertainty 

arising from the COVID-19 pandemic. As of September 30, 2021, management removed the remaining nonmodeled adjustment as the effects of the economic stimulus, the vaccine rollout, and the effectiveness of 

COVID-19-related loss mitigation strategies have all become much less uncertain. See “Single-Family Benefit 

(Provision) for Credit Losses,” above for more information on these factors.

MD&A | Consolidated Results of Operations

Fannie Mae Third Quarter 2021 Form 10-Q 24
Our multifamily provision for credit losses in the third quarter and first nine months of 2020 was primarily driven by: 

• Provision for actual and projected economic data and estimated impact of the COVID-19 pandemic, which 

includes adjustments to modeled results. Our multifamily provision for credit losses for the first nine months of 

2020 was driven by higher expected losses as a result of the economic dislocation caused by the COVID-19 

pandemic and heightened economic uncertainty, driven by elevated unemployment, which we expected would

result in a decrease of multifamily property income and property values. In addition, the multifamily provision for 

credit losses included increased expected credit losses on seniors housing loans, as these properties were 

disproportionately impacted by the pandemic. The vast majority of these expenses were recognized in the first 

half of 2020. Consistent with the single-family discussion above, the model we used to estimate multifamily 

credit losses did not capture the entirety of losses we expected to incur relating to COVID-19 at that time. The 

model consumed data from the initial months of the pandemic, but we continued to apply management 

judgment and supplement model results as of September 30, 2020, taking into account the continued high 

degree of uncertainty that remained relating to the impact of the pandemic.

In the third quarter of 2020, our multifamily provision for expected credit losses as a result of the COVID-19 

pandemic was relatively flat. In September 2020, we decreased our estimate for credit losses due to a 

downward revision of our estimated multifamily cumulative forbearance take-up rates, as well as an improved 

forecasted unemployment rate. These benefits were offset by continued economic uncertainty, forbearance 

arrangements that were extended beyond the initial term, and overall increased delinquencies. These factors, 

inclusive of the other components of the multifamily provision for credit losses, resulted in a modest expense for 

the third quarter of 2020. See “Multifamily Business—Multifamily Mortgage Credit Risk Management—

Multifamily Problem Loan Management and Foreclosure Prevention” for information on our multifamily loans in 

forbearance.

MD&A | Consolidated Results of Operations

Fannie Mae Third Quarter 2021 Form 10-Q 25
Consolidated Balance Sheet Analysis

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

consolidated financial statements and the accompanying notes. 

Summary of Condensed Consolidated Balance Sheets

As of

September 30, 

2021

December 31, 

2020 Variance

(Dollars in millions)

Assets

Cash and cash equivalents and federal funds sold and securities purchased 

under agreements to resell or similar arrangements $ 94,987 $ 66,537 $ 28,450 

Restricted cash and cash equivalents 66,087 77,286 (11,199) 

Investments in securities 98,095 138,239 (40,144) 

Mortgage loans:

Of Fannie Mae 78,415 117,911 (39,496) 

Of consolidated trusts 3,831,588 3,546,533 285,055 

Allowance for loan losses (6,334) (10,552) 4,218 

Mortgage loans, net of allowance for loan losses 3,903,669 3,653,892 249,777 

Deferred tax assets, net 13,128 12,947 181 

Other assets 33,243 36,848 (3,605) 

Total assets $ 4,209,209 $ 3,985,749 $ 223,460 

Liabilities and equity

Debt:

Of Fannie Mae $ 234,843 $ 289,572 $ (54,729) 

Of consolidated trusts 3,907,626 3,646,164 261,462 

Other liabilities 24,567 24,754 (187) 

Total liabilities 4,167,036 3,960,490 206,546 

Fannie Mae stockholders’ equity:

Senior preferred stock 120,836 120,836 — 

Other net deficit (78,663) (95,577) 16,914 

Total equity 42,173 25,259 16,914 

Total liabilities and equity $ 4,209,209 $ 3,985,749 $ 223,460 

Cash and Cash Equivalents and Federal Funds Sold and Securities Purchased 

under Agreements to Resell or Similar Arrangements and Investments in 

Securities

Investments in securities declined from December 31, 2020 to September 30, 2021 primarily driven by a shift from 

investments in U.S. Treasury securities to investments in cash equivalents, as well as a decrease in funding debt 

issuances during the period. With lower funding debt issuances, our other investments portfolio declined as maturing 

investments in securities were not replaced.

For further discussion, see “Liquidity and Capital Management—Liquidity Management.”

Mortgage Loans, Net of Allowance

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

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

Mortgage loans, net of allowance for loan losses increased as of September 30, 2021 compared with December 31, 

2020, driven by an increase in loan acquisitions, primarily from continued high refinancing activity, outpacing liquidations 

and sales.

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

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

MD&A | Consolidated Balance Sheet Analysis

Fannie Mae Third Quarter 2021 Form 10-Q 26
Debt

The decrease in debt of Fannie Mae from December 31, 2020 to September 30, 2021 was primarily due to decreased 

funding needs. The increase in debt of consolidated trusts from December 31, 2020 to September 30, 2021 was 

primarily driven by sales of Fannie Mae MBS, which are accounted for as issuances of debt of consolidated trusts in our 

condensed consolidated balance sheets, since the MBS certificate ownership is transferred from us to a third party. See 

“Liquidity and Capital Management—Debt Funding” for a summary of activity in debt of Fannie Mae and a comparison 

of the mix between our outstanding short-term and long-term debt. Also see “Note 7, Short-Term and Long-Term Debt” 

for additional information on our total outstanding debt. 

Stockholders’ Equity

Our net equity increased as of September 30, 2021 compared with December 31, 2020 by the amount of our 

comprehensive income recognized during the first nine months of 2021. 

The aggregate liquidation preference of the senior preferred stock increased to $158.8 billion as of September 30, 2021

and will further increase to $163.7 billion as of December 31, 2021 due to the $4.8 billion increase in our net worth 

during the third quarter of 2021.

Retained Mortgage Portfolio

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

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

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

investment purposes.

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

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

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

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

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

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

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

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

trusts. 

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

of “Other” as of September 30, 2021 consisted of Fannie Mae reverse mortgage securities and reverse 

mortgage loans. We expect the amount of assets in “Other” will continue to decline over time as they liquidate, 

mature or are sold.

Retained Mortgage Portfolio

(Dollars in billions)

$80.8

$46.8

$56.3

$42.1

$25.6

$22.0

$162.7

$110.9

Lender liquidity Loss mitigation Other

12/31/2020 9/30/2021

The decrease in our retained mortgage portfolio as of September 30, 2021 compared with December 31, 2020 was 

primarily due to a decrease in our lender liquidity portfolio driven by a decline in mortgage refinance activity, primarily in 

the second and third quarters of 2021, leading to lower acquisition volumes through the whole loan conduit. In addition, 

sales of reperforming and nonperforming mortgage loans drove a decrease in our loss mitigation portfolio.

MD&A | Consolidated Balance Sheet Analysis

Fannie Mae Third Quarter 2021 Form 10-Q 27
The table below displays the components of our retained mortgage portfolio, measured by unpaid principal balance. 

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

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

Retained Mortgage Portfolio

As of

September 30, 2021 December 31, 2020

(Dollars in millions)

Lender liquidity:

Agency securities(1) $ 23,173 $ 34,810 

Mortgage loans 23,621 45,895 

Total lender liquidity 46,794 80,705 

Loss mitigation mortgage loans(2) 42,144 56,315 

Other:

Reverse mortgage loans 10,426 12,388 

Mortgage loans 4,069 4,881 

Reverse mortgage securities(3) 6,496 7,185 

Private-label and other securities 381 473 

Fannie Mae-wrapped private-label securities 460 521 

Mortgage revenue bonds 140 182 

Total other 21,972 25,630 

Total retained mortgage portfolio $ 110,910 $ 162,650 

Retained mortgage portfolio by segment:

Single-family mortgage loans and mortgage-related securities $ 105,184 $ 154,943 

Multifamily mortgage loans and mortgage-related securities $ 5,726 $ 7,707 

(1) Consists of Fannie Mae, Freddie Mac and Ginnie Mae mortgage-related securities, including Freddie Mac securities guaranteed by Fannie 

Mae. Excludes Fannie Mae and Ginnie Mae reverse mortgage securities and Fannie Mae-wrapped private-label securities.

(2) Includes single-family loans classified as troubled debt restructurings (“TDRs”) that were on accrual status of $18.7 billion and $29.4 billion

as of September 30, 2021 and December 31, 2020, respectively, and single-family loans on nonaccrual status of $13.0 billion and $19.6 

billion as of September 30, 2021 and December 31, 2020. Includes multifamily loans classified as TDRs that were on accrual status of $30 

million and $20 million as of September 30, 2021 and December 31, 2020, respectively, and multifamily loans on nonaccrual status of $449 

million and $536 million as of September 30, 2021 and December 31, 2020, respectively. 

(3) Consists of Fannie Mae and Ginnie Mae reverse mortgage securities.

The amount of mortgage assets that we may own is capped at $250 billion and will decrease to $225 billion on 

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

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

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

cap.

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

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

associated FHFA guidance. As of September 30, 2021, 10% of the notional value of our interest-only securities was 

$2.1 billion, which is not included in the table above.

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

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

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

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

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

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

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

delinquent payments to security holders. 

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

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

MD&A | Retained Mortgage Portfolio

Fannie Mae Third Quarter 2021 Form 10-Q 28
become four consecutive monthly payments delinquent. In September 2020, FHFA instructed both us and Freddie Mac 

to extend the timeframe for our single-family delinquent loan buyout policy to 24 consecutively missed monthly 

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

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

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

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

In support of our loss mitigation strategies, we purchased $6.1 billion of loans from our single-family MBS trusts in the 

first nine months of 2021, the substantial majority of which were delinquent, compared with $9.2 billion of loans 

purchased from single-family MBS trusts in the first nine months of 2020. We expect the amount of loans we buy out of 

trusts will increase slightly in 2022 compared with 2021 as loans exiting COVID-19-related forbearance will lead to an 

increase in the number of delinquencies and loan modifications. The size of our retained mortgage portfolio will be 

impacted by the volume of loans we ultimately buy, the timing of those purchases, and the length of time those loans 

remain in our retained mortgage portfolio. These factors are highly uncertain and depend on a number of things, 

including the length of time loans remain in forbearance, the duration of foreclosure suspensions, future loan sales and 

the nature and success of our loss mitigation activities, including payment deferrals and repayment plans, which do not 

require us to purchase loans out of trust. See “Single-Family Business—Single-Family Mortgage Credit Risk 

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

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

Prevention” for information on our loans in forbearance.

Guaranty Book of Business

Our “guaranty book of business” consists of: 

• Fannie Mae MBS outstanding, excluding the portions of any structured securities we issue that are backed by 

Freddie Mac securities; 

• mortgage loans of Fannie Mae held in our retained mortgage portfolio; and 

• other credit enhancements that we provide on mortgage assets. 

“Total Fannie Mae guarantees” consists of: 

• our guaranty book of business; and 

• the portions of any structured securities we issue that are backed by Freddie Mac securities. 

We and Freddie Mac issue single-family uniform mortgage-backed securities, or “UMBS®.” In this report, we use the 

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

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

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

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

Some Fannie Mae MBS that we issue are backed in whole or in part by Freddie Mac securities. When we resecuritize 

Freddie Mac securities into Fannie Mae-issued structured securities, such as Supers and REMICs, our guaranty of 

principal and interest extends to the underlying Freddie Mac securities. However, Freddie Mac continues to guarantee 

the payment of principal and interest on the underlying Freddie Mac securities that we have resecuritized. We do not 

charge an incremental guaranty fee to include Freddie Mac securities in the structured securities that we issue. 

References to our single-family guaranty book of business in this report exclude Freddie Mac-acquired mortgage loans 

underlying Freddie Mac securities that we have resecuritized.

MD&A | Retained Mortgage Portfolio

Fannie Mae Third Quarter 2021 Form 10-Q 29
The table below displays the composition of our guaranty book of business based on unpaid principal balance. Our 

single-family guaranty book of business accounted for 89% and 90% of our guaranty book of business as of September 

30, 2021 and December 31, 2020, respectively. 

Composition of Fannie Mae Guaranty Book of Business

As of

September 30, 2021 December 31, 2020

SingleFamily Multifamily TotalSingleFamily Multifamily Total

(Dollars in millions)

Conventional guaranty book of business(1) $ 3,492,837 $ 411,137 $ 3,903,974 $ 3,305,030 $ 386,379 $ 3,691,409 

Government guaranty book of business(2) 17,659 763 18,422 20,777 2,268 23,045 

Guaranty book of business 3,510,496 411,900 3,922,396 3,325,807 388,647 3,714,454 

Freddie Mac securities guaranteed by Fannie Mae(3) 190,229 — 190,229 137,316 — 137,316 

Total Fannie Mae guarantees $ 3,700,725 $ 411,900 $ 4,112,625 $ 3,463,123 $ 388,647 $ 3,851,770 

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

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

(3) Consists of approximately (i) $159.7 billion and $110.7 billion in unpaid principal balance of Freddie Mac-issued UMBS backing Fannie 

Mae-issued Supers as of September 30, 2021 and December 31, 2020, respectively; and (ii) $30.6 billion and $26.6 billion in unpaid 

principal balance of Freddie Mac securities backing Fannie Mae-issued REMICs as of September 30, 2021 and December 31, 2020, 

respectively.

The GSE Act requires us to set aside each year an amount equal to 4.2 basis points of the unpaid principal balance of 

our new business purchases and to pay this amount to specified U.S. Department of Housing and Urban Development 

(“HUD”) and Treasury funds in support of affordable housing. In March 2021, we paid $603 million to the funds based on 

our new business purchases in 2020. For the first nine months of 2021, we recognized an expense of $470 million

related to this obligation based on $1.1 trillion in new business purchases during the period. We expect to pay this 

amount to the funds in 2022, plus additional amounts to be accrued based on our new business purchases in the fourth 

quarter of 2021. See “Business—Legislation and Regulation—GSE Act and Other Legislative and Regulatory Matters—

Affordable Housing Allocations” in our 2020 Form 10-K for more information regarding this obligation.

Business Segments

We have two reportable business segments: Single-Family and Multifamily. The Single-Family business operates in the 

secondary mortgage market relating to single-family mortgage loans, which are secured by properties containing four or 

fewer residential dwelling units. The Multifamily business operates in the secondary mortgage market relating primarily 

to multifamily mortgage loans, which are secured by properties containing five or more residential units.

The chart below displays net revenues and net income for each of our business segments for the first nine months of 

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

income.

Business Segment Net Revenues and Net Income

(Dollars in billions) 

$15.6

$19.3

$5.9

$14.9

Single-Family net revenues

Single-Family net income

YTD 2020 YTD 2021

$2.5 $3.0

$1.3 $2.1

Multifamily net revenues

Multifamily net income

YTD 2020 YTD 2021

MD&A | Guaranty Book of Business

Fannie Mae Third Quarter 2021 Form 10-Q 30
In the following sections, we describe each segment’s business metrics, financial results and credit performance. For an 

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

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

Single-Family Business

Our Single-Family business provides liquidity to the mortgage market primarily by acquiring single-family loans from 

lenders and securitizing those loans into Fannie Mae MBS, which are either delivered to the lenders or sold to investors 

or dealers. 

This section supplements and updates information regarding our Single-Family business segment in our 2020 Form 10-

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

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

Single-Family Mortgage Market

Housing activity increased slightly in the third quarter of 2021 compared to the second quarter of 2021. Total existing 

home sales averaged 6.1 million units annualized in the third quarter of 2021, compared with 5.8 million units in the 

second quarter of 2021, according to data from the National Association of REALTORS®. According to the U.S. Census 

Bureau, new single-family home sales remained relatively flat during the third quarter of 2021, averaging an annualized 

rate of approximately 738,000 units, compared with approximately 737,300 units in the second quarter of 2021.

The 30-year fixed mortgage rate averaged 2.90% in September 2021, compared with 2.98% in June 2021, according to 

Freddie Mac’s Primary Mortgage Market Survey®.

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

levels by approximately 1%, from an estimated $4.37 trillion in 2020 to $4.32 trillion in 2021, and that the amount of 

refinance originations in the U.S. single-family mortgage market will decrease from an estimated $2.80 trillion in 2020 to 

$2.47 trillion in 2021. We forecast that total originations in the U.S. single-family mortgage market in 2022 will decrease 

from 2021 levels by approximately 23% to an estimated $3.33 trillion in 2022 and refinance originations will decrease 

from 2021 levels by approximately 47% to an estimated $1.32 trillion in 2022. Declining origination volume reduces the 

number of mortgages available for us to acquire, which affects our business volume. See “Key Market Economic 

Indicators” for additional discussion of how housing activity can affect our financial results and the uncertainties that 

may affect our forecasts and expectations.

Single-Family Market Activity

Single-Family Mortgage-Related Securities Issuances Share

Our single-family Fannie Mae MBS issuances were $303.1 billion for the third quarter of 2021, compared with $383.8 

billion for the third quarter of 2020. Based on the latest data available, the chart below displays our estimated share of 

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

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

Single-Family Mortgage-Related Securities Issuances Share

Third Quarter 2021

Fannie Mae: 36%

Freddie Mac: 36%

Ginnie Mae: 24%

Private-label securities: 4%

MD&A | Business Segments

Fannie Mae Third Quarter 2021 Form 10-Q 31
We estimate our share of single-family mortgage-related securities issuances was 40% in the second quarter of 2021

and 41% in the third quarter of 2020.

Presentation of Our Single-Family Guaranty Book of Business

For purposes of the information reported in this “Single-Family Business” section, we measure the single-family 

guaranty book of business using the unpaid principal balance of our mortgage loans underlying Fannie Mae MBS 

outstanding. By contrast, the single-family guaranty book of business presented in the “Composition of Fannie Mae 

Guaranty Book of Business” table in the “Guaranty Book of Business” section is based on the unpaid principal balance 

of the Fannie Mae MBS outstanding, rather than the unpaid principal balance of the underlying mortgage loans. These

amounts differ primarily as a result of payments we receive on underlying loans that have not yet been remitted to the 

MBS holders or instances where we have advanced missed borrower payments on mortgage loans to make required 

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

conventional guaranty book of business was $3,422.0 billion as of September 30, 2021 and $3,200.9 billion as of 

December 31, 2020.

Single-Family Business Metrics

Net interest income for our Single-Family business is driven by the guaranty fees we charge and the size of our singlefamily conventional guaranty book of business. Our business volume and growth in our guaranty book of business is 

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

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

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

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

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

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

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

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

Select Single-Family Business Metrics

(Dollars in billions)

44.4 bps

45.4 bps 44.9 bps

47.3 bps

Q3 2020 Q3 2021

$3,086.2

$3,399.6

$391.4 $296.4

Q3 2020 Q3 2021

Average charged guaranty fee on single-family 

conventional guaranty book of business, net of TCCA 

fees(1) 

Average single-family conventional guaranty book 

of business(2)

Average charged guaranty fee on new single-family 

conventional acquisitions, net of TCCA fees(1)

Single-family conventional acquisitions

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

remitted to Treasury and not retained by us.

(2) Our single-family conventional guaranty book of business primarily consists of single-family conventional mortgage loans underlying 

Fannie Mae MBS outstanding. It also includes single-family conventional mortgage loans of Fannie Mae held in our retained mortgage 

portfolio, and other credit enhancements that we provide on single-family conventional mortgage assets. Our single-family conventional 

guaranty book of business does not include: (a) non-Fannie Mae single-family mortgage-related securities held in our retained mortgage 

portfolio for which we do not provide a guaranty; (b) mortgage loans guaranteed or insured, in whole or in part, by the U.S. government; or 

(c) Freddie Mac-acquired mortgage loans underlying Freddie Mac-issued UMBS that we have resecuritized. Our average single-family 

conventional guaranty book of business is based on quarter-end balances.

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

Fannie Mae Third Quarter 2021 Form 10-Q 32
Average charged guaranty fee on newly acquired conventional single-family loans is a metric management uses to 

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

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

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

recognition of any upfront cash payments, including loan-level price adjustments, based on an estimated average life at 

the time of acquisition. We use loan-level price adjustments, including various upfront risk-based fees, to price for the 

credit risk we assume in providing our guaranty. FHFA must approve changes to the national loan-level price 

adjustments we charge and can direct us to make other changes to our single-family guaranty fee pricing. 

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

the third quarter of 2021 compared with the third quarter of 2020 due to the slightly weaker credit risk profile of our third 

quarter 2021 acquisitions as well as the impact of the adverse market refinance fee, which was in effect for one month 

in the third quarter of 2021.

Single-Family Business Financial Results(1)

For the Three Months 

Ended September 30,

For the Nine Months 

Ended September 30,

2021 2020 Variance 2021 2020 Variance

(Dollars in millions)

Net interest income(2) $ 5,870 $ 5,870 $ — $ 19,087 $ 15,350 $ 3,737 

Fee and other income 86 73 13 228 238 (10) 

Net revenues 5,956 5,943 13 19,315 15,588 3,727 

Investment gains, net 222 583 (361) 944 527 417 

Fair value gains (losses), net (31) (244) 213 323 (1,734) 2,057 

Administrative expenses (620) (634) 14 (1,862) (1,888) 26 

Credit-related income (expense)(3) 807 478 329 4,011 (1,556) 5,567 

TCCA fees(2) (781) (679) (102) (2,270) (1,976) (294) 

Credit enhancement expense (174) (274) 100 (619) (897) 278 

Change in expected credit enhancement 

recoveries(4) (28) (48) 20 (101) 218 (319) 

Other expenses, net(5) (261) (307) 46 (863) (722) (141) 

Income before federal income taxes 5,090 4,818 272 18,878 7,560 11,318 

Provision for federal income taxes (1,065) (1,049) (16) (3,952) (1,623) (2,329) 

Net income $ 4,025 $ 3,769 $ 256 $ 14,926 $ 5,937 $ 8,989 

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

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

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

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

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

our CAS and CIRT programs. 

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

mitigation activities, and loan subservicing costs.

Net Interest Income

Single-family net interest income remained flat in the third quarter of 2021 compared with the third quarter of 2020. 

Higher base guaranty fee income during the third quarter of 2021 was offset by lower net amortization income and lower 

income from portfolios. 

The increase in single-family net interest income for the first nine months of 2021 compared with the first nine months of 

2020 was primarily driven by higher base guaranty fee income and higher net amortization income, partially offset by 

lower income from portfolios. 

The drivers of net interest income for the Single-Family segment are consistent with the drivers of net interest income in 

our condensed consolidated statements of operations and comprehensive income, which we discuss in “Consolidated 

Results of Operations—Net Interest Income.” 

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

Fannie Mae Third Quarter 2021 Form 10-Q 33
Investment Gains, Net

The decrease in net investment gains in the third quarter of 2021 compared with the third quarter of 2020 was primarily 

driven by a decrease in the volume of sales of single-family HFS loans.

The increase in net investment gains in the first nine months of 2021 compared with the first nine months of 2020 was 

primarily driven by a significant increase in the volume of sales of single-family HFS loans.

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

gains (losses), net in our condensed consolidated statements of operations and comprehensive income, which we 

discuss in “Consolidated Results of Operations—Investment Gains (Losses), Net.” 

Fair Value Gains (Losses), Net

Fair value losses, net in the third quarter of 2021 were primarily driven by losses on trading securities, partially offset by 

decreases in the fair value of long-term debt of consolidated trusts held at fair value. 

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

accounting program resulting in the presentation of fair value losses on designated interest-rate swaps in “net interest 

income.” Fair value gains, net in the first nine months of 2021 were also driven by gains as a result of increases in the 

fair value of mortgage commitment derivatives and decreases in the fair value of long-term debt of consolidated trusts 

held at fair value, which were partially offset by losses on trading securities.

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

commitment derivatives and losses on trading securities, partially offset by fair value gains on credit enhancement 

derivatives. 

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

mortgage commitment derivatives and increases in the fair value of long-term debt of consolidated trusts held at fair 

value, partially offset by fair value gains on trading securities and CAS debt. 

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

gains (losses), net in our condensed consolidated statements of operations and comprehensive income, which we 

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

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

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

Gains (Losses), Net.”

Credit-Related Income (Expense)

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

and forecasted home price growth and a reduction in our estimate of losses we expect to incur as a result of the 

COVID-19 pandemic.

Credit-related income for the first nine months of 2021 was driven by a benefit for credit losses due primarily to strong 

actual and forecasted home price growth, the redesignation of certain nonperforming and reperforming single-family 

loans from HFI to HFS and a reduction in our estimate of losses we expect to incur as a result of the COVID-19 

pandemic. The impact of those factors was partially offset by higher actual and projected interest rates.

Credit-related income for the third quarter of 2020 was primarily driven by a decrease in our allowance for loan losses 

due to an increase in actual and forecasted home prices and the redesignation of certain reperforming single-family 

loans from HFI to HFS. This was partially offset by an increase to our allowance for loan losses we expected to incur as 

a result of the COVID-19 pandemic as well as an increase in the allowance on accrued interest receivable.

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

losses due to losses we expected to incur as a result of the COVID-19 pandemic, as well as an increase in the 

allowance on accrued interest receivable due to the updated application of our nonaccrual policy. This was partially 

offset by lower actual and projected mortgage interest rates and the redesignation of certain reperforming single-family 

loans from HFI to HFS.

See “Consolidated Results of Operations—Credit-Related Income (Expense)” in this report for more information on the 

primary factors that contributed to our single-family credit-related income (expense).

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

Fannie Mae Third Quarter 2021 Form 10-Q 34
Single-Family Mortgage Credit Risk Management

This section updates our discussion of single-family mortgage credit risk management in our 2020 Form 10-K. For an 

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

our 2020 Form 10-K. For additional information on our acquisition and servicing policies, underwriting and servicing 

standards, quality control process, repurchase requests, and representation and warranty framework, see “MD&A—

Single-Family Business—Single-Family Mortgage Credit Risk Management” in our 2020 Form 10-K.

Single-Family Acquisition and Servicing Policies and Underwriting and 

Servicing Standards

COVID-19 Selling Policies

Based on improved current market conditions, we are no longer offering most of the COVID-19-related temporary 

flexibilities to our Selling Guide requirements that we had previously offered.

We continue to maintain the following temporary selling policy updates, which provide clarity and mitigate risk: 

• requiring additional due diligence regarding the payment status of a borrower’s existing mortgage loans;

• providing clarity for assessing self-employment income for qualifying purposes; and

• requiring that loans be no more than six months old to be eligible for sale to us.

In October 2021, FHFA announced that desktop appraisals would be incorporated into our Selling Guide for certain 

purchase loans beginning in early 2022 to sustainably advance the affordability of homeownership for mortgage 

borrowers. We previously offered a desktop appraisal option as a temporary flexibility from March 2020 through May 

2021.

COVID-19 Servicing Policies

We worked with Freddie Mac as instructed by FHFA to implement temporary policies to assist borrowers impacted by 

COVID-19 in March 2020, and have subsequently amended some of these requirements. We continue to monitor the 

market and work with Freddie Mac as instructed by FHFA to amend or implement temporary policies in response to the 

COVID-19 pandemic to enable our single-family loan servicers to better assist borrowers impacted by COVID-19.

These temporary policies include: 

• authorizing servicers to offer up to 12 months of forbearance, upon the request of any single-family borrower 

experiencing a financial hardship due to the COVID-19 pandemic, regardless of the borrower’s delinquency 

status; for loans already in a COVID-19-related forbearance as of February 28, 2021, servicers may grant an 

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

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

• offering a payment deferral workout option to eligible borrowers who have resolved a COVID-19-related 

financial hardship but cannot afford to bring the loan current by reinstating the loan (that is, repaying all the 

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

The payment deferral workout option allows the borrower to defer up to 18 months of past-due payments, 

without interest, to the end of the loan term (or when the loan is refinanced, the property is sold or the loan is 

otherwise paid off before the end of the loan term). All other terms of the loan remain unchanged;

• adjusting the terms for a Flex Modification for eligible COVID-19-impacted borrowers to provide an opportunity 

to reduce the interest rate regardless of the mortgage loan’s post-modification mark-to-market loan-to-value 

(“LTV”) ratio. This change, which was announced on June 30, 2021, is intended to help all eligible borrowers 

obtain a lower payment on their mortgage loan. Servicers were required to implement the policy change no 

later than August 31, 2021;

• suspending foreclosures and certain foreclosure-related activities for single-family properties through July 31, 

2021, other than for vacant or abandoned properties; and

• reporting as current to the credit bureaus the obligation of a borrower who receives a forbearance plan or other 

form of relief as a result of the COVID-19 pandemic during the period covered by the Coronavirus Aid, Relief, 

and Economic Security Act (the “CARES Act”), if the borrower was current before the accommodation and 

makes payments as agreed under the accommodation in accordance with the Fair Credit Reporting Act, as 

amended by the CARES Act.

The Consumer Financial Protection Bureau (“CFPB”) and certain states and localities have implemented COVID-19-

related borrower and/or renter protections that are more extensive than our Servicing Guide requirements. On June 28, 

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

Fannie Mae Third Quarter 2021 Form 10-Q 35
2021, the CFPB issued a final rule prohibiting certain new single-family foreclosures on mortgage loans secured by the 

borrower’s principal residence until after December 31, 2021. In addition, on June 29, 2021, FHFA announced that 

Fannie Mae servicers will not be permitted to initiate foreclosures that would be prohibited under the CFPB rule before 

the rule’s August 31, 2021 effective date. The CFPB and certain states and localities may continue to consider such 

proposals in the future or extend the time period of existing protections. Our servicers must comply with all applicable 

laws. 

Single-Family Portfolio Diversification and Monitoring

The following table displays our single-family conventional business volumes and our single-family conventional 

guaranty book of business, based on certain key risk characteristics that we use to evaluate the risk profile and credit 

quality of our single-family loans. As shown in the table below, our single-family conventional guaranty book of business 

has been impacted by record home price appreciation in the first nine months of 2021. The weighted average mark-tomarket LTV ratio decreased from 58% as of December 31, 2020 to 54% as of September 30, 2021, and the percentage 

of our single-family conventional guaranty book of business with a mark-to-market LTV ratio over 80% decreased from

13% of our single-family conventional guaranty book of business as of December 31, 2020, to 7% as of September 30, 

2021. 

We provide additional information on the credit characteristics of our single-family loans in quarterly financial 

supplements, which we furnish to the Securities and Exchange Commission (the “SEC”) with current reports on Form 8-

K and make available on our website. Information in our quarterly financial supplements is not incorporated by reference 

into this report.

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

Fannie Mae Third Quarter 2021 Form 10-Q 36
Key Risk Characteristics of Single-Family Conventional Business Volume and Guaranty Book 

of Business(1)

Percent of Single-Family Conventional 

Business Volume at Acquisition(2)

Percent of Single-Family Conventional

Guaranty Book of Business(3)

As of

For the Three Months 

Ended September 30,

For the Nine Months 

Ended September 30,

2021 2020 2021 2020 September 30, 2021 December 31, 2020

Original LTV ratio:(4)

<= 60% 30 % 28 % 32 % 25 % 26 % 23 %

60.01% to 70% 16 15 16 16 15 14 

70.01% to 80% 31 33 31 34 34 35 

80.01% to 90% 9 11 9 12 10 11 

90.01% to 95% 10 10 9 10 10 11 

95.01% to 100% 4 3 3 3 4 4 

Greater than 100% — * * * 1 2 

Total 100 % 100 % 100 % 100 % 100 % 100 %

Weighted average 70 % 71 % 69 % 72 % 72 % 74 %

Average loan amount $ 282,305 $ 281,202 $ 282,206 $ 279,641 $ 195,844 $ 185,047 

Estimated mark-to-market 

LTV ratio:(5)

<= 60% 60 % 52 %

60.01% to 70% 19 17 

70.01% to 80% 14 18 

80.01% to 90% 5 9 

90.01% to 100% 2 4 

Greater than 100% * *

Total 100 % 100 %

Weighted average 54 % 58 %

FICO credit score at 

origination:

< 620 — % — % — % * % 1 % 1 %

620 to < 660 4 2 3 2 4 4 

660 to < 680 4 2 3 2 3 4 

680 to < 700 7 5 6 5 7 7 

700 to < 740 19 17 18 19 19 20 

>= 740 66 74 70 72 66 64 

Total 100 % 100 % 100 % 100 % 100 % 100 %

Weighted average 753 762 757 759 752 750 

Debt-to-income (“DTI”) ratio 

at origination:(6)

<= 43% 76 % 81 % 78 % 79 % 78 % 77 %

43.01% to 45% 8 7 8 8 8 9 

Greater than 45% 16 12 14 13 14 14 

Total 100 % 100 % 100 % 100 % 100 % 100 %

Weighted average 35 % 33 % 34 % 34 % 34 % 35 %

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

Fannie Mae Third Quarter 2021 Form 10-Q 37
Percent of Single-Family Conventional 

Business Volume at Acquisition(2)

Percent of Single-Family Conventional

Guaranty Book of Business(3)

As of

For the Three Months 

Ended September 30,

For the Nine Months 

Ended September 30,

2021 2020 2021 2020 September 30, 2021 December 31, 2020

Product type:

Fixed-rate:(7)

Long-term 82 % 84 % 83 % 85 % 84 % 85 %

Intermediate-term 17 16 17 15 15 14 

Total fixed-rate 99 100 100 100 99 99 

Adjustable-rate 1 * * * 1 1 

Total 100 % 100 % 100 % 100 % 100 % 100 %

Number of property units:

1 unit 99 % 99 % 98 % 98 % 97 % 97 %

2-4 units 1 1 2 2 3 3 

Total 100 % 100 % 100 % 100 % 100 % 100 %

Property type:

Single-family homes 91 % 92 % 91 % 92 % 91 % 91 %

Condo/Co-op 9 8 9 8 9 9 

Total 100 % 100 % 100 % 100 % 100 % 100 %

Occupancy type: 

Primary residence 95 % 92 % 93 % 93 % 90 % 90 %

Second/vacation home 3 4 3 3 4 4 

Investor 2 4 4 4 6 6 

Total 100 % 100 % 100 % 100 % 100 % 100 %

Loan purpose:

Purchase 39 % 32 % 32 % 31 % 36 % 38 %

Cash-out refinance 26 17 22 19 20 20 

Other refinance 35 51 46 50 44 42 

Total 100 % 100 % 100 % 100 % 100 % 100 %

Geographic concentration:(8)

Midwest 14 % 14 % 13 % 14 % 14 % 14 %

Northeast 13 12 14 12 16 17 

Southeast 22 21 22 21 23 22 

Southwest 20 20 18 21 18 19 

West 31 33 33 32 29 28 

Total 100 % 100 % 100 % 100 % 100 % 100 %

Origination year:

2015 and prior 21 % 30 %

2016 6 8 

2017 4 7 

2018 3 6 

2019 7 11 

2020 32 38 

2021 27 — 

Total 100 % 100 %

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

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

Fannie Mae Third Quarter 2021 Form 10-Q 38
(1) Second-lien mortgage loans held by third parties are not reflected in the original LTV or the estimated mark-to-market LTV ratios in this 

table. 

(2) Calculated based on the unpaid principal balance of single-family loans for each category at time of acquisition.

(3) Calculated based on the aggregate unpaid principal balance of single-family loans for each category divided by the aggregate unpaid 

principal balance of loans in our single-family conventional guaranty book of business as of the end of each period.

(4) The original LTV ratio generally is based on the original unpaid principal balance of the loan divided by the appraised property value 

reported to us at the time of acquisition of the loan. Excludes loans for which this information is not readily available.

(5) The aggregate estimated mark-to-market LTV ratio is based on the unpaid principal balance of the loan as of the end of each reported 

period divided by the estimated current value of the property, which we calculate using an internal valuation model that estimates periodic 

changes in home value. Excludes loans for which this information is not readily available.

(6) Excludes loans for which this information is not readily available.

(7) Long-term fixed-rate consists of mortgage loans with maturities greater than 15 years, while intermediate-term fixed-rate loans have 

maturities equal to or less than 15 years.

(8) Midwest consists of IL, IN, IA, MI, MN, NE, ND, OH, SD and WI. Northeast consists of CT, DE, ME, MA, NH, NJ, NY, PA, PR, RI, VT and 

VI. Southeast consists of AL, DC, FL, GA, KY, MD, MS, NC, SC, TN, VA and WV. Southwest consists of AZ, AR, CO, KS, LA, MO, NM, OK, 

TX and UT. West consists of AK, CA, GU, HI, ID, MT, NV, OR, WA and WY.

Characteristics of our New Single-Family Loan Acquisitions

Over half of our single-family guaranty book of business has been originated since the beginning of 2020 as borrowers 

took advantage of the historically low rate environment. However, refinancing activity began to taper in the second 

quarter of 2021 and declined further in the third quarter of 2021, as fewer borrowers could benefit from refinancing. 

Accordingly, the share of our single-family loan acquisitions consisting of refinance loans rather than home purchase 

loans decreased in the third quarter of 2021 compared with the third quarter of 2020. The decline in refinance share led

to a decline in the percentage of loans we acquired with a FICO credit score over 740, from 74% in the third quarter of 

2020 to 66% in the third quarter of 2021.

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

third quarter of 2020. This increase was driven by the higher share of home purchase acquisitions, which tend to have 

higher DTI ratios than refinance loan acquisitions. 

In the second quarter of 2021, we implemented a new low-income refinance program, referred to as RefiNowTM,

intended to increase refinancings by low-income borrowers by reducing their refinancing costs. In October 2021, we 

announced enhancements to help expand the reach of RefiNow to additional creditworthy homeowners, further enabling 

equitable and sustainable access to homeownership. To be eligible for the RefiNow program as enhanced, borrowers 

must meet specified criteria, including having:

• a Fannie Mae-backed mortgage secured by a 1-unit, principal residence;

• a current income at or below 100% of the area median income;

• not missed a mortgage payment in the past six months, and no more than one missed mortgage payment in 

the past 12 months, unless the missed payment was associated with a COVID-19-related forbearance and has 

been resolved; and

• a mortgage with an LTV ratio up to 97%, a DTI ratio of 65% or less, and a minimum FICO credit score of 620.

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

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

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

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

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

Desktop Underwriter Update

As part of our comprehensive risk management approach, we periodically update our proprietary automated 

underwriting system, Desktop Underwriter® (“DU®”), to reflect changes to our underwriting and eligibility guidelines. In 

September 2021, we enhanced DU to include the following updates, among others:

• To help increase homeownership opportunities, we enhanced DU’s eligibility assessment to consider a 

borrower’s positive rental payment history in the credit risk assessment. 

• To support homeownership opportunities for more underserved borrowers, we updated the credit score used by 

DU in the eligibility assessment. Though credit scores are not an integral part of DU's risk assessment, DU 

uses credit scores when determining if a loan meets the minimum credit score requirement of 620. For loan 

applications with multiple borrowers, DU will now use an average median credit score instead of just the lowest 

credit score.

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

Fannie Mae Third Quarter 2021 Form 10-Q 39
We expect these changes will result in an increase in loans eligible for acquisition through DU. We will continue to 

closely monitor loan acquisitions and market conditions and, as appropriate, make changes to DU, including its eligibility 

criteria, to ensure that the loans we acquire are consistent with our risk appetite and mission.

Single-Family Credit Enhancement and Transfer of Mortgage Credit Risk

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

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

insurance. We also use enterprise paid mortgage insurance (“EPMI”), a form of primary mortgage insurance that is 

acquired by Fannie Mae. Under FHFA guidance, we began our EPMI pilot in 2018. In May 2021, FHFA instructed us to 

discontinue our EPMI pilot program and in August 2021, we ceased acquiring loans insured with EPMI. We also enter 

into various other types of transactions in which we transfer mortgage credit risk to third parties.

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

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

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

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

Management—Institutional Counterparty Credit Risk Management” and “Note 10, Concentrations of Credit Risk” in this 

report. Also see “Risk Factors” in our 2020 Form 10-K and in this report.

Single-Family Loans without Credit Enhancement

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

business currently without credit enhancement.

Single-Family Loans without Credit Enhancement

As of

September 30, 2021 December 31, 2020

Unpaid 

Principal 

Balance

Percentage of 

Single-Family 

Conventional 

Guaranty Book 

of Business

Unpaid 

Principal 

Balance

Percentage of 

Single-Family 

Conventional 

Guaranty Book 

of Business

(Dollars in billions)

Low LTV ratio or short-term(1) $ 1,125 33 % $ 938 29 %

Pre-credit risk transfer program inception(2) 354 10 462 14 

Recently acquired(3) 1,120 33 934 29 

Other(4) 505 15 286 9 

Less: Loans in multiple categories (810) (24) (751) (23) 

Total single-family loans currently without credit 

enhancement $ 2,294 67 % $ 1,869 58 %

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

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

(3) Primarily consists of loans that have been acquired in the past 24 months, and have not been included in a reference pool.

(4) Includes adjustable-rate mortgage loans, loans with a combined LTV ratio greater than 97%, non-Refi Plus loans acquired after the 

inception of our credit risk transfer programs that became 30 or more days delinquent prior to inclusion in a credit risk transfer transaction, 

and loans that were delinquent as of September 30, 2021 or December 31, 2020.

We did not enter into any new credit risk transfer transactions from April 2020 through September 2021. As a result, the 

percentage of loans in our single-family conventional guaranty book of business without credit enhancement has 

increased in recent periods. The percentage of our single-family conventional loans without credit enhancement was 

67% and 58% as of September 30, 2021 and December 31, 2020, respectively. 

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

Fannie Mae Third Quarter 2021 Form 10-Q 40
Single-Family Loans with Credit Enhancement

The table below displays information about loans in our single-family conventional guaranty book of business covered 

by one or more forms of credit enhancement, including mortgage insurance or a credit risk transfer transaction. For a 

description of primary mortgage insurance and the other types of credit enhancements specified in the table, see 

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

Enhancement and Transfer of Mortgage Credit Risk” in our 2020 Form 10-K. 

Single-Family Loans with Credit Enhancement

As of

September 30, 2021 December 31, 2020

Unpaid 

Principal 

Balance

Percentage of 

Single-Family 

Conventional 

Guaranty Book 

of Business

Unpaid 

Principal 

Balance

Percentage of 

Single-Family 

Conventional 

Guaranty Book 

of Business

(Dollars in billions)

Primary mortgage insurance and other $ 694 20 % $ 681 21 %

Connecticut Avenue Securities 411 12 608 19 

Credit Insurance Risk Transfer 125 4 216 7 

Lender risk-sharing 80 2 131 4 

Less: Loans covered by multiple credit 

enhancements (182) (5) (304) (9) 

Total single-family loans with credit enhancement $ 1,128 33 % $ 1,332 42 %

Transfer of Mortgage Credit Risk

In addition to primary mortgage insurance, our Single-Family business has developed other risk-sharing capabilities to 

transfer portions of our single-family mortgage credit risk to domestic and international investors and reinsurers in the 

private market. Our credit risk transfer transactions have been designed to transfer a portion of the losses we expect 

would be incurred in an economic downturn or a stressed credit environment. As described in “MD&A—Single-Family 

Business—Single-Family Mortgage Credit Risk Management—Single-Family Credit Enhancement and Transfer of 

Mortgage Credit Risk—Credit Risk Transfer Transactions” in our 2020 Form 10-K, we have used primarily three singlefamily credit risk transfer programs: Connecticut Avenue Securities® (“CAS”), Credit Insurance Risk TransferTM

(“CIRTTM”), and lender risk-sharing. At FHFA’s direction, we discontinued entering into new lender risk-sharing 

transactions as of the end of 2020. We continually evaluate our credit risk transfer transactions, which, in addition to 

managing our credit risk, also affect our returns on capital.

In October 2021, we entered into new credit risk transfer transactions to transfer mortgage credit risk via both our CAS 

and CIRT programs. These were the first credit risk transfer transactions we have entered into since the first quarter of 

2020. As a result, the percentage of our book that is covered by these transactions has declined from 53% as of March 

31, 2020 to 33% as of September 30, 2021. The structure of and extent to which we engage in any additional credit risk 

transfer transactions in the future may be affected by our capital requirements, the degree of regulatory capital relief 

provided by the transactions, our risk appetite, the strength of future market conditions, the cost of these transactions, 

FHFA guidance, and the review of our overall business and capital plan. 

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

Fannie Mae Third Quarter 2021 Form 10-Q 41
The table below displays the mortgage credit risk transferred to third parties and retained by Fannie Mae pursuant to 

our single-family credit risk transfer transactions. The table excludes the credit risk transferred on single-family 

transactions that have been cancelled or terminated as of September 30, 2021. The risk in force of these transactions, 

which refers to the maximum amount of losses that could be absorbed by credit risk transfer investors, was 

approximately $34 billion as of September 30, 2021 compared with $39 billion as of September 30, 2020. Because of 

the large number of mortgage prepayments in the past year, the first loss retention layer on our credit risk transfer 

transactions has increased as a percentage of the outstanding reference pool. As a result, losses on the remaining 

covered reference pools must generally reach a higher percentage of the remaining outstanding balance before those 

credit risk transfer transactions will pay any benefits. In addition, home price appreciation since we entered into the 

transactions has reduced the likelihood that we will incur losses on the covered loans large enough to receive a benefit 

from these transactions.

Outstanding as of September 30, 2021

(Dollars in billions)

Senior Fannie Mae(1)

$605

Outstanding 

Reference 

Pool(4)(6)

$648

Mezzanine Fannie Mae(1)

$1

CIRT(2)(3)

$9

CAS(2)

$13

Lender RiskSharing(2)

$4

First Loss Fannie Mae(1)

$8

CAS(2)(5)

$6

Lender RiskSharing(2)

$2

(1) Credit risk retained by Fannie Mae in CAS, CIRT and lender risk-sharing transactions. Tranche sizes vary across programs.

(2) Credit risk transferred to third parties. Tranche sizes vary across programs.

(3) Includes mortgage pool insurance transactions covering loans with an unpaid principal balance of approximately $1.6 billion outstanding as 

of September 30, 2021. 

(4) For CIRT and some lender risk-sharing transactions, “Reference Pool” reflects a pool of covered loans. 

(5) For CAS transactions, “First Loss” represents all B tranche balances.

(6) For CAS and some lender risk-sharing transactions, represents outstanding reference pools, not the outstanding unpaid principal balance 

of the underlying loans. The outstanding unpaid principal balance for all loans covered by credit risk transfer programs, including all loans 

on which risk has been transferred in lender risk-sharing transactions, was approximately $616 billion as of September 30, 2021.

The following table displays the approximate cash paid or transferred to investors for credit risk transfer transactions 

outstanding. The cash represents the portion of the guaranty fee paid to investors as compensation for taking on a 

share of the credit risk.

Credit Risk Transfer Transactions

For the Nine Months Ended September 30,

2021 2020

Cash paid or transferred for: (Dollars in millions)

CAS transactions(1) $ 619 $ 773 

CIRT transactions 210 300 

Lender risk-sharing transactions 196 228 

(1) Consists of cash paid for interest expense net of LIBOR on outstanding CAS debt and amounts paid for both CAS REMIC®

 and CAS 

Credit-linked notes (“CLN”) transactions. 

Cash paid or transferred to investors for CIRT transactions in the first nine months of 2021 includes cancellation fees 

paid on certain CIRT transactions where we determined that the cost of these deals exceeded the expected remaining 

benefit.

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

Fannie Mae Third Quarter 2021 Form 10-Q 42
Single-Family Problem Loan Management

Our problem loan management strategies focus primarily on reducing defaults to avoid losses that would otherwise 

occur and pursuing foreclosure alternatives to mitigate the severity of the losses we incur. See “MD&A—Single-Family 

Business—Single-Family Mortgage Credit Risk Management—Single-Family Problem Loan Management” in our 2020

Form 10-K for a discussion of delinquency statistics on our problem loans, efforts undertaken to manage our problem 

loans, metrics regarding our loan workout activities, real estate owned (“REO”) management and other single-family 

credit-related information. The discussion below updates some of that information. We also provide ongoing credit 

performance information on loans underlying single-family Fannie Mae MBS and loans covered by single-family credit 

risk transfer transactions. For loans backing Fannie Mae MBS, see the “Forbearance and Delinquency Dashboard” 

available in the MBS section of our Data Dynamics® tool, which is available at www.fanniemae.com/datadynamics. For 

loans covered by credit risk transfer transactions, see the “Deal Performance Data” report available in the CAS and 

CIRT sections of the tool. Information on our website is not incorporated into this report. Information in Data Dynamics 

may differ from similar measures presented in our financial statements and other public disclosures for a variety of 

reasons, including as a result of variations in the loan population covered, timing differences in reporting and other 

factors.

Delinquency

The tables below display the delinquency status of loans and changes in the volume of seriously delinquent loans in our 

single-family conventional guaranty book of business based on the number of loans. Single-family seriously delinquent 

loans are loans that are 90 days or more past due or in the foreclosure process, expressed as a percentage of our 

single-family conventional guaranty book of business based on loan count. Management monitors the single-family 

serious delinquency rate as an indicator of potential future credit losses and loss mitigation activities. Serious 

delinquency rates are reflective of our performance in assessing and managing credit risk associated with single-family 

loans in our guaranty book of business. Typically, higher serious delinquency rates result in a higher allowance for loan 

losses. 

For purposes of our disclosures regarding delinquency status, we report loans receiving COVID-19-related payment 

forbearance as delinquent according to the contractual terms of the loan. Pursuant to the CARES Act, for purposes of 

reporting to the credit bureaus, servicers must report a borrower receiving a COVID-19-related payment 

accommodation during the covered period, such as a forbearance plan or loan modification, as current if the borrower 

was current prior to receiving the accommodation and the borrower makes all required payments in accordance with the 

accommodation. 

Delinquency Status and Activity of Single-Family Conventional Loans

As of

September 30, 

2021

December 31, 

2020

September 30, 

2020

Delinquency status:

30 to 59 days delinquent 0.78 % 1.02 % 1.11 %

60 to 89 days delinquent 0.20 0.36 0.50 

Seriously delinquent (“SDQ”) 1.62 2.87 3.20 

Percentage of SDQ loans that have been delinquent for more than 

180 days 79 67 18 

Percentage of SDQ loans that have been delinquent for more than 

two years 8 3 3 

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

Fannie Mae Third Quarter 2021 Form 10-Q 43
For the Nine Months Ended 

September 30,

2021 2020

Single-family SDQ loans (number of loans):

Beginning balance 495,806 112,434 

Additions 184,352 719,100 

Removals:

Modifications and other loan workouts (257,632) (134,266) 

Liquidations and sales (61,187) (37,801) 

Cured or less than 90 days delinquent (78,322) (108,058) 

Total removals (397,141) (280,125) 

Ending balance 283,017 551,409 

Our single-family serious delinquency rate decreased as of September 30, 2021 compared with December 31, 2020

and September 30, 2020 due to the ongoing economic recovery and the decline in the number of our single-family loans 

in a COVID-19 forbearance plan. As of September 30, 2021, single-family loans in forbearance comprised 56% of our 

single-family seriously delinquent loans. The percentage of seriously delinquent loans that have been delinquent for 

more than 180 days increased as of September 30, 2021 compared with September 30, 2020 primarily due to loans that 

continue to remain in a COVID-19-related forbearance and have become more delinquent. 

Our single-family serious delinquency rate excluding loans in forbearance increased to 0.72% as of September 30, 2021

compared to 0.66% as of December 31, 2020 primarily due to loans exiting forbearance without resolving their 

delinquency. We monitor the single-family serious delinquency rate excluding loans that received a forbearance to 

better understand the impact that forbearance activity has had on the overall rate and to monitor loans that are seriously 

delinquent not as a result of COVID-19. We expect the COVID-19 pandemic to result in a continued higher single-family 

serious delinquency rate over the next several quarters compared with pre-pandemic levels. 

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

Fannie Mae Third Quarter 2021 Form 10-Q 44
The table below displays the serious delinquency rates for, and the percentage of our seriously delinquent single-family 

conventional loans represented by, the specified loan categories. Percentage of book amounts present the unpaid 

principal balance of loans for each category divided by the unpaid principal balance of our total single-family 

conventional guaranty book of business. The reported categories are not mutually exclusive.

Single-Family Conventional Seriously Delinquent Loan Concentration Analysis

As of

September 30, 2021 December 31, 2020 September 30, 2020

Percentage 

of Book 

Outstanding

Percentage 

of Seriously 

Delinquent 

Loans(1)

Serious 

Delinquency 

Rate

Percentage 

of Book 

Outstanding

Percentage 

of Seriously 

Delinquent 

Loans(1)

Serious 

Delinquency 

Rate

Percentage 

of Book 

Outstanding

Percentage 

of Seriously 

Delinquent 

Loans(1)

Serious 

Delinquency 

Rate

States:

California 20 % 11 % 1.38 % 19 % 12 % 2.62 % 19 % 13 % 3.04 %

Florida 6 8 2.11 6 9 4.17 6 10 4.76 

Illinois 3 5 2.00 3 5 3.10 3 4 3.46 

New Jersey 3 5 2.58 3 5 4.57 3 5 5.31 

New York 5 8 2.92 5 7 4.79 5 7 5.39 

All other states 63 63 1.48 64 62 2.59 64 61 2.85 

Product type:

Alt-A(2) 1 5 6.27 1 5 9.32 1 5 9.46 

Vintages:

2004 and prior 1 10 4.25 2 9 5.88 2 9 5.81 

2005-2008 2 15 7.21 2 15 9.98 3 14 9.84 

2009-2021 97 75 1.31 96 76 2.39 95 77 2.74 

Estimated mark-tomarket LTV ratio:

<= 60% 60 71 1.63 52 56 2.52 52 54 2.70 

60.01% to 70% 19 16 1.78 17 18 3.73 17 18 4.13 

70.01% to 80% 14 9 1.53 18 14 3.05 18 15 3.66 

80.01% to 90% 5 3 1.08 9 9 4.17 9 10 4.98 

90.01% to 100% 2 1 0.77 4 2 1.85 4 2 3.05 

Greater than 100% * * 16.04 * 1 22.43 * 1 21.74 

Credit enhanced:(3)

Primary MI & other(4) 20 28 2.64 21 27 4.36 21 26 4.73 

Credit risk transfer(5) 18 33 2.66 30 37 3.69 35 37 3.79 

Non-credit enhanced 67 53 1.26 58 51 2.36 55 51 2.73 

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

(1) Calculated based on the number of single-family loans that were seriously delinquent for each category divided by the total number of 

single-family conventional loans that were seriously delinquent.

(2) For a description of our Alt-A loan classification criteria, see “MD&A—Glossary of Terms Used in This Report” in our 2020 Form 10-K. 

(3) The credit-enhanced categories are not mutually exclusive. A loan with primary mortgage insurance that is also covered by a credit risk 

transfer transaction will be included in both the “Primary MI & other” category and the “Credit risk transfer” category. As a result, the “Credit 

enhanced” and “Non-credit enhanced” categories do not sum to 100%. The total percentage of our single-family conventional guaranty 

book of business with some form of credit enhancement as of September 30, 2021 was 33%. 

(4) Refers to loans included in an agreement used to reduce credit risk by requiring primary mortgage insurance, collateral, letters of credit, 

corporate guarantees, or other agreements to provide an entity with some assurance that it will be compensated to some degree in the 

event of a financial loss. Excludes loans covered by credit risk transfer transactions unless such loans are also covered by primary 

mortgage insurance.

(5) Refers to loans included in reference pools for credit risk transfer transactions, including loans in these transactions that are also covered 

by primary mortgage insurance. For CAS and some lender risk-sharing transactions, this represents outstanding unpaid principal balance 

of the underlying loans on the single-family mortgage credit book, not the outstanding reference pool, as of the specified date. Loans 

included in our credit risk transfer transactions have all been acquired since 2009.

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

Fannie Mae Third Quarter 2021 Form 10-Q 45
Single-Family Loans in Forbearance

As a part of our relief programs, we have authorized our servicers to permit payment forbearance to borrowers 

experiencing a COVID-19-related financial hardship for up to 12 months without regard to the delinquency status of the 

loan, and for borrowers already in forbearance as of February 28, 2021, for a total of up to 18 months, provided that the 

forbearance does not result in the loan becoming greater than 18 months delinquent. We estimate that, through 

September 30, 2021, approximately 8% of the single-family loans, based on loan count, of our conventional guaranty 

book of business as of March 31, 2020, have been in a COVID-19-related forbearance at some point between then and 

September 30, 2021 (referred to as our “single-family cumulative forbearance take-up rate”). Based on our expectations 

regarding the economic recovery, which we discuss in “Key Market Economic Indicators,” we believe that the substantial 

majority of borrowers who will ultimately request COVID-19-related relief have already done so. 

As shown in the tables below, many of the loans that entered forbearance have since exited; therefore, the percentage 

of loans in our single-family conventional guaranty book of business in forbearance as of September 30, 2021 has 

declined to 1.2%. Some borrowers whose loans are in forbearance continue to make payments according to the original 

contractual terms of the loan notwithstanding the forbearance arrangement; we expect some of these borrowers will 

continue to do so and therefore remain current. The table below provides information on the delinquency and accrual 

status of our single-family loans in forbearance. We expect many of the loans in forbearance will resolve their 

delinquency through a payment deferral or other form of loan workout. As discussed below, servicers are required to 

contact borrowers prior to the end of forbearance to evaluate them for loan workout options that can support their 

successful transition out of forbearance. 

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

Fannie Mae Third Quarter 2021 Form 10-Q 46
We continue to accrue interest income on a majority of our single-family loans in forbearance because we have 

determined that collection of principal and interest on these loans is reasonably assured. For information on our 

nonaccrual policy for loans negatively impacted by the COVID-19 pandemic, see “Note 3, Mortgage Loans.”

Delinquency and Accrual Status of Single-Family Loans in Forbearance

As of

September 30, 2021

Number of 

Loans

Unpaid 

Principal 

Balance(1)

Percentage of 

Loans in 

Forbearance(2) 

Percentage 

of Loans on 

Accrual 

Status(2)

(Dollars in millions)

Delinquency status:

Current 19,724 $ 3,701 10 % 100 %

30 to 59 days delinquent 15,494 2,966 7 96 

60 to 89 days delinquent 12,579 2,449 6 83 

Seriously delinquent:

90 to 180 days delinquent 35,032 7,074 17 82 

180+ days delinquent 123,464 26,011 60 76 

Total seriously delinquent 158,496 33,085 77 77 

Total loans in forbearance(3) 206,293 $ 42,201 100 % 81 

Percentage of single-family conventional guaranty book of 

business 1.2 % 1.2 %

As of

December 31, 2020

Number of 

Loans

Unpaid

Principal 

Balance(1)

Percentage of 

Loans in 

Forbearance(2) 

Percentage 

of Loans on 

Accrual 

Status(2)

Delinquency status: (Dollars in millions)

Current 64,159 $ 12,110 12 % 100 %

30 to 59 days delinquent 40,653 7,672 8 97 

60 to 89 days delinquent 35,107 6,658 7 85 

Seriously delinquent:

90 to 180 days delinquent 126,611 24,961 24 85 

180+ days delinquent 258,025 56,379 49 82 

Total seriously delinquent 384,636 81,340 73 83 

Total loans in forbearance(3) 524,555 $ 107,780 100 % 86 

Percentage of single-family conventional guaranty book of 

business 3.0 % 3.4 %

(1) Does not reflect a valuation allowance recorded on the unpaid principal balance of loans in forbearance of $452 million and $1.8 billion as 

of September 30, 2021 and December 31, 2020, respectively.

(2) Based on loan count.

(3) Amortized cost of these loans was $43.7 billion and $110.4 billion as of September 30, 2021 and December 31, 2020, respectively.

As of September 30, 2021, the vast majority of our single-family conventional loans in forbearance were due to 

borrowers experiencing a COVID-19-related financial hardship. We expect the number of single-family loans in 

forbearance to remain elevated through 2021 compared with pre-pandemic levels. However we expect the number of 

loans in forbearance to continue to decrease into 2022 as borrowers resolve their forbearance or as the forbearance 

period ends.

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

Fannie Mae Third Quarter 2021 Form 10-Q 47
The table below provides information on the credit profile of our single-family loans in forbearance with select higher-risk 

characteristics. While the credit profile of our single-family loans in forbearance is weaker than the overall credit profile 

of our single-family conventional guaranty book of business, only 1% of our single-family loans in forbearance with a 

mark-to-market LTV ratio over 80% are not covered by mortgage insurance. 

Select Higher-Risk Characteristics of Single-Family Loans in Forbearance

As of September 30, 2021 As of December 31, 2020

Number of 

Loans

Percentage 

of Unpaid 

Principal 

Balance in 

Forbearance

Number of 

Loans

Percentage 

of Unpaid 

Principal 

Balance in 

Forbearance

Loans in forbearance with certain higher-risk 

characteristics:(1)

Estimated mark-to-market LTV ratio > 80% 7,938 5 % 62,144 15 %

Estimated mark-to-market LTV ratio > 80% without mortgage 

insurance 1,005 1 6,811 2 

DTI ratio > 43% 78,047 41 201,354 41 

FICO credit score at origination < 680 64,730 27 159,017 26 

(1) The higher-risk categories are not mutually exclusive.

As a part of our loss mitigation efforts, servicers must attempt to contact the borrower no later than 30 days before the 

end of the forbearance period to evaluate them for a workout option after the forbearance period. Those options include:

• a reinstatement (where the borrower repays all of the missed payments at one time);

• a repayment plan (where the borrower repays the missed payments over time);

• a payment deferral (where the borrower defers the missed payments to the end of the loan term, or to when the 

loan is refinanced, the property is sold or the loan is otherwise paid off before the end of the loan term); or 

• a modification of the loan terms so that the borrower may be brought current, which typically results in the 

borrower making reduced monthly contractual payments over a longer period of time.

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

Fannie Mae Third Quarter 2021 Form 10-Q 48
The table below displays the status as of the current period-end of the single-family loans in our guaranty book of 

business that received a forbearance in 2020 or 2021. The vast majority of these forbearance arrangements were 

offered to borrowers who experienced a COVID-19-related financial hardship. Many of these borrowers have 

successfully resolved their forbearance arrangement, primarily through payment deferral or reinstatement. In addition,

many of the loans that received a forbearance arrangement have subsequently liquidated, primarily as a result of 

refinancing, through the first nine months of 2021. By contrast, we expect that a higher percentage of loans that have 

yet to resolve their forbearance will receive a modification. 

As of September 30, 2021, 95% of loans that received a forbearance and subsequently received a payment deferral 

were current, and 89% of loans that received a forbearance and subsequently received a completed modification were 

current. See “Loan Workout Metrics” for additional information about actions we have taken to help reinstate loans to 

current status.

Status of Single-Family Forbearance Loans

As of September 30, 2021

Number of 

Loans

Percentage of 

Loans with 

Forbearance 

by Category

Loans that received a forbearance, by status:(1)

Active forbearance 206,293 15 %

Payment deferral 359,233 26 

Modification(2) 41,843 3 

Reinstated(3) 311,328 22 

Delinquent at time of exit or repayment plan(4) 60,823 4 

Total loans that received a forbearance in our single-family guaranty book of business 979,520 70 

Loans that have received a forbearance, but paid off 415,578 30 

Total loans that have received a forbearance(5) 1,395,098 100 %

(1) Loans are classified based on their status as of period end; therefore, loans may move from one category to another.

(2) Includes loans that are in trial modifications.

(3) Represents loans that are no longer in forbearance but are current according to the original terms of the loan. Also includes loans that 

remained current throughout the forbearance arrangement and continue to perform.

(4) Consists of 54,915 loans that were delinquent upon the expiration of the forbearance arrangement and 5,908 delinquent loans that exited 

forbearance through a repayment plan.

(5) Includes 5,415 loans that were in forbearance as of January 1, 2020.

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

Fannie Mae Third Quarter 2021 Form 10-Q 49
The table below displays the status as of December 31, 2020 for single-family loans in our guaranty book of business 

that received a forbearance in 2020. As of December 31, 2020, 96% of loans that received a forbearance and 

subsequently received a payment deferral were current and 83% of loans that received a forbearance and subsequently 

received a completed modification were current.

Status of Single-Family Forbearance Loans 

As of December 31, 2020

Number of 

Loans

Percentage of 

Loans with 

Forbearance 

by Category

Loans that received a forbearance, by status:(1)

Active forbearance 524,555 40 %

Payment deferral 220,414 17 

Modification(2) 13,277 1 

Reinstated(3) 337,086 26 

Delinquent at time of exit or repayment plan(4) 45,655 3 

Total loans that received a forbearance in our single-family guaranty book of business 1,140,987 87 

Loans that have received a forbearance, but paid off 167,388 13 

Total loans that have received a forbearance(5) 1,308,375 100 %

(1) Loans are classified based on their status as of period end; therefore, loans may move from one category to another.

(2) Includes loans that are in trial modifications.

(3) Represents loans that are no longer in forbearance but are current according to the original terms of the loan. Also includes loans that 

remained current throughout the forbearance arrangement and continue to perform.

(4) Consists of 40,401 loans that were delinquent upon the expiration of the forbearance arrangement and 5,254 delinquent loans that exited 

forbearance through a repayment plan.

(5) Includes 5,415 loans that were in forbearance as of January 1, 2020.

Accrued Interest Receivable, Net on Single-Family Loans in Forbearance

For loans negatively impacted by the COVID-19 pandemic, we continue to recognize interest income at the current 

contractual yield for up to six months of delinquency provided that the loans were either current at March 1, 2020 or 

originated after March 1, 2020. We continue to accrue interest income beyond six months of delinquency provided that 

the collection of principal and interest continues to be reasonably assured. Our evaluation of whether the collection of 

principal and interest is reasonably assured considers the probability of default and the current value of the collateral. 

Once the forbearance period has ended, we will also consider the extent to which the borrower and the servicer have 

agreed to any of the loss mitigation options that are available. We then measure an allowance for expected credit losses 

on the unpaid accrued interest receivable balances such that the balance sheet reflects the net amount of interest we 

expect to collect. The application of our nonaccrual policy for loans negatively impacted by the COVID-19 pandemic has 

resulted in a large portion of delinquent loans, including those in forbearance, remaining on accrual status. See “Note 1, 

Summary of Significant Accounting Policies” in our 2020 Form 10-K and “Note 3, Mortgage Loans” in this report for 

additional information about our nonaccrual accounting policy. See also “Risk Factors—COVID-19 Pandemic Risk” in 

this report for a discussion of credit risk and the COVID-19 pandemic.

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

Fannie Mae Third Quarter 2021 Form 10-Q 50
Under our nonaccrual accounting policy for loans negatively impacted by the COVID-19 pandemic, our allowance for 

accrued interest receivable considers both the loan’s principal and accrued interest receivable balances as well as any 

proceeds that are expected from contractually attached mortgage insurance when assessing collectability. Our 

assessment of collectability requires significant management judgment; as a result, our allowance for accrued interest 

receivable is subject to the same review processes, as well as other established governance and controls, used for our 

allowance for loan losses. Our allowance for accrued interest receivable on single-family loans in forbearance 

decreased as of September 30, 2021 compared to December 31, 2020, primarily as a result of loans exiting 

forbearance as well as record home price appreciation in the first nine months of 2021. The table below displays an 

aging analysis of our accrued interest receivable, net of allowance on single-family loans that are in a forbearance plan.

Aging of Accrued Interest Receivable, Net of Allowance on Single-Family Loans in Forbearance

As of September 30, 2021 As of December 31, 2020

(Dollars in millions)

Aging analysis of accrued interest receivable:

Current $ 9 $ 32 

30 to 59 days delinquent 17 46 

60 to 89 days delinquent 19 55 

Seriously delinquent:

90 to 180 days delinquent 95 377 

180+ days delinquent 981 1,427 

Total accrued interest receivable 1,121 1,937 

Allowance for accrued interest receivable (67) (173) 

Total accrued interest receivable, net $ 1,054 $ 1,764 

Principal and Interest Payments while Loans are in Forbearance

While a loan is in forbearance and remains in an MBS trust, investors in the MBS are entitled to continue to receive 

principal and interest payments on the MBS even though the borrower is not required to make principal and interest 

payments. For the majority of loans in our single-family guaranty book of business, our Single-Family Servicing Guide 

used to require servicers to advance missed scheduled principal and interest payments to the MBS trusts until the loans 

were purchased from the MBS trusts, including the portion of interest that represents guaranty fees owed to us. 

Because we typically do not purchase loans from MBS trusts while they are in forbearance, this servicer payment 

obligation could have continued for the entirety of the forbearance plan. Beginning in August 2020, at FHFA’s instruction, 

we reduced our single-family servicers’ obligations to advance these missed borrower payments and only require 

servicers to advance missed scheduled principal and interest payments on a loan for the first four months of missed 

borrower payments. After four months, we make the missed scheduled principal and interest payments to the MBS trust 

for payment to MBS holders so long as the loan remains in the MBS trust. For the third quarter and first nine months of 

2021, we advanced $375 million and $1.5 billion, respectively, in missed borrower principal and interest payments to 

MBS trusts for payment to MBS holders, compared with $458 million in missed borrower principal and interest payments 

for the third quarter and first nine months of 2020. Since FHFA’s instruction in August of 2020 through September 30, 

2021, we have advanced $2.7 billion in missed borrower principal and interest payments. See “Retained Mortgage 

Portfolio” in this report for a description of when we purchase loans from single-family MBS trusts.

Loan Workout Metrics

As a part of our credit risk management efforts, loan workouts represent actions we take to help reinstate loans to 

current status and help homeowners stay in their home or to otherwise avoid foreclosure. Our loan workouts reflect 

various types of home retention solutions, including repayment plans, payment deferrals, and loan modifications. Our 

loan workouts also include foreclosure alternatives, such as short sales and deeds-in-lieu of foreclosure. 

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

Fannie Mae Third Quarter 2021 Form 10-Q 51
The chart below displays the unpaid principal balance of our completed single-family loan workouts by type, as well as 

the number of loan workouts, for the first nine months of 2020 compared with the first nine months of 2021. This table 

does not include loans in an active forbearance arrangement, trial modifications, loans to certain borrowers who have 

received bankruptcy relief that are classified as troubled debt restructurings, and repayment plans that have been 

initiated but not completed.

Completed Loan Workout Activity

(Dollars in billions )

$4.3 $6.1

$32.5

$50.5

$0.9

$0.8

$37.7

$57.4

178,600

275,700

Modifications1 Payment deferrals Other2 Approximate number of loan workouts

YTD 2020 YTD 2021

(1) There were approximately 19,000 loans and 13,600 loans in a trial modification period that was not complete as of September 30, 2021

and 2020, respectively.

(2) Includes repayment plans and foreclosure alternatives and excludes completed forbearance arrangements. Repayment plans reflect only 

those plans associated with loans that were 60 days or more delinquent. 

The increase in home retention solutions in the first nine months of 2021 compared with the first nine months of 2020

was primarily driven by completed COVID-19-related payment deferrals, which have been the primary loan workout 

solution for borrowers exiting COVID-19-related forbearance. The total amount of principal and interest deferred to the 

end of the loan term for single-family loans that received a payment deferral was $2.9 billion for the first nine months of 

2021 compared with $720 million for the first nine months of 2020. 

Given the broad impact of the pandemic and the number of loans in forbearance, we expect loan workout activity to 

remain elevated throughout 2021 and into 2022.

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

Fannie Mae Third Quarter 2021 Form 10-Q 52
REO Management

If a loan defaults, we may acquire the property through foreclosure or a deed-in-lieu of foreclosure. The table below 

displays our REO activity by region. Regional REO acquisition trends generally follow a pattern that is similar to, but 

lags, that of regional delinquency trends.

Single-Family REO Properties

For the Nine Months Ended September 30,

2021 2020

Single-family REO properties (number of properties):

Beginning of period inventory of single-family REO properties(1) 7,973 17,501 

Acquisitions by geographic area:(2)

Midwest 755 1,298 

Northeast 780 1,104 

Southeast 743 1,572 

Southwest 389 862 

West 159 381 

Total REO acquisitions(1) 2,826 5,217 

Dispositions of REO (4,245) (13,146) 

End of period inventory of single-family REO properties(1) 6,554 9,572 

Carrying value of single-family REO properties (dollars in millions) $ 956 $ 1,347 

Single-family foreclosure rate(3) 0.02 % 0.04 %

REO net sales price to unpaid principal balance(4) 110 % 86 %

Short sales net sales price to unpaid principal balance(5) 83 % 80 %

(1) Includes held-for-use properties, which are reported in our condensed consolidated balance sheets as a component of “Other assets.” 

(2) See footnote 8 to the “Key Risk Characteristics of Single-Family Conventional Business Volume and Guaranty Book of Business” table for 

states included in each geographic region.

(3) Estimated based on the annualized total number of properties acquired through foreclosure or deeds-in-lieu of foreclosure as a percentage 

of the total number of loans in our single-family conventional guaranty book of business as of the end of each period.

(4) Calculated as the amount of sale proceeds received on disposition of REO properties during the respective periods, excluding those 

subject to repurchase requests made to our sellers or servicers, divided by the aggregate unpaid principal balance of the related loans at 

the time of foreclosure. Net sales price represents the contract sales price less selling costs for the property and other charges paid by the 

seller at closing. 

(5) Calculated as the amount of sale proceeds received on properties sold in short sale transactions during the respective periods divided by 

the aggregate unpaid principal balance of the related loans. Net sales price includes borrower relocation incentive payments and 

subordinate lien(s) negotiated payoffs. 

In response to the pandemic and with instruction from FHFA, we prohibited our servicers from completing foreclosures 

on our single-family loans through July 31, 2021, except in the case of vacant or abandoned properties. In addition, as 

described in “Single-Family Acquisition and Servicing Policies and Underwriting and Servicing Standards—COVID-19 

Servicing Policies,” our servicers are required to comply with a CFPB rule that prohibits certain new single-family 

foreclosures on mortgage loans secured by the borrower’s principal residence until after December 31, 2021. As a 

result, foreclosure volumes were lower through the first nine months of 2021 compared with the first nine months of 

2020. We expect foreclosure volumes to gradually increase in 2022.

Other Single-Family Credit Information

Single-Family Credit Loss Metrics and Loan Sale Performance

The single-family credit loss metrics and loan sale performance measures below present information about losses or 

gains we realized on our single-family loans during the periods presented. The amount of these losses or gains in a 

given period is driven by foreclosures, pre-foreclosure sales, post-foreclosure REO activity, mortgage loan 

redesignations, and other events that trigger write-offs and recoveries. The single-family credit loss metrics we present 

are not defined terms and may not be calculated in the same manner as similarly titled measures reported by other 

companies. Management uses these measures to evaluate the effectiveness of our single-family credit risk 

management strategies in conjunction with leading indicators such as serious delinquency and forbearance rates, which 

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

Fannie Mae Third Quarter 2021 Form 10-Q 53
are potential indicators of future realized single-family credit losses. We believe these measures provide useful 

information about our single-family credit performance and the factors that impact it.

The table below displays the components of our single-family credit loss metrics and loan sale performance.

Single-Family Credit Loss Metrics and Loan Sale Performance 

For the Three Months 

Ended September 30,

For the Nine Months 

Ended September 30,

2021 2020 2021 2020

Amount Amount Amount Amount

(Dollars in millions)

Write-offs $ (7) $ (35) $ (30) $ (150) 

Recoveries 137 7 221 26 

Foreclosed property expense (80) (64) (91) (145) 

Credit gains (losses) 50 (92) 100 (269) 

Write-offs on the redesignation of mortgage loans from HFI to 

HFS(1) (47) (227) (247) (236) 

Gains on sales and other valuation adjustments(2) 215 486 850 407 

Net credit gains (losses), write-offs on redesignations and 

gains (losses) on sales and other valuation adjustments $ 218 $ 167 $ 703 $ (98) 

Credit (gain) loss ratio (in bps)(3) (0.6) 1.2 (0.4) 1.2

Net credit (gains), write-offs on redesignations and (gains) losses 

on sales and other valuation adjustments ratio (in bps)(3) (2.6) (2.2) (2.8) 0.4 

(1) Consists of the lower of cost or fair value adjustment at time of redesignation.

(2) Consists of gains or losses realized on the sales of nonperforming and reperforming mortgage loans during the period and temporary 

lower-of-cost-or-market adjustments on HFS loans, which are recognized in “Investment gains, net” in our condensed consolidated 

statements of operations and comprehensive income.

(3) Calculated based on the annualized amount of “Credit (gain) losses” and “Net credit gains (losses), write-offs on redesignations and gains 

(losses) on sales and other valuation adjustments” divided by the average single-family conventional guaranty book of business during the 

period.

We had higher write-offs on the redesignation of mortgage loans as well as increased single-family gains on sales and 

other valuation adjustments for the first nine months of 2021 compared with the first nine months of 2020, primarily due 

to a higher volume of nonperforming and reperforming loans sales in 2021 than in 2020. This increase in volume was 

primarily due to our having suspended new sales of reperforming and nonperforming loans in the second quarter of 

2020. 

However, our suspension of nonperforming and reperforming loan sales in the second quarter of 2020 led to an 

elevated level of reperforming loans sales in the third quarter of 2020, when we resumed these sales. As a result, in the 

third quarter of 2021 we had fewer reperforming loan sales than in the third quarter of 2020, which resulted in lower 

write-offs on the redesignation of mortgage loans as well as decreased single-family gains on sales and other valuation 

adjustments for the third quarter of 2021 as compared with the third quarter of 2020.

We do not expect a substantial increase in our realized single-family credit losses in the near term as a result of 

COVID-19 because we expect limited foreclosure activity during the remainder of 2021 due in part to the CFPB rule 

which prohibits certain new single-family foreclosures on mortgage loans secured by the borrower’s principal residence 

until after December 31, 2021. See “Risk Factors” in this report for additional information on the potential credit risk 

impact of the COVID-19 pandemic. 

For information on our credit-related income or expense, which includes changes in our allowance, see “Consolidated 

Results of Operations—Credit-Related Income (Expense)” and “Single-Family Business Financial Results.”

Single-Family Loss Reserves

Our single-family loss reserves, which include our allowance for loan losses and the related accrued interest receivable, 

and our reserve for guaranty losses, provide for an estimate of credit losses in our single-family guaranty book of 

business.

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

Fannie Mae Third Quarter 2021 Form 10-Q 54
The table below summarizes the changes in our single-family loss reserves, excluding credit losses on our AFS 

securities. For a discussion of changes in our single-family benefit or provision for credit losses see “Consolidated 

Results of Operations—Credit-Related Income (Expense).”

For the Three Months Ended 

September 30,

For the Nine Months Ended 

September 30,

2021 2020 2021 2020

(Dollars in millions)

Changes in loss reserves:

Beginning balance $ (6,244) $ (11,788) $ (9,573) $ (8,779) 

Transition impact of the adoption of the CECL 

standard — — — (1,231) 

Benefit (provision) for credit losses 885 542 4,100 (1,409) 

Write-offs 54 262 277 386 

Recoveries (137) (7) (221) (26) 

Other (8) 23 (33) 91 

Ending balance $ (5,450) $ (10,968) $ (5,450) $ (10,968) 

Write-offs, net of recoveries annualized, as a 

percentage of the average single-family 

conventional guaranty book of business (in bps) (1.0) 3.3 0.2 1.6

As of

September 30, 

2021

December 31, 

2020

Loss reserves as a percentage of single-family(1):

Conventional guaranty book of business 0.16 % 0.30 %

Estimated mark-to-market LTV ratio > 80% 2.29 2.41 

Nonaccrual loans at amortized cost 22.69 34.63 

Single-Family Loss Reserves

(1) Calculated as single-family loss reserves divided by, as indicated, “Conventional guaranty book of business,” “Estimated mark-to-market 

LTV ratio > 80%” or “Nonaccrual loans at amortized cost.”

Our loss reserves and loss reserves as a percentage of our single-family conventional guaranty book of business 

decreased in the first nine months of 2021 primarily as a result of a benefit for credit losses. See “Consolidated Results 

of Operations—Credit-Related Income (Expense)” in this report for information on the primary factors that contributed to 

our single-family benefit for credit losses in the first nine months of 2021.

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

Fannie Mae Third Quarter 2021 Form 10-Q 55
Troubled Debt Restructurings and Nonaccrual Loans

The table below displays the single-family loans classified as TDRs that were on accrual status and single-family loans 

on nonaccrual status. The table includes our amortized cost in HFI and HFS single-family mortgage loans, as well as 

interest income forgone and recognized for on-balance sheet TDRs on accrual status and nonaccrual loans. For more 

information on TDRs and nonaccrual loans, see “Note 3, Mortgage Loans.”

Single-Family TDRs on Accrual Status and Nonaccrual Loans

As of

September 30, 2021 December 31, 2020

(Dollars in millions)

TDRs on accrual status $ 56,240 $ 69,503 

Nonaccrual loans 24,021 27,643 

Total TDRs on accrual status and nonaccrual loans $ 80,261 $ 97,146 

Accruing on-balance sheet loans past due 90 days or more(1) $ 37,668 $ 77,181 

For the Nine Months Ended September 30,

2021 2020

(Dollars in millions)

Interest related to on-balance sheet TDRs on accrual status and 

nonaccrual loans:

Interest income forgone(2) $ 866 $ 1,143 

Interest income recognized(3) 2,142 2,921 

(1) Includes loans that, as of the end of each period, are 90 days or more past due and continuing to accrue interest. As of September 30, 

2021 and December 31, 2020, a large majority of these loans had a COVID-19-related forbearance.

(2) Represents the amount of interest income we did not recognize, but would have recognized during the period, for nonaccrual loans and 

TDRs on accrual status held as of the end of each period had the loans performed according to their original contractual terms.

(3) Primarily includes amounts accrued while the loans were performing, including the amortization of any deferred cost basis adjustments, 

and cash payments received on nonaccrual loans held as of the end of each period.

We continue to account for eligible COVID-19-related loss mitigation activities as permitted under the CARES Act and 

the Consolidated Appropriations Act of 2021, which provide relief from TDR accounting and disclosure requirements for 

our forbearance plans and loan modifications. As a result, the balance of TDRs on accrual status remains lower as of 

September 30, 2021 and December 31, 2020 compared with pre-pandemic levels. In addition, loan sales in the first nine 

months of 2021 contributed to the further decline in TDRs on accrual status as of September 30, 2021, compared with 

December 31, 2020. See “Note 1, Summary of Significant Accounting Policies” in our 2020 Form 10-K for more 

information on the relief from TDR accounting and disclosure requirements. 

Under our nonaccrual policy for loans negatively impacted by the COVID-19 pandemic, we continue to recognize 

interest income at the current contractual yield for up to six months of delinquency provided that the loans were either 

current at March 1, 2020 or originated after March 1, 2020. We continue to accrue interest income beyond six months of 

delinquency provided that the collection of principal and interest continues to be reasonably assured according to our 

nonaccrual policy. This has resulted in a large portion of loans in forbearance remaining on accrual status. However, as 

more borrowers resolve their forbearance arrangement, primarily through a payment deferral, the balance of loans 

accruing on-balance sheet that were past due 90 days or more as of September 30, 2021 compared with December 31, 

2020 has declined. For additional information on our accounting policy for nonaccrual loans, see “Note 3, Mortgage 

Loans.”

Multifamily Business

Our Multifamily business provides mortgage market liquidity primarily for properties with five or more residential units, 

which may be apartment communities, cooperative properties, seniors housing, dedicated student housing or 

manufactured housing communities.

This section supplements and updates information regarding our Multifamily business segment in our 2020 Form 10-K. 

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

activities, customers, competition and market share of our Multifamily business.

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

Fannie Mae Third Quarter 2021 Form 10-Q 56
Multifamily Mortgage Market

Multifamily market fundamentals, which include factors such as vacancy rates and rents, remained resilient during the 

third quarter of 2021, due to pent up demand for multifamily housing stemming from a rebounding economy, including

increasing job growth and rising wages, as well as the slowing but continued rollout of vaccinations across the country. 

In addition, payments from the Emergency Rental Assistance program appear to be helping some renters pay their rent. 

• Vacancy rates. Based on preliminary third-party data, the estimated national multifamily vacancy rate for 

institutional investment-type apartment properties as of September 30, 2021 decreased to 5.0% compared with 

5.5% as of June 30, 2021, and 5.8% as of September 30, 2020. The estimated national multifamily vacancy 

rate remains below its estimated average rate of about 6.0% over the last ten years.

• Rents. Effective rents are estimated to have increased by 3.5% during the third quarter of 2021 compared with 

an increase of 3.0% during the second quarter of 2021 and a decrease of 0.3% during the third quarter of 2020. 

Vacancy rates and rents are important to loan performance because multifamily loans are generally repaid from the 

cash flows generated by the underlying properties. Several years of strengthening in these fundamentals helped to 

increase property values in most metropolitan areas, even over the past year despite pressures from the pandemic. 

Based on preliminary multifamily property sales data, transaction volumes in the first eight months of 2021 are far ahead 

of previous years’ levels, with capitalization rates remaining low but stable. We believe this is due to property owners 

benefiting from strong fundamentals, and commercial real estate investors remaining interested in the multifamily sector 

over the long term.

Multifamily construction underway remains elevated, with more than 470,000 units expected to be delivered in 2021, 

compared with the estimated 403,000 new multifamily units that were completed in 2020.

We expect the multifamily sector to benefit from an improving economy and continued job growth, but with rent growth 

returning to more normalized levels over the coming months.

Multifamily Business Metrics

Through the secondary mortgage market, we support rental housing for the workforce population, for senior citizens and 

students, and for families with the greatest economic need. Over 90% of the multifamily units we financed in the third 

quarter of 2021 were affordable to families earning at or below 120% of the median income in their area, providing 

support for both workforce housing and affordable housing.

Multifamily New Business Volume

(Dollars in billions)

$15.2 $16.4

$48.9 $48.8

169,000 166,000

542,000 511,000

Multifamily new business volume1 Multifamily units financed from new business volume

Q3 2020 Q3 2021 YTD 2020 YTD 2021

(1) Reflects unpaid principal balance of multifamily Fannie Mae MBS issued, multifamily loans purchased, and credit enhancements provided 

on multifamily mortgage assets during the period.

FHFA established a 2021 multifamily volume cap of $70 billion in new business volume over the four-quarter period from 

January 1, 2021 through December 31, 2021. FHFA also required that at least 50% of our 2021 multifamily business 

volume must be mission-driven, focused on specified affordable and underserved market segments. Furthermore, 

FHFA’s 2021 multifamily volume cap requires that a minimum of 20% of our multifamily business volume in 2021 must 

be affordable to residents at 60% of area median income or below. Multifamily business that meets the minimum 20% 

requirement also counts as meeting the minimum 50% requirement. In October 2021, FHFA announced that the 

multifamily loan purchase cap for 2022 will be $78 billion. As in 2021, a minimum of 50% of loan purchases must be 

mission-driven, focused on specified affordable and underserved market segments. In addition, 25% of loan purchases 

must be affordable to residents earning 60% or less of area median income, up from the 20% requirement in 2021. 

MD&A | Multifamily Business | Multifamily Mortgage Market

Fannie Mae Third Quarter 2021 Form 10-Q 57
An independent $80 billion limit on our acquisition of multifamily mortgage assets in any 52-week period was 

established in January 2021 and temporarily suspended in September 2021 under letter agreements in connection with 

our senior preferred stock purchase agreement with Treasury. That limit also requires that at least 50% of our 

multifamily acquisitions in any calendar year must be classified as mission-driven. The September 2021 letter 

agreement provides that the suspension of this restriction will terminate on the later of one year after the date of the 

agreement and six months after Treasury notifies us. For additional information on the September 2021 letter 

agreement, see “Legislation and Regulation—Letter Agreement with Treasury.” The $70 billion multifamily volume cap in 

2021 and $78 billion multifamily volume cap in 2022, and the mission-related requirements established by FHFA, remain 

in effect. For information on how conservatorship may affect our business activities, see “Risk Factors” in our 2020 Form 

10-K.

Presentation of Our Multifamily Guaranty Book of Business

For purposes of the information reported in this “Multifamily Business” section, we measure our multifamily guaranty 

book of business using the unpaid principal balance of mortgage loans underlying Fannie Mae MBS. By contrast, the 

multifamily guaranty book of business presented in the “Composition of Fannie Mae Guaranty Book of Business” table 

in the “Guaranty Book of Business” section is based on the unpaid principal balance of Fannie Mae MBS outstanding, 

rather than the unpaid principal balance of the underlying mortgage loans. These amounts differ primarily as a result of 

payments we receive on underlying loans that have not yet been remitted to the MBS holders. 

Multifamily Guaranty Book of Business

(Dollars in billions) 

$366.8

$408.1

73.3

77.5

Unpaid principal balance of multifamily guaranty book of business1

Average charged guaranty fee rate on multifamily guaranty book of business (in basis points), at end of period

9/30/2020 9/30/2021

(1) Our multifamily guaranty book of business primarily consists of multifamily mortgage loans underlying Fannie Mae MBS outstanding, 

multifamily mortgage loans of Fannie Mae held in our retained mortgage portfolio, and other credit enhancements that we provide on 

multifamily mortgage assets. It does not include non-Fannie Mae multifamily mortgage-related securities held in our retained mortgage 

portfolio for which we do not provide a guaranty.

Average charged guaranty fee represents our effective revenue rate relative to the size of our multifamily guaranty book 

of business. Management uses this metric to assess the return we earn as compensation for the multifamily credit risk 

we manage. Average charged guaranty fee increased in the third quarter of 2021 compared with the third quarter of 

2020 due to increased pricing on new multifamily business. While our multifamily guaranty fee pricing is primarily based 

on the individual credit risk characteristics of the loans we acquire, it is also influenced by market forces such as the 

availability of other sources of liquidity, our mission-related goals, the FHFA volume cap and the management of our 

overall portfolio composition. 

MD&A | Multifamily Business | Multifamily Business Metrics

Fannie Mae Third Quarter 2021 Form 10-Q 58
Multifamily Business Financial Results(1)

For the Three Months 

Ended September 30,

For the Nine Months 

Ended September 30,

2021 2020 Variance 2021 2020 Variance

(Dollars in millions)

Net interest income $ 1,102 $ 786 $ 316 $ 2,913 $ 2,430 $ 483 

Fee and other income 25 20 5 73 65 8 

Net revenues 1,127 806 321 2,986 2,495 491 

Fair value gains (losses), net 14 (83) 97 (2) 113 (115) 

Administrative expenses (125) (128) 3 (377) (377) — 

Credit-related income (expense)(2) 61 (48) 109 174 (699) 873 

Credit enhancement expense(3) (59) (51) (8) (172) (164) (8) 

Change in expected credit enhancement 

recoveries(4) (14) — (14) (16) 195 (211) 

Other income (expenses), net(5) 14 64 (50) (14) 47 (61) 

Income before federal income taxes 1,018 560 458 2,579 1,610 969 

Provision for federal income taxes (201) (100) (101) (518) (312) (206) 

Net income $ 817 $ 460 $ 357 $ 2,061 $ 1,298 $ 763 

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

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

(3) Primarily consists of costs associated with our MCIRTTM and Multifamily Connecticut Avenue SecuritiesTM (“MCASTM”) programs as well as 

amortization expense for certain lender risk-sharing programs.

(4) Consists of change in benefits recognized from our freestanding credit enhancements that primarily relates to our Delegated Underwriting 

and Servicing (“DUS®”) lender risk-sharing. 

(5) Consists of investment gains or losses, gains or losses from partnership investments, debt extinguishment gains or loss, and other income 

or expenses.

Net Interest Income

Net interest income increased in the third quarter and first nine months of 2021 compared with the third quarter and first 

nine months of 2020 primarily due to higher guaranty fee income as a result of an increase in our multifamily guaranty 

book of business combined with an increase in average charged guaranty fees and higher yield maintenance revenue

related to the prepayment of multifamily loans. 

Credit-Related Income (Expense)

Credit-related income for the third quarter and first nine months of 2021 was primarily driven by a benefit from actual 

and projected economic data and lower expected losses resulting from the COVID-19 pandemic.

Credit-related expense for the third quarter of 2020 was primarily driven by provision for credit losses on a seniors 

housing portfolio that was written off, partially offset by a lower estimated multifamily cumulative forbearance take-up 

rate, which reduced the losses we expected to incur as a result of the COVID-19 pandemic from our prior estimate.

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

losses due to losses we expected to incur as a result of the COVID-19 pandemic.

See “Consolidated Results of Operations—Credit-Related Income (Expense)” in this report for more information on our 

multifamily benefit (provision) for credit losses. 

Multifamily Mortgage Credit Risk Management

This section updates our discussion of multifamily mortgage credit risk management in our 2020 Form 10-K in “MD&A—

Multifamily Business—Multifamily Mortgage Credit Risk Management.” For an overview of key elements of our 

mortgage credit risk management, see “Business—Managing Mortgage Credit Risk” in our 2020 Form 10-K.

MD&A | Multifamily Business | Multifamily Business Financial Results

Fannie Mae Third Quarter 2021 Form 10-Q 59
Multifamily Acquisition Policy and Underwriting Standards 

Our standards for multifamily loans specify maximum original LTV ratio and minimum original debt service coverage 

ratio (“DSCR”) values that vary based on loan characteristics. Our experience has been that original LTV ratio and 

DSCR values have been reliable indicators of future credit performance. At underwriting, we evaluate the DSCR based 

on both actual and underwritten debt service payments. The original DSCR is calculated using the underwritten debt 

service payments for the loan, which assumes both principal and interest payments, rather than the actual debt service 

payments. Depending on the loan’s interest rate and structure, using the underwritten debt service payments may result 

in a more conservative estimate of the debt service payments (for example, loans with an interest-only period). This 

approach is used for all loans, including those with full and partial interest-only terms. 

To address possible fluctuations in borrower income and expenses resulting from the COVID-19 pandemic, we instituted 

additional reserve requirements in 2020 for certain new multifamily loan acquisitions depending on the product type, 

LTV ratio and DSCR. We rescinded these temporary COVID-related reserve requirements as of May 2021.

Key Risk Characteristics of Multifamily Guaranty Book of Business 

As of

September 30, 2021 December 31, 2020 September 30, 2020

Weighted average original LTV ratio 65 % 66 % 66 %

Original LTV ratio greater than 80% 1 1 1 

Original DSCR less than or equal to 1.10 11 10 11 

Full term interest-only loans 32 30 29 

Partial term interest-only loans(1) 51 51 51 

(1) Consists of mortgage loans that were underwritten with an interest-only term, regardless of whether the loan is currently in its interest-only 

period.

We provide additional information on the credit characteristics of our multifamily loans in quarterly financial 

supplements, which we furnish to the SEC with current reports on Form 8-K. Information in our quarterly financial 

supplements is not incorporated by reference into this report. 

Transfer of Multifamily Mortgage Credit Risk

Lender risk-sharing is a cornerstone of our Multifamily business. We primarily transfer risk through our Delegated 

Underwriting and Servicing (“DUS®”) program, which delegates to DUS lenders the ability to underwrite and service 

multifamily loans, in accordance with our standards and requirements. DUS lenders receive credit risk-related revenues 

for their respective portion of credit risk retained, and, in turn, are required to fulfill any loss-sharing obligation. This 

aligns the interests of the lender and Fannie Mae throughout the life of the loan. We monitor the capital resources and 

loss sharing capacity of our DUS lenders on an ongoing basis.

Our DUS model typically results in our lenders sharing approximately one-third of the credit risk on our multifamily 

loans, either on a pro-rata or tiered basis. Lenders who share on a tiered basis cover loan-level credit losses up to the 

first 5% of the unpaid principal balance of the loan and then share with us any remaining losses up to a prescribed limit. 

Loans serviced by DUS lenders and their affiliates represented substantially all of our multifamily guaranty book of 

business as of September 30, 2021 and December 31, 2020. In certain situations, to effectively manage our 

counterparty risk, we do not allow the lender to fully share in one-third of the credit risk, but have them share in a 

smaller portion.

While not a large portion of our multifamily guaranty book of business, our non-DUS lenders typically also have lender 

risk-sharing, where the lenders typically share or absorb losses based on a negotiated percentage of the loan or the 

pool balance.

To complement our front-end lender-risk sharing program, we have engaged in back-end credit risk transfer transactions 

through our MCIRTTM and Multifamily Connecticut Avenue Securities (“MCASTM”) transactions. Through these 

transactions, we have transferred a portion of credit risk associated with Fannie Mae losses on a reference pool of 

multifamily mortgage loans.

Our back-end multifamily credit-risk sharing transactions were primarily designed to further reduce the capital 

requirements associated with loans in the reference pool with the related benefit of additional credit risk protection in the 

event of a stress environment. We transfer multifamily credit risk through lender risk-sharing at the time of acquisition, 

but our multifamily back-end credit risk transfer activity occurs later, typically up to a year or more after acquisition.

MD&A | Multifamily Business | Multifamily Mortgage Credit Risk Management

Fannie Mae Third Quarter 2021 Form 10-Q 60
In October 2021, we entered into a new credit risk transfer transaction, transferring mortgage credit risk through our 

MCIRTTM program. The structure of, and extent to which we engage in, any additional credit risk transfer transactions in 

the future may be affected by our capital requirements, the degree of regulatory capital relief provided by the 

transactions, our risk appetite, the strength of future market conditions, the cost of these transactions, FHFA guidance, 

and the review of our overall business and capital plan. 

The table below displays the total unpaid principal balance of multifamily loans and the percentage of our multifamily 

guaranty book of business, based on unpaid principal balance, that is covered by a back-end credit risk transfer 

transaction. The table does not reflect front-end lender risk-sharing arrangements, as only a small portion of our 

multifamily guaranty book of business is not covered by these arrangements.

Multifamily Loans in Back-End Credit Risk Transfer Transactions

As of

September 30, 2021 December 31, 2020

Unpaid 

Principal 

Balance

Percentage of 

Multifamily 

Guaranty Book 

of Business

Unpaid 

Principal 

Balance

Percentage of 

Multifamily 

Guaranty Book 

of Business

(Dollars in millions)

MCIRT $ 68,319 17 % $ 72,166 19 %

MCAS 28,146 7 28,968 7 

Total $ 96,465 24 % $ 101,134 26 %

Multifamily Portfolio Diversification and Monitoring

Diversification within our multifamily book of business by geographic concentration, term to maturity, interest-rate 

structure, borrower concentration, loan size and credit enhancement coverage are important factors that influence credit 

performance and help reduce our credit risk. 

As part of our ongoing credit risk management process, we and our lenders monitor the performance and risk 

characteristics of our multifamily loans and the underlying properties on an ongoing basis throughout the loan term at 

the asset and portfolio level. We require lenders to provide quarterly and annual financial updates for the loans for which 

we are contractually entitled to receive such information. We closely monitor loans with an estimated current DSCR 

below 1.0, as that is an indicator of heightened default risk. The percentage of loans in our multifamily guaranty book of 

business, calculated based on unpaid principal balance, with a current DSCR less than 1.0 was approximately 2% as of 

September 30, 2021 and December 31, 2020. Our estimates of current DSCRs are based on the latest available 

income information for these properties and exclude co-op loans. Although we use the most recently available results 

from our multifamily borrowers, there is a lag in reporting, which typically can range from three to six months, but in 

some cases may be longer.

In addition to the factors discussed above, we track the following credit risk characteristics to determine loan credit 

quality indicators, which are the internal risk categories we use and which are further discussed in “Note 3, Mortgage 

Loans”:

• the physical condition of the property;

• delinquency status;

• the relevant local market and economic conditions that may signal changing risk or return profiles; and

• other risk factors.

For example, we closely monitor the rental payment trends and vacancy levels in local markets, as well as capitalization 

rates, to identify loans that merit closer attention or loss mitigation actions. We manage our exposure to refinancing risk 

for multifamily loans maturing in the next several years. We have a team that proactively manages upcoming loan 

maturities to minimize losses on maturing loans. This team assists lenders and borrowers with timely and appropriate 

refinancing of maturing loans with the goal of reducing defaults and foreclosures related to these loans. The primary 

asset management responsibilities for our multifamily loans are performed by our DUS and other multifamily lenders. 

We periodically evaluate these lenders’ performance for compliance with our asset management criteria.

Multifamily Problem Loan Management and Foreclosure Prevention

In addition to the credit performance information on our multifamily loans provided below, we provide information about 

multifamily loans in a COVID-19-related forbearance that back MBS and whole loan REMICs in a “Multifamily MBS 

MD&A | Multifamily Business | Multifamily Mortgage Credit Risk Management

Fannie Mae Third Quarter 2021 Form 10-Q 61
COVID-19 Forbearance List” in the “Data Collections” section of our DUS Disclose®

 tool, available at 

www.fanniemae.com/dusdisclose. Information on our website is not incorporated into this report.

Delinquency Statistics on our Problem Loans

The percentage of our multifamily loans classified as substandard in our guaranty book of business increased modestly 

as of September 30, 2021 compared with December 31, 2020, due to the continued impact of COVID-19. Substandard 

loans are loans that have a well-defined weakness that could impact their timely full repayment. While the majority of 

the substandard loans in our multifamily guaranty book of business are currently making timely payments or are in 

forbearance, we continue to monitor the performance of the full substandard loan population. For more information on 

our credit quality indicators, including our population of substandard loans, see “Note 3, Mortgage Loans.” 

Our multifamily serious delinquency rate decreased to 0.42% as of September 30, 2021 compared with 0.98% as of 

December 31, 2020 and 1.12% as of September 30, 2020, primarily driven by the ongoing economic recovery resulting 

in loans that received forbearance completing their repayment plans or otherwise reinstating. Our multifamily serious 

delinquency rate consists of multifamily loans that were 60 days or more past due based on unpaid principal balance, 

expressed as a percentage of our multifamily guaranty book of business. Our multifamily serious delinquency rate 

includes 0.27% and 0.50% of multifamily loans that were 180 days or more past due as of September 30, 2021 and 

December 31, 2020, respectively. 

Management monitors the multifamily serious delinquency rate as an indicator of potential future credit losses and loss 

mitigation activities. Serious delinquency rates are reflective of our performance in assessing and managing credit risk 

associated with multifamily loans in our guaranty book of business. Typically, higher serious delinquency rates result in 

a higher allowance for loan losses.

Our multifamily serious delinquency rate, excluding loans that received a forbearance, was 0.03% as of September 30, 

2021 and December 31, 2020. We monitor this rate to better understand the impact that forbearance activity has had on 

multifamily serious delinquency and the performance of loans that are seriously delinquent not as a result of COVID-19.

COVID-19 Forbearance and Multifamily Eviction Moratorium 

In response to the COVID-19 pandemic and its impact, we have broadly offered forbearance to affected multifamily 

borrowers, as we describe in “MD&A—Multifamily Business—Multifamily Mortgage Credit Risk Management—

Multifamily Problem Loan Management and Foreclosure Prevention” in our 2020 Form 10-K. In 2020, we delegated to 

our lenders the ability to provide forbearance for up to six monthly payments for most loan types. In September 2021, 

FHFA extended our program to provide forbearance for multifamily loans impacted by COVID-19 indefinitely. While the 

forbearance program remains in place, the delegation to our lenders expired on September 30, 2021. As a result, we 

determine whether to offer forbearance relief based on the borrower’s circumstances through our normal loss mitigation 

procedures. For delegated forbearances, borrowers are required to bring their loans current within a time period 

determined by multiplying the number of months of forbearance by four. For example, a three-month forbearance would 

translate into a twelve-month repayment period. In exchange for receiving forbearance, borrowers must agree to 

suspend tenant evictions for nonpayment of rent, provide monthly operating statements and remit any excess cash flow 

to our servicers on a monthly basis, to be held until the end of the forbearance period and then applied to missed 

mortgage payments.

Multifamily Loan Forbearance 

We estimate that 1.6% of our multifamily book of business as of March 31, 2020, based on unpaid principal balance, 

has been in a COVID-19-related forbearance at some point in time through September 30, 2021. Most of these loans

have exited forbearance into a repayment plan, have reinstated, or have since liquidated.

The table below displays the status as of September 30, 2021 and December 31, 2020 of the active multifamily loans in 

our guaranty book of business that have received a forbearance since the start of the pandemic, as well as the serious 

delinquency rate of such loans. The table excludes multifamily loans that received a forbearance, but liquidated or were 

foreclosed upon prior to period end. As of September 30, 2021, nearly all of our multifamily loans that have received 

forbearance were associated with a COVID-19-related financial hardship. Seniors housing loans, which constituted 

4.1% of our multifamily guaranty book of business as of September 30, 2021, comprised approximately 42% of the total 

unpaid principal balance of multifamily loans that received a forbearance and remained in our multifamily guaranty book 

as of September 30, 2021. Of those multifamily seniors housing loans that received a forbearance and were still active 

on our guaranty book of business as of the end of the period, based on unpaid principal balance, 90% were reinstated,

6% were in a repayment plan, 2% were in active forbearance, and the remaining 2% had defaulted on their forbearance 

arrangement. 

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Fannie Mae Third Quarter 2021 Form 10-Q 62
Status and SDQ Rate of Multifamily Forbearance Loans Outstanding(1)

As of September 30, 2021

Number of 

Loans

Unpaid 

Principal 

Balance

Percentage 

of Unpaid 

Principal 

Balance in 

Book of 

Business

Percentage 

of Unpaid 

Principal 

Balance 

with 

Forbearance 

by Category

Percentage 

of Loans on 

Accrual 

Status

Percentage 

of Loans 

that are 

Seriously 

Delinquent

(Dollars in millions)

Loans that received a forbearance, by 

status:

Active forbearance(2) 27 $ 362 0.1 % 8 % 6 % 100 %

Repayment plan 84 1,041 0.2 22 25 94 

Reinstated(3) 181 3,140 0.8 65 75 — 

Defaulted(4) 34 257 0.1 5 — 100 

Total loans that received a forbearance 326 4,800 1.2 100 % 56 33 

Loans that have not received a 

forbearance 28,882 403,331 98.8 — 100 0.03 

Total multifamily guaranty book of 

business 29,208 $ 408,131 100 % 1.2 % 99 % 0.42 %

As of December 31, 2020

Number of 

Loans

Unpaid 

Principal 

Balance

Percentage 

of Unpaid 

Principal 

Balance in 

Book of 

Business

Percentage 

of Unpaid 

Principal 

Balance 

with 

Forbearance 

by Category

Percentage 

of Loans on 

Accrual 

Status

Percentage 

of Loans 

that are 

Seriously 

Delinquent

(Dollars in millions)

Loans that received a forbearance, by 

status:

Active forbearance(2) 88 $ 1,689 0.4 % 32 % 32 % 100 %

Repayment plan 183 2,707 0.8 52 82 61 

Reinstated(3) 56 491 0.1 10 100 — 

Defaulted(4) 33 325 0.1 6 — 100 

Total loans that received a forbearance 360 5,212 1.4 100 % 63 71 

Loans that have not received a 

forbearance 28,285 379,335 98.6 — 100 0.03 

Total multifamily guaranty book of 

business 28,645 $ 384,547 100 % 1.4 % 99 % 0.98 %

(1) Excludes $686 million as of September 30, 2021 and $123 million as of December 31, 2020 in multifamily loans that received a 

forbearance after the start of the COVID-19 pandemic and liquidated prior to period end. Of the $686 million in loans that liquidated prior to 

September 30, 2021, $215 million went to foreclosure prior to that date, largely as a result of the foreclosure of loans within a seniors 

housing portfolio. There were no multifamily loans that received a forbearance after the start of the COVID-19 pandemic and went to 

foreclosure prior to December 31, 2020.

(2) Includes loans that are in the process of extending their forbearance. 

(3) Represents loans that are no longer in forbearance but are current according to the original terms of the loan or have been modified and 

are performing under the modification. 

(4) Includes loans that are no longer in forbearance and are not on a repayment plan. Loans in this population may proceed to other loss 

mitigation activities, such as modification, or foreclosure. 

Under our nonaccrual accounting policy for loans negatively impacted by the COVID-19 pandemic, we continue to 

accrue interest income for up to six months provided that the loans were either current as of March 1, 2020 or originated 

after March 1, 2020. Multifamily loans are placed on nonaccrual status when the borrower is six months past due unless 

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Fannie Mae Third Quarter 2021 Form 10-Q 63
the loan is both well secured and in the process of collection. See “Note 1, Summary of Significant Accounting Policies” 

in our 2020 Form 10-K and “Note 3, Mortgage Loans” in this report for additional information about our nonaccrual 

accounting policy.

For multifamily loans that received forbearance and were in our book of business as of September 30, 2021, we have 

recorded a total accrued interest receivable balance of $27 million, for which we have established a valuation allowance 

of $3 million.

REO Management

The number of multifamily foreclosed properties held for sale was 30 properties with a carrying value of $306 million as 

of September 30, 2021, compared with 14 properties with a carrying value of $114 million as of December 31, 2020. 

The increase was primarily driven by the loans in a seniors housing portfolio that defaulted on their forbearance 

arrangements in 2020. The majority of the loans in this portfolio that defaulted on the terms of their forbearance 

agreement were foreclosed upon in 2021.

We expect a continued increase in our multifamily foreclosed properties primarily due to loans that received a 

COVID-19 forbearance but are unable to successfully cure their delinquency through a repayment plan or other 

modification.

Other Multifamily Credit Information 

Multifamily Credit Loss Performance Metrics

The amount of multifamily credit loss or income we realize in a given period is driven by foreclosures, pre-foreclosure 

sales, REO activity and write-offs, net of recoveries. Our multifamily credit loss performance metrics are not defined 

terms and may not be calculated in the same manner as similarly titled measures reported by other companies. We 

believe our multifamily credit losses and our multifamily credit losses, net of freestanding loss-sharing benefit, may be 

useful to stakeholders because they display our credit losses in the context of our multifamily guaranty book of 

business, including the benefit we receive from loss-sharing arrangements. Management views multifamily credit 

losses, net of freestanding loss-sharing benefit as a key metric related to our multifamily business model and our 

strategy to share multifamily credit risk. 

The table below displays the components of our multifamily credit loss performance metrics, as well as our multifamily 

initial write-off severity rate and write-off loan count. 

Multifamily Credit Loss Performance Metrics 

For the Three Months Ended 

September 30,

For the Nine Months Ended 

September 30,

2021 2020 2021 2020

(Dollars in millions)

Write-offs(1) $ (7) $ (86) $ (54) $ (104) 

Recoveries 21 — 40 1 

Foreclosed property income (expense) 11 (7) (14) (16) 

Credit gains (losses) 25 (93) (28) (119) 

Freestanding loss-sharing benefit(2) 1 26 22 29 

Credit gains (losses), net of freestanding losssharing benefit $ 26 $ (67) $ (6) $ (90) 

Credit (gain) loss ratio (in bps)(3) (2.5) 10.3 0.9 4.5 

Credit (gain) loss ratio, net of freestanding losssharing benefit (in bps)(2)(3) (2.6) 7.4 0.2 3.4 

Multifamily initial write-off severity rate(4) 6.6 % 30.2 % 11.9 % 21.5 %

Multifamily write-off loan count 8 4 23 10 

(1) Write-offs associated with non-REO sales are net of loss sharing.

(2) Represents expected benefits that we receive from write-offs as a result of certain freestanding credit enhancements, primarily multifamily 

DUS lender risk-sharing transactions. These benefits are recorded in “Change in expected credit enhancement recoveries” in our 

condensed consolidated statements of operations and comprehensive income. 

(3) Calculated based on the annualized amount of “Credit losses” and “Credit losses, net of freestanding loss-sharing benefit,” divided by the 

average multifamily guaranty book of business during the period. 

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Fannie Mae Third Quarter 2021 Form 10-Q 64
(4) Rate is calculated as the initial write-off amount divided by the average defaulted unpaid principal balance. The rate excludes write-offs not 

associated with foreclosures or other liquidation events (such as a deed-in-lieu of foreclosure or a short-sale) and any costs, gains or 

losses associated with REO after initial acquisition through final disposition. Write-offs are net of lender loss-sharing agreements.

We recognized credit gains in the third quarter of 2021 compared with credit losses in the third quarter of 2020, and we 

had lower credit losses in the first nine months of 2021 compared with the first nine months of 2020. These changes 

were primarily driven by a seniors housing loan portfolio defaulting on its forbearance arrangements in 2020. This 

default led to a write-down during the third quarter of 2020, which increased our losses for the quarter and for the first 

nine months of 2020. We subsequently recognized recoveries on the loan portfolio, which contributed to credit gains in 

the third quarter of 2021 and lower credit losses in the first nine months of 2021.

Although we have realized some credit losses related to COVID-19-impacted loans in recent periods, we expect our 

realized multifamily credit losses will remain higher over the long term compared to pre-pandemic levels as some loans 

that have been materially impacted by COVID-19 are ultimately unable to reperform. See “Risk Factors” in this report for 

additional information on the potential credit risk impact of the COVID-19 pandemic. 

Multifamily Loss Reserves

Our multifamily loss reserves, which include our allowance for loan losses and the related accrued interest receivable, 

and our reserve for guaranty losses, provide for an estimate of credit losses in our multifamily guaranty book of 

business. 

The table below summarizes the changes in our multifamily loss reserves, excluding credit losses on our AFS securities. 

For a discussion of changes in our multifamily benefit or provision for credit losses, see “Consolidated Results of 

Operations—Credit-Related Income (Expense).”

Multifamily Loss Reserves

For the Three Months Ended 

September 30,

For the Nine Months Ended 

September 30,

2021 2020 2021 2020

(Dollars in millions)

Changes in loss reserves:

Beginning balance $ (1,059) $ (1,382) $ (1,225) $ (268) 

Transition impact of the adoption of the CECL 

standard(1)

 — — — (490) 

Benefit (provision) for credit losses 50 (42) 188 (683) 

Write-offs 7 86 54 104 

Recoveries (21) — (40) (1) 

Ending balance $ (1,023) $ (1,338) $ (1,023) $ (1,338) 

Expected benefit of freestanding credit enhancements on multifamily loans not netted 

against loss reserves as of the end of the period $ 328 $ 408 

As of

September 30, 

2021

December 31, 

2020

Loss reserves as a percentage of multifamily guaranty book of business 0.25 % 0.32 %

(1) Includes the transition impact of $221 million for the reclassification of freestanding credit enhancements, such as DUS lender risk-sharing, 

to “Other assets” from “Allowance for loan losses” in our condensed consolidated balance sheets on January 1, 2020.

Troubled Debt Restructurings and Nonaccrual Loans

We continue to account for eligible COVID-19-related loss mitigation activities as permitted under the CARES Act and 

the Consolidated Appropriations Act of 2021, which provide relief from TDR accounting and disclosure requirements for 

our forbearance plans and loan modifications. See “Note 1, Summary of Significant Accounting Policies” in our 2020

Form 10-K for more information on the relief from TDR accounting and disclosure requirements.

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Fannie Mae Third Quarter 2021 Form 10-Q 65
The table below displays the multifamily loans classified as TDRs that were on accrual status and multifamily loans on 

nonaccrual status. The table includes our amortized cost in HFI multifamily mortgage loans, as well as interest income 

forgone and recognized for on-balance sheet TDRs on accrual status and nonaccrual loans. For more information on 

TDRs and nonaccrual loans see “Note 3, Mortgage Loans.” 

Multifamily TDRs on Accrual Status and Nonaccrual Loans

As of 

September 30, 2021 December 31, 2020

(Dollars in millions)

TDRs on accrual status $ 27 $ 29 

Nonaccrual loans 2,253 2,073 

Total TDRs on accrual status and nonaccrual loans $ 2,280 $ 2,102 

Accruing on-balance sheet loans past due 90 days or more $ 122 $ 610 

For the Nine Months Ended September 30,

2021 2020

(Dollars in millions)

Interest related to on-balance sheet TDRs on accrual status and 

nonaccrual loans:

Interest income forgone(1) $ 33 $ 10 

Interest income recognized(2) 26 5 

(1) Represents the amount of interest income we did not recognize, but would have recognized during the period for nonaccrual loans and 

TDRs on accrual status held as of the end of each period had the loans performed according to their original contractual terms.

(2) Represents interest income recognized during the period, including the amortization of any deferred cost basis adjustments, for loans 

classified as TDRs on accrual status or nonaccrual loans held as of the end of each period. Primarily includes amounts accrued while the 

loans were performing. Cash received on nonaccrual loans in a forbearance plan are applied as a reduction of accrued interest receivable 

until the receivable has been reduced to zero, and then recognized as interest income.

The balance of loans on nonaccrual status remained elevated as of September 30, 2021 and December 31, 2020

compared to pre-pandemic levels primarily due to loans that received a COVID-19 forbearance that became more than 

six months delinquent and were placed on nonaccrual status. For additional information on our accounting policy for 

nonaccrual loans, see “Note 3, Mortgage Loans.”

Liquidity and Capital Management

Liquidity Management

This section supplements and updates information regarding liquidity management in our 2020 Form 10-K. See “MD&A

—Liquidity and Capital Management—Liquidity Management” in our 2020 Form 10-K for additional information, 

including discussions of our primary sources and uses of funds, our liquidity and funding risk management practices and 

contingency planning, factors that influence our debt funding activity, factors that may impact our access to or the cost 

of our debt funding and factors that could adversely affect our liquidity and funding. Also see “Risk Factors—Liquidity 

and Funding Risk” in our 2020 Form 10-K for a discussion of liquidity and funding risks. 

Debt Funding

We are currently subject to a $300 billion debt limit under our senior preferred stock purchase agreement with Treasury, 

which will decrease to $270 billion as of December 31, 2022. The unpaid principal balance of our aggregate 

indebtedness was $236.1 billion as of September 30, 2021. Pursuant to the terms of the senior preferred stock 

purchase agreement, we are prohibited from issuing debt without the prior consent of Treasury if it would result in our 

aggregate indebtedness exceeding our outstanding debt limit. The calculation of our indebtedness for purposes of 

complying with our debt limit reflects the unpaid principal balance and excludes debt basis adjustments and debt of 

consolidated trusts. 

Outstanding Debt 

Total outstanding debt of Fannie Mae includes short-term and long-term debt and excludes debt of consolidated trusts. 

Short-term debt of Fannie Mae consists of borrowings with an original contractual maturity of one year or less and, 

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Fannie Mae Third Quarter 2021 Form 10-Q 66
therefore, does not include the current portion of long-term debt. Long-term debt of Fannie Mae consists of borrowings 

with an original contractual maturity of greater than one year. 

The following chart and table display information on our outstanding short-term and long-term debt based on original 

contractual maturity. The primary driver for the decrease in our short-term and long-term debt from December 31, 2020 

to September 30, 2021 was decreased funding needs compared with the prior year. In 2020, we had unusually high 

liquidity demands driven by our expectations relating to the COVID-19 pandemic, as well as historically high loan 

acquisition volumes through our whole loan conduit, resulting in high volumes of debt issuance during the year. Our 

funding needs were lower in the first nine months of 2021 because we built up a large amount of liquidity through our 

debt issuances in 2020, our expected loan buyouts relating to the COVID-19 pandemic have declined, and we are now 

able to retain more of our earnings pursuant to the terms of the January 2021 amendment to the senior preferred stock 

purchase agreement. As a result of our lower funding needs, the new debt we issued during the first nine months of 

2021 replaced only some of our debt that paid off, and we issued no new long-term debt during the second or third 

quarters of 2021.

Debt of Fannie Mae(1)

(Dollars in billions)

$289.6

$234.8

$12.2 $8.0

$66.6

$89.4

$210.8

$137.4

Short-term debt

Long-term debt maturing within one year

Long-term debt, excluding portion maturing within one year

12/31/2020 9/30/2021

(1) Outstanding debt balance consists of the unpaid principal balance, premiums and discounts, fair value adjustments, hedge-related basis 

adjustments and other cost basis adjustments. Reported amounts include net discount unamortized cost basis adjustments and fair value

adjustments of $1.3 billion and $393 million as of September 30, 2021 and December 31, 2020, respectively.

MD&A | Liquidity and Capital Management

Fannie Mae Third Quarter 2021 Form 10-Q 67
Selected Debt Information

As of

September 30, 2021 December 31, 2020

(Dollars in billions)

Selected Weighted-Average Interest Rates(1)

Interest rate on short-term debt 0.03 % 0.18 %

Interest rate on long-term debt, including portion maturing within one year 1.48 1.34 

Interest rate on callable long-term debt 1.53 1.40 

Selected Maturity Data

Weighted-average maturity of debt maturing within one year (in days) 138 196 

Weighted-average maturity of debt maturing in more than one year (in months) 60 52 

Other Data

Outstanding callable long-term debt $ 49.4 $ 57.5 

Connecticut Avenue Securities debt(2) 13.7 15.0 

(1) Excludes the effects of fair value adjustments and hedge-related basis adjustments.

(2) Represents CAS debt issued prior to November 2018. See “MD&A—Single-Family Business—Single-Family Mortgage Credit Risk 

Management—Single-Family Credit Enhancement and Transfer of Mortgage Credit Risk—Credit Risk Transfer Transactions” in our 2020

Form 10-K for information regarding our Connecticut Avenue Securities.

We intend to repay our short-term and long-term debt obligations as they become due primarily through proceeds from 

cash from business operations and the issuance of additional debt securities.

For information on the maturity profile of our outstanding long-term debt, see “Note 7, Short-Term and Long-Term Debt.”

MD&A | Liquidity and Capital Management

Fannie Mae Third Quarter 2021 Form 10-Q 68
Debt Funding Activity

The table below displays activity in debt of Fannie Mae. This activity excludes the deb t of consolidated trusts and 

intraday loans. Activity in short-term debt of Fannie Mae relates to borrowings with an original contractual maturity of 

one year or less while activity in long-term debt of Fannie Mae relates to borrowings with an original contractual maturity 

of greater than one year. The reported amounts of debt issued and paid off during each period represent the face 

amount of the debt at issuance and redemption.

The decrease in debt issued during the third quarter and debt issued and paid off during the first nine months of 2021

compared with the third quarter and first nine months of 2020 was primarily due to decreased funding needs as 

discussed above. The increase in debt paid off during the third quarter of 2021 compared with the third quarter of 2020

was primarily due to an increase in the amount of maturities for shorter duration long-term debt in the third quarter of 

2021 following elevated levels of issuance throughout 2020. We did not issue new debt to replace all of our debt that 

paid off during the third quarter and first nine months of 2021.

Activity in Debt of Fannie Mae

For the Three Months 

Ended September 30,

For the Nine Months 

Ended September 30,

2021 2020 2021 2020

(Dollars in millions)

Issued during the period:

Short-term:

Amount $ 39,022 $ 15,112 $ 52,448 $ 183,073 

Weighted-average interest rate(1) 0.01 % 0.10 % 0.01 % 1.10 %

Long-term:(2)

Amount $ — $ 45,868 $ 2,815 $ 168,099 

Weighted-average interest rate — % 0.50 % 0.59 % 0.50 %

Total issued:

Amount $ 39,022 $ 60,980 $ 55,263 $ 351,172 

Weighted-average interest rate 0.01 % 0.40 % 0.04 % 0.81 %

Paid off during the period:(3)

Short-term:

Amount $ 32,894 $ 33,848 $ 56,214 $ 186,709 

Weighted-average interest rate(1) 0.01 % 0.22 % 0.03 % 1.21 %

Long-term:(2)

Amount $ 22,330 $ 13,313 $ 52,557 $ 57,276 

Weighted-average interest rate 0.58 % 1.94 % 0.84 % 1.85 %

Total paid off:

Amount $ 55,224 $ 47,161 $ 108,771 $ 243,985 

Weighted-average interest rate 0.24 % 0.71 % 0.42 % 1.36 %

(1) Includes interest generated from negative interest rates on certain repurchase agreements, which offset our short-term funding costs. 

(2) Includes credit risk-sharing securities issued as CAS debt prior to November 2018. For information on our credit risk transfer transactions, 

see “MD&A—Single-Family Business—Single-Family Mortgage Credit Risk Management—Single-Family Credit Enhancement and 

Transfer of Mortgage Credit Risk—Credit Risk Transfer Transactions” in our 2020 Form 10-K.

(3) Consists of all payments on debt, including regularly scheduled principal payments, payments at maturity, payments resulting from calls 

and payments for any other repurchases. Repurchases of debt and early retirements of zero-coupon debt are reported at original face 

value, which does not equal the amount of actual cash payment.

MD&A | Liquidity and Capital Management

Fannie Mae Third Quarter 2021 Form 10-Q 69
Other Investments Portfolio

The chart below displays information on the composition of our other investments portfolio. The balance of our other 

investments portfolio fluctuates as a result of changes in our cash flows, liquidity in the fixed-income markets, and our 

liquidity risk management framework and practices.

Our other investments portfolio decreased during the first nine months of 2021 primarily as a result of a change in how 

funds held by consolidated trusts are invested, which resulted in a decrease in our holdings of U.S. Treasury securities. 

In the first quarter of 2021, we began to invest funds held by consolidated trusts directly in eligible short-term third-party 

investments. As the funds underlying these investments are restricted per the trust agreements, these securities are not 

considered in our sources of liquidity and are excluded from our other investments portfolio. Prior to this change, funds 

held by consolidated trusts were invested in Fannie Mae short-term debt, as allowed by the trust agreements. We then 

invested those proceeds in unrestricted short-term investments, which were included in our other investments portfolio. 

This change did not materially alter our liquidity position.

In addition, we used cash and other liquid assets that accumulated in 2020 to fund our operations during the first nine 

months of 2021. Due to lower overall funding needs, we reduced our debt issuances during this period, which also 

resulted in a reduction in our other investments portfolio as maturing investments were not replaced.

During the third quarter of 2021, we reduced our investments in federal funds sold and securities purchased under 

agreements to resell and invested more in overnight repurchase agreements, which are classified as cash equivalents, 

as a result of market conditions. 

Other Investments Portfolio

(Dollars in billions)

$38.3

$67.3

$28.2

$0.5

$130.5

$92.2

$197.0

$160.0

12/31/2020 9/30/2021

Cash and cash equivalents(1)

Federal funds sold and securities purchased under agreements to resell or similar arrangements

U.S. Treasury securities

(1) Cash equivalents are composed of overnight repurchase agreements and U.S. Treasuries that have a maturity at the date of acquisition of 

three months or less.

Cash Flows

Nine Months Ended September 30, 2021. Cash, cash equivalents and restricted cash and cash equivalents increased 

from $115.6 billion as of December 31, 2020 to $133.5 billion as of September 30, 2021. The increase was primarily 

driven by cash inflows from (1) the sale of Fannie Mae MBS to third parties and (2) proceeds from repayments and 

sales of loans.

Partially offsetting these cash inflows were cash outflows primarily from (1) payments on outstanding debt of 

consolidated trusts, (2) purchases of loans held for investment, and (3) the redemption of funding debt, which outpaced 

issuances, primarily for the reasons described above.

Nine Months Ended September 30, 2020. Cash, cash equivalents and restricted cash and cash equivalents increased

from $61.4 billion as of December 31, 2019 to $111.0 billion as of September 30, 2020. The increase was primarily 

MD&A | Liquidity and Capital Management

Fannie Mae Third Quarter 2021 Form 10-Q 70
driven by cash inflows from (1) proceeds from repayments and sales of loans, (2) the sale of Fannie Mae MBS to third 

parties, and (3) the issuance of funding debt, which outpaced redemptions.

Partially offsetting these cash inflows were cash outflows primarily from (1) payments on outstanding debt of 

consolidated trusts and (2) purchases of loans held for investment.

Credit Ratings

As of September 30, 2021, our credit ratings have not changed since we filed our 2020 Form 10-K. For information on 

our credit ratings, see “MD&A—Liquidity and Capital Management—Liquidity Management—Credit Ratings” in our 2020

Form 10-K. 

Capital Management

Capital Requirements

Statutory Minimum Capital

The deficit of our core capital over statutory minimum capital established in the GSE Act was $106.5 billion as of 

September 30, 2021 and $124.3 billion as of December 31, 2020. 

Enterprise Regulatory Capital Framework

FHFA established an enterprise regulatory capital framework pursuant to its authority under the GSE Act, as described 

in “Business—Legislation and Regulation—GSE Act and Other Legislative and Regulatory Matters—Capital” in our 

2020 Form 10-K. The enterprise regulatory capital framework requires significantly higher levels of capital than what is 

required under our statutory minimum capital requirements. The enterprise regulatory capital framework went into effect 

in February 2021, but we are not currently required to hold capital according to the framework’s requirements. The dates 

on which we must comply with the quantitative requirements of the enterprise regulatory capital framework are 

staggered and largely dependent on whether we remain in conservatorship. We are required to report capital amounts 

as determined under the enterprise regulatory capital framework for periods beginning after 2021. At September 30, 

2021, we had a deficit relative to the amount of capital required under the enterprise regulatory capital framework.

Capital Activity

Under the dividend provisions of the senior preferred stock, we are permitted to retain increases in our net worth until 

our net worth exceeds the amount of adjusted total capital necessary for us to meet the capital requirements and buffers 

under the enterprise regulatory capital framework discussed in “Business—Legislation and Regulation—GSE Act and 

Other Legislative and Regulatory Matters—Capital” in our 2020 Form 10-K. The aggregate liquidation preference of the 

senior preferred stock increased to $158.8 billion as of September 30, 2021 and will further increase to $163.7 billion as 

of December 31, 2021 due to the $4.8 billion increase in our net worth during the third quarter of 2021. 

See “Business—Conservatorship, Treasury Agreements and Housing Finance Reform—Treasury Agreements” in our 

2020 Form 10-K and “Legislation and Regulation—Letter Agreement with Treasury” in this report for more information 

on the terms of our senior preferred stock and our senior preferred stock purchase agreement with Treasury. See “Risk 

Factors—GSE and Conservatorship Risk” in our 2020 Form 10-K for a discussion of the risks associated with the limit 

on our capital reserves.

Treasury Funding Commitment 

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

certain circumstances if we have a net worth deficit. As of September 30, 2021, the remaining amount of Treasury’s 

funding commitment to us was $113.9 billion. See “Note 11, Equity” in our 2020 Form 10-K for more information on the 

funding commitment provided by Treasury under the senior preferred stock purchase agreement.

Off-Balance Sheet Arrangements

Our off-balance sheet arrangements result primarily from the following: 

• our guaranty of mortgage loan securitization and resecuritization transactions, and other guaranty 

commitments, over which we do not have control; 

• liquidity support transactions; and 

• partnership interests. 

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Fannie Mae Third Quarter 2021 Form 10-Q 71
Some of the securities we issue are structured securities backed, in whole or in part, by Freddie Mac securities. When 

we issue a structured security, we provide a guaranty that we will supplement amounts received from the underlying 

mortgage-related security as required to permit timely payment of principal and interest on the certificates related to the 

resecuritization trust. Accordingly, when we issue structured securities backed in whole or in part by Freddie Mac 

securities, we extend our guaranty to the underlying Freddie Mac security included in the structured security. Our 

issuance of structured securities backed in whole or in part by Freddie Mac securities creates additional off-balance 

sheet exposure as we do not have control over the Freddie Mac mortgage loan securitizations. Because we do not have 

the power to direct matters (primarily the servicing of mortgage loans) that impact the credit risk to which we are 

exposed, which constitute control of these securitization trusts, we do not consolidate these trusts in our condensed 

consolidated balance sheet, giving rise to off-balance sheet exposure. 

The total amount of our off-balance sheet exposure related to unconsolidated Fannie Mae MBS net of any beneficial 

interest that we retain, and other financial guarantees was $205.0 billion as of September 30, 2021. Approximately 

$159.7 billion of this amount consisted of the unpaid principal balance of Freddie Mac-issued UMBS backing Fannie 

Mae-issued Supers. Additionally, off-balance sheet exposure includes approximately $30.6 billion of the unpaid principal 

balance of Freddie Mac securities backing Fannie Mae-issued REMICs. We expect our off-balance sheet exposure to 

Freddie Mac securities to increase as we issue more structured securities backed by Freddie Mac securities in the 

future. The total amount of our off-balance sheet exposure related to unconsolidated Fannie Mae MBS, net of any 

beneficial interest that we retain, and other financial guarantees was $153.6 billion as of December 31, 2020. 

Approximately $110.7 billion of this amount consisted of the unpaid principal balance of Freddie Mac-issued UMBS 

backing Fannie Mae-issued Supers and $26.6 billion of this amount consisted of the unpaid principal balance of Freddie 

Mac securities backing Fannie Mae-issued REMICs. See “Note 6, Financial Guarantees” for more information regarding 

our maximum exposure to loss on unconsolidated Fannie Mae MBS and Freddie Mac securities.

We also have off-balance sheet exposure to losses from liquidity support transactions and partnership interests.

• Our total outstanding liquidity commitments to advance funds for securities backed by multifamily housing 

revenue bonds totaled $5.6 billion as of September 30, 2021 and $6.4 billion as of December 31, 2020. These 

commitments require us to advance funds to third parties that enable them to repurchase tendered bonds or 

securities that are unable to be remarketed. We hold cash and cash equivalents in our other investments 

portfolio in excess of these commitments to advance funds.

• We make investments in various limited partnerships and similar legal entities, which consist of low-income 

housing tax credit investments, community investments and other entities. When we do not have a controlling 

financial interest in those entities, our condensed consolidated balance sheets reflect only our investment 

rather than the full amount of the partnership’s assets and liabilities. See “Note 2, Consolidations and Transfers 

of Financial Assets— Unconsolidated VIEs” for information regarding our limited partnerships and similar legal 

entities.

Risk Management

Our business activities expose us to the following major categories of risk: credit risk (including mortgage credit risk and 

institutional counterparty credit risk), market risk (including interest-rate risk), liquidity and funding risk, and operational 

risk (including cyber/information security risk, third-party risk and model risk), as well as strategic risk, compliance risk 

and reputational risk. See “MD&A—Risk Management” in our 2020 Form 10-K for a discussion of our management of 

these risks. This section supplements and updates that discussion but does not address all of the risk management 

categories described in our 2020 Form 10-K. 

Institutional Counterparty Credit Risk Management

This section supplements and updates our discussion of institutional counterparty credit risk management in our 2020

Form 10-K. See “MD&A—Risk Management—Institutional Counterparty Credit Risk Management” and “Risk Factors—

Credit Risk” in our 2020 Form 10-K for a discussion of our exposure to institutional counterparty credit risk and our 

strategy for managing this risk. As described in “Risk Factors” in this report, the COVID-19 pandemic has increased our 

counterparty credit risk. Also see “Note 10, Concentrations of Credit Risk” in this report for an update on our 

counterparty credit risk exposure.

Change in Non-Depository Seller and Servicer Liquidity Requirement as a 

Result of COVID-19 Forbearances

We have previously established minimum liquidity requirements for single-family non-depository servicers to maintain 

eligibility with Fannie Mae. With the increase in delinquent loans in forbearance plans as a result of the unprecedented 

MD&A | Off-Balance Sheet Arrangements

Fannie Mae Third Quarter 2021 Form 10-Q 72
circumstances of the COVID-19 pandemic and the CARES Act, we temporarily modified our minimum liquidity 

requirements for single-family non-depository servicers to maintain eligibility with Fannie Mae. Beginning with the 

second quarter of 2020, when calculating the minimum liquidity requirement for seriously delinquent mortgage loans for 

non-depository servicers, an adjustment is included for mortgage loans in a COVID-19-related forbearance plan that are 

90 days or more delinquent and were current at the inception of the plan. The adjustment provides partial relief of the 

minimum liquidity requirements for the servicers of these impacted loans. 

In 2020, FHFA announced that it would re-propose the minimum financial eligibility requirements for Fannie Mae and 

Freddie Mac sellers and servicers due to market volatility driven by the COVID-19 pandemic.

Change in Private Mortgage Insurer Eligibility Requirements

Mortgage insurers must meet and maintain compliance with private mortgage insurer eligibility requirements (“PMIERs”) 

to be eligible to write mortgage insurance on loans acquired by Fannie Mae. The PMIERs are designed to ensure that 

mortgage insurers have sufficient liquid assets to pay all claims under a hypothetical future stress scenario. Under FHFA 

guidance, we and Freddie Mac published an update to the PMIERs in June 2021, which revised PMIERs guidance 

issued in 2020 that addressed issues arising from the COVID-19 pandemic. The revisions include:

• maintaining the temporary adjustment when calculating risk-based required assets for nonperforming mortgage 

loans that became newly delinquent after the onset of the COVID-19 pandemic or that are subject to a 

forbearance plan granted in response to a financial hardship related to COVID-19; and

• establishing through December 31, 2021, the ability for private mortgage insurers to pay dividends or make 

other new transfers of cash if they have a PMIERs surplus above a specified level. 

The adjustment to the risk-based required assets for nonperforming mortgage loans provides partial relief to mortgage 

insurers’ capital requirements under the PMIERs for the impacted loans.

Market Risk Management, including Interest-Rate Risk Management

We are subject to market risk, which includes interest-rate risk and spread risk. Interest-rate risk is the risk that 

movements in benchmark interest rates could adversely affect the fair value of our assets or liabilities or our future 

earnings. Spread risk represents the change in an instrument’s fair value that relates to factors other than changes in 

the benchmark interest rate.

We are exposed to interest rate risk through our “net portfolio,” which we define as our retained mortgage portfolio 

assets; other investments portfolio; outstanding debt of Fannie Mae used to fund the retained mortgage portfolio assets 

and other investments portfolio; and mortgage commitments and risk management derivatives. Our goal is to manage 

interest-rate risk from our net portfolio to be neutral to movements in interest rates and volatility on an economic basis, 

subject to model constraints and prevailing market conditions. We actively manage the interest-rate risk of our net 

portfolio through the use of interest-rate derivatives and by issuing a broad range of both callable and non-callable debt 

instruments.

We are also exposed to interest-rate risk in connection with cost basis adjustments related to mortgage assets held by 

our consolidated MBS trusts. These cost basis adjustments often result from upfront cash fees exchanged at the time of 

loan acquisition, which include buy-ups, buy-downs, and loan-level risk-based pricing adjustments. Changes in interest 

rates, which drive loan prepayment rates, can impact the timing of when we recognize amortization income related to 

these cost basis amounts thereby impacting our earnings. Changes in the timing of income recognition related to cost 

basis adjustments impact the present value of this income. See “Consolidated Results of Operations—Net Interest 

Income—Analysis of Deferred Amortization Income” for more information on our outstanding net cost basis adjustments 

related to consolidated MBS trusts. 

We do not currently actively manage or hedge, on an economic basis, our spread risk or the interest rate risk arising 

from cost basis adjustments associated with mortgage assets held by our consolidated MBS trusts.

For additional information on the impact of market risk on our earnings, see “Earnings Exposure to Interest-Rate Risk” 

below.

This section supplements and updates information regarding market risk management in our 2020 Form 10-K. See 

“MD&A—Risk Management—Market Risk Management, including Interest-Rate Risk Management” and “Risk Factors” 

in our 2020 Form 10-K for additional information, including our sources of interest-rate risk exposure, business risks 

posed by changes in interest rates, and our strategy for managing interest-rate risk. 

MD&A | Risk Management | Institutional Counterparty Credit Risk Management

Fannie Mae Third Quarter 2021 Form 10-Q 73
Measurement of Interest-Rate Risk

The table below displays the pre-tax market value sensitivity of our net portfolio to changes in the level of interest rates 

and the slope of the yield curve as measured on the last day of each period presented. The table below also provides 

the daily average, minimum, maximum and standard deviation values for duration gap and for the most adverse market 

value impact on the net portfolio to changes in the level of interest rates and the slope of the yield curve for the three 

months ended September 30, 2021 and 2020. Our practice is to allow interest rates to go below zero in the downward 

shock models unless otherwise prevented through contractual floors.

For information on how we measure our interest-rate risk, see our 2020 Form 10-K in “MD&A—Risk Management—

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

Interest-Rate Sensitivity of Net Portfolio to Changes in Interest-Rate Level and Slope of Yield 

Curve

As of (1)(2)

September 30, 2021 December 31, 2020

(Dollars in millions)

Rate level shock:

-100 basis points $ (224) $ (179) 

-50 basis points (47) 8 

+50 basis points 10 (111) 

+100 basis points * (154) 

Rate slope shock:

-25 basis points (flattening) 1 (9) 

+25 basis points (steepening) 3 4 

* Represents a rate level shock impact of under $0.5 million.

For the Three Months Ended September 30, (1)(3)

2021 2020

Duration 

Gap

Rate Slope 

Shock 25 bps

Rate Level 

Shock 50 bps

Duration 

Gap

Rate Slope 

Shock 25 bps

Rate Level 

Shock 50 bps

Market Value Sensitivity Market Value Sensitivity

(In years) (Dollars in millions) (In years) (Dollars in millions)

Average (0.03) $ (1) $ (83) — $ (22) $ (18) 

Minimum (0.06) (9) (117) (0.04) (36) (75) 

Maximum — 3 (47) 0.08 (12) 42 

Standard deviation 0.01 3 16 0.03 6 27 

(1) Computed based on changes in U.S. LIBOR interest-rates swap curve. Changes in the level of interest-rates assume a parallel shift in all 

maturities of the U.S. LIBOR interest-rate swap curve. Changes in the slope of the yield curve assume a constant 7-year rate, a shift of 

16.7 basis points for the 1-year rate (and shorter tenors) and an opposite shift of 8.3 basis points for the 30-year rate. Rate shocks for 

remaining maturity points are interpolated.

(2) Measured on the last business day of each period presented. 

(3) Computed based on daily values during the period presented.

The market value sensitivity of our net portfolio varies across a range of interest-rate shocks depending upon the 

duration and convexity profile of our net portfolio. 

MD&A | Risk Management | Market Risk Management, including Interest-Rate Risk Management

Fannie Mae Third Quarter 2021 Form 10-Q 74
We use derivatives to help manage the residual interest-rate risk exposure between the assets and liabilities in our net 

portfolio. Derivatives have enabled us to keep our economic interest-rate risk exposure at consistently low levels in a 

wide range of interest-rate environments. The table below displays an example of how derivatives impacted the net 

market value exposure for a 50 basis point parallel interest-rate shock.

Derivative Impact on Interest-Rate Risk (50 Basis Points)

As of (1)

September 30, 2021 December 31, 2020

(Dollars in millions)

Before derivatives $ (692) $ (613) 

After derivatives (47) 8 

Effect of derivatives 645 621 

(1) Measured on the last business day of each period presented.

Earnings Exposure to Interest-Rate Risk

While we manage the interest-rate risk of our net portfolio with the objective of remaining neutral to movements in 

interest rates and volatility on an economic basis, our earnings can experience volatility due to interest-rate changes 

and differing accounting treatments that apply to certain financial instruments on our balance sheet. Specifically, we 

have exposure to earnings volatility that is driven by changes in interest rates in two primary areas: our net portfolio and 

our consolidated MBS trusts. The exposure in the net portfolio is primarily driven by changes in the fair value of risk 

management derivatives, mortgage commitments, and certain assets, primarily securities, that are carried at fair value. 

The exposure related to our consolidated MBS trusts relates to changes in the amortization of cost basis adjustments 

and our credit loss reserves driven by changes in interest rates.

In January 2021, we began applying fair value hedge accounting to address some of the exposure to interest rates, 

particularly the earnings volatility related to changes in benchmark interest rates, including LIBOR and SOFR. Although 

we continue to expect reduced earnings volatility related to changes in the benchmark interest rates as a result of our 

adoption of hedge accounting, earnings variability driven by other factors, such as spreads or changes in cost basis 

amortization recognized in net interest income, remains. In addition, when the shape of the yield curve shifts

significantly from period to period, hedge accounting may be less effective. In our current program, we establish new 

hedging relationships daily to provide flexibility in our overall risk management strategy. 

See “Consolidated Results of Operations—Hedge Accounting Impact,” “Note 1, Summary of Significant Accounting 

Policies” and “Note 8, Derivative Instruments” for additional information on our fair value hedge accounting policy and 

related disclosures.

Critical Accounting Policies and Estimates

The preparation of financial statements in accordance with generally accepted accounting principles in the United 

States of America (“GAAP”) requires management to make a number of judgments, estimates and assumptions that 

affect the reported amount of assets, liabilities, income and expenses in our condensed consolidated financial 

statements. Understanding our accounting policies and the extent to which we use management judgment and 

estimates in applying these policies is integral to understanding our financial statements. We describe our most 

significant accounting policies in “Note 1, Summary of Significant Accounting Policies” in this report and in our 2020

Form 10-K.

We evaluate our critical accounting estimates and judgments required by our policies on an ongoing basis and update 

them as necessary based on changing conditions. We have identified one of our accounting policies, allowance for loan 

losses, as critical because it involves significant judgments and assumptions about highly complex and inherently 

uncertain matters, and the use of reasonably different estimates and assumptions could have a material impact on our 

reported results of operations or financial condition. 

Allowance for Loan Losses

The allowance for loan losses is an estimate of single-family and multifamily HFI loan receivables that we expect will not 

be collected related to loans held by Fannie Mae and consolidated Fannie Mae MBS trusts. The expected credit losses 

are deducted from the amortized cost basis of HFI loans to present the net amount expected to be received. We use a 

discounted cash flow method to measure expected credit losses on our single-family mortgage loans and an 

undiscounted loss method to measure expected credit losses on our multifamily mortgage loans. The models use 

MD&A | Risk Management | Market Risk Management, including Interest-Rate Risk Management

Fannie Mae Third Quarter 2021 Form 10-Q 75
reasonable and supportable forecasts for key economic drivers, such as home prices (single-family), rental income 

(multifamily) and capitalization rates (multifamily). Our modeled loan performance is based on our historical experience 

of loans with similar risk characteristics adjusted to reflect current conditions and reasonable and supportable forecasts. 

Our historical loss experience and our credit loss estimates capture the possibility of remote events that could result in 

credit losses on loans that are considered low risk. Our credit loss models, including the forecast data used as key 

inputs, are subject to our model oversight and review processes as well as other established governance and controls. 

Changes to our estimate of expected credit losses, including changes due to the passage of time, are recorded through

the benefit (provision) for credit losses. When calculating our allowance for loan losses, we consider only our amortized 

cost in the loans at the balance sheet date. We record write-offs as a reduction to the allowance for loan losses when 

losses are confirmed through the receipt of assets in satisfaction of a loan, such as the underlying collateral upon 

foreclosure or cash upon completion of a short sale. Additionally, we record write-offs as a reduction to our allowance for 

loan losses when a loan is determined to be uncollectible and upon the redesignation of a nonperforming or 

reperforming loan from HFI to HFS. We include expected recoveries of amounts previously written off and expected to 

be written off in determining our allowance for loan losses.

Our process for determining the measurement of expected credit losses for the period under the expected credit loss 

model is complex and involves significant management judgment, including a reliance on historical loss information and 

current economic forecasts that may not be representative of credit losses we ultimately realize.

We provide more detailed information on our accounting for the allowance for loan losses in “Note 1, Summary of 

Significant Accounting Policies” in our 2020 Form 10-K. See “Note 4, Allowance for Loan Losses” in this report for 

additional information about our current-period benefit or provision for loan losses, including a discussion of the 

estimates used in measuring the impact of the COVID-19 pandemic on our allowance. See “Risk Factors” in our 2020

Form 10-K and in this report for a discussion of the risks associated with the need for management to make judgments 

and estimates in applying our accounting policies and methods.

Impact of Future Adoption of New Accounting Guidance

We identify and discuss the expected impact on our condensed consolidated financial statements of recently issued 

accounting guidance, if any, in “Note 1, Summary of Significant Accounting Policies.” No applicable guidance was 

identified during the third quarter of 2021.

Forward-Looking Statements

This report includes statements that constitute forward-looking statements within the meaning of Section 21E of the 

Securities Exchange Act of 1934 (the “Exchange Act”). In addition, we and our senior management may from time to 

time make forward-looking statements in our other filings with the SEC, our other publicly available written statements, 

and orally to analysts, investors, the news media and others. Forward-looking statements often include words such as 

“expect,” “anticipate,” “intend,” “plan,” “believe,” “seek,” “estimate,” “forecast,” “project,” “would,” “should,” “could,” 

“likely,” “may,” “will” or similar words. Examples of forward-looking statements in this report include, among others, 

statements relating to our expectations regarding the following matters:

• our future financial performance, financial condition and net worth, and the factors that will affect them, 

including our expectations regarding our future net revenues, amortization income and guaranty fees;

• economic, mortgage market and housing market conditions (including expectations regarding home price 

growth, refinance volumes and interest rates), the factors that will affect those conditions, and the impact of 

those conditions on our business and financial results; 

• our business plans and strategies, and their impact;

• our plans relating to and the effects of our credit risk transfer transactions, as well as the factors that will affect 

our engagement in future transactions;

• volatility in our future financial results and the impact of our adoption of hedge accounting on such volatility; 

• the size and composition of our retained mortgage portfolio;

• the amount and timing of our purchases of loans from MBS trusts;

• the impact of legislation and regulation on our business or financial results;

• the impact of the COVID-19 pandemic on our business;

MD&A | Critical Accounting Policies and Estimates

Fannie Mae Third Quarter 2021 Form 10-Q 76
• our payments to HUD and Treasury funds under the GSE Act;

• our future off-balance sheet exposure to Freddie Mac-issued securities;

• the risks to our business;

• future delinquency rates, defaults, forbearances, modifications and other loss mitigation activity, foreclosures, 

and credit losses relating to the loans in our guaranty book of business and the factors that will affect them, 

including the impact of the COVID-19 pandemic;

• the performance of loans in our book of business and the factors that will affect such performance;

• the amount of our outstanding debt and how we expect to meet our debt obligations; and 

• our response to legal and regulatory proceedings and their impact on our business or financial condition.

Forward-looking statements reflect our management’s current expectations, forecasts or predictions of future conditions, 

events or results based on various assumptions and management’s estimates of trends and economic factors in the 

markets in which we are active and that otherwise impact our business plans. Forward-looking statements are not 

guarantees of future performance. By their nature, forward-looking statements are subject to significant risks and 

uncertainties and changes in circumstances. Our actual results and financial condition may differ, possibly materially, 

from the anticipated results and financial condition indicated in these forward-looking statements. 

There are a number of factors that could cause actual conditions, events or results to differ materially from those 

described in our forward-looking statements, including, among others, the following: 

• uncertainty regarding our future, our exit from conservatorship and our ability to raise or earn the capital 

needed to meet our capital requirements; 

• challenges we face in retaining and hiring qualified executives and other employees; 

• the duration, spread and severity of the COVID-19 pandemic; the actions taken to contain the virus or treat its 

impact, including government actions to mitigate the economic impact of the pandemic and COVID-19 

vaccination rates; the effectiveness of currently available COVID-19 vaccines over time and against variants of 

the coronavirus; the nature, extent and success of the forbearance, payment deferrals, modifications and other 

loss mitigation options we provide to borrowers affected by the pandemic; accounting elections and estimates 

relating to the impact of the COVID-19 pandemic; borrower and renter behavior in response to the pandemic 

and its economic impact; the extent to which current economic and operating conditions continue, including 

whether any future outbreaks or increases in new COVID-19 cases interrupt economic recovery; and how 

quickly and to what extent affected borrowers, renters and counterparties recover from the negative economic 

impact of the pandemic; 

• the impact of the senior preferred stock purchase agreement and the enterprise regulatory capital framework, 

as well as future legislative and regulatory requirements or changes, governmental initiatives, or executive 

orders affecting us, such as the enactment of housing finance reform legislation, including changes that limit 

our business activities or our footprint or impose new mandates on us; 

• actions by FHFA, Treasury, HUD, the CFPB or other regulators, Congress, the Executive Branch, or state or 

local governments that affect our business;

• changes in the structure and regulation of the financial services industry; 

• the potential impact of a change in the corporate income tax rate, which we expect would affect our capital 

requirements and net income in the quarter of enactment as a result of a change in our measurement of our 

deferred tax assets and our net income in subsequent quarters as a result of the change in our effective federal 

income tax rate;

• the timing and level of, as well as regional variation in, home price changes; 

• future interest rates and credit spreads; 

• developments that may be difficult to predict, including: market conditions that result in changes in our net 

amortization income from our guaranty book of business, fluctuations in the estimated fair value of our 

derivatives and other financial instruments that we mark to market through our earnings; and developments that 

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

such as natural or other disasters, the emergence of widespread health emergencies or pandemics, or other 

disruptive or catastrophic events;

• uncertainties relating to the discontinuance of LIBOR, or other market changes that could impact the loans we 

own or guarantee or our MBS; 

MD&A | Forward-Looking Statements

Fannie Mae Third Quarter 2021 Form 10-Q 77
• disruptions or instability in the housing and credit markets;

• the size and our share of the U.S. mortgage market and the factors that affect them, including population 

growth and household formation;

• growth, deterioration and the overall health and stability of the U.S. economy, including U.S. GDP, 

unemployment rates, personal income, inflation rates and other indicators thereof;

• changes in fiscal monetary policy; 

• our and our competitors’ future guaranty fee pricing and the impact of that pricing on our competitive 

environment and guaranty fee revenues; 

• the volume of mortgage originations;

• the size, composition, quality and performance of our guaranty book of business and retained mortgage 

portfolio; 

• the competitive environment in which we operate, including the impact of legislative, regulatory or other 

developments on levels of competition in our industry and other factors affecting our market share; 

• how long loans in our guaranty book of business remain outstanding; 

• the effectiveness of our business resiliency plans and systems;

• changes in the demand for Fannie Mae MBS, in general or from one or more major groups of investors;

• our conservatorship, including any changes to or termination (by receivership or otherwise) of the 

conservatorship and its effect on our business; 

• the investment by Treasury, including the impact of recent changes or potential future changes to the terms of 

the senior preferred stock purchase agreement, and its and their effect on our business, including restrictions 

imposed on us by the terms of the senior preferred stock purchase agreement, the senior preferred stock, and 

Treasury’s warrant, as well as the extent that these or other restrictions on our business and activities are 

applied to us through other mechanisms even if we cease to be subject to these agreements and instruments; 

• adverse effects from activities we undertake to support the mortgage market and help borrowers, renters, 

lenders and servicers; 

• actions we may be required to take by FHFA, in its role as our conservator or as our regulator, such as actions 

in response to the COVID-19 pandemic, changes in the type of business we do, or actions relating to UMBS or 

our resecuritization of Freddie Mac-issued securities; 

• limitations on our business imposed by FHFA, in its role as our conservator or as our regulator; 

• our future objectives and activities in support of those objectives, including actions we may take to reach 

additional underserved borrowers or address barriers to sustainable housing opportunities and advance equity 

in housing finance; 

• the possibility that changes in leadership at FHFA or the Administration may result in changes that affect our 

company or our business;

• our reliance on Common Securitization Solutions, LLC (“CSS”) and the common securitization platform for a 

majority of our single-family securitization activities, our reduced influence over CSS as a result of changes 

made in 2020 to the CSS limited liability company agreement, and any additional changes FHFA may require in 

our relationship with or in our support of CSS;

• a decrease in our credit ratings; 

• limitations on our ability to access the debt capital markets; 

• constraints on our entry into new credit risk transfer transactions;

• significant changes in forbearance, modification and foreclosure activity; 

• the volume and pace of future nonperforming and reperforming loan sales and their impact on our results and 

serious delinquency rates; 

• changes in borrower behavior; 

• actions we may take to mitigate losses, and the effectiveness of our loss mitigation strategies, management of 

our REO inventory and pursuit of contractual remedies; 

• defaults by one or more institutional counterparties; 

MD&A | Forward-Looking Statements

Fannie Mae Third Quarter 2021 Form 10-Q 78
• resolution or settlement agreements we may enter into with our counterparties; 

• our need to rely on third parties to fully achieve some of our corporate objectives; 

• our reliance on mortgage servicers; 

• changes in GAAP, guidance by the Financial Accounting Standards Board and changes to our accounting 

policies; 

• changes in the fair value of our assets and liabilities; 

• the stability and adequacy of the systems and infrastructure that impact our operations, including ours and 

those of CSS, our other counterparties and other third parties; 

• the impact of increasing interdependence between the single-family mortgage securitization programs of 

Fannie Mae and Freddie Mac in connection with UMBS;

• operational control weaknesses; 

• our reliance on models and future updates we make to our models, including the assumptions used by these 

models; 

• domestic and global political risks and uncertainties; 

• natural disasters, environmental disasters, terrorist attacks, widespread health emergencies or pandemics, 

infrastructure failures, or other disruptive or catastrophic events; 

• severe weather events, fires, floods or other climate change events for which we may be uninsured or underinsured or that may affect our counterparties, and other risks resulting from climate change and efforts to 

address climate change;

• cyber attacks or other information security breaches or threats; and 

• the other factors described in “Risk Factors” in this report and in our 2020 Form 10-K.

Readers are cautioned not to unduly rely on the forward-looking statements we make and to place these forwardlooking statements into proper context by carefully considering the factors discussed in “Risk Factors” in our 2020 Form 

10-K and in this report. These forward-looking statements are representative only as of the date they are made, and we 

undertake no obligation to update any forward-looking statement as a result of new information, future events or 

otherwise, except as required under the federal securities laws. 

MD&A | Forward-Looking Statements

Fannie Mae Third Quarter 2021 Form 10-Q 79
Item 1. Financial Statements

FANNIE MAE

(In conservatorship)

Condensed Consolidated Balance Sheets — (Unaudited)

(Dollars in millions)

As of

September 30, 

2021

December 31, 

2020

ASSETS

Cash and cash equivalents $ 67,377 $ 38,337 

Restricted cash and cash equivalents (includes $59,370 and $68,308, respectively, related to 

consolidated trusts) 66,087 77,286 

Federal funds sold and securities purchased under agreements to resell or similar arrangements 

(includes $27,110 and $0, respectively, related to consolidated trusts) 27,610 28,200 

Investments in securities:

Trading, at fair value (includes $5,567 and $6,544, respectively, pledged as collateral) 97,209 136,542 

Available-for-sale, at fair value (with an amortized cost of $873 and $1,606, net of allowance for 

credit losses of $0 and $3 as of September 30, 2021 and December 31, 2020, respectively) 886 1,697 

Total investments in securities 98,095 138,239 

Mortgage loans:

Loans held for sale, at lower of cost or fair value 7,489 5,197 

Loans held for investment, at amortized cost:

Of Fannie Mae 70,936 112,726 

Of consolidated trusts 3,831,578 3,546,521 

 Total loans held for investment (includes $5,301 and $6,490, respectively, at fair value) 3,902,514 3,659,247 

Allowance for loan losses (6,334) (10,552) 

Total loans held for investment, net of allowance 3,896,180 3,648,695 

Total mortgage loans 3,903,669 3,653,892 

Advances to lenders 9,924 10,449 

Deferred tax assets, net 13,128 12,947 

Accrued interest receivable, net (includes $9,544 and $9,635 related to consolidated trusts and net of 

allowance of $118 and $216 as of September 30, 2021 and December 31, 2020, respectively) 9,895 9,937 

Acquired property, net 1,261 1,261 

Other assets 12,163 15,201 

Total assets $ 4,209,209 $ 3,985,749 

LIABILITIES AND EQUITY

Liabilities:

Accrued interest payable (includes $8,563 and $8,955, respectively, related to consolidated trusts) $ 9,299 $ 9,719 

Debt:

Of Fannie Mae (includes $2,633 and $3,728, respectively, at fair value) 234,843 289,572 

Of consolidated trusts (includes $23,020 and $24,586, respectively, at fair value) 3,907,626 3,646,164 

Other liabilities (includes $1,233 and $1,523, respectively, related to consolidated trusts) 15,268 15,035 

Total liabilities 4,167,036 3,960,490 

Commitments and contingencies (Note 13) — — 

Fannie Mae stockholders’ equity:

Senior preferred stock (liquidation preference of $158,844 and $142,192, respectively) 120,836 120,836 

Preferred stock, 700,000,000 shares are authorized—555,374,922 shares issued and outstanding 19,130 19,130 

Common stock, no par value, no maximum authorization—1,308,762,703 shares issued and 

1,158,087,567 shares outstanding 687 687 

Accumulated deficit (91,123) (108,110) 

Accumulated other comprehensive income 43 116 

Treasury stock, at cost, 150,675,136 shares (7,400) (7,400) 

Total stockholders’ equity (See Note 1: Senior Preferred Stock Purchase Agreement and Senior 

Preferred Stock for information on the related dividend obligation and liquidation preference) 42,173 25,259 

Total liabilities and equity $ 4,209,209 $ 3,985,749 

See Notes to Condensed Consolidated Financial Statements

 Financial Statements | Condensed Consolidated Balance Sheets

Fannie Mae (In conservatorship) Third Quarter 2021 Form 10-Q 80
FANNIE MAE

(In conservatorship)

Condensed Consolidated Statements of Operations and 

Comprehensive Income — (Unaudited)

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

For the Three Months 

Ended September 30,

For the Nine Months 

Ended September 30,

2021 2020 2021 2020

Interest income:

Trading securities $ 134 $ 177 $ 396 $ 712 

Available-for-sale securities 11 19 48 76 

Mortgage loans 24,798 25,810 73,083 81,755 

Federal funds sold and securities purchased under agreements to resell or 

similar arrangements 5 14 17 135 

Other 33 33 106 92 

Total interest income 24,981 26,053 73,650 82,770 

Interest expense:

Short-term debt — (19) (4) (175) 

Long-term debt (18,009) (19,378) (51,646) (64,815) 

Total interest expense (18,009) (19,397) (51,650) (64,990) 

Net interest income 6,972 6,656 22,000 17,780 

Benefit (provision) for credit losses 937 501 4,290 (2,094) 

Net interest income after benefit (provision) for credit losses 7,909 7,157 26,290 15,686 

Investment gains, net 243 653 934 644 

Fair value gains (losses), net (17) (327) 321 (1,621) 

Fee and other income 111 93 301 303 

Non-interest income (loss) 337 419 1,556 (674) 

Administrative expenses:

Salaries and employee benefits (376) (386) (1,128) (1,161) 

Professional services (184) (230) (582) (673) 

Other administrative expenses (185) (146) (529) (431) 

Total administrative expenses (745) (762) (2,239) (2,265) 

Foreclosed property expense (69) (71) (105) (161) 

Temporary Payroll Tax Cut Continuation Act of 2011 (“TCCA”) fees (781) (679) (2,270) (1,976) 

Credit enhancement expense (233) (325) (791) (1,061) 

Change in expected credit enhancement recoveries (42) (48) (117) 413 

Other expenses, net (268) (313) (867) (792) 

Total expenses (2,138) (2,198) (6,389) (5,842) 

Income before federal income taxes 6,108 5,378 21,457 9,170 

Provision for federal income taxes (1,266) (1,149) (4,470) (1,935) 

Net income 4,842 4,229 16,987 7,235 

Other comprehensive loss:

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

reclassification adjustments and taxes (10) (11) (64) (4) 

Other, net of taxes (4) (2) (9) (7) 

Total other comprehensive loss (14) (13) (73) (11) 

Total comprehensive income $ 4,828 $ 4,216 $ 16,914 $ 7,224 

Net income $ 4,842 $ 4,229 $ 16,987 $ 7,235 

Dividends distributed or amounts attributable to senior preferred stock (4,828) (4,216) (16,914) (7,224) 

Net income attributable to common stockholders $ 14 $ 13 $ 73 $ 11 

Earnings per share:

Basic $ 0.00 $ 0.00 $ 0.01 $ 0.00 

Diluted 0.00 0.00 0.01 0.00 

Weighted-average common shares outstanding:

Basic 5,867 5,867 5,867 5,867 

Diluted 5,893 5,893 5,893 5,893 

See Notes to Condensed Consolidated Financial Statements

 Financial Statements | Condensed Consolidated Statements of Operations and Comprehensive Income

Fannie Mae (In conservatorship) Third Quarter 2021 Form 10-Q 81
FANNIE MAE

(In conservatorship)

Condensed Consolidated Statements of Cash Flows — 

(Unaudited)

(Dollars in millions)

For the Nine Months 

Ended September 30,

2021 2020

Net cash provided by (used in) operating activities $ 37,055 $ (76,994) 

Cash flows provided by investing activities:

Proceeds from maturities and paydowns of trading securities held for investment 33 35 

Proceeds from sales of trading securities held for investment 159 44 

Proceeds from maturities and paydowns of available-for-sale securities 221 275 

Proceeds from sales of available-for-sale securities 582 258 

Purchases of loans held for investment (528,555) (519,133) 

Proceeds from repayments of loans acquired as held for investment of Fannie Mae 8,595 7,711 

Proceeds from sales of loans acquired held-for-investment of Fannie Mae 10,475 4,422 

Proceeds from repayments and sales of loans acquired as held for investment of consolidated trusts 861,516 770,982 

Advances to lenders (306,079) (223,007) 

Proceeds from disposition of acquired property and preforeclosure sales 2,816 4,694 

Net change in federal funds sold and securities purchased under agreements to resell or similar arrangements 590 878 

Other, net (62) (576) 

Net cash provided by investing activities 50,291 46,583 

Cash flows provided by (used in) financing activities:

Proceeds from issuance of debt of Fannie Mae 199,222 501,627 

Payments to redeem debt of Fannie Mae (253,093) (394,187) 

Proceeds from issuance of debt of consolidated trusts 887,383 716,591 

Payments to redeem debt of consolidated trusts (903,450) (743,578) 

Other, net 433 (461) 

Net cash provided by (used in) financing activities (69,505) 79,992 

Net increase in cash, cash equivalents and restricted cash and cash equivalents 17,841 49,581 

Cash, cash equivalents and restricted cash and cash equivalents at beginning of period 115,623 61,407 

Cash, cash equivalents and restricted cash and cash equivalents at end of period $ 133,464 $ 110,988 

Cash paid during the period for:

Interest $ 80,048 $ 86,035 

Income taxes 4,650 2,750 

See Notes to Condensed Consolidated Financial Statements

 Financial Statements | Condensed Consolidated Statements of Cash Flows

Fannie Mae (In conservatorship) Third Quarter 2021 Form 10-Q 82
FANNIE MAE

(In conservatorship)

Condensed Consolidated Statements of Changes in 

Equity — (Unaudited)

(Dollars and shares in millions)

Fannie Mae Stockholders’ Equity

Shares Outstanding

Senior

Preferred 

Stock

Preferred

Stock

Common

Stock

Accumulated

Deficit

Accumulated 

Other

Comprehensive

Income

Treasury

Stock

Total

Equity

Senior

Preferred Preferred Common

Balance as of June 30, 2021 1 556 1,158 $ 120,836 $ 19,130 $ 687 $ (95,965) $ 57 $ (7,400) $ 37,345 

Comprehensive income:

Net income — — — — — — 4,842 — — 4,842 

Other comprehensive income, net of tax effect:

Changes in net unrealized gains on availablefor-sale securities (net of taxes of $3) — — — — — — — (10) — (10) 

Reclassification adjustment for gains included 

in net income (net of taxes of $0) — — — — — — — — — — 

Other (net of taxes of $1) — — — — — — — (4) — (4) 

Total comprehensive income 4,828 

Balance as of September 30, 2021 1 556 1,158 $ 120,836 $ 19,130 $ 687 $ (91,123) $ 43 $ (7,400) $ 42,173 

Fannie Mae Stockholders’ Equity

Shares Outstanding

Senior

Preferred 

Stock

Preferred

Stock

Common

Stock

Accumulated

Deficit

Accumulated 

Other

Comprehensive

Income

Treasury

Stock

Total

Equity

Senior

Preferred Preferred Common

Balance as of December 31, 2020 1 556 1,158 $ 120,836 $ 19,130 $ 687 $ (108,110) $ 116 $ (7,400) $ 25,259 

Comprehensive income:

Net income — — — — — — 16,987 — — 16,987 

Other comprehensive income, net of tax effect:

Changes in net unrealized gains on availablefor-sale securities (net of taxes of $4) — — — — — — — (14) — (14) 

Reclassification adjustment for gains included 

in net income (net of taxes of $13) — — — — — — — (50) — (50) 

Other (net of taxes of $2) — — — — — — — (9) — (9) 

Total comprehensive income 16,914 

Balance as of September 30, 2021 1 556 1,158 $ 120,836 $ 19,130 $ 687 $ (91,123) $ 43 $ (7,400) $ 42,173 

See Notes to Condensed Consolidated Financial Statements

Financial Statements | Condensed Consolidated Statements of Changes in Equity

Fannie Mae (In conservatorship) Third Quarter 2021 Form 10-Q 83
FANNIE MAE

(In conservatorship)

Condensed Consolidated Statements of Changes in 

Equity — (Unaudited)

(Dollars and shares in millions)

Fannie Mae Stockholders’ Equity 

Shares Outstanding

Senior

Preferred 

Stock

Preferred

Stock

Common

Stock

Accumulated

Deficit

Accumulated 

Other

Comprehensive

Income

Treasury

Stock

Total

Equity

Senior

Preferred Preferred Common

Balance as of June 30, 2020 1 556 1,158 $ 120,836 $ 19,130 $ 687 $ (116,909) $ 133 $ (7,400) $ 16,477 

Senior preferred stock dividends paid — — — — — — — — — — 

Comprehensive income:

Net income — — — — — — 4,229 — — 4,229 

Other comprehensive income, net of tax effect:

Changes in net unrealized gains on available-

 for-sale securities (net of taxes of $1) — — — — — — — 1 — 1 

Reclassification adjustment for gains included

 in net income (net of taxes of $1) — — — — — — — (12) — (12) 

Other (net of taxes of $1) — — — — — — — (2) — (2) 

Total comprehensive income 4,216 

Balance as of September 30, 2020 1 556 1,158 $ 120,836 $ 19,130 $ 687 $ (112,680) $ 120 $ (7,400) $ 20,693 

Fannie Mae Stockholders’ Equity

Shares Outstanding

Senior

Preferred 

Stock

Preferred

Stock

Common

Stock

Accumulated

Deficit

Accumulated 

Other

Comprehensive

Income

Treasury

Stock

Total

Equity

Senior

Preferred Preferred Common

Balance as of December 31, 2019 1 556 1,158 $ 120,836 $ 19,130 $ 687 $ (118,776) $ 131 $ (7,400) $ 14,608 

Transition impact, net of tax, from the adoption of

 the current expected credit loss standard — — — — — — (1,139) — — (1,139) 

Balance as of January 1, 2020, adjusted 1 556 1,158 120,836 19,130 687 (119,915) 131 (7,400) 13,469 

Comprehensive income:

Net income — — — — — — 7,235 — — 7,235 

Other comprehensive income, net of tax effect:

Changes in net unrealized gains on availablefor-sale securities (net of taxes of $1) — — — — — — — 2 — 2 

Reclassification adjustment for gains included 

in net income (net of taxes of $2) — — — — — — — (6) — (6) 

Other (net of taxes of $2) — — — — — — — (7) — (7) 

Total comprehensive income 7,224 

Balance as of September 30, 2020 1 556 1,158 $ 120,836 $ 19,130 $ 687 $ (112,680) $ 120 $ (7,400) $ 20,693 

See Notes to Condensed Consolidated Financial Statements

Financial Statements | Condensed Consolidated Statements of Changes in Equity

Fannie Mae (In conservatorship) Third Quarter 2021 Form 10-Q 84
FANNIE MAE

(In conservatorship)

Notes to Condensed Consolidated Financial Statements

(Unaudited)

1. Summary of Significant Accounting Policies

Fannie Mae is a leading source of financing for mortgages in the United States. We are a shareholder-owned 

corporation organized as a government-sponsored entity (“GSE”) and existing under the Federal National Mortgage 

Association Charter Act (the “Charter Act” or our “charter”). Our charter is an act of Congress, and we have a mission 

under that charter to provide liquidity and stability to the residential mortgage market and to promote access to 

mortgage credit. As a result, we are subject to government oversight and regulation. Our regulators include the Federal 

Housing Finance Agency (“FHFA”), the U.S. Department of Housing and Urban Development (“HUD”), the U.S. 

Securities and Exchange Commission (“SEC”) and the U.S. Department of the Treasury (“Treasury”). The U.S. 

government does not guarantee our securities or other obligations. 

We have been under conservatorship, with FHFA acting as conservator, since September 6, 2008. See below and “Note 

1, Summary of Significant Accounting Policies” in our annual report on Form 10-K for the year ended December 31, 

2020 (“2020 Form 10-K”) for additional information on our conservatorship and the impact of U.S. government support 

of our business.

The unaudited interim condensed consolidated financial statements as of and for the three and nine months ended 

September 30, 2021 and related notes should be read in conjunction with our audited consolidated financial statements 

and related notes included in our 2020 Form 10-K. 

Basis of Presentation 

The accompanying unaudited interim condensed consolidated financial statements have been prepared in accordance 

with generally accepted accounting principles in the United States of America (“GAAP”) for interim financial information 

and with the SEC’s instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the 

information and note disclosures required by GAAP for complete consolidated financial statements. In the opinion of 

management, all adjustments of a normal recurring nature considered necessary for a fair presentation have been 

included. The accompanying condensed consolidated financial statements include our accounts as well as the accounts 

of other entities in which we have a controlling financial interest. All intercompany accounts and transactions have been 

eliminated. Results for the three and nine months ended September 30, 2021 may not necessarily be indicative of the 

results for the year ending December 31, 2021.

Presentation of Restricted Cash and Cash Equivalents

Restricted cash and cash equivalents includes funds held by consolidated MBS trusts that have not yet been remitted to 

MBS certificateholders under the terms of our servicing guide and the related trust agreements. In 2021, Fannie Mae, in 

its role as trustee, began to invest funds held by consolidated trusts directly in eligible short-term third-party 

investments, which may include investments in cash equivalents that are composed of overnight repurchase 

agreements and U.S. Treasuries that have a maturity at the date of acquisition of three months or less. The funds 

underlying these short-term investments are restricted per the trust agreements. Accordingly, any investment in cash 

equivalents should be classified as restricted and is presented as “Restricted cash and cash equivalents” in our 

condensed consolidated balance sheets to reflect the investment of funds related to MBS trusts.

Use of Estimates

Preparing condensed consolidated financial statements in accordance with GAAP requires management to make 

estimates and assumptions that affect our reported amounts of assets and liabilities and disclosure of contingent assets 

and liabilities as of the dates of our condensed consolidated financial statements, as well as our reported amounts of 

revenues and expenses during the reporting periods. Management has made significant estimates in a variety of areas 

including, but not limited to, the allowance for loan losses. Actual results could be different from these estimates.

Notes to Condensed Consolidated Financial Statements | Summary of Significant Accounting Policies

Fannie Mae (In conservatorship) Third Quarter 2021 Form 10-Q 85
Conservatorship

On September 7, 2008, the Secretary of the Treasury and the Director of FHFA announced several actions taken by 

Treasury and FHFA regarding Fannie Mae, which included: (1) placing us in conservatorship, with FHFA acting as our 

conservator, and (2) the execution of a senior preferred stock purchase agreement by our conservator, on our behalf, 

and Treasury, pursuant to which we issued to Treasury both senior preferred stock and a warrant to purchase common 

stock. 

Under the Federal Housing Enterprises Financial Safety and Soundness Act of 1992, as amended, including by the 

Housing and Economic Recovery Act of 2008 (together, the “GSE Act”), the conservator immediately succeeded to (1) 

all rights, titles, powers and privileges of Fannie Mae, and of any stockholder, officer or director of Fannie Mae with 

respect to Fannie Mae and its assets, and (2) title to the books, records and assets of any other legal custodian of 

Fannie Mae. The conservator subsequently issued an order that provided for our Board of Directors to exercise 

specified authorities. The conservator also provided instructions regarding matters for which conservator decision or 

notification is required. The conservator retains the authority to amend or withdraw its order and instructions at any time.

The conservator has the power to transfer or sell any asset or liability of Fannie Mae (subject to limitations and posttransfer notice provisions for transfers of qualified financial contracts) without any approval, assignment of rights or 

consent of any party. However, mortgage loans and mortgage-related assets that have been transferred to a Fannie 

Mae MBS trust must be held by the conservator for the beneficial owners of the Fannie Mae MBS and cannot be used 

to satisfy the general creditors of Fannie Mae. Neither the conservatorship nor the terms of our agreements with 

Treasury change our obligation to make required payments on our debt securities or perform under our mortgage 

guaranty obligations.

The conservatorship has no specified termination date and there continues to be significant uncertainty regarding our 

future, including how long we will continue to exist in our current form, the extent of our role in the market, the level of 

government support of our business, how long we will be in conservatorship, what form we will have and what 

ownership interest, if any, our current common and preferred stockholders will hold in us after the conservatorship is 

terminated and whether we will continue to exist following conservatorship. Under the GSE Act, FHFA must place us 

into receivership if the Director of FHFA makes a written determination that our assets are less than our obligations or if 

we have not been paying our debts, in either case, for a period of 60 days. In addition, the Director of FHFA may place 

us into receivership at the Director’s discretion at any time for other reasons set forth in the GSE Act, including if we are 

critically undercapitalized or if we are undercapitalized and have no reasonable prospect of becoming adequately 

capitalized. Should we be placed into receivership, different assumptions could be required to determine the carrying 

value of our assets, which could lead to substantially different financial results. Treasury has made a commitment under 

the senior preferred stock purchase agreement to provide funding to us under certain circumstances if we have a net 

worth deficit. We are not aware of any plans of FHFA (1) to fundamentally change our business model, or (2) to reduce 

the aggregate amount available to or held by the company under our capital structure, which includes the senior 

preferred stock purchase agreement.

Senior Preferred Stock Purchase Agreement and Senior Preferred 

Stock

Under our senior preferred stock purchase agreement with Treasury, in September 2008 we issued Treasury one million

shares of senior preferred stock and a warrant to purchase shares of our common stock. The senior preferred stock 

purchase agreement and the dividend and liquidation provisions of the senior preferred stock were amended in January 

2021 pursuant to a letter agreement between Fannie Mae, through FHFA in its capacity as conservator, and Treasury. 

These changes included the following:

• The dividend provisions of the senior preferred stock were amended to permit us to retain increases in our net 

worth until our net worth exceeds the amount of adjusted total capital necessary for us to meet the capital 

requirements and buffers under the enterprise regulatory capital framework discussed in “Note 12, Regulatory 

Capital Requirements” in our 2020 Form 10-K. After the “capital reserve end date,” which is defined as the last 

day of the second consecutive fiscal quarter during which we have had and maintained capital equal to, or in 

excess of, all of the capital requirements and buffers under the enterprise regulatory capital framework, the 

amount of quarterly dividends to Treasury will be equal to the lesser of any quarterly increase in our net worth 

and a 10% annual rate on the then-current liquidation preference of the senior preferred stock. 

• At the end of each fiscal quarter, through and including the capital reserve end date, the liquidation preference 

of the senior preferred stock will be increased by an amount equal to the increase in our net worth, if any, 

during the immediately prior fiscal quarter. 

Notes to Condensed Consolidated Financial Statements | Summary of Significant Accounting Policies

Fannie Mae (In conservatorship) Third Quarter 2021 Form 10-Q 86
• We may issue and retain up to $70 billion in proceeds from the sale of common stock without Treasury’s prior 

consent, provided that (1) Treasury has already exercised its warrant in full, and (2) all currently pending 

significant litigation relating to the conservatorship and to an amendment to the senior preferred stock purchase 

agreement made in August 2012 has been resolved, which may require Treasury’s assent.

• FHFA may release us from conservatorship without Treasury’s consent after (1) all currently pending significant 

litigation relating to the conservatorship and to the August 2012 amendment to the senior preferred stock 

purchase agreement has been resolved, and (2) our common equity tier 1 capital, together with any other 

common stock that we may issue in a public offering, equals or exceeds 3% of our “adjusted total assets” under 

our enterprise regulatory capital framework. 

• New restrictive covenants were added that impact both our single-family and multifamily business activities.

On September 14, 2021, Fannie Mae, through FHFA acting in its capacity as Fannie Mae’s conservator, entered into a 

letter agreement with Treasury temporarily suspending certain of the restrictive business covenants that were added in 

the January 2021 letter agreement amending the senior preferred stock purchase agreement. The letter agreement 

provides that the suspension of these provisions will terminate on the later of one year after the date of the agreement 

and six months after Treasury notifies us. While the September 2021 letter agreement temporarily suspended 

restrictions on certain business activities, in the ordinary course of business these and other business activities are 

subject to constraints from a variety of sources, including board- and management-approved risk limits, capital 

considerations and FHFA instructions. 

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

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

have received a total of $119.8 billion from Treasury as of September 30, 2021, and the amount of remaining funding 

available to us under the agreement is $113.9 billion. We have not received any funding from Treasury under this 

commitment since the first quarter of 2018.

Dividend provisions of the senior preferred stock permit us to retain increases in our net worth until our net worth 

exceeds the amount of adjusted total capital necessary for us to meet the capital requirements and buffers under the 

enterprise regulatory capital framework established by FHFA in November 2020. The aggregate liquidation preference 

of the senior preferred stock increased to $158.8 billion as of September 30, 2021 and will further increase to 

$163.7 billion as of December 31, 2021 due to the $4.8 billion increase in our net worth during the third quarter of 2021. 

Both the January and September 2021 letter agreements have been accounted for as modifications of the existing 

agreement. As a result, there is no change in the carrying value of the senior preferred stock.

See “Note 11, Equity” in our 2020 Form 10-K for additional information about the senior preferred stock purchase 

agreement and the senior preferred stock.

Statutory Capital

We submit capital reports to FHFA, which monitors our capital levels. The deficit of core capital over statutory minimum 

capital was $106.5 billion as of September 30, 2021 and $124.3 billion as of December 31, 2020.

Related Parties

Because Treasury holds a warrant to purchase shares of Fannie Mae common stock equal to 79.9% of the total number 

of shares of Fannie Mae common stock, we and Treasury are deemed related parties. As of September 30, 2021, 

Treasury held an investment in our senior preferred stock with an aggregate liquidation preference of $158.8 billion. See 

“Senior Preferred Stock Purchase Agreement and Senior Preferred Stock” above for additional information on 

transactions under this agreement and the modifications made in the January 2021 and September 2021 letter 

agreements. 

FHFA’s control of both Fannie Mae and Freddie Mac has caused Fannie Mae, FHFA and Freddie Mac to be deemed 

related parties. Additionally, Fannie Mae and Freddie Mac jointly own Common Securitization Solutions, LLC (“CSS”), a 

limited liability company created to operate a common securitization platform; as a result, CSS is deemed a related 

party. As a part of our joint ownership, Fannie Mae, Freddie Mac and CSS are parties to a limited liability company 

agreement that sets forth the overall framework for the joint venture, including Fannie Mae’s and Freddie Mac’s rights 

and responsibilities as members of CSS. Fannie Mae, Freddie Mac and CSS are also parties to a customer services 

agreement that sets forth the terms under which CSS provides mortgage securitization services to us and Freddie Mac, 

including the operation of the common securitization platform, as well as an administrative services agreement. CSS 

operates as a separate company from us and Freddie Mac, with all funding and limited administrative support services 

and other resources provided to it by us and Freddie Mac.

Notes to Condensed Consolidated Financial Statements | Summary of Significant Accounting Policies

Fannie Mae (In conservatorship) Third Quarter 2021 Form 10-Q 87
In the ordinary course of business, Fannie Mae may purchase and sell securities issued by Treasury and Freddie Mac. 

These transactions occur on the same terms as those prevailing at the time for comparable transactions with unrelated 

parties. Some of the structured securities we issue are backed in whole or in part by Freddie Mac securities. Fannie 

Mae and Freddie Mac each have agreed to indemnify the other party for losses caused by: its failure to meet its 

payment or other specified obligations under the trust agreements pursuant to which the underlying resecuritized 

securities were issued; its failure to meet its obligations under the customer services agreement; its violations of laws; or 

with respect to material misstatements or omissions in offering documents, ongoing disclosures and related materials 

relating to the underlying resecuritized securities. Additionally, we make regular income tax payments to and receive tax 

refunds from the Internal Revenue Service (“IRS”), a bureau of Treasury.

Transactions with Treasury

Our administrative expenses were reduced by $4 million and $5 million for the three months ended September 30, 2021

and 2020, respectively, and $13 million and $14 million for the nine months ended September 30, 2021 and 2020, 

respectively, due to reimbursements from Treasury and Freddie Mac for expenses incurred as program administrator for 

Treasury’s Home Affordable Modification Program and other initiatives under Treasury’s Making Home Affordable 

Program.

In December 2011, Congress enacted the Temporary Payroll Cut Continuation Act of 2011 (“TCCA”) which, among other 

provisions, required that we increase our single-family guaranty fees by at least 10 basis points and remit this increase 

to Treasury. Effective April 1, 2012, we increased the guaranty fee on all single-family residential mortgages delivered to 

us by 10 basis points. In 2012, FHFA and Treasury advised us to remit this fee increase to Treasury with respect to all 

loans acquired by us on or after April 1, 2012 and before January 1, 2022, and to continue to remit these amounts to 

Treasury on and after January 1, 2022 with respect to loans we acquired before this date until those loans are paid off 

or otherwise liquidated. The resulting fee revenue and expense are recorded in “Interest income: Mortgage loans” and 

“TCCA fees,” respectively, in our condensed consolidated statements of operations and comprehensive income. 

In 2020, FHFA provided guidance that we are not required to accrue or remit TCCA fees to Treasury with respect to 

loans backing MBS trusts that have been delinquent for four months or longer. Once payments on such loans resume, 

we will resume accrual and remittance to Treasury of the associated TCCA fees on the loans. 

We recognized $781 million and $679 million in TCCA fees during the three months ended September 30, 2021 and 

2020, respectively, and $2.3 billion and $2.0 billion for the nine months ended September 30, 2021 and 2020, 

respectively, of which $781 million had not been remitted to Treasury as of September 30, 2021.

The GSE Act requires us to set aside certain funding obligations, a portion of which is attributable to Treasury’s Capital 

Magnet Fund. These funding obligations, recognized in “Other expenses, net” in our condensed consolidated 

statements of operations and comprehensive income, were measured as the product of 4.2 basis points and the unpaid 

principal balance of our total new business purchases for the respective period, and 35% of this amount is payable to 

Treasury’s Capital Magnet Fund. We recognized a total of $46 million and $59 million in “Other expenses, net” for the 

three months ended September 30, 2021 and 2020, respectively, and $165 million and $144 million for the nine months 

ended September 30, 2021 and 2020, respectively, in connection with Treasury’s Capital Magnet Fund, of which $165 

million has not been remitted as of September 30, 2021.

On September 14, 2021, Fannie Mae, through FHFA acting in its capacity as Fannie Mae’s conservator, entered into a 

letter agreement with Treasury temporarily suspending certain of the restrictive business covenants in the senior 

preferred stock purchase agreement. The specified provisions of the letter agreement are described under “Senior 

Preferred Stock Purchase Agreement and Senior Preferred Stock” above. 

Transactions with FHFA

The GSE Act authorizes FHFA to establish an annual assessment for regulated entities, including Fannie Mae, which is 

payable on a semi-annual basis (April and October), for FHFA’s costs and expenses, as well as to maintain FHFA’s 

working capital. We recognized FHFA assessment fees, which are recorded in “Administrative expenses” in our 

condensed consolidated statements of operations and comprehensive income, of $35 million for the three months 

ended September 30, 2021 and 2020, and $107 million and $102 million for the nine months ended September 30, 

2021 and 2020, respectively.

Transactions with CSS and Freddie Mac

We contributed capital to CSS, the company we jointly own with Freddie Mac, of $15 million and $19 million for the 

three months ended September 30, 2021 and 2020, respectively, and $60 million and $67 million for the nine months 

ended September 30, 2021 and 2020, respectively.

Notes to Condensed Consolidated Financial Statements | Summary of Significant Accounting Policies

Fannie Mae (In conservatorship) Third Quarter 2021 Form 10-Q 88
Derivatives

We recognize our derivatives as either assets or liabilities in our condensed consolidated balance sheets at their fair 

value on a trade date basis. Changes in fair value and interest accruals on derivatives not in qualifying fair value 

hedging relationships are recorded as “Fair value gains (losses), net” in our condensed consolidated statements of 

operations and comprehensive income. We offset the carrying amounts of certain derivatives that are in gain positions 

and loss positions as well as cash collateral receivables and payables associated with derivative positions pursuant to 

the terms of enforceable master netting arrangements. We offset these amounts only when we have the legal right to 

offset under the contract and we have met all the offsetting conditions. For our over-the-counter (“OTC”) derivative 

positions, our master netting arrangements allow us to net derivative assets and liabilities with the same counterparty. 

For our cleared derivative contracts, our master netting arrangements allow us to net our exposure by clearing 

organization and by clearing member.

After offsetting, we report derivatives in a gain position in “Other assets” and derivatives in a loss position in “Other 

liabilities” in our condensed consolidated balance sheets.

We evaluate financial instruments that we purchase or issue and other financial and non-financial contracts for 

embedded derivatives. To identify embedded derivatives that we must account for separately, we determine whether: (1)

the economic characteristics of the embedded derivative are not clearly and closely related to the economic 

characteristics of the financial instrument or other contract (i.e., the host contract); (2) the financial instrument or other 

contract itself is not already measured at fair value with changes in fair value included in earnings; and (3) a separate 

instrument with the same terms as the embedded derivative would meet the definition of a derivative. If the embedded 

derivative meets all three of these conditions, we elect to carry the hybrid contract in its entirety at fair value with 

changes in fair value recorded in earnings.

Fair Value Hedge Accounting

In January 2021, to reduce earnings volatility related to changes in benchmark interest rates, we began applying fair 

value hedge accounting to certain pools of single-family mortgage loans and certain issuances of our funding debt by 

designating such instruments as the hedged item in hedging relationships with interest-rate swaps. In these 

relationships, we have designated the change in the benchmark interest rate, either the London Inter-bank Offered Rate 

(“LIBOR”) or Secured Overnight Financing Rate (“SOFR”), as the risk being hedged. We have elected to use the last-oflayer method to hedge certain pools of single-family mortgage loans. This election involves establishing fair value 

hedging relationships on the portion of each loan pool that is not expected to be affected by prepayments, defaults and 

other events that affect the timing and amount of cash flows. The term of each hedging relationship is generally one 

business day and we establish hedging relationships daily to align our hedge accounting with our risk management 

practices. 

We apply hedge accounting to qualifying hedging relationships. A qualifying hedging relationship exists when changes 

in the fair value of a derivative hedging instrument are expected to be highly effective in offsetting changes in the fair 

value of the hedged item attributable to the risk being hedged during the term of the hedging relationship. We assess 

hedge effectiveness using statistical regression analysis. A hedging relationship is considered highly effective if the total 

change in fair value of the hedging instrument and the change in the fair value of the hedged item due to changes in the 

benchmark interest rate offset each other within a range of 80% to 125% and certain other statistical tests are met.

If a hedging relationship qualifies for hedge accounting, the change in the fair value of the interest-rate swaps and the 

change in the fair value of the hedged item for the risk being hedged are recorded through net interest income. A 

corresponding basis adjustment is recorded against the hedged item, either the pool of mortgage loans or the debt, for 

the changes in the fair value attributable to the risk being hedged. For hedging relationships that hedge pools of singlefamily mortgage loans, basis adjustments are allocated to individual single-family loans based on the relative unpaid 

principal balance of each loan at the termination of the hedging relationship. The cumulative basis adjustments on the 

hedged item are amortized into earnings using the effective interest method over the contractual life of the hedged item, 

with amortization beginning upon termination of the hedging relationship.

All changes in fair value of the designated portion of the derivative hedging instrument (i.e., interest-rate swap), 

including interest accruals, are recorded in the same line item in the condensed consolidated statements of operations 

and comprehensive income used to record the earnings effect of the hedged item. Therefore, changes in the fair value 

of the hedged mortgage loans and debt attributable to the risk being hedged are recognized in “Interest income” or 

“Interest expense,” along with the changes in the fair value of the respective derivative hedging instruments.

The recognition of basis adjustments on the hedged item and the subsequent amortization are noncash activities and 

are removed from net income to derive the “Net cash provided by (used in) operating activities” in our condensed 

consolidated statement of cash flows. Cash on derivative instruments paid or received while the derivative is designated 

Notes to Condensed Consolidated Financial Statements | Summary of Significant Accounting Policies

Fannie Mae (In conservatorship) Third Quarter 2021 Form 10-Q 89
in a hedging relationship is reported as “Net cash provided by (used in) operating activities” in the condensed 

consolidated statement of cash flows.

See “Note 3, Mortgage Loans,” “Note 7, Short-Term and Long-Term Debt” and “Note 8, Derivative Instruments” for 

additional information on our fair value hedge accounting policy and related disclosures. 

Earnings per Share 

Earnings per share (“EPS”) is presented for basic and diluted EPS. We compute basic EPS by dividing net income 

attributable to common stockholders by the weighted-average number of shares of common stock outstanding during 

the period. However, as a result of our conservatorship status and the terms of the senior preferred stock, no amounts 

would be available to distribute as dividends to common or preferred stockholders (other than to Treasury as the holder 

of the senior preferred stock). Net income attributable to common stockholders excludes amounts attributable to the 

senior preferred stock. Weighted average common shares include 4.7 billion shares for the periods ended September 

30, 2021 and 2020 that would have been issued upon the full exercise of the warrant issued to Treasury from the date 

the warrant was issued through September 30, 2021 and 2020.

The calculation of diluted EPS includes all the components of basic earnings per share, plus the dilutive effect of 

common stock equivalents such as convertible securities and stock options. Weighted average shares outstanding is 

increased to include the number of additional common shares that would have been outstanding if the dilutive potential 

common shares had been issued. For the three and nine months ended September 30, 2021 and the three and nine 

months ended September 30, 2020, our diluted EPS weighted-average shares outstanding includes 26 million shares 

issuable upon the conversion of convertible preferred stock. 

2. Consolidations and Transfers of Financial Assets

We have interests in various entities that are considered to be variable interest entities (“VIEs”). The primary types of 

entities are securitization and resecuritization trusts, limited partnerships and special purpose vehicles (“SPVs”). These 

interests include investments in securities issued by VIEs, such as Fannie Mae MBS created pursuant to our 

securitization transactions and our guaranty to the entity. We consolidate the substantial majority of our single-class 

securitization trusts because our role as guarantor and master servicer provides us with the power to direct matters 

(primarily the servicing of mortgage loans) that impact the credit risk to which we are exposed. In contrast, we do not 

consolidate single-class securitization trusts when other organizations have the power to direct these activities unless 

we have the unilateral ability to dissolve the trust. We also do not consolidate our resecuritization trusts unless we have 

the unilateral ability to dissolve the trust. Historically, the vast majority of underlying assets of our resecuritization trusts 

were limited to Fannie Mae securities that were collateralized by mortgage loans held in consolidated trusts. However, 

with our issuance of uniform mortgage-backed securities (“UMBS®”), we include securities issued by Freddie Mac in 

some of our resecuritization trusts. The mortgage loans that serve as collateral for Freddie Mac-issued securities are 

not held in trusts that are consolidated by Fannie Mae.

Notes to Condensed Consolidated Financial Statements | Summary of Significant Accounting Policies

Fannie Mae (In conservatorship) Third Quarter 2021 Form 10-Q 90
Unconsolidated VIEs

We do not consolidate VIEs when we are not deemed to be the primary beneficiary. Our unconsolidated VIEs include 

securitization and resecuritization trusts, limited partnerships, and certain SPVs designed to transfer credit risk. The 

following table displays the carrying amount and classification of our assets and liabilities that relate to our involvement 

with unconsolidated securitization and resecuritization trusts.

As of

September 30, 2021 December 31, 2020

(Dollars in millions)

Assets and liabilities recorded in our condensed consolidated balance sheets 

related to unconsolidated mortgage-backed trusts:

Assets:

Trading securities:

Fannie Mae $ 1,073 $ 1,611 

Non-Fannie Mae 3,282 3,608 

Total trading securities 4,355 5,219 

Available-for-sale securities:

Fannie Mae 518 1,168 

Non-Fannie Mae 207 318 

Total available-for-sale securities 725 1,486 

Other assets 37 41 

Other liabilities (63) (67) 

Net carrying amount $ 5,054 $ 6,679 

Our maximum exposure to loss generally represents the greater of our carrying value in the entity or the unpaid 

principal balance of the assets covered by our guaranty. Our involvement in unconsolidated resecuritization trusts may 

give rise to additional exposure to loss depending on the type of resecuritization trust. Fannie Mae non-commingled 

resecuritization trusts are backed entirely by Fannie Mae MBS. These non-commingled single-class and multi-class 

resecuritization trusts are not consolidated and do not give rise to any additional exposure to loss as we already 

consolidate the underlying collateral. 

Fannie Mae commingled resecuritization trusts are backed in whole or in part by Freddie Mac securities. The guaranty 

that we provide to these commingled resecuritization trusts may increase our exposure to loss to the extent that we are 

providing a guaranty for the timely payment and interest on the underlying Freddie Mac securities that we have not 

previously guaranteed. Our maximum exposure to loss for these unconsolidated trusts is measured by the amount of 

Freddie Mac securities that are held in these resecuritization trusts. 

Our maximum exposure to loss related to unconsolidated securitization and resecuritization trusts, which includes but is 

not limited to our exposure to these Freddie Mac securities, was approximately $198 billion and $146 billion as of 

September 30, 2021 and December 31, 2020, respectively. The total assets of our unconsolidated securitization and 

resecuritization trusts were approximately $240 billion and $180 billion as of September 30, 2021 and December 31, 

2020, respectively.

The maximum exposure to loss for our unconsolidated limited partnerships and similar legal entities, which consist of 

low-income housing tax credit investments (“LIHTC”), community investments and other entities, was $225 million and 

the related net carrying value was $219 million as of September 30, 2021. As of December 31, 2020, the maximum 

exposure to loss was $126 million and the related net carrying value was $121 million. The total assets of these limited 

partnership investments were $3.3 billion as of September 30, 2021 and $2.6 billion as of December 31, 2020.

The maximum exposure to loss related to our involvement with unconsolidated SPVs that transfer credit risk represents 

the unpaid principal balance and accrued interest payable of obligations issued by the Connecticut Avenue Securities® 

(“CAS”) and Multifamily Connecticut Avenue SecuritiesTM (“MCASTM”) SPVs. The maximum exposure to loss related to 

these unconsolidated SPVs was $8.2 billion and $11.4 billion as of September 30, 2021 and December 31, 2020, 

respectively. The total assets related to these unconsolidated SPVs were $8.2 billion and $11.4 billion as of September 

30, 2021 and December 31, 2020, respectively.

Notes to Condensed Consolidated Financial Statements | Consolidations and Transfers of Financial Assets

Fannie Mae (In conservatorship) Third Quarter 2021 Form 10-Q 91
The unpaid principal balance of our multifamily loan portfolio was $398.2 billion as of September 30, 2021. As our 

lending relationship does not provide us with a controlling financial interest in the borrower entity, we do not consolidate 

these borrowers regardless of their status as either a VIE or a voting interest entity. We have excluded these entities 

from our VIE disclosures. However, the disclosures we have provided in “Note 3, Mortgage Loans,” “Note 4, Allowance 

for Loan Losses” and “Note 6, Financial Guarantees” with respect to this population are consistent with the Financial 

Accounting Standards Board’s stated objectives for the disclosures related to unconsolidated VIEs.

Transfers of Financial Assets

We issue Fannie Mae MBS through portfolio securitization transactions by transferring pools of mortgage loans or 

mortgage-related securities to one or more trusts or special purpose entities. We are considered to be the transferor 

when we transfer assets from our own retained mortgage portfolio in a portfolio securitization transaction. For the three

months ended September 30, 2021 and 2020, the unpaid principal balance of portfolio securitizations was $140.1 billion

and $213.0 billion, respectively. For the nine months ended September 30, 2021 and 2020, the unpaid principal balance 

of portfolio securitizations was $554.0 billion and $504.9 billion, respectively. The substantial majority of these portfolio 

securitization transactions generally do not qualify for sale treatment. Portfolio securitization trusts that do qualify for 

sale treatment primarily consist of loans that are guaranteed or insured, in whole or in part, by the U.S. government.

We retain interests from the transfer and sale of mortgage-related securities to unconsolidated single-class and multiclass portfolio securitization trusts. As of September 30, 2021, the unpaid principal balance of retained interests was 

$1.1 billion and its related fair value was $2.1 billion. As of December 31, 2020, the unpaid principal balance of retained 

interests was $1.7 billion and its related fair value was $2.9 billion. For the three months ended September 30, 2021 and 

2020, the principal, interest and other fees received on retained interests was $139 million and $166 million, 

respectively. For the nine months ended September 30, 2021 and 2020, the principal, interest and other fees received 

on retained interests was $426 million and $517 million, respectively.

Notes to Condensed Consolidated Financial Statements | Consolidations and Transfers of Financial Assets

Fannie Mae (In conservatorship) Third Quarter 2021 Form 10-Q 92
3. Mortgage Loans

We own single-family mortgage loans, which are secured by four or fewer residential dwelling units, and multifamily 

mortgage loans, which are secured by five or more residential dwelling units. We classify these loans as either held for 

investment (“HFI”) or held for sale (“HFS”). We report the amortized cost of HFI loans for which we have not elected the 

fair value option at the unpaid principal balance, net of unamortized premiums and discounts, hedge-related basis 

adjustments, other cost basis adjustments, and accrued interest receivable. For purposes of our condensed 

consolidated balance sheets, we present accrued interest receivable, net separately from the amortized cost of our 

loans held for investment. We report the carrying value of HFS loans at the lower of cost or fair value and record 

valuation changes in “Investment gains, net” in our condensed consolidated statements of operations and 

comprehensive income. See “Note 1, Summary of Significant Accounting Policies” and “Note 8, Derivative Instruments” 

for additional information on hedge-related basis adjustments and on the implementation of our fair value hedge 

accounting program in January 2021.

For purposes of the single-family mortgage loan disclosures below, we display loans by class of financing receivable 

type. Financing receivable classes used for disclosure consist of: “20- and 30-year or more, amortizing fixed-rate,” “15-

year or less, amortizing fixed-rate,” “Adjustable-rate,” and “Other.” The “Other” class primarily consists of reverse 

mortgage loans, interest-only loans, negative-amortizing loans and second liens. 

The following table displays the carrying value of our mortgage loans and allowance for loan losses.

As of

September 30, 2021 December 31, 2020

(Dollars in millions)

Single-family $ 3,435,023 $ 3,216,146 

Multifamily 398,168 373,722 

Total unpaid principal balance of mortgage loans 3,833,191 3,589,868 

Cost basis and fair value adjustments, net 76,812 74,576 

Allowance for loan losses for HFI loans (6,334) (10,552) 

Total mortgage loans(1) $ 3,903,669 $ 3,653,892 

(1) Excludes $9.8 billion of accrued interest receivable, net of allowance as of September 30, 2021 and December 31, 2020.

The following table displays information about our redesignation of loans from HFI to HFS and the sales of mortgage 

loans during the period. 

For the Three Months 

Ended September 30,

For the Nine Months 

Ended September 30,

2021 2020 2021 2020

(Dollars in millions)

Single-family loans redesignated from HFI to HFS:

Amortized cost $ 3,427 $ 5,305 $ 12,844 $ 6,942 

Lower of cost or fair value adjustment at time of redesignation(1) (47) (227) (247) (236) 

Allowance reversed at time of redesignation 165 737 1,350 921 

Single-family loans sold:

Unpaid principal balance $ 3,063 $ 4,593 $ 10,588 $ 5,088 

Realized gains, net 300 424 955 464 

(1) Consists of the write-off against the allowance at the time of redesignation.

The amortized cost of single-family mortgage loans for which formal foreclosure proceedings were in process was $5.0 

billion as of September 30, 2021 and December 31, 2020. As a result of our various loss mitigation and foreclosure 

prevention efforts, we expect that a portion of the loans in the process of formal foreclosure proceedings will not 

ultimately foreclose. In response to the COVID-19 pandemic, we have prohibited our servicers from completing 

foreclosures on our single-family loans through July 31, 2021, except in the case of vacant or abandoned properties. In 

addition, our servicers are required to comply with a Consumer Financial Protection Bureau (the “CFPB”) rule that 

Notes to Condensed Consolidated Financial Statements | Mortgage Loans

Fannie Mae (In conservatorship) Third Quarter 2021 Form 10-Q 93
prohibits certain new single-family foreclosures on mortgage loans secured by the borrower’s principal residence until 

after December 31, 2021.

Aging Analysis

The following tables display an aging analysis of the total amortized cost of our HFI mortgage loans by portfolio 

segment and class, excluding loans for which we have elected the fair value option.

Pursuant to the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), for purposes of reporting to the 

credit bureaus, servicers must report a borrower receiving a COVID-19-related payment accommodation during the 

covered period, such as a forbearance plan or loan modification, as current if the borrower was current prior to receiving 

the accommodation and the borrower makes all required payments in accordance with the accommodation. For 

purposes of our disclosures regarding delinquency status, we report loans receiving COVID-19-related payment 

forbearance as delinquent according to the contractual terms of the loan.

As of September 30, 2021

30 - 59 

Days 

Delinquent

60 - 89 

Days 

Delinquent

Seriously 

Delinquent(1)

Total 

Delinquent Current Total

Loans 90 

Days or 

More 

Delinquent 

and 

Accruing 

Interest

Nonaccrual 

Loans with 

No 

Allowance

(Dollars in millions)

Single-family:

20- and 30-year 

or more, 

amortizing 

fixed-rate $ 19,980 $ 5,013 $ 48,802 $ 73,795 $ 2,838,393 $ 2,912,188 $ 33,274 $ 5,608 

15-year or less, 

amortizing 

fixed-rate 1,960 337 2,477 4,774 519,238 524,012 2,083 185 

Adjustable-rate 165 32 537 734 26,235 26,969 434 72 

Other(2) 715 212 2,425 3,352 39,285 42,637 1,360 541 

Total single-family 22,820 5,594 54,241 82,655 3,423,151 3,505,806 37,151 6,406 

Multifamily(3) 368 N/A 1,656 2,024 399,217 401,241 122 126 

Total $ 23,188 $ 5,594 $ 55,897 $ 84,679 $ 3,822,368 $ 3,907,047 $ 37,273 $ 6,532 

As of December 31, 2020

30 - 59 

Days 

Delinquent

60 - 89 

Days 

Delinquent

Seriously 

Delinquent(1)

Total 

Delinquent Current Total

Loans 90 

Days or 

More 

Delinquent 

and 

Accruing 

Interest

Nonaccrual 

Loans with 

No 

Allowance

(Dollars in millions)

Single-family:

20- and 30-year 

or more, 

amortizing 

fixed-rate $ 24,928 $ 9,414 $ 88,276 $ 122,618 $ 2,619,585 $ 2,742,203 $ 68,526 $ 6,028 

15-year or less, 

amortizing 

fixed-rate 1,987 601 5,028 7,616 449,443 457,059 4,292 240 

Adjustable-rate 268 97 1,143 1,508 29,933 31,441 907 114 

Other(2) 1,150 458 5,037 6,645 47,937 54,582 2,861 771 

Total single-family 28,333 10,570 99,484 138,387 3,146,898 3,285,285 76,586 7,153 

Multifamily(3) 1,140 N/A 3,688 4,828 372,598 377,426 610 302 

Total $ 29,473 $ 10,570 $ 103,172 $ 143,215 $ 3,519,496 $ 3,662,711 $ 77,196 $ 7,455 

Notes to Condensed Consolidated Financial Statements | Mortgage Loans

Fannie Mae (In conservatorship) Third Quarter 2021 Form 10-Q 94
(1) Single-family seriously delinquent loans are loans that are 90 days or more past due or in the foreclosure process. Multifamily seriously 

delinquent loans are loans that are 60 days or more past due. 

(2) Reverse mortgage loans included in “Other” are not aged due to their nature and are included in the current column. 

(3) Multifamily loans 60-89 days delinquent are included in the seriously delinquent column.

Credit Quality Indicators

The following tables display the total amortized cost of our single-family HFI loans by class, year of origination and 

credit quality indicator, excluding loans for which we have elected the fair value option. The estimated mark-to-market 

loan-to-value (“LTV”) ratio is a primary factor we consider when estimating our allowance for loan losses for singlefamily loans. As LTV ratios increase, the borrower's equity in the home decreases, which may negatively affect the 

borrower's ability to refinance or to sell the property for an amount at or above the outstanding balance of the loan.

As of September 30, 2021, by Year of Origination(1)

2021 2020 2019 2018 2017 Prior Total

(Dollars in millions)

Estimated mark-to-market LTV ratio:(2)

20- and 30-year or more, amortizing fixed-rate:

Less than or equal to 80% $ 613,085 $ 912,984 $ 199,883 $ 99,052 $ 123,581 $ 724,677 $ 2,673,262 

Greater than 80% and less than or equal to 90% 107,349 63,299 3,821 1,250 731 2,226 178,676 

Greater than 90% and less than or equal to 100% 55,381 2,642 626 302 60 585 59,596 

Greater than 100% 3 6 7 12 27 599 654 

Total 20- and 30-year or more, amortizing fixed-rate 775,818 978,931 204,337 100,616 124,399 728,087 2,912,188 

15-year or less, amortizing fixed-rate:

Less than or equal to 80% 157,618 167,706 28,311 10,712 22,806 133,000 520,153 

Greater than 80% and less than or equal to 90% 2,642 564 23 5 3 9 3,246 

Greater than 90% and less than or equal to 100% 589 9 — 1 1 4 604 

Greater than 100% — — — 1 1 7 9 

Total 15-year or less, amortizing fixed-rate 160,849 168,279 28,334 10,719 22,811 133,020 524,012 

Adjustable-rate:

Less than or equal to 80% 4,791 2,424 1,239 1,424 2,880 13,636 26,394 

Greater than 80% and less than or equal to 90% 377 39 7 5 2 3 433 

Greater than 90% and less than or equal to 100% 141 1 — — — — 142 

Greater than 100% — — — — — — — 

Total adjustable-rate 5,309 2,464 1,246 1,429 2,882 13,639 26,969 

Other:

Less than or equal to 80% — — 35 287 697 29,199 30,218 

Greater than 80% and less than or equal to 90% — — — 5 9 387 401 

Greater than 90% and less than or equal to 100% — — 1 1 2 185 189 

Greater than 100% — — — 2 2 189 193 

Total other — — 36 295 710 29,960 31,001 

Total $ 941,976 $ 1,149,674 $ 233,953 $ 113,059 $ 150,802 $ 904,706 $ 3,494,170 

Total for all classes by LTV ratio:(2)

Less than or equal to 80% $ 775,494 $ 1,083,114 $ 229,468 $ 111,475 $ 149,964 $ 900,512 $ 3,250,027 

Greater than 80% and less than or equal to 90% 110,368 63,902 3,851 1,265 745 2,625 182,756 

Greater than 90% and less than or equal to 100% 56,111 2,652 627 304 63 774 60,531 

Greater than 100% 3 6 7 15 30 795 856 

Total $ 941,976 $ 1,149,674 $ 233,953 $ 113,059 $ 150,802 $ 904,706 $ 3,494,170 

Notes to Condensed Consolidated Financial Statements | Mortgage Loans

Fannie Mae (In conservatorship) Third Quarter 2021 Form 10-Q 95
As of December 31, 2020, by Year of Origination(1)

2020 2019 2018 2017 2016 Prior Total

(Dollars in millions)

Estimated mark-to-market LTV ratio:(2)

20- and 30-year or more, amortizing fixed-rate:

Less than or equal to 80% $ 794,156 $ 233,994 $ 135,849 $ 183,315 $ 221,172 $ 775,636 $ 2,344,122 

Greater than 80% and less than or equal to 90% 157,500 85,227 23,440 5,270 1,592 5,958 278,987 

Greater than 90% and less than or equal to 100% 109,743 4,186 820 250 124 1,994 117,117 

Greater than 100% 28 7 28 77 81 1,756 1,977 

Total 20- and 30-year or more, amortizing fixed-rate 1,061,427 323,414 160,137 188,912 222,969 785,344 2,742,203 

15-year or less, amortizing fixed-rate:

Less than or equal to 80% 181,418 41,374 15,768 31,497 46,088 132,596 448,741 

Greater than 80% and less than or equal to 90% 6,105 811 35 14 8 20 6,993 

Greater than 90% and less than or equal to 100% 1,274 9 3 4 3 10 1,303 

Greater than 100% — — 3 3 3 13 22 

Total 15-year or less, amortizing fixed-rate 188,797 42,194 15,809 31,518 46,102 132,639 457,059 

Adjustable-rate:

Less than or equal to 80% 2,935 1,839 2,412 4,765 2,678 16,248 30,877 

Greater than 80% and less than or equal to 90% 234 152 79 19 5 12 501 

Greater than 90% and less than or equal to 100% 56 3 1 — — 2 62 

Greater than 100% — — — — — 1 1 

Total adjustable-rate 3,225 1,994 2,492 4,784 2,683 16,263 31,441 

Other:

Less than or equal to 80% — 41 328 811 1,028 36,216 38,424 

Greater than 80% and less than or equal to 90% — 2 20 43 30 1,298 1,393 

Greater than 90% and less than or equal to 100% — 2 8 16 10 602 638 

Greater than 100% — — 4 8 9 631 652 

Total other — 45 360 878 1,077 38,747 41,107 

Total $ 1,253,449 $ 367,647 $ 178,798 $ 226,092 $ 272,831 $ 972,993 $ 3,271,810 

Total for all classes by LTV ratio:(2)

Less than or equal to 80% $ 978,509 $ 277,248 $ 154,357 $ 220,388 $ 270,966 $ 960,696 $ 2,862,164 

Greater than 80% and less than or equal to 90% 163,839 86,192 23,574 5,346 1,635 7,288 287,874 

Greater than 90% and less than or equal to 100% 111,073 4,200 832 270 137 2,608 119,120 

Greater than 100% 28 7 35 88 93 2,401 2,652 

Total $ 1,253,449 $ 367,647 $ 178,798 $ 226,092 $ 272,831 $ 972,993 $ 3,271,810 

(1) Excludes $11.6 billion and $13.5 billion as of September 30, 2021 and December 31, 2020, respectively, of mortgage loans guaranteed or 

insured, in whole or in part, by the U.S. government or one of its agencies, which represents primarily reverse mortgages for which we do 

not calculate an estimated mark-to-market LTV ratio.

(2) The aggregate estimated mark-to-market LTV ratio is based on the unpaid principal balance of the loan divided by the estimated current 

value of the property as of the end of each reported period, which we calculate using an internal valuation model that estimates periodic 

changes in home value. 

Notes to Condensed Consolidated Financial Statements | Mortgage Loans

Fannie Mae (In conservatorship) Third Quarter 2021 Form 10-Q 96
The following tables display the total amortized cost in our multifamily HFI loans by year of origination and credit-risk 

rating, excluding loans for which we have elected the fair value option. Property rental income and property valuations 

are key inputs to our internally assigned credit risk ratings.

As of September 30, 2021, by Year of Origination

2021 2020 2019 2018 2017 Prior Total

(Dollars in millions)

Internally assigned credit risk rating:

Non-classified(1) $ 38,547 $ 81,070 $ 66,157 $ 59,144 $ 47,164 $ 95,395 $ 387,477 

Classified(2) 56 264 1,679 1,871 3,353 6,541 13,764 

Total $ 38,603 $ 81,334 $ 67,836 $ 61,015 $ 50,517 $ 101,936 $ 401,241 

As of December 31, 2020, by Year of Origination

2020 2019 2018 2017 2016 Prior Total

(Dollars in millions)

Internally assigned credit risk rating:

Non-classified(1) $ 71,977 $ 68,296 $ 62,087 $ 50,907 $ 43,174 $ 70,933 $ 367,374 

Classified(2) 37 1,041 1,529 2,616 1,579 3,250 10,052 

Total $ 72,014 $ 69,337 $ 63,616 $ 53,523 $ 44,753 $ 74,183 $ 377,426 

(1) A loan categorized as “Non-classified” is current or adequately protected by the current financial strength and debt service capability of the 

borrower. 

(2) Represents loans classified as “Substandard” or “Doubtful.” Loans classified as “Substandard” have a well-defined weakness that 

jeopardizes the timely full repayment. “Doubtful” refers to a loan with a weakness that makes collection or liquidation in full highly 

questionable and improbable based on existing conditions and values. We had no loans classified as doubtful as of September 30, 2021

and loans with an amortized cost of less than $1 million classified as doubtful as of December 31, 2020.

Troubled Debt Restructurings

A modification to the contractual terms of a loan that results in granting a concession to a borrower experiencing 

financial difficulties is considered a troubled debt restructuring (“TDR”). In addition to formal loan modifications, we also 

engage in other loss mitigation activities with troubled borrowers, which include repayment plans and forbearance 

arrangements, both of which represent informal agreements with the borrower that do not result in the legal modification 

of the loan’s contractual terms. We account for these informal restructurings as a TDR if we defer more than three 

missed payments. We also classify loans to certain borrowers who have received bankruptcy relief as TDRs. However, 

our current TDR accounting described herein is temporarily impacted by our election to account for certain eligible loss 

mitigation activities under the COVID-19 relief granted pursuant to the CARES Act and the Consolidated Appropriations 

Act of 2021. See “Note 1, Summary of Significant Accounting Policies” in our 2020 Form 10-K for more information on 

the COVID-19 relief from TDR accounting and disclosure requirements.

The substantial majority of the loan modifications accounted for as a TDR result in term extensions, interest rate 

reductions or a combination of both. The average term extension of a single-family modified loan was 151 months and 

159 months for the three months ended September 30, 2021 and 2020, respectively. The average interest rate 

reduction was 0.56 and 0.42 percentage points, for the three months ended September 30, 2021 and 2020, 

respectively. During the nine months ended September 30, 2021 and 2020, the average term extension of a singlefamily modified loan was 146 months and 166 months, respectively, and the average interest rate reduction was 0.57

and 0.35 percentage points, respectively. 

Notes to Condensed Consolidated Financial Statements | Mortgage Loans

Fannie Mae (In conservatorship) Third Quarter 2021 Form 10-Q 97
The following tables display the number of loans and amortized cost of loans classified as a TDR during the period. 

For the Three Months Ended September 30,

2021 2020

Number of 

Loans

Amortized 

Cost

Number of 

Loans

Amortized 

Cost

(Dollars in millions)

Single-family:

20- and 30-year or more, amortizing fixed-rate 2,126 $ 345 5,993 $ 1,006 

15-year or less, amortizing fixed-rate 209 16 579 50 

Adjustable-rate 18 2 109 16 

Other 88 8 371 47 

Total single-family 2,441 371 7,052 1,119 

Multifamily — — — — 

Total TDRs 2,441 $ 371 7,052 $ 1,119 

For the Nine Months Ended September 30,

2021 2020

Number of 

Loans

Amortized 

Cost

Number of 

Loans

Amortized 

Cost

(Dollars in millions)

Single-family:

20- and 30-year or more, amortizing fixed-rate 8,022 $ 1,274 25,360 $ 4,412 

15-year or less, amortizing fixed-rate 886 70 2,448 216 

Adjustable-rate 96 14 395 62 

Other 416 43 1,464 185 

Total single-family 9,420 1,401 29,667 4,875 

Multifamily — — — — 

Total TDRs 9,420 $ 1,401 29,667 $ 4,875 

For loans that defaulted in the periods presented and that were classified as a TDR in the twelve months prior to the 

default, the following tables display the number of loans and the amortized cost of these loans at the time of payment 

default. For purposes of this disclosure, we define loans that had a payment default as: single-family and multifamily 

loans with completed TDRs that liquidated during the period, either through foreclosure, deed-in-lieu of foreclosure, or a 

short sale; single-family loans with completed modifications that are two or more months delinquent during the period; or 

multifamily loans with completed modifications that are one or more months delinquent during the period. 

For the Three Months Ended September 30,

2021 2020

Number of 

Loans

Amortized 

Cost

Number of 

Loans

Amortized 

Cost

(Dollars in millions)

Single-family:

20- and 30-year or more, amortizing fixed-rate 1,782 $ 294 2,956 $ 532 

15-year or less, amortizing fixed-rate 133 10 21 1 

Adjustable-rate 11 1 3 — 

Other 200 37 219 35 

Total single-family 2,126 342 3,199 568 

Multifamily — — — — 

Total TDRs that subsequently defaulted 2,126 $ 342 3,199 $ 568 

Notes to Condensed Consolidated Financial Statements | Mortgage Loans

Fannie Mae (In conservatorship) Third Quarter 2021 Form 10-Q 98
For the Nine Months Ended September 30,

2021 2020

Number of 

Loans

Amortized 

Cost

Number of 

Loans

Amortized 

Cost

(Dollars in millions)

Single-family:

20- and 30-year or more, amortizing fixed-rate 5,754 $ 969 11,529 $ 2,119 

15-year or less, amortizing fixed-rate 330 24 106 7 

Adjustable-rate 26 4 15 2 

Other 693 128 1,094 180 

Total single-family 6,803 1,125 12,744 2,308 

Multifamily — — 4 16 

Total TDRs that subsequently defaulted 6,803 $ 1,125 12,748 $ 2,324 

Nonaccrual Loans

For loans not subject to the COVID-19-related nonaccrual policy described below, we discontinue accruing interest 

when we believe collectability of principal and interest is not reasonably assured, which for a single-family loan we have 

determined, based on our historical experience, to be when the loan becomes two months or more past due according 

to its contractual terms. Interest previously accrued but not collected on such loans is reversed through interest income 

at the date the loan is placed on nonaccrual status. For single-family loans on nonaccrual status, we recognize income 

when cash payments are received. We return a non-modified single-family loan to accrual status at the point when the 

borrower brings the loan current. We return a modified single-family loan to accrual status at the point when the 

borrower has successfully made all required payments during the trial period (generally three to four months) and the 

modification is made permanent. We place a multifamily loan on nonaccrual status when the loan becomes two months 

or more past due according to its contractual terms unless the loan is well secured such that collectability of principal 

and accrued interest is reasonably assured. For multifamily loans on nonaccrual status, we apply any payment received 

on a cost recovery basis to reduce principal on the mortgage loan. We return a multifamily loan to accrual status when 

the borrower cures the delinquency of the loan. Single-family and multifamily loans are reported past due if a full 

payment of principal and interest is not received within one month of its due date.

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

months of delinquency provided that the loan was either current at March 1, 2020 or originated after March 1, 2020. For 

single-family loans, we continue to accrue interest income beyond six months of delinquency provided that the collection 

of principal and interest continues to be reasonably assured. Multifamily loans that are in a forbearance arrangement 

are placed on nonaccrual status when the borrower is six months past due unless the loan is both well secured and in 

the process of collection. Loans on nonaccrual status that have been placed in a repayment plan or that have been 

brought current through a modification or a payment deferral are returned to accrual status once the borrower has made 

six consecutive contractual payments under the terms of the repayment plan or the modified loan. For loans in a 

forbearance arrangement that are placed on nonaccrual status, cash payments for interest are applied as a reduction of 

accrued interest receivable until the receivable has been reduced to zero, and then recognized as interest income. If 

interest is capitalized pursuant to a loan modification, any capitalized interest that had not been previously recognized 

as interest income is recorded as a discount to the loan and amortized over the life of the loan. See “Note 1, Summary 

of Significant Accounting Policies” in our 2020 Form 10-K for more information on our nonaccrual policy, including a 

discussion of regulatory guidance on interest income issued in response to COVID-19, and additional information on our 

policies for determining if the collection of principal and interest is reasonably assured, as well as our policy for 

establishing a valuation allowance for expected credit losses on the accrued interest receivable balance for loans 

negatively impacted by COVID-19.

Notes to Condensed Consolidated Financial Statements | Mortgage Loans

Fannie Mae (In conservatorship) Third Quarter 2021 Form 10-Q 99
The tables below display the forgone interest and the accrued interest receivable written off through the reversal of 

interest income for HFI single-family and multifamily nonaccrual loans.

For the Three Months Ended September 30,

2021 2020

(Dollars in millions)

Single-family:

Interest income forgone(1) $ 133 $ 219 

Accrued interest receivable written off through the reversal of interest 

income 15 33 

Multifamily:

Interest income forgone(1) $ 13 $ 8 

Accrued interest receivable written off through the reversal of interest 

income — 5 

For the Nine Months Ended September 30,

2021 2020

(Dollars in millions)

Single-family:

Interest income forgone(1) $ 450 $ 573 

Accrued interest receivable written off through the reversal of interest 

income 144 165 

Multifamily:

Interest income forgone(1) $ 33 $ 9 

Accrued interest receivable written off through the reversal of interest 

income 1 7 

(1) For loans on nonaccrual status held as of period end, represents the amount of interest income we did not recognize but would have 

recognized if the loans had performed in accordance with their original contractual terms.

The tables below include the amortized cost of and interest income recognized on our HFI single-family and multifamily 

loans on nonaccrual status by class, excluding loans for which we have elected the fair value option. 

As of

September 30, 2021 June 30, 2021 December 31, 2020

Amortized Cost

(Dollars in millions)

Single-family:

20- and 30-year or more, amortizing fixed-rate $ 20,083 $ 24,728 $ 22,907 

15-year or less, amortizing fixed-rate 491 596 853 

Adjustable-rate 126 179 270 

Other 1,277 1,761 2,475 

Total single-family 21,977 27,264 26,505 

Multifamily 2,253 2,220 2,069 

Total nonaccrual loans $ 24,230 $ 29,484 $ 28,574 

Notes to Condensed Consolidated Financial Statements | Mortgage Loans

Fannie Mae (In conservatorship) Third Quarter 2021 Form 10-Q 100
For the Three Months Ended 

September 30,

For the Nine Months Ended 

September 30,

2021 2020 2021 2020

Total Interest Income Recognized(1)

(Dollars in millions)

Single-family:

20- and 30-year or more, amortizing fixed-rate $ 67 $ 68 $ 241 $ 309 

15-year or less, amortizing fixed-rate 1 2 4 9 

Adjustable-rate — 1 1 3 

Other 3 5 14 31 

Total single-family 71 76 260 352 

Multifamily 9 — 24 3 

Total nonaccrual loans $ 80 $ 76 $ 284 $ 355 

(1) Single-family interest income recognized includes amounts accrued while the loans were performing, including the amortization of any 

deferred cost basis adjustments, as well as payments received on nonaccrual loans held as of period end. Multifamily interest income 

recognized includes amounts accrued while the loans were performing and the amortization of any deferred cost basis adjustments for 

nonaccrual loans held as of period end.

4. Allowance for Loan Losses

We maintain an allowance for loan losses for HFI loans held by Fannie Mae and by consolidated Fannie Mae MBS 

trusts, excluding loans for which we have elected the fair value option. When calculating our allowance for loan losses, 

we consider the unpaid principal balance, net of unamortized premiums and discounts, and other cost basis 

adjustments of HFI loans at the balance sheet date. We record write-offs as a reduction to our allowance for loan losses 

at the point of foreclosure, completion of a short sale, upon the redesignation of nonperforming and reperforming loans 

from HFI to HFS or when a loan is determined to be uncollectible.

The following table displays changes in our allowance for single-family loans, multifamily loans and total allowance for 

loan losses, including the transition impact of adopting Accounting Standards Update (“ASU”) 2016-13, “Financial 

Instruments—Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments,” which was later 

amended by ASU 2019-04, ASU 2019-05 and ASU 2019-1 (collectively, the “CECL standard”), on January 1, 2020. See 

“Note 1, Summary of Significant Accounting Policies” in our 2020 Form 10-K for additional information on changes to 

our allowance for loan losses resulting from our adoption of the CECL standard. 

The benefit or provision for loan losses excludes provision for accrued interest receivable losses, guaranty loss reserves 

and credit losses on available-for-sale (“AFS”) debt securities. Cumulatively, these amounts are recognized as “Benefit 

(provision) for credit losses” in our condensed consolidated statements of operations and comprehensive income. 

Notes to Condensed Consolidated Financial Statements | Mortgage Loans

Fannie Mae (In conservatorship) Third Quarter 2021 Form 10-Q 101
For the Three Months Ended 

September 30,

For the Nine Months Ended 

September 30,

2021 2020 2021 2020

(Dollars in millions)

Single-family allowance for loan losses:

Beginning balance $ (6,064) $ (11,598) $ (9,344) $ (8,759) 

Transition impact of the adoption of the CECL 

standard — — — (1,229) 

Benefit (provision) for loan losses 839 931 4,003 (857) 

Write-offs 51 261 271 377 

Recoveries (133) (4) (212) (10) 

Other (8) 23 (33) 91 

Ending Balance $ (5,315) $ (10,387) $ (5,315) $ (10,387) 

Multifamily allowance for loan losses:

Beginning balance $ (1,050) $ (1,368) $ (1,208) $ (257) 

Transition impact of the adoption of the CECL 

standard — — — (493) 

Benefit (provision) for loan losses 45 (34) 175 (669) 

Write-offs 7 86 54 104 

Recoveries (21) — (40) (1) 

Ending Balance $ (1,019) $ (1,316) $ (1,019) $ (1,316) 

Total allowance for loan losses:

Beginning balance $ (7,114) $ (12,966) $ (10,552) $ (9,016) 

Transition impact of the adoption of the CECL 

standard — — — (1,722) 

Benefit (provision) for loan losses 884 897 4,178 (1,526) 

Write-offs 58 347 325 481 

Recoveries (154) (4) (252) (11) 

Other (8) 23 (33) 91 

Ending Balance $ (6,334) $ (11,703) $ (6,334) $ (11,703) 

Our benefit or provision for loan losses can vary substantially from period to period based on a number of factors, such 

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

rates, borrower payment behavior, events such as natural disasters or pandemics, the type, volume and effectiveness of 

our loss mitigation activities, including forbearances and loan modifications, the volume of foreclosures completed, and 

the redesignation of loans from HFI to HFS. Our benefit or provision can also be impacted by updates to the models, 

assumptions, and data used in determining our allowance for loan losses. As described below, our benefit or provision 

for loan losses and our loss reserves have been significantly affected by our estimates of the impact of the COVID-19 

pandemic and the pace and strength of the economy’s subsequent recovery, which require significant management 

judgment.

The primary factors that contributed to our single-family benefit for loan losses for the three months ended September 

30, 2021 were:

• Benefit from actual and forecasted home price growth. For the three months ended September 30, 2021, actual 

home price growth continued to be strong. We also increased our expectations for home price growth on a 

national basis for full-year 2021. Higher home prices decrease the likelihood that loans will default and reduce 

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

our loss reserves and provision for loan losses.

• Benefit from changes in assumptions regarding COVID-19 forbearance and loan delinquencies. For the three 

months ended September 30, 2021, the benefit was primarily driven by the removal of the remaining nonmodeled adjustment related to COVID-19 as discussed below.

Notes to Condensed Consolidated Financial Statements | Allowance for Loan Losses

Fannie Mae (In conservatorship) Third Quarter 2021 Form 10-Q 102
The primary factors that contributed to our single-family benefit for loan losses for the nine months ended September 

30, 2021 were:

• Benefit from actual and forecasted home price growth which have been robust throughout 2021.

• Benefit from the redesignation of certain nonperforming and reperforming single-family loans from HFI to HFS. 

We redesignated certain nonperforming and reperforming single-family loans from HFI to HFS, as we no longer 

intend to hold them for the foreseeable future or to maturity. Upon redesignation of these loans, we recorded 

the loans at the lower of cost or fair value with a write-off against the allowance for loan losses. Amounts 

recorded in the allowance related to these loans exceeded the amounts written off, resulting in a net benefit for 

loan losses.

• Benefit from changes in assumptions regarding COVID-19 forbearance and loan delinquencies. During the first 

and second quarters of 2021, management used its judgment to supplement the loss projections developed by 

our credit loss model to account for uncertainty arising from the COVID-19 pandemic that was not represented 

in historical data or otherwise captured by our credit model. As of September 30, 2021, management removed 

the remaining non-modeled adjustment as the effects of the economic stimulus, the vaccine rollout, and the 

effectiveness of COVID-19-related loss mitigation strategies have all become much less uncertain. Specifically, 

the decrease in uncertainty as of September 30, 2021 compared with the end of 2020 was primarily driven by 

the passage of the American Rescue Plan Act of 2021 and the broad implementation of the COVID-19 

vaccination program in the United States, which contributed to a significant increase in business activity and 

helped support continued economic growth. There has also been a steady decline in the number of borrowers 

in a COVID-19-related forbearance, lessening expectations of loan losses. Additionally, we believe the array of 

possible future economic environments included in our credit model, which captures scenarios that may be 

remote, combined with data consumed over the course of the COVID-19 pandemic have removed the need to 

continue to supplement modeled results.

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

benefit for loan losses recognized for the nine months ended September 30, 2021.

• Provision for higher actual and projected interest rates. Actual and projected interest rates were higher as of 

September 30, 2021 compared with December 31, 2020. As mortgage rates increase, we expect a decrease in 

future prepayments on single-family loans, including modified loans. Lower expected prepayments extend the 

expected lives of modified loans, which increases the expected impairment relating to term and interest-rate 

concessions provided on these loans, resulting in a provision for loan losses.

The decrease in single-family write-offs for the three months ended September 30, 2021 compared with the three 

months ended September 30, 2020 was primarily due to a reduction in the number of nonperforming and reperforming 

loans redesignated from HFI to HFS in the third quarter of 2021 as well as more favorable pricing on our HFS loans. 

The primary factors that contributed to our single-family provision for loan losses for the nine months ended September 

30, 2020 were:

• Provision for changes in assumptions regarding COVID-19 forbearance and loan delinquencies, which included 

adjustments to modeled results. Our single-family provision for loan losses for the nine months ended 

September 30, 2020 was driven by the economic dislocation caused by the COVID-19 pandemic, with the 

majority of the provision recognized in the first quarter of 2020. Estimating expected loan losses as a result of 

the COVID-19 pandemic continued to require significant management judgment regarding a number of matters, 

including our expectations surrounding borrower participation in a COVID-19-related forbearance, the type and 

extent of loss mitigation that may be needed when the loan exits forbearance, the high degree of uncertainty 

regarding the future course of the pandemic and its effect on the economy, and expectations regarding the 

impact of fiscal stimulus to support borrowers. As a result, the model used to estimate single-family loan losses 

did not capture the entirety of losses we expected to incur relating to COVID-19 at that time. The model 

consumed data from the initial months of the pandemic, including loan delinquencies, and updated credit profile 

data for loans in forbearance. As more of this data was consumed by our credit loss model, we reduced the 

non-modeled adjustment initially recorded in the first quarter.

In the third quarter of 2020, management continued to apply its judgment and supplement model results as of 

September 30, 2020, taking into account the continued high degree of uncertainty regarding the future impact 

of the pandemic and its effect on the economy, future economic and housing policy, and extended foreclosure 

moratoriums. These factors, combined with higher loan delinquencies, led to an increase in provision 

attributable to these COVID-19-related factors, which was partially offset by a decrease in our estimated singlefamily cumulative forbearance take-up, based on the economic data and forbearance activity observed through 

the third quarter of 2020. 

Notes to Condensed Consolidated Financial Statements | Allowance for Loan Losses

Fannie Mae (In conservatorship) Third Quarter 2021 Form 10-Q 103
The factors discussed above were offset by the factors below, which contributed to a single-family benefit for loan 

losses for the three months ended September 30, 2020 and reduced the amount of single-family provision for loan 

losses recognized for the nine months ended September 30, 2020:

• Benefit from lower actual and projected interest rates. For much of 2020, we continued to be in a historically 

low interest-rate environment. As mortgage interest rates decline, we expect an increase in future prepayments 

on single-family loans, including modified loans. Higher expected prepayments shorten the expected lives of 

modified loans, which decreases the expected impairment relating to term and interest-rate concessions 

provided on these loans and results in a benefit for loan losses. Most of this benefit from lower actual and 

projected mortgage interest rates was recognized in the first half of 2020.

• Benefit from the redesignation of certain reperforming single-family loans from HFI to HFS. In the third quarter

of 2020, we resumed sales of reperforming loans after our suspension of new loan sales in the second quarter 

of 2020. As a result, we redesignated certain reperforming single-family loans from HFI to HFS in the third 

quarter of 2020, as we no longer intended to hold them for the foreseeable future or to maturity. Upon 

redesignation of these loans, we recorded the loans at the lower of cost or fair value with a write-off against the 

allowance for loan losses. Amounts recorded in the allowance related to these loans exceeded the amounts 

written off, which contributed to a net benefit for loan losses for the three and nine months ended September 

30, 2020.

• Benefit from actual and expected home price growth. In the first quarter of 2020, we significantly reduced our 

expectations for home price growth to near-zero for 2020. However, the negative impact from the first quarter of 

2020 was more than offset by an increase in actual home price growth in the second and third quarters.

The primary factors that contributed to our multifamily benefit for loan losses for the three and nine months ended 

September 30, 2021 were:

• Benefit from actual and projected economic data. For the three and nine months ended September 30, 2021, 

property value forecasts increased due to continued demand for multifamily housing. In addition, improved job 

growth led to an increase in projected average property net operating income, which reduced the probability of 

loan defaults resulting in a benefit for loan losses for the quarter and year-to-date.

• Benefit from lower expected loan losses as a result of the COVID-19 pandemic. Similar to our single-family 

benefit for loan losses described above, for the first and second quarters of 2021 management used its 

judgment to supplement the loss projections developed by our credit loss model to account for uncertainty 

arising from the COVID-19 pandemic. As of September 30, 2021, management removed the remaining nonmodeled adjustment as the effects of the economic stimulus, the vaccine rollout, and the effectiveness of 

COVID-19-related loss mitigation strategies have all become much less uncertain. See our single-family 2021 

benefit for loan losses discussion above for more information on these factors.

Our multifamily provision for loan losses for the nine months ended September 30, 2020 was driven by higher expected 

losses as a result of the economic dislocation caused by the COVID-19 pandemic and heightened economic 

uncertainty, driven by elevated unemployment which we expected would result in a decrease of multifamily property 

income and property values. In addition, the multifamily provision for loan losses included increased expected loan 

losses on seniors housing loans as these properties were disproportionately impacted by the pandemic. The vast 

majority of these expenses were recognized in the first half of 2020. Consistent with the single-family discussion above, 

the model we used to estimate multifamily loan losses did not capture the entirety of losses we expected to incur 

relating to COVID-19 at that time. The model consumed data from the initial months of the pandemic, but we continued

to apply management judgment and supplement model results as of September 30, 2020, taking into account the 

continued high degree of uncertainty that remained relating to the impact of the pandemic.

In the third quarter of 2020, our provision for expected multifamily loan losses as a result of the COVID-19 pandemic 

was relatively flat. In September 2020, we decreased our estimate for loan losses due to a downward revision of our 

estimated multifamily cumulative forbearance take-up rate, as well as an improved forecasted unemployment rate. 

These benefits were offset by continued economic uncertainty, forbearance arrangements that were extended beyond 

the initial term, and overall increased delinquencies. These factors, inclusive of the other components of the multifamily 

provision for loan losses, resulted in a modest expense for the third quarter of 2020. 

The primary factor that contributed to multifamily write-offs for the three and nine months ended September 30, 2020

was a write down in the value of a seniors housing portfolio during the third quarter of 2020 following its default on its 

forbearance agreement.

Notes to Condensed Consolidated Financial Statements | Allowance for Loan Losses

Fannie Mae (In conservatorship) Third Quarter 2021 Form 10-Q 104
5. Investments in Securities

Trading Securities

Trading securities are recorded at fair value with subsequent changes in fair value recorded as “Fair value gains 

(losses), net” in our condensed consolidated statements of operations and comprehensive income. The following table 

displays our investments in trading securities.

As of

September 30, 2021 December 31, 2020

(Dollars in millions)

Mortgage-related securities:

Fannie Mae $ 1,715 $ 2,404 

Other agency(1) 3,139 3,451 

Private-label and other mortgage securities 143 158 

Total mortgage-related securities (includes $642 million and $793 million, 

respectively, related to consolidated trusts) 4,997 6,013 

Non-mortgage-related securities:

U.S. Treasury securities 92,192 130,456 

Other securities 20 73 

Total non-mortgage-related securities 92,212 130,529 

Total trading securities $ 97,209 $ 136,542 

(1) Consists of Freddie Mac and Ginnie Mae mortgage-related securities.

The following table displays information about our net trading gains (losses).

For the Three Months 

Ended September 30,

For the Nine Months 

Ended September 30,

2021 2020 2021 2020

(Dollars in millions)

Net trading gains (losses) $ (129) $ (91) $ (726) $ 691 

Net trading gains (losses) recognized in the period related to securities 

still held at period end (124) (71) (702) 448 

Available-for-Sale Securities

We record AFS securities at fair value with unrealized gains and losses, recorded net of tax, as a component of “Other 

comprehensive income (loss)” and we recognize realized gains and losses from the sale of AFS securities in 

“Investment gains, net” in our condensed consolidated statements of operations and comprehensive income. We define 

the amortized cost basis of our AFS securities as unpaid principal balance, net of unamortized premiums and discounts, 

and other cost basis adjustments. We record an allowance for credit losses for AFS securities that reflects the 

impairment for credit losses, which are limited to the amount that fair value is less than the amortized cost. Impairment 

due to non-credit losses are recorded as unrealized losses within other comprehensive income.

Notes to Condensed Consolidated Financial Statements | Investments in Securities

Fannie Mae (In conservatorship) Third Quarter 2021 Form 10-Q 105
The following tables display the amortized cost, allowance for credit losses, gross unrealized gains and losses in 

accumulated other comprehensive income (loss) (“AOCI”), and fair value by major security type for AFS securities.

As of September 30, 2021

Total 

Amortized 

Cost(1)

Allowance 

for Credit 

Losses(3)

Gross 

Unrealized 

Gains in 

AOCI

Gross 

Unrealized 

Losses in 

AOCI

Total Fair 

Value(1)

(Dollars in millions)

Fannie Mae $ 510 $ — $ 16 $ (8) $ 518 

Other agency(2) 14 — 1 — 15 

Alt-A and subprime private-label securities 3 — — — 3 

Mortgage revenue bonds 161 — 5 (2) 164 

Other mortgage-related securities 185 — 1 — 186 

Total $ 873 $ — $ 23 $ (10) $ 886 

As of December 31, 2020

Total 

Amortized 

Cost(1)

Allowance 

for Credit 

Losses

Gross 

Unrealized 

Gains in 

AOCI

Gross 

Unrealized 

Losses in 

AOCI

Total Fair 

Value(1)

(Dollars in millions)

Fannie Mae $ 1,094 $ — $ 86 $ (12) $ 1,168 

Other agency(2) 59 — 6 — 65 

Alt-A and subprime private-label securities 4 — 2 — 6 

Mortgage revenue bonds 211 (3) 8 — 216 

Other mortgage-related securities 238 — 4 — 242 

Total $ 1,606 $ (3) $ 106 $ (12) $ 1,697 

(1) We exclude from amortized cost and fair value accrued interest of $3 million and $6 million as of September 30, 2021 and December 31, 

2020, respectively, which we record in “Other assets” in our condensed consolidated balance sheets.

(2) Other agency securities consist of securities issued by Freddie Mac and Ginnie Mae.

(3) Total allowance for credit losses is less than $1 million as of September 30, 2021.

Fannie Mae and Other Agency Securities

Our Fannie Mae and other agency AFS securities consist of securities issued by us, Freddie Mac, or Ginnie Mae. The 

principal and interest on these securities are guaranteed by the issuing agency. We believe that the guaranty provided 

by the issuing agency, the support provided to the agencies by the U.S. government, the importance of the agencies to 

the liquidity and stability in the secondary mortgage market, and the long history of zero credit losses on agency 

mortgage-related securities are all indicators that there are currently no credit losses on these securities, even if the 

security is in an unrealized loss position. In addition, we generally hold these securities that are in an unrealized loss 

position to recovery. As a result, unless we intend to sell the security, we do not recognize an allowance for credit losses 

on agency mortgage-related securities. 

Non-Agency Mortgage-Related Securities

As of September 30, 2021, substantially all of our non-agency mortgage-related securities were in an unrealized gain 

position. As a result, we have not recognized an allowance for credit losses on these securities.

Notes to Condensed Consolidated Financial Statements | Investments in Securities

Fannie Mae (In conservatorship) Third Quarter 2021 Form 10-Q 106
The following table displays additional information regarding gross unrealized losses and fair value by major security 

type for AFS securities in an unrealized loss position, excluding allowance for credit losses. 

As of

September 30, 2021 December 31, 2020

Less Than 12 

Consecutive Months

12 Consecutive 

Months or Longer

Less Than 12 

Consecutive Months

12 Consecutive 

Months or Longer

Gross 

Unrealized 

Losses in 

AOCI

Fair 

Value

Gross 

Unrealized 

Losses in 

AOCI

Fair 

Value

Gross 

Unrealized 

Losses in 

AOCI

Fair 

Value

Gross 

Unrealized 

Losses in 

AOCI

Fair 

Value

(Dollars in millions)

Fannie Mae $ (2) $ 231 $ (6) $ 105 $ (1) $ 40 $ (11) $ 94 

Mortgage revenue bonds (2) 2 — — — — — — 

Total $ (4) $ 233 $ (6) $ 105 $ (1) $ 40 $ (11) $ 94 

The following table displays the gross realized gains and proceeds on sales of AFS securities.

For the Three Months 

Ended September 30,

For the Nine Months 

Ended September 30,

2021 2020 2021 2020

(Dollars in millions)

 Gross realized gains $ — $ 15 $ 59 $ 45 

 Total proceeds (excludes initial sale of securities from new portfolio 

securitizations) — 137 582 258 

The following table displays net unrealized gains and losses on AFS securities and other amounts accumulated within 

our accumulated other comprehensive income, net of tax.

As of 

September 30, 2021 December 31, 2020

(Dollars in millions)

 Net unrealized gains on AFS securities for which we have not recorded an 

allowance for credit losses $ 12 $ 74 

Net unrealized gains (losses) on AFS securities for which we have recorded an 

allowance for credit losses (2) — 

Other 33 42 

Accumulated other comprehensive income $ 43 $ 116 

Notes to Condensed Consolidated Financial Statements | Investments in Securities

Fannie Mae (In conservatorship) Third Quarter 2021 Form 10-Q 107
Maturity Information

The following table displays the carrying amount and fair value of our AFS securities by major security type and 

remaining contractual maturity, assuming no principal prepayments. The contractual maturity of mortgage-backed 

securities is not a reliable indicator of their expected life because borrowers generally have the right to prepay their 

obligations at any time.

As of September 30, 2021

Total 

Carrying 

Amount(1)

Total

Fair 

Value

One Year or Less

After One Year 

Through Five Years

After Five Years 

Through Ten Years After Ten Years

Net 

Carrying 

Amount(1)

Fair 

Value

Net 

Carrying 

Amount(1)

Fair 

Value

Net 

Carrying 

Amount(1)

Fair 

Value

Net 

Carrying 

Amount(1)

Fair 

Value

(Dollars in millions)

Fannie Mae $ 510 $ 518 $ — $ — $ 2 $ 2 $ 12 $ 13 $ 496 $ 503 

Other agency 14 15 — — — — 1 1 13 14 

Alt-A and subprime 

private-label securities 3 3 — — — — 2 2 1 1 

Mortgage revenue bonds 161 164 1 1 29 30 10 9 121 124 

Other mortgage-related 

securities 185 186 — — — — 3 4 182 182 

Total $ 873 $ 886 $ 1 $ 1 $ 31 $ 32 $ 28 $ 29 $ 813 $ 824 

(1) Net carrying amount consists of amortized cost, net of allowance for credit losses on AFS debt securities but does not include any 

unrealized fair value gains or losses.

6. Financial Guarantees

We recognize a guaranty obligation for our obligation to stand ready to perform on our guarantees to unconsolidated 

trusts and other guaranty arrangements. These off-balance sheet guarantees expose us to credit losses primarily 

relating to the unpaid principal balance of our unconsolidated Fannie Mae MBS and other financial guarantees. The 

maximum remaining contractual term of our guarantees is 31 years; however, the actual term of each guaranty may be 

significantly less than the contractual term based on the prepayment characteristics of the related mortgage loans. We 

measure our guaranty reserve for estimated credit losses for off-balance sheet exposures over the contractual period 

for which they are exposed to the credit risk, unless that obligation is unconditionally cancellable by the issuer. 

As the guarantor of structured securities backed in whole or in part by Freddie Mac-issued securities, we extend our 

guaranty to the underlying Freddie Mac securities in our resecuritization trusts. However, Freddie Mac continues to 

guarantee the payment of principal and interest on the underlying Freddie Mac securities that we have resecuritized. 

We do not charge an incremental guaranty fee to include Freddie Mac securities in the structured securities that we 

issue. When we began issuing UMBS, we entered into an indemnification agreement under which Freddie Mac agreed 

to indemnify us for losses caused by its failure to meet its payment or other specified obligations under the trust 

agreements pursuant to which the underlying resecuritized securities were issued. As a result, and due to the funding 

commitment available to Freddie Mac through its senior preferred stock purchase agreement with Treasury, we have 

concluded that the associated credit risk is negligible. Accordingly, we exclude from the following table Freddie Mac 

securities backing unconsolidated Fannie Mae-issued structured securities of approximately $190.2 billion and 

$137.3 billion as of September 30, 2021 and December 31, 2020, respectively.

Notes to Condensed Consolidated Financial Statements | Investments in Securities

Fannie Mae (In conservatorship) Third Quarter 2021 Form 10-Q 108
The following table displays our off-balance sheet maximum exposure, guaranty obligation recognized in our condensed 

consolidated balance sheets and the potential maximum recovery from third parties through available credit 

enhancements and recourse related to our financial guarantees.

As of

September 30, 2021 December 31, 2020

Maximum 

Exposure

Guaranty 

Obligation

Maximum 

Recovery(1)

Maximum 

Exposure

Guaranty 

Obligation

Maximum 

Recovery(1)

(Dollars in millions)

Unconsolidated Fannie Mae MBS $ 3,964 $ 17 $ 3,847 $ 4,424 $ 18 $ 4,226 

Other guaranty arrangements(2) 10,772 91 2,180 11,828 109 2,438 

Total $ 14,736 $ 108 $ 6,027 $ 16,252 $ 127 $ 6,664 

(1) Recoverability of such credit enhancements and recourse is subject to, among other factors, the ability of our mortgage insurers and the 

U.S. government, as a financial guarantor, to meet their obligations to us. For information on our mortgage insurers, “Note 10, 

Concentrations of Credit Risk.”

(2) Primarily consists of credit enhancements and long-term standby commitments.

7. Short-Term and Long-Term Debt

In January 2021, we began applying fair value hedge accounting to certain debt issuances. The objective of our fair 

value hedges is to reduce GAAP earnings volatility related to changes in benchmark interest rates. See “Note 1, 

Summary of Significant Accounting Policies” and “Note 8, Derivative Instruments” for additional information on our fair 

value hedge accounting policy and related disclosures.

Short-Term Debt

The following table displays our outstanding short-term debt (debt with an original contractual maturity of one year or 

less) and weighted-average interest rates of this debt.

As of

September 30, 2021 December 31, 2020

Outstanding

WeightedAverage 

Interest Rate(1) Outstanding

WeightedAverage 

Interest Rate(1)

(Dollars in millions)

Federal funds purchased and securities sold under 

agreements to repurchase(2) $ 363 (0.04) % $ — — %

Short-term debt of Fannie Mae 8,045 0.03 12,173 0.18 

(1) Includes the effects of discounts, premiums and other cost basis adjustments. Includes interest generated from negative interest rates on 

certain repurchase agreements.

(2) Represents agreements to repurchase securities for a specified price, with repayment generally occurring on the following day, reported as 

“Other liabilities” in our condensed consolidated balance sheets.

Notes to Condensed Consolidated Financial Statements | Financial Guarantees

Fannie Mae (In conservatorship) Third Quarter 2021 Form 10-Q 109
Long-Term Debt

Long-term debt represents debt with an original contractual maturity of greater than one year. The following table 

displays our outstanding long-term debt.

As of

September 30, 2021 December 31, 2020

Maturities Outstanding(1)

WeightedAverage 

Interest 

Rate(2) Maturities Outstanding(1)

WeightedAverage 

Interest 

Rate(2)

(Dollars in millions)

Senior fixed: 

Benchmark notes and bonds 2021 - 2030 $ 93,233 2.16 % 2021 - 2030 $ 106,691 2.03 %

Medium-term notes(3) 2021 - 2031 38,385 0.62 2021 - 2030 48,524 0.63 

Other(4) 2023 - 2038 7,048 3.80 2021 - 2038 6,701 3.90 

Total senior fixed 138,666 1.82 161,916 1.69 

Senior floating:

Medium-term notes(3) 2021 - 2022 74,078 0.33 2021 - 2022 100,089 0.35 

Connecticut Avenue Securities(5) 2023 - 2031 13,666 4.11 2023 - 2031 14,978 4.16 

Other(6) 2037 388 8.16 2037 416 7.75 

Total senior floating 88,132 0.94 115,483 0.86 

Total long-term debt of Fannie Mae(7) 226,798 1.48 277,399 1.34 

Debt of consolidated trusts 2021 - 2061 3,907,626 1.75 2021 - 2060 3,646,164 1.88 

Total long-term debt $ 4,134,424 1.74 % $ 3,923,563 1.85 %

(1) Outstanding debt balance consists of the unpaid principal balance, premiums and discounts, fair value adjustments, hedge-related basis 

adjustments, and other cost basis adjustments.

(2) Excludes the effects of fair value adjustments and hedge-related basis adjustments.

(3) Includes long-term debt with an original contractual maturity of greater than 1 year and up to 10 years, excluding zero-coupon debt.

(4) Includes other long-term debt with an original contractual maturity of greater than 10 years and foreign exchange bonds. 

(5) Consists of CAS debt issued prior to November 2018, a portion of which is reported at fair value. See “Note 2, Consolidations and 

Transfers of Financial Assets” in our 2020 Form 10-K for more information about our CAS structures issued beginning November 2018.

(6) Consists of structured debt instruments that are reported at fair value.

(7) Includes unamortized discounts and premiums, fair value adjustments, hedge-related cost basis adjustments, and other cost basis 

adjustments in a net discount position of $1.3 billion and $392 million as of September 30, 2021 and December 31, 2020, respectively.

Notes to Condensed Consolidated Financial Statements | Short-Term and Long-Term Debt

Fannie Mae (In conservatorship) Third Quarter 2021 Form 10-Q 110
8. Derivative Instruments

Derivative instruments are an integral part of our strategy in managing interest-rate risk. Derivative instruments may be 

privately-negotiated, bilateral contracts, or they may be listed and traded on an exchange. We refer to our derivative 

transactions made pursuant to bilateral contracts as our over-the-counter (“OTC”) derivative transactions and our 

derivative transactions accepted for clearing by a derivatives clearing organization as our cleared derivative 

transactions. We typically do not settle the notional amount of our risk management derivatives; rather, notional 

amounts provide the basis for calculating actual payments or settlement amounts. The derivative contracts we use for 

interest-rate risk management purposes consist primarily of interest-rate swaps and interest-rate options. See “Note 8, 

Derivative Instruments” in our 2020 Form 10-K for additional information on interest-rate risk management.

We account for certain forms of credit risk transfer transactions as derivatives. In our credit risk transfer transactions, a 

portion of the credit risk associated with losses on a reference pool of mortgage loans is transferred to a third party. We 

enter into derivative transactions that are associated with some of our credit risk transfer transactions, whereby we 

manage investment risk to guarantee that certain unconsolidated VIEs have sufficient cash flows to pay their contractual 

obligations.

We enter into forward purchase and sale commitments that lock in the future delivery of mortgage loans and mortgagerelated securities at a fixed price or yield. Certain commitments to purchase mortgage loans and purchase or sell 

mortgage-related securities meet the criteria of a derivative. We typically settle the notional amount of our mortgage 

commitments that are accounted for as derivatives.

We recognize all derivatives as either assets or liabilities in our condensed consolidated balance sheets at their fair 

value on a trade date basis. Fair value amounts, which are (1) netted to the extent a legal right of offset exists and is 

enforceable by law at the counterparty level and (2) inclusive of the right or obligation associated with the cash collateral 

posted or received, are recorded in “Other assets” or “Other liabilities” in our condensed consolidated balance sheets.

See “Note 12, Fair Value” for additional information on derivatives recorded at fair value. We present cash flows from 

derivatives as operating activities in our condensed consolidated statements of cash flows.

Fair Value Hedge Accounting

As discussed in “Note 1, Summary of Significant Accounting Policies,” we implemented a fair value hedge accounting 

program in January 2021. Pursuant to this program, we may designate certain interest-rate swaps as hedging 

instruments in hedges of the change in fair value attributable to the designated benchmark interest rate for certain 

closed pools of fixed-rate, single-family mortgage loans or our funding debt. For hedged items in qualifying fair value 

hedging relationships, changes in fair value attributable to the designated risk are recognized as a basis adjustment to 

the hedged item. We also report changes in the fair value of the derivative hedging instrument in the same condensed 

consolidated statements of operations and comprehensive income line item used to recognize the earnings effect of the 

hedged item’s basis adjustment. The objective of our fair value hedges is to reduce GAAP earnings volatility related to 

changes in benchmark interest rates.

Notes to Condensed Consolidated Financial Statements | Derivative Instruments

Fannie Mae (In conservatorship) Third Quarter 2021 Form 10-Q 111
Notional and Fair Value Position of our Derivatives

The following table displays the notional amount and estimated fair value of our asset and liability derivative 

instruments, including derivative instruments designated as hedges.

As of September 30, 2021 As of December 31, 2020

Asset Derivatives Liability Derivatives Asset Derivatives Liability Derivatives

Notional 

Amount

Estimated 

Fair Value

Notional 

Amount

Estimated 

Fair Value

Notional 

Amount

Estimated 

Fair Value

Notional 

Amount

Estimated 

Fair Value

(Dollars in millions)

Risk management derivatives 

designated as fair value hedges:

Swaps:(1)

Pay-fixed $ 2,575 $ — $ — $ — $ — $ — $ — $ — 

Receive-fixed 40,833 — 205 (2) — — — — 

Total risk management derivatives 

designated as hedges 43,408 — 205 (2) — — — — 

Risk management derivatives not 

designated as fair value hedges:

Swaps:(1)

Pay-fixed 71,189 — 300 — 88,361 — 11,461 (595) 

Receive-fixed 26,348 1 44,273 (765) 92,315 233 33,919 (123) 

Basis 250 154 — — 250 192 — — 

Foreign currency 233 28 101 (35) 237 57 239 (58) 

Swaptions:(1)

Pay-fixed 4,430 68 160 (1) 5,530 37 2,025 (118) 

Receive-fixed 390 7 700 (24) 3,355 346 700 (16) 

Futures(1) 30 — — — 64,398 — — — 

Total gross risk management 

derivatives 102,870 258 45,534 (825) 254,446 865 48,344 (910) 

Accrued interest receivable (payable) — 78 — (14) — 97 — (105) 

Total risk management derivatives 

not designated as hedges 102,870 336 45,534 (839) 254,446 962 48,344 (1,015) 

Netting adjustment(2) — (290) — 838 — (905) — 995 

Total risk management derivatives 

portfolio 146,278 46 45,739 (3) 254,446 57 48,344 (20) 

Mortgage commitment derivatives:

Mortgage commitments to 

purchase whole loans 6,649 6 11,794 (71) 35,292 145 51 — 

Forward contracts to purchase 

mortgage-related securities 11,360 22 73,742 (498) 144,215 844 607 — 

Forward contracts to sell 

mortgage-related securities 115,159 735 20,606 (30) 199 — 227,828 (1,426) 

Total mortgage commitment 

derivatives 133,168 763 106,142 (599) 179,706 989 228,486 (1,426) 

Credit enhancement derivatives 10,093 — 8,167 (20) 16,829 179 11,368 (49) 

Derivatives at fair value $ 289,539 $ 809 $ 160,048 $ (622) $ 450,981 $ 1,225 $ 288,198 $ (1,495) 

(1) Centrally cleared derivatives have no ascribable fair value because the positions are settled daily.

(2) The netting adjustment represents the effect of the legal right to offset under legally enforceable master netting arrangements to settle with 

the same counterparty on a net basis, including cash collateral posted and received. Cash collateral posted was $570 million and 

$658 million as of September 30, 2021 and December 31, 2020, respectively. Cash collateral received was $22 million and $568 million as 

of September 30, 2021 and December 31, 2020, respectively.

Notes to Condensed Consolidated Financial Statements | Derivative Instruments

Fannie Mae (In conservatorship) Third Quarter 2021 Form 10-Q 112
We record all gains and losses, including accrued interest, on derivatives while they are not in a qualifying designated 

hedging relationship in “Fair value gains (losses), net” in our condensed consolidated statements of operations and 

comprehensive income. The following table displays, by type of derivative instrument, the fair value gains and losses, 

net on our derivatives. 

For the Three Months 

Ended September 30,

For the Nine Months 

Ended September 30,

2021 2020 2021 2020

(Dollars in millions)

Risk management derivatives:

Swaps:

Pay-fixed $ 343 $ 634 $ 1,855 $ (3,489) 

Receive-fixed (209) (550) (1,307) 2,984 

Basis (12) (5) (39) 68 

Foreign currency (19) 23 (23) (11) 

Swaptions:

Pay-fixed 6 2 55 (159) 

Receive-fixed (14) (60) (223) 597 

Futures — — 1 (75) 

Net contractual interest income (expense) on interest-rate swaps (2) (46) (6) (216) 

Total risk management derivatives fair value gains (losses), net 93 (2) 313 (301) 

Mortgage commitment derivatives fair value gains (losses), net (25) (672) 504 (2,327) 

Credit enhancement derivatives fair value gains (losses), net (55) 380 (163) 400 

Total derivatives fair value gains (losses), net $ 13 $ (294) $ 654 $ (2,228) 

Notes to Condensed Consolidated Financial Statements | Derivative Instruments

Fannie Mae (In conservatorship) Third Quarter 2021 Form 10-Q 113
Effect of Fair Value Hedge Accounting 

The following table displays the effect of fair value hedge accounting on our condensed consolidated statements of 

operations and comprehensive income, including gains and losses recognized on fair value hedging relationships.

For the Three Months 

Ended September 30,

For the Nine Months 

Ended September 30,

2021 2021

Interest 

Income: 

Mortgage 

Loans

Interest 

Expense: 

Long-Term 

Debt

Interest 

Income: 

Mortgage 

Loans

Interest 

Expense: 

Long-Term 

Debt

(Dollars in millions)

Total amounts presented in our condensed consolidated 

statements of operations and comprehensive income $ 24,798 $ (18,009) $ 73,083 $ (51,646) 

Gains (losses) from fair value hedging relationships: 

Mortgage loans HFI and related interest-rate contracts:

Hedged items $ (1) $ — $ 69 $ — 

Discontinued hedge related basis adjustment amortization (3) — (3) — 

Derivatives designated as hedging instruments (1) — (71) — 

Interest accruals on hedging instruments (4) — (9) — 

Debt of Fannie Mae and related interest-rate contracts:

Hedged items — 195 — 1,000 

Discontinued hedge-related basis adjustment amortization — (20) — (54) 

Derivatives designated as hedging instruments — (191) — (982) 

Interest accruals on derivative hedging instruments — 65 — 178 

Total effect of fair value hedges $ (9) $ 49 $ (14) $ 142 

Notes to Condensed Consolidated Financial Statements | Derivative Instruments

Fannie Mae (In conservatorship) Third Quarter 2021 Form 10-Q 114
Hedged Items in Fair Value Hedging Relationships

The following table displays the carrying amounts of the hedged items that have been in qualifying fair value hedges

recorded in our condensed consolidated balance sheets, including the hedged item's cumulative basis adjustments and 

the closed portfolio balances under the last-of-layer method. The hedged item carrying amounts and total basis 

adjustments include both open and discontinued hedges. The amortized cost and designated UPB consists only of open 

hedges as of September 30, 2021.

As of September 30, 2021

Carrying 

Amount Assets 

(Liabilities)

Cumulative Amount of Fair Value 

Hedging Basis Adjustments 

Included in the Carrying Amount

Closed Portfolio of Mortgage Loans 

Under Last-of-Layer Method

Total Basis 

Adjustments(1)(2)

Remaining 

Adjustments - 

Discontinued 

Hedge

Total Amortized 

Cost Designated UPB

(Dollars in millions)

Mortgage loans HFI $ 150,829 $ 66 $ 66 $ 36,424 $ 2,548 

Debt of Fannie Mae (72,497) 946 946 N/A N/A

(1) No basis adjustment associated with open hedges, as all hedges are designated at the close of business, with a one-day term.

(2) Based on the unamortized balance of the hedge-related cost basis.

Derivative Counterparty Credit Exposure

Our derivative counterparty credit exposure relates principally to interest-rate derivative contracts. We are exposed to 

the risk that a counterparty in a derivative transaction will default on payments due to us, which may require us to seek 

a replacement derivative from a different counterparty. This replacement may be at a higher cost, or we may be unable 

to find a suitable replacement. We manage our derivative counterparty credit exposure relating to our risk management 

derivative transactions mainly through enforceable master netting arrangements, which allow us to net derivative assets 

and liabilities with the same counterparty or clearing organization and clearing member. For our OTC derivative 

transactions, we require counterparties to post collateral, which may include cash, U.S. Treasury securities, agency debt 

and agency mortgage-related securities.

See “Note 11, Netting Arrangements” for information on our rights to offset assets and liabilities as of September 30, 

2021 and December 31, 2020. 

Notes to Condensed Consolidated Financial Statements | Derivative Instruments

Fannie Mae (In conservatorship) Third Quarter 2021 Form 10-Q 115
9. Segment Reporting

We have two reportable business segments, which are based on the type of business activities each perform: SingleFamily and Multifamily. Results of our two business segments are intended to reflect each segment as if it were a standalone business. The sum of the results for our two business segments equals our condensed consolidated results of 

operations. For additional information related to our business segments, including basis of organization and other 

segment activities, see “Note 10, Segment Reporting” in our 2020 Form 10-K.

Segment Allocations and Results 

The majority of our revenues and expenses are directly associated with each respective business segment and are 

included in determining its operating results. Those revenues and expenses that are not directly attributable to a 

particular business segment are allocated based on the size of each segment’s guaranty book of business. The 

substantial majority of the gains and losses associated with our risk management derivatives, including the impact of 

hedge accounting, are allocated to our Single-Family business segment.

The following tables display our segment results.

For the Three Months Ended September 30,

2021 2020

SingleFamily Multifamily TotalSingleFamily Multifamily Total

(Dollars in millions)

Net interest income(1) $ 5,870 $ 1,102 $ 6,972 $ 5,870 $ 786 $ 6,656 

Fee and other income(2) 86 25 111 73 20 93 

Net revenues 5,956 1,127 7,083 5,943 806 6,749 

Investment gains, net(3) 222 21 243 583 70 653 

Fair value gains (losses), net(4) (31) 14 (17) (244) (83) (327) 

Administrative expenses (620) (125) (745) (634) (128) (762) 

Credit-related income (expense)(5)

Benefit (provision) for credit losses 887 50 937 542 (41) 501 

Foreclosed property income (expense) (80) 11 (69) (64) (7) (71) 

Total credit-related income (expense) 807 61 868 478 (48) 430 

TCCA fees(6) (781) — (781) (679) — (679) 

Credit enhancement expense(7) (174) (59) (233) (274) (51) (325) 

Change in expected credit enhancement 

recoveries(8) (28) (14) (42) (48) — (48) 

Other expenses, net (261) (7) (268) (307) (6) (313) 

Income before federal income taxes 5,090 1,018 6,108 4,818 560 5,378 

Provision for federal income taxes (1,065) (201) (1,266) (1,049) (100) (1,149) 

Net income $ 4,025 $ 817 $ 4,842 $ 3,769 $ 460 $ 4,229 

Notes to Condensed Consolidated Financial Statements | Segment Reporting

Fannie Mae (In conservatorship) Third Quarter 2021 Form 10-Q 116
For the Nine Months Ended September 30,

2021 2020

SingleFamily Multifamily TotalSingleFamily Multifamily Total

(Dollars in millions)

Net interest income(1) $ 19,087 $ 2,913 $ 22,000 $ 15,350 $ 2,430 $ 17,780 

Fee and other income(2) 228 73 301 238 65 303 

Net revenues 19,315 2,986 22,301 15,588 2,495 18,083 

Investment gains (losses), net(3) 944 (10) 934 527 117 644 

Fair value gains (losses), net(4) 323 (2) 321 (1,734) 113 (1,621) 

Administrative expenses (1,862) (377) (2,239) (1,888) (377) (2,265) 

Credit-related income (expense)(5)

Benefit (provision) for credit losses 4,102 188 4,290 (1,411) (683) (2,094) 

Foreclosed property expense (91) (14) (105) (145) (16) (161) 

Total credit-related income (expense) 4,011 174 4,185 (1,556) (699) (2,255) 

TCCA fees(6) (2,270) — (2,270) (1,976) — (1,976) 

Credit enhancement expense(7) (619) (172) (791) (897) (164) (1,061) 

Change in expected credit enhancement 

recoveries(8) (101) (16) (117) 218 195 413 

Other expenses, net (863) (4) (867) (722) (70) (792) 

Income before federal income taxes 18,878 2,579 21,457 7,560 1,610 9,170 

Provision for federal income taxes (3,952) (518) (4,470) (1,623) (312) (1,935) 

Net income $ 14,926 $ 2,061 $ 16,987 $ 5,937 $ 1,298 $ 7,235 

(1) Net interest income primarily consists of guaranty fees received as compensation for assuming and managing the credit risk on loans 

underlying Fannie Mae MBS held by third parties for the respective business segment, and the difference between the interest income 

earned on the respective business segment’s mortgage assets in our retained mortgage portfolio and the interest expense associated with 

the debt funding those assets. Revenues from single-family guaranty fees include revenues generated by the 10 basis point increase in 

guaranty fees pursuant to the TCCA, the incremental revenue from which is remitted to Treasury and not retained by us. Also includes 

yield maintenance fees we recognized on the prepayment of multifamily loans. Beginning in January 2021, net interest income was 

impacted by the application of fair value hedge accounting. See “Note 1, Summary of Significant Accounting Policies” and “Note 8, 

Derivative Instruments” for additional information on our fair value hedge accounting policy and related disclosures.

(2) Single-family fee and other income primarily consists of compensation for engaging in structured transactions and providing other lender 

services. Multifamily fee and other income consists of fees associated with Multifamily business activities.

(3) Single-family investment gains and losses primarily consist of gains and losses on the sale of mortgage assets. Multifamily investment 

gains and losses primarily consists of gains and losses on resecuritization activity. 

(4) Single-family fair value gains and losses primarily consist of fair value gains and losses on risk management and mortgage commitment 

derivatives, trading securities, fair value option debt, and other financial instruments associated with our single-family guaranty book of 

business. Multifamily fair value gains and losses primarily consist of fair value gains and losses on MBS commitment derivatives, trading 

securities and other financial instruments associated with our multifamily guaranty book of business. Beginning in January 2021, fair value 

gains (losses), net was impacted by the application of fair value hedge accounting. See “Note 1, Summary of Significant Accounting 

Policies” and “Note 8, Derivative Instruments” for additional information on our fair value hedge accounting policy and related disclosures.

(5) Credit-related income or expense is based on the guaranty book of business of the respective business segment and consists of the 

applicable segment’s benefit or provision for credit losses and foreclosed property income or expense on loans underlying the segment’s 

guaranty book of business. 

(6) Consists of the portion of our single-family guaranty fees that is remitted to Treasury pursuant to the TCCA.

(7) Single-family credit enhancement expense consists of costs associated with our freestanding credit enhancements, which primarily include 

costs associated with our Credit Insurance Risk TransferTM (“CIRTTM”), Connecticut Avenue Securities® (“CAS”) and enterprise-paid 

mortgage insurance (“EPMI”) programs. Multifamily credit enhancement expense primarily consists of costs associated with our Multifamily 

CIRTTM (“MCIRTTM”) and Multifamily Connecticut Avenue SecuritiesTM (“MCASTM”) programs as well as amortization expense for certain 

lender risk-sharing programs. Excludes CAS transactions accounted for as debt instruments and credit risk transfer programs accounted 

for as derivative instruments.

(8) Consists of change in benefits recognized from our freestanding credit enhancements, primarily from our CAS and CIRT programs as well 

as certain lender risk-sharing arrangements, including our multifamily Delegated Underwriting and Servicing (“DUS®”) program. 

Notes to Condensed Consolidated Financial Statements | Segment Reporting

Fannie Mae (In conservatorship) Third Quarter 2021 Form 10-Q 117
10. Concentrations of Credit Risk

Risk Characteristics of our Guaranty Book of Business

One of the measures by which we gauge our credit risk is the delinquency status of the mortgage loans in our guaranty 

book of business. 

For single-family and multifamily loans, we use this information, in conjunction with housing market and other economic 

data, to structure our pricing and our eligibility and underwriting criteria to reflect the current risk of loans with higher-risk 

characteristics, and in some cases we decide to significantly reduce our participation in riskier loan product categories. 

Management also uses this data together with other credit risk measures to identify key trends that guide the 

development of our loss mitigation strategies.

We report the delinquency status of our single-family and multifamily guaranty book of business below. We report loans 

receiving COVID-19-related payment forbearance as delinquent according to the contractual terms of the loans.

Single-Family Credit Risk Characteristics

For single-family loans, management monitors the serious delinquency rate, which is the percentage of single-family 

loans, based on the number of loans, that are 90 days or more past due or in the foreclosure process, and loans that 

have higher risk characteristics, such as high mark-to-market LTV ratios.

The following tables display the delinquency status and serious delinquency rates for specified loan categories of our 

single-family conventional guaranty book of business.

As of

September 30, 2021 December 31, 2020

30 Days 

Delinquent

60 Days 

Delinquent

Seriously 

Delinquent(1)

30 Days 

Delinquent

60 Days 

Delinquent

Seriously 

Delinquent(1)

Percentage of single-family conventional 

guaranty book of business based on UPB 0.66 % 0.16 % 1.61 % 0.88 % 0.33 % 3.10 %

Percentage of single-family conventional 

loans based on loan count 0.78 0.20 1.62 1.02 0.36 2.87 

As of

September 30, 2021 December 31, 2020

Percentage of 

Single-Family

Conventional

Guaranty Book of 

Business

Based on UPB

Serious 

Delinquency 

Rate(1)

Percentage of 

Single-Family

Conventional

Guaranty Book of 

Business

Based on UPB

Serious 

Delinquency 

Rate(1)

Estimated mark-to-market LTV ratio:

Greater than 100% * 16.04 % * 22.43 %

Geographical distribution:

California 20 % 1.38 19 % 2.62 

Florida 6 2.11 6 4.17 

Illinois 3 2.00 3 3.10 

New Jersey 3 2.58 3 4.57 

New York 5 2.92 5 4.79 

All other states 63 1.48 64 2.59 

Product distribution:

Alt-A 1 6.27 1 9.32 

Vintages:

2004 and prior 1 4.25 2 5.88 

2005-2008 2 7.21 2 9.98 

2009-2021 97 1.31 96 2.39 

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

Notes to Condensed Consolidated Financial Statements | Concentrations of Credit Risk

Fannie Mae (In conservatorship) Third Quarter 2021 Form 10-Q 118
(1) Based on loan count, consists of single-family conventional loans that were 90 days or more past due or in the foreclosure process as of 

September 30, 2021 or December 31, 2020. 

Multifamily Credit Risk Characteristics

For multifamily loans, management monitors the serious delinquency rate, which is the percentage of multifamily loans, 

based on unpaid principal balance, that are 60 days or more past due, and loans with other higher risk characteristics to 

determine the overall credit quality of our multifamily book of business. Higher risk characteristics include, but are not 

limited to, current debt service coverage ratio (“DSCR”) below 1.0 and original LTV ratios greater than 80%. We stratify 

multifamily loans into different internal risk categories based on the credit risk inherent in each individual loan.

The following tables display the delinquency status and serious delinquency rates for specified loan categories of our 

multifamily guaranty book of business.

As of

September 30, 2021(1) December 31, 2020(1)

30 Days 

Delinquent

Seriously 

Delinquent(2)

30 Days 

Delinquent

Seriously 

Delinquent(2)

Percentage of multifamily guaranty book of business 0.09 % 0.42 % 0.29 % 0.98 %

As of

September 30, 2021 December 31, 2020

Percentage of 

Multifamily 

Guaranty Book 

of Business(1)

Serious 

Delinquency 

Rate(2)(3)

Percentage of 

Multifamily 

Guaranty Book 

of Business(1)

Serious 

Delinquency 

Rate(2)(3)

Original LTV ratio:

Greater than 80% 1 % 0.13 % 1 % 1.04 %

Less than or equal to 80% 99 0.42 99 0.98 

Current DSCR below 1.0(4) 2 14.21 2 21.19 

(1) Calculated based on the aggregate unpaid principal balance of multifamily loans for each category divided by the aggregate unpaid 

principal balance of loans in our multifamily guaranty book of business.

(2) Consists of multifamily loans that were 60 days or more past due as of the dates indicated. 

(3) Calculated based on the unpaid principal balance of multifamily loans that were seriously delinquent divided by the aggregate unpaid 

principal balance of multifamily loans for each category included in our multifamily guaranty book of business.

(4) Our estimates of current DSCRs are based on the latest available income information for these properties. Although we use the most 

recently available results of our multifamily borrowers, there is a lag in reporting, which typically can range from 3 to 6 months but in some 

cases may be longer. For certain properties, we do not receive updated financial information. 

Other Concentrations

Mortgage Insurers. Mortgage insurance “risk in force” refers to our maximum potential loss recovery under the 

applicable mortgage insurance policies in force and is generally based on the loan-level insurance coverage percentage 

and, if applicable, any aggregate pool loss limit, as specified in the policy.

The following table displays our total mortgage insurance risk in force by primary and pool insurance, as well as the total 

risk-in-force mortgage insurance coverage as a percentage of the single-family conventional guaranty book of business.

As of

September 30, 2021 December 31, 2020

Risk in Force

Percentage of 

Single-Family 

Conventional 

Guaranty Book 

of Business Risk in Force

Percentage of 

Single-Family 

Conventional 

Guaranty Book 

of Business

(Dollars in millions)

Mortgage insurance risk in force:

Primary mortgage insurance $ 174,973 $ 170,890 

Pool mortgage insurance 269 291 

Total mortgage insurance risk in force $ 175,242 5% $ 171,181 5%

Notes to Condensed Consolidated Financial Statements | Concentrations of Credit Risk

Fannie Mae (In conservatorship) Third Quarter 2021 Form 10-Q 119
Mortgage insurance does not protect us from all losses on covered loans. For example, mortgage insurance does not 

cover property damage that is not covered by the hazard insurance we require, and such damage may result in a 

reduction to, or a denial of, mortgage insurance benefits. Specifically, a property damaged by a flood that was outside a 

Federal Emergency Management Agency (“FEMA”)-identified Special Flood Hazard Area, where we require coverage, 

or a property damaged by an earthquake are the most likely scenarios where property damage may result in a loss 

event not covered by hazard insurance.

The table below displays our mortgage insurer counterparties that provided approximately 10% or more of the risk-inforce mortgage insurance coverage on mortgage loans in our single-family conventional guaranty book of business. 

Percentage of Risk-in-Force 

Coverage by Mortgage Insurer

As of

September 30, 2021 December 31, 2020

Counterparty:(1)

Arch Capital Group Ltd. 19 % 21 %

Mortgage Guaranty Insurance Corp. 19 18 

Radian Guaranty, Inc. 17 19 

Genworth Mortgage Insurance Corp. 17 16 

Essent Guaranty, Inc. 16 16 

National Mortgage Insurance Corp. 11 9 

Others 1 1 

Total 100 % 100 %

(1) Insurance coverage amounts provided for each counterparty may include coverage provided by affiliates and subsidiaries of the 

counterparty.

Three of our mortgage insurer counterparties that are currently not approved to write new business—PMI Mortgage 

Insurance Co. (“PMI”), Triad Guaranty Insurance Corporation (“Triad”) and Republic Mortgage Insurance Company 

(“RMIC”)—are currently in run-off. A mortgage insurer that is in run-off continues to collect renewal premiums and 

process claims on its existing insurance business, but no longer writes new insurance, which increases the risk that the 

mortgage insurer will fail to pay claims fully. Entering run-off may limit sources of profits and liquidity for the mortgage 

insurer and could also cause the quality and speed of its claims processing to deteriorate. These three mortgage 

insurers provided a combined $1.8 billion, or 1%, of the risk-in-force mortgage insurance coverage of our single-family 

conventional guaranty book of business as of September 30, 2021. 

PMI and Triad have been paying only a portion of policyholder claims and deferring the remaining portion. PMI is 

currently paying 77.5% of claims under its mortgage insurance policies in cash and is deferring the remaining 22.5%, 

and Triad is currently paying 75% of claims in cash and deferring the remaining 25%. It is uncertain whether PMI or 

Triad will be permitted in the future to pay their deferred policyholder claims or increase or decrease the amount of cash 

they pay on claims. RMIC is no longer deferring payments on policyholder claims, but remains in run-off. 

We have counterparty credit risk relating to the potential insolvency of, or non-performance by, monoline mortgage 

insurers that insure single-family loans we purchase or guarantee. There is risk that these counterparties may fail to 

fulfill their obligations to pay our claims under insurance policies. On at least a quarterly basis, we assess our mortgage 

insurer counterparties’ respective abilities to fulfill their obligations to us. Our assessment includes financial reviews and 

analyses of the insurers’ portfolios and capital adequacy. If we determine that it is probable that we will not collect all of 

our claims from one or more of our mortgage insurer counterparties, it could increase our loss reserves, which could 

adversely affect our results of operations, liquidity, financial condition and net worth.

When we estimate the credit losses that are inherent in our mortgage loans and under the terms of our guaranty 

obligations, we also consider the recoveries that we will receive on primary mortgage insurance, as mortgage insurance 

recoveries would reduce the severity of the loss associated with defaulted loans. We evaluate the financial condition of 

our mortgage insurer counterparties and adjust the contractually due recovery amounts to ensure that expected credit 

losses as of the balance sheet date are included in our loss reserve estimate. As a result, if our assessment of one or 

more of our mortgage insurer counterparties’ ability to fulfill their respective obligations to us worsens, it could increase 

our loss reserves. As of September 30, 2021 and December 31, 2020, our estimated benefit from mortgage insurance, 

which is based on estimated credit losses as of period end, reduced our loss reserves by $528 million and $1.4 billion, 

respectively. 

Notes to Condensed Consolidated Financial Statements | Concentrations of Credit Risk

Fannie Mae (In conservatorship) Third Quarter 2021 Form 10-Q 120
As of September 30, 2021 and December 31, 2020, we had outstanding receivables of $535 million and $560 million, 

respectively, recorded in “Other assets” in our condensed consolidated balance sheets related to amounts claimed on 

insured, defaulted loans excluding government-insured loans. As of September 30, 2021 and December 31, 2020, we 

assessed these outstanding receivables for collectability, and established a valuation allowance of $479 million and 

$497 million, respectively, which reduced our claim receivable to the amount considered probable of collection. 

Mortgage Servicers and Sellers. Mortgage servicers collect mortgage and escrow payments from borrowers, pay taxes 

and insurance costs from escrow accounts, monitor and report delinquencies, and perform other required activities, 

including loss mitigation, on our behalf. Our mortgage servicers and sellers may also be obligated to repurchase loans 

or foreclosed properties, reimburse us for losses or provide other remedies under certain circumstances, such as if it is 

determined that the mortgage loan did not meet our underwriting or eligibility requirements, if certain loan 

representations and warranties are violated or if mortgage insurers rescind coverage. Our representation and warranty 

framework does not require repurchase for loans that have breaches of certain selling representations and warranties if 

they have met specified criteria for relief.

Our business with mortgage servicers is concentrated. The table below displays the percentage of our single-family 

guaranty book of business serviced by our top five depository single-family mortgage servicers and top five nondepository single-family mortgage servicers (i.e., servicers that are not insured depository institutions), and identifies 

one depository servicer that serviced more than 10% of our single-family guaranty book of business based on unpaid 

principal balance.

Percentage of Single-Family

Guaranty Book of Business

As of

September 30, 2021 December 31, 2020

Wells Fargo Bank, N.A. (together with its affiliates) 11 % 13 %

Remaining top five depository servicers 11 11 

Top five non-depository servicers 23 24 

Total 45 % 48 %

Compared with depository financial institutions, our non-depository servicers pose additional risks because they may 

not have the same financial strength or operational capacity, or be subject to the same level of regulatory oversight as 

depository financial institutions.

The table below displays the percentage of our multifamily guaranty book of business serviced by our top five 

multifamily mortgage servicers, and identifies two servicers that serviced 10% or more of our multifamily guaranty book 

of business based on unpaid principal balance. 

Percentage of Multifamily

Guaranty Book of Business

As of

September 30, 2021 December 31, 2020

Walker & Dunlop, Inc. 13 % 12 %

Wells Fargo Bank, N.A. (together with its affiliates) 11 12 

Remaining top five servicers 24 24 

Total 48 % 48 %

If a significant mortgage servicer or seller counterparty, or a number of mortgage servicers or sellers, fails to meet their 

obligations to us, it could adversely affect our results of operations and financial condition. We mitigate these risks in 

several ways, including: 

• establishing minimum standards and financial requirements for our servicers;

• monitoring financial and portfolio performance as compared with peers and internal benchmarks; and

• for our largest mortgage servicers, conducting periodic financial reviews to confirm compliance with servicing 

guidelines and servicing performance expectations.

We may take one or more of the following actions to mitigate our credit exposure to mortgage servicers that present a 

higher risk:

• require a guaranty of obligations by higher-rated entities;

• transfer exposure to third parties;

Notes to Condensed Consolidated Financial Statements | Concentrations of Credit Risk

Fannie Mae (In conservatorship) Third Quarter 2021 Form 10-Q 121
• require collateral;

• establish more stringent financial requirements;

• work with underperforming major servicers to improve operational processes; and

• suspend or terminate the selling and servicing relationship if deemed necessary.

Derivatives Counterparties. For information on credit risk associated with our derivative transactions and repurchase 

agreements see “Note 8, Derivative Instruments” and “Note 11, Netting Arrangements.”

11. Netting Arrangements

We use master netting arrangements, which allow us to offset certain financial instruments and collateral with the same 

counterparty, to minimize counterparty credit exposure. The tables below display information related to derivatives, 

securities purchased under agreements to resell or similar arrangements, and securities sold under agreements to 

repurchase or similar arrangements, which are subject to an enforceable master netting arrangement or similar 

agreement that are either offset or not offset in our condensed consolidated balance sheets.

As of September 30, 2021

Gross 

Amount 

Offset(1)

Net Amount 

Presented in our 

Condensed 

Consolidated 

Balance Sheets

Amounts Not Offset in our 

Condensed Consolidated 

Balance Sheets

Gross 

Amount

Financial 

Instruments(2) Collateral(3)

Net 

Amount

(Dollars in millions)

Assets:

OTC risk management derivatives $ 336 $ (331) $ 5 $ — $ — $ 5 

Cleared risk management derivatives — 41 41 — — 41 

Mortgage commitment derivatives 763 — 763 (323) (2) 438 

Total derivative assets 1,099 (290) 809 (4) (323) (2) 484 

Securities purchased under agreements 

to resell or similar arrangements(5) 87,010 — 87,010 — (87,010) — 

Total assets $ 88,109 $ (290) $ 87,819 $ (323) $ (87,012) $ 484 

Liabilities:

OTC risk management derivatives $ (841) $ 838 $ (3) $ — $ — $ (3) 

Cleared risk management derivatives — — — — — — 

Mortgage commitment derivatives (599) — (599) 323 11 (265) 

Total derivative liabilities (1,440) 838 (602) (4) 323 11 (268) 

Securities sold under agreements to 

repurchase or similar arrangements(6) (363) — (363) — 363 — 

Total liabilities $ (1,803) $ 838 $ (965) $ 323 $ 374 $ (268) 

Notes to Condensed Consolidated Financial Statements | Concentrations of Credit Risk

Fannie Mae (In conservatorship) Third Quarter 2021 Form 10-Q 122
As of December 31, 2020

Gross 

Amount 

Offset(1)

Net Amount 

Presented in our 

Condensed 

Consolidated 

Balance Sheets

Amounts Not Offset in our 

Condensed Consolidated 

Balance Sheets

Gross 

Amount

Financial 

Instruments(2) Collateral(3)

Net 

Amount

(Dollars in millions)

Assets:

OTC risk management derivatives $ 962 $ (952) $ 10 $ — $ — $ 10 

Cleared risk management derivatives — 47 47 — — 47 

Mortgage commitment derivatives 989 — 989 (406) (53) 530 

Total derivative assets 1,951 (905) 1,046 (4) (406) (53) 587 

Securities purchased under agreements 

to resell or similar arrangements(5) 46,644 — 46,644 — (46,644) — 

Total assets $ 48,595 $ (905) $ 47,690 $ (406) $ (46,697) $ 587 

Liabilities:

OTC risk management derivatives $ (1,015) $ 999 $ (16) $ — $ — $ (16) 

Cleared risk management derivatives — (4) (4) — 2 (2) 

Mortgage commitment derivatives (1,426) — (1,426) 406 1,017 (3) 

Total derivative liabilities (2,441) 995 (1,446) (4) 406 1,019 (21) 

Securities sold under agreements to 

repurchase or similar arrangements (6) — — — — — — 

Total liabilities $ (2,441) $ 995 $ (1,446) $ 406 $ 1,019 $ (21) 

(1) Represents the effect of the right to offset under legally enforceable master netting arrangements to settle with the same counterparty on a 

net basis, including cash collateral posted and received and accrued interest.

(2) Mortgage commitment derivative amounts reflect where we have recognized both an asset and a liability with the same counterparty under 

an enforceable master netting arrangement but we have not elected to offset the related amounts in our condensed consolidated balance 

sheets.

(3) Represents collateral received that has not been recognized and not offset in our condensed consolidated balance sheets, as well as 

collateral posted which has been recognized but not offset in our condensed consolidated balance sheets. Does not include collateral held 

or posted in excess of our exposure. The fair value of non-cash collateral we pledged which the counterparty was permitted to sell or 

repledge was $3.8 billion and $4.7 billion as of September 30, 2021 and December 31, 2020, respectively. The fair value of non-cash 

collateral received was $87.0 billion and $46.6 billion, of which $33.5 billion and $46.6 billion could be sold or repledged as of September 

30, 2021 and December 31, 2020, respectively. None of the underlying collateral was sold or repledged as of September 30, 2021 or 

December 31, 2020. 

(4) Excludes derivative assets of less than $1 million and $179 million as of September 30, 2021 and December 31, 2020, respectively, and 

derivative liabilities of $20 million and $49 million recognized in our condensed consolidated balance sheets as of September 30, 2021 and 

December 31, 2020, respectively, that are not subject to enforceable master netting arrangements.

(5) Includes $53.1 billion and $18.4 billion in securities purchased under agreements to resell classified as “Cash and cash equivalents” in our 

condensed consolidated balance sheets as of September 30, 2021 and December 31, 2020, respectively. Includes $6.3 billion in securities 

purchased under agreements to resell classified as “Restricted cash and cash equivalents” in our condensed consolidated balance sheets 

as of September 30, 2021. There were no securities purchased under agreements to resell classified as “Restricted cash and cash 

equivalents” as of December 31, 2020.

(6) Represents agreements to repurchase securities for a specified price, with repayment generally occurring on the following day, reported as 

“Other liabilities” in our condensed consolidated balance sheets. 

Derivative instruments are recorded at fair value and securities purchased under agreements to resell or similar 

arrangements are recorded at amortized cost in our condensed consolidated balance sheets. For how we determine our 

rights to offset the assets and liabilities presented above with the same counterparty, including collateral posted or 

received, see “Note 14, Netting Arrangements” in our 2020 Form 10-K.

Notes to Condensed Consolidated Financial Statements | Netting Arrangements

Fannie Mae (In conservatorship) Third Quarter 2021 Form 10-Q 123
12. Fair Value

We use fair value measurements for the initial recording of certain assets and liabilities and periodic remeasurement of 

certain assets and liabilities on a recurring or nonrecurring basis. 

Fair Value Measurement

Fair value measurement guidance defines fair value, establishes a framework for measuring fair value, and sets forth 

disclosures around fair value measurements. This guidance applies whenever other accounting guidance requires or 

permits assets or liabilities to be measured at fair value. The guidance establishes a three-level fair value hierarchy that 

prioritizes the inputs into the valuation techniques used to measure fair value. The hierarchy gives the highest priority, 

Level 1, to measurements based on unadjusted quoted prices in active markets for identical assets or liabilities. The 

next highest priority, Level 2, is given to measurements of assets and liabilities based on limited observable inputs or 

observable inputs for similar assets and liabilities. The lowest priority, Level 3, is given to measurements based on 

unobservable inputs. 

Notes to Condensed Consolidated Financial Statements | Fair Value

Fannie Mae (In conservatorship) Third Quarter 2021 Form 10-Q 124
Recurring Changes in Fair Value 

The following tables display our assets and liabilities measured in our condensed consolidated balance sheets at fair 

value on a recurring basis subsequent to initial recognition, including instruments for which we have elected the fair 

value option. 

Fair Value Measurements as of September 30, 2021

Quoted Prices in 

Active Markets 

for Identical 

Assets (Level 1)

Significant Other 

Observable 

Inputs

(Level 2)

Significant 

Unobservable 

Inputs

(Level 3)

Netting 

Adjustment(1)

Estimated Fair 

Value

(Dollars in millions)

Recurring fair value measurements:

Assets:

Cash equivalents(2) $ 875 $ — $ — $ — $ 875 

Trading securities:

Mortgage-related securities:

Fannie Mae — 1,586 129 — 1,715 

Other agency — 3,139 — — 3,139 

Private-label and other mortgage securities — 143 — — 143 

Non-mortgage-related securities:

U.S. Treasury securities 92,192 — — — 92,192 

Other securities — 20 — — 20 

Total trading securities 92,192 4,888 129 — 97,209 

Available-for-sale securities:

Mortgage-related securities:

Fannie Mae — 68 450 — 518 

Other agency — 15 — — 15 

Alt-A and subprime private-label securities — 3 — — 3 

Mortgage revenue bonds — — 164 — 164 

Other — 4 182 — 186 

Total available-for-sale securities — 90 796 — 886 

Mortgage loans — 4,516 785 — 5,301 

Other assets:

Risk management derivatives:

Swaps — 102 159 — 261 

Swaptions — 75 — — 75 

Netting adjustment — — — (290) (290) 

Mortgage commitment derivatives — 763 — — 763 

Credit enhancement derivatives — — — — — 

Total other assets — 940 159 (290) 809 

Total assets at fair value $ 93,067 $ 10,434 $ 1,869 $ (290) $ 105,080 

Liabilities:

Long-term debt:

Of Fannie Mae:

Senior floating $ — $ 2,245 $ 388 $ — $ 2,633 

Total of Fannie Mae — 2,245 388 — 2,633 

Of consolidated trusts — 22,919 101 — 23,020 

Total long-term debt — 25,164 489 — 25,653 

Other liabilities:

Risk management derivatives:

Swaps — 816 — — 816 

Swaptions — 25 — — 25 

Netting adjustment — — — (838) (838) 

Mortgage commitment derivatives — 599 — — 599 

Credit enhancement derivatives — — 20 — 20 

Total other liabilities — 1,440 20 (838) 622 

Total liabilities at fair value $ — $ 26,604 $ 509 $ (838) $ 26,275 

Notes to Condensed Consolidated Financial Statements | Fair Value

Fannie Mae (In conservatorship) Third Quarter 2021 Form 10-Q 125
Fair Value Measurements as of December 31, 2020

Quoted Prices in 

Active Markets 

for Identical 

Assets (Level 1)

Significant Other 

Observable 

Inputs

(Level 2)

Significant 

Unobservable 

Inputs 

(Level 3)

Netting 

Adjustment(1)

Estimated Fair 

Value

(Dollars in millions)

Recurring fair value measurements:

Assets:

Cash equivalents(2) $ 1,120 $ — $ — $ — $ 1,120 

Trading securities:

Mortgage-related securities:

Fannie Mae — 2,310 94 — 2,404 

Other agency — 3,450 1 — 3,451 

Private-label and other mortgage securities — 158 — — 158 

Non-mortgage-related securities:

U.S. Treasury securities 130,456 — — — 130,456 

Other securities — 73 — — 73 

Total trading securities 130,456 5,991 95 — 136,542 

Available-for-sale securities:

Mortgage-related securities:

Fannie Mae — 973 195 — 1,168 

Other agency — 65 — — 65 

Alt-A and subprime private-label securities — 4 2 — 6 

Mortgage revenue bonds — — 216 — 216 

Other — 7 235 — 242 

Total available-for-sale securities — 1,049 648 — 1,697 

Mortgage loans — 5,629 861 — 6,490 

Other assets:

Risk management derivatives:

Swaps — 376 203 — 579 

Swaptions — 383 — — 383 

Netting adjustment — — — (905) (905) 

Mortgage commitment derivatives — 989 — — 989 

Credit enhancement derivatives — — 179 — 179 

Total other assets — 1,748 382 (905) 1,225 

Total assets at fair value $ 131,576 $ 14,417 $ 1,986 $ (905) $ 147,074 

Liabilities:

Long-term debt:

Of Fannie Mae:

Senior floating $ — $ 3,312 $ 416 $ — $ 3,728 

Total of Fannie Mae — 3,312 416 — 3,728 

Of consolidated trusts — 24,503 83 — 24,586 

Total long-term debt — 27,815 499 — 28,314 

Other liabilities:

Risk management derivatives:

Swaps — 881 — — 881 

Swaptions — 134 — — 134 

Netting adjustment — — — (995) (995) 

Mortgage commitment derivatives — 1,426 — — 1,426 

Credit enhancement derivatives — — 49 — 49 

Total other liabilities — 2,441 49 (995) 1,495 

Total liabilities at fair value $ — $ 30,256 $ 548 $ (995) $ 29,809 

(1) Derivative contracts are reported on a gross basis by level. The netting adjustment represents the effect of the legal right to offset under 

legally enforceable master netting arrangements to settle with the same counterparty on a net basis, including cash collateral posted and 

received.

(2) Cash equivalents are comprised of U.S. Treasuries that have a maturity at the date of acquisition of three months or less.

Notes to Condensed Consolidated Financial Statements | Fair Value

Fannie Mae (In conservatorship) Third Quarter 2021 Form 10-Q 126
The following tables display a reconciliation of all assets and liabilities measured at fair value on a recurring basis using 

significant unobservable inputs (Level 3). The tables also display gains and losses due to changes in fair value, 

including realized and unrealized gains and losses, recognized in our condensed consolidated statements of operations 

and comprehensive income for Level 3 assets and liabilities. 

Fair Value Measurements Using Significant Unobservable Inputs (Level 3)

For the Three Months Ended September 30, 2021

Total Gains (Losses)

(Realized/Unrealized) 

Net 

Unrealized 

Gains 

(Losses) 

Included in 

Net Income 

Related to 

Assets and 

Liabilities Still 

Held as of 

September 30, 

2021(4)(5)

Net 

Unrealized 

Gains 

(Losses) 

Included in 

OCI Related to 

Assets and 

Liabilities Still 

Held as of 

September 30, 

2021(1)

Balance, 

June 30, 2021

Included 

in Net 

Income

Included 

in Total 

OCI 

Gain/

(Loss)(1) Purchases(2) Sales(2) Issues(3) Settlements(3)

Transfers 

out of 

Level 3

Transfers 

into 

Level 3

Balance, 

September 30, 

2021

(Dollars in millions)

Trading securities:

Mortgage-related:

Fannie Mae $ 141 $ (13) $ — $ 15 $ — $ — $ — $ (51) $ 37 $ 129 $ — $ — 

Total trading 

securities $ 141 $ (13) 

(5)(6)

$ — $ 15 $ — $ — $ — $ (51) $ 37 $ 129 $ — $ — 

Available-for-sale 

securities:

Mortgage-related:

Fannie Mae $ 84 $ — $ 2 $ — $ — $ — $ (12) $ — $ 376 $ 450 $ — $ — 

Alt-A and 

subprime 

private-label 

securities 2 — (2) — — — — — — — — — 

Mortgage 

revenue 

bonds 172 2 (2) — — — (8) — — 164 — (2) 

Other 194 1 (4) — — — (9) — — 182 — (2) 

Total available-forsale securities $ 452 $ 3 

(6)(7)

$ (6) $ — $ — $ — $ (29) $ — $ 376 $ 796 $ — $ (4) 

Mortgage loans $ 832 $ 1 (5)(6) $ — $ 4 $ (4) $ — $ (47) $ (20) $ 19 $ 785 $ 3 $ — 

Net derivatives 194 (62) (5) — — — — 7 — — 139 (55) — 

Long-term debt:

Of Fannie Mae:

Senior floating $ (397) $ 9 (5) $ — $ — $ — $ — $ — $ — $ — $ (388) $ 9 $ — 

Of consolidated 

trusts (55) (3) 

(5)(6)

 — — — — 2 — (45) (101) (2) — 

Total long-term 

debt $ (452) $ 6 $ — $ — $ — $ — $ 2 $ — $ (45) $ (489) $ 7 $ — 

Notes to Condensed Consolidated Financial Statements | Fair Value

Fannie Mae (In conservatorship) Third Quarter 2021 Form 10-Q 127
Fair Value Measurements Using Significant Unobservable Inputs (Level 3)

For the Nine Months Ended September 30, 2021

Total Gains (Losses)

(Realized/Unrealized) 

Net 

Unrealized 

Gains 

(Losses) 

Included in 

Net Income 

Related to 

Assets and 

Liabilities Still 

Held as of 

September 30, 

2021(4)(5)

Net 

Unrealized 

Gains 

(Losses) 

Included in 

OCI Related to 

Assets and 

Liabilities Still 

Held as of 

September 30, 

2021(1)

Balance, 

December 31, 

2020

Included 

in Net 

Income

Included 

in Total 

OCI 

Gain/

(Loss)(1) Purchases(2) Sales(2) Issues(3) Settlements(3)

Transfers 

out of 

Level 3

Transfers 

into 

Level 3

Balance, 

September 30, 

2021

(Dollars in millions)

Trading securities:

Mortgage-related:

Fannie Mae $ 94 $ (18) $ — $ 18 $ — $ — $ — $ (90) $ 125 $ 129 $ 1 $ — 

Other agency 1 — — — — — — (1) — — — — 

Total trading 

securities $ 95 $ (18) 

(5)(6)

$ — $ 18 $ — $ — $ — $ (91) $ 125 $ 129 $ 1 $ — 

Available-for-sale 

securities:

Mortgage-related:

Fannie Mae $ 195 $ 1 $ 4 $ — $ — $ — $ (19) $ (107) $ 376 $ 450 $ — $ 1 

Alt-A and 

subprime 

private-label 

securities 2 — (2) — — — — — — — — — 

Mortgage 

revenue 

bonds 216 2 (4) — — — (50) — — 164 — (2) 

Other 235 8 (2) — — — (59) — — 182 — — 

Total available-forsale securities $ 648 $ 11 

(6)(7)

$ (4) $ — $ — $ — $ (128) $ (107) $ 376 $ 796 $ — $ (1) 

Mortgage loans $ 861 $ 30 (5)(6) $ — $ 89 $ (48) $ — $ (147) $ (72) $ 72 $ 785 $ 28 $ — 

Net derivatives 333 (187) (5) — — — — (7) — — 139 (194) — 

Long-term debt:

Of Fannie Mae:

Senior floating $ (416) $ 28 (5) $ — $ — $ — $ — $ — $ — $ — $ (388) $ 28 $ — 

Of consolidated 

trusts (83) (2) (5)(6) — — — — 10 20 (46) (101) (3) — 

Total long-term 

debt $ (499) $ 26 $ — $ — $ — $ — $ 10 $ 20 $ (46) $ (489) $ 25 $ — 

Notes to Condensed Consolidated Financial Statements | Fair Value

Fannie Mae (In conservatorship) Third Quarter 2021 Form 10-Q 128
Fair Value Measurements Using Significant Unobservable Inputs (Level 3)

For the Three Months Ended September 30, 2020

Total Gains (Losses)

(Realized/Unrealized) 

Net 

Unrealized 

Gains 

(Losses) 

Included in 

Net Income 

Related to 

Assets and 

Liabilities Still 

Held as of 

September 30, 

2020(4)(5)

Net 

Unrealized 

Gains 

(Losses) 

Included in 

OCI Related to 

Assets and 

Liabilities Still 

Held as of 

September 30, 

2020(1)

Balance, 

June 30, 2020

Included 

in Net 

Income

Included 

in Total 

OCI 

Gain/

(Loss)(1) Purchases(2) Sales(2) Issues(3) Settlements(3)

Transfers 

out of 

Level 3

Transfers 

into 

Level 3

Balance, 

September 30, 

2020

(Dollars in millions)

Trading securities:

Mortgage-related:

Fannie Mae $ 38 $ — $ — $ — $ (1) $ — $ — $ (3) $ 26 $ 60 $ — $ — 

Other agency — — — — — — — — 1 1 — — 

Private-label 

and other 

mortgage 

securities 98 (4) — — (94) — — — — — — — 

Total trading 

securities $ 136 $ (4) 

(5)(6)

$ — $ — $ (95) $ — $ — $ (3) $ 27 $ 61 $ — $ — 

Available-for-sale 

securities:

Mortgage-related:

Fannie Mae $ 446 $ 1 $ 2 $ — $ — $ — $ (9) $ (218) $ — $ 222 $ — $ — 

Alt-A and 

subprime 

private-label 

securities 2 — — — — — — — — 2 — — 

Mortgage 

revenue 

bonds 278 — — — — — (23) — — 255 — — 

Other 254 5 5 — — — (16) — — 248 — 4 

Total available-forsale securities $ 980 $ 6 

(6)(7)

$ 7 $ — $ — $ — $ (48) $ (218) $ — $ 727 $ — $ 4 

Mortgage loans $ 797 $ 41 (5)(6) $ — $ — $ (11) $ — $ (39) $ (31) $ 121 $ 878 $ 36 $ — 

Net derivatives 269 380 (5) — — — — (7) — — 642 372 — 

Long-term debt:

Of Fannie Mae:

Senior floating $ (433) $ (3) (5) $ — $ — $ — $ — $ 1 $ — $ — $ (435) $ (3) $ — 

Of consolidated 

trusts (89) (1) 

(5)(6)

 — — — — 5 1 (1) (85) (1) — 

Total long-term 

debt $ (522) $ (4) $ — $ — $ — $ — $ 6 $ 1 $ (1) $ (520) $ (4) $ — 

Notes to Condensed Consolidated Financial Statements | Fair Value

Fannie Mae (In conservatorship) Third Quarter 2021 Form 10-Q 129
Fair Value Measurements Using Significant Unobservable Inputs (Level 3)

For the Nine Months Ended September 30, 2020

Total Gains (Losses)

(Realized/Unrealized) 

Net 

Unrealized 

Gains 

(Losses) 

Included in 

Net Income 

Related to 

Assets and 

Liabilities Still 

Held as of 

September 30, 

2020(4)(5)

Net 

Unrealized 

Gains 

(Losses) 

Included in 

OCI Related to 

Assets and 

Liabilities Still 

Held as of 

September 30, 

2020(1)

Balance, 

December 31, 

2019

Included 

in Net 

Income

Included 

in Total 

OCI 

Gain/

(Loss)(1) Purchases(2) Sales(2) Issues(3) Settlements(3)

Transfers 

out of 

Level 3

Transfers 

into 

Level 3

Balance, 

September 30, 

2020

(Dollars in millions)

Trading securities:

Mortgage-related:

Fannie Mae $ 45 $ (9) $ — $ — $ (1) $ — $ — $ (48) $ 73 $ 60 $ (8) $ — 

Other agency 1 — — — — — — (1) 1 1 — — 

Private-label 

and other 

mortgage 

securities — 3 — — (94) — (3) — 94 — — — 

Total trading 

securities $ 46 $ (6) 

(5)(6)

$ — $ — $ (95) $ — $ (3) $ (49) $ 168 $ 61 $ (8) $ — 

Available-for-sale 

securities:

Mortgage-related:

Fannie Mae $ 171 $ 1 $ 2 $ — $ — $ — $ (12) $ (218) $ 278 $ 222 $ — $ — 

Alt-A and 

subprime 

private-label 

securities — — — — — — — — 2 2 — — 

Mortgage 

revenue 

bonds 315 (3) 3 74 (74) — (60) — — 255 — 5 

Other 306 (9) 4 268 (268) — (53) — — 248 — 3 

Total available-forsale securities $ 792 $ (11) 

(6)(7)

$ 9 $ 342 $ (342) $ — $ (125) $ (218) $ 280 $ 727 $ — $ 8 

Mortgage loans $ 688 $ 32 (5)(6) $ — $ — $ (11) $ — $ (93) $ (75) $ 337 $ 878 $ 5 $ — 

Net derivatives 162 470 (5) — — — — (8) 18 — 642 468 — 

Long-term debt:

Of Fannie Mae:

Senior floating $ (398) $ (61) (5) $ — $ — $ — $ — $ 24 $ — $ — $ (435) $ (61) $ — 

Of consolidated 

trusts (75) — 

(5)(6)

 — — — — 12 2 (24) (85) 1 — 

Total long-term 

debt $ (473) $ (61) $ — $ — $ — $ — $ 36 $ 2 $ (24) $ (520) $ (60) $ — 

(1) Gains (losses) included in other comprehensive income (loss) are included in “Changes in unrealized gains (losses) on available-for-sale 

securities, net of reclassification adjustments and taxes” in our condensed consolidated statements of operations and comprehensive 

income.

(2) Purchases and sales include activity related to the consolidation and deconsolidation of assets of securitization trusts.

(3) Issues and settlements include activity related to the consolidation and deconsolidation of liabilities of securitization trusts.

(4) Amount represents temporary changes in fair value. Amortization, accretion and the impairment of credit losses are not considered 

unrealized and are not included in this amount.

(5) Gains (losses) are included in “Fair value gains (losses), net” in our condensed consolidated statements of operations and comprehensive 

income.

(6) Gains (losses) are included in “Net interest income” in our condensed consolidated statements of operations and comprehensive income.

(7) Gains (losses) are included in “Investment gains, net” in our condensed consolidated statements of operations and comprehensive 

income.

Notes to Condensed Consolidated Financial Statements | Fair Value

Fannie Mae (In conservatorship) Third Quarter 2021 Form 10-Q 130
The following tables display valuation techniques and the range and the weighted average of significant unobservable 

inputs for our Level 3 assets and liabilities measured at fair value on a recurring basis, excluding instruments for which 

we have elected the fair value option. Changes in these unobservable inputs can result in significantly higher or lower 

fair value measurements of these assets and liabilities as of the reporting date.

Fair Value Measurements as of September 30, 2021

Fair Value

Significant Valuation 

Techniques

Significant 

Unobservable

Inputs(1) Range(1)

Weighted - 

Average(1)(2)

(Dollars in millions)

Recurring fair value measurements:

Trading securities:

Mortgage-related securities:

Agency(3) $ 129 Various

Available-for-sale securities:

Mortgage-related securities:

Agency(3) 410 Consensus

 40 Various

Total agency 450 

Mortgage revenue bonds 98 Single Vendor Spreads (bps) 4.1 - 37.3 18.1

 66 Various

Total mortgage revenue bonds 164 

Other 181 Discounted Cash Flow Spreads (bps) 364.0 - 372.0 368.1

 1 Various

Total other 182 

Total available-for-sale securities $ 796 

Net derivatives $ 159 Dealer Mark

 (20) Discounted Cash Flow

Total net derivatives $ 139 

Notes to Condensed Consolidated Financial Statements | Fair Value

Fannie Mae (In conservatorship) Third Quarter 2021 Form 10-Q 131
Fair Value Measurements as of December 31, 2020

Fair Value

Significant Valuation 

Techniques

Significant 

Unobservable

Inputs(1) Range(1)

Weighted - 

Average(1)(2)

(Dollars in millions)

Recurring fair value measurements:

Trading securities:

Mortgage-related securities:

Agency(3) $ 95 Various

Available-for-sale securities:

Mortgage-related securities:

Agency(3) 97 Consensus

 98 Various

Total agency 195 

Alt-A and subprime private-label securities 2 Various

Mortgage revenue bonds 144 Single Vendor Spreads (bps) 32.0 - 315.3 93.4

 72 Various

Total mortgage revenue bonds 216 

Other 206 Discounted Cash Flow Spreads (bps) 425.0 - 443.0 434.2

 29 Various

Total other 235 

Total available-for-sale securities $ 648 

Net derivatives $ 203 Dealer Mark

 130 Discounted Cash Flow

Total net derivatives $ 333 

(1) Valuation techniques for which no unobservable inputs are disclosed generally reflect the use of third-party pricing services or dealers, and 

the range of unobservable inputs applied by these sources is not readily available or cannot be reasonably estimated. Where we have 

disclosed unobservable inputs for consensus and single vendor techniques, those inputs are based on our validations performed at the 

security level using discounted cash flows.

(2) Unobservable inputs were weighted by the relative fair value of the instruments. 

(3) Includes Fannie Mae and Freddie Mac securities.

Notes to Condensed Consolidated Financial Statements | Fair Value

Fannie Mae (In conservatorship) Third Quarter 2021 Form 10-Q 132
In our condensed consolidated balance sheets, certain assets and liabilities are measured at fair value on a 

nonrecurring basis; that is, the instruments are not measured at fair value on an ongoing basis but are subject to fair 

value adjustments in certain circumstances (for example, when we evaluate loans for impairment). We had no Level 1 

assets or liabilities held as of September 30, 2021 or December 31, 2020 that were measured at fair value on a 

nonrecurring basis. We held $97 million and $25 million in Level 2 assets as of September 30, 2021 and December 31, 

2020, respectively, comprised of mortgage loans held for sale that were impaired. We had no Level 2 liabilities that were 

measured at fair value on a nonrecurring basis as of September 30, 2021 or December 31, 2020.

The following table displays valuation techniques for our Level 3 assets measured at fair value on a nonrecurring basis. 

Fair Value Measurements 

as of

Valuation Techniques

September 30, 

2021

December 31, 

2020

(Dollars in millions)

Nonrecurring fair value measurements:

Mortgage loans held for sale, at lower of cost or fair value Consensus $ 511 $ 754 

Single Vendor 316 333 

Various 2 — 

Total mortgage loans held for sale, at lower of cost or fair value 829 1,087 

Single-family mortgage loans held for investment, at amortized cost Internal Model 592 979 

Multifamily mortgage loans held for investment, at amortized cost Appraisals 47 225 

Internal Model 113 125 

Broker Price Opinion 117 40 

Total multifamily mortgage loans held for investment, at 

amortized cost 277 390 

Acquired property, net:

Single-family Accepted Offers 9 35 

Appraisals 54 89 

Internal Model 67 41 

Walk Forwards 25 85 

Various 9 11 

Total single-family 164 261 

Multifamily Various 34 25 

Total nonrecurring assets at fair value $ 1,896 $ 2,742 

We use valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs. 

See “Note 15, Fair Value” in our 2020 Form 10-K for information on the valuation control processes and the valuation 

techniques we use for fair value measurement and disclosure as well as our basis for classifying these measurements 

as Level 1, Level 2 or Level 3 of the valuation hierarchy in more specific situations. We made no material changes to the 

valuation control processes or the valuation techniques for the nine months ended September 30, 2021.

Notes to Condensed Consolidated Financial Statements | Fair Value

Fannie Mae (In conservatorship) Third Quarter 2021 Form 10-Q 133
Fair Value of Financial Instruments

The following table displays the carrying value and estimated fair value of our financial instruments. The fair value of 

financial instruments we disclose includes commitments to purchase multifamily and single-family mortgage loans that 

we do not record in our condensed consolidated balance sheets. The fair values of these commitments are included as 

“Mortgage loans held for investment, net of allowance for loan losses.” The disclosure excludes all non-financial 

instruments; therefore, the fair value of our financial assets and liabilities does not represent the underlying fair value of 

our total consolidated assets and liabilities.

As of September 30, 2021

Carrying 

Value

Quoted 

Prices in 

Active 

Markets 

for 

Identical 

Assets 

(Level 1)

Significant 

Other 

Observable 

Inputs 

(Level 2)

Significant 

Unobservable 

Inputs 

(Level 3) 

Netting 

Adjustment

Estimated 

Fair Value

(Dollars in millions)

Financial assets:

Cash and cash equivalents, 

including restricted cash and cash 

equivalents $ 133,464 $ 74,064 $ 59,400 $ — $ — $ 133,464 

Federal funds sold and securities 

purchased under agreements to 

resell or similar arrangements 27,610 — 27,610 — — 27,610 

Trading securities 97,209 92,192 4,888 129 — 97,209 

Available-for-sale securities 886 — 90 796 — 886 

Mortgage loans held for sale 7,489 — 2,250 6,129 — 8,379 

Mortgage loans held for investment, 

net of allowance for loan losses 3,896,180 — 3,745,286 220,358 — 3,965,644 

Advances to lenders 9,924 — 9,923 1 — 9,924 

Derivative assets at fair value 809 — 940 159 (290) 809 

Guaranty assets and buy-ups 97 — — 234 — 234 

Total financial assets $ 4,173,668 $ 166,256 $ 3,850,387 $ 227,806 $ (290) $ 4,244,159 

Financial liabilities:

Federal funds purchased and 

securities sold under agreements to 

repurchase $ 363 $ — $ 363 $ — $ — $ 363 

Short-term debt:

Of Fannie Mae 8,045 — 8,045 — — 8,045 

Long-term debt:

Of Fannie Mae 226,798 — 235,120 814 — 235,934 

Of consolidated trusts 3,907,626 — 3,937,618 30,914 — 3,968,532 

Derivative liabilities at fair value 622 — 1,440 20 (838) 622 

Guaranty obligations 108 — — 86 — 86 

Total financial liabilities $ 4,143,562 $ — $ 4,182,586 $ 31,834 $ (838) $ 4,213,582 

Notes to Condensed Consolidated Financial Statements | Fair Value

Fannie Mae (In conservatorship) Third Quarter 2021 Form 10-Q 134
As of December 31, 2020

Carrying 

Value

Quoted 

Prices in 

Active 

Markets 

for 

Identical 

Assets 

(Level 1)

Significant 

Other 

Observable 

Inputs 

(Level 2)

Significant 

Unobservable 

Inputs 

(Level 3)

Netting 

Adjustment

Estimated 

Fair Value

(Dollars in millions)

Financial assets:

Cash and cash equivalents and 

restricted cash $ 115,623 $ 97,179 $ 18,444 $ — $ — $ 115,623 

Federal funds sold and securities 

purchased under agreements to 

resell or similar arrangements 28,200 — 28,200 — — 28,200 

Trading securities 136,542 130,456 5,991 95 — 136,542 

Available-for-sale securities 1,697 — 1,049 648 — 1,697 

Mortgage loans held for sale 5,197 — 116 5,502 — 5,618 

Mortgage loans held for investment, 

net of allowance for loan losses 3,648,695 — 3,512,672 255,556 — 3,768,228 

Advances to lenders 10,449 — 10,448 1 — 10,449 

Derivative assets at fair value 1,225 — 1,748 382 (905) 1,225 

Guaranty assets and buy-ups 115 — — 258 — 258 

Total financial assets $ 3,947,743 $ 227,635 $ 3,578,668 $ 262,442 $ (905) $ 4,067,840 

Financial liabilities:

Short-term debt:

Of Fannie Mae $ 12,173 $ — $ 12,177 $ — $ — $ 12,177 

Long-term debt:

Of Fannie Mae 277,399 — 288,414 878 — 289,292 

Of consolidated trusts 3,646,164 — 3,756,673 31,584 — 3,788,257 

Derivative liabilities at fair value 1,495 — 2,441 49 (995) 1,495 

Guaranty obligations 127 — — 82 — 82 

Total financial liabilities $ 3,937,358 $ — $ 4,059,705 $ 32,593 $ (995) $ 4,091,303 

For a detailed description and classification of our financial instruments, see “Note 15, Fair Value” in our 2020 Form 10-

K.

Fair Value Option

We elected the fair value option for loans and debt that contain embedded derivatives that would otherwise require 

bifurcation. Additionally, we elected the fair value option for our credit risk-sharing securities accounted for as debt of 

Fannie Mae issued under our CAS series prior to January 1, 2016. Under the fair value option, we elected to carry these 

instruments at fair value instead of bifurcating the embedded derivative from such instruments.

Interest income for the mortgage loans is recorded in “Interest income—Mortgage loans” and interest expense for the 

debt instruments is recorded in “Interest expense—Long-term debt” in our condensed consolidated statements of 

operations and comprehensive income.

Notes to Condensed Consolidated Financial Statements | Fair Value

Fannie Mae (In conservatorship) Third Quarter 2021 Form 10-Q 135
The following table displays the fair value and unpaid principal balance of the financial instruments for which we have 

made fair value elections.

As of

September 30, 2021 December 31, 2020

Loans(1)

Long-Term 

Debt of 

Fannie Mae

Long-Term Debt 

of Consolidated 

Trusts Loans(1)

Long-Term 

Debt of 

Fannie Mae

Long-Term Debt 

of Consolidated 

Trusts

(Dollars in millions)

Fair value $ 5,301 $ 2,633 $ 23,020 $ 6,490 $ 3,728 $ 24,586 

Unpaid principal balance 4,902 2,427 20,239 6,046 3,518 21,408 

(1) Includes nonaccrual loans with a fair value of $105 million and $139 million as of September 30, 2021 and December 31, 2020, 

respectively. The difference between unpaid principal balance and the fair value of these nonaccrual loans as of September 30, 2021 and 

December 31, 2020 was $1 million and $8 million, respectively. Includes loans that are 90 days or more past due with a fair value of $153 

million and $257 million as of September 30, 2021 and December 31, 2020, respectively. The difference between unpaid principal balance 

and the fair value of these 90 or more days past due loans as of September 30, 2021 and December 31, 2020 was $4 million and $14 

million, respectively.

Changes in Fair Value under the Fair Value Option Election

We recorded gains of $28 million and $48 million for the three and nine months ended September 30, 2021, 

respectively, and gains of $107 million and $248 million for the three and nine months ended September 30, 2020, 

respectively, from changes in the fair value of loans recorded at fair value in “Fair value gains (losses), net” in our 

condensed consolidated statements of operations and comprehensive income.

We recorded gains of $62 million and $346 million for the three and nine months ended September 30, 2021, 

respectively, and losses of $32 million and $344 million for the three and nine months ended September 30, 2020, 

respectively, from changes in the fair value of long-term debt recorded at fair value in “Fair value gains (losses), net” in 

our condensed consolidated statements of operations and comprehensive income.

13. Commitments and Contingencies

We are party to various types of legal actions and proceedings, including actions brought on behalf of various classes of 

claimants. We also are subject to regulatory examinations, inquiries and investigations, and other information gathering 

requests. In some of the matters, indeterminate amounts are sought. Modern pleading practice in the U.S. permits 

considerable variation in the assertion of monetary damages or other relief. Jurisdictions may permit claimants not to 

specify the monetary damages sought or may permit claimants to state only that the amount sought is sufficient to 

invoke the jurisdiction of the trial court. This variability in pleadings, together with our and our counsel’s actual 

experience in litigating or settling claims, leads us to conclude that the monetary relief that may be sought by plaintiffs 

bears little relevance to the merits or disposition value of claims. 

We have substantial and valid defenses to the claims in the proceedings described below and intend to defend these 

matters vigorously. However, legal actions and proceedings of all types are subject to many uncertain factors that 

generally cannot be predicted with assurance. Accordingly, the outcome of any given matter and the amount or range of 

potential loss at particular points in time is frequently difficult to ascertain. Uncertainties can include how fact finders will 

evaluate documentary evidence and the credibility and effectiveness of witness testimony, and how courts will apply the 

law. Disposition valuations are also subject to the uncertainty of how opposing parties and their counsel may view the 

evidence and applicable law.

On a quarterly basis, we review relevant information about all pending legal actions and proceedings for the purpose of 

evaluating and revising our contingencies, accruals and disclosures. We establish an accrual only for matters when a 

loss is probable and we can reasonably estimate the amount of such loss. We are often unable to estimate the possible 

losses or ranges of losses, particularly for proceedings that are in their early stages of development, where plaintiffs 

seek indeterminate or unspecified damages, where there may be novel or unsettled legal questions relevant to the 

proceedings, or where settlement negotiations have not occurred or progressed. Given the uncertainties involved in any 

action or proceeding, regardless of whether we have established an accrual, the ultimate resolution of certain of these 

matters may be material to our operating results for a particular period, depending on, among other factors, the size of 

the loss or liability imposed and the level of our net income or loss for that period. 

In addition to the matters specifically described below, we are involved in a number of legal and regulatory proceedings 

that arise in the ordinary course of business that we do not expect will have a material impact on our business or 

Notes to Condensed Consolidated Financial Statements | Fair Value

Fannie Mae (In conservatorship) Third Quarter 2021 Form 10-Q 136
financial condition. We have also advanced fees and expenses of certain current and former officers and directors in 

connection with various legal proceedings pursuant to our bylaws and indemnification agreements.

Senior Preferred Stock Purchase Agreements Litigation

A consolidated class action (“In re Fannie Mae/Freddie Mac Senior Preferred Stock Purchase Agreement Class Action 

Litigations”) and two non-class action lawsuits, Arrowood Indemnity Company v. Fannie Mae and Fairholme Funds v. 

FHFA, filed by Fannie Mae and Freddie Mac shareholders against us, FHFA as our conservator, and Freddie Mac are 

pending in the U.S. District Court for the District of Columbia. The lawsuits challenge the August 2012 amendment to 

each company’s senior preferred stock purchase agreement with Treasury. 

Plaintiffs filed amended complaints in all three lawsuits on November 1, 2017 alleging that the net worth sweep dividend 

provisions of the senior preferred stock that were implemented pursuant to the August 2012 amendments nullified 

certain of the shareholders’ rights, particularly the right to receive dividends. Plaintiffs seek unspecified damages, 

equitable and injunctive relief, and costs and expenses, including attorneys’ fees. Plaintiffs in the class action seek to 

represent several classes of preferred and/or common shareholders of Fannie Mae and/or Freddie Mac who held stock 

as of the public announcement of the August 2012 amendments. On September 28, 2018, the court dismissed all of the 

plaintiffs’ claims except for their claims for breach of an implied covenant of good faith and fair dealing. 

Given the stage of these lawsuits, the substantial and novel legal questions that remain, and our substantial defenses, 

we are currently unable to estimate the reasonably possible loss or range of loss arising from this litigation.

Notes to Condensed Consolidated Financial Statements | Commitments and Contingencies

Fannie Mae (In conservatorship) Third Quarter 2021 Form 10-Q 137
Item 3. Quantitative and Qualitative Disclosures about 

Market Risk

Information about market risk is set forth in “MD&A—Risk Management—Market Risk Management, including InterestRate Risk Management.”

Item 4. Controls and Procedures

Overview

We are required under applicable laws and regulations to maintain controls and procedures, which include disclosure 

controls and procedures as well as internal control over financial reporting, as further described below.

Evaluation of Disclosure Controls and Procedures

Disclosure Controls and Procedures

Disclosure controls and procedures refer to controls and other procedures designed to provide reasonable assurance 

that information required to be disclosed in the reports we file or submit under the Exchange Act is recorded, processed, 

summarized and reported within the time periods specified in the rules and forms of the SEC. Disclosure controls and 

procedures include, without limitation, controls and procedures designed to provide reasonable assurance that 

information required to be disclosed by us in the reports that we file or submit under the Exchange Act is accumulated 

and communicated to management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to 

allow timely decisions regarding our required disclosure. In designing and evaluating our disclosure controls and 

procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can 

provide only reasonable assurance of achieving the desired control objectives, and management was required to apply 

its judgment in evaluating and implementing possible controls and procedures.

Evaluation of Disclosure Controls and Procedures

As required by Rule 13a-15 under the Exchange Act, management has evaluated, with the participation of our Chief 

Executive Officer and Chief Financial Officer, the effectiveness of our disclosure controls and procedures in effect as of 

September 30, 2021, the end of the period covered by this report. As a result of management’s evaluation, our Chief 

Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were not effective at 

a reasonable assurance level as of September 30, 2021 or as of the date of filing this report. 

Our disclosure controls and procedures were not effective as of September 30, 2021 or as of the date of filing this report 

because they did not adequately ensure the accumulation and communication to management of information known to 

FHFA that is needed to meet our disclosure obligations under the federal securities laws. As a result, we were not able 

to rely upon the disclosure controls and procedures that were in place as of September 30, 2021 or as of the date of this 

filing, and we continue to have a material weakness in our internal control over financial reporting. This material 

weakness is described in more detail below under “Description of Material Weakness.” Based on discussions with FHFA 

and the structural nature of this material weakness, we do not expect to remediate this material weakness while we are 

under conservatorship.

Description of Material Weakness

The Public Company Accounting Oversight Board’s Auditing Standard 2201 defines a material weakness as a 

deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable 

possibility that a material misstatement of the company’s annual or interim financial statements will not be prevented or 

detected on a timely basis.

Management has determined that we continued to have the following material weakness as of September 30, 2021 and 

as of the date of filing this report:

• Disclosure Controls and Procedures. We have been under the conservatorship of FHFA since September 6, 

2008. Under the GSE Act, FHFA is an independent agency that currently functions as both our conservator and 

our regulator with respect to our safety, soundness and mission. Because of the nature of the conservatorship 

under the GSE Act, which places us under the “control” of FHFA (as that term is defined by securities laws), 

some of the information that we may need to meet our disclosure obligations may be solely within the 

knowledge of FHFA. As our conservator, FHFA has the power to take actions without our knowledge that could 

be material to our shareholders and other stakeholders, and could significantly affect our financial performance 

or our continued existence as an ongoing business. Although we and FHFA attempted to design and implement 

Quantitative and Qualitative Disclosures about Market Risk

Fannie Mae Third Quarter 2021 Form 10-Q 138
disclosure policies and procedures that would account for the conservatorship and accomplish the same 

objectives as a disclosure controls and procedures policy of a typical reporting company, there are inherent 

structural limitations on our ability to design, implement, test or operate effective disclosure controls and 

procedures. As both our regulator and our conservator under the GSE Act, FHFA is limited in its ability to design 

and implement a complete set of disclosure controls and procedures relating to Fannie Mae, particularly with 

respect to current reporting pursuant to Form 8-K. Similarly, as a regulated entity, we are limited in our ability to 

design, implement, operate and test the controls and procedures for which FHFA is responsible.

Due to these circumstances, we have not been able to update our disclosure controls and procedures in a manner that 

adequately ensures the accumulation and communication to management of information known to FHFA that is needed 

to meet our disclosure obligations under the federal securities laws, including disclosures affecting our condensed 

consolidated financial statements. As a result, we did not maintain effective controls and procedures designed to ensure 

complete and accurate disclosure as required by GAAP as of September 30, 2021 or as of the date of filing this report. 

Based on discussions with FHFA and the structural nature of this weakness, we do not expect to remediate this material 

weakness while we are under conservatorship.

Mitigating Actions Related to Material Weakness

As described above under “Description of Material Weakness,” we continue to have a material weakness in our internal 

control over financial reporting relating to our disclosure controls and procedures. However, we and FHFA have 

engaged in the following practices intended to permit accumulation and communication to management of information 

needed to meet our disclosure obligations under the federal securities laws:

• FHFA has established the Division of Conservatorship Oversight and Readiness, which is intended to facilitate 

operation of the company with the oversight of the conservator.

• We have provided drafts of our SEC filings to FHFA personnel for their review and comment prior to filing. We 

also have provided drafts of external press releases, statements and speeches to FHFA personnel for their 

review and comment prior to release.

• FHFA personnel, including senior officials, have reviewed our SEC filings prior to filing, including this quarterly 

report on Form 10-Q for the quarter ended September 30, 2021 (“Third Quarter 2021 Form 10-Q”), and 

engaged in discussions regarding issues associated with the information contained in those filings. Prior to 

filing our Third Quarter 2021 Form 10-Q, FHFA provided Fannie Mae management with written 

acknowledgment that it had reviewed the Third Quarter 2021 Form 10-Q, and it was not aware of any material 

misstatements or omissions in the Third Quarter 2021 Form 10-Q and had no objection to our filing the Third 

Quarter 2021 Form 10-Q.

• Our senior management meets regularly with senior leadership at FHFA, including, but not limited to, the Acting 

Director.

• FHFA representatives attend meetings frequently with various groups within the company to enhance the flow 

of information and to provide oversight on a variety of matters, including accounting, credit and market risk 

management, external communications and legal matters.

• Senior officials within FHFA’s Office of the Chief Accountant have met frequently with our senior finance 

executives regarding our accounting policies, practices and procedures.

Changes in Internal Control Over Financial Reporting

Management has evaluated, with the participation of our Chief Executive Officer and Chief Financial Officer, whether 

any changes in our internal control over financial reporting that occurred during our last fiscal quarter have materially 

affected, or are reasonably likely to materially affect, our internal control over financial reporting. There have been no 

changes in our internal control over financial reporting from July 1, 2021 through September 30, 2021 that management 

believes have materially affected, or are reasonably likely to materially affect, our internal control over financial 

reporting. 

In the ordinary course of business, we review our system of internal control over financial reporting and make changes 

that we believe will improve these controls and increase efficiency, while continuing to ensure that we maintain effective 

internal controls. Changes may include implementing new, more efficient systems, automating manual processes and 

updating existing systems. For example, we are currently implementing changes to various financial system applications 

in stages across the company. As we continue to implement these changes, each implementation may become a 

significant component of our internal control over financial reporting.

Controls and Procedures

Fannie Mae Third Quarter 2021 Form 10-Q 139
PART II—OTHER INFORMATION

Item 1. Legal Proceedings

The information in this item supplements and updates information regarding certain legal proceedings set forth in “Legal 

Proceedings” in our 2020 Form 10-K, our First Quarter 2021 Form 10-Q and our Second Quarter 2021 Form 10-Q. We 

also provide information regarding material legal proceedings in “Note 13, Commitments and Contingencies,” which is 

incorporated herein by reference. In addition to the matters specifically described or incorporated by reference in this 

item, we are involved in a number of legal and regulatory proceedings that arise in the ordinary course of business that 

we do not expect will have a material impact on our business or financial condition. However, litigation claims and 

proceedings of all types are subject to many factors and their outcome and effect on our business and financial 

condition generally cannot be predicted accurately. 

We establish an accrual for legal claims only when a loss is probable and we can reasonably estimate the amount of 

such loss. The actual costs of resolving legal claims may be substantially higher or lower than the amounts accrued for 

those claims. If certain of these matters are determined against us, FHFA or Treasury, it could have a material adverse 

effect on our results of operations, liquidity and financial condition, including our net worth. 

Senior Preferred Stock Purchase Agreements Litigation

Between June 2013 and August 2018, preferred and common stockholders of Fannie Mae and Freddie Mac filed 

lawsuits in multiple federal courts against one or more of the United States, Treasury and FHFA, challenging actions 

taken by the defendants relating to the Fannie Mae and Freddie Mac senior preferred stock purchase agreements and 

the conservatorships of Fannie Mae and Freddie Mac. Some of these lawsuits also contain claims against Fannie Mae 

and Freddie Mac. The legal claims being advanced by one or more of these lawsuits include challenges to the net worth 

sweep dividend provisions of the senior preferred stock that were implemented pursuant to August 2012 amendments to 

the agreements, the payment of dividends to Treasury under the net worth sweep dividend provisions, and FHFA’s 

decision to require Fannie Mae and Freddie Mac to draw funds from Treasury in order to pay dividends to Treasury prior 

to the August 2012 amendments. The plaintiffs seek various forms of equitable and injunctive relief as well as damages. 

The cases that remain pending after June 30, 2021 are as follows:

District of Columbia. Fannie Mae is a defendant in three cases pending in the U.S. District Court for the District of 

Columbia—a consolidated class action and two additional cases. In all three cases, Fannie Mae and Freddie Mac 

stockholders filed amended complaints on November 1, 2017 against us, FHFA as our conservator and Freddie Mac. 

On September 28, 2018, the court dismissed all of the plaintiffs’ claims in these cases, except for their claims for breach 

of an implied covenant of good faith and fair dealing. All three cases are described in “Note 13, Commitments and 

Contingencies.”

Southern District of Texas (Collins v. Yellen). On October 20, 2016, preferred and common stockholders filed a 

complaint against FHFA and Treasury in the U.S. District Court for the Southern District of Texas. On May 22, 2017, the 

court dismissed the case. On September 6, 2019, the U.S. Court of Appeals for the Fifth Circuit, sitting en banc, 

affirmed the district court’s dismissal of claims against Treasury, but reversed the dismissal of claims against FHFA. 

On June 23, 2021, the U.S. Supreme Court held that FHFA did not exceed its statutory powers as conservator when it 

agreed to the net worth sweep dividend provisions of the third amendment to the senior preferred stock purchase 

agreements in August 2012. The court also held that the provision of the Housing and Economic Recovery Act of 2008 

that restricts the President’s power to remove the FHFA Director without cause violates the Constitution’s separation of 

powers and, thus, the FHFA Director may be removed by the President for any reason. The court rejected plaintiffs’ 

request to rescind the third amendment to the senior preferred stock purchase agreements. However, the Supreme 

Court remanded the case to the Fifth Circuit for further proceedings on the sole issue of whether the stockholders 

suffered compensable harm related to the constitutional claim during the limited time-period when a Senate-confirmed 

FHFA Director was in office.

Western District of Michigan. On June 1, 2017, preferred and common stockholders of Fannie Mae and Freddie Mac 

filed a complaint for declaratory and injunctive relief against FHFA and Treasury in the U.S. District Court for the 

Western District of Michigan. FHFA and Treasury moved to dismiss the case on September 8, 2017, and plaintiffs filed a 

motion for summary judgment on October 6, 2017. On September 8, 2020, the court denied plaintiffs’ motion for 

summary judgment and granted defendants’ motion to dismiss. The plaintiffs filed a notice of appeal with the U.S. Court 

of Appeals for the Sixth Circuit on October 27, 2020.

District of Minnesota. On June 22, 2017, preferred and common stockholders of Fannie Mae and Freddie Mac filed a 

complaint for declaratory and injunctive relief against FHFA and Treasury in the U.S. District Court for the District of 

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Fannie Mae Third Quarter 2021 Form 10-Q 140
Minnesota. The court dismissed the case on July 6, 2018. On October 6, 2021, the U.S. Court of Appeals for the Eighth 

Circuit affirmed in part and reversed in part the district court’s ruling and remanded the case to the district court to 

determine whether the stockholders suffered compensable harm and are entitled to retrospective relief.

Eastern District of Pennsylvania. On August 16, 2018, common stockholders of Fannie Mae and Freddie Mac filed a 

complaint for declaratory and injunctive relief against FHFA and Treasury in the U.S. District Court for the Eastern 

District of Pennsylvania. FHFA and Treasury moved to dismiss the case on November 16, 2018, and plaintiffs filed a 

motion for summary judgment on December 21, 2018.

U.S. Court of Federal Claims. Numerous cases are pending against the United States in the U.S. Court of Federal 

Claims. Fannie Mae is a nominal defendant in four of these cases: Fisher v. United States of America, filed on 

December 2, 2013; Rafter v. United States of America, filed on August 14, 2014; Perry Capital LLC v. United States of 

America, filed on August 15, 2018; and Fairholme Funds Inc. v. United States, which was originally filed on July 9, 2013, 

and amended publicly to include Fannie Mae as a nominal defendant on October 2, 2018. Plaintiffs in these cases 

allege that the net worth sweep dividend provisions of the senior preferred stock that were implemented pursuant to the 

August 2012 amendment constitute a taking of Fannie Mae’s property without just compensation in violation of the U.S. 

Constitution. The Fisher plaintiffs are pursuing this claim derivatively on behalf of Fannie Mae, while the Rafter, Perry 

Capital and Fairholme Funds plaintiffs are pursuing the claim both derivatively and directly against the United States. 

Plaintiffs in Rafter also allege direct and derivative breach of contract claims against the government. The Perry Capital 

and Fairholme Funds plaintiffs allege similar breach of contract claims, as well as direct and derivative breach of 

fiduciary duty claims against the government. Plaintiffs in Fisher request just compensation to Fannie Mae in an 

unspecified amount. Plaintiffs in Rafter, Perry Capital and Fairholme Funds seek just compensation for themselves on 

their direct claims and payment of damages to Fannie Mae on their derivative claims. The United States filed a motion 

to dismiss the Fisher, Rafter and Fairholme Funds cases on August 1, 2018. On December 6, 2019, the court entered 

an order in the Fairholme Funds case that granted the government’s motion to dismiss all the direct claims but denied 

the motion as to all of the derivative claims brought on behalf of Fannie Mae. On June 18, 2020, the U.S. Court of 

Appeals for the Federal Circuit agreed to hear the appeal of the court’s December 6, 2019 order. In the Fisher case, the 

court denied the government’s motion to dismiss on May 8, 2020 and, on August 21, 2020, the Federal Circuit denied 

the Fisher plaintiffs’ request for interlocutory appeal. Oral argument in the Fairholme Funds case that is on appeal took 

place on August 4, 2021.

Item 1A. Risk Factors

In addition to the information in this report, you should carefully consider the risks relating to our business that we 

identify in “Risk Factors” in our 2020 Form 10-K. This section supplements and updates that discussion. Also refer to 

“MD&A—Risk Management,” “MD&A—Single-Family Business” and “MD&A—Multifamily Business” in our 2020 Form 

10-K and in this report for more detailed descriptions of the primary risks to our business and how we seek to manage 

those risks.

The risks we face could materially adversely affect our business, results of operations, financial condition, liquidity and 

net worth, and could cause our actual results to differ materially from our past results or the results contemplated by any 

forward-looking statements we make. We believe the risks described in the sections of this report and our 2020 Form 

10-K identified above are the most significant we face; however, these are not the only risks we face. We face additional 

risks and uncertainties not currently known to us or that we currently believe are immaterial.

GSE and Conservatorship Risk

Our business and results of operations may be materially adversely affected if we are unable to retain and 

recruit well-qualified executives and other employees. The conservatorship, the uncertainty of our future and 

limitations on our executive and employee compensation put us at a disadvantage compared to many other 

companies with which we compete for talent. In addition, the improving economy has increased the 

competition we face in retaining and hiring executives and other employees.

Our business is highly dependent on the talents and efforts of our executives and other employees. The 

conservatorship, the uncertainty of our future and limitations on executive and employee compensation have had, and 

are likely to continue to have, an adverse effect on our ability to retain and recruit talent. Voluntary attrition of our 

executives and employees as a whole has increased in 2021. Attrition in key management positions and challenges in 

finding replacements could harm our ability to manage our business effectively, to successfully implement strategic 

initiatives, and ultimately could adversely affect our financial performance. 

Actions taken by Congress, FHFA and Treasury to date, or that may be taken by them or other government agencies in 

the future, have had, and may continue to have, an adverse effect on our retention and recruitment of executives and 

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Fannie Mae Third Quarter 2021 Form 10-Q 141
other employees. We are subject to significant restrictions on the amount and type of compensation we may pay while 

under conservatorship. For example:

• The Equity in Government Compensation Act of 2015 limits the compensation and benefits for our Chief 

Executive Officer to the same level in effect as of January 1, 2015 while we are in conservatorship or 

receivership. Accordingly, annual direct compensation for our Chief Executive Officer is limited to base salary at 

an annual rate of $600,000.

• The Stop Trading on Congressional Knowledge Act of 2012, known as the STOCK Act, and related FHFA 

regulations prohibit our senior executives from receiving bonuses during conservatorship. 

• As our conservator, FHFA has the authority to approve the terms and amount of our executive compensation 

and may require changes to our executive compensation program. For example:

◦ In 2019, FHFA directed us, for so long as we are in conservatorship, to:

▪ increase the mandatory deferral period for at-risk deferred salary received by senior vice 

presidents and above from one year to two years, effective January 1, 2022 for executives 

hired before January 1, 2020 and effective January 1, 2020 for executives hired or promoted 

to senior vice president on or after January 1, 2020; and

▪ limit base salaries for all employees to no more than $600,000. 

◦ In 2019, FHFA directed us to submit for conservator decision any compensation arrangement for a 

newly hired employee where the proposed total target direct compensation is $600,000 or above, or 

any increase in total target direct compensation for an existing employee where the proposed total 

target direct compensation is $600,000 or above. This directive continues for so long as we are in 

conservatorship.

◦ For new executive hires and compensation increase requests for executives, FHFA has requested that 

we target annual direct compensation to the 25th percentile of the market to the extent practicable and 

subject to appropriate exceptions.

• The terms of our senior preferred stock purchase agreement with Treasury contain specified restrictions 

relating to compensation, including a prohibition on selling or issuing equity securities without Treasury’s prior 

written consent except under limited circumstances, which effectively eliminates our ability to offer equity-based 

compensation to our employees.

As a result of the restrictions on our compensation, we have not been able to incent and reward excellent performance 

with compensation structures that provide upside potential to our executives, which places us at a disadvantage 

compared to many other companies in attracting and retaining executives. In addition, the restrictions on our 

compensation and the uncertainty of potential action by Congress or the Administration with respect to our future— 

including whether we will exit conservatorship, how long it may take before we exit conservatorship, or whether housing 

finance reform will result in a significant restructuring of the company or the company no longer continuing to exist—also 

negatively affects our ability to retain and recruit executives and other employees.

The cap on our Chief Executive Officer compensation continues to make retention and succession planning for this 

position difficult, and it may make it difficult to attract qualified candidates for this critical role in the future.

In June 2021, FHFA issued a request for input on our executive compensation. The request for input asks for public 

feedback on our executive compensation program both during and after conservatorship. Changes in our executive 

compensation program could affect our ability to retain and recruit executive officers. See “Legislation and Regulation—

Executive Compensation Request for Input,” in our Second Quarter 2021 Form 10-Q for more information on the 

request for input. 

We face competition from the financial services and technology industries, and from businesses outside of these 

industries, for qualified executives and other employees. Additionally, with an improving economy and with increased 

remote work opportunities, attractive opportunities have become more available to our executives and other employees, 

which has increased the competition we face from other companies in hiring new executives and other employees. If 

this increased competition for executive and employee talent persists and if we are unable to retain, promote and attract 

executives and other employees with the necessary skills and talent, we would face increased risks for operational 

failures. If there were several high-level departures at approximately the same time, our ability to conduct our business 

could be materially adversely affected, which could have a material adverse effect on our results of operations and 

financial condition.

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Fannie Mae Third Quarter 2021 Form 10-Q 142
COVID-19 Pandemic Risk

The COVID-19 pandemic may continue to adversely affect our business and financial results. 

The COVID-19 pandemic significantly adversely affected the U.S. economy, particularly in the second quarter of 2020. 

Economic conditions in the United States have improved substantially since the second quarter of 2020, but risks 

relating to the pandemic remain that could negatively affect the economic recovery. While new daily cases of COVID-19 

in the U.S. began to decline substantially with the implementation of the COVID-19 vaccination program in the first half 

of 2021, contributing to a significant increase in business activity and an improved economy in 2021, the level of 

community transmission in the United States remains high, according to the U.S. Centers for Disease Control and 

Prevention, or CDC. The emergence of other new, more infectious variants of the coronavirus, potential waning of 

vaccine effectiveness over time and lower vaccination rates in certain areas of the country could lead to new shutdowns or other business restrictions or constraints in various locales and reductions in business activity. If this occurs 

and negatively affects the economic recovery, it could impact the ability of borrowers and renters to make their monthly 

payments, which could negatively affect our business and financial results.

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

uncertainties and may change, perhaps substantially. Factors that may impact the extent to which the COVID-19 

pandemic affects our business, financial results and financial condition include: the duration, spread and severity of the 

COVID-19 pandemic; the actions taken to contain the virus or treat its impact, including government actions to mitigate 

the economic impact of the pandemic and COVID-19 vaccination rates; the effectiveness of currently available 

COVID-19 vaccines over time and against variants of the coronavirus; the nature, extent and success of the 

forbearance, payment deferrals, modifications and other loss mitigation options we provide to borrowers affected by the 

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

behavior in response to the pandemic and its economic impact; the extent to which current economic and operating 

conditions continue, including whether any future outbreaks or increases in new COVID-19 cases interrupt economic 

recovery; and how quickly and to what extent affected borrowers, renters and counterparties recover from the negative 

economic impact of the pandemic. While we are unable to predict the future course of these events or their longer-term 

effects on our business, key areas we have identified where the COVID-19 pandemic is negatively affecting or may 

negatively affect our business, financial results and financial condition are described below:

• Increased borrower credit risk. Among other factors, income growth and unemployment levels affect borrowers’ 

ability to repay their mortgage loans. The economic dislocation caused by the COVID-19 pandemic resulted in 

a significant increase in the serious delinquency rate of the single-family and multifamily loans in our guaranty 

book of business in 2020. While our single-family and multifamily serious delinquency rates declined in the first 

nine months of 2021 due to the ongoing economic recovery and the decline in the number of our loans in 

forbearance plans, they remain significantly higher than pre-pandemic levels. And although our expectations 

relating to the extent of the negative impact of the COVID-19 pandemic on our credit results have improved 

since 2020, uncertainty remains with respect to the ultimate impact of the COVID-19 pandemic on our business 

and financial results. We may ultimately experience greater losses than we currently expect and may have high 

credit-related expenses in future periods. Moreover, we are taking a number of actions to help borrowers 

affected by the COVID-19 pandemic that may continue to adversely affect our financial results and financial 

condition, such as providing forbearance to single-family and multifamily borrowers impacted by COVID-19-

related financial hardships. We discuss some of the actions we are taking and their impact in more detail in 

“MD&A—Single-Family Business—Single-Family Mortgage Credit Risk Management” and in “MD&A—

Multifamily Business—Multifamily Mortgage Credit Risk Management.” 

The CFPB and certain states and localities have implemented COVID-19-related borrower and/or renter 

protections that are more extensive than our requirements. The CFPB and states and localities may continue to 

consider such proposals in the future or extend the time period of existing protections. These additional 

protections, depending on their scope and whether and to what extent they apply to our business, could 

contribute to a higher number of single-family and multifamily borrowers becoming delinquent on their loans or 

limit our ability to take enforcement actions with respect to our loans.

In addition, while home price appreciation was strong in 2020 and the first nine months of 2021, any additional 

economic dislocation resulting from the COVID-19 pandemic could result in declines in home prices and 

multifamily property valuations in the future. Declines in home prices and multifamily property valuations would 

increase the amount of our loss in the event a borrower defaults on their loan. The magnitude of the impact 

would likely vary significantly across geographic regions and based on the credit characteristics of the loans.

The COVID-19 pandemic may also affect the credit quality of our new loan acquisitions. For example, CARES 

Act provisions prohibiting lenders from reporting previously-current borrowers receiving COVID-19-related 

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Fannie Mae Third Quarter 2021 Form 10-Q 143
payment accommodations as delinquent to the credit bureaus may result in our not having accurate data on a 

borrower’s credit history when we are determining the eligibility of the single-family loans we acquire. 

• Increased human capital and business resiliency risk. As noted above, COVID-19 continues to spread in the 

United States. If a significant number of our executives or other employees, or family members for whom they 

provide care, contract COVID-19 during the same time period, it could materially adversely affect our ability to 

manage our business, which could have a material adverse effect on our results of operations and financial 

condition. The risk of executives, other employees or their family members contracting COVID-19 may increase 

with the further reopening of workplaces and schools. We are now allowing employees to work from our 

primary office locations on a voluntary basis and anticipate more fully opening our office locations next year. 

Although we have established COVID-19 safety protocols, the return of employees to the office may increase 

the risk of our employees contracting COVID-19. 

At this time, a significant majority of our employees are working remotely. While our transition to a remote work 

environment has been successful to date, this remote work arrangement increases the risk that technological, 

cybersecurity or other operational incidents could materially adversely affect our business operations. This 

telework arrangement, as well as the risk that employees or their family members could contract COVID-19 and 

our reliance on third parties for some functions, also could materially adversely affect our ability to maintain 

effective controls, which could result in material errors to our reported financial results or disclosures that are 

not complete or accurate. 

• Increased counterparty credit and operational risk. Economic dislocation caused by the COVID-19 pandemic 

could lead to default by one or more of our institutional counterparties on their obligations to us, which could 

result in significant financial losses. For example, if the pandemic results in a substantially higher level of 

mortgage defaults, it could affect our mortgage insurer counterparties' ability to fully meet their payment 

obligations to us.

In addition, if multiple single-family or multifamily servicers were to fail to meet their obligations to us, it could 

cause substantial disruption to our business, borrowers and the mortgage industry. We may not be able to 

transfer the servicing of loans to new servicers without significant operational disruptions and financial losses, 

and there may not be sufficient industry capacity to take on large servicing transfers. 

• Increased model and accounting estimate risk. The unprecedented nature of the COVID-19 pandemic may

negatively affect our ability to rely on models to effectively manage the risks to our business. Moreover, the 

CARES Act provisions prohibiting lenders from reporting some borrowers receiving COVID-19-related payment 

accommodations as delinquent may also impact the stability of the interpretation and predictiveness of 

borrower credit data and therefore the reliability of our models in the future.

• Increased risk of additional government action affecting our business. Federal, state and local governments 

have taken many actions that have adversely affected or could adversely affect our financial results, such as 

the loan forbearance requirements of the CARES Act. In addition, while states have generally lifted most or all 

of their COVID-19-related restrictions on businesses, new restrictions could be imposed in the future if the level 

of new COVID-19 cases or hospitalizations rises. The U.S. Congress, Treasury, the Federal Reserve, FHFA or 

other national, state or local government agencies or legislatures may take additional steps in response to the 

COVID-19 pandemic that could adversely affect our business, financial results and financial condition, such as 

expanding or extending our obligations to help borrowers, renters or counterparties affected by the pandemic or 

imposing new business shut-downs or other restrictions. 

• Increased risk of mortgage fraud. In response to the COVID-19 pandemic, until recently, we offered certain 

temporary flexibilities relating to our Single-Family Selling Guide requirements. This could increase the risk of 

mortgage fraud relating to the loans we acquired during the time period we offered these flexibilities.

Operational Risk

A breach of the security of our systems or facilities, or those of third parties with which we do business, 

including as a result of cyber attacks, could damage or disrupt our business or result in the disclosure or 

misuse of confidential information, which could damage our reputation, result in regulatory sanctions and/or 

increase our costs and cause losses.

Our operations rely on the secure receipt, processing, storage and transmission of confidential and other information in 

our computer systems and networks and with our business partners, including proprietary, confidential or personal 

information that is subject to privacy laws, regulations or contractual obligations. Information security risks for large 

institutions like us have significantly increased in recent years in part because of the proliferation of new technologies 

and the use of the Internet and telecommunications technologies to conduct or automate financial transactions. A 

number of financial services companies, consumer-based companies and other organizations have reported the 

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Fannie Mae Third Quarter 2021 Form 10-Q 144
unauthorized disclosure of client, customer or other confidential information, as well as cyber attacks involving the 

dissemination, theft and destruction of corporate information, intellectual property, cash or other valuable assets. There 

have also been several highly publicized ransomware cyber attacks where hackers have requested “ransom” payments 

in exchange for not disclosing stolen customer information or for unlocking or not disabling the target company’s 

computer or other systems.

We have been, and likely will continue to be, the target of cyber attacks, computer viruses, malicious code, phishing 

attacks, denial of service attacks and other information security threats. To date, cyber attacks have not had a material 

impact on our financial condition, results or business. However, we could suffer material financial or other losses in the 

future as a result of cyber attacks, and these attacks and their impacts are hard to predict. Our risk and exposure to 

these matters remains heightened because of, among other things:

• the evolving nature of these threats; 

• the current global economic and political environment; 

• our prominent size and scale and our role in the financial services industry; 

• the outsourcing of some of our business operations; 

• the ongoing shortage of qualified cybersecurity professionals; 

• our migration to cloud-based systems; 

• our increased use of employee-owned devices for business communication;

• the large number of our employees working remotely; and 

• the interconnectivity and interdependence of third parties to our systems. 

Despite our efforts to ensure the integrity of our software, computers, systems and information, we may not be able to 

anticipate, detect or recognize threats to our systems and assets, or to implement effective preventive measures against 

all cyber threats, especially because the techniques used are increasingly sophisticated, change frequently, are 

complex, and are often not recognized until launched. In addition, although we have not experienced any material 

impacts from the SolarWinds Orion cyber breach in late 2020, which reportedly affected roughly 18,000 organizations, 

or the Microsoft Exchange cyber attack in early 2021, which reportedly affected over 30,000 organizations, these two 

recent large-scale cyber attacks suggest that the risk of damaging cyberattacks impacting us and/or third-parties with 

which we do business is increasing. We expect cyber attack and breach incidents to continue, and we are unable to 

predict the direct or indirect impact of future attacks or breaches on our business operations. 

We routinely identify cyber threats as well as vulnerabilities in our systems and work to address them. Some cyber 

vulnerabilities take a substantial amount of time to resolve. In addition, efforts to resolve them may be insufficient. 

Further, these efforts involve costs that can be significant as cyber attack methods continue to rapidly evolve. Cyber 

attacks can originate from a variety of sources, including external parties who are affiliated with foreign governments or 

are involved with organized crime or terrorist organizations. Third parties may also attempt to induce employees, 

customers or other users of our systems to disclose sensitive information or provide access to our systems or network, 

or to our data or that of our counterparties or borrowers, and these types of risks may be difficult to detect or prevent.

The occurrence of a cyber attack, breach, unauthorized access, misuse, computer virus or other malicious code or other 

cybersecurity event could jeopardize or result in the unauthorized disclosure, gathering, monitoring, misuse, corruption, 

loss or destruction of confidential and other information that belongs to us, our customers, our counterparties, third-party 

service providers or borrowers that is processed and stored in, and transmitted through, our computer systems and 

networks. The occurrence of such an event could also result in damage to our software, computers or systems, or 

otherwise cause interruptions or malfunctions in our, our customers’, our counterparties’ or third parties’ operations. This 

could result in significant financial losses, loss of customers and business opportunities, reputational damage, litigation, 

regulatory fines, penalties or intervention, reimbursement or other compensatory costs, or otherwise adversely affect 

our business, financial condition or results of operations. 

Cyber attacks can occur and persist for an extended period of time without detection. Investigations of cyber attacks are 

inherently unpredictable, and it takes time to complete an investigation and have full and reliable information. While we 

are investigating a cyber attack, we do not necessarily know the extent of the harm or how best to remediate it, and we 

can repeat or compound certain errors or actions before we discover and remediate them. In addition, announcing that 

a cyber attack has occurred increases the risk of additional cyber attacks, and preparing for this elevated risk can delay 

the announcement of a cyber attack. All or any of these challenges could further increase the costs and consequences 

of a cyber attack. 

In addition, we may be required to expend significant additional resources to modify our protective measures and to 

investigate and remediate vulnerabilities or other exposures arising from operational and security risks. Although we 

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Fannie Mae Third Quarter 2021 Form 10-Q 145
maintain insurance coverage relating to cybersecurity risks, our insurance may not be sufficient to provide adequate 

loss coverage in all circumstances. 

Because we are interconnected with and dependent on third-party vendors, exchanges, clearing houses, fiscal and 

paying agents, and other financial intermediaries, including CSS, we could be materially adversely impacted if any of 

them is subject to a successful cyber attack or other information security event. Third parties with which we do business 

may also be sources of cybersecurity or other technological risks. We outsource certain functions and these 

relationships allow for the external storage and processing of our information, as well as customer, counterparty and 

borrower information, including on cloud-based systems. We also share this type of information with regulatory agencies 

and their vendors. While we engage in actions to mitigate our exposure resulting from our information-sharing activities, 

ongoing threats may result in unauthorized access, loss or destruction of data or other cybersecurity incidents with 

increased costs and consequences to us such as those described above.

We routinely transmit and receive personal, confidential and proprietary information by electronic means. In addition, 

our customers maintain personal, confidential and proprietary information on systems we provide. We have discussed 

and worked with customers, vendors, service providers, counterparties and other third parties to develop secure 

transmission capabilities and protect against cyber attacks, but we do not have, and may be unable to put in place, 

secure capabilities with all of our clients, vendors, service providers, counterparties and other third parties and we may 

not be able to ensure that these third parties have appropriate controls in place to protect the confidentiality of the 

information. An interception, misuse or mishandling of personal, confidential or proprietary information being sent to or 

received from a customer, vendor, service provider, counterparty or other third party could result in legal liability, 

regulatory action and reputational harm. 

Market and Industry Risk

A deterioration in general economic conditions, including home prices and employment trends, or financial 

markets may materially adversely affect our business and financial condition.

Our business is significantly affected by the status of the U.S. economy, particularly home prices and employment 

trends. A prolonged period of slow growth in the U.S. economy or any deterioration in general economic conditions or 

financial markets could materially adversely affect our results of operations, net worth and financial condition. Given the 

level of fiscal and monetary policy support for the economy in 2020 and 2021, there is a risk that inflation may exceed 

the level desired by policy makers and currently anticipated in financial markets. This could lead the government to 

adopt various corrective measures designed to restrict the availability of credit and regulate growth to contain inflation. 

In September 2021 the Federal Reserve signaled it may soon begin reducing its bond and mortgage-backed securities 

purchases as inflation “is on track to moderately exceed 2 percent for some time” and as the labor market recovery 

progresses. Currently, we also expect the Federal Reserve will begin raising the federal funds rate it charges financial 

institutions in the fourth quarter of 2022. We also expect interest rates on Treasury securities to increase in 2022 in 

anticipation of further inflation or a shift in monetary policy, leading to a rise in mortgage rates and likely a slowdown in 

housing demand and a deceleration in the pace of home price appreciation. In general, significant home price declines 

or meaningful increases in the unemployment rate could materially increase our credit losses and credit-related 

expense.

Global economic conditions can also adversely affect our business and financial results. Changes or volatility in market 

conditions resulting from deterioration in or uncertainty regarding global economic conditions can adversely affect the 

value of our assets, which could materially adversely affect our results of operations, net worth and financial condition. 

Differing rates of economic recovery from the COVID-19 pandemic around the world along with continued dislocations 

in supply chains remain a concern for policy makers and financial markets. In addition, events such as the China 

Evergrande Group debt crisis may significantly impact global markets or adversely affect economic conditions. To the 

extent global economic conditions negatively affect the U.S. economy, they also could negatively affect the credit 

performance of the loans in our book of business. 

Volatility or uncertainty in global or domestic political conditions also can significantly affect economic conditions and 

financial markets. Global or domestic political unrest also could affect growth and financial markets. We describe in our 

2020 Form 10-K the risks to our business posed by changes in interest rates and changes in spreads. In addition, future 

changes or disruptions in financial markets, including the disruption that would occur if the U.S. government defaults on 

its debt because the debt ceiling is not timely raised, could significantly change the amount, mix and cost of funds we 

obtain, as well as our liquidity position.

Other Information

Fannie Mae Third Quarter 2021 Form 10-Q 146
Item 2. Unregistered Sales of Equity Securities and Use of 

Proceeds

Common Stock

Our common stock is traded in the over-the-counter market and quoted on the OTCQB, operated by OTC Markets 

Group Inc., under the ticker symbol “FNMA.”

Recent Sales of Unregistered Equity Securities

Under the terms of our senior preferred stock purchase agreement with Treasury, we are prohibited from selling or 

issuing our equity interests without the prior written consent of Treasury except under limited circumstances, which are 

described in “Business—Conservatorship, Treasury Agreements and Housing Finance Reform—Treasury Agreements

—Covenants under Treasury Agreements” in our 2020 Form 10-K. During the quarter ended September 30, 2021, we 

did not sell any equity securities.

Information about Certain Securities Issuances by Fannie Mae

Pursuant to SEC regulations, public companies are required to disclose certain information when they incur a material 

direct financial obligation or become directly or contingently liable for a material obligation under an off-balance sheet 

arrangement. The disclosure must be made in a current report on Form 8-K under Item 2.03 or, if the obligation is 

incurred in connection with certain types of securities offerings, in prospectuses for that offering that are filed with the 

SEC.

Because the securities we issue are exempted securities under the Securities Act of 1933, we do not file registration 

statements or prospectuses with the SEC with respect to our securities offerings. To comply with the disclosure 

requirements of Form 8-K relating to the incurrence of material financial obligations, in accordance with a “no-action” 

letter we received from the staff in 2004, we report our incurrence of these types of obligations in offering circulars or 

prospectuses (or supplements thereto) that we post on our website within the same time period that a prospectus for a 

non-exempt securities offering would be required to be filed with the SEC. To the extent we incur a material financial 

obligation that is not disclosed in this manner, we would file a Form 8-K if required to do so under applicable Form 8-K 

requirements. 

The website address for disclosure about our debt securities is www.fanniemae.com/debtsearch. From this address, 

investors can access the offering circular and related supplements for debt securities offerings under Fannie Mae’s 

universal debt facility, including pricing supplements for individual issuances of debt securities.

Disclosure about our obligations pursuant to the MBS we issue, some of which may be off-balance sheet obligations, 

can be found at www.fanniemae.com/mbsdisclosure. From this address, investors can access information and 

documents about our MBS, including prospectuses and related prospectus supplements.

We are providing our website address solely for your information. Information appearing on our website is not 

incorporated into this report.

Our Purchases of Equity Securities

We did not repurchase any of our equity securities during the third quarter of 2021.

Dividend Restrictions 

Our payment of dividends is subject to the following restrictions: 

Restrictions Relating to Conservatorship. Our conservator announced on September 7, 2008 that we would not pay any 

dividends on the common stock or on any series of preferred stock, other than the senior preferred stock. In addition, 

FHFA’s regulations relating to conservatorship and receivership operations prohibit us from paying any dividends while 

in conservatorship unless authorized by the Director of FHFA. The Director of FHFA has directed us to make dividend 

payments on the senior preferred stock on a quarterly basis for every dividend period for which dividends were payable.

Restrictions Under Senior Preferred Stock Purchase Agreement and Senior Preferred Stock. The senior preferred stock 

purchase agreement prohibits us from declaring or paying any dividends on Fannie Mae equity securities (other than 

the senior preferred stock) without the prior written consent of Treasury. In addition, the provisions of the senior 

preferred stock provide for dividends each quarter through and including the capital reserve end date in the amount, if 

any, by which our net worth as of the end of the immediately preceding fiscal quarter exceeds an applicable capital 

reserve amount. The applicable capital reserve amount is the amount of adjusted total capital necessary for us to meet 

the capital requirements and buffers set forth in the enterprise regulatory capital framework. The capital reserve end 

Other Information

Fannie Mae Third Quarter 2021 Form 10-Q 147
date is defined as the last day of the second consecutive fiscal quarter during which we have had and maintained 

capital equal to, or in excess of, all of the capital requirements and buffers under the enterprise regulatory capital 

framework. After the capital reserve end date, the amount of quarterly dividends to Treasury will be equal to the lesser 

of any quarterly increase in our net worth and a 10% annual rate on the then-current liquidation preference of the senior 

preferred stock. As a result, our ability to retain earnings in excess of the capital requirements and buffers set forth in 

the enterprise regulatory capital framework will be limited. For more information on the terms of the senior preferred 

stock purchase agreement and senior preferred stock, see “Business—Conservatorship, Treasury Agreements and 

Housing Finance Reform” in our 2020 Form 10-K.

Additional Restrictions Relating to Preferred Stock. Payment of dividends on our common stock is also subject to the 

prior payment of dividends on our preferred stock and our senior preferred stock. Payment of dividends on all 

outstanding preferred stock, other than the senior preferred stock, is also subject to the prior payment of dividends on 

the senior preferred stock. 

Statutory Restrictions. Under the GSE Act, FHFA has authority to prohibit capital distributions, including payment of 

dividends, if we fail to meet our capital requirements. If FHFA classifies us as significantly undercapitalized, approval of 

the Director of FHFA is required for any dividend payment. Under the Charter Act and the GSE Act, we are not permitted 

to make a capital distribution if, after making the distribution, we would be undercapitalized. The Director of FHFA, 

however, may permit us to repurchase shares if the repurchase is made in connection with the issuance of additional 

shares or obligations in at least an equivalent amount and will reduce our financial obligations or otherwise improve our 

financial condition. 

Item 3. Defaults Upon Senior Securities

None. 

Item 4. Mine Safety Disclosures

None.

Item 5. Other Information

None.

Other Information

Fannie Mae Third Quarter 2021 Form 10-Q 148
Item 6. Exhibits

The exhibits listed below are being filed or furnished with or incorporated by reference into this report. 

3.1 Fannie Mae Charter Act (12 U.S.C. § 1716 et seq.) as amended through July 25, 2019 (Incorporated by 

reference to Exhibit 3.1 to Fannie Mae’s Quarterly Report on Form 10-Q for the quarter ended September 

30, 2019, filed October 31, 2019.)

3.2 Fannie Mae Bylaws, as amended through January 29, 2019 (Incorporated by reference to Exhibit 3.2 to 

Fannie Mae’s Annual Report on Form 10-K for the year ended December 31, 2018, filed February 14, 

2019.)

4.1 Letter Agreement between the United States Department of the Treasury and the Federal National 

Mortgage Association, acting through the Federal Housing Finance Agency as its duly appointed 

conservator, dated September 14, 2021 (Incorporated by reference to Exhibit 10.1 to Fannie Mae’s Current 

Report on Form 8-K, filed September 20, 2021)

10.1 Letter Agreement between the United States Department of the Treasury and the Federal National 

Mortgage Association, acting through the Federal Housing Finance Agency as its duly appointed 

conservator, dated September 14, 2021 (Incorporated by reference to Exhibit 10.1 to Fannie Mae’s Current 

Report on Form 8-K, filed September 20, 2021)

10.2 Confidentiality and Proprietary Rights Agreement (Incorporated by reference to Exhibit 10.1 to Fannie Mae’s 

Quarterly Report on Form 10-Q for the quarter ended June 30, 2021, filed August 3, 2021)

10.3 Retention Award Agreement between Kimberly Johnson and Fannie Mae dated July 29, 2021 (Incorporated 

by reference to Exhibit 10.2 to Fannie Mae’s Quarterly Report on Form 10-Q for the quarter ended June 30, 

2021, filed August 3, 2021)

31.1 Certification of Chief Executive Officer pursuant to Securities Exchange Act Rule 13a-14(a)

31.2 Certification of Chief Financial Officer pursuant to Securities Exchange Act Rule 13a-14(a)

32.1 Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350

32.2 Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350

101. INS Inline XBRL Instance Document* - the instance document does not appear in the Interactive Data File 

because its XBRL tags are embedded within the Inline XBRL document

101. SCH Inline XBRL Taxonomy Extension Schema*

101. CAL Inline XBRL Taxonomy Extension Calculation*

101. DEF Inline XBRL Taxonomy Extension Definition*

101. LAB Inline XBRL Taxonomy Extension Label*

101. PRE Inline XBRL Taxonomy Extension Presentation*

104 Cover Page Interactive Data File* - the cover page interactive data file does not appear in the Interactive 

Data File because its XBRL tags are embedded within the Inline XBRL document included as Exhibit 101

Item Description

* The financial information contained in these Inline XBRL documents is unaudited.

Other Information

Fannie Mae Third Quarter 2021 Form 10-Q 149
SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be 

signed on its behalf by the undersigned thereunto duly authorized.

Federal National Mortgage Association

By: /s/ Hugh R. Frater

Hugh R. Frater

Chief Executive Officer

Date: October 29, 2021

By: /s/ David C. Benson

David C. Benson

President (and Interim Chief Financial Officer)

Date: October 29, 2021

Signatures

Fannie Mae Third Quarter 2021 Form 10-Q 150