UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

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

EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2020

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 March 31, 2020, 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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60

Condensed Consolidated Statements of Operations and Comprehensive Income . . . . . . . . . . . . . . . . . . . . 61

Condensed Consolidated Statements of Cash Flows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62

Condensed Consolidated Statements of Changes in Equity (Deficit) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63

Note 1—Summary of Significant Accounting Policies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64

Note 2—Consolidations and Transfers of Financial Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72

Note 3—Mortgage Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73

Note 4—Allowance for Loan Losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82

Note 5—Investments in Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84

Note 6—Financial Guarantees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87

Note 7—Short-Term and Long-Term Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88

Note 8—Derivative Instruments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89

Note 9—Segment Reporting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92

Note 10—Concentrations of Credit Risk . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93

Note 11—Netting Arrangements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97

Note 12—Fair Value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98

Note 13—Commitments and Contingencies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 108

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

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

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

Legislation and Regulation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

Key Market Economic Indicators . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

Consolidated Results of Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

Consolidated Balance Sheet Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19

Retained Mortgage Portfolio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20

Guaranty Book of Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22

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

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

Multifamily Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41

Liquidity and Capital Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49

Off-Balance Sheet Arrangements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53

Risk Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54

Critical Accounting Policies and Estimates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56

Impact of Future Adoption of New Accounting Guidance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56

Forward-Looking Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57

Item 3. Quantitative and Qualitative Disclosures about Market Risk . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 110

Item 4. Controls and Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 110

PART II—Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 112

Item 1. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 112

Item 1A. Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 113

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 117

Item 3. Defaults Upon Senior Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 118

Item 4. Mine Safety Disclosures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 118

Item 5. Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 118

Item 6. Exhibits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 118

Fannie Mae First Quarter 2020 Form 10-Q i
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. The U.S. Department of the Treasury (“Treasury”) released a plan in September 2019 for housing 

finance reform (the “Treasury plan”) that includes recommendations related to ending our conservatorship. Congress and 

the Administration continue to consider options for reform of the housing finance system, including Fannie Mae. We are 

not permitted to retain more than $25 billion in capital reserves or to pay dividends or other distributions to stockholders 

other than Treasury. Our agreements with Treasury 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” in our Form 10-K for the year ended December 31, 2019 (“2019 Form 10-K”) and “Risk Factors” in our 

2019 Form 10-K and in this report.

You should read this Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) in 

conjunction with our unaudited condensed consolidated financial statements and related notes in this report and the more 

detailed information in our 2019 Form 10-K. You can find a “Glossary of Terms Used in This Report” in our 2019 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 2019 Form 10-K. 

Introduction

Fannie Mae is a leading source of financing for mortgages in the United States. Our revenues are primarily driven by guaranty 

fees we receive for managing the credit risk on loans underlying the mortgage-backed securities we issue. Our mission is to 

provide a stable source of liquidity to support housing in the U.S. for low- and moderate-income borrowers and renters. We 

operate in the secondary mortgage market, primarily working with lenders, who originate loans to borrowers. We do not 

originate loans or lend money directly to borrowers in the primary mortgage market. Instead, we securitize mortgage loans 

originated by lenders into Fannie Mae mortgage-backed securities that we guarantee (which we refer to as Fannie Mae MBS 

or our MBS); purchase mortgage loans and mortgage-related securities, primarily for securitization and sale at a later date; 

manage mortgage credit risk; and engage in other activities that support access to credit and the supply of affordable housing. 

Through our single-family and multifamily business segments, we provided $204.6 billion in liquidity to the mortgage market in 

the first quarter of 2020, which enabled the financing of approximately 854,000 home purchases, refinancings or rental units.

 Fannie Mae Provided $204.6 Billion in Liquidity in the First Quarter of 2020

Unpaid Principal Balance Units

$68.8B 256K

Single-Family Home Purchases

$121.7B 439K

Single-Family Refinancings

$14.1B 159K

Multifamily Rental Units

MD&A | Introduction

Fannie Mae First Quarter 2020 Form 10-Q 1
Executive Summary

Summary of Our Financial Performance

Condensed Consolidated Results

(Dollars in billions)

$4.9

$5.7

$2.4

$0.5

$2.4

$0.5

Net revenues Net income Comprehensive income

Q1 2019 Q1 2020

The decrease in our net income in the first quarter of 2020, compared with the first quarter of 2019, was primarily driven by a 

shift from credit-related income to credit-related expense driven by the economic dislocation caused by the COVID-19 

outbreak, partially offset by an increase in net interest income and a decrease in fair value losses. See “Consolidated Results 

of Operations” for more information on our financial results.

Net worth. Our net worth declined from $14.6 billion as of December 31, 2019 to $13.9 billion as of March 31, 2020. Although 

we had comprehensive income of $476 million for the first quarter of 2020, we had a charge of $1.1 billion to retained earnings 

due to our implementation of Accounting Standards Update 2016-13, Financial Instruments—Credit Losses, Measurement of 

Credit Losses on Financial Instruments and related amendments (the “CECL standard”) on January 1, 2020, resulting in a 

$663 million decline in our net worth during the period. See “Note 1, Summary of Significant Accounting Policies—New 

Accounting Guidance—The Current Expected Credit Loss Standard” for further details. 

Changes in our net worth can be significantly impacted by market conditions that affect our net interest income; fluctuations in 

the estimated fair value of our derivatives and other financial instruments that we mark to market through our earnings; 

developments that affect our loss reserves, such as changes in interest rates, home prices or accounting standards, or events 

such as natural disasters or pandemics; and other factors, as we discuss in “Risk Factors” and “Consolidated Results of 

Operations” in our 2019 Form 10-K and in this report.

Financial performance. Our long-term financial performance will depend on many factors, including:

• the size of and our share of the U.S. mortgage market, which in turn will depend upon macroeconomic factors such 

as population growth, household formation and housing supply; 

• borrower performance and changes in macroeconomic factors, including home prices and interest rates; and

• actions by FHFA, the Administration and Congress relating to our business and housing finance reform, including the 

capital requirements that will be applicable to us, our ongoing financial obligations to Treasury, potential restrictions 

on our activities and our business footprint, our competitive environment, and actions we are required to take to 

support borrowers or the mortgage market.

Quarterly fluctuations in acquisition volumes, market share, guaranty fees, or acquisition credit characteristics in any one 

period typically have limited impact on the size and stability of our conventional guaranty book of business and the associated 

revenue, profitability, and credit quality. 

As described further in “COVID-19 Impact” and “Risk Factors,” the COVID-19 outbreak has significantly affected our financial 

performance and we expect that it will continue to do so. Given the unprecedented nature of the COVID-19 outbreak and the 

fast pace at which new developments relating to the outbreak are occurring, it is difficult to assess or predict the short-term or 

long-term effects of the outbreak on our financial performance.

MD&A | Executive Summary

Fannie Mae First Quarter 2020 Form 10-Q 2
Net Worth, Treasury Funding and Senior Preferred Stock Dividends 

Treasury has made a commitment under a 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 issued shares of 

senior preferred stock to Treasury in 2008. 

Under the terms of the senior preferred stock, we will not owe senior preferred stock dividends to Treasury until we have 

accumulated over $25 billion in net worth as of the end of a quarter. Accordingly, no dividends were payable to Treasury for the 

first quarter of 2020, and none are payable for the second quarter of 2020. 

The charts below show information about our net worth, the remaining amount of Treasury’s funding commitment to us, senior 

preferred stock dividends we have paid Treasury and funds we have drawn from Treasury pursuant to its funding commitment.

Net Worth and Treasury

Funding Commitment

(Dollars in billions)

$13.9

$113.9

Net worth

Remaining Treasury funding commitment

As of March 31, 2020

Dividend Payments and Draws

(Dollars in billions)

$181.4

$119.8

Cumulative dividend payments to Treasury1

Cumulative draws from Treasury2

As of March 31, 2020

(1)

Aggregate amount of dividends we have paid to Treasury on the senior preferred stock from 2008 through March 31, 2020. Under the 

terms of the senior preferred stock purchase agreement, dividend payments we make to Treasury do not offset our draws of funds from 

Treasury.

(2)

Aggregate amount of funds we have drawn from Treasury pursuant to the senior preferred stock purchase agreement from 2008 through 

March 31, 2020.

The aggregate liquidation preference of the senior preferred stock increased from $131.2 billion as of December 31, 2019 to 

$135.4 billion as of March 31, 2020 due to the increase in our net worth during the fourth quarter of 2019. Because our net 

worth did not increase during the first quarter of 2020, the aggregate liquidation preference of the senior preferred stock will 

remain at $135.4 billion as of June 30, 2020.

If we were to draw additional funds from Treasury under the senior preferred stock purchase agreement with respect to a 

future period, the amount of remaining funding under the agreement would be reduced by the amount of our draw, and the 

aggregate liquidation preference of the senior preferred stock would increase by the amount of our draw. For a description of 

the terms of the senior preferred stock purchase agreement and the senior preferred stock, see “Business—Conservatorship, 

Treasury Agreements and Housing Finance Reform” in our 2019 Form 10-K.

Treasury owns our senior preferred stock and a warrant to purchase 79.9% of our common stock. Treasury has also made a 

commitment under the senior preferred stock purchase agreement 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.

MD&A | Executive Summary

Fannie Mae First Quarter 2020 Form 10-Q 3
COVID-19 Impact

On March 11, 2020, the World Health Organization characterized COVID-19, a new respiratory disease caused by a novel 

coronavirus, as a pandemic, and on March 13, 2020, President Trump declared the COVID-19 outbreak in the United States a 

national emergency. The COVID-19 outbreak in the United States has expanded in recent weeks, and has resulted in stay-athome orders, school closures and widespread business shutdowns across the country. The COVID-19 outbreak had a 

significant impact on our business and financial results in the first quarter of 2020, and we expect that it will continue to do so. 

We provide a brief overview below of the economic impact of the outbreak, our response to the outbreak, and the outbreak's 

impact on our business and financial results, with references to where these items are discussed in more detail in this report. 

We also highlight below the many uncertainties relating to the impact of the COVID-19 outbreak.

Economic Impact

The COVID-19 outbreak has caused substantial financial market volatility in recent weeks and has significantly adversely 

affected both the U.S. and the global economy. The extensive shutdowns and other reductions in business activity across the 

country and globally have substantially increased unemployment levels. The federal government is taking many actions to 

reduce the negative economic impact of the COVID-19 outbreak. For example, the Federal Reserve has lowered the federal 

funds rate and is increasing its purchases of Treasury and mortgage-backed securities, purchasing corporate debt securities, 

and establishing and expanding liquidity facilities to support the flow of credit to consumers and businesses. In addition, the 

federal government has passed legislation increasing and expanding unemployment benefits, providing direct cash payments 

to eligible taxpayers, and allocating funds to assist businesses, states, and municipalities. However, the extent to which these 

actions will mitigate the short-term and long-term negative impacts of the COVID-19 outbreak on the U.S. economy and our 

business is unclear. The outbreak has already resulted in a contraction in U.S. gross domestic product (“GDP”) for the first 

quarter of 2020, and could result in a sustained drop in the level of U.S. economic activity. 

We expect the COVID-19 outbreak to significantly negatively impact GDP, unemployment rates, and home price growth in 

2020. See “Key Market Economic Indicators” for information on macroeconomic conditions during the first quarter of 2020 and 

our current forecasts regarding future macroeconomic conditions. 

Fannie Mae Response

We are taking a number of actions to help borrowers, renters, lenders and servicers manage the negative impact of the 

COVID-19 outbreak, including providing forbearance to single-family and multifamily borrowers with COVID-19-related 

financial hardships, suspending foreclosure-related activities, providing lenders and servicers temporary flexibilities for certain 

of our Selling Guide and Servicing Guide requirements, and providing liquidity to lenders by purchasing loans through our 

whole loan conduit. See “Single-Family Business—Single-Family Mortgage Credit Risk Management” and “Multifamily 

Business—Multifamily Mortgage Credit Risk Management” for more information on the actions we are taking to help 

borrowers, renters, lenders and servicers in response to the COVID-19 outbreak. Also see “Legislation and Regulation” for a 

discussion of the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), which contains a number of 

provisions aimed at providing relief for borrowers and renters experiencing financial hardship caused by the COVID-19 

outbreak that apply to the loans we guarantee, and for a discussion of a change to our Single-Family Servicing Guide to 

provide stability and clarity to mortgage servicers regarding their obligations to advance missed borrower payments.

We have also taken steps to protect the safety and resiliency of our workforce. We have required nearly all of our workforce to 

work remotely since mid-March and continue to assess when it will be safe for employees to return to the office. To date, our 

business resiliency plans and technology systems have effectively supported this company-wide telework arrangement.

Impact on our Business and Financial Results

The economic dislocation caused by the COVID-19 outbreak was the primary driver of the decline in our net income in the first 

quarter of 2020, as compared with the first quarter of 2019. We significantly increased our allowance for loan losses to reflect 

the loan losses we currently expect as a result of the outbreak, which resulted in substantial credit-related expenses for the 

quarter. We expect the impact of the outbreak to continue to negatively affect our financial results and contribute to lower net 

income in 2020 than in 2019. We could have a net loss in one or more future periods or possibly could have a net worth deficit 

that requires a draw from Treasury under the senior preferred stock purchase agreement. See “Consolidated Results of 

Operations,” “Single-Family Business” and “Multifamily Business” for more information on our financial results for the first 

quarter of 2020.

The volatile market conditions in recent weeks have also adversely affected our ability to issue credit risk transfer securities, as 

described in “Single-Family Business—Single-Family Mortgage Credit Risk Management—Single-Family Credit Enhancement 

and Transfer of Mortgage Credit Risk” and “Multifamily Business—Multifamily Mortgage Credit Risk Management—Transfer of 

Multifamily Mortgage Credit Risk.”

Also see “Retained Mortgage Portfolio,” “Liquidity and Capital Management” and “Risk Management” for discussions of the 

impact of the COVID-19 outbreak on our business.

MD&A | Executive Summary

Fannie Mae First Quarter 2020 Form 10-Q 4
Risks and Uncertainties

Our current forecasts and expectations relating to the impact of the COVID-19 outbreak are subject to many uncertainties and 

may change, perhaps substantially. It is difficult to assess or predict the impact of this unprecedented event on our business, 

financial results or financial condition. Factors that will impact the extent to which the COVID-19 outbreak affects our business, 

financial results and financial condition include: the duration, spread and severity of the outbreak; the actions taken to contain 

the virus or treat its impact, including government actions to mitigate the economic impact of the outbreak; the nature and 

extent of the forbearance and modification options we offer borrowers affected by the outbreak; accounting elections and 

estimates relating to the impact of the COVID-19 outbreak; borrower and renter behavior in response to the outbreak and its 

economic impact; how quickly and to what extent normal economic and operating conditions can resume, including whether 

any future outbreaks interrupt economic recovery; and how quickly and to what extent affected borrowers, renters and 

counterparties can recover from the negative economic impact of the outbreak. See “Risk Factors” for a discussion of the risks 

to our business, financial results and financial condition relating to the COVID-19 outbreak. See “Forward-Looking Statements”

for a discussion of factors that could cause actual conditions, events or results to differ materially from those described in our 

forecasts, expectations and other forward-looking statements in this report.

Legislation and Regulation

The information in this section updates and supplements information regarding legislative and regulatory developments 

affecting our business set forth in “Business—Conservatorship, Treasury Agreements and Housing Finance Reform” and 

“Business—Charter Act and Regulation” in our 2019 Form 10-K. Also see “Risk Factors” in this report and in our 2019 Form 

10-K for discussions of risks relating to legislative and regulatory matters.

CARES Act

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act, referred to as the CARES Act, was enacted. The 

CARES Act is an economic stimulus bill that provides relief for individuals and businesses negatively affected by the 

COVID-19 outbreak. The CARES Act includes a number of provisions that apply to the loans we guarantee, including 

provisions requiring that our servicers:

• provide forbearance (that is, a temporary suspension of the borrower’s monthly mortgage payments) for up to 360 

days upon the request of any single-family borrower experiencing a financial hardship caused by the COVID-19 

outbreak, regardless of the borrower’s delinquency status and with no additional documentation required other than 

the borrower’s attestation to a financial hardship caused by the COVID-19 outbreak;

• provide forbearance for up to 90 days upon the request of any multifamily borrower experiencing a documented 

financial hardship due to the COVID-19 outbreak that was current on its payments as of February 1, 2020; during the 

forbearance period, multifamily borrowers may not evict tenants for nonpayment, issue notices to vacate, or charge 

fees for late payment of rent; and

• suspend foreclosures and foreclosure-related evictions for single-family properties through May 17, 2020, other than 

for vacant or abandoned properties.

The CARES Act also instituted a temporary moratorium through July 25, 2020 on tenant evictions for nonpayment of rent that 

applies to any single-family or multifamily property that secures a mortgage loan we own or guarantee. 

See “Single-Family Business—Single-Family Mortgage Credit Risk Management” and “Multifamily Business—Multifamily 

Mortgage Credit Risk Management” for more information on the actions we are taking to provide forbearance and suspend 

foreclosures and evictions pursuant to the CARES Act, FHFA directives, and other legal requirements.

The CARES Act also allows financial institutions to elect temporary relief relating to the accounting for troubled debt 

restructurings (“TDRs”). The CARES Act provides that a financial institution may elect to suspend the TDR requirements under 

U.S. generally accepted accounting principles (“GAAP”) for certain loss mitigation activities, including forbearance and loan 

modifications, related to the COVID-19 pandemic that occur between March 1, 2020 through the earlier of December 31, 2020 

or 60 days after the date on which the COVID-19 outbreak national emergency terminates, as long as the loan was not more 

than 30 days delinquent as of December 31, 2019. As described in “Note 1, Summary of Significant Accounting Policies,” we 

have elected this option for temporary TDR relief for COVID-19-related loss mitigation activities.

In addition to the requirements applicable to us, the CARES Act also contains many provisions designed to mitigate the 

negative economic impact of the COVID-19 outbreak. Some of these provisions may improve the ability of impacted borrowers 

to pay their mortgage loans and renters to pay their rent, including direct cash payments to eligible taxpayers below specified 

income limits, expanded unemployment insurance benefits and eligibility, and relief designed to prevent layoffs and business 

closures at small businesses. 

MD&A | Executive Summary

Fannie Mae First Quarter 2020 Form 10-Q 5
State and Local Government Responses to COVID-19

To slow the spread of the COVID-19 outbreak, many states and localities have issued stay-at-home orders requiring nonessential businesses to close. Across the nation, states are following different practices in determining which mortgage-related 

businesses, title companies, courts, county recording offices, and other such operations are essential and should remain open, 

which is contributing to uncertainty and delays in some mortgage refinances and originations.

Many states and localities are continuing to issue executive orders and propose legislation requiring mortgage forbearance, 

foreclosure and eviction moratoriums, and rent flexibilities. These executive orders and proposals vary significantly in duration 

and scope. Some of these orders and proposals provide borrower or renter relief that goes beyond the scope of the CARES 

Act. In addition, due to growing concern that renters will not be able to meet their monthly rental payments as the COVID-19 

emergency continues, some states and localities are considering rent freezes or rent forgiveness during the emergency’s 

duration. Actions taken by federal, state or local lawmakers to provide additional relief to borrowers and renters during the 

COVID-19 outbreak, depending on their scope and whether and to what extent they apply to our business, could negatively 

affect our business and financial results.

FHFA Instructions on Servicer Advance Requirement and Loan Removal Policy

In April 2020, FHFA instructed us to reduce our single-family servicers’ current obligations to advance missed borrower 

payments to MBS trusts. Currently, for the majority of our single-family guaranty book of business, when borrowers do not pay 

their mortgages, our Single-Family Servicing Guide generally requires servicers to advance the missed scheduled principal 

and interest payments to MBS trusts for payment to MBS holders until the loans are purchased from the MBS trusts. Since we 

typically do not purchase loans from MBS trusts while they are in forbearance, this servicer payment obligation could continue 

for an extended period of time. To provide servicers with stability and clarity regarding their payment obligations and to align 

our servicer advance requirement with Freddie Mac, FHFA’s instructions require that, effective August 2020, we cease 

requiring servicers to advance missed scheduled principal and interest payments after four months of missed borrower 

payments on a loan. After this time, we will 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. 

FHFA also issued an instruction in April 2020 requiring that loans subject to forbearance plans must remain in MBS trusts to 

the extent permitted by the trust documents. Our current policies already provide that we generally do not purchase loans in 

forbearance plans from MBS trusts, so this did not require a change to our current policies.

Stress Testing

The Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) requires certain financial companies 

to conduct annual stress tests to determine whether the companies have the capital necessary to absorb losses as a result of 

adverse economic conditions. In March 2020, FHFA amended its regulation relating to this requirement. Under the previous 

version of FHFA’s stress testing regulation, each year we were required to conduct a stress test using three different scenarios 

of financial conditions provided by FHFA: baseline, adverse and severely adverse. Consistent with actions taken by other U.S. 

financial services regulators, FHFA’s amended stress testing regulation eliminated the adverse scenario from the list of 

required scenarios. 

Duty to Serve Plan Extension

In March 2020, in light of COVID-19, FHFA notified us that it has extended until September 1, 2020 the deadline for the 

submission of our draft duty to serve underserved markets plan for 2021-2023.

MD&A | Legislation and Regulation

Fannie Mae First Quarter 2020 Form 10-Q 6
Key Market Economic Indicators

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

business and economic environments.

Selected Benchmark Interest Rates

2.31%

2.60%

1.45%

1.77%

2.65%

0.01%

2.79%

2.41%

0.72%

2.74%

2.41%

0.67%

3.46%

3.11%

1.80%

4.44%

4.06%

3.50%

3-month LIBOR1 SOFR1 2 10-year swap rate1

10-year Treasury rate1 30-year Fannie Mae MBS

par coupon rate1

30-year FRM rate3

03/31/18 06/30/18 09/30/18 12/31/18 03/31/19 06/30/19 09/30/19 12/31/19 03/31/20

(1)

According to Bloomberg. 

(2)

Secured Overnight Financing Rate (“SOFR”) began April 2018.

(3)

Refers to the U.S. weekly average fixed-rate mortgage rate according to Freddie Mac's Primary Mortgage Market Survey®. These rates are 

reported using the latest available data for a given period.

How interest rates can affect our financial results

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

typically results in lower net amortization income from cost basis adjustments on mortgage loans and related debt. 

Conversely, in a declining interest-rate environment, our mortgage loans tend to prepay faster, typically resulting in 

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 risk management derivatives and mortgage commitment derivatives, which we mark to market. 

Generally, we experience fair value losses when swap rates decrease and fair value gains when swap rates increase; 

however, because the composition of our derivative position varies across the yield curve, different yield curve 

changes (e.g., parallel, steepening or flattening) will generate different gains and losses. We are preparing to 

implement hedge accounting to reduce the impact of interest-rate volatility on our financial results. For additional 

information on the expected impact of hedge accounting, see “Consolidated Results of Operations—Fair Value 

Losses, Net.”

• Credit-related income (expense). Increases in mortgage interest rates tend to lengthen the expected lives of our 

loans, which generally increases the impairment and provision for credit losses on such loans. Decreases in 

mortgage interest rates tend to shorten the expected lives of our loans, which reduces the impairment and provision 

for credit losses on such loans.

MD&A | Key Market Economic Indicators

Fannie Mae First Quarter 2020 Form 10-Q 7
Single-Family Quarterly Home Price Growth Rate(1)

0.7%

2.5%

1.2%

0.5%

1.3%

Fannie Mae national home price index

1Q19 2Q19 3Q19 4Q19 1Q20

(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 become available.

How home prices 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. Decreases in home prices 

increase the losses we incur on defaulted loans.

• We currently expect home prices on a national basis will be flat in 2020. While we previously expected home price 

appreciation on a national basis to moderate slightly in 2020, compared with the 5.1% home price growth rate in 

2019, we revised our prior expectation downward due to the impact of the COVID-19 outbreak. We also expect 

significant regional variation in the timing and rate of home price growth. Our forecasts and expectations relating to 

the impact of the COVID-19 outbreak are subject to many uncertainties and may change, perhaps substantially, from 

our current forecasts and expectations. For example, if GDP declines more than we currently expect or the housing 

market is more sensitive to economic and labor market weakness than we expect, home price growth could contract 

further with potential declines in annual nominal home prices for 2020. For further discussion on housing activity, see 

“Single-Family Business—Single-Family Mortgage Market” and “Multifamily Business—Multifamily Mortgage Market.” 

New Housing Starts(1)

4.3%

(2.0)%

5.6%

8.5%

(0.9)%

(2.2)%

17.1%

(5.2)%

21.3%

7.3%

% quarterly change in single-family housing starts

% quarterly change in multifamily housing starts

1Q19 2Q19 3Q19 4Q19 1Q20

(1)

According to U.S. Census Bureau and subject to revision.

MD&A | Key Market Economic Indicators

Fannie Mae First Quarter 2020 Form 10-Q 8
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 rate of household formation and new 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 of broader 

economic activity contributing to the growth of GDP and to employment. Residential construction activity has 

historically been a leading indicator, weakening prior to a slowdown in U.S. economic activity and accelerating prior to 

a recovery. However, the 2008-2009 recession was significantly impacted by real estate and real estate finance. 

Therefore, various policy responses were targeted to real estate and real estate finance, potentially altering the 

cyclical performance of the real estate sector. Due to the adverse nature of the current economic situation, the 

housing sector’s performance may vary from its historical precedent. 

• In light of the uncertainties surrounding the effects of the COVID-19 outbreak and its impact on the economy, 

purchase demand is likely to decline as people delay buying homes, which we expect will contribute to a decrease in 

home construction. We expect single-family housing starts to fall sharply in the second quarter, and we expect fullyear 2020 single-family housing starts to decline as well. 

• 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. 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 often leads to a broader economic 

slowdown and signals expected increases in delinquency and losses on defaulted loans.

GDP, Unemployment Rate and Personal Consumption

1.7%

4.0% 3.5%

1.4% 1.1%

4.6%

3.2%

1.8%

(7.6)%

2.5%

3.5%

2.9%

1.1%

3.1%

2.0% 2.1% 2.1%

(4.8)%

4.0% 4.0% 3.7% 3.9% 3.8% 3.7% 3.5% 3.5%

4.4%

U.S. personal consumption, annualized percentage change1

Growth (decline) in GDP, annualized percentage change1

U.S. unemployment rate, as of period end2

1Q18 2Q18 3Q18 4Q18 1Q19 2Q19 3Q19 4Q19 1Q20

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

and subject to revision. 

(2)

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

MD&A | Key Market Economic Indicators

Fannie Mae First Quarter 2020 Form 10-Q 9
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.

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

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

consider purchasing another home, and renters to consider becoming homeowners. Homebuilding typically increases 

to meet the rise in demand. Mortgage delinquencies typically fall in an expanding economy, thereby decreasing credit 

losses. 

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

reduced economic activity. As the slowdown intensifies, households become more conservative and debt repayment 

takes precedence over consumption, which then falls and accelerates the slowdown. If the slowdown of economic 

growth turns to recession, employment losses occur impairing the ability of borrowers and renters to meet mortgage 

and rental payments, and loan delinquencies rise. Home sales and mortgage originations also typically fall in a 

slowing economy.

• Due to the impact of the COVID-19 outbreak, the unemployment rate rose significantly in March and unemployment 

claims increased sharply in April. We expect this trend to continue for the near term. Additionally, we expect GDP to 

decline in 2020. 

See “Risk Factors—Market and Industry Risk” in our 2019 Form 10-K and “Risk Factors” in this report for further discussion of 

risks to our business and financial results associated with interest rates, home prices, housing activity and economic 

conditions.

MD&A | Key Market Economic Indicators

Fannie Mae First Quarter 2020 Form 10-Q 10
Consolidated Results of Operations

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

consolidated financial statements and the accompanying notes.

Summary of Condensed Consolidated Results of Operations

For the Three Months 

Ended March 31,

2020 2019 Variance

(Dollars in millions)

Net interest income(1)$ 5,347 $ 4,796 $ 551

Fee and other income 308 134 174

Net revenues 5,655 4,930 725

Investment gains (losses), net (158) 133 (291)

Fair value losses, net (276) (831) 555

Administrative expenses (749) (744) (5)

Credit-related income (expenses):

Benefit (provision) for credit losses (2,583) 650 (3,233)

Foreclosed property expense (80) (140) 60

Total credit-related income (expenses) (2,663) 510 (3,173)

Temporary Payroll Tax Cut Continuation Act of 2011 (“TCCA”) fees (637) (593) (44)

Credit enhancement expense(2)(331) (171) (160)

Other expenses, net(3)(263) (207) (56)

Income before federal income taxes 578 3,027 (2,449)

Provision for federal income taxes (117) (627) 510

Net income $ 461 $ 2,400 $ (1,939)

Total comprehensive income $ 476 $ 2,361 $ (1,885)

(1)

Prior period amounts have been adjusted to reflect the current year change in presentation related to our yield maintenance fees. See 

“Note 1, Summary of Significant Accounting Policies” for more information about our change in presentation.

(2)

Previously included in Other expenses, net. Primarily consists of costs associated with our Credit Insurance Risk TransferTM (“CIRT

TM

”) and 

Connecticut Avenue Securities® (“CAS”) programs as well as enterprise-paid mortgage insurance (“EPMI”). See “Note 1, Summary of 

Significant Accounting Policies” for more information about our change in presentation.

(3)

Consists of the following: (a) debt extinguishment losses, net; (b) gains (losses) from partnership investments; and (c) losses on certain 

guaranty contracts.

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. Those guaranty 

fees are the primary component 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.

MD&A | Consolidated Results of Operations

Fannie Mae First Quarter 2020 Form 10-Q 11
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. Prior period amounts have been adjusted to reflect the current year 

change in presentation related to our yield maintenance fees. See “Note 1, Summary of Significant Accounting Policies” for 

more information about our change in presentation.

Components of Net Interest Income

For the Three Months 

Ended March 31,

2020 2019 Variance

(Dollars in millions)

Net interest income from guaranty book of business:

Base guaranty fee income, net of TCCA $ 2,600 $ 2,318 $ 282

Base guaranty fee income related to TCCA(1)637 593 44

Net amortization income 1,506 986 520

Total net interest income from guaranty book of business 4,743 3,897 846

Net interest income from portfolios 604 899 (295)

Total net interest income $ 5,347 $ 4,796 $ 551

(1)

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. 

Net interest income increased in the first quarter of 2020 compared with the first quarter of 2019, driven by higher net 

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

• Net amortization income increased in the first quarter of 2020 compared with the first quarter of 2019 as a lower 

interest-rate environment in the first quarter of 2020 led to increased prepayments on mortgage loans, which 

accelerated the amortization of cost basis adjustments on mortgage loans of consolidated trusts and the related debt.

• Net interest income from base guaranty fees increased in the first quarter of 2020 compared with the first quarter of 

2019 due to an increase in the size of our guaranty book of business and loans with higher base guaranty fees 

comprising a larger part of our guaranty book of business.

• Net interest income from portfolios decreased in the first quarter of 2020 compared with the first quarter of 2019

primarily due to sales of reperforming loans as well as liquidations, which have reduced the average balance of our 

retained mortgage portfolio over time. This was partially offset by a decrease in interest expense on long-term funding 

debt as the decline in our retained mortgage portfolio reduced our funding needs over the past twelve months. For a 

discussion of the impact of the COVID-19 outbreak on our funding needs and funding activity, see “Liquidity and 

Capital Management—Liquidity Management—Debt Funding.”

Analysis of Deferred Amortization Income

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

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

adjustments, either as premiums or discounts, 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 amortization income in future periods.

Deferred Income Represented by Net Premium Position

on Debt of Consolidated Trusts

(Dollars in billions)

$36.2 $33.6 $33.0

3/31/2019 12/31/2019 3/31/2020

MD&A | Consolidated Results of Operations

Fannie Mae First Quarter 2020 Form 10-Q 12
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. Prior-period amounts have been adjusted to reflect the current-year change in 

presentation related to our yield maintenance fees. See “Note 1, Summary of Significant Accounting Policies” for more 

information about our change in presentation.

Analysis of Net Interest Income and Yield

(1)

For the Three Months Ended March 31,

2020 2019

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 $ 101,765 $ 1,016 3.99 % $ 119,495 $ 1,323 4.43 %

Mortgage loans of consolidated trusts 3,259,557 27,922 3.43 3,153,383 28,539 3.62

Total mortgage loans(2)3,361,322 28,938 3.44 3,272,878 29,862 3.65

Mortgage-related securities 10,875 99 3.64 9,044 102 4.51

Non-mortgage-related securities(3)64,806 248 1.51 60,833 378 2.49

Federal funds sold and securities purchased 

under agreements to resell or similar 

arrangements 29,335 107 1.44 41,533 263 2.53

Advances to lenders 6,416 34 2.10 3,703 32 3.46

Total interest-earning assets $3,472,754 $ 29,426 3.39 % $3,387,991 $ 30,637 3.62 %

Interest-bearing liabilities:

Short-term funding debt $ 31,842 $ (102) 1.27 % $ 20,712 $ (125) 2.41 %

Long-term funding debt 135,415 (787) 2.32 179,152 (1,114) 2.49

Connecticut Avenue Securities®(“CAS”) 20,536 (289) 5.63 24,884 (382) 6.14

Total debt of Fannie Mae 187,793 (1,178) 2.51 224,748 (1,621) 2.89

Debt securities of consolidated trusts held by 

third parties 3,281,716 (22,901) 2.79 3,156,398 (24,220) 3.07

Total interest-bearing liabilities $3,469,509 $ (24,079) 2.78 % $3,381,146 $ (25,841) 3.06 %

Net interest income/net interest yield $ 5,347 0.62 % $ 4,796 0.57 %

(1)

Includes the effects of discounts, premiums and other cost basis adjustments.

(2)

Average balance includes mortgage loans on nonaccrual status. Typically, interest income on nonaccrual mortgage loans is recognized 

when cash is received. Interest income from the amortization of loan fees, primarily consisting of upfront cash fees and yield maintenance 

fees, was $1.6 billion and $1.1 billion for the first quarter of 2020 and 2019, respectively.

(3)

Consists of cash, cash equivalents and U.S Treasury securities.

Investment Gains (Losses), Net

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

securities, the sale of loans, gains and losses recognized on the consolidation and deconsolidation of securities, net of otherthan-temporary impairments recognized on our investments, and the lower of cost or fair value adjustments on single-family 

held-for-sale (“HFS”) loans. We recognized investment losses, net in the first quarter of 2020 as a result of the decrease in the 

fair value of HFS loans driven by price decreases during the quarter. We recognized investment gains, net in the first quarter of 

2019 primarily as a result of gains on the sale of AFS securities.

MD&A | Consolidated Results of Operations

Fannie Mae First Quarter 2020 Form 10-Q 13
Fair Value 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. While the estimated fair value of our derivatives that 

mitigate certain risk exposures may fluctuate, some of the financial instruments that generate these exposures are not 

recorded at fair value in our condensed consolidated financial statements. 

We are preparing to implement fair value hedge accounting to reduce the impact of interest-rate volatility on our financial 

results. Once implemented, for derivatives in designated hedges, fair value gains and losses attributable to changes in certain 

benchmark interest rates, such as the London Inter-bank Offered Rate (“LIBOR”) or the Secured Overnight Financing Rate 

(“SOFR”), may be reduced by offsetting gains and losses in the fair value of designated hedged mortgage loans or debt. 

Therefore, we expect the volatility of our financial results associated with changes in interest rates will be reduced substantially 

while fair value gains and losses driven by other factors, such as credit spreads, will remain. 

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

Fair Value Losses, Net

For the Three Months 

Ended March 31,

2020 2019

(Dollars in millions)

Risk management derivatives fair value losses attributable to:

Net contractual interest expense on interest-rate swaps $ (106) $ (266)

Net change in fair value during the period (255) (122)

Total risk management derivatives fair value losses, net (361) (388)

Mortgage commitment derivatives fair value losses, net (993) (300)

Credit enhancement derivatives fair value losses, net (11) (7)

Total derivatives fair value losses, net (1,365) (695)

Trading securities gains, net 647 92

CAS debt fair value gains (losses), net 637 (22)

Other, net(1)(195) (206)

Fair value losses, net $ (276) $ (831)

(1)

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

Fair value losses, net decreased in the first quarter of 2020 compared with the first quarter of 2019, due to gains on our trading 

securities and CAS debt. Our fair value gains and losses in the first quarter of 2020 were impacted by market disruptions due 

to the COVID-19 outbreak that resulted in lower interest rates and widened spreads between debt and U.S. Treasury yields.

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

• decreases in the fair value of mortgage commitment derivatives due to losses on commitments to sell mortgagerelated securities as prices increased during the commitment period as interest rates declined, which were partially 

offset by gains on commitments to buy mortgage-related securities; 

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

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

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

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

due to declines in interest rates.

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

driven by declines in U.S. Treasury yields and widened spreads between debt yields and U.S. Treasury yields, which resulted 

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

Fair value losses in the first quarter of 2019 were primarily driven by: 

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

pay-fixed risk management derivatives due to declines in longer-term swap rates during the quarter, which were

partially offset by increases in the fair value of our receive-fixed risk management derivatives;

MD&A | Consolidated Results of Operations

Fannie Mae First Quarter 2020 Form 10-Q 14
• decreases in the fair value of our mortgage commitment derivatives due to losses on commitments to sell mortgagerelated securities as a result of increases in the prices of securities as interest rates decreased during the

commitment periods; and

• losses driven by increases in the fair value of long-term debt of consolidated trusts held at fair value.

Credit-Related Income (Expense)

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

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

borrower payment behavior, events such as natural disasters or pandemics, the types and volume of our loss mitigation 

activities, including forbearance and loan modifications, the volume of foreclosures completed, and the redesignation of loans 

from held for investment (“HFI”) to held for sale (“HFS”). While the redesignation of certain reperforming and nonperforming 

single-family loans has been a significant driver of credit-related income in recent periods, we expect to see a significantly 

reduced impact from this activity in 2020 as market disruptions due to the COVID-19 outbreak have decreased investor 

interest in reperforming and nonperforming loans.

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

data used in determining our allowance for loan losses. The January 1, 2020 CECL standard implementation introduces 

additional volatility in our financial results as credit-related income or expense now includes expected lifetime losses on our 

loans and thus are sensitive to fluctuations in the factors detailed above.

The primary driver of credit-related expense for the first quarter of 2020 was an increase in our allowance for loan losses due 

to losses we expect to incur as a result of the COVID-19 outbreak, using an expected lifetime loss methodology. Estimating the 

impact of the COVID-19 outbreak on our expected credit loss reserves required significant management judgment, including 

estimates of the number of single-family borrowers who will receive forbearance and any resulting loan modifications that will 

be provided once the forbearance period ends. Under our CECL methodology, depending on the type of loan modification 

granted, loss severity estimates vary. In determining our allowance for loan losses as of March 31, 2020, we estimated that 

15% of our single-family borrowers and 20% of our multifamily borrowers would ultimately receive forbearance due to a 

COVID-19-related financial hardship. Given the short-term nature of the forbearance period for multifamily borrowers (up to 3 

months), the impact of forbearance did not have a material impact on our multifamily allowance as of March 31, 2020. 

Although we believe our estimates underlying our allowance determination 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 surrounding 

this unprecedented event. 

MD&A | Consolidated Results of Operations

Fannie Mae First Quarter 2020 Form 10-Q 15
Benefit (Provision) for Credit Losses

The table below provides a quantitative analysis of the drivers for the first quarter of 2020 of our single-family and multifamily 

provision for credit losses and the increase in expected benefit from freestanding credit enhancements. The provision for credit 

losses includes our provision for loan losses on our loan book of business as well as our provision for our guaranty loss 

reserves. It excludes the transition impact of adopting the CECL standard, which was recorded as an adjustment to beginning 

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

attribution shown below is based on internal allocation estimates. 

Expected benefits from credit enhancements that are contractually attached to the loan, which largely consist of primary 

mortgage insurance, are included as a reduction of estimated credit losses in our allowance for loan losses. Expected benefits 

from freestanding credit enhancements are not considered in our allowance for loan losses and are recognized separately in 

“Fee and other income.” Freestanding credit enhancements relate to our credit risk transfers, including but not limited to, Credit 

Insurance Risk TransferTM (“CIRT

TM

”) transactions, Connecticut Avenue Securities® (“CAS”) credit risk transfer programs, and 

multifamily Delegated Underwriting and Servicing (“DUS®”) lender risk-sharing. Benefits from these programs are modeled 

based on estimated losses and the contractual terms of the credit risk transfer arrangements.

Components of Provision for Credit Losses and Benefit from Freestanding 

Credit Enhancements 

For the Three Months 

Ended March 31, 2020

(Dollars in millions)

Single-family provision for credit losses:

Changes in loan activity(1)

$ (84)

Redesignation of loans from HFI to HFS 175

Actual and forecasted home prices (921)

Actual and projected interest rates 1,257

Adjustment to model results for estimated impact of the COVID-19 outbreak (2,500)

Other (97)

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

Multifamily provision for credit losses:

Changes in loan activity(1)

(22)

Actual and projected interest rates 216

Estimated impact of the COVID-19 outbreak (636)

Other 32

Multifamily provision for credit losses (410)

Total provision for credit losses(2)

$ (2,580)

Increase in expected benefit from freestanding credit enhancements:

Single-family $ 58

Multifamily 127

Total increase in expected benefit from freestanding credit enhancements $ 185

(1)

Primarily consists of changes in the allowance due to loan delinquency, loan liquidations, new TDRs, amortization of concessions granted 

to borrowers and the impact of FHFA’s Advisory Bulletin 2012-02, “Framework for Adversely Classifying Loans, Other Real Estate Owned, 

and Other Assets and Listing Assets for Special Mention” (the “Advisory Bulletin”). For multifamily, it also includes the impact of changes in 

debt service coverage ratios (“DSCRs”) based on updated property financial information.

(2)

The table does not include credit losses of $3 million on our AFS securities.

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

• Expected credit losses as a result of the COVID-19 outbreak, which was included as an adjustment to modeled 

results. Given the rapidly changing and deteriorating market conditions in recent weeks as a result of the 

unprecedented COVID-19 outbreak, we believe our model used to estimate single-family credit losses as of March 

31, 2020 does not capture the entirety of losses we expect to incur relating to COVID-19. As such, management used 

its judgment to increase the loss projections developed by our credit loss model to reflect our current expectations 

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

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

modifications as a result thereof, (2) the effect of TDR accounting relief from the CARES Act, and (3) lower expected 

MD&A | Consolidated Results of Operations

Fannie Mae First Quarter 2020 Form 10-Q 16
prepayment volumes given the sharp rise in unemployment rates that are expected to stay elevated over the near 

term. In developing the model adjustment shown in the table above, management considered the current credit risk 

profile of our single-family loan book of business, as well as relevant historical credit loss experience during rare or 

stressful economic environments.

• A decrease in our expectations for home price growth. We revised our forecast to reflect near zero home price 

appreciation on a national basis for 2020 due to COVID-19 market disruptions. The actual and forecasted home price 

impact shown in the table above reflects our revised forecast. Lower home prices increase the likelihood that loans 

will default and increase the amount of credit loss on loans that do default, which impacts our estimate of losses and 

ultimately increases our loss reserves and provision for credit losses.

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

actual and forecasted interest rate impact shown in the table above reflects our modeled results. As noted above, we 

adjusted downward our modeled expectation of prepayment volumes due to the COVID-19 outbreak, which reduced 

this modeled benefit from interest rates.

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

• Expected credit losses as a result of the COVID-19 outbreak. Similar to the single-family provision for credit losses 

discussed above, we believe our model used to estimate multifamily credit losses as of March 31, 2020 does not 

capture the entirety of losses we expect to incur relating to COVID-19. As such, management used its judgment to 

increase the loss projections developed by our credit loss model to reflect our current expectations relating to 

COVID-19’s impact. Accordingly, our current multifamily provision for credit losses was primarily driven by higher 

expected unemployment rates, which we expect will increase the number of loans in forbearance and reduce property 

net operating income in the near term, thereby decreasing forecasted property values and increasing the probability 

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

multifamily loan book of business, as well as relevant historical credit loss experience during rare or stressful 

economic environments. 

The table below provides quantitative analysis of the drivers for the first quarter of 2019 of our single-family benefit for credit 

losses. The presentation of our components represents amounts recognized prior to our transition to the lifetime loss model 

prescribed by the CECL standard. Many of the drivers that contribute to our benefit for credit losses overlap or are 

interdependent. The attribution shown below is based on internal allocation estimates. The table does not include our 

multifamily benefit (provision) for credit losses as the amounts for 2019 were less than $50 million. 

Components of Benefit for Credit Losses

For the Three Months 

Ended March 31,

2019

(Dollars in millions)

Single-family benefit for credit losses:

Changes in loan activity(1)$ 24

Redesignation of loans from HFI to HFS 227

Actual and forecasted home prices 228

Actual and projected interest rates 165

Other(2)17

Total single-family benefit for credit losses $ 661

(1)

Primarily consists of changes in the allowance due to loan delinquency, loan liquidations, new TDRs, amortization of concessions granted 

to borrowers and the impact of FHFA’s Advisory Bulletin. 

(2)

Primarily consists of the impact of model and assumption changes and changes in the reserve for guaranty losses that are not separately 

included in the other components.

The primary factors that contributed to our benefit for credit losses in the first quarter of 2019 were:

• The redesignation of certain reperforming single-family loans from HFI to HFS as we no longer intend to hold them for 

the foreseeable future or to maturity. Upon redesignation of these loans, we recorded the loans at the lower of cost or 

fair value with a write-off to the allowance for loan losses. Amounts recorded in the allowance related to these loans 

exceeded the amounts charged off, which contributed to the benefit for credit losses.

MD&A | Consolidated Results of Operations

Fannie Mae First Quarter 2020 Form 10-Q 17
• An increase in actual and forecasted home prices. 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.

• Lower actual and projected mortgage interest rates. 

TCCA Fees 

Pursuant to the TCCA, in 2012, FHFA directed us to increase our single-family guaranty fees by 10 basis points and remit this 

increase to Treasury. This TCCA-related revenue is included in “Net interest income” and the expense is recognized as “TCCA

fees” in our condensed consolidated financial statements. TCCA fees increased in the first quarter of 2020 compared with the 

first quarter of 2019 as our book of business subject to the TCCA continued to grow. See “Business—Charter Act and 

Regulation—GSE Act and Other Legislation—Guaranty Fees and Pricing” in our 2019 Form 10-K for further discussion of the 

TCCA. 

Credit Enhancement Expense

Credit enhancement expense primarily consists of costs associated with our CIRT and CAS programs as well as enterprisepaid mortgage insurance (“EPMI”). We exclude from this expense costs related to our CAS transactions accounted for as debt 

instruments and credit risk transfer programs accounted for as derivative instruments. Credit enhancement expense has been 

presented as a separate line item for all periods presented as the percentage of our book of business covered by freestanding 

credit enhancements has increased and become a more significant driver of our results of operations. In prior periods, credit 

enhancement expenses were recorded in “Other expenses, net.” 

Credit enhancement expense increased in the first quarter of 2020 compared with the first quarter of 2019 primarily due to 

higher outstanding volumes of loans covered by credit risk transfer transactions. We discuss the transfer of mortgage credit 

risk in “Single-Family Business—Single-Family Mortgage Credit Risk Management—Single-Family Credit Enhancement and 

Transfer of Mortgage Credit Risk” and “Multifamily Business—Multifamily Mortgage Credit Risk Management—Transfer of 

Multifamily Mortgage Credit Risk.”

MD&A | Consolidated Results of Operations

Fannie Mae First Quarter 2020 Form 10-Q 18
Consolidated Balance Sheet Analysis

This section discusses our condensed consolidated balance sheets and should be read together with our condensed 

consolidated financial statements and the accompanying notes. 

Summary of Condensed Consolidated Balance Sheets

As of

March 31, 

2020

December 31, 

2019 Variance

(Dollars in millions)

Assets

Cash and cash equivalents and federal funds sold and securities purchased 

under agreements to resell or similar arrangements $ 88,238 $ 34,762 $ 53,476

Restricted cash 48,245 40,223 8,022

Investments in securities 55,230 50,527 4,703

Mortgage loans:

Of Fannie Mae 106,674 101,668 5,006

Of consolidated trusts 3,269,345 3,241,510 27,835

Allowance for loan losses (13,209) (9,016) (4,193)

Mortgage loans, net of allowance for loan losses 3,362,810 3,334,162 28,648

Deferred tax assets, net 12,831 11,910 921

Other assets 34,002 31,735 2,267

Total assets $ 3,601,356 $ 3,503,319 $ 98,037

Liabilities and equity

Debt:

Of Fannie Mae $ 228,458 $ 182,247 $ 46,211

Of consolidated trusts 3,334,098 3,285,139 48,959

Other liabilities 24,855 21,325 3,530

Total liabilities 3,587,411 3,488,711 98,700

Fannie Mae stockholders’ equity:

Senior preferred stock 120,836 120,836 —

Other net deficit (106,891) (106,228) (663)

Total equity 13,945 14,608 (663)

Total liabilities and equity $ 3,601,356 $ 3,503,319 $ 98,037

Cash and Cash Equivalents and Federal Funds Sold and Securities Purchased 

Under Agreements to Resell or Similar Arrangements

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

similar arrangements from December 31, 2019 to March 31, 2020 was primarily driven by proceeds from new debt issuances 

to support refinancing activity and in anticipation of future potential liquidity needs as a result of the COVID-19 outbreak, as 

well as proceeds from loan payoffs. See “Liquidity and Capital Management—Debt Funding—Debt Funding Activity" for a 

discussion of our funding needs related to the COVID-19 outbreak.

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 increased as of March 31, 2020 compared with December 31, 2019, primarily driven by:

• an increase in mortgage loans due to acquisitions outpacing liquidations and sales; 

• partially offset by an increase in our allowance for loan losses due to losses we expect to incur as a result of the 

COVID-19 outbreak and the impact of our adoption of the CECL standard on January 1, 2020.

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

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

MD&A | Consolidated Balance Sheet Analysis

Fannie Mae First Quarter 2020 Form 10-Q 19
Debt

The increase in debt of Fannie Mae from December 31, 2019 to March 31, 2020 was primarily driven by new short- and longterm debt issuances to support refinancing activity and in anticipation of future potential liquidity needs as a result of the 

COVID-19 outbreak. The increase in debt of consolidated trusts from December 31, 2019 to March 31, 2020 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—Liquidity Management—Debt Funding” for a summary of the activity of the 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 decreased as of March 31, 2020 compared with December 31, 2019 due to a charge of $1.1 billion to retained 

earnings due to our implementation of the CECL standard on January 1, 2020. See “Note 1, Summary of Significant 

Accounting Policies—New Accounting Guidance—The Current Expected Credit Loss Standard” for further details.

Under the liquidation preference provisions of the senior preferred stock described in “Business—Conservatorship, Treasury 

Agreements and Housing Finance Reform—Treasury Agreements” in our 2019 Form 10-K, the aggregate liquidation 

preference of the senior preferred stock increased from $131.2 billion as of December 31, 2019 to $135.4 billion as of March 

31, 2020. Because our net worth did not increase during the first quarter of 2020, the aggregate liquidation preference of the 

senior preferred stock will remain at $135.4 billion as of June 30, 2020.

Retained Mortgage Portfolio

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

We use our retained mortgage portfolio primarily to provide liquidity to the mortgage market and support our loss mitigation 

activities. Previously, we also used our retained mortgage portfolio for investment purposes.

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. More than half of the balance of 

“Other” as of March 31, 2020 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)

$59.5 $59.0

$60.7 $60.5

$33.4 $31.9

$153.6 $151.4

Lender liquidity Loss mitigation Other

12/31/2019 3/31/2020

The decrease in our retained mortgage portfolio as of March 31, 2020 compared with December 31, 2019 was primarily due to 

sales of Fannie Mae securities and continued liquidations of loans. This decrease was partially offset by an increase in our 

acquisitions of loans through our whole loan conduit in the first quarter of 2020 driven by higher mortgage refinance activity. 

MD&A | Consolidated Balance Sheet Analysis

Fannie Mae First Quarter 2020 Form 10-Q 20
The table below displays the components of our retained mortgage portfolio, measured by unpaid principal balance.

Retained Mortgage Portfolio

As of

March 31, 

2020

December 31, 

2019

(Dollars in millions)

Lender liquidity:

Agency securities(1)$ 32,316 $ 38,375

Mortgage loans 26,744 21,152

Total lender liquidity 59,060 59,527

Loss mitigation mortgage loans(2)60,477 60,731

Other:

Reverse mortgage loans 16,397 17,129

Mortgage loans 6,474 6,546

Reverse mortgage securities(3)7,233 7,575

Private-label and other securities 974 1,250

Fannie Mae-wrapped private-label securities 555 581

Mortgage revenue bonds 257 272

Total other 31,890 33,353

Total retained mortgage portfolio $ 151,427 $ 153,611

Retained mortgage portfolio by segment:

Single-family mortgage loans and mortgage-related securities $ 144,040 $ 145,179

Multifamily mortgage loans and mortgage-related securities $ 7,387 $ 8,432

(1)

Consists of Fannie Mae, Freddie Mac, and Ginnie Mae mortgage-related securities, including Freddie Mac securities guaranteed by 

Fannie Mae. Excludes Fannie Mae and Ginnie Mae reverse mortgage securities and Fannie Mae-wrapped private-label securities.

(2)

Includes single-family loans classified as TDRs that were on accrual status of $37.9 billion and $38.2 billion as of March 31, 2020 and 

December 31, 2019, respectively, and single-family loans on nonaccrual status of $19.6 billion as of March 31, 2020 and December 31, 

2019. Includes multifamily loans classified as TDRs that were on accrual status of $40 million and $51 million as of March 31, 2020 and 

December 31, 2019, respectively, and multifamily loans on nonaccrual status of $95 million and $132 million as of March 31, 2020 and 

December 31, 2019, 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 by our senior preferred stock purchase agreement 

with Treasury, and FHFA has directed that we further cap our mortgage assets at $225 billion. The Treasury plan includes a 

recommendation that Treasury and FHFA amend our senior preferred stock purchase agreement to further reduce the cap on 

our investments in mortgage-related assets, and also to restrict our retained mortgage portfolio to solely supporting the 

business of securitizing MBS. See “Business—Conservatorship, Treasury Agreements and Housing Finance Reform” in our 

2019 Form 10-K for additional information on our portfolio cap and the Treasury plan. 

Effective January 31, 2020, FHFA directed us to include 10% of the notional value of interest-only securities in calculating the 

size of the retained portfolio for the purpose of determining compliance with the senior preferred stock purchase agreement 

retained portfolio limits and associated FHFA guidance. As of March 31, 2020, 10% of the notional value of our interest-only 

securities was $2.1 billion, which is not included in the table above. 

We have the option or, in some instances, the obligation, to purchase mortgage loans that meet specific criteria from an MBS 

trust. In support of our loss mitigation strategy, we purchased $3.0 billion of loans from our single-family MBS trusts in the first 

quarter of 2020, the substantial majority of which were delinquent. In deciding whether and when to exercise our option to 

purchase a loan from a single-family MBS trust, we consider a variety of factors, including, but not limited to, the cost of funds, 

general market conditions, and relevant market yields. The weight we give to these factors, among others, changes depending 

on market circumstances and other factors. See “MD&A—Retained Mortgage Portfolio—Purchases of Loans from Our MBS 

Trusts” in our 2019 Form 10-K for more information relating to our purchases of loans from MBS trusts.

As a result of the COVID-19 outbreak, we have made a number of changes to our single-family and multifamily loss mitigation 

strategies. This includes providing single-family borrowers experiencing COVID-19-related financial hardship with forbearance 

for up to 12 months, as well as repayment plan and loan modification options once the forbearance period ends. Typically, we 

do not buy loans out of our MBS trusts while they are in forbearance or when they are granted certain other loss mitigation 

options, such as a repayment plan or certain types of loan modifications. Given the significant uncertainty associated with the 

MD&A | Retained Mortgage Portfolio

Fannie Mae First Quarter 2020 Form 10-Q 21
COVID-19 outbreak, the amount of loans we may buy out of trusts over the long term as a result of loan delinquencies or loss 

mitigation strategies could substantially increase the size of our retained mortgage portfolio. As described in “MD&A—Liquidity 

and Capital Management—Debt Funding Activity,” depending on the extent of our funding needs and the amount of mortgage 

loans we purchase from MBS trusts, we may be required to obtain FHFA’s and Treasury’s prior written consent to increase our 

current debt limit and mortgage asset limit.

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 began issuing single-family uniform mortgage-backed securities, or “UMBS®”, in June 2019. In this 

report, we use the term “Fannie Mae-issued UMBS” to refer to single-family Fannie Mae MBS that are directly backed by fixedrate 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, SupersTM, Real Estate 

Mortgage Investment Conduit securities (“REMICs”) and other types of single-family or multifamily mortgage-backed 

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.

The table below displays the composition of our guaranty book of business based on unpaid principal balance. Our singlefamily guaranty book of business accounted for 90% of our guaranty book of business as of March 31, 2020 and December 

31, 2019. 

Composition of Fannie Mae Guaranty Book of Business(1)

As of

March 31, 2020 December 31, 2019

SingleFamily Multifamily TotalSingleFamily Multifamily Total

(Dollars in millions)

Conventional guaranty book of business(2)$ 3,038,517 $ 347,381 $3,385,898 $ 2,997,475 $ 341,522 $3,338,997

Government guaranty book of business(3)26,135 1,060 27,195 27,422 1,079 28,501

Guaranty book of business 3,064,652 348,441 3,413,093 3,024,897 342,601 3,367,498

Freddie Mac securities guaranteed by Fannie Mae(4)72,660 — 72,660 50,100 — 50,100

Total Fannie Mae guarantees $ 3,137,312 $ 348,441 $3,485,753 $ 3,074,997 $ 342,601 $3,417,598

(1)

Includes other single-family Fannie Mae guaranty arrangements of $1.3 billion as of March 31, 2020 and December 31, 2019, and other 

multifamily Fannie Mae guaranty arrangements of $11.1 billion and $11.3 billion as of March 31, 2020 and December 31, 2019, 

respectively. The unpaid principal balance of resecuritized Fannie Mae MBS is included only once in the reported amount.

(2)

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

(3)

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

(4)

Consists of approximately (i) $55.3 billion in unpaid principal balance of Freddie Mac-issued UMBS backing Fannie Mae-issued Supers; 

and (ii) $17.3 billion in unpaid principal balance of Freddie Mac securities backing Fannie Mae-issued REMICs, a portion of which may be 

backed in whole or in part by Fannie Mae MBS. Therefore, our total exposure to Freddie Mac securities included in Fannie Mae REMIC 

collateral is likely lower.

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

Finance Regulatory Reform Act of 2008 (together, the “GSE Act”) requires us to set aside each year an amount equal to 4.2 

MD&A | Retained Mortgage Portfolio

Fannie Mae First Quarter 2020 Form 10-Q 22
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 2020, 

we paid $280 million to the funds based on our new business purchases in 2019. For the first three months of 2020, we 

recognized an expense of $86 million related to this obligation based on our $204.9 billion in new business purchases during 

the period. We expect to pay this amount to the funds in 2021, plus additional amounts to be accrued based on our new 

business purchases in the remaining nine months of 2020. See “Business—Charter Act and Regulation—GSE Act and Other 

Legislation—Affordable Housing Allocations” in our 2019 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 the net revenues and net income for each of our business segments for the first quarter of 2019

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

Business Segment Net Revenues and Net Income

(Dollars in billions) 

$4.1

$4.7

$1.8

$0.1

Single-Family net revenues

Single-Family net income

Q1 2019 Q1 2020

$0.8 $1.0

$0.6 $0.4

Multifamily net revenues

Multifamily net income

Q1 2019 Q1 2020

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

Single-Family Business

Working with our lender customers, 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 2019 Form 10-K. See 

“MD&A—Single-Family Business” in our 2019 Form 10-K for additional information regarding the primary business activities, 

customers and competition of our Single-Family business.

Single-Family Market Share

Single-Family Mortgage Acquisition Market Share

Our share of the single-family mortgage acquisition market, including loans held on lenders’ books, may fluctuate from period 

to period. We currently estimate our single-family acquisition market share in the last three years remained within the range of 

24% to 30%, supporting approximately one in four single-family mortgage loans. Our market share estimate is based on 

publicly available data regarding the amount of single-family first-lien mortgage loans originated and our competitors’

acquisitions. 

MD&A | Guaranty Book of Business

Fannie Mae First Quarter 2020 Form 10-Q 23
Single-Family Mortgage-Related Securities Issuances Market Share

Our single-family Fannie Mae MBS issuances were $185.7 billion for the first quarter of 2020, compared with $88.4 billion for 

the first quarter of 2019. Based on the latest data available, the chart below displays our estimated market share of singlefamily mortgage-related securities issuances in the first quarter of 2020 as compared with that of our primary competitors for 

the issuance of single-family mortgage-related securities.

Single-Family Mortgage-Related Securities Issuances

First Quarter 2020 Market Share

Fannie Mae: 38%

Freddie Mac: 26%

Ginnie Mae: 32%

Private-label securities: 4%

We estimate our market share of single-family mortgage-related securities issuances was 38% in the first quarter of 2020, 

compared with 37% in the fourth quarter of 2019 and 36% in the first quarter of 2019.

Single-Family Mortgage Market

We expect housing activity to slow significantly in the months ahead due to the COVID-19 outbreak despite a solid first quarter

of 2020. We forecast a sharp decline in total home sales and housing starts in the second quarter of 2020 and, despite some 

modest recovery expected in the following quarters, declines for the full year of 2020. However, we expect the current low 

interest rate environment to support refinance activity throughout 2020.

Housing activity rose slightly in the first quarter of 2020 compared with the fourth quarter of 2019. Total existing home sales 

averaged 5.5 million units annualized in the first quarter of 2020, compared with 5.4 million units in the fourth quarter of 2019, 

according to data from the National Association of REALTORS®. According to the U.S. Census Bureau, new single-family 

home sales increased during the first quarter of 2020, averaging an annualized rate of 715,000 units, compared with 710,000

units in the fourth quarter of 2019. 

The 30-year fixed mortgage rate averaged 3.51% in the first quarter of 2020, compared with 3.70% in the fourth quarter of 

2019, according to Freddie Mac’s Primary Mortgage Market Survey®.

We forecast that total originations in the U.S. single-family mortgage market in 2020 will increase from 2019 levels by 

approximately 10%, from an estimated $2.30 trillion in 2019 to $2.52 trillion in 2020, and that the amount of originations in the 

U.S. single-family mortgage market that are refinances will increase from an estimated $1.01 trillion in 2019 to $1.41 trillion in 

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. As measured for purposes of the information 

reported below, our single-family conventional guaranty book of business was $2,976.8 billion as of March 31, 2020 and 

$2,951.9 billion as of December 31, 2019.

MD&A | Single-Family Business

Fannie Mae First Quarter 2020 Form 10-Q 24
Single-Family Business Metrics

Net interest income for our Single-Family business is driven by the guaranty fees we charge and the size of our single-family 

conventional guaranty book of business. 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, which are based on 

FHFA’s conservatorship capital framework. 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 acquisitions, along with our average single-family conventional 

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

Single-Family Guaranty Fees, Acquisitions

 and Book of Business Metrics

(Dollars in billions)

43.3 bps 43.8 bps

50.4 bps 49.4 bps

Q1 2019 Q1 2020

$2,903.9

$2,964.3

$85.0

$190.5

Q1 2019 Q1 2020

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.

Average charged guaranty fee represents, on an annualized basis, the sum of the average guaranty fee rate for our singlefamily conventional guaranty arrangements during the period plus the recognition of any upfront cash payments relating to 

these guaranty arrangements based on an estimated average life at the time of acquisition. Management uses average 

charged guaranty fee on new acquisitions as a metric to assess the reasonableness of our compensation for the credit risk we 

manage on newly acquired loans.

Our average charged guaranty fee on newly acquired conventional single-family loans, net of TCCA fees, decreased from 50.4

basis points in the first quarter of 2019 to 49.4 basis points in the first quarter of 2020, primarily driven by the stronger credit 

profile of our newly acquired single-family loans. 

MD&A | Single-Family Business

Fannie Mae First Quarter 2020 Form 10-Q 25
Single-Family Business Financial Results

For the Three Months 

Ended March 31,

2020 2019 Variance

(Dollars in millions)

Net interest income(1)$ 4,541 $ 4,039 $ 502

Fee and other income 152 106 46

Net revenues 4,693 4,145 548

Investment gains (losses), net (152) 94 (246)

Fair value losses, net (460) (887) 427

Administrative expenses (629) (631) 2

Credit-related income (expense)(2)(2,250) 518 (2,768)

TCCA fees(1)(637) (593) (44)

Credit enhancement expense (312) (167) (145)

Other expenses, net(3)(167) (170) 3

Income before federal income taxes 86 2,309 (2,223)

Provision for federal income taxes (18) (484) 466

Net income $ 68 $ 1,825 $ (1,757)

(1)

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.” 

(2)

Consists of the benefit or provision for credit losses and foreclosed property income or expense. The presentation of our credit-related 

income for the three months ended March 31, 2019 represents amounts recognized prior to our transition to the lifetime loss model 

prescribed by the CECL standard.

(3)

Consists primarily of debt extinguishment gains and losses, housing trust fund expenses and loan subservicing costs.

Net Interest Income

Single-family net interest income increased in the first quarter of 2020 compared with the first quarter of 2019, primarily due to 

higher net amortization income and higher base guaranty fee income, partially offset by a decline in income from portfolios. 

The drivers of net interest income for the Single-Family segment for the first quarter of 2020 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.”

Investment Gains (Losses), Net

Investment losses in the first quarter of 2020 were the result of decreases in the fair value of HFS loans. Investment gains in 

the first quarter of 2019 were the result of gains on sales of AFS securities. 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 Losses, Net

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

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

value losses, net in the first quarter of 2019 were primarily driven by net interest expense on our risk management derivatives, 

and decreases in the fair value of our pay-fixed risk management derivatives and our mortgage commitments. In addition, the 

increase in the fair value of our debt also resulted in fair value losses for the first quarter of 2019. The drivers of fair value 

losses, net for the Single-Family segment are consistent with the drivers of fair value losses, net in our condensed 

consolidated statements of operations and comprehensive income, which we discuss in “Consolidated Results of Operations—

Fair Value Losses, Net.”

As we discuss in “Consolidated Results of Operations—Fair Value Losses, Net,” we expect that implementing a hedge 

accounting program will reduce the volatility of our financial results associated with changes in interest rates, while fair value 

gains and losses driven by other factors such as credit spreads will remain.

MD&A | Single-Family Business

Fannie Mae First Quarter 2020 Form 10-Q 26
Credit-Related Income (Expense)

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

losses we expect to incur as a result of the COVID-19 outbreak using an expected lifetime loss methodology consistent with 

our implementation of the CECL standard. 

Credit-related income for the first quarter of 2019 was primarily driven by the redesignation of certain single-family loans from 

HFI to HFS; an increase in actual and forecasted home prices; and lower actual and projected mortgage interest rates.

See “Consolidated Results of Operations—Credit-Related Income (Expense)” in this report for more information on the primary 

factors that contributed to our single-family credit-related income (expense).

Single-Family Mortgage Credit Risk Management

This section updates our discussion of single-family mortgage credit risk management in our 2019 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 2019 Form 10-K.

Single-Family Acquisition and Servicing Policies and Underwriting and 

Servicing Standards

COVID-19 Temporary Selling Policies

We are working closely with Freddie Mac under the guidance and at the direction of FHFA to offer temporary measures during 

the COVID-19 national emergency to help ensure lenders have the clarity and flexibility to continue to lend in a prudent and 

responsible manner. The temporary flexibilities to our Selling Guide requirements during the COVID-19 national emergency 

include: 

• purchasing certain loans that are subject to a COVID-19-related forbearance at the time of sale, subject to payment of 

a loan-level price adjustment;

• offering flexibilities related to the lender’s process for obtaining verbal verification of employment;

• allowing temporary flexibilities to our appraisal requirements; and

• providing flexibilities for use of a power of attorney and remote online notarization.

We have also temporarily updated some of our Selling Guide requirements to help ensure that the most up-to-date information 

is being considered to support the borrower’s ability to repay the loan, including:

• reducing our age-of-document requirements from four months to two months for most income and asset 

documentation;

• requiring lenders to confirm a self-employed borrower’s business is open and operating within 10 business days of 

the note date, or after closing but prior to delivery of the loan; and

• in light of current market volatility, updating our policies for use of stocks, stock options and mutual funds for down 

payment or closing costs to require documentation of the borrower’s actual receipt of funds realized from the sale, or 

when these assets are used for reserves, allowing the lender to consider only 70% of the value of the assets. 

COVID-19 Temporary Servicing Policies

We are also working with Freddie Mac under the direction of FHFA to implement temporary policies to enable our single-family 

loan servicers to better assist borrowers impacted by COVID-19. We issued initial requirements to servicers on temporary 

policies to assist borrowers impacted by COVID-19 in March 2020, and updated these requirements in April 2020 to align with 

the CARES Act. These temporary policies include requiring that our single-family loan servicers:

• provide forbearance upon the request of any single-family borrower experiencing a financial hardship due to the 

COVID-19 outbreak, regardless of the borrower’s delinquency status and with no additional documentation required 

other than the borrower’s attestation to a financial hardship caused by COVID-19. The borrower must be provided an 

initial forbearance plan for a period up to 180 days, and that forbearance period may be extended for up to an 

additional 180 days at the request of the borrower. If the borrower’s COVID-19-related hardship has not been 

resolved during an incremental forbearance period, the servicer must extend the borrower’s forbearance period at the 

borrower’s request, not to exceed 12 months total;

• suspend foreclosures and foreclosure-related activities for single-family properties through at least May 17, 2020, 

other than for vacant or abandoned properties; and

• report the status of the mortgage loan to the credit bureaus in accordance with the Fair Credit Reporting Act, as 

amended by the CARES Act, for borrowers who receive an accommodation, including a forbearance plan, loan 

MD&A | Single-Family Business

Fannie Mae First Quarter 2020 Form 10-Q 27
modification or other form of assistance or relief, as a result of the COVID-19 outbreak. Specifically, the CARES Act 

requires that if a lender agrees to provide a payment accommodation to a consumer affected by the COVID-19 

outbreak during the covered period, the lender must report the borrower’s obligation to the credit bureaus as current if 

the borrower was current before the accommodation and makes payments as agreed under the accommodation (or is 

not required to make payments under the accommodation). If the borrower was delinquent before the 

accommodation, the lender must maintain the delinquency status while the accommodation is in effect, unless the 

borrower brings the account current during the accommodation.

A servicer is required to contact a borrower on a forbearance plan 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 deferral of some missed payments to the end of the loan term, or a modification of the loan term so that the 

borrower may be brought current and either continues to make their original monthly contractual payment or makes reduced 

monthly contractual payments over a longer period of time. 

In addition, some states and local governments are considering proposals that would assist borrowers and renters impacted by 

COVID-19 that are more extensive than the CARES Act or our Servicing Guide requirements. Servicers must comply with all 

applicable laws even where a provision of our Servicing Guide conflicts with applicable law.

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. As part of normal 

business operations, we regularly review DU to determine whether its risk analysis and eligibility assessment are appropriate 

based on the current market environment and loan performance information. As a result of our most recent review, in April 

2020 we enhanced the DU eligibility assessment to help Fannie Mae and our customers better manage credit risk in the 

current market while providing sustainable options to borrowers. We expect this change will result in a modest reduction of 

loans with high-risk factors being eligible for acquisition through DU.

We will continue to closely monitor loan acquisitions and market conditions and, as appropriate, seek to make changes in our 

eligibility criteria so that the loans we acquire are consistent with our risk appetite.

For further information regarding Desktop Underwriter, please see “MD&A—Single-Family Business—Single-Family Mortgage 

Credit Risk Management—Single-Family Acquisition and Servicing Policies and Underwriting and Servicing Standards” in our 

2019 Form 10-K.

MD&A | Single-Family Business

Fannie Mae First Quarter 2020 Form 10-Q 28
Single-Family Portfolio Diversification and Monitoring

The table below displays our single-family conventional business volumes and our single-family conventional guaranty book of 

business, based on certain key risk characteristics that we use to evaluate the risk profile and credit quality of our single-family 

loans. We provide additional information on the credit characteristics of our single-family loans in quarterly financial 

supplements, which we furnish to the U.S. Securities and Exchange Commission (“SEC”) with current reports on Form 8-K. 

Information in our quarterly financial supplements is not incorporated by reference into this report.

Key Risk Characteristics of Single-Family Conventional Business Volume 

and Guaranty Book of Business(1)

Percent of Single-Family 

Conventional Business

Volume at Acquisition(2)

Percent of Single-Family Conventional

Guaranty Book of Business(3)

As of

For the Three Months Ended 

March 31,

2020 2019 March 31, 2020 December 31, 2019

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

<= 60% 21 % 15 % 19 % 19 %

60.01% to 70% 15 11 14 13

70.01% to 80% 36 35 37 37

80.01% to 90% 13 13 12 12

90.01% to 95% 12 16 11 12

95.01% to 100% 3 10 5 5

Greater than 100% * * 2 2

Total 100 % 100 % 100 % 100 %

Weighted average 74 % 78 % 75 % 76 %

Average loan amount $ 274,345 $ 238,932 $ 175,026 $ 173,804

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

<= 60% 53 % 54 %

60.01% to 70% 17 17

70.01% to 80% 17 16

80.01% to 90% 8 8

90.01% to 100% 5 5

Greater than 100% * *

Total 100 % 100 %

Weighted average 57 % 57 %

Product type:

Fixed-rate:(6)

Long-term 87 % 90 % 85 % 85 %

Intermediate-term 12 8 13 13

Total fixed-rate 99 98 98 98

Adjustable-rate 1 2 2 2

Total 100 % 100 % 100 % 100 %

Number of property units:

1 unit 98 % 98 % 97 % 97 %

2 to 4 units 2 2 3 3

Total 100 % 100 % 100 % 100 %

Property type:

Single-family homes 91 % 90 % 91 % 91 %

Condo/Co-op 9 10 9 9

Total 100 % 100 % 100 % 100 %

MD&A | Single-Family Business

Fannie Mae First Quarter 2020 Form 10-Q 29
Percent of Single-Family 

Conventional Business

Volume at Acquisition(2)

Percent of Single-Family Conventional

Guaranty Book of Business(3)

As of

For the Three Months Ended 

March 31,

2020 2019 March 31, 2020 December 31, 2019

Occupancy type: 

Primary residence 92 % 90 % 89 % 89 %

Second/vacation home 3 4 4 4

Investor 5 6 7 7

Total 100 % 100 % 100 % 100 %

FICO credit score at origination:

< 620 * % * % 1 % 1 %

620 to < 660 3 6 5 5

660 to < 680 3 5 4 5

680 to < 700 6 9 7 7

700 to < 740 22 24 21 21

>= 740 66 56 62 61

Total 100 % 100 % 100 % 100 %

Weighted average 753 742 747 746

Debt-to-income (“DTI”) ratio at origination:(7)

<= 43% 75 % 65 % 76 % 76 %

43.01% to 45% 9 10 9 9

Greater than 45% 16 25 15 15

Total 100 % 100 % 100 % 100 %

Weighted average 35 % 38 % 35 % 35 %

Loan purpose:

Purchase 36 % 66 % 44 % 45 %

Cash-out refinance 24 20 20 19

Other refinance 40 14 36 36

Total 100 % 100 % 100 % 100 %

Geographic concentration:(8)

Midwest 13 % 13 % 15 % 15 %

Northeast 12 14 17 17

Southeast 21 24 22 22

Southwest 21 22 18 18

West 33 27 28 28

Total 100 % 100 % 100 % 100 %

Origination year:

2014 and prior 36 % 38 %

2015 8 8

2016 13 14

2017 11 12

2018 10 11

2019 18 17

2020 4 —

Total 100 % 100 %

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

MD&A | Single-Family Business

Fannie Mae First Quarter 2020 Form 10-Q 30
(1)

Second-lien mortgage loans held by third parties are not reflected in the original LTV or the estimated mark-to-market LTV ratios in this 

table. 

(2)

Calculated based on the unpaid principal balance of single-family loans for each category at time of acquisition.

(3)

Calculated based on the aggregate unpaid principal balance of single-family loans for each category divided by the aggregate unpaid 

principal balance of loans in our single-family conventional guaranty book of business as of the end of each period.

(4)

The original LTV ratio generally is based on the original unpaid principal balance of the loan divided by the appraised property value 

reported to us at the time of acquisition of the loan. Excludes loans for which this information is not readily available.

(5)

The aggregate estimated mark-to-market LTV ratio is based on the unpaid principal balance of the loan as of the end of each reported 

period divided by the estimated current value of the property, which we calculate using an internal valuation model that estimates periodic 

changes in home value. Excludes loans for which this information is not readily available.

(6)

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.

(7)

Excludes loans for which this information is not readily available.

(8) Midwest consists of IL, IN, IA, MI, MN, NE, ND, OH, SD and WI. Northeast consists of CT, DE, ME, MA, NH, NJ, NY, PA, PR, RI, VT and 

VI. Southeast consists of AL, DC, FL, GA, KY, MD, MS, NC, SC, TN, VA and WV. Southwest consists of AZ, AR, CO, KS, LA, MO, NM, OK, 

TX and UT. West consists of AK, CA, GU, HI, ID, MT, NV, OR, WA and WY.

Characteristics of our New Single-Family Loan Acquisitions

The share of our single-family loan acquisitions consisting of refinance loans rather than home purchase loans increased in the 

first quarter of 2020 compared with the first quarter of 2019, primarily due to a lower interest-rate environment, which 

encouraged refinance activity. Typically, refinance loans have lower LTV ratios than home purchase loans. This trend 

contributed to a decrease in the percentage of our single-family loan acquisitions with LTV ratios over 90%—from 26% in the 

first quarter of 2019 to 15% in the first quarter of 2020.

Our share of acquisitions of loans with DTI ratios above 45% decreased in the first quarter of 2020 compared with the first 

quarter of 2019. This decrease was driven in part by changes in our eligibility guidelines implemented in 2019 to further limit 

risk layering, particularly with respect to loans with DTI ratios above 45%, as well as a higher volume of refinance loan 

acquisitions.

For a discussion of factors that may impact the credit characteristics of loans we acquire in the future, see “MD&A—SingleFamily Business—Single-Family Mortgage Credit Risk Management—Single-Family Portfolio Diversification and Monitoring” in 

our 2019 Form 10-K. In this section of our 2019 Form 10-K, we also provide more information on the credit characteristics of 

loans in our single-family conventional guaranty book of business, including Home Affordable Refinance Program® (“HARP®”) 

and Refi PlusTM loans, jumbo-conforming and high-balance loans, reverse mortgages and mortgage products with rate resets. 

MD&A | Single-Family Business

Fannie Mae First Quarter 2020 Form 10-Q 31
Single-Family Credit Enhancement and Transfer of Mortgage Credit Risk

Single-Family Credit Enhancement

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

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

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

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 2019 Form 10-K. 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 2019 Form 10-K and “Note 10, 

Concentrations of Credit Risk” in this report. Also see “Risk Factors” in our 2019 Form 10-K and in this report. 

Single-Family Loans with Credit Enhancement

As of

March 31, 2020 December 31, 2019

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 $ 658 22 % $ 653 22 %

Connecticut Avenue Securities 916 31 919 31

Credit Insurance Risk Transfer 307 10 275 10

Lender risk-sharing 148 5 147 5

Less: Loans covered by multiple credit enhancements (456) (15) (438) (15)

Total single-family loans with credit enhancement $ 1,573 53 % $ 1,556 53 %

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 the private market. Our credit risk transfer transactions are 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 2019 Form 10-K, we have 

three primary single-family credit risk transfer programs: Connecticut Avenue Securities, Credit Insurance Risk Transfer, and 

lender risk-sharing. In March 2020, FHFA directed us to wind down our single-family lender risk-sharing transactions by the 

end of this year. We continually evaluate our credit risk transfer transactions which, in addition to managing our credit risk, also 

affect our returns on capital under FHFA’s conservatorship capital requirements. We discuss FHFA’s proposed capital rule in 

“Business—Charter Act and Regulation—GSE Act and Other Legislation” in our 2019 Form 10-K.

During the first quarter of 2020, pursuant to our credit risk transfer transactions, we transferred a portion of the mortgage credit 

risk on single-family mortgages with an unpaid principal balance of $118 billion at the time of the transactions. As of March 31, 

2020, approximately 46% of the loans in our single-family conventional guaranty book of business, measured by unpaid 

principal balance, were included in a reference pool for a credit risk transfer transaction.

In recent weeks, we have been significantly restricted in our ability to enter into credit risk transfer transactions due to 

detrimental market conditions as a result of the COVID-19 outbreak. We do not anticipate being able to enter into such 

transactions until market conditions improve. See “Risk Factors” in this report for additional information on the risks associated 

with the current limitations on our ability to enter into credit risk transfer transactions.

MD&A | Single-Family Business

Fannie Mae First Quarter 2020 Form 10-Q 32
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. 

Single-Family Credit Risk Transfer Transactions

Issuances from Inception to March 31, 2020

(Dollars in billions)

Senior

Fannie Mae(1)

Initial 

Reference 

Pool(5)

$2,079

Mezzanine Fannie Mae(1) CIRT

(2)(3) CAS(2)

Lender RiskSharing(2)(4)

$2 $12 $41 $4 $2,156

First Loss Fannie Mae(1) CAS(2)(6)

Lender RiskSharing(2)(4)

$9 $6 $3

Outstanding as of March 31, 2020

(Dollars in billions)

Senior

Fannie Mae(1)

Outstanding 

Reference 

Pool(5)(7)

$1,361

Mezzanine Fannie Mae(1) CIRT

(2)(3) CAS(2)

Lender RiskSharing(2)(4)

$1 $10 $25 $4 $1,418

First Loss Fannie Mae(1) CAS(2)(6)

Lender RiskSharing(2)(4)

$9 $6 $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 $7 billion at issuance and 

approximately $3 billion outstanding as of March 31, 2020. 

(4)

For some lender risk-sharing transactions, does not reflect completed transfers of risk prior to settlement.

(5)

For CIRT and some lender risk-sharing transactions, “Reference Pool” reflects a pool of covered loans. 

(6)

For CAS transactions, “First Loss” represents all B tranche balances.

(7)

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 $1,371 billion as of March 31, 2020.

MD&A | Single-Family Business

Fannie Mae First Quarter 2020 Form 10-Q 33
The following table displays the approximate cash paid or transferred to investors for these credit risk transfer transactions. 

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 Three Months Ended March 31,

2020 2019

Cash paid or transferred for: (Dollars in millions)

CAS transactions(1)$ 261 $ 229

CIRT transactions 102 85

Lender risk-sharing transactions 81 48

(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. CAS REMICs are Connecticut Avenue Securities that are structured as notes issued by trusts that 

qualify as REMICs. CAS CLNs are similar to CAS REMICs with the exception that loans underlying the transactions were not tagged for 

use in a REMIC transaction at the time of acquisition.

Once we are able to resume credit risk transfer transactions, we will evaluate loans in our single-family guaranty book of 

business without credit enhancement to determine if it makes economic sense to include them in a future CAS or CIRT

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

book of business currently without credit enhancement.

Single-Family Loans without Credit Enhancement

As of

March 31, 2020 December 31, 2019

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)$ 749 25 % $ 736 25 %

Pre-credit risk transfer program inception(2)583 20 608 20

Recently acquired(3)335 11 287 10

Other(4)241 8 246 8

Less: Loans in multiple categories (504) (17) (481) (16)

Total single-family loans currently without credit 

 enhancement $ 1,404 47 % $ 1,396 47 %

(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 Plus loans.

(3)

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

(4)

Includes adjustable-rate mortgage loans, loans with a combined LTV ratio greater than 97%, non-Refi Plus loans acquired after the 

inception of our credit risk transfer programs that became 30 or more days delinquent prior to inclusion in a credit risk transfer transaction, 

and loans that were delinquent as of March 31, 2020 or December 31, 2019.

MD&A | Single-Family Business

Fannie Mae First Quarter 2020 Form 10-Q 34
Single-Family Problem Loan Management

Our problem loan management strategies focus primarily on reducing defaults to avoid losses that would otherwise occur and 

pursuing foreclosure alternatives to mitigate the severity of the losses we incur. See “MD&A—Single-Family Business—SingleFamily Mortgage Credit Risk Management—Problem Loan Management” in our 2019 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 disclosures. The discussion 

below updates some of that information.

Delinquency

The table below displays the delinquency status of loans and changes in the balance 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.

As described above in “Single-Family Acquisition and Servicing Policies and Underwriting and Servicing Standards—

COVID-19 Temporary Servicing Policies,” 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, such as a forbearance plan or loan 

modification, as current if his or her loan was current prior to receiving the accommodation. For purposes of our Form 10-Q 

and related public disclosures regarding the delinquency status of the loans in our guaranty book of business, we will continue 

to report loans receiving COVID-19-related payment forbearance as delinquent according to the contractual terms of the loan.

Delinquency Status and Activity of Single-Family Conventional Loans

As of

March 31, 

2020

December 31, 

2019

March 31, 

2019

Delinquency status:

30 to 59 days delinquent 1.31 % 1.27 % 1.32 %

60 to 89 days delinquent 0.32 0.35 0.35

Seriously delinquent (“SDQ”) 0.66 0.66 0.74

Percentage of SDQ loans that have been delinquent for more than 180 

days 51 % 49 % 50 %

Percentage of SDQ loans that have been delinquent for more than two 

years 11 11 11

For the Three Months 

Ended March 31,

2020 2019

Single-family SDQ loans (number of loans):

Beginning balance 112,434 130,440

Additions 47,756 52,679

Removals:

Modifications and other loan workouts (9,714) (12,527)

Liquidations and sales (9,634) (11,830)

Cured or less than 90 days delinquent (29,087) (32,746)

Total removals (48,435) (57,103)

Ending balance 111,755 126,016

Our single-family serious delinquency rate remained relatively flat as of March 31, 2020 compared with December 31, 2019

and March 31, 2019. 

While our single-family delinquency rates have been low in recent periods, we expect current and future declines in economic 

activity and resulting higher unemployment rates due to the COVID-19 outbreak will likely lead to significantly higher rates of 

delinquencies.

Certain higher-risk loan categories, such as Alt-A loans, loans with mark-to-market LTV ratios greater than 100%, and our 2005 

through 2008 loan vintages, continue to exhibit higher-than-average delinquency rates and/or account for a higher share of our 

credit losses. Single-family loans originated in 2005 through 2008 constituted 3% of our single-family book of business as of 

March 31, 2020, but constituted 32% of our seriously delinquent single-family loans as of March 31, 2020 and drove 26% of 

our single-family credit losses in the first quarter of 2020. In addition, loans in certain judicial foreclosure states such as 

MD&A | Single-Family Business

Fannie Mae First Quarter 2020 Form 10-Q 35
Florida, New Jersey and New York with historically long foreclosure timelines have exhibited higher-than-average delinquency 

rates and/or account for a higher share of our credit losses.

The table below displays the serious delinquency rates for, and the percentage of our total 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. We also include information for our loans in California because the state accounts for a large share of our 

single-family conventional guaranty book of business. The reported categories are not mutually exclusive.

Single-Family Conventional Seriously Delinquent Loan Concentration Analysis

As of

March 31, 2020 December 31, 2019 March 31, 2019

Percentage of 

Book 

Outstanding

Percentage of 

Seriously 

Delinquent 

Loans

(1)

Serious 

Delinquency 

Rate

Percentage of 

Book 

Outstanding

Percentage 

of Seriously 

Delinquent 

Loans

(1)

Serious 

Delinquency 

Rate

Percentage 

of Book 

Outstanding

Percentage of 

Seriously 

Delinquent 

Loans

(1)

Serious 

Delinquency 

Rate

States:

California 19 % 7 % 0.33 % 19 % 6 % 0.32 % 19 % 6 % 0.34 %

Florida 6 8 0.83 6 8 0.84 6 9 1.03

Illinois 4 6 0.91 4 6 0.91 4 6 0.98

New Jersey 3 5 1.13 3 5 1.13 3 5 1.32

New York 5 8 1.19 5 8 1.18 5 8 1.38

All other states 63 66 0.64 63 67 0.64 63 66 0.71

Product type:

Alt-A(2)1 9 2.95 2 9 2.95 2 11 3.31

Vintages:

2004 and prior 2 20 2.48 2 20 2.48 3 23 2.68

2005-2008 3 32 4.11 4 33 4.11 4 38 4.50

2009-2020 95 48 0.35 94 47 0.35 93 39 0.33

Estimated mark-tomarket LTV ratio:

<= 60% 53 52 0.53 54 52 0.53 54 48 0.56

60.01% to 70% 17 17 0.80 17 17 0.80 18 17 0.84

70.01% to 80% 17 14 0.74 16 14 0.75 16 14 0.87

80.01% to 90% 8 9 0.96 8 9 1.00 8 10 1.16

90.01% to 100% 5 4 0.85 5 4 0.86 4 5 1.21

Greater than 100% * 4 10.06 * 4 10.14 * 6 9.35

Credit enhanced:(3)

Primary MI & other(4)22 26 0.95 22 26 0.96 21 26 1.07

Credit risk transfer(5)46 17 0.29 45 16 0.27 42 10 0.24

Non-credit enhanced 47 65 0.77 47 66 0.79 52 69 0.83

* 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 2019 Form 10-K. 

(3)

The credit-enhanced categories are not mutually exclusive. A loan with primary mortgage insurance that is also covered by a credit risk 

transfer transaction will be included in both the “Primary MI & other” category and the “Credit risk transfer” category. As a result, the “Credit 

enhanced” and “Non-credit enhanced” categories do not sum to 100%. The total percentage of our single-family conventional guaranty 

book of business with some form of credit enhancement as of March 31, 2020 was 53%. 

(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.

MD&A | Single-Family Business

Fannie Mae First Quarter 2020 Form 10-Q 36
(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.

Loan Workout Metrics

Our loan workouts reflect:

• home retention solutions, including loan modifications, repayment plans and forbearances; and

• foreclosure alternatives, including short sales and deeds-in-lieu of foreclosure.

The chart below displays the unpaid principal balance of our completed single-family loan workouts by type for the first quarter

of 2019 compared with the first quarter of 2020, as well as the number of loan workouts for each period.

Loan Workout Activity

(Dollars in billions)

$2.4

$1.9

$0.2

$0.1

$2.6

$2.0

15.9

12.0

Home retention solutions1

Foreclosure alternatives2

Number of loan workouts (in thousands)

Q1 2019 Q1 2020

(1)

Consists of loan modifications and completed repayment plans and forbearances. Repayment plans reflect only those plans associated 

with loans that were 60 days or more delinquent. Forbearances reflect loans that were 90 days or more delinquent. Excludes trial 

modifications, loans to certain borrowers who have received bankruptcy relief that are classified as troubled debt restructurings, and 

repayment and forbearance plans that have been initiated but not completed. There were approximately 18,100 loans in a trial modification 

period as of March 31, 2020.

(2)

Consists of short sales and deeds-in-lieu of foreclosure.

The decline in home retention solutions in the first quarter of 2020 compared with the first quarter of 2019 was primarily driven 

by improved loan performance. We expect the amount of our home retention solutions to increase in future periods due to the 

forbearance programs we are offering borrowers experiencing financial hardship due to the COVID-19 outbreak.

MD&A | Single-Family Business

Fannie Mae First Quarter 2020 Form 10-Q 37
REO Management

If a loan defaults, we acquire the home through foreclosure or a deed-in-lieu of foreclosure. The table below displays our 

foreclosure activity by region. Regional REO acquisition trends generally follow a pattern that is similar to, but lags, that of 

regional delinquency trends.

Single-Family REO Properties

For the Three Months Ended March 31,

2020 2019

Single-family REO properties (number of properties):

Beginning of period inventory of single-family REO properties(1)17,501 20,156

Acquisitions by geographic area:(2)

Midwest 944 1,261

Northeast 890 1,457

Southeast 1,148 1,746

Southwest 545 821

West 248 510

Total REO acquisitions(1)3,775 5,795

Dispositions of REO (4,987) (6,953)

End of period inventory of single-family REO properties(1)16,289 18,998

Carrying value of single-family REO properties (dollars in millions) $ 2,129 $ 2,404

Single-family foreclosure rate(3)0.09 % 0.14 %

REO net sales price to unpaid principal balance(4)82 % 77 %

Short sales net sales price to unpaid principal balance(5)79 % 75 %

(1)

Includes acquisitions through foreclosure and deeds-in-lieu of foreclosure. Also includes held-for-use properties, which are reported in our 

condensed consolidated balance sheets as a component of “Other assets.” 

(2)

See footnote 8 to the “Key Risk Characteristics of Single-Family Conventional Business Volume and Guaranty Book of Business” table for 

states included in each geographic region.

(3)

Estimated based on the annualized total number of properties acquired through foreclosure or deeds-in-lieu of foreclosure as a percentage 

of the total number of loans in our single-family conventional guaranty book of business as of the end of each period.

(4)

Calculated as the amount of sale proceeds received on disposition of REO properties during the respective periods, excluding those 

subject to repurchase requests made to our sellers or servicers, divided by the aggregate unpaid principal balance of the related loans at 

the time of foreclosure. Net sales price represents the contract sales price less selling costs for the property and other charges paid by the 

seller at closing. 

(5)

Calculated as the amount of sale proceeds received on properties sold in short sale transactions during the respective periods divided by 

the aggregate unpaid principal balance of the related loans. Net sales price includes borrower relocation incentive payments and 

subordinate lien(s) negotiated payoffs. 

The decline in single-family REO properties in the first quarter of 2020 compared with the first quarter of 2019 was primarily 

due to a reduction in REO acquisitions from serious delinquencies aged greater than 180 days, driven by improved loan 

performance and the continued sale of nonperforming loans.

Pursuant to the CARES Act, except in the case of vacant or abandoned properties, our servicers are currently prohibited from 

completing foreclosures on our single-family loans through at least May 17, 2020. In addition, many states have enacted 

foreclosure moratoriums that extend either beyond the CARES Act timeframe or until further notice. 

Other Single-Family Credit Information

Single-Family Credit Loss Metrics and Loan Sale Performance

The amount of credit loss we realize in a given period is driven by foreclosures, pre-foreclosure sales, REO activity, mortgage 

loan redesignations and write-offs, net of recoveries. Our credit loss metrics are not defined terms within GAAP and may not 

be calculated in the same manner as similarly titled measures reported by other companies. We believe our credit loss metrics 

may be useful to stakeholders because they are presented as a percentage of our conventional guaranty book of business and 

represent our incurred credit losses. 

We have revised the presentation of our single-family credit loss metrics in connection with our implementation of the CECL

standard in January 2020, principally by separating the line item previously referred to as “Charge-offs, net of recoveries” into 

the following three line items: “Write-offs,” “Recoveries” and “Write-offs on the redesignation of mortgage loans from HFI to 

HFS.” Because sales of nonperforming and reperforming loans have been an important part of our credit loss mitigation 

MD&A | Single-Family Business

Fannie Mae First Quarter 2020 Form 10-Q 38
strategy in recent periods, we also provide information on our loan sale performance in the table below through the “Gains 

(losses) on sales and other valuation adjustments” line item, which shows our gains and/or losses realized on the sale of 

nonperforming and reperforming loans during the period as well as any lower-of-cost-or-market adjustments (“LOCOM”) 

related to loans held for sale.

As a result of the COVID-19 outbreak, there has been insufficient investor interest in sales of our nonperforming and 

reperforming loans in recent weeks. As a result, we do not anticipate entering into any new contracts for sales of 

nonperforming or reperforming loans until market conditions improve.

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 March 31,

2020 2019

Amount Ratio(1)Amount Ratio(1)

(Dollars in millions)

Write-offs $ (65) $ (146)

Recoveries 14 60

Foreclosed property expense (78) (143)

Credit losses and credit loss ratio (129) 1.7 bps (229) 3.2 bps

Write-offs on the redesignation of mortgage loans from HFI to HFS (9) (240)

Gains (losses) on sales and other valuation adjustments(2)(167) 23

Total credit losses, write-offs on redesignations, and gains (losses) on 

sales and other valuation adjustments, and related ratio $ (305) 4.1 bps $ (446) 6.1 bps

(1)

Basis points are calculated based on the amount of each line item annualized divided by the average single-family conventional guaranty 

book of business during the period.

(2)

Consists of the temporary LOCOM adjustments on HFS loans and gains (losses) realized on the sales of mortgage loans during the 

period, which are recognized in “Investment gains (losses), net” in our condensed consolidated financial statements.

Our single-family credit losses and credit loss ratio decreased in the first quarter of 2020 compared with the first quarter of 

2019 primarily due to reduced foreclosures and foreclosure alternatives and lower write-off severity rates due to continued 

home price appreciation. 

Our single-family write-offs on redesignations, and gains (losses) on sales and other valuation adjustments decreased in the 

first quarter of 2020 compared with the first quarter of 2019 due to fewer redesignations of mortgage loans from HFI to HFS, 

which resulted in lower write-off activity, partially offset by LOCOM adjustments driven by price declines on our HFS loans.

We do not expect a substantial increase in our single-family credit losses in the near term as a result of the COVID-19 

outbreak, as we are currently offering up to 12 months of forbearance to single-family borrowers suffering financial hardship 

relating to the COVID-19 outbreak and have suspended foreclosures and foreclosure-related activities for single-family 

properties through at least May 17, 2020; however, the COVID-19 outbreak is likely to result in higher single-family credit 

losses over the longer term. See “Risk Factors” for additional information.

For information on our credit-related income or expense, which includes changes in our allowance, see “Consolidated Results 

of Operations—Credit-Related Income (Expense)” and “Single-Family Business Financial Results.”

MD&A | Single-Family Business

Fannie Mae First Quarter 2020 Form 10-Q 39
Single-Family Loss Reserves

Our single-family loss reserves, which include our allowance for loan losses and reserve for guaranty losses, provide for an 

estimate of credit losses in our single-family guaranty book of business. For periods beginning January 1, 2020, our 

measurement of loss reserves reflects a lifetime credit loss methodology pursuant to our adoption of the CECL standard and 

requires consideration of a broader range of reasonable and supportable forecast information to develop credit loss estimates. 

For the prior period, single-family loss reserves were measured using an incurred loss impairment methodology for loans that 

are collectively evaluated for impairment. For further details on our previous single-family loss reserves methodology, refer to 

“Note 1, Summary of Significant Accounting Policies” in our 2019 Form 10-K. 

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 benefit (provision) for credit losses see “Consolidated Results of Operations—Credit-Related 

Income (Expense).”

Single-Family Loss Reserves

For the Three Months Ended 

March 31,

2020 2019

(Dollars in millions)

Changes in loss reserves:

Beginning balance $ (8,779) $ (14,007)

Transition impact from the adoption of the CECL standard (1,231) —

Benefit (provision) for credit losses (2,170) 661

Write-offs 74 386

Recoveries (14) (60)

Other 28 1

Ending balance $ (12,092) $ (13,019)

Write-offs, net of recoveries as a percentage of the average single-family conventional 

guaranty book of business (in bps) 0.8 4.5

As of

March 31, 

2020

December 31, 

2019

Loss reserves as a percentage of single-family:

Conventional guaranty book of business 0.41 % 0.30 %

Nonaccrual loans at amortized cost 42.68 30.58

MD&A | Single-Family Business

Fannie Mae First Quarter 2020 Form 10-Q 40
Troubled Debt Restructurings and Nonaccrual Loans

The tables below display the single-family loans classified as TDRs that were on accrual status and single-family loans on 

nonaccrual status. The tables include 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 information on the 

impact of TDRs and nonaccrual loans see “Note 3, Mortgage Loans.”

Pursuant to the CARES Act, we have elected to temporarily suspend the accounting for TDRs under GAAP for certain loss 

mitigation activities, including forbearance and loan modifications, related to the COVID-19 pandemic that occur between 

March 1, 2020 through the earlier of December 31, 2020 or 60 days after the date on which the COVID-19 outbreak national 

emergency terminates, as long as the loan was not more than 30 days delinquent as of December 31, 2019. Accordingly, we 

do not expect an increase in our TDRs in 2020. See “Note 1, Summary of Significant Accounting Policies” for additional 

information on our accounting for TDRs.

Single-Family TDRs on Accrual Status and Nonaccrual Loans

As of

March 31, 

2020

December 31, 

2019

(Dollars in millions)

TDRs on accrual status $ 80,952 $ 81,634

Nonaccrual loans 28,335 28,708

Total TDRs on accrual status and nonaccrual loans $ 109,287 $ 110,342

Accruing on-balance sheet loans past due 90 days or more(1)$ 178 $ 191

For the Three Months Ended 

March 31,

2020 2019

(Dollars in millions)

Interest related to on-balance sheet TDRs on accrual status and nonaccrual loans:

Interest income forgone(2)$ 406 $ 521

Interest income recognized(3)1,068 1,272

(1)

Includes loans that, as of the end of each period, are 90 days or more past due and continuing to accrue interest. The majority of these 

amounts consist of loans insured or guaranteed by the U.S. government and loans for which we have recourse against the seller in the 

event of a default.

(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 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 and cash payments received on nonaccrual 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 2019 Form 10-K. See 

“MD&A—Multifamily Business” in our 2019 Form 10-K for additional information regarding the primary business activities, 

customers, competition and market share of our Multifamily business.

Multifamily Mortgage Market

National multifamily market fundamentals, which include factors such as vacancy rates and rents, remained relatively stable 

throughout most of the first quarter of 2020, since the onset of the COVID-19 outbreak did not begin impacting most local 

economies until mid- to late- March 2020. 

• Vacancy rates. Based on preliminary third-party data, the estimated national multifamily vacancy rate for institutional 

investment-type apartment properties was 5.8% as of March 31, 2020, compared with 5.5% as of December 31, 2019

and March 31, 2019. The estimated national multifamily vacancy rate remains below its average rate of about 6.0%

over the last 10 years.

• Rents. Effective rents are estimated to have increased by 0.5% in the first quarter of 2020, compared to an estimated 

0.3% in the fourth quarter of 2019 and an estimated 0.5% in the first quarter of 2019.

MD&A | Single-Family Business

Fannie Mae First Quarter 2020 Form 10-Q 41
Vacancy rates and rents are important to loan performance because multifamily loans are generally repaid from the cash flows 

generated by the underlying property. Several years of improvement in these fundamentals helped to increase property values 

in most metropolitan areas. According to the latest third-party estimate, approximately 494,000 new multifamily units are 

expected to be completed in 2020; however, we believe the amount of new multifamily units in 2020 likely will be lower than 

this estimate due to the ongoing supply chain disruptions, coupled with the current social distancing restrictions and stay-athome orders in place across the country. 

Although multifamily fundamentals remained positive in the first quarter of 2020, we expect the multifamily sector to be 

negatively impacted in 2020 from rising vacancy rates, as well as from declining or negative rent growth due to the economic 

dislocation resulting from the COVID-19 outbreak. While we expect vacancy rates to rise, we believe the increase is likely to 

be modest as tenants will be less likely to move given the recent declines in employment rates, the stay-at-home orders 

currently in place across the country, and the eviction moratoriums in place in many localities.

Multifamily Business Metrics

Through the secondary mortgage market, we support rental housing for the workforce population, for senior citizens and 

students, and for families with the greatest economic need. Over 90% of the multifamily units we financed in the first quarter of 

2020 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) 

$16.9

$14.1

171,000 159,000

Multifamily new business volume1

Multifamily units financed from new business volume

Q1 2019 Q1 2020

(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’s 2020 conservatorship scorecard includes an objective to maintain the dollar volume of new multifamily business at or 

below $100 billion for the five-quarter period from October 1, 2019 through December 31, 2020. In addition, FHFA directed that 

at least 37.5% of our multifamily business during that time period must be mission-driven, affordable housing, pursuant to 

FHFA’s guidelines for mission-driven loans. Our multifamily new business volume was $18.1 billion for the fourth quarter of 

2019 and $14.1 billion for the first quarter of 2020, leaving $67.8 billion of capacity remaining under our current multifamily 

volume cap for the remainder of 2020. 

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. As measured for purposes of the information reported 

below, the following chart displays our multifamily guaranty book of business.

MD&A | Multifamily Business

Fannie Mae First Quarter 2020 Form 10-Q 42
Multifamily Guaranty Book of Business

(Dollars in billions) 

$314.1

$345.4

74.1

71.9

3/31/2019 3/31/2020

Unpaid principal balance of multifamily guaranty book of business(1)

Average charged guaranty fee rate on multifamily guaranty book of business (in basis points), at end of period

(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.

Our average charged guaranty fee rate has trended downward from 2019 to 2020, driven by competitive market pressure on 

guaranty fees charged on newly acquired multifamily loans. 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 

reasonableness of our annual compensation rate for the multifamily credit risk we manage. 

Multifamily Business Financial Results(1)

For the Three Months 

Ended March 31,

2020 2019 Variance

(Dollars in millions)

Net interest income $ 806 $ 757 $ 49

Fee and other income 156 28 128

Net revenues 962 785 177

Fair value gains, net 184 56 128

Administrative expenses (120) (113) (7)

Credit-related expense(2)(413) (8) (405)

Credit enhancement expense (19) (4) (15)

Other income (expenses), net(3)(102) 2 (104)

Income before federal income taxes 492 718 (226)

Provision for federal income taxes (99) (143) 44

Net income $ 393 $ 575 $ (182)

(1)

See “Note 1, Summary of Significant Accounting Policies” for more information about the change in presentation to our yield maintenance 

fees. Prior period amounts have been adjusted to reflect the current year change in presentation. 

(2)

Consists of the benefit or provision for credit losses and foreclosed property income or expense. The presentation of our credit-related 

expense for the three months ended March 31, 2019 represents amounts recognized prior to our transition to the lifetime loss model 

prescribed by the CECL standard.

(3)

Consists of investment gains or losses, gains or losses from partnership investments, and other income or expenses.

MD&A | Multifamily Business

Fannie Mae First Quarter 2020 Form 10-Q 43
Net Interest Income

Multifamily net interest income is primarily driven by guaranty fee income. Guaranty fee income increased in the first quarter of 

2020 as compared with the first quarter of 2019 as a result of growth in the size of our multifamily guaranty book of business, 

partially offset by a decrease in average charged guaranty fees on the multifamily guaranty book.

Fee and Other Income

Fee and other income increased in the first quarter of 2020 as compared with the first quarter of 2019, primarily as a result of 

an increase in our credit enhancement benefits from our multifamily DUS loss-sharing arrangements, which were driven by an 

increase in our estimated credit losses due to the COVID-19 outbreak. Prior to the adoption of the CECL standard in January 

2020, the mitigating impact of our DUS loss-sharing arrangements was a component of credit-related expense.

Fair Value Gains, Net

Depending on portfolio activity, our multifamily mortgage commitment derivatives may be in a net-buy or net-sell position 

during any given period. Fair value gains in the first quarter of 2020 and the first quarter of 2019 were primarily driven by gains 

on commitments to buy multifamily mortgage-related securities as a result of increases in prices as interest rates declined 

during the commitment periods.

Credit-Related Expense

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

losses we expect to incur as a result of the COVID-19 outbreak using an expected lifetime loss methodology consistent with 

our implementation of the CECL standard.

See “Consolidated Results of Operations—Credit-Related Income (Expense)” in this report for more information on our 

multifamily provision for credit losses.

Multifamily Mortgage Credit Risk Management

This section updates our discussion of multifamily mortgage credit risk management in our 2019 Form 10-K in “MD&A—

Multifamily Business—Multifamily Mortgage Credit Risk Management.”

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 outbreak, we may institute 

additional reserve requirements for new multifamily loan acquisitions depending on the product type, as well as LTV ratios and 

DSCRs.

Key Risk Characteristics of Multifamily Guaranty Book of Business 

As of

March 31, 2020 December 31, 2019 March 31, 2019

Weighted average original LTV ratio 66 % 66 % 66 %

Original LTV ratio greater than 80% 1 1 1

Original DSCR less than or equal to 1.10 11 11 12

Full interest-only loans 27 27 25

Partial interest-only loans(1)51 51 49

(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. 

MD&A | Multifamily Business

Fannie Mae First Quarter 2020 Form 10-Q 44
Transfer of Multifamily Mortgage Credit Risk

Lender risk-sharing is a cornerstone of our Multifamily business. We primarily transfer risk through our DUS program, which 

delegates to DUS lenders the ability to underwrite and service multifamily loans, in accordance with our standards and 

requirements. DUS lenders receive credit risk-related revenues for their respective portion of credit risk retained, and, in turn, 

are required to fulfill any loss sharing obligation. This aligns the interests of the lender and Fannie Mae throughout the life of 

the loan. 

Our DUS model typically results in our lenders sharing on a pro-rata or tiered basis approximately one-third of the credit risk on 

our multifamily loans. As of March 31, 2020 and December 31, 2019, 98% of the unpaid principal balance in our multifamily 

guaranty book of business had front-end lender risk-sharing.

To complement our front-end lender risk-sharing, we also engage in back-end credit risk transfer transactions through our 

multifamily CIRT (“MCIRT”) and Multifamily Connecticut Avenue SecuritiesTM (“MCAS”) transactions. Through these 

transactions, we transfer a portion of credit risk associated with Fannie Mae losses on a reference pool of multifamily mortgage 

loans.

While we were able to enter into both an MCIRT and MCAS transaction in the first quarter of 2020, due to the COVID-19 

outbreak we may not be able to enter into additional transactions until market conditions improve. See “Risk Factors” in this 

report for additional information on the risks associated with the current limitations on our ability to enter into credit risk transfer 

transactions. We expect to continue entering into front-end lender risk-sharing arrangements, primarily through our DUS 

program. 

The table below displays the number of transactions and unpaid principal balance of multifamily mortgage loans covered by a 

back-end credit risk transfer transaction at the time of issuance. The table also includes the total unpaid principal balance of 

multifamily loans and percentage of our multifamily guaranty book of business that are covered by a back-end credit risk 

transfer transaction. The table does not reflect front-end lender risk-sharing arrangements, as only a small portion of our 

multifamily guaranty book of business does not include these arrangements.

Multifamily Loans in Back-End Credit Risk Transfer Transactions

Year-to-date 2020 Since Inception

Number of 

Back-End 

Credit Risk 

Transfer 

Transactions

Unpaid 

Principal 

Balance 

Covered at 

Issuance

Number of 

Back-End 

Credit Risk 

Transfer 

Transactions

Unpaid 

Principal 

Balance 

Covered at 

issuance

(Dollars in millions)

MCIRT 1 $ 8,720 8 $ 80,617

MCAS 1 12,212 2 29,293

Total 2 $ 20,932 10 $ 109,910

As of

March 31, 2020 December 31, 2019

Unpaid 

Principal 

Balance

Percentage of 

Multifamily 

Guaranty Book 

of Business

Unpaid 

Principal 

Balance

Percentage of 

Multifamily 

Guaranty Book 

of Business

(Dollars in millions)

MCIRT $ 74,802 22 % $ 66,851 20 %

MCAS 29,227 8 17,077 5

Total unpaid principal balance of multifamily loans in 

back-end credit risk transfer transactions $ 104,029 30 % $ 83,928 25 %

For more information on our multifamily credit-risk sharing transactions and their impact on our conservatorship capital 

requirements, see “MD&A—Multifamily Business—Multifamily Mortgage Credit Risk Management” in our 2019 Form 10-K.

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 

MD&A | Multifamily Business

Fannie Mae First Quarter 2020 Form 10-Q 45
heightened default risk. The percentage of loans in our multifamily guaranty book of business, calculated based on unpaid 

principal balance, with a current DSCR less than 1.0 was approximately 2% as of March 31, 2020, and December 31, 2019. 

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

COVID-19 Forbearance and Eviction Moratorium 

We have delegated to our lenders the authority to execute a forbearance agreement with a multifamily borrower experiencing 

a documented financial hardship due to the COVID-19 outbreak for up to 3 monthly payments beginning with the first missed 

monthly payment occurring after February 1, 2020. Lenders may grant forbearances for any one or more monthly payments, 

but are only delegated to do so for up to 3 months. The borrower is required to bring the mortgage loan current within 12 

months after the end of the forbearance period. The borrower is also required to suspend all tenant evictions for nonpayment 

of rent for any reason until the later of July 25, 2020 (120 days after the enactment of the CARES Act) or the months of actual 

payment forbearance, or as required by local law.

Delinquency Statistics on our Problem Loans

The percentage of our multifamily loans categorized as substandard based on the characteristics mentioned above remained 

at historically low levels as of March 31, 2020 and December 31, 2019. Substandard loans are loans that have a well-defined 

weakness that could impact the timely full repayment. While the vast majority of the substandard loans in our multifamily 

guaranty book of business are currently making timely payments, 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.”

The multifamily serious delinquency rate was 0.05% as of March 31, 2020, compared with 0.04% as of December 31, 2019

and 0.07% as of March 31, 2019. Our multifamily seriously delinquent 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.

We expect our population of substandard loans and our multifamily serious delinquency rate to increase due to the COVID-19 

outbreak as the majority of loans on forbearance will be considered substandard and seriously delinquent.

REO Management

The number of multifamily foreclosed properties held for sale was 12 properties with a carrying value of $84 million as of 

March 31, 2020, compared with 12 properties with a carrying value of $72 million as of December 31, 2019.

MD&A | Multifamily Business

Fannie Mae First Quarter 2020 Form 10-Q 46
Other Multifamily Credit Information 

Multifamily Credit Loss Performance Metrics

The amount of 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 credit loss performance metrics are not defined terms within GAAP and may not be 

calculated in the same manner as similarly titled measures reported by other companies. We believe our credit losses and our 

credit losses, net of loss-sharing benefit, may be useful to stakeholders because they display our credit losses in the context of 

our guaranty book of business, including the benefit we receive from loss-sharing arrangements. Management views credit 

losses net of loss-sharing benefit as a key metric related to our business model and our strategy to share 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. Our multifamily guaranty book of business has experienced very low levels of write-offs in the past 

several years, which in some periods has resulted in credit income rather than losses, and drives variability in our write-off 

severity rate.

Multifamily Credit Loss Performance Metrics

For the Three Months Ended March 31,

2020 2019

(Dollars in millions)

Write-offs $ (20) $ —

Recoveries 1 —

Foreclosed property income (expense) (2) 3

Credit income (losses)(1)(21) 3

Freestanding loss-sharing benefit(2)

3 N/A

Credit income (losses) net of freestanding loss-sharing benefit $ (18) $ 3

Credit (income) loss ratio(1)(3)(in bps) 2.5 (0.4)

Credit (income) loss ratio, net of freestanding loss-sharing benefit(2)(3)(in bps) 2.1 N/A

Multifamily initial write-off severity rate(4)

23.3 % — %

Multifamily loan write-off count 3 —

(1)

Credit income is the result of net gains on the sale of foreclosed properties.

(2)

Includes expected benefit of freestanding credit enhancements, primarily multifamily DUS lender-risk sharing transactions, which are 

recorded in “Fee and other income” in our condensed consolidated statements of operations. Prior to the adoption of the CECL standard, 

benefits from lender risk-sharing transactions were included in the benefit (provision) for credit losses in our condensed consolidated 

statements of operations and comprehensive income.

(3)

Calculated based on the annualized amount of credit income (losses), and credit losses net of freestanding loss-sharing benefit, divided by 

the average multifamily guaranty book of business during the period. 

(4)

Rate is calculated as the initial write-off amount divided by the average defaulted unpaid principal balance. The rate includes write-offs 

pursuant to the provisions of the Advisory Bulletin and excludes any costs, gains or losses associated with REO after initial acquisition 

through final disposition. Write-offs are net of lender loss sharing agreements. Recoveries primarily include amounts accrued while the 

loans were performing and cash payments received on nonaccrual loans.

We do not expect a significant increase in our multifamily credit losses in the next six months as a result of the COVID-19 

outbreak due to the forbearance we are currently offering described above; however, the COVID-19 outbreak will likely result 

in higher multifamily credit losses over the longer term. See “Risk Factors” for additional information.

Multifamily Loss Reserves

Our multifamily loss reserves, which include our allowance for loan losses and reserve for guaranty losses, provide for an 

estimate of credit losses in our multifamily guaranty book of business. For periods beginning January 1, 2020, our 

measurement of loss reserves reflects a lifetime credit loss methodology pursuant to our adoption of the CECL standard and 

requires consideration of a broader range of reasonable and supportable forecast information to develop credit loss estimates. 

For the prior period, multifamily loss reserves were measured using an incurred loss methodology. For further details on our 

previous multifamily loss reserves methodology, refer to “Note 1, Summary of Significant Accounting Policies” in our 2019

Form 10-K. 

MD&A | Multifamily Business

Fannie Mae First Quarter 2020 Form 10-Q 47
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 provision for credit losses see “Consolidated Results of Operations—Credit-Related Income 

(Expense).”

Multifamily Loss Reserves

For the Three Months Ended 

March 31,

2020 2019

Changes in loss reserves:

Beginning balance $ (268) $ (245)

Transition impact from the adoption of the CECL standard(1)(490) —

Provision for credit losses (410) (11)

Write-offs 20 —

Recoveries (1) —

Ending balance $ (1,149) $ (256)

Expected benefit of freestanding credit enhancements on multifamily loans not netted 

against loss reserves as of the end of the period(2)$ 347 N/A

As of

March 31, 

2020

December 31, 

2019

Loss reserves as a percentage of multifamily guaranty book of business 0.33 % 0.08 %

(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” on our condensed consolidated balance sheets.

(2)

Prior to our adoption of the CECL standard, benefits for freestanding credit enhancements were netted against our multifamily loss 

reserves, which for March 31, 2019 was $100 million. As of January 1, 2020 these credit enhancements are recorded in “Other assets” in 

our condensed consolidated balance sheets. 

Troubled Debt Restructurings and Nonaccrual Loans

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 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 our accounting 

policies for nonaccrual loans and TDRs, as well as accounting relief for certain eligible TDRs pursuant to the CARES Act, see 

“Note 1, Summary of Significant Accounting Policies.” 

Multifamily TDRs on Accrual Status and Nonaccrual Loans

As of 

March 31, 

2020

December 31, 

2019

(Dollars in millions)

TDRs on accrual status $ 58 $ 66

Nonaccrual loans (1)95 439

Total TDRs on accrual status and nonaccrual loans $ 153 $ 505

For the Three Months Ended 

March 31,

2020 2019

(Dollars in millions)

Interest related to on-balance sheet TDRs on accrual status and nonaccrual loans:

Interest income forgone(2)$ 1 $ 7

Interest income recognized(3)1 —

(1)

As of January 1, 2020, 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. As a 

result, the population of loans classified as nonaccrual declined as a substantial amount of these loans were current and had been 

MD&A | Multifamily Business

Fannie Mae First Quarter 2020 Form 10-Q 48
previously individually impaired, but were not two months or more past due. 

(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 as of the end of each period had the loans performed according to their original contractual terms.

(3)

Represents interest income recognized during the period, including the amortization of any deferred cost basis adjustments, for loans 

classified as either nonaccrual loans or TDRs on accrual status as of the end of each period. Primarily includes amounts accrued while the 

loans were performing.

Liquidity and Capital Management

Liquidity Management

This section supplements and updates information regarding liquidity management in our 2019 Form 10-K. See “MD&A—

Liquidity and Capital Management—Liquidity Management” in our 2019 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 

2019 Form 10-K and “Risk Factors” in this report for a discussion of liquidity and funding risks, including potential impacts of 

the COVID-19 outbreak.

Debt Funding

Outstanding Debt 

Total outstanding debt of Fannie Mae includes short-term and long-term debt and excludes debt of consolidated trusts. Shortterm debt of Fannie Mae consists of borrowings with an original contractual maturity of one year or less and, therefore, does 

not include the current portion of long-term debt. Long-term debt of Fannie Mae consists of borrowings with an original 

contractual maturity of greater than one year. 

The following chart and table display information on our outstanding short-term and long-term debt based on original 

contractual maturity. The increase in our short-term and long-term debt during the first quarter of 2020 was primarily to support 

refinancing activity and in anticipation of future potential liquidity needs as a result of market dislocations caused by the 

COVID-19 outbreak as discussed below.

Debt of Fannie Mae

(1)

(Dollars in billions)

$26.7

$58.3

$47.4

$35.8

$108.1

$134.3

$182.2

$228.4

Short-term debt

Long-term debt maturing within one year

Long-term debt, excluding portion maturing within one year

12/31/2019 3/31/2020

MD&A | Multifamily Business

Fannie Mae First Quarter 2020 Form 10-Q 49
Selected Debt Information

As of

March 31, 

2020

December 31, 

2019

(Dollars in billions)

Selected Weighted-Average Interest Rates(1)

Interest rate on short-term debt 0.71 % 1.56 %

Interest rate on long-term debt, including portion maturing within one year 2.43 % 2.86 %

Interest rate on callable long-term debt 3.55 % 3.39 %

Selected Maturity Data

Weighted-average maturity of debt maturing within one year (in days) 162 137

Weighted-average maturity of debt maturing in more than one year (in months) 54 66

Other Data

Outstanding callable long-term debt $ 31.3 $ 38.5

Connecticut Avenue Securities debt(2)$ 19.5 $ 21.4

(1) Outstanding debt amounts and weighted-average interest rates reported in this chart and table include the effects of discounts, premiums, 

other cost basis adjustments and fair value gains and losses associated with debt that we elected to carry at fair value. Reported amounts 

include unamortized cost basis adjustments and fair value adjustments of $647 million and $28 million as of March 31, 2020 and 

December 31, 2019, respectively.

(2)

Represents CAS debt issued prior to November 2018. See “Single-Family Business—Single-Family Mortgage Credit Risk Management—

Single-Family Credit Enhancement and Transfer of Mortgage Credit Risk—Credit Risk Transfer Transactions” in our 2019 Form 10-K and 

in this report for information regarding our Connecticut Avenue Securities.

We intend to repay our short-term and long-term debt obligations as they become due primarily through proceeds from the 

issuance of additional debt securities and cash from business operations.

Debt Funding Activity

The table below displays the activity in debt of Fannie Mae. This activity excludes the debt of consolidated trusts and intraday 

loans. Activity for short-term debt of Fannie Mae relates to borrowings with an original contractual maturity of one year or less 

while activity for 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 market dislocations relating to the COVID-19 outbreak have affected both our debt funding needs and debt funding 

activity. We significantly increased our debt issuances in the first quarter of 2020 due to increased volume in the whole loan 

conduit driven by a significant increase in refinance activity during the quarter, to pay off callable debt and in anticipation of 

potential future liquidity needs. Adverse market conditions in March limited our ability to issue debt with a maturity greater than 

two years. As a result, most of the debt we issued in the first quarter of 2020 had terms from three to twenty-four months. 

Market conditions improved in April, and we issued $3.5 billion in 5-year benchmark notes. If market conditions limit our ability 

to issue longer-term debt, it could require that we fund longer-term assets with short-term debt, which would increase the rollover risk on our outstanding debt. See “Risk Factors” for additional information on the impact of the COVID-19 outbreak on our 

liquidity risk.

We expect our debt funding needs to increase in future periods, as significantly higher rates of loan delinquencies and an 

increase in forbearances and other loss mitigation activity driven by the COVID-19 outbreak require us to fund greater 

amounts of principal, interest, tax and insurance payments on delinquent loans and to purchase a larger volume of delinquent 

loans from MBS trusts. We also may continue to fund a high volume of whole loan conduit activity. 

Pursuant to the terms of our senior preferred stock purchase agreement with Treasury, our aggregate indebtedness may not 

exceed $300 billion and our mortgage assets may not exceed $250 billion without Treasury’s prior written consent. FHFA has 

directed that we further cap our mortgage assets at $225 billion, as described in “Business—Conservatorship, Treasury 

Agreements and Housing Finance Reform—Treasury Agreements” in our 2019 Form 10-K. As described above, we expect our 

debt funding needs to increase. Depending on the extent of these funding needs and the amount of mortgage loans we 

purchase from MBS trusts, we may be required to obtain FHFA’s and Treasury’s prior written consent to increase our current 

debt limit and mortgage asset limit.

MD&A | Liquidity and Capital Management

Fannie Mae First Quarter 2020 Form 10-Q 50
Activity in Debt of Fannie Mae

For the Three Months 

Ended March 31,

2020 2019

(Dollars in millions)

Issued during the period:

Short-term:

Amount $160,023 $121,910

Weighted-average interest rate 1.25 % 2.35 %

Long-term:(1)

Amount $39,319 $ 6,595

Weighted-average interest rate 0.70 % 2.63 %

Total issued:

Amount $199,342 $128,505

Weighted-average interest rate 1.14 % 2.36 %

Paid off during the period:(2)

Short-term:

Amount $128,792 $123,726

Weighted-average interest rate 1.52 % 2.10 %

Long-term:(1)

Amount $24,164 $ 15,810

Weighted-average interest rate 1.88 % 1.75 %

Total paid off:

Amount $152,956 $139,536

Weighted-average interest rate 1.58 % 2.06 %

(1)

Includes credit risk-sharing securities issued as CAS debt prior to November 2018. For information on our credit risk transfer transactions, 

see “Single-Family Business—Single-Family Mortgage Credit Risk Management—Single-Family Credit Enhancement and Transfer of 

Mortgage Credit Risk—Credit Risk Transfer Transactions” in our 2019 Form 10-K and in this report.

(2)

Consists of all payments on debt, including regularly scheduled principal payments, payments at maturity, payments resulting from calls 

and payments for any other repurchases. Repurchases of debt and early retirements of zero-coupon debt are reported at original face 

value, which does not equal the amount of actual cash payment.

MD&A | Liquidity and Capital Management

Fannie Mae First Quarter 2020 Form 10-Q 51
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 increased significantly during the first quarter of 2020 due primarily to an increase in cash and 

cash equivalents driven by proceeds from increased debt issuances to support higher refinance activity in the whole loan 

conduit and potential future liquidity needs as described above, as well as proceeds from loan payoffs. 

Other Investments Portfolio

(Dollars in billions)

$21.2

$80.5

$13.6

$7.8

$39.5

$44.7

$74.3

$133.0

12/31/2019 3/31/2020

Cash and cash equivalents(1)

Federal funds sold and securities purchased under agreements to resell or similar 

U.S. Treasury securities

(1)

Cash equivalents are comprised of overnight repurchase agreements and U.S. Treasuries that have a maturity at the date of acquisition of 

three months or less.

Cash Flows

Three Months Ended March 31, 2020. Cash, cash equivalents and restricted cash increased from $61.4 billion as of December 

31, 2019 to $128.7 billion as of March 31, 2020. The increase was primarily driven by cash inflows from (1) proceeds from 

repayments and sales of loans, (2) the sale of Fannie Mae MBS to third parties, and (3) the issuance of funding debt, which 

outpaced redemptions, primarily for the reasons described above.

Partially offsetting these cash inflows were cash outflows primarily from (1) purchases of loans held for investment and (2) 

payments on outstanding debt of consolidated trusts.

Three Months Ended March 31, 2019. Cash, cash equivalents and restricted cash increased from $49.4 billion as of December 

31, 2018 to $52.2 billion as of March 31, 2019. The increase was primarily driven by cash inflows from (1) the net decreases in 

federal funds sold and securities purchased under agreements to resell or similar agreements and (2) the sale of Fannie Mae 

MBS to third parties.

Partially offsetting these cash inflows were cash outflows from, among other things, (1) the redemption of funding debt, which 

outpaced issuances, due to lower funding needs, and (2) the purchase of Fannie Mae MBS from third parties.

Credit Ratings

Our credit ratings from the major credit ratings organizations, as well as the credit ratings of the U.S. government, are primary 

factors that could affect our ability to access the capital markets and our cost of funds. In addition, our credit ratings are 

important when we seek to engage in certain long-term transactions, such as derivative transactions. Standard & Poor’s 

Global Ratings (“S&P”), Moody’s Investors Services (“Moody’s”) and Fitch Ratings Limited (“Fitch”) have all indicated that, if 

they were to lower the sovereign credit ratings on the U.S., they would likely lower their ratings on the debt of Fannie Mae and 

certain other government-related entities. In addition, actions by governmental entities impacting Treasury’s support for our 

business or our debt securities could adversely affect the credit ratings of our senior unsecured debt. See “Risk Factors—

Liquidity and Funding Risk” in our 2019 Form 10-K for a discussion of the risks to our business relating to a decrease in our 

MD&A | Liquidity and Capital Management

Fannie Mae First Quarter 2020 Form 10-Q 52
credit ratings, which could include an increase in our borrowing costs, limits on our ability to issue debt, and additional 

collateral requirements under our derivatives contracts.

The table below displays the credit ratings issued by the three major credit rating agencies.

Fannie Mae Credit Ratings

March 31, 2020

S&P Moody's Fitch

Long-term senior debt AA+ Aaa AAA

Short-term senior debt A-1+ P-1 F1+

Preferred stock D Ca C/RR6

Outlook Stable Stable Stable

(for Long-Term Senior Debt) (for AAA rated Long-Term 

Issuer Default Ratings)

We have no covenants in our existing debt agreements that would be violated by a downgrade in our credit ratings. However, 

in connection with certain derivatives counterparties, we could be required to provide additional collateral to or terminate 

transactions with certain counterparties in the event that our senior unsecured debt ratings are downgraded.

Capital Management

Regulatory Capital

The deficit of our core capital over statutory minimum capital was $131.3 billion as of March 31, 2020 and $128.8 billion as of 

December 31, 2019. For information on our current and proposed capital requirements, see “Business—Charter Act and 

Regulation—GSE Act and Other Regulation” and “Note 12, Regulatory Capital Requirements” in our 2019 Form 10-K.

Capital Activity

Under the terms governing the senior preferred stock, effective with the third quarter 2019 dividend period, we will not owe 

dividends to Treasury until we have accumulated over $25 billion in net worth; and the aggregate liquidation preference of the 

senior preferred stock increases at the end of each quarter by the increase, if any, in our net worth during the immediately prior 

fiscal quarter, until the liquidation preference has increased by $22 billion pursuant to this provision. Accordingly, no dividends 

were payable to Treasury for the first quarter of 2020 and none are payable for the second quarter of 2020. Also, the 

aggregate liquidation preference of the senior preferred stock increased to $135.4 billion as of March 31, 2020. Because our 

net worth did not increase during the first quarter of 2020, the aggregate liquidation preference of the senior preferred stock 

will remain at $135.4 billion as of June 30, 2020. As of March 31, 2020, our net worth was $13.9 billion.

See “Business—Conservatorship, Treasury Agreements and Housing Finance Reform—Treasury Agreements” in our 2019

Form 10-K for more information on the terms of our senior preferred stock and our senior preferred stock purchase agreement 

with Treasury. See “Risk Factors—GSE and Conservatorship Risk” in our 2019 Form 10-K for a discussion of the risks 

associated with the limit on our capital reserves.

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. 

Since we began issuing UMBS in June 2019, some of the securities we issue are structured securities backed, in whole or in 

part, by Freddie Mac securities. When we issue a structured security, we provide a guaranty that we will supplement amounts 

received from the underlying mortgage-related security as required to permit timely payment of principal and interest on the 

certificates related to the resecuritization trust. Accordingly, when we issue structured securities backed in whole or in part by 

Freddie Mac securities, we extend our guaranty to the underlying Freddie Mac security included in the structured security. Our 

issuance of structured securities backed in whole or in part by Freddie Mac securities creates additional off-balance sheet 

exposure as we do not have control over the Freddie Mac mortgage loan securitizations. Because we do not have the power 

to direct matters (primarily the servicing of mortgage loans) that impact the credit risk to which we are exposed, which 

constitute control of these securitization trusts, we do not consolidate these trusts in our condensed consolidated balance 

sheet, giving rise to off-balance sheet exposure. 

MD&A | Liquidity and Capital Management

Fannie Mae First Quarter 2020 Form 10-Q 53
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 $90.5 billion as of March 31, 2020. Approximately $55.3 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 $17.3 billion of the unpaid principal balance of Freddie Mac 

securities backing Fannie Mae-issued REMICs; however, a portion of these Freddie Mac securities may be backed in whole or 

in part by Fannie Mae MBS. Therefore, our total exposure to Freddie Mac securities included in Fannie Mae REMIC collateral 

is likely lower. 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 and other financial guarantees was $68.6 billion as of December 31, 2019. Approximately 

$37.8 billion of this amount consisted of the unpaid principal balance of Freddie Mac-issued UMBS backing Fannie Maeissued Supers and $12.3 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 $7.0 billion as of March 31, 2020 and $7.2 billion as of December 31, 2019. 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 2019 Form 10-K for a discussion of our management of these risks. 

This section supplements and updates that discussion but does not repeat all of the risk management categories described in 

our 2019 Form 10-K. 

Institutional Counterparty Credit Risk Management

See “MD&A—Risk Management—Institutional Counterparty Credit Risk Management” and “Risk Factors—Credit Risk” in our 

2019 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 outbreak 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.

Market Risk Management, Including Interest-Rate Risk Management

This section supplements and updates information regarding market risk management in our 2019 Form 10-K. See “MD&A—

Risk Management—Market Risk Management, Including Interest-Rate Risk Management” and “Risk Factors” in our 2019

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. As described in “Risk Factors” in this report, the COVID-19 

outbreak has increased our market risk.

Measurement of Interest-Rate Risk

The table below displays the pre-tax market value sensitivity of our net portfolio to changes in the level of interest rates and the 

slope of the yield curve as measured on the last day of each period presented. The table below also provides the daily 

average, minimum, maximum and standard deviation values for duration gap and for the most adverse market value impact on 

the net portfolio to changes in the level of interest rates and the slope of the yield curve for the three months ended March 31, 

2020 and 2019. 

MD&A | Off-Balance Sheet Arrangements

Fannie Mae First Quarter 2020 Form 10-Q 54
The significant volatility in the financial markets makes it more challenging to manage our interest-rate risk. The volatile market 

conditions in recent weeks have affected our ability to rely on our models for managing interest-rate risk. The rapid changes in 

market conditions occurring in the current environment also requires more active interest-rate risk management to maintain our 

desired interest rate-risk profile, which may result in additional hedging costs.

For information on how we measure our interest-rate risk, see our 2019 Form 10-K in “MD&A—Risk Management—Market 

Risk Management, Including Interest-Rate Risk Management.”

Interest-Rate Sensitivity of Net Portfolio to Changes in Interest-Rate Level

and Slope of Yield Curve

As of (1)(2)

March 31, 2020 December 31, 2019

(Dollars in millions)

Rate level shock:

-100 basis points $ (185) $ 57

-50 basis points (54) 11

+50 basis points 32 51

+100 basis points 88 160

Rate slope shock:

-25 basis points (flattening) (7) (20)

+25 basis points (steepening) 4 22

For the Three Months Ended March 31,(1)(3)

2020 2019

Duration 

Gap

Rate Slope 

Shock 25 bps

Rate Level 

Shock 50 bps

Duration 

Gap

Rate Slope 

Shock 25 bps

Rate Level 

Shock 50 bps

Market Value Sensitivity Market Value Sensitivity

(In years) (Dollars in millions) (In years) (Dollars in millions)

Average (0.02) $ (20) $ (32) (0.02) $ (6) $ (48)

Minimum (0.10) (33) (144) (0.07) (11) (116)

Maximum 0.12 (7) 20 0.02 (1) (11)

Standard deviation 0.04 6 31 0.02 3 22

(1)

Computed based on changes in U.S. LIBOR interest-rates swap curve. Changes in the level of interest-rates assume a parallel shift in all 

maturities of the U.S. LIBOR interest-rate swap curve. Changes in the slope of the yield curve assume a constant 7-year rate, a shift of 

16.7 basis points for the 1-year rate (and shorter tenors) and an opposite shift of 8.3 basis points for the 30-year rate. Rate shocks for 

remaining maturity points are interpolated.

(2) Measured on the last business day of each period presented. 

(3)

Computed based on daily values during the period presented.

The market value sensitivity of our net portfolio varies across a range of interest-rate shocks depending upon the duration and 

convexity profile of our net portfolio. 

We use derivatives to help manage the residual interest-rate risk exposure between our assets and liabilities. Derivatives have 

enabled us to keep our interest-rate risk exposure at consistently low levels in a wide range of interest-rate environments. The 

table below displays an example of how derivatives impacted the net market value exposure for a 50 basis point parallel 

interest-rate shock.

Derivative Impact on Interest-Rate Risk (50 Basis Points)

As of (1)

March 31, 2020 December 31, 2019

(Dollars in millions)

Before derivatives $ (177) $ (197)

After derivatives 32 51

Effect of derivatives 209 248

(1) Measured on the last business day of each period presented.

MD&A | Risk Management

Fannie Mae First Quarter 2020 Form 10-Q 55
Critical Accounting Policies and Estimates

The preparation of financial statements in accordance with GAAP requires management to make a number of judgments, 

estimates and assumptions that affect the reported amount of assets, liabilities, income and expenses in our condensed 

consolidated financial statements. Understanding our accounting policies and the extent to which we use management 

judgment and estimates in applying these policies is integral to understanding our financial statements. We describe our most 

significant accounting policies in “Note 1, Summary of Significant Accounting Policies” in this report and in our 2019 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 and Adoption of the CECL Standard

The CECL standard is effective for our fiscal year beginning January 1, 2020 and impacts the measurement of our allowance 

for loan losses. The CECL standard reflects lifetime expected credit losses on the loans in our book of business and requires 

consideration of a range of reasonable and supportable forecast information to develop that estimate. We have changed our 

accounting policies and implemented system, model and process changes to adopt the standard.

Our allowance for loan losses is a valuation account that is deducted from the amortized cost basis of HFI loans to present the 

net amount expected to be collected on the loans. The allowance for loan losses reflects an estimate of expected credit losses 

on single-family and multifamily HFI loans held by Fannie Mae and by consolidated Fannie Mae MBS trusts. Upon adoption, 

we used 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 used 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 seriously delinquent 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 impact of the adoption as well as the measurement of expected credit losses for the period 

under the new standard is complex and involves significant management judgment, including a reliance on historical loss 

information and current economic forecasts that may not be representative of credit losses we ultimately realize. For example, 

uncertainty regarding the expected impacts of the COVID-19 outbreak required significant management judgment in assessing 

our allowance for loan losses as of March 31, 2020.

We provide more detailed information on our accounting for the allowance for loan losses and impact of adopting the CECL

standard in “Note 1, Summary of Significant Accounting Policies.” See “Risk Factors” in our 2019 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 in “Note 1, Summary of Significant Accounting Policies.”

MD&A | Critical Accounting Policies and Estimates

Fannie Mae First Quarter 2020 Form 10-Q 56
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 forwardlooking 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;

• the impact of the COVID-19 outbreak on our business, financial results, financial condition, business plans and 

strategies, and on mortgage market and economic conditions, and the factors that will affect the outbreak’s impact;

• expectations for, and the impact of fluctuations in our acquisition volumes, market share, guaranty fees, or acquisition 

credit characteristics;

• our business plans and strategies and the impact of such plans and strategies; 

• our dividend payments to Treasury and the liquidation preference of the senior preferred stock; 

• volatility in our future financial results and efforts we may make to address volatility, including our expectations 

relating to our implementation of a hedge accounting program and its impact on the volatility of our financial results; 

• the size and composition of our retained mortgage portfolio;

• the amount of our purchases of loans from MBS trusts;

• the volume of whole loan conduit activity;

• the impact of legislation and regulation on our business or financial results;

• our payments to HUD and Treasury funds under the GSE Act;

• our plans relating to and the effects of our credit risk transfer transactions;

• factors that could affect or mitigate our credit risk exposure;

• mortgage market and economic conditions (including U.S. GDP, unemployment rates, home price growth, multifamily 

property valuation growth, housing activity, housing starts, home sales, rent growth, multifamily vacancy rates, and 

the future volume of and characteristics of mortgage originations) and the impact of mortgage market and economic 

conditions on our business and financial results;

• our future off-balance sheet exposure to Freddie Mac securities;

• the risks to our business;

• future delinquency rates, default rates, forbearances and other loss mitigation activity, substandard loan amounts 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 outbreak;

• our expectations relating to our TDRs;

• the performance of the loans in our book of business and the factors that will affect such performance;

• our loan acquisitions, the credit risk profile of such acquisitions, and the factors that will affect them;

• our future debt funding needs and factors that will affect our ability 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: 

• the uncertainty of our future and our exit from conservatorship; 

• the duration, spread and severity of the COVID-19 outbreak; the actions taken to contain the virus or treat its impact, 

including government actions to mitigate the economic impact of the outbreak; the nature and extent of the 

forbearance and modification options we offer borrowers affected by the outbreak; accounting elections and estimates 

MD&A | Forward-Looking Statements

Fannie Mae First Quarter 2020 Form 10-Q 57
relating to the impact of the COVID-19 outbreak; borrower and renter behavior in response to the outbreak and its 

economic impact; how quickly and to what extent normal economic and operating conditions can resume, including 

whether any future outbreaks interrupt economic recovery; and how quickly and to what extent affected borrowers, 

renters and counterparties can recover from the negative economic impact of the outbreak; 

• the market and regulatory changes we anticipate and our readiness for them, including changes relating to an 

eventual exit from conservatorship, the competitive landscape, and the need to attract private investment;

• future legislative and regulatory requirements or changes affecting us, such as the enactment of housing finance 

reform legislation (including all or any portion of the Treasury plan), including changes that limit our business activities 

or our footprint; 

• actions by FHFA, Treasury, HUD, the Consumer Financial Protection Bureau or other regulators, Congress, or state 

or local governments that affect our business, including new capital requirements that become applicable to us or 

changes in the ability-to-repay rule to replace the qualified mortgage patch for government-sponsored enterpriseeligible loans;

• changes in the structure and regulation of the financial services industry; 

• the timing and level of, as well as regional variation in, home price changes; 

• changes in interest rates and credit spreads; 

• developments that may be difficult to predict, including: market conditions that result in changes in our net 

amortization income from our guaranty book of business, fluctuations in the estimated fair value of our derivatives and 

other financial instruments that we mark to market through our earnings; and developments that affect our loss 

reserves, such as changes in interest rates, home prices or accounting standards, or events such as natural disasters 

or the emergence of widespread health emergencies or pandemics;

• uncertainties relating to the discontinuance of LIBOR, or other market changes that could impact the loans we own or 

guarantee or our MBS; 

• credit availability; 

• disruptions or instability in the housing and credit markets;

• the size and our share of the U.S. mortgage market and the factors that affect them, including population growth and 

household formation;

• growth, deterioration and the overall health and stability of the U.S. economy, including U.S. GDP, unemployment 

rates, personal income and other indicators thereof;

• changes in the fiscal and monetary policies of the Federal Reserve; 

• our and our competitors’ future guaranty fee pricing and the impact of that pricing on our competitive environment and 

guaranty fee revenues; 

• the volume of mortgage originations;

• the size, composition, quality and performance of our guaranty book of business and retained mortgage portfolio; 

• the competitive environment in which we operate, including the impact of legislative, regulatory or other developments 

on levels of competition in our industry and other factors affecting our market share; 

• how long loans in our guaranty book of business remain outstanding; 

• challenges we face in retaining and hiring qualified executives and other employees; 

• the effectiveness of our business resiliency plans and systems;

• changes in the demand for Fannie Mae MBS, in general or from one or more major groups of investors;

• our conservatorship, including any changes to or termination (by receivership or otherwise) of the conservatorship 

and its effect on our business; 

• the investment by Treasury, including potential changes to the terms of the senior preferred stock purchase 

agreement or senior preferred stock, and its effect on our business, including restrictions imposed on us by the terms 

of the senior preferred stock purchase agreement, the senior preferred stock, and Treasury’s warrant, as well as the 

possibility that these or other restrictions on our business and activities may be 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 outbreak, changes in the type of business we do, or actions relating to UMBS or our 

resecuritization of Freddie Mac-issued securities; 

MD&A | Forward-Looking Statements

Fannie Mae First Quarter 2020 Form 10-Q 58
• limitations on our business imposed by FHFA, in its role as our conservator or as our regulator; 

• our future objectives and activities in support of those objectives, including actions we may take to reach additional 

underserved creditworthy borrowers; 

• the possibility that future changes in leadership at FHFA or the Administration may result in changes in FHFA’s or 

Treasury’s willingness to pursue the administrative reform recommendations in the Treasury plan;

• our reliance on Common Securitization Solutions, LLC (“CSS”) and the common securitization platform for a majority 

of our single-family securitization activities, our reduced influence over CSS as a result of recent changes to the CSS 

limited liability company agreement, and 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; 

• continued limitations on our ability to enter into credit risk transfer transactions;

• significant changes in forbearance, modification and foreclosure activity; 

• the volume and pace of future nonperforming and reperforming loan sales and their impact on our results and serious 

delinquency rates; 

• changes in borrower behavior; 

• actions we may take to mitigate losses, and the effectiveness of our loss mitigation strategies, management of our 

REO inventory and pursuit of contractual remedies; 

• defaults by one or more institutional counterparties; 

• resolution or settlement agreements we may enter into with our counterparties; 

• our need to rely on third parties to fully achieve some of our corporate objectives; 

• our reliance on mortgage servicers; 

• changes in GAAP, guidance by the Financial Accounting Standards Board and changes to our accounting policies; 

• changes in the fair value of our assets and liabilities; 

• the stability and adequacy of the systems and infrastructure that impact our operations, including ours and those of 

CSS, our other counterparties and other third parties; 

• the impact of increasing interdependence between the single-family mortgage securitization programs of Fannie Mae 

and Freddie Mac in connection with UMBS;

• operational control weaknesses; 

• our reliance on models and future updates we make to our models, including the assumptions used by these models; 

• domestic and global political risks and uncertainties; 

• natural disasters, environmental disasters, terrorist attacks, widespread health emergencies or pandemics, or other 

major disruptive events; 

• cyber attacks or other information security breaches or threats; and 

• the other factors described in “Risk Factors” in this report and in our 2019 Form 10-K.

Readers are cautioned not to unduly rely on the forward-looking statements we make and to place these forward-looking 

statements into proper context by carefully considering the factors discussed in “Risk Factors” in our 2019 Form 10-K and in 

this report. These forward-looking statements are representative only as of the date they are made, and we undertake no 

obligation to update any forward-looking statement as a result of new information, future events or otherwise, except as 

required under the federal securities laws. 

MD&A | Forward-Looking Statements

Fannie Mae First Quarter 2020 Form 10-Q 59
Item 1. Financial Statements

FANNIE MAE

(In conservatorship)

Condensed Consolidated Balance Sheets — (Unaudited)

(Dollars in millions)

As of

March 31, 

2020

December 31, 

2019

ASSETS

Cash and cash equivalents $ 80,463 $ 21,184

Restricted cash (includes $41,331 and $33,294, respectively, related to consolidated trusts) 48,245 40,223

Federal funds sold and securities purchased under agreements to resell or similar arrangements 7,775 13,578

Investments in securities:

Trading, at fair value (includes $5,562 and $3,037, respectively, pledged as collateral) 52,941 48,123

Available-for-sale, at fair value (with an amortized cost of $2,147, net of allowance for credit losses of

 $3 as of March 31, 2020) 2,289 2,404

Total investments in securities 55,230 50,527

Mortgage loans:

Loans held for sale, at lower of cost or fair value 8,103 6,773

Loans held for investment, at amortized cost:

Of Fannie Mae 98,585 94,911

Of consolidated trusts 3,269,331 3,241,494

Total loans held for investment (includes $7,701 and $7,825, respectively, at fair value) 3,367,916 3,336,405

Allowance for loan losses (13,209) (9,016)

Total loans held for investment, net of allowance 3,354,707 3,327,389

Total mortgage loans 3,362,810 3,334,162

Advances to lenders 8,971 6,453

Deferred tax assets, net 12,831 11,910

Accrued interest receivable, net (includes $8,417 and $8,172, respectively, related to consolidated trusts) 8,808 8,604

Acquired property, net 2,224 2,366

Other assets 13,999 14,312

Total assets $ 3,601,356 $ 3,503,319

LIABILITIES AND EQUITY

Liabilities:

Accrued interest payable (includes $9,386 and $9,361, respectively, related to consolidated trusts) $ 10,246 $ 10,228

Debt:

Of Fannie Mae (includes $4,752 and $5,687, respectively, at fair value) 228,458 182,247

Of consolidated trusts (includes $22,855 and $21,880, respectively, at fair value) 3,334,098 3,285,139

Other liabilities (includes $355 and $376, respectively, related to consolidated trusts) 14,609 11,097

Total liabilities 3,587,411 3,488,711

Commitments and contingencies (Note 13) — —

Fannie Mae stockholders’ equity:

Senior preferred stock (liquidation preference of $135,444 and $131,178, 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 (119,454) (118,776)

Accumulated other comprehensive income 146 131

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) 13,945 14,608

Total liabilities and equity $ 3,601,356 $ 3,503,319

See Notes to Condensed Consolidated Financial Statements

 Financial Statements | Condensed Consolidated Balance Sheets

Fannie Mae (In conservatorship) First Quarter 2020 Form 10-Q 60
FANNIE MAE

(In conservatorship)

Condensed Consolidated Statements of Operations and 

Comprehensive Income — (Unaudited)

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

For the Three Months Ended 

March 31,

2020 2019

Interest income:

Trading securities $ 316 $ 427

Available-for-sale securities 31 53

Mortgage loans 28,938 29,862

Federal funds sold and securities purchased under agreements to resell or similar arrangements 107 263

Other 34 32

Total interest income 29,426 30,637

Interest expense:

Short-term debt (102) (125)

 Long-term debt (23,977) (25,716)

Total interest expense (24,079) (25,841)

Net interest income 5,347 4,796

Benefit (provision) for credit losses (2,583) 650

Net interest income after benefit (provision) for credit losses 2,764 5,446

Investment gains (losses), net (158) 133

Fair value losses, net (276) (831)

Fee and other income 308 134

Non-interest loss (126) (564)

Administrative expenses:

Salaries and employee benefits (393) (386)

Professional services (212) (225)

Other administrative expenses (144) (133)

Total administrative expenses (749) (744)

Foreclosed property expense (80) (140)

Temporary Payroll Tax Cut Continuation Act of 2011 (“TCCA”) fees (637) (593)

Credit enhancement expense (331) (171)

Other expenses, net (263) (207)

Total expenses (2,060) (1,855)

Income before federal income taxes 578 3,027

Provision for federal income taxes (117) (627)

Net income 461 2,400

Other comprehensive income (loss):

Changes in unrealized gains (losses) on available-for-sale securities, net of reclassification adjustments 

and taxes 18 (36)

Other, net of taxes (3) (3)

Total other comprehensive income (loss) 15 (39)

Total comprehensive income $ 476 $ 2,361

Net income $ 461 $ 2,400

Dividends distributed or amounts attributable to senior preferred stock (476) (2,361)

Net income (loss) attributable to common stockholders $ (15) $ 39

Earnings per share:

Basic $ 0.00 $ 0.01

Diluted 0.00 0.01

Weighted-average common shares outstanding:

Basic 5,867 5,762

Diluted 5,867 5,893

See Notes to Condensed Consolidated Financial Statements

 Financial Statements | Condensed Consolidated Statements of Operations and Comprehensive Income

Fannie Mae (In conservatorship) First Quarter 2020 Form 10-Q 61
FANNIE MAE

(In conservatorship)

Condensed Consolidated Statements of Cash Flows — 

(Unaudited)

(Dollars in millions)

For the Three Months 

Ended March 31,

2020 2019

Net cash provided by operating activities $ 2,174 $ 1,816

Cash flows provided by investing activities:

Proceeds from maturities and paydowns of trading securities held for investment 13 15

Proceeds from sales of trading securities held for investment — 49

Proceeds from maturities and paydowns of available-for-sale securities 96 113

Proceeds from sales of available-for-sale securities 50 131

Purchases of loans held for investment (86,307) (33,631)

Proceeds from repayments of loans acquired as held for investment of Fannie Mae 2,308 2,786

Proceeds from sales of loans acquired as held for investment of Fannie Mae — 26

Proceeds from repayments and sales of loans acquired as held for investment of consolidated trusts 169,656 88,419

Advances to lenders (45,248) (22,991)

Proceeds from disposition of acquired property and preforeclosure sales 1,832 1,965

Net change in federal funds sold and securities purchased under agreements to resell or similar arrangements 5,803 10,688

Other, net (539) (124)

Net cash provided by investing activities 47,664 47,446

Cash flows used in financing activities:

Proceeds from issuance of debt of Fannie Mae 254,559 173,122

Payments to redeem debt of Fannie Mae (207,818) (184,222)

Proceeds from issuance of debt of consolidated trusts 135,918 64,821

Payments to redeem debt of consolidated trusts (164,726) (96,925)

Payments of cash dividends on senior preferred stock to Treasury — (3,240)

Other, net (470) —

Net cash provided by (used in) financing activities 17,463 (46,444)

Net increase in cash, cash equivalents and restricted cash 67,301 2,818

Cash, cash equivalents and restricted cash at beginning of period 61,407 49,423

Cash, cash equivalents and restricted cash at end of period $128,708 $ 52,241

Cash paid during the period for:

Interest $ 28,867 $ 28,650

Income taxes — —

See Notes to Condensed Consolidated Financial Statements

 Financial Statements | Condensed Consolidated Statements of Cash Flows

Fannie Mae (In conservatorship) First Quarter 2020 Form 10-Q 62
FANNIE MAE

(In conservatorship)

Condensed Consolidated Statements of Changes in 

Equity (Deficit) — (Unaudited)

(Dollars and shares in millions)

Fannie Mae Stockholders’ Equity (Deficit)

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

Senior preferred stock dividends paid — — — — — — — — — —

Comprehensive income:

Net income — — — — — — 461 — — 461

Other comprehensive income, net of tax effect:

Changes in net unrealized gains on 

available-for-sale securities (net of taxes of 

$5) — — — — — — — 18 — 18

Reclassification adjustment for gains 

included in net income (net of taxes of $—) — — — — — — — — — —

Other (net of taxes of $1) — — — — — — — (3) — (3)

Total comprehensive income 476

Balance as of March 31, 2020 1 556 1,158 $ 120,836 $ 19,130 $ 687 $ (119,454) $ 146 $ (7,400) $13,945

Fannie Mae Stockholders’ Equity (Deficit)

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, 2018 1 556 1,158 $ 120,836 $ 19,130 $ 687 $ (127,335) $ 322 $ (7,400) $ 6,240

Senior preferred stock dividends paid — — — — — — (3,240) — — (3,240)

Comprehensive income:

Net income — — — — — — 2,400 — — 2,400

Other comprehensive income, net of tax effect:

Changes in net unrealized gains on 

available-for-sale securities (net of taxes of 

$2) — — — — — — — 8 — 8

Reclassification adjustment for gains 

included in net income (net of taxes of $12) — — — — — — — (44) — (44)

Other (net of taxes of $1) — — — — — — — (3) — (3)

Total comprehensive income 2,361

Balance as of March 31, 2019 1 556 1,158 $ 120,836 $ 19,130 $ 687 $ (128,175) $ 283 $ (7,400) $ 5,361

See Notes to Condensed Consolidated Financial Statements

Financial Statements | Condensed Consolidated Statements of Changes in Equity (Deficit)

Fannie Mae (In conservatorship) First Quarter 2020 Form 10-Q 63
FANNIE MAE

(In conservatorship)

Notes to Condensed Consolidated Financial Statements

(Unaudited)

1. Summary of Significant Accounting Policies

We are a stockholder-owned corporation organized and existing under the Federal National Mortgage Association Charter Act 

(the “Charter Act” or our “charter”). We are a government-sponsored enterprise (“GSE”), and 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, 2019 (“2019

Form 10-K”) for additional information on our conservatorship and the impact of U.S. government support of our business.

The unaudited interim condensed consolidated financial statements as of and for the three months ended March 31, 2020 and 

related notes, should be read in conjunction with our audited consolidated financial statements and related notes included in 

our 2019 Form 10-K.

Basis of Presentation 

The accompanying unaudited interim condensed consolidated financial statements have been prepared in accordance with 

generally accepted accounting principles in the United States of America (“GAAP”) for interim financial information and with the 

SEC’s instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and 

note disclosures required by GAAP for complete consolidated financial statements. In the opinion of management, all 

adjustments of a normal recurring nature considered necessary for a fair presentation have been included. The accompanying 

condensed consolidated financial statements include our accounts as well as the accounts of other entities in which we have a 

controlling financial interest. All intercompany accounts and transactions have been eliminated. To conform to our current 

period presentation, we have reclassified certain amounts reported in our prior period condensed consolidated financial 

statements. Results for the three months ended March 31, 2020 may not necessarily be indicative of the results for the year 

ending December 31, 2020.

Presentation of Advances to Lenders 

Advances to lenders represent our payments of cash in exchange for the receipt of mortgage loans from lenders in a transfer

that is accounted for as a secured lending arrangement. These transfers primarily occur when we provide early funding to

lenders for loans that they will subsequently either sell to us or securitize into a Fannie Mae MBS that they will deliver to us.

Early lender funding advances have terms up to 60 days and earn a short-term market rate of interest. Advances to lenders 

has been presented as a separate line item for all periods presented as increased mortgage refinance activity resulted in a 

higher balance at period end. In prior periods, advances to lenders were recorded in “Other assets.” 

Presentation of Credit Enhancement Expense

Credit enhancement expense primarily consists of costs associated with our Connecticut Avenue Securities®(“CAS”) and 

Credit Insurance Risk TransferTM (“CIRT

TM

”) programs as well as enterprise-paid mortgage insurance (“EPMI”). We exclude 

from this expense costs related to our CAS transactions accounted for as debt instruments and credit risk transfer programs 

accounted for as derivative instruments. Credit enhancement expense has been presented as a separate line item for all 

periods presented as the percentage of our book of business covered by freestanding credit enhancements has increased and 

become a more significant driver of our results of operations. In prior periods, credit enhancement expenses were recorded in 

“Other expenses, net.” 

Presentation of Yield Maintenance Fees 

Prior period multifamily yield maintenance fees have been reclassified to conform to the current period presentation. 

Multifamily yield maintenance fees, or prepayment premiums, are fees that a borrower pays when they prepay their loan. For 

multifamily loans held in consolidated trust, a portion of the yield maintenance fee is typically passed through to the holders of 

the trust certificate. As of January 1, 2020, we classify all yield maintenance fees as interest income. For consolidated loans, 

the portion of the fee passed through to the certificate holders of the trust is classified as interest expense. Previously, we 

classified multifamily yield maintenance fees as interest income when the fee was associated with a loan refinancing, 

otherwise the fee was classified as fee and other income. The portion of the fees passed through to the certificate holders of 

the trust were previously classified as interest expense when the fee was associated with a loan refinancing, otherwise the fee 

was classified as other expense. The changes in presentation have been applied retrospectively to all periods presented, 

which have been immaterial historically. 

Notes to Condensed Consolidated Financial Statements | Summary of Significant Accounting Policies

Fannie Mae (In conservatorship) First Quarter 2020 Form 10-Q 64
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, disclosure of contingent assets and liabilities as of 

the dates of our condensed consolidated financial statements, as well as our reported amounts of revenues and expenses 

during the reporting periods. Management has made significant estimates in a variety of areas including, but not limited to, the 

allowance for loan losses. For example, significant uncertainty regarding the expected impacts of the COVID-19 outbreak 

required substantial management judgment in assessing our allowance for loan losses as of March 31, 2020. Actual results 

could differ from these estimates.

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 and (2) the execution of a senior preferred 

stock purchase agreement by our conservator, on our behalf, and Treasury, pursuant to which we issued to Treasury both 

senior preferred stock and a warrant to purchase common stock.

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

Housing Finance Regulatory Reform Act of 2008 (together, the “GSE Act”), the conservator immediately succeeded to (1) all 

rights, titles, powers and privileges of Fannie Mae, and of any stockholder, officer or director of Fannie Mae with respect to 

Fannie Mae and its assets, and (2) title to the books, records and assets of any other legal custodian of Fannie Mae. The 

conservator subsequently issued an order that provided for our Board of Directors to exercise specified authorities. The 

conservator also provided instructions regarding matters for which conservator decision or notification is required. The 

conservator retains the authority to amend or withdraw its order and instructions at any time.

The conservator has the power to transfer or sell any asset or liability of Fannie Mae (subject to limitations and post-transfer 

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.

On September 5, 2019, Treasury released a plan to reform the housing finance system. The Treasury Housing Reform Plan 

(the “Treasury plan”) is far-reaching in scope and could have a significant impact on our structure, our role in the secondary 

mortgage market, our capitalization, our business and our competitive environment. The Treasury plan includes 

recommendations relating to ending our conservatorship, amending our senior preferred stock purchase agreement with 

Treasury, considering additional restrictions and requirements on our business, and many other matters. The Treasury plan 

recommends that Treasury’s commitment to provide funding under the senior preferred stock purchase agreement should be 

replaced with legislation that authorizes an explicit, paid-for guarantee backed by the full faith and credit of the Federal 

Government that is limited to the timely payment of principal and interest on qualifying MBS. The Treasury plan further 

recommends that, pending legislation, even after conservatorship Treasury should maintain its ongoing commitment to support 

our single-family and multifamily mortgage-backed securities through the senior preferred stock purchase agreement, as 

amended as contemplated by the plan.

The conservatorship has no specified termination date and there continues to be significant uncertainty regarding our future, 

including how long we will continue to exist in our current form, the extent of our role in the market, the level of government 

support of our business, how long we will be in conservatorship, what form we will have and what ownership interest, if any, 

our current common and preferred stockholders will hold in us after the conservatorship is terminated and whether we will 

continue to exist following conservatorship. Under the GSE Act, FHFA must place us into receivership if the Director of FHFA

makes a written determination that our assets are less than our obligations or if we have not been paying our debts, in either 

case, for a period of 60 days. In addition, the Director of FHFA may place us into receivership at his discretion at any time for 

other reasons set forth in the GSE Act, including if we are critically undercapitalized or if we are undercapitalized and have no 

reasonable prospect of becoming adequately capitalized. Should we be placed into receivership, different assumptions would 

be required to determine the carrying value of our assets, which could lead to substantially different financial results. Treasury 

has made a commitment under the senior preferred stock purchase agreement to provide funding to us under certain 

circumstances if we have a net worth deficit. We are not aware of any plans of FHFA (1) to fundamentally change our business 

model, other than changes that might result from recommendations in the Treasury plan, if implemented, 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.

Notes to Condensed Consolidated Financial Statements | Summary of Significant Accounting Policies

Fannie Mae (In conservatorship) First Quarter 2020 Form 10-Q 65
Senior Preferred Stock Purchase Agreement and Senior Preferred

Stock

Treasury has made a commitment under the senior preferred stock purchase agreement to provide funding to us under certain 

circumstances if we have a net worth deficit. Pursuant to the senior preferred stock purchase agreement, we have received a 

total of $119.8 billion from Treasury as of March 31, 2020, and the amount of remaining funding available to us under the 

agreement was $113.9 billion.

Pursuant to the senior preferred stock purchase agreement, we issued shares of senior preferred stock in 2008. The current 

dividend provisions of the senior preferred stock provide for quarterly dividends consisting of the amount, if any, by which our 

net worth as of the end of the immediately preceding fiscal quarter exceeds a $25 billion capital reserve amount. We refer to 

this as a “net worth sweep” dividend. Because we had a net worth of $14.6 billion as of December 31, 2019, no dividends were 

payable for the first quarter of 2020. And because we had a net worth of $13.9 billion as of March 31, 2020, no dividends are 

payable for the second quarter of 2020.

The liquidation preference of the senior preferred stock is subject to adjustment. The aggregate liquidation preference of the 

senior preferred stock increased from $131.2 billion as of December 31, 2019 to $135.4 billion as of March 31, 2020 due to the 

increase in our net worth during the fourth quarter of 2019. Because our net worth did not increase during the first quarter of 

2020, the aggregate liquidation preference of the senior preferred stock will remain at $135.4 billion as of June 30, 2020.

See “Note 11, Equity” in our 2019 Form 10-K for additional information about the senior preferred stock purchase agreement 

and the senior preferred stock.

Regulatory Capital

We submit capital reports to FHFA, which monitors our capital levels. The deficit of core capital over statutory minimum capital 

was $131.3 billion as of March 31, 2020 and $128.8 billion as of December 31, 2019.

Related Parties

Because Treasury holds a warrant to purchase shares of Fannie Mae common stock equal to 79.9% of the total number of 

shares of Fannie Mae common stock, we and Treasury are deemed related parties. As of March 31, 2020, Treasury held an 

investment in our senior preferred stock with an aggregate liquidation preference of $135.4 billion. See “Senior Preferred Stock 

Purchase Agreement and Senior Preferred Stock” above for additional information on transactions under this agreement.

FHFA’s control of both Fannie Mae and Freddie Mac has caused Fannie Mae, FHFA and Freddie Mac to be deemed related 

parties. Additionally, Fannie Mae and Freddie Mac jointly own Common Securitization Solutions, LLC (“CSS”), a limited liability 

company created to operate a common securitization platform; as such, CSS is deemed a related party. As a part of our joint 

ownership, Fannie Mae, Freddie Mac and CSS are parties to a limited liability company agreement that sets forth the overall 

framework for the joint venture, including Fannie Mae’s and Freddie Mac’s rights and responsibilities as members of CSS. 

Fannie Mae, Freddie Mac and CSS are also parties to a customer services agreement that sets forth the terms under which 

CSS provides mortgage securitization services to us and Freddie Mac, including the operation of the common securitization 

platform as well as an administrative services agreement. CSS operates as a separate company from us and Freddie Mac, 

with all funding and limited administrative support services and other resources provided to it by us and Freddie Mac through 

our capital contributions.

In the ordinary course of business, Fannie Mae may purchase and sell securities issued by Treasury and Freddie Mac. These 

transactions occur on the same terms as those prevailing at the time for comparable transactions with unrelated parties. With 

our implementation of the Single Security Initiative in June 2019, some of the structured securities we issue are backed in 

whole or in part by Freddie Mac 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 $5 million for the three months ended March 31, 2020 and 2019, 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. The resulting fee revenue and expense are recorded in “Mortgage loans interest income” and “TCCA fees,” 

respectively, in our condensed consolidated statements of operations and comprehensive income. We recognized $637 million

and $593 million in TCCA fees during the three months ended March 31, 2020 and 2019, respectively, of which $637 million

had not been remitted to Treasury as of March 31, 2020.

Notes to Condensed Consolidated Financial Statements | Summary of Significant Accounting Policies

Fannie Mae (In conservatorship) First Quarter 2020 Form 10-Q 66
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, are 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 $30 million and $15 million in “Other expenses, net” in connection with Treasury’s Capital Magnet Fund 

for the three months ended March 31, 2020 and 2019, respectively, of which $30 million had not been remitted as of March 31, 

2020.

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 $32 million and $30 million for the three months ended 

March 31, 2020 and 2019, respectively. 

Transactions with CSS and Freddie Mac

We contributed capital to CSS, the company we jointly own with Freddie Mac, of $29 million and $36 million for the three

months ended March 31, 2020 and 2019, respectively. 

In January 2020, at FHFA’s direction we entered into an amended limited liability company agreement for CSS expanding the 

CSS Board of Managers from two members designated by each GSE to include (1) the CSS Chief Executive Officer; (2) a 

Board Chair not affiliated with either GSE or CSS (who was designated by FHFA in January 2020); and (3) up to three 

additional Board members not affiliated with either GSE or CSS who may be designated by FHFA while we and Freddie Mac 

both remain in conservatorship. As a result of the amendment, if FHFA were to designate three additional Board members, the 

four managers designated by us and Freddie Mac would constitute a minority of the CSS Board, and the Board could take 

actions without the approval of any of the managers we have designated on any matter during conservatorship and on a 

number of significant matters following either our or Freddie Mac’s exit from conservatorship.

Principles of Consolidation

Our condensed consolidated financial statements include our accounts as well as the accounts of the other entities in which 

we have a controlling financial interest. All intercompany balances and transactions have been eliminated. The typical 

condition for a controlling financial interest is ownership of a majority of the voting interests of an entity. A controlling financial 

interest may also exist in entities through arrangements that do not involve voting interests, such as a variable interest entity 

(“VIE”).

Investments in Securities

Impairment of Available-for-Sale Debt Securities 

An available-for-sale (“AFS”) debt security is impaired if the fair value of the investment is less than its amortized cost basis. 

Credit losses (benefits) on impaired AFS debt securities are recognized through an allowance for credit losses. Credit losses 

are evaluated on an individual security basis and are limited to the difference between the fair value of the debt security and its 

amortized cost basis. If we intend to sell a debt security or it is more likely than not that we will be required to sell the debt 

security before recovery, any allowance for credit losses on the debt security is reversed and the amortized cost basis of the 

debt security is written down to its fair value.

Mortgage Loans

Loans Held for Sale

When we acquire mortgage loans that we intend to sell or securitize via trusts that will not be consolidated, we classify the 

loans as held for sale (“HFS”). We report the carrying value of HFS loans at the lower of cost or fair value. Any excess of an 

HFS loan’s cost over its fair value is recognized as a valuation allowance, with changes in the valuation allowance recognized 

as “Investment gains (losses), net” in our condensed consolidated statements of operations and comprehensive income. We 

recognize interest income on HFS loans on an accrual basis, unless we determine that the ultimate collection of contractual 

principal or interest payments in full is not reasonably assured. Purchased premiums, discounts and other cost basis 

adjustments on HFS loans are deferred upon loan acquisition, included in the cost basis of the loan, and not amortized. We 

determine any lower of cost or fair value adjustment on HFS loans at an individual loan level.

For nonperforming loans transferred from held for investment (“HFI”) to HFS, based upon a change in our intent, we record the 

loans at the lower of cost or fair value on the date of transfer. When the fair value of the nonperforming loan is less than its 

amortized cost, we record a write-off against the allowance for loan losses in an amount equal to the difference between the 

amortized cost basis and the fair value of the loan. If the amount written off upon transfer exceeds the allowance related to the 

Notes to Condensed Consolidated Financial Statements | Summary of Significant Accounting Policies

Fannie Mae (In conservatorship) First Quarter 2020 Form 10-Q 67
transferred loan, we record the excess in provision for credit losses. If the amounts written off are less than the allowance 

related to the loans, we recognize a benefit for credit losses. 

Nonperforming loans include both seriously delinquent and reperforming loans, which are loans that were previously 

delinquent but are performing again because payments on the mortgage loan have become current with or without the use of a 

loan modification plan. 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. 

In the event that we reclassify a performing loan from HFI to HFS, based upon a change in our intent, the allowance for loan 

losses previously recorded on the HFI mortgage loan is reversed through earnings at the time of reclassification. The 

mortgage loan is reclassified into HFS at its amortized cost basis and a valuation allowance is established to the extent that 

the amortized cost basis of the loan exceeds its fair value. The initial recognition of the valuation allowance and any 

subsequent changes are recorded as a gain or loss in “Investment gains (losses), net.”

Loans Held for Investment

When we acquire mortgage loans that we have the ability and the intent to hold for the foreseeable future or until maturity, we 

classify the loans as HFI. When we consolidate a securitization trust, we recognize the loans underlying the trust in our 

condensed consolidated balance sheets. The trusts do not have the ability to sell mortgage loans and the use of such loans is 

limited exclusively to the settlement of obligations of the trusts. Therefore, mortgage loans acquired when we have the intent to 

securitize via consolidated trusts are generally classified as HFI in our condensed consolidated balance sheets both prior to 

and subsequent to their securitization.

We report the carrying value of HFI loans at the unpaid principal balance, net of unamortized premiums and discounts, other 

cost basis adjustments, and allowance for loan losses. We define the amortized cost of HFI loans as unpaid principal balance 

and accrued interest receivable, net of unamortized premiums, discounts, and other cost basis adjustments. For purposes of 

our condensed consolidated balance sheets, we present accrued interest receivable separately from the amortized cost of our 

loans held for investment. We recognize interest income on HFI loans on an accrual basis using the effective yield method 

over the contractual life of the loan, including the amortization of any deferred cost basis adjustments, such as the premium or 

discount at acquisition, unless we determine that the ultimate collection of contractual principal or interest payments in full is 

not reasonably assured.

Nonaccrual Loans

We discontinue accruing interest on loans when we believe collectability of principal or 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 loans is reversed 

through interest income at the date a 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 

that the borrower brings the loan current. We return a modified single-family loan to accrual status at the point that the 

borrower successfully makes all required payments during the trial period (generally three to four months) and the modification 

is made permanent. As of January 1, 2020, 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. Transactions related to the multifamily nonaccrual policy have been immaterial historically.

Allowance for Loan Losses

Our allowance for loan losses is a valuation account that is deducted from the amortized cost basis of HFI loans to present the 

net amount expected to be collected on the loans. The allowance for loan losses reflects an estimate of expected credit losses 

on single-family and multifamily HFI loans held by Fannie Mae and by consolidated Fannie Mae MBS trusts. Estimates of 

credit losses are based on expected cash flows derived from internal models that estimate loan performance under simulated 

ranges of economic environments. 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. The allowance for loans losses does not consider benefits from freestanding credit enhancements, 

such as our CAS and CIRT programs and multifamily Delegated Underwriting and Servicing (“DUS®”) lender risk-sharing 

arrangements, which are recorded in “Other assets” in our condensed consolidated balance sheets. We have elected not to 

measure an allowance for credit losses on accrued interest receivable balances as we have a nonaccrual policy to ensure the 

timely reversal of unpaid accrued interest. See “Note 4, Allowance for Loan Losses” for additional information about our current 

period provision for loan losses, including a discussion of the estimates used in measuring the impact of the COVID-19 

outbreak on our allowance.

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 

Notes to Condensed Consolidated Financial Statements | Summary of Significant Accounting Policies

Fannie Mae (In conservatorship) First Quarter 2020 Form 10-Q 68
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 transfer of a nonperforming 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. 

Single-Family Loans

We estimate the amount expected to be collected on our single-family loans using a discounted cash flow approach. Our 

allowance for loan losses is calculated as the difference between the amortized cost basis of the loan and the present value of 

expected cash flows on the loan. Expected cash flows include payments from the borrower, net of servicing fees, contractually 

attached credit enhancements and proceeds from the sale of the underlying collateral, net of selling costs.

When foreclosure of a single-family loan is probable, the allowance for loan losses is calculated as the difference between the 

amortized cost basis of the loan and the fair value of the collateral as of the reporting date, adjusted for the estimated costs to 

sell the property and the amount of expected recoveries from contractually attached credit enhancements or other proceeds 

we expect to receive. 

Expected cash flows are developed using internal models that capture market and loan characteristic inputs. Market inputs 

include information such as actual and forecasted home prices, interest rates, volatility, and spreads, while loan characteristic 

inputs include information such as mark-to-market loan-to-value (“LTV”) ratios, delinquency status, geography, and borrower 

FICO credit scores. The model assigns a probability to borrower events including contractual payment, loan payoff and default 

under various economic environments based on historical data, current conditions, and reasonable and supportable forecasts.

The two primary drivers of our forecasted economic environments are interest rates and home prices. Our model projects the 

range of possible interest rate scenarios over the life of the loan based on actual interest rates and observed option pricing 

volatility in the capital markets. We develop regional forecasts based on Metropolitan Statistical Area data for single-family 

home prices using a multi-path simulation that captures home price projections over a five-year period, the period for which we 

can develop reasonable and supportable forecasts. After the five-year period, the home price forecast immediately reverts to a 

historical long-term growth rate.

Expected cash flows on the loan are discounted at the effective interest rate on the loan, adjusted for expected prepayments. 

For single-family loans that have not been modified in a troubled debt restructuring (“TDR”), the discount rate is updated each 

reporting period to reflect changes in expected prepayments. Expected cash flows do not include expected extensions of the 

contractual term unless such extension is the result of a reasonably expected TDR.

We consider the effects of actual and reasonably expected TDRs in our estimate of credit losses. These effects include any 

economic concession provided or expected to be provided to a borrower experiencing financial difficulty. We consider our 

current servicing practices and our historical experience to estimate reasonably expected TDRs. When a loan is contractually 

modified in a TDR, to capture the concession, the discount rate on the loan is locked to the rate in effect just prior to the 

modification and is no longer updated for changes in expected prepayments.

Multifamily Loans

Our allowance for loan losses on multifamily loans is calculated based on estimated probabilities of default and loss severities 

to derive expected loss ratios, which are then applied to the amortized cost basis of the loans. Our probabilities of default and 

severity are estimated using internal models based on historical loss experience of loans with similar risk characteristics that 

affect credit performance, such as debt service coverage ratio (“DSCR”), mark-to-market LTV ratio, collateral type, age, loan 

size, geography, prepayment penalty term, and note type. Our models simulate a range of possible future economic scenarios, 

which are used to estimate probabilities of default and loss severities. Key inputs to our models include rental income, which 

drives expected DSCRs for our loans, and capitalization rates, which project future property values. Our reasonable and 

supportable forecasts for multifamily rental income and capitalization rates, which are projected based on Metropolitan 

Statistical Area data, extend through the contractual maturity of the loans. For TDRs, we use a discounted cash flow approach 

to estimate expected credit losses.

When foreclosure of a multifamily loan is probable, the allowance for loan losses is calculated as the difference between the 

amortized cost basis of the loan and the fair value of the collateral as of the reporting date, adjusted for the estimated costs to 

sell the property and the amount of expected recoveries from contractually attached credit enhancements or other proceeds 

we expect to receive.

Notes to Condensed Consolidated Financial Statements | Summary of Significant Accounting Policies

Fannie Mae (In conservatorship) First Quarter 2020 Form 10-Q 69
Earnings per Share 

Earnings per share (“EPS”) is presented for basic and diluted EPS. We compute basic EPS by dividing net income attributable 

to common stockholders by the weighted-average number of shares of common stock outstanding during the period. However, 

as a result of our conservatorship status and the terms of the senior preferred stock, no amounts would be available to 

distribute as dividends to common or preferred stockholders (other than to Treasury as the holder of the senior preferred 

stock). Net income (loss) attributable to common stockholders excludes amounts attributable to the senior preferred stock. 

Weighted average common shares include 4.7 billion and 4.6 billion shares for the periods ended March 31, 2020 and 2019, 

respectively, that would be issued upon the full exercise of the warrant issued to Treasury from the date the warrant was 

issued through March 31, 2020 and 2019, respectively.

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 months ended March 31, 2020, convertible preferred stock is not included in the calculation 

because a net loss attributable to common shareholders was incurred and it would have an anti-dilutive effect. For the three 

months ended March 31, 2019, our diluted EPS weighted average shares outstanding includes shares of common stock that 

would be issuable upon the conversion of 131 million shares of convertible preferred stock.

New Accounting Guidance 

The CARES Act and Interagency Regulatory Guidance 

Section 4013 of the Coronavirus Aid, Relief, and Economic Security Act, referred to as the CARES Act, which was enacted in 

March 2020, provides temporary relief from the accounting and reporting requirements for TDRs regarding certain loan 

modifications related to COVID-19. The CARES Act provides that a financial institution may elect to suspend the TDR 

requirements under GAAP for loan modifications related to the COVID-19 pandemic that occur between March 1, 2020 

through the earlier of December 31, 2020 or 60 days after the date on which the COVID-19 outbreak national emergency 

terminates (the “Applicable Period”), as long as the loan was not more than 30 days delinquent as of December 31, 2019. 

Loan modifications are defined in this section of the CARES Act to include forbearance arrangements, repayment plans, 

interest rate modifications, and any similar arrangement that defer or delay the payment of principal or interest.

We have elected to account for eligible loan modifications under Section 4013 of the CARES Act. Therefore, the initial relief 

(i.e., the forbearance arrangement) and the subsequent agreements (i.e., repayment plans and loan modifications) that are 

necessary to allow the borrower to repay the past due amounts (collectively, the “COVID-19 Relief”), will not be subject to the 

specialized accounting or disclosures that are required for TDRs if the initial relief related to COVID-19 is granted during the 

Applicable Period and the borrower was no more than 30 days past due as of December 31, 2019. 

In addition to the CARES Act, the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance 

Corporation, National Credit Union Administration, Office of the Comptroller of the Currency, Consumer Financial Protection 

Bureau and the State Banking Regulators (collectively, the “Banking Agencies”) issued an Interagency Statement on Loan 

Modifications and Reporting for Financial Institutions Working with Customers Affected by the Coronavirus (the “Interagency 

Statement”) in April 2020. The Interagency Statement primarily provides incremental guidance related to the nonaccrual of 

interest income. It indicates that financial institutions may continue to accrue interest income on loans that are granted shortterm (e.g., six months) payment delays, such as forbearance, if the delay is in response to COVID-19 and the borrower was 

less than 30 days past due at the time the delay was granted. We are still evaluating this option provided under the 

Interagency Statement for loans that have received short-term payment deferrals related to the COVID-19 pandemic. Our 

election on this matter will be finalized during the second quarter of 2020 as this guidance did not affect our first quarter 

financial statements.

The Current Expected Credit Loss Standard

The Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) 2016-13, Financial 

Instruments—Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments in June 2016, which was 

later amended by ASU 2019-04, ASU 2019-05 and ASU 2019-11. These ASUs (the “CECL standard”) replaced the existing 

incurred loss impairment methodology for loans that are collectively evaluated for impairment with a methodology that reflects 

lifetime expected credit losses and requires consideration of a broader range of reasonable and supportable forecast 

information to develop a lifetime credit loss estimate. The CECL standard also requires credit losses related to AFS debt 

securities to be recorded through an allowance for credit losses. Our adoption of this standard on January 1, 2020 did not have 

a material impact on our portfolio of AFS debt securities.

The CECL standard became effective for our fiscal year beginning January 1, 2020. We have changed our accounting policies 

as described above and implemented system, model and process changes to adopt the standard. Upon adoption, we used 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 used to estimate credit losses 

incorporated our historical credit loss experience, adjusted for current economic forecasts and the current credit profile of our 

Notes to Condensed Consolidated Financial Statements | Summary of Significant Accounting Policies

Fannie Mae (In conservatorship) First Quarter 2020 Form 10-Q 70
loan book of business. The models used reasonable and supportable forecasts for key economic drivers, such as home prices 

(single-family), rental income (multifamily) and capitalization rates (multifamily).

The adoption of the CECL standard on January 1, 2020 reduced our retained earnings by $1.1 billion on an after-tax basis. 

The adoption of this guidance increased our overall credit loss reserves primarily as the result of an increase in our singlefamily loan loss reserves that were previously evaluated on a collective basis for impairment. This increase was partially offset 

by a decrease in estimated credit losses on loans that were previously considered individually impaired (our TDRs).

The increase in our single-family loan loss reserves that were previously evaluated on a collective basis was primarily driven 

by the migration from an incurred-loss approach, which allowed us to consider only default events and economic conditions 

that already existed as of each financial reporting date, to an estimate that incorporates both expected default events over the 

expected life of each mortgage loan and a forecast of home prices in different economic environments over a reasonable and 

supportable period. The increase in loss reserves for this portion of our book was low relative to its size due to the credit 

quality of these loans and because as of the date of adoption our current model forecasted home price growth.

The allowance for loan losses on the TDR book was already measured using an expected lifetime credit loss estimate. The 

credit losses on this portion of our single-family book decreased upon the adoption of the CECL standard because the new 

guidance required us to exclude from our estimate of credit losses all pre-foreclosure and post-foreclosure costs that are 

expected to be advanced after the balance sheet date. Prior to the adoption of the CECL standard, we incorporated these 

costs in our estimate of credit losses for this book.

Impacts on Key Balance Sheet Line Items upon Implementation of the CECL Standard 

The following table discloses the impact of adopting the CECL standard on key balance sheet line items.

Balance as of December 31, 

2019

Transition Impact from 

Adoption of the CECL 

Standard 

Balance as of January 1, 

2020

(Dollars in millions) 

Mortgage loans held for sale $ 6,773 $ 50 $ 6,823

Allowance for loan losses (9,016) (1,722) (10,738)

Other assets(1)14,312 230 14,542

Deferred tax assets, net 11,910 303 12,213

Accumulated deficit (beginning retained earnings) (118,776) (1,139) (119,915)

(1)

Transition adjustment primarily represents the reclassification and recognition of freestanding credit enhancements not contractually 

attached to the loan.

For a discussion of the current period measurement of our allowance for loan losses under the CECL standard, including the 

expected impact of the COVID-19 outbreak, see “Note 4, Allowance for Loan Losses.”

Reference Rate Reform

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference 

Rate Reform on Financial Reporting (“ASU 2020-04”), which provides optional temporary relief to ease the potential burden of 

transitioning away from LIBOR and other discontinued interest rates. Specifically, ASU 2020-04 provides optional practical 

expedients and exceptions under GAAP related to contract modifications and hedging relationships that reference LIBOR or 

another reference rate expected to be discontinued. Qualifying for the accounting relief provided by ASU 2020-04 is subject to 

meeting certain criteria and is generally only available to contract modifications made and hedging relationships entered into or 

evaluated prospectively from March 12, 2020 through December 31, 2022. 

We did not enter into any contract modifications between March 12, 2020 and March 31, 2020 that would be eligible for the 

accounting relief provided by ASU 2020-04. We also had no hedge accounting relationships during that period. We will 

continue to evaluate ASU 2020-04 to determine the timing and extent to which we will apply the provided accounting relief. 

Notes to Condensed Consolidated Financial Statements | Summary of Significant Accounting Policies

Fannie Mae (In conservatorship) First Quarter 2020 Form 10-Q 71
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 UMBS beginning in June 2019, we include securities issued 

by Freddie Mac in some of our resecuritization trusts. The mortgage loans that serve as collateral for Freddie Mac-issued 

securities are not held in trusts that are consolidated by Fannie Mae.

Unconsolidated VIEs

We do not consolidate VIEs when we are not deemed to be the primary beneficiary. Our unconsolidated VIEs include 

securitization and resecuritization trusts, limited partnerships, and certain SPVs designed to transfer credit risk. The following 

table displays the carrying amount and classification of our assets and liabilities that relate to our involvement with 

unconsolidated securitization and resecuritization trusts.

As of

March 31, 2020 December 31, 2019

Assets and liabilities recorded in our condensed consolidated balance sheets 

related to unconsolidated mortgage-backed trusts:

(Dollars in millions)

Assets:

Trading securities:

Fannie Mae $ 2,666 $ 2,543

Non-Fannie Mae 4,610 5,100

Total trading securities 7,276 7,643

Available-for-sale securities:

Fannie Mae 1,505 1,524

Non-Fannie Mae 493 574

Total available-for-sale securities 1,998 2,098

Other assets 45 56

Other liabilities (71) (78)

Net carrying amount $ 9,248 $ 9,719

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. However, a portion of these Freddie Mac securities may be backed in whole or in part by 

Fannie Mae MBS. To the extent that these Freddie Mac securities are backed by Fannie Mae MBS, our guarantee to the 

resecuritization trust does not subject us to any additional exposure to credit risk. Thus, our actual exposure to credit risk from 

Freddie Mac securities held in our resecuritization trusts is likely lower than the disclosed maximum exposure to loss. Our 

maximum exposure to loss related to unconsolidated securitization and resecuritization trusts was approximately $84 billion

and $62 billion as of March 31, 2020 and December 31, 2019, respectively. The total assets of our unconsolidated 

securitization and resecuritization trusts were approximately $170 billion and $130 billion as of March 31, 2020 and December 

31, 2019, respectively.

The maximum exposure to loss for our unconsolidated limited partnerships and similar legal entities, which consist of lowincome housing tax credit investments (“LIHTC”), community investments and other entities, was $93 million and the related 

Notes to Condensed Consolidated Financial Statements | Consolidations and Transfers of Financial Assets

Fannie Mae (In conservatorship) First Quarter 2020 Form 10-Q 72
carrying value was $75 million as of March 31, 2020. As of December 31, 2019, the maximum exposure to loss was $98 

million and the related carrying value was $79 million. The total assets of these limited partnership investments were $1.7 

billion as of March 31, 2020 and $2.0 billion as of December 31, 2019.

The maximum exposure to loss related to our involvement with unconsolidated SPVs that transfer credit risk represents the 

unpaid principal balance and accrued interest payable of obligations issued by the Connecticut Avenue Securities (“CAS”) and 

Multifamily Connecticut Avenue Securities (“MCAS”) SPVs. The maximum exposure to loss related to these unconsolidated 

SPVs was $12.3 billion and $9.5 billion as of March 31, 2020 and December 31, 2019, respectively. The total assets related to 

these unconsolidated SPVs were $12.4 billion and $9.5 billion as of March 31, 2020 and December 31, 2019, respectively.

The unpaid principal balance of our multifamily loan portfolio was $334.4 billion as of March 31, 2020. As our lending 

relationship does not provide us with a controlling financial interest in the borrower entity, we do not consolidate these 

borrowers regardless of their status as either a VIE or a voting interest entity. We have excluded these entities from our VIE 

disclosures. However, the disclosures we have provided in “Note 3, Mortgage Loans,” “Note 4, Allowance for Loan Losses” 

and “Note 6, Financial Guarantees” with respect to this population are consistent with the FASB’s stated objectives for the 

disclosures related to unconsolidated VIEs.

Transfers of Financial Assets

We issue Fannie Mae MBS through portfolio securitization transactions by transferring pools of mortgage loans or mortgagerelated securities to one or more trusts or special purpose entities. We are considered to be the transferor when we transfer 

assets from our own retained mortgage portfolio in a portfolio securitization transaction. For the three months ended March 31, 

2020 and 2019, the unpaid principal balance of portfolio securitizations was $89.0 billion and $41.4 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 multi-class 

portfolio securitization trusts. As of March 31, 2020, the unpaid principal balance of retained interests was $2.9 billion and its 

related fair value was $4.1 billion. As of December 31, 2019, the unpaid principal balance of retained interests was $2.9 billion

and its related fair value was $4.0 billion. For the three months ended March 31, 2020 and 2019, the principal, interest and 

other fees received on retained interests was $181 million and $116 million, respectively.

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 HFI or 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, other cost basis adjustments, and accrued interest receivable. For purposes of our 

condensed consolidated balance sheet, we present accrued interest receivable separately from the amortized cost of our 

loans held for investment. We report the carrying value of HFS loans at the lower of cost or fair value and record valuation 

changes in “Investment gains (losses), net” in our condensed consolidated statements of operations and comprehensive 

income.

For purposes of the single-family mortgage loan disclosures below, we display loans by class of financing receivable type. In 

the current period, we revised the financing receivable classes used for disclosure to 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. We believe the revised 

classifications are more aligned with how we assess and manage the credit risk of our loans. We have revised the 

presentation of certain loan disclosures for prior periods to conform with the revised current period classes of financing 

receivables. 

The following table displays the carrying value of mortgage loans and our allowance for loan losses.

As of

March 31, 2020 December 31, 2019

(Dollars in millions)

Single-family $ 2,996,281 $ 2,972,361

Multifamily 334,397 327,593

Total unpaid principal balance of mortgage loans 3,330,678 3,299,954

Cost basis and fair value adjustments, net 45,341 43,224

Allowance for loan losses (13,209) (9,016)

Total mortgage loans $ 3,362,810 $ 3,334,162

Notes to Condensed Consolidated Financial Statements | Consolidations and Transfers of Financial Assets

Fannie Mae (In conservatorship) First Quarter 2020 Form 10-Q 73
The following tables display information about our sales of mortgage loans during the period along with our redesignations of 

loans at the time of redesignation.

For the Three Months Ended 

March 31,

2020 2019

(Dollars in millions)

Single family loans redesignated from HFI to HFS:

Amortized cost $ 1,637 $ 2,945

Lower of cost or fair value adjustment at time of redesignation(1)(9) (240)

Allowance reversed at time of redesignation 184 467

Single-family loans sold:

Unpaid principal balance $ — $ 58

Realized gains (losses) — 36

(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 $7.9 billion

and $7.6 billion as of March 31, 2020 and December 31, 2019, respectively. As a result of our various loss mitigation and 

foreclosure prevention efforts, we expect that a portion of the loans in the process of formal foreclosure proceedings will not 

ultimately foreclose. 

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.

As of March 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 $ 29,663 $ 6,665 $ 13,323 $ 49,651 $ 2,497,239 $ 2,546,890 $ 23 $ 6,653

15-year or less, 

amortizing 

fixed-rate 1,803 280 450 2,533 373,012 375,545 — 542

Adjustable-rate 383 76 165 624 41,864 42,488 — 150

Other(2)2,302 756 1,847 4,905 61,288 66,193 132 710

Total singlefamily 34,151 7,777 15,785 57,713 2,973,403 3,031,116 155 8,055

Multifamily(3)37 N/A 158 195 337,499 337,694 — 33

Total $ 34,188 $ 7,777 $ 15,943 $ 57,908 $ 3,310,902 $ 3,368,810 $ 155 $ 8,088

Notes to Condensed Consolidated Financial Statements | Mortgage Loans

Fannie Mae (In conservatorship) First Quarter 2020 Form 10-Q 74
As of December 31, 2019

30 - 59 Days 

Delinquent

60 - 89 Days 

Delinquent

Seriously 

Delinquent(1)

Total 

Delinquent Current Total

Loans 90 

Days or More 

Delinquent 

and Accruing 

Interest

(Dollars in millions)

Single-family:

20- and 30-year or 

more, 

amortizing fixedrate $ 26,882 $ 7,126 $ 13,082 $ 47,090 $ 2,470,457 $ 2,517,547 $ 28

15-year or less, 

amortizing fixedrate 1,616 286 445 2,347 371,740 374,087 —

Adjustable-rate 412 85 167 664 44,244 44,908 —

Other(2)2,323 829 1,891 5,043 64,726 69,769 136

Total single-family 31,233 8,326 15,585 55,144 2,951,167 3,006,311 164

Multifamily(3)7 N/A 115 122 330,496 330,618 —

Total $ 31,240 $ 8,326 $ 15,700 $ 55,266 $ 3,281,663 $ 3,336,929 $ 164

(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.

Notes to Condensed Consolidated Financial Statements | Mortgage Loans

Fannie Mae (In conservatorship) First Quarter 2020 Form 10-Q 75
Credit Quality Indicators

The following table displays 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 LTV ratio is 

a primary factor we consider when estimating our allowance for loan losses for single-family loans. As LTV ratios increase, 

the borrower's equity in the home decreases, which may negatively affect the borrower's ability to refinance or to sell the 

property for an amount at or above the outstanding balance of the loan.

As of March 31, 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% $ 76,429 $ 307,581 $ 177,622 $ 252,599 $ 312,333 $1,034,737 $2,161,301

Greater than 80% and less than or equal to 

90% 16,159 93,510 72,787 40,029 10,145 14,220 246,850

Greater than 90% and less than or equal to 

100% 17,666 92,907 16,344 2,080 503 4,715 134,215

Greater than 100% — 443 143 167 170 3,601 4,524

Total 20 and 30-year or more, amortizing 

fixed-rate 110,254 494,441 266,896 294,875 323,151 1,057,273 2,546,890

15-year or less, amortizing fixed-rate:

Less than or equal to 80% 15,233 56,811 23,322 42,251 58,651 172,743 369,011

Greater than 80% and less than or equal to 

90% 795 3,502 668 97 23 46 5,131

Greater than 90% and less than or equal to 

100% 322 967 22 10 8 23 1,352

Greater than 100% — 2 7 9 7 26 51

Total 15-year or less, amortizing fixed-rate 16,350 61,282 24,019 42,367 58,689 172,838 375,545

Adjustable-rate:

Less than or equal to 80% 433 2,551 3,917 7,631 4,116 22,449 41,097

Greater than 80% and less than or equal to 

90% 38 360 501 208 21 54 1,182

Greater than 90% and less than or equal to 

100% 17 125 49 7 1 8 207

Greater than 100% — — — — — 2 2

Total adjustable-rate 488 3,036 4,467 7,846 4,138 22,513 42,488

Other:

Less than or equal to 80% — 42 348 871 1,134 42,367 44,762

Greater than 80% and less than or equal to 

90% — 4 33 73 60 2,470 2,640

Greater than 90% and less than or equal to 

100% — 1 17 37 26 1,193 1,274

Greater than 100% — 2 11 18 19 1,198 1,248

Total other — 49 409 999 1,239 47,228 49,924

Total $ 127,092 $ 558,808 $ 295,791 $ 346,087 $ 387,217 $1,299,852 $3,014,847

Total for all classes by LTV ratio(2)

Less than or equal to 80% $ 92,095 $ 366,985 $ 205,209 $ 303,352 $ 376,234 $1,272,296 $2,616,171

Greater than 80% and less than or equal to 

90% 16,992 97,376 73,989 40,407 10,249 16,790 255,803

Greater than 90% and less than or equal to 

100% 18,005 94,000 16,432 2,134 538 5,939 137,048

Greater than 100% — 447 161 194 196 4,827 5,825

Total $ 127,092 $ 558,808 $ 295,791 $ 346,087 $ 387,217 $1,299,852 $3,014,847

Notes to Condensed Consolidated Financial Statements | Mortgage Loans

Fannie Mae (In conservatorship) First Quarter 2020 Form 10-Q 76
As of December 31, 2019(1)

20- and 30-

Year or More, 

Amortizing 

Fixed-Rate

15-Year or 

less, 

Amortizing 

Fixed-Rate

AdjustableRate Other Total

(Dollars in millions)

Estimated mark-to-market LTV ratio:(2)

Less than or equal to 80% $ 2,145,018 $ 368,181 $ 43,415 $ 47,005 $ 2,603,619

Greater than 80% and less than or equal to 90% 237,623 4,556 1,275 2,872 246,326

Greater than 90% and less than or equal to 100% 130,152 1,284 215 1,398 133,049

Greater than 100% 4,754 66 3 1,365 6,188

Total $ 2,517,547 $ 374,087 $ 44,908 $ 52,640 $ 2,989,182

(1)

Excludes $16.3 billion and $17.1 billion as of March 31, 2020 and December 31, 2019, respectively, of mortgage loans 

guaranteed or insured, in whole or in part, by the U.S. government or one of its agencies. The class is 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. 

The following table displays the total amortized cost of our multifamily HFI loans by year of origination and credit-risk rating, 

excluding loans for which we have elected the fair value option. Property rental income and property valuations are key inputs 

to our internally assigned credit risk ratings.

As of March 31, 2020, by Year of Origination

2020 2019 2018 2017 2016 Prior Total

(Dollars in millions)

Internally assigned credit risk rating:

Non-classified(1)$ 9,858 $ 69,507 $ 63,830 $ 53,715 $ 46,030 $ 87,262 $ 330,202

Classified(2) — 347 910 1,655 1,458 3,122 7,492

Total $ 9,858 $ 69,854 $ 64,740 $ 55,370 $ 47,488 $ 90,384 $ 337,694

As of December 31, 

2019

(Dollars in millions)

Internally assigned credit risk rating:

Non-classified(1)$ 323,773

Classified(2)6,845

Total $ 330,618

(1)

A loan categorized as “Non-classified” is current or adequately protected by the current financial strength and debt service capability of the 

borrower. 

(2)

Represents loans classified as “Substandard” or “Doubtful.” Loans classified as “Substandard” have a well-defined weakness that 

jeopardizes the timely full repayment. “Doubtful” refers to a loan with a weakness that makes collection or liquidation in full highly 

questionable and improbable based on existing conditions and values. As of March 31, 2020 and December 31, 2019, we had loans with 

amortized cost of $39 million and $5 million, respectively, classified as doubtful.

Troubled Debt Restructurings

A modification to the contractual terms of a loan that results in granting a concession to a borrower experiencing financial 

difficulties is considered a 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. Our current TDR accounting described herein will be temporarily impacted by 

our election to account for certain eligible loan modifications under the COVID-19 Relief granted pursuant to the CARES Act.

See “Note 1, Summary of Significant Accounting Policies” for more information on the impact of the CARES Act. 

Notes to Condensed Consolidated Financial Statements | Mortgage Loans

Fannie Mae (In conservatorship) First Quarter 2020 Form 10-Q 77
The substantial majority of the loan modifications we complete result in term extensions, interest rate reductions or a 

combination of both. During the three months ended March 31, 2020 and 2019, the average term extension of a single-family 

modified loan was 168 months and 157 months, respectively, and the average interest rate reduction was 0.32 and 0.10

percentage points, respectively.

The following table displays the number of loans and amortized cost in loans classified as a TDR.

For the Three Months Ended March 31,

2020 2019

Number of 

Loans

Amortized 

Cost

Number of 

Loans

Amortized 

Cost

(Dollars in millions)

Single-family:

20- and 30-year or more, amortizing fixed-rate 10,856 $ 1,909 11,445 $ 1,826

15-year or less, amortizing fixed-rate 1,073 98 1,295 114

Adjustable-rate 144 24 217 32

Other 537 68 936 127

Total single-family 12,610 2,099 13,893 2,099

Multifamily — — 3 13

Total TDRs 12,610 $ 2,099 13,896 $ 2,112

For loans that defaulted in the period presented and that were classified as a TDR in the twelve months prior to the default, the 

following table displays the number of loans and the amortized cost of these loans at the time of payment default. For 

purposes of this disclosure, we define loans that had a payment default as: single-family and multifamily loans with completed 

TDRs that liquidated during the period, either through foreclosure, deed-in-lieu of foreclosure, or a short sale; single-family 

loans with completed modifications that are two or more months delinquent during the period; or multifamily loans with 

completed modifications that are one or more months delinquent during the period.

For the Three Months Ended March 31,

2020 2019

Number of 

Loans

Amortized 

Cost

Number of 

Loans

Amortized 

Cost

(Dollars in millions)

Single-family:

20- and 30-year or more, amortizing fixed-rate 3,175 $ 521 4,376 $ 664

15-year or less, amortizing fixed-rate 50 3 132 8

Adjustable-rate 7 1 8 1

Other 327 51 643 104

Total single-family 3,559 576 5,159 777

Multifamily 2 2 — —

Total TDRs that subsequently defaulted 3,561 $ 578 5,159 $ 777

Notes to Condensed Consolidated Financial Statements | Mortgage Loans

Fannie Mae (In conservatorship) First Quarter 2020 Form 10-Q 78
Nonaccrual Loans

The table below displays the amortized cost of and interest income on our HFI single-family and multifamily loans on 

nonaccrual status by class, excluding loans for which we have elected the fair value option. For the three months ended March 

31, 2020, the total amount of foregone interest income for single-family nonaccrual loans was $182 million, of which $87 

million was accrued interest receivable written off through the reversal of interest income for nonaccrual loans held at period 

end. For the three months ended March 31, 2020, the total amount of foregone interest income for multifamily nonaccrual 

loans held as of period end was $1 million.

As of

For the Three Months 

March 31, 2020 December 31, 2019 Ended March 31, 2020

Amortized Cost

Total Interest Income 

Recognized (1)

(Dollars in millions)

Single-family:

20- and 30-year or more, amortizing fixed-rate $ 23,212 $ 23,427 $ 101

15-year or less, amortized fixed-rate 856 858 2

Adjustable-rate 279 288 1

Other 2,827 2,973 13

Total single-family 27,174 27,546 117

Multifamily 91 435 —

Total $ 27,265 $ 27,981 $ 117

(1)

Represents the amount of cash payments received for nonaccrual loans held as of period end.

Notes to Condensed Consolidated Financial Statements | Mortgage Loans

Fannie Mae (In conservatorship) First Quarter 2020 Form 10-Q 79
Individually Impaired Loans

Prior to the adoption of the CECL standard, we recorded a specific loss reserve for individually impaired loans and a collective 

loss reserve for all other loans. Individually impaired loans include TDRs, acquired credit-impaired loans and multifamily loans 

that we have assessed as probable that we will not collect all contractual amounts due, regardless of whether we are currently 

accruing interest, excluding loans classified as HFS and loans for which we have elected the fair value option. The following 

tables display the unpaid principal balance, total amortized cost, related allowance as of December 31, 2019 and average 

amortized cost, total interest income recognized, and interest income recognized on a cash basis for individually impaired 

loans for the three months ended March 31, 2019.

As of December 31, 2019

Unpaid 

Principal 

Balance

Total 

Amortized 

Cost

Related 

Allowance 

for Loan 

Losses

(Dollars in millions)

Individually impaired loans:

With related allowance recorded:

Single-family:

20- and 30-year or more, amortizing fixed-rate $ 63,091 $ 61,033 $ (5,851)

15-year or less, amortizing fixed-rate 954 960 (24)

Adjustable-rate 156 157 (9)

Other 15,181 14,078 (2,291)

Total single-family 79,382 76,228 (8,175)

Multifamily 314 315 (45)

Total individually impaired loans with related allowance recorded 79,696 76,543 (8,220)

With no related allowance recorded:(1)

Single-family:

20- and 30-year or more, amortizing fixed-rate 18,372 17,578 —

15-year or less, amortizing fixed-rate 410 407 —

Adjustable-rate 265 265 —

Other 3,014 2,718 —

Total single-family 22,061 20,968 —

Multifamily 363 365 —

Total individually impaired loans with no related allowance recorded 22,424 21,333 —

Total individually impaired loans(2)$102,120 $ 97,876 $ (8,220)

(1)

The discounted cash flows or collateral value equals or exceeds the carrying value of the loan and, as such, no valuation allowance is 

required.

(2)

 Includes single-family loans restructured in a TDR with an amortized cost of $96.9 billion as of December 31, 2019. Includes multifamily 

loans restructured in a TDR with an amortized cost of $102 million as of December 31, 2019.

Notes to Condensed Consolidated Financial Statements | Mortgage Loans

Fannie Mae (In conservatorship) First Quarter 2020 Form 10-Q 80
For the Three Months Ended March 31, 2019

Average 

Amortized 

Cost

Total Interest 

Income 

Recognized

Interest 

Income 

Recognized 

on a Cash 

Basis

(Dollars in millions)

Individually impaired loans:

With related allowance recorded:

Single-family:

20- and 30-year or more, amortizing fixed-rate $ 76,400 $ 804 $ 79

15-year or less, amortizing fixed-rate 1,323 12 1

Adjustable-rate 120 1 —

Other 19,898 204 15

Total single-family 97,741 1,021 95

Multifamily 247 2 —

Total individually impaired loans with related allowance recorded 97,988 1,023 95

With no related allowance recorded:(1)

Single-family:

20- and 30-year or more, amortizing fixed-rate 14,474 212 26

15-year or less, amortizing fixed-rate 318 4 1

Adjustable-rate 400 4 1

Other 3,000 48 3

Total single-family 18,192 268 31

Multifamily 353 2 —

Total individually impaired loans with no related allowance recorded 18,545 270 31

Total individually impaired loans $116,533 $ 1,293 $ 126

(1)

The discounted cash flows or collateral value equals or exceeds the carrying value of the loan and, as such, no valuation allowance is 

required.

Notes to Condensed Consolidated Financial Statements | Mortgage Loans

Fannie Mae (In conservatorship) First Quarter 2020 Form 10-Q 81
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 loans from HFI to HFS or when a loan is determined to be 

uncollectible. See “Note 1, Summary of Significant Accounting Policies” for additional information and accounting policy 

changes resulting from our adoption of the CECL standard.

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 the CECL standard.

For the Three Months Ended March 31, 2020

Balance 

December 31, 

2019

Transition 

Impact 

from the 

Adoption of 

the CECL 

Standard

Balance 

January 1, 

2020

Provision 

for Loan 

Losses Write-offs Recoveries Other

Balance 

March 31, 

2020

(Dollars in millions)

Single-family $ (8,759) $ (1,229) $ (9,988) $ (2,177) $ 70 $ (3) $ 28 $ (12,070)

Multifamily (257) (493) (750) (407) 19 (1) — (1,139)

Total allowance for 

loan losses $ (9,016) $ (1,722) $ (10,738) $ (2,584) $ 89 $ (4) $ 28 $ (13,209)

Our provision for loan losses can vary substantially from period to period based on a number of factors, such as changes in 

actual and forecasted home prices or property valuations, fluctuations in actual and forecasted interest rates, borrower 

payment behavior, events such as natural disasters or pandemics, the types and volume of our loss mitigation activities, 

including forbearance and loan modifications, the volume of foreclosures completed, and the redesignation of loans from HFI 

to HFS. Estimating the impact of the COVID-19 outbreak on our expected loan loss reserves required significant management 

judgment, including estimates of the number of single-family borrowers who will receive forbearance and any resulting loan 

modifications that will be provided once the forbearance period ends. Under our CECL methodology, depending on the type of 

loan modification granted, loss severity estimates vary. Our provision can also be impacted by updates to the models, 

assumptions, and data used in determining our allowance for loan losses.

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

• Expected loan losses as a result of the COVID-19 outbreak. Given the rapidly changing and deteriorating market 

conditions in recent weeks as a result of the unprecedented COVID-19 outbreak, we believe our model used to 

estimate single-family credit losses as of March 31, 2020 does not capture the entirety of losses we expect to incur 

relating to COVID-19. As such, management used its judgment to increase the loss projections developed by our 

credit loss model to reflect our current expectations relating to COVID-19’s impact. These judgments included 

adjusting our modeled results for (1) the expected impact of widespread forbearance programs, including the rate of 

borrower participation, and the volume and type of loan modifications as a result thereof, (2) the effect of TDR 

accounting relief from the CARES Act, and (3) lower expected prepayment volumes given the sharp rise in 

unemployment rates that are expected to stay elevated over the near term. In developing this model adjustment, 

management considered the current credit risk profile of our single-family loan book of business, as well as relevant 

historical credit loss experience during rare or stressful economic environments.

• A decrease in our expectations for home price growth. We revised our forecast to reflect near zero home price 

appreciation on a national basis for 2020 due to COVID-19 market disruptions. Lower home prices increase the 

likelihood that loans will default and increase the amount of credit loss on loans that do default, which impacts our 

estimate of losses and ultimately increases our loss reserves and provision for credit losses.

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

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

outbreak, which reduced the modeled benefit from interest rates.

Notes to Condensed Consolidated Financial Statements | Allowance for Loan Losses

Fannie Mae (In conservatorship) First Quarter 2020 Form 10-Q 82
The primary factor that contributed to a decrease in single-family write-offs in the first quarter of 2020 compared to the first 

quarter of 2019 was a reduction in the number of reperforming loans redesignated from HFI to HFS, resulting in lower writeoffs.

Our multifamily provision for loan losses in the first quarter of 2020 was primarily driven by expected loan losses as a result of 

the COVID-19 outbreak. Similar to the single-family provision for loan losses discussed above, we believe our model used to 

estimate multifamily credit losses as of March 31, 2020 does not capture the entirety of losses we expect to incur relating to 

COVID-19. As such, management used its judgment to increase the loss projections developed by our credit loss model to 

reflect our current expectations relating to COVID-19’s impact. Accordingly, our current multifamily provision for loan losses 

was primarily driven by higher expected unemployment rates, which we expect will increase the number of loans in 

forbearance and reduce property net operating income in the near term, thereby decreasing forecasted property values and 

increasing the probability of loan default. In developing these adjustments, management considered the current credit risk 

profile of our multifamily loan book of business, as well as relevant historical credit loss experience during rare or stressful 

economic environments. 

For the three months ended March 31, 2020, we recorded a benefit of $58 million related to changes in the expected benefit of 

freestanding credit enhancements on our single-family loans. Additionally, we recorded a benefit of $127 million related to 

freestanding credit enhancements on our multifamily loans. Freestanding credit enhancements primarily consist of transactions 

under our CAS program, our CIRT program, and certain lender risk-sharing programs, including our multifamily DUS program. 

The impact from these credit enhancements is recorded in “Fee and other income” in our condensed consolidated statements

of operations and comprehensive income.

The following tables display prior period changes in single-family and multifamily allowance for loan losses and the prior period 

amortized cost in our HFI loans by impairment or allowance methodology and portfolio segment prior to the adoption of the 

CECL standard. For a description of our previous allowance and impairment methodology refer to “Note 1, Summary of 

Significant Accounting Policies” in our 2019 Form 10-K.

For the Three Months Ended March 31, 2019

Balance 

December 31, 

2018

Benefit 

(Provision) 

for Loan 

Losses Write-offs Recoveries Other

Balance 

March 31, 

2019

(Dollars in millions)

Single-family $ (13,969) $ 647 $ 381 $ (45) $ 1 $ (12,985)

Multifamily (234) (13) — — — (247)

Total allowance for loan 

losses $ (14,203) $ 634 $ 381 $ (45) $ 1 $ (13,232)

As of December 31, 2019

Single-Family Multifamily Total

(Dollars in millions)

Allowance for loan losses by segment:

Individually impaired loans $ (8,175) $ (45) $ (8,220)

Collectively reserved loans (584) (212) (796)

Total allowance for loan losses $ (8,759) $ (257) $ (9,016)

Amortized cost in loans by segment:

Individually impaired loans $ 97,196 $ 680 $ 97,876

Collectively reserved loans 2,909,115 329,938 3,239,053

Total amortized cost in loans $ 3,006,311 $ 330,618 $ 3,336,929

Notes to Condensed Consolidated Financial Statements | Allowance for Loan Losses

Fannie Mae (In conservatorship) First Quarter 2020 Form 10-Q 83
5. Investments in Securities

Trading Securities

Trading securities are recorded at fair value with subsequent changes in fair value recorded as “Fair value losses, net” in our 

condensed consolidated statements of operations and comprehensive income. The following table displays our investments in 

trading securities.

As of

March 31, 

2020

December 31, 

2019

(Dollars in millions)

Mortgage-related securities:

Fannie Mae $ 3,530 $ 3,424

Other agency(1)4,167 4,490

Private-label and other mortgage securities 444 629

Total mortgage-related securities (includes $863 million and $896 million, respectively, 

related to consolidated trusts) 8,141 8,543

Non-mortgage-related securities:

U.S. Treasury securities 44,727 39,501

Other securities 73 79

Total non-mortgage-related securities 44,800 39,580

Total trading securities $ 52,941 $ 48,123

(1)

Consists of Freddie Mac and Ginnie Mae mortgage-related securities.

The following table displays information about our net trading gains.

For the Three Months 

Ended March 31,

2020 2019

(Dollars in millions)

Net trading gains $ 647 $ 92

Net trading gains recognized in the period related to securities still held at period end 591 89

Available-for-Sale Securities

We record AFS securities at fair value with unrealized gains and losses, recorded net of tax, as a component of “Other 

comprehensive income (loss)” and we recognize realized gains and losses from the sale of AFS securities in “Investment gains 

(losses), net” in our condensed consolidated statements of operations and comprehensive income. We define the amortized 

cost basis of our AFS securities as unpaid principal balance, net of unamortized premiums and discounts, and other cost basis 

adjustments.

Pursuant to the CECL standard, we record an allowance for credit losses for AFS securities that reflects the impairment for 

credit losses, limited by the amount that fair value is less than the amortized cost. Credit-related losses are written off when 

deemed uncollectible. Recoveries of credit losses are recorded as a reversal of the allowance for credit losses and benefit for 

credit losses only prior to the write-down or write-off of a security’s amortized cost basis. 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) First Quarter 2020 Form 10-Q 84
The following tables display the amortized cost, allowance for credit losses, gross unrealized gains and losses in accumulated 

other comprehensive income (loss) (“AOCI”), and fair value by major security type for AFS securities.

As of March 31, 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 $ 1,393 $ — $ 123 $ (11) $ 1,505

Other agency(2)171 — 19 — 190

Alt-A and subprime private-label securities 4 — 3 — 7

Mortgage revenue bonds 291 (3) 9 (1) 296

Other mortgage-related securities 288 — 3 — 291

Total $ 2,147 $ (3) $ 157 $ (12) $ 2,289

As of December 31, 2019

Total 

Amortized 

Cost(1)(3)

Gross 

Unrealized 

Gains

Gross 

Unrealized 

Losses

Total Fair 

Value(1)

(Dollars in millions)

Fannie Mae $ 1,445 $ 85 $ (10) $ 1,520

Other agency(2)183 15 — 198

Alt-A and subprime private-label securities 34 23 — 57

Mortgage revenue bonds 309 9 (3) 315

Other mortgage-related securities 310 5 (1) 314

Total $ 2,281 $ 137 $ (14) $ 2,404

(1) We exclude from amortized cost and fair value accrued interest of $8 million and $10 million as of March 31, 2020 and December 31, 

2019, 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)

Prior to our adoption of the CECL standard, total amortized cost represented the unpaid principal balance, unamortized premiums, 

discounts and other cost basis adjustments, as well as temporary impairments recognized in “Investment gains, net” in our consolidated 

statements of operations and comprehensive income.

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 not currently credit losses on these securities, even if the security is in an unrealized loss 

position. In addition, we generally hold these securities that are in an unrealized loss position to recovery. As a result, unless 

we intend to sell the security, we do not recognize an allowance for credit losses on agency mortgage-related securities. 

Non-Agency Mortgage-Related Securities

As of March 31, 2020, 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) First Quarter 2020 Form 10-Q 85
The following tables display additional information regarding gross unrealized losses and fair value by major security type for 

AFS securities in an unrealized loss position, excluding allowance for credit losses. 

As of March 31, 2020

Less Than 12 

Consecutive Months

12 Consecutive 

Months or Longer

Gross 

Unrealized 

Losses in 

AOCI

Fair 

Value

Gross 

Unrealized 

Losses in 

AOCI

Fair 

Value

(Dollars in millions)

Fannie Mae $ (1) $ 66 $ (10) $ 105

Mortgage revenue bonds (1) 22 — —

Total $ (2) $ 88 $ (10) $ 105

As of December 31, 2019

Less Than 12 

Consecutive Months

12 Consecutive 

Months or Longer

Gross 

Unrealized 

Losses

Fair 

Value

Gross 

Unrealized 

Losses

Fair 

Value

(Dollars in millions)

Fannie Mae $ — $ — $ (10) $ 337

Mortgage revenue bonds — — (3) 3

Other mortgage-related securities (1) 130 — —

Total $ (1) $ 130 $ (13) $ 340

The following table displays the gross realized gains and proceeds on sales of AFS securities.

For the Three Months 

Ended March 31,

2020 2019

(Dollars in millions)

 Gross realized gains $ 21 $ 61

Total proceeds (excludes initial sale of securities from new portfolio securitizations) 50 131

The following tables display net unrealized gains on AFS securities and other amounts accumulated within our accumulated 

other comprehensive income, net of tax.

As of 

March 31, 2020

(Dollars in millions)

Net unrealized gains on AFS securities for which we have not recorded an allowance for credit 

losses $ 115

Other 31

Accumulated other comprehensive income $ 146

As of 

December 31, 2019

(Dollars in millions)

Net unrealized gains on AFS securities for which we have not recorded OTTI $ 97

Other 34

Accumulated other comprehensive income $ 131

Prior to our adoption of the CECL standard on January 1, 2020, we evaluated AFS securities for other-than-temporary 

impairment. The balance of the unrealized credit-loss component of AFS securities held by us and recognized in our 

consolidated statements of operations and comprehensive income was $36 million as of December 31, 2019.

Notes to Condensed Consolidated Financial Statements | Investments in Securities

Fannie Mae (In conservatorship) First Quarter 2020 Form 10-Q 86
Maturity Information

The following table displays the amortized cost and fair value of our AFS securities by major security type and remaining 

contractual maturity, assuming no principal prepayments. The contractual maturity of mortgage-backed securities is not a 

reliable indicator of their expected life because borrowers generally have the right to prepay their obligations at any time.

As of March 31, 2020

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 $ 1,393 $ 1,505 $ — $ — $ 14 $ 14 $ 96 $ 109 $ 1,283 $ 1,382

Other agency 171 190 — — 16 17 23 25 132 148

Alt-A and subprime 

private-label securities 4 7 — — — — 2 3 2 4

Mortgage revenue bonds 288 296 2 2 30 32 27 28 229 234

Other mortgage-related 

securities 288 291 — — — — 23 24 265 267

Total $ 2,144 $ 2,289 $ 2 $ 2 $ 60 $ 63 $ 171 $ 189 $ 1,911 $ 2,035

(1)

 Net carrying amount consists of book value, net of allowance for credit losses on AFS debt securities.

6. Financial Guarantees

We recognize a guaranty obligation for our obligation to stand ready to perform on our guarantees to unconsolidated trusts and 

other guaranty arrangements. These off-balance sheet guarantees expose us to credit losses primarily relating to the unpaid 

principal balance of our unconsolidated Fannie Mae MBS and other financial guarantees. The maximum remaining contractual 

term of our guarantees is 33 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. With our adoption of the CECL standard on 

January 1, 2020, we measure our guaranty reserve for estimated credit losses for off-balance sheet exposures over the 

contractual period for which they are exposed to the credit risk, unless that obligation is unconditionally cancellable by the 

issuer.

As the guarantor of structured securities backed in whole or in part by Freddie Mac-issued securities, we extend our guaranty 

to the underlying Freddie Mac securities in our resecuritization trusts. However, Freddie Mac continues to guarantee the 

payment of principal and interest on the underlying Freddie Mac securities that we have resecuritized. We do not charge an 

incremental guaranty fee to include Freddie Mac securities in the structured securities that we issue. When we began issuing 

UMBS in June 2019, we entered into an indemnification agreement under which Freddie Mac agreed to indemnify us for 

losses caused by its failure to meet its payment or other specified obligations under the trust agreements pursuant to which the 

underlying resecuritized securities were issued. As a result, and due to the funding commitment available to Freddie Mac 

through its senior preferred stock purchase agreement with Treasury, we have concluded that the associated credit risk is 

negligible. As such, we exclude from the following table Freddie Mac securities backing unconsolidated Fannie Mae-issued 

structured securities of approximately $72.7 billion and $50.1 billion as of March 31, 2020 and December 31, 2019, 

respectively.

The following table displays our off-balance sheet maximum exposure, guaranty obligation recognized in our condensed 

consolidated balance sheets and the potential maximum recovery from third parties through available credit enhancements 

and recourse related to our financial guarantees.

As of

March 31, 2020 December 31, 2019

Maximum 

Exposure

Guaranty 

Obligation

Maximum 

Recovery(1)

Maximum 

Exposure

Guaranty 

Obligation

Maximum 

Recovery(1)

(Dollars in millions)

Unconsolidated Fannie Mae MBS $ 5,487 $ 18 $ 5,244 $ 5,801 $ 26 $ 5,545

Other guaranty arrangements(2)12,399 123 2,495 12,670 128 2,553

Total $ 17,886 $ 141 $ 7,739 $ 18,471 $ 154 $ 8,098

(1)

Recoverability of such credit enhancements and recourse is subject to, among other factors, our mortgage insurers’ and financial 

guarantors’ ability to meet their obligations to us. For information on our mortgage insurers, see “Note 10, Concentrations of Credit Risk.”

(2)

Primarily consists of credit enhancements and long-term standby commitments.

Notes to Condensed Consolidated Financial Statements | Investments in Securities

Fannie Mae (In conservatorship) First Quarter 2020 Form 10-Q 87
7. Short-Term and Long-Term Debt

Short-Term Debt

The following table displays our outstanding short-term debt (debt with an original contractual maturity of one year or less) and 

weighted-average interest rates of this debt.

As of

March 31, 2020 December 31, 2019

Outstanding

WeightedAverage 

Interest Rate(1) Outstanding

WeightedAverage 

Interest Rate(1)

(Dollars in millions)

Federal funds purchased and securities sold under 

agreements to repurchase(2)$ — — % $ 478 1.67 %

Short-term debt of Fannie Mae 58,337 0.71 26,662 1.56

(1)

Includes the effects of discounts, premiums and other cost basis adjustments.

(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.

Intraday Line of Credit

We use a secured intraday funding line of credit provided by a large financial institution. We post collateral which, in some 

circumstances, the secured party has the right to repledge to third parties. As this line of credit is an uncommitted intraday loan 

facility, we may be unable to draw on it if and when needed. The line of credit under this facility was up to $15.0 billion as of 

March 31, 2020 and December 31, 2019.

Long-Term Debt

Long-term debt represents debt with an original contractual maturity of greater than one year. The following table displays our 

outstanding long-term debt.

As of

March 31, 2020 December 31, 2019

Maturities Outstanding

WeightedAverage 

Interest 

Rate(1) Maturities Outstanding

WeightedAverage 

Interest 

Rate(1)

(Dollars in millions)

Senior fixed: 

Benchmark notes and bonds 2020 - 2030 $ 83,115 2.70 % 2020 - 2030 $ 86,114 2.66 %

Medium-term notes(2)

2020 - 2026 22,919 1.59 2020 - 2026 32,590 1.57

Other(3)2020 - 2038 4,080 5.47 2020 - 2038 5,254 5.01

Total senior fixed 110,114 2.57 123,958 2.47

Senior floating:

Medium-term notes(2)2020 - 2022 40,078 0.54 2020 - 2021 9,774 1.66

Connecticut Avenue Securities(4)2023 - 2031 19,470 5.42 2023 - 2031 21,424 5.61

Other(5)2020 - 2037 432 7.37 2020 - 2037 398 6.27

Total senior floating 59,980 2.17 31,596 4.40

Secured borrowings(6)2021 - 2022 27 2.60 2021 - 2022 31 2.31

Total long-term debt of Fannie Mae(7)

170,121 2.43 155,585 2.86

Debt of consolidated trusts 2020 - 2059 3,334,098 2.78 2020 - 2059 3,285,139 2.78

Total long-term debt $ 3,504,219 2.76 % $ 3,440,724 2.78 %

(1)

Includes the effects of discounts, premiums and other cost basis adjustments.

(2)

Includes long-term debt with an original contractual maturity of greater than 1 year and up to 10 years, excluding zero-coupon debt.

(3)

Includes other long-term debt with an original contractual maturity of greater than 10 years and foreign exchange bonds.

Notes to Condensed Consolidated Financial Statements | Short-Term and Long-Term Debt

Fannie Mae (In conservatorship) First Quarter 2020 Form 10-Q 88
(4)

Credit risk-sharing securities that transfer a portion of the credit risk on specified pools of single-family mortgage loans to the investors in 

these securities, a portion of which is reported at fair value. Represents CAS issued prior to November 2018. See “Note 2, Consolidations 

and Transfers of Financial Assets” in our 2019 Form 10-K for more information about our CAS structures issued beginning November 

2018.

(5)

Consists of structured debt instruments that are reported at fair value.

(6)

Represents our remaining liability resulting from the transfer of financial assets from our condensed consolidated balance sheets that did 

not qualify as a sale under the accounting guidance for the transfer of financial instruments.

(7)

Includes unamortized discounts and premiums, other cost basis adjustments and fair value adjustments of $586 million and $2 million as 

of March 31, 2020 and December 31, 2019, respectively.

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 2019 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 mortgage-related 

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.

Notes to Condensed Consolidated Financial Statements | Short-Term and Long-Term Debt

Fannie Mae (In conservatorship) First Quarter 2020 Form 10-Q 89
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.

As of March 31, 2020 As of December 31, 2019

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:

Swaps:

Pay-fixed $ 50,946 $ — $ 29,603 $ (1,930) $ 41,052 $ — $ 29,178 $ (970)

Receive-fixed 94,704 1,151 9,854 (2) 73,579 816 26,382 (62)

Basis 273 205 — — 273 149 — —

Foreign currency 215 29 217 (93) 229 39 232 (65)

Swaptions:

Pay-fixed 4,600 7 5,875 (328) 4,600 18 6,375 (219)

Receive-fixed 6,625 619 350 (130) 2,875 106 4,600 (232)

Futures(1)53,742 — — — 20,507 — — —

Total gross risk management 

derivatives 211,105 2,011 45,899 (2,483) 143,115 1,128 66,767 (1,548)

Accrued interest receivable 

(payable) — 195 — (310) — 226 — (250)

Netting adjustment(2) — (2,137) — 2,607 — (1,288) — 1,694

Total net risk management 

derivatives $211,105 $ 69 $ 45,899 $ (186) $143,115 $ 66 $ 66,767 $ (104)

Mortgage commitment derivatives:

Mortgage commitments to 

purchase whole loans $ 31,152 $ 413 $ 10,452 $ (56) $ 7,115 $ 15 $ 1,787 $ (1)

Forward contracts to purchase 

mortgage-related securities 103,770 2,153 10,936 (36) 55,531 137 9,560 (28)

Forward contracts to sell 

mortgage-related securities 20,070 99 177,213 (3,502) 9,282 13 109,066 (277)

Total mortgage commitment 

derivatives 154,992 2,665 198,601 (3,594) 71,928 165 120,413 (306)

Credit enhancement derivatives 26,897 37 12,312 (29) 28,432 40 9,486 (25)

Derivatives at fair value $392,994 $ 2,771 $256,812 $ (3,809) $243,475 $ 271 $196,666 $ (435)

(1)

Futures have no ascribable fair value because the positions are settled daily.

(2)

The netting adjustment represents the effect of the legal right to offset under legally enforceable master netting arrangements to settle with 

the same counterparty on a net basis, including cash collateral posted and received. Cash collateral posted was $1.4 billion and $1.0 

billion as of March 31, 2020 and December 31, 2019, respectively. Cash collateral received was $896 million and $635 million as of March 

31, 2020 and December 31, 2019, respectively.

Notes to Condensed Consolidated Financial Statements | Derivative Instruments

Fannie Mae (In conservatorship) First Quarter 2020 Form 10-Q 90
We record all derivative gains and losses, including accrued interest, in “Fair value losses, net” in our condensed consolidated 

statements of operations and comprehensive income. The following table displays, by type of derivative instrument, the fair 

value gains and losses, net on our derivatives. 

For the Three Months Ended 

March 31,

2020 2019

(Dollars in millions)

Risk management derivatives:

Swaps:

Pay-fixed $ (4,029) $ (1,335)

Receive-fixed 3,343 1,281

Basis 56 24

Foreign currency (38) 19

Swaptions:

Pay-fixed (148) (177)

Receive-fixed 632 7

Futures (71) 59

Net contractual interest expense on interest-rate swaps (106) (266)

Total risk management derivatives fair value losses, net (361) (388)

Mortgage commitment derivatives fair value losses, net (993) (300)

Credit enhancement derivatives fair value losses, net (11) (7)

Total derivatives fair value losses, net $ (1,365) $ (695)

Derivative Counterparty Credit Exposure

Our derivative counterparty credit exposure relates principally to interest-rate derivative contracts. We are exposed to the risk 

that a counterparty in a derivative transaction will default on payments due to us, which may require us to seek a replacement 

derivative from a different counterparty. This replacement may be at a higher cost, or we may be unable to find a suitable 

replacement. We manage our derivative counterparty credit exposure relating to our risk management derivative transactions 

mainly through enforceable master netting arrangements, which allow us to net derivative assets and liabilities with the same 

counterparty or clearing organization and clearing member. For our OTC derivative transactions, we require counterparties to 

post collateral, which may include cash, U.S. Treasury securities, agency debt and agency mortgage-related securities.

See “Note 11, Netting Arrangements” for information on our rights to offset assets and liabilities as of March 31, 2020 and 

December 31, 2019.

Notes to Condensed Consolidated Financial Statements | Derivative Instruments

Fannie Mae (In conservatorship) First Quarter 2020 Form 10-Q 91
9. Segment Reporting

We have two reportable business segments: Single-Family and Multifamily. Results of our two business segments are 

intended to reflect each segment as if it were a stand-alone business. The sum of the results for our two business segments 

equals our condensed consolidated results of operations.

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 are allocated to our Single-Family business segment.

The following table displays our segment results.

For the Three Months Ended March 31,

2020 2019

SingleFamily Multifamily TotalSingleFamily Multifamily Total

(Dollars in millions)

Net interest income(1)$ 4,541 $ 806 $ 5,347 $ 4,039 $ 757 $ 4,796

Fee and other income(2)152 156 308 106 28 134

Net revenues 4,693 962 5,655 4,145 785 4,930

Investment gains (losses), net(3)(152) (6) (158) 94 39 133

Fair value gains (losses), net(4)(460) 184 (276) (887) 56 (831)

Administrative expenses (629) (120) (749) (631) (113) (744)

Credit-related income (expense)(5)

Benefit (provision) for credit losses (2,172) (411) (2,583) 661 (11) 650

Foreclosed property income (expense) (78) (2) (80) (143) 3 (140)

Total credit-related income (expense) (2,250) (413) (2,663) 518 (8) 510

TCCA fees(6)(637) — (637) (593) — (593)

Credit enhancement expense(7)(312) (19) (331) (167) (4) (171)

Other expenses, net (167) (96) (263) (170) (37) (207)

Income before federal income taxes 86 492 578 2,309 718 3,027

Provision for federal income taxes (18) (99) (117) (484) (143) (627)

Net income $ 68 $ 393 $ 461 $ 1,825 $ 575 $ 2,400

(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.

(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 the benefit or costs associated with freestanding credit enhancements and fees 

associated with Multifamily business activities.

(3)

Investment gains and losses primarily consist of gains and losses on the sale of mortgage assets for the respective business segment. 

(4)

Single-Family fair value gains and losses primarily consist of fair value gains and losses on risk management and mortgage commitment 

derivatives, trading securities, fair value option debt, and other financial instruments associated with our single-family guaranty book of 

business. Multifamily fair value gains and losses primarily consist of fair value gains and losses on MBS commitment derivatives, trading 

securities and other financial instruments associated with our multifamily guaranty book of business. 

(5)

Credit-related income or expense is based on the guaranty book of business of the respective business segment and consists of the 

applicable segment’s benefit or provision for credit losses and foreclosed property income or expense on loans underlying the segment’s 

guaranty book of business. The presentation of our credit-related income or expense for the three months ended March 31, 2019

represents amounts recognized prior to our transition to the lifetime loss model prescribed by the CECL standard.

(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 primarily consists of costs associated with our CIRT, CAS and EPMI programs. Multifamily 

credit enhancement expense primarily consists of costs associated with our MCIRT and MCAS programs.

Notes to Condensed Consolidated Financial Statements | Segment Reporting

Fannie Mae (In conservatorship) First Quarter 2020 Form 10-Q 92
10. Concentrations of Credit Risk

Risk Characteristics of our Guaranty Book of Business

One of the measures by which we gauge our performance 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 economic conditions, 

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.

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 singlefamily conventional guaranty book of business.

As of

March 31, 2020 December 31, 2019

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 1.16 % 0.27 % 0.59 % 1.07 % 0.29 % 0.59 %

Percentage of single-family 

conventional loans based on loan 

count 1.31 0.32 0.66 1.27 0.35 0.66

As of

March 31, 2020 December 31, 2019

Percentage of 

Single-Family

Conventional

Guaranty Book 

of Business

Based on UPB

Seriously 

Delinquent 

Rate(1)

Percentage of 

Single-Family

Conventional

Guaranty Book 

of Business

Based on UPB

Seriously 

Delinquent 

Rate(1)

Estimated mark-to-market LTV ratio:

Greater than 100% * 10.06 % * 10.14 %

Geographical distribution:

California 19 0.33 19 0.32

Florida 6 0.83 6 0.84

Illinois 4 0.91 4 0.91

New Jersey 3 1.13 3 1.13

New York 5 1.19 5 1.18

All other states 63 0.64 63 0.64

Product distribution:

Alt-A 1 2.95 2 2.95

Vintages:

2004 and prior 2 2.48 2 2.48

2005-2008 3 4.11 4 4.11

2009-2020 95 0.35 94 0.35

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

(1)

Consists of single-family conventional loans that were 90 days or more past due or in the foreclosure process as of March 31, 2020 or 

December 31, 2019. 

Notes to Condensed Consolidated Financial Statements | Concentrations of Credit Risk

Fannie Mae (In conservatorship) First Quarter 2020 Form 10-Q 93
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 other loans that have higher risk characteristics, to assess 

the overall credit quality of our multifamily book of business. Higher risk characteristics include, but are not limited to, current 

DSCR below 1.0 and original LTV ratios greater than 80%. We stratify multifamily loans into different internal risk categories 

based on the credit risk inherent in each individual loan.

The following tables display the delinquency status and serious delinquency rates for specified loan categories of our 

multifamily guaranty book of business.

As of

March 31, 2020(1)December 31, 2019(1)

30 Days 

Delinquent

Seriously 

Delinquent(2)

30 Days 

Delinquent

Seriously 

Delinquent(2)

Percentage of multifamily guaranty book of business 0.03 % 0.05 % 0.02 % 0.04 %

As of

March 31, 2020 December 31, 2019

Percentage of 

Multifamily 

Guaranty Book 

of Business(1)

Percentage 

Seriously 

Delinquent(2)(3)

Percentage of 

Multifamily 

Guaranty Book 

of Business(1)

Percentage 

Seriously 

Delinquent(2)(3)

Original LTV ratio:

Greater than 80% 1 % — % 1 % — %

Less than or equal to 80% 99 0.05 99 0.04

Current DSCR below 1.0(4)2 0.68 2 0.48

(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 riskin-force mortgage insurance coverage as a percentage of the single-family conventional guaranty book of business.

As of

March 31, 2020 December 31, 2019

Risk in Force

Percentage of 

Single-Family 

Guaranty Book 

of Business Risk in Force

Percentage of 

Single-Family 

Guaranty Book 

of Business

(Dollars in millions)

Mortgage insurance risk in force:

Primary mortgage insurance $ 164,218 $ 162,855

Pool mortgage insurance 306 339

Total mortgage insurance risk in force $ 164,524 6% $ 163,194 6%

Mortgage insurance does not protect us from all losses on covered loans. For example, mortgage insurance does not cover us 

from default risk for properties that suffered damages that were not covered by the hazard insurance we require. 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 default not covered by hazard insurance.

Notes to Condensed Consolidated Financial Statements | Concentrations of Credit Risk

Fannie Mae (In conservatorship) First Quarter 2020 Form 10-Q 94
The table below displays our mortgage insurer counterparties that provided approximately 10% or more of the risk-in-force 

mortgage insurance coverage on mortgage loans in our single-family conventional guaranty book of business. 

Percentage of Risk-in-Force Coverage

by Mortgage Insurer

As of

March 31, 2020 December 31, 2019

Counterparty:(1)

Arch Capital Group Ltd. 23 % 23 %

Radian Guaranty, Inc. 20 20

Mortgage Guaranty Insurance Corp. 18 18

Genworth Mortgage Insurance Corp.(2)16 15

Essent Guaranty, Inc. 13 14

Others 10 10

Total 100 % 100 %

(1)

Insurance coverage amounts provided for each counterparty may include coverage provided by affiliates and subsidiaries of the 

counterparty.

(2) Genworth Financial, Inc., the ultimate parent company of Genworth Mortgage Insurance Corp., is in the process of being acquired by 

China Oceanwide Holdings Group Co., Ltd. Upon acquisition, Genworth Mortgage Insurance Corp. will continue to be subject to our 

ongoing review of financial and operational eligibility requirements.

Three of our mortgage insurer counterparties that are currently not approved to write new business are in run-off: PMI 

Mortgage Insurance Co. (“PMI”), Triad Guaranty Insurance Corporation (“Triad”) and Republic Mortgage Insurance Company 

(”RMIC”). Entering run-off may close off a source of profits and liquidity that may have otherwise assisted a mortgage insurer in 

paying claims under insurance policies, and could also cause the quality and speed of its claims processing to deteriorate. 

These three mortgage insurers provided a combined $3.1 billion, or 2%, of our risk-in-force mortgage insurance coverage of 

our single-family conventional guaranty book of business as of March 31, 2020. 

PMI and Triad have been paying only a portion of policyholder claims and deferring the remaining portion. PMI is currently 

paying 76.5% of claims under its mortgage insurance policies in cash and is deferring the remaining 23.5%, 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 any remaining deferred policyholder claims and/or increase or decrease the amount of cash they pay on 

claims. RMIC is no longer deferring payments on policyholder claims and has paid us its previously outstanding deferred 

payment obligations as well as interest on those obligations; however, RMIC remains in run-off.

We have counterparty credit risk relating to the potential insolvency of, or non-performance by, mortgage insurers that insure 

single-family loans we purchase or guarantee. There is risk that these counterparties may fail to fulfill their obligations to pay 

our claims under insurance policies. On at least a quarterly basis, we assess our mortgage insurer counterparties’ respective 

abilities to fulfill their obligations to us. Our assessment includes financial reviews and analyses of the insurers’ portfolios and 

capital adequacy. If we determine that it is probable that we will not collect all of our claims from one or more of our mortgage 

insurer counterparties, it could increase our loss reserves, which could adversely affect our results of operations, liquidity, 

financial condition and net worth.

When we estimate the credit losses that are inherent in our mortgage loans and under the terms of our guaranty obligations, 

we also consider the recoveries that we will receive on primary mortgage insurance, as mortgage insurance recoveries would 

reduce the severity of the loss associated with defaulted loans. We evaluate the financial condition of our mortgage insurer 

counterparties and adjust the contractually due recovery amounts to ensure that expected credit losses as of the balance 

sheet date are included in our loss reserve estimate. As a result, if our assessment of one or more of our mortgage insurer 

counterparties’ ability to fulfill their respective obligations to us worsens, it could increase our loss reserves. As of March 31, 

2020 and December 31, 2019, our estimated benefit from mortgage insurance, which is based on estimated credit losses as of 

period end, reduced our loss reserves by $1.4 billion and $410 million, respectively. 

As of March 31, 2020 and December 31, 2019, we had outstanding receivables of $607 million and $654 million, respectively, 

recorded in “Other assets” in our condensed consolidated balance sheets related to amounts claimed on insured, defaulted 

loans excluding government-insured loans. As of March 31, 2020 and December 31, 2019, we assessed these outstanding 

receivables for collectability, and established a valuation allowance of $502 million and $541 million, respectively, which 

reduced our claim receivable to the amount considered probable of collection.

Notes to Condensed Consolidated Financial Statements | Concentrations of Credit Risk

Fannie Mae (In conservatorship) First Quarter 2020 Form 10-Q 95
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 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 non-depository single-family 

mortgage servicers (i.e., servicers that are not insured depository institutions), and identifies one servicer that serviced more 

than 10% of our single-family guaranty book of business based on unpaid principal balance.

Percentage of Single-Family

Guaranty Book of Business

As of

March 31, 2020 December 31, 2019

Wells Fargo Bank, N.A. (together with its affiliates) 17 % 17 %

Remaining top five depository servicers 14 15

Top five non-depository servicers 28 27

Total 59 % 59 %

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 our largest 

mortgage servicer counterparties, which are mostly depository institutions.

The table below displays the percentage of our multifamily guaranty book of business serviced by our top five multifamily 

mortgage servicers, and identifies two servicers that serviced 10% or more of our multifamily guaranty book of business based 

on unpaid principal balance. 

Percentage of Multifamily

Guaranty Book of Business

As of

March 31, 2020 December 31, 2019

Wells Fargo Bank, N.A. (together with its affiliates) 13 % 13 %

Walker & Dunlop, Inc. 12 12

Remaining top five servicers 23 23

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 on-site and 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;

• 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.

Derivative Counterparties. For information on credit risk associated with our derivative transactions and repurchase 

agreements see “Note 8, Derivative Instruments” and “Note 11, Netting Arrangements.”

Notes to Condensed Consolidated Financial Statements | Concentrations of Credit Risk

Fannie Mae (In conservatorship) First Quarter 2020 Form 10-Q 96
11. Netting Arrangements

We use master netting arrangements, which allow us to offset certain financial instruments and collateral with the same 

counterparty, to minimize counterparty credit exposure. The tables below display information related to derivatives, securities 

purchased under agreements to resell or similar arrangements, and securities sold under agreements to repurchase or similar 

arrangements, which are subject to an enforceable master netting arrangement or similar agreement that are either offset or 

not offset in our condensed consolidated balance sheets.

As of March 31, 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 $ 2,206 $ (2,202) $ 4 $ — $ — $ 4

Cleared risk management derivatives — 65 65 — — 65

Mortgage commitment derivatives 2,665 — 2,665 (1,228) (499) 938

Total derivative assets 4,871 (2,137) 2,734 (4)(1,228) (499) 1,007

Securities purchased under agreements to 

resell or similar arrangements(5)20,175 — 20,175 — (20,175) —

Total assets $25,046 $ (2,137) $ 22,909 $ (1,228) $ (20,674) $ 1,007

Liabilities:

OTC risk management derivatives $ (2,793) $ 2,643 $ (150) $ — $ — $ (150)

Cleared risk management derivatives — (36) (36) — 36 —

Mortgage commitment derivatives (3,594) — (3,594) 1,228 2,349 (17)

Total derivative liabilities (6,387) 2,607 (3,780) (4)1,228 2,385 (167)

Total liabilities $ (6,387) $ 2,607 $ (3,780) $ 1,228 $ 2,385 $ (167)

As of December 31, 2019

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 $ 1,354 $ (1,334) $ 20 $ — $ — $ 20

Cleared risk management derivatives — 46 46 — — 46

Mortgage commitment derivatives 165 — 165 (101) (1) 63

Total derivative assets 1,519 (1,288) 231 (4)(101) (1) 129

Securities purchased under agreements to 

resell or similar arrangements(5)24,928 — 24,928 — (24,928) —

Total assets $26,447 $ (1,288) $ 25,159 $ (101) $ (24,929) $ 129

Liabilities:

OTC risk management derivatives $ (1,798) $ 1,695 $ (103) $ — $ — $ (103)

Cleared risk management derivatives — (1) (1) — 1 —

Mortgage commitment derivatives (306) — (306) 101 181 (24)

Total derivative liabilities (2,104) 1,694 (410) (4)101 182 (127)

Securities sold under agreements to 

repurchase or similar arrangements (478) — (478) — 475 (3)

Total liabilities $ (2,582) $ 1,694 $ (888) $ 101 $ 657 $ (130)

Notes to Condensed Consolidated Financial Statements | Netting Arrangements

Fannie Mae (In conservatorship) First Quarter 2020 Form 10-Q 97
(1)

Represents the effect of the right to offset under legally enforceable master netting arrangements to settle with the same counterparty on a 

net basis, including cash collateral posted and received and accrued interest. 

(2) Mortgage commitment derivative amounts reflect where we have recognized both an asset and a liability with the same counterparty under 

an enforceable master netting arrangement but we have not elected to offset the related amounts in our condensed consolidated balance 

sheets.

(3)

Represents collateral received that has not been recognized and not offset in our condensed consolidated balance sheets as well as 

collateral posted which has been recognized but not offset in our condensed consolidated balance sheets. Does not include collateral held 

or posted in excess of our exposure. The fair value of non-cash collateral we pledged which the counterparty was permitted to sell or 

repledge was $4.2 billion and $2.3 billion as of March 31, 2020 and December 31, 2019, respectively. The fair value of non-cash collateral 

received was $20.1 billion and $24.7 billion, of which $20.1 billion and $23.8 billion could be sold or repledged as of March 31, 2020 and 

December 31, 2019, respectively. None of the underlying collateral was sold or repledged as of March 31, 2020 or December 31, 2019. 

(4)

Excludes derivative assets of $37 million and $40 million as of March 31, 2020 and December 31, 2019, respectively, and derivative 

liabilities of $29 million and $25 million recognized in our condensed consolidated balance sheets as of March 31, 2020 and December 31, 

2019, respectively, that are not subject to enforceable master netting arrangements.

(5)

Includes $12.4 billion and $11.4 billion in securities purchased under agreements to resell classified as “Cash and cash equivalents” in our 

condensed consolidated balance sheets as of March 31, 2020 and December 31, 2019, respectively. 

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 2019 Form 10-K.

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 | Netting Arrangements

Fannie Mae (In conservatorship) First Quarter 2020 Form 10-Q 98
Recurring Changes in Fair Value 

The following tables display our assets and liabilities measured in our condensed consolidated balance sheets at fair value on 

a recurring basis subsequent to initial recognition, including instruments for which we have elected the fair value option. 

Fair Value Measurements as of March 31, 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:

Trading securities:

Mortgage-related securities:

Fannie Mae $ — $ 3,462 $ 68 $ — $ 3,530

Other agency — 4,167 — — 4,167

Private-label and other mortgage securities — 350 94 — 444

Non-mortgage-related securities:

U.S. Treasury securities 44,727 — — — 44,727

Other securities — 73 — — 73

Total trading securities 44,727 8,052 162 — 52,941

Available-for-sale securities:

Mortgage-related securities:

Fannie Mae — 1,317 188 — 1,505

Other agency — 190 — — 190

Alt-A and subprime private-label securities — 7 — — 7

Mortgage revenue bonds — — 296 — 296

Other — 7 284 — 291

Total available-for-sale securities — 1,521 768 — 2,289

Mortgage loans — 7,063 638 — 7,701

Other assets:

Risk management derivatives:

Swaps — 1,370 210 — 1,580

Swaptions — 626 — — 626

Netting adjustment — — — (2,137) (2,137)

Mortgage commitment derivatives — 2,665 — — 2,665

Credit enhancement derivatives — — 37 — 37

Total other assets — 4,661 247 (2,137) 2,771

Total assets at fair value $ 44,727 $ 21,297 $ 1,815 $ (2,137) $ 65,702

Liabilities:

Long-term debt:

Of Fannie Mae:

Senior floating $ — $ 4,320 $ 432 $ — $ 4,752

Total of Fannie Mae — 4,320 432 — 4,752

Of consolidated trusts — 22,772 83 — 22,855

Total long-term debt — 27,092 515 — 27,607

Other liabilities:

Risk management derivatives:

Swaps — 2,334 1 — 2,335

Swaptions — 458 — — 458

Netting adjustment — — — (2,607) (2,607)

Mortgage commitment derivatives — 3,594 — — 3,594

Credit enhancement derivatives — — 29 — 29

Total other liabilities — 6,386 30 (2,607) 3,809

Total liabilities at fair value $ — $ 33,478 $ 545 $ (2,607) $ 31,416

Notes to Condensed Consolidated Financial Statements | Fair Value

Fannie Mae (In conservatorship) First Quarter 2020 Form 10-Q 99
Fair Value Measurements as of December 31, 2019

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:

Trading securities:

Mortgage-related securities:

Fannie Mae $ — $ 3,379 $ 45 $ — $ 3,424

Other agency — 4,489 1 — 4,490

Private-label and other mortgage securities — 629 — — 629

Non-mortgage-related securities:

U.S. Treasury securities 39,501 — — — 39,501

Other securities — 79 — — 79

Total trading securities 39,501 8,576 46 — 48,123

Available-for-sale securities:

Mortgage-related securities:

Fannie Mae — 1,349 171 — 1,520

Other agency — 198 — — 198

Alt-A and subprime private-label securities — 57 — — 57

Mortgage revenue bonds — — 315 — 315

Other — 8 306 — 314

Total available-for-sale securities — 1,612 792 — 2,404

Mortgage loans — 7,137 688 — 7,825

Other assets:

Risk management derivatives:

Swaps — 1,071 159 — 1,230

Swaptions — 124 — — 124

Netting adjustment — — — (1,288) (1,288)

Mortgage commitment derivatives — 165 — — 165

Credit enhancement derivatives — — 40 — 40

Total other assets — 1,360 199 (1,288) 271

Total assets at fair value $ 39,501 $ 18,685 $ 1,725 $ (1,288) $ 58,623

Liabilities:

Long-term debt:

Of Fannie Mae:

Senior floating $ — $ 5,289 $ 398 $ — $ 5,687

Total of Fannie Mae — 5,289 398 — 5,687

Of consolidated trusts — 21,805 75 — 21,880

Total long-term debt — 27,094 473 — 27,567

Other liabilities:

Risk management derivatives:

Swaps — 1,346 1 — 1,347

Swaptions — 440 11 — 451

Netting adjustment — — — (1,694) (1,694)

Mortgage commitment derivatives — 306 — — 306

Credit enhancement derivatives — — 25 — 25

Total other liabilities — 2,092 37 (1,694) 435

Total liabilities at fair value $ — $ 29,186 $ 510 $ (1,694) $ 28,002

(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.

Notes to Condensed Consolidated Financial Statements | Fair Value

Fannie Mae (In conservatorship) First Quarter 2020 Form 10-Q 100
The following tables display a reconciliation of all assets and liabilities measured at fair value on a recurring basis using 

significant unobservable inputs (Level 3). The tables also display gains and losses due to changes in fair value, including 

realized and unrealized gains and losses, recognized in our condensed consolidated statements of operations and 

comprehensive income for Level 3 assets and liabilities. 

Fair Value Measurements Using Significant Unobservable Inputs (Level 3)

For the Three Months Ended March 31, 2020

Total Gains (Losses)

(Realized/Unrealized) 

Net 

Unrealized 

Gains 

(Losses) 

Included in 

Net Income 

Related to 

Assets and 

Liabilities 

Still Held as 

of March 31, 

2020

(4)(5)

Net 

Unrealized 

Gains 

(Losses) 

Included in 

OCI Related 

to Assets 

and 

Liabilities 

Still Held as 

of March 31, 

2020

(1)

Balance, 

December 31, 

2019

Included 

in Net 

Income

Included 

in Total 

OCI Gain/

(Loss)

(1)

Purchases

(2)

Sales

(2)

Issues

(3)

Settlements

(3)

Transfers 

out of 

Level 3

Transfers 

into 

Level 3

Balance, 

March 31, 

2020

(Dollars in millions)

Trading securities:

Mortgage-related:

Fannie Mae $ 45 $ (9) $ — $ — $ — $ — $ — $ (11) $ 43 $ 68 $ (10) $ —

Other agency 1 — — — — — — (1) — — — —

Private-label and 

other 

mortgage 

securities — — — — — — — — 94 94 — —

Total trading 

securities $ 46 $ (9)

(5)(6)

$ — $ — $ — $ — $ — $ (12) $ 137 $ 162 $ (10) $ —

Available-for-sale 

securities:

Mortgage-related:

Fannie Mae $ 171 $ — $ 4 $ — $ — $ — $ (1) $ — $ 14 $ 188 $ — $ 3

Mortgage 

revenue 

bonds 315 (3) 2 74 (74) — (18) — — 296 — 4

Other 306 (11) (1) 268 (268) — (10) — — 284 — (1)

Total available-forsale securities $ 792 $ (14)

(6)(7)

$ 5 $ 342 $ (342) $ — $ (29) $ — $ 14 $ 768 $ — $ 6

Mortgage loans $ 688 $ (24)

(5)(6)

$ — $ — $ — $ — $ (29) $ (23) $ 26 $ 638 $ (26) $ —

Net derivatives 162 41

(5)

— — — — (4) 18 — 217 44 —

Long-term debt:

Of Fannie Mae:

Senior floating (398) (34)

(5)

— — — — — — — (432) (34) —

Of consolidated 

trusts (75) 4

(5)(6)

— — — — 3 — (15) (83) 4 —

Total long-term debt $ (473) $ (30) $ — $ — $ — $ — $ 3 $ — $ (15) $ (515) $ (30) $ —

Notes to Condensed Consolidated Financial Statements | Fair Value

Fannie Mae (In conservatorship) First Quarter 2020 Form 10-Q 101
Fair Value Measurements Using Significant Unobservable Inputs (Level 3)

For the Three Months Ended March 31, 2019

Total Gains (Losses)

(Realized/Unrealized) 

Net 

Unrealized 

Gains 

(Losses) 

Included in 

Net Income 

Related to 

Assets and 

Liabilities 

Still Held as 

of March 31, 

2019

(4)(5)

Net 

Unrealized 

Gains 

(Losses) 

Included in 

OCI Related 

to Assets and 

Liabilities 

Still Held as 

of March 31, 

2019

(1)

Balance, 

December 31, 

2018

Included 

in Net 

Income

Included 

in Total 

OCI Gain/

(Loss)

(1)

Purchases

(2)

Sales

(2)

Issues

(3)

Settlements

(3)

Transfers 

out of 

Level 3

Transfers 

into 

Level 3

Balance, 

March 31, 

2019

(Dollars in millions)

Trading securities:

Mortgage-related:

Fannie Mae $ 32 $ 2 $ — $ — $ — $ — $ — $ — $ 33 $ 67 $ 2 $ —

Private-label and 

other 

mortgage 

securities 1 — — — — — (1) — — — — —

Total trading 

securities $ 33 $ 2

(5)(6)

$ — $ — $ — $ — $ (1) $ — $ 33 $ 67 $ 2 $ —

Available-for-sale 

securities:

Mortgage-related:

Fannie Mae $ 152 $ — $ 4 $ — $ — $ — $ — $ (41) $ 84 $ 199 $ — $ 2

Alt-A and 

subprime 

private-label 

securities 24 — — — — — (1) — — 23 — —

Mortgage 

revenue 

bonds 434 — — — — — (9) — — 425 — —

Other 342 7 (5) — — — (8) — 1 337 — (4)

Total available-forsale securities $ 952 $ 7

(6)(7)

$ (1) $ — $ — $ — $ (18) $ (41) $ 85 $ 984 $ — $ (2)

Mortgage loans $ 937 $ 14

(5)(6)

$ — $ — $ — $ — $ (34) $ (28) $ 45 $ 934 $ 11 $ —

Net derivatives 194 98

(5)

— — — — (89) — — 203 44 —

Long-term debt:

Of Fannie Mae:

Senior floating (351) (25)

(5)

— — — — — — — (376) (25) —

Of consolidated 

trusts (201) (3)

(5)(6)

— — — — 5 49 (74) (224) (1) —

Total long-term debt $ (552) $ (28) $ — $ — $ — $ — $ 5 $ 49 $ (74) $ (600) $ (26) $ —

(1) Gains (losses) included in other comprehensive loss are included in “Changes in unrealized gains 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 losses, net” in our condensed consolidated statements of operations and comprehensive 

income.

(6) Gains (losses) are included in “Net interest income” in our condensed consolidated statements of operations and comprehensive income.

(7) Gains (losses) are included in “Investment gains (losses), net” in our condensed consolidated statements of operations and 

comprehensive income.

Notes to Condensed Consolidated Financial Statements | Fair Value

Fannie Mae (In conservatorship) First Quarter 2020 Form 10-Q 102
The following tables display valuation techniques and the range and the weighted average of significant unobservable inputs 

for our Level 3 assets and liabilities measured at fair value on a recurring basis, excluding instruments for which we have 

elected the fair value option. Changes in these unobservable inputs can result in significantly higher or lower fair value 

measurements of these assets and liabilities as of the reporting date.

Fair Value Measurements as of March 31, 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)$ 68 Various

 Private-label securities and other 

mortgage securities 94 Various

Total trading securities $ 162

Available-for-sale securities:

Mortgage-related securities:

Agency(3)$ 113 Consensus

75 Various

Total agency 188

Mortgage revenue bonds 211 Single Vendor Spreads (bps) 32.5 - 376.0 97.5

85 Various

Total mortgage revenue bonds 296

Other 248 Discounted Cash Flow Spreads (bps) 620.0 620.0

36 Various

Total other 284

Total available-for-sale securities $ 768

Net derivatives $ 209 Dealer Mark

8 Various

Total net derivatives $ 217

Notes to Condensed Consolidated Financial Statements | Fair Value

Fannie Mae (In conservatorship) First Quarter 2020 Form 10-Q 103
Fair Value Measurements as of December 31, 2019

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)$ 46 Various

Available-for-sale securities:

Mortgage-related securities:

Agency(3)$ 107 Consensus

64 Various

Total agency 171

Mortgage revenue bonds 222 Single Vendor Spreads(bps) 23.0 - 205.1 76.1

93 Various

Total mortgage revenue bonds 315

Other 267 Discounted Cash Flow Spreads(bps) 300.0 300.0

39 Various

Total other 306

Total available-for-sale securities $ 792

Net derivatives $ 147 Dealer Mark

15 Various

Total net derivatives $ 162

(1)

Valuation techniques for which no unobservable inputs are disclosed generally reflect the use of third-party pricing services or dealers, and 

the range of unobservable inputs applied by these sources is not readily available or cannot be reasonably estimated. Where we have 

disclosed unobservable inputs for consensus and single vendor techniques, those inputs are based on our validations performed at the 

security level using discounted cash flows.

(2)

Unobservable inputs were weighted by the relative fair value of the instruments. 

(3)

Includes Fannie Mae and Freddie Mac securities.

Notes to Condensed Consolidated Financial Statements | Fair Value

Fannie Mae (In conservatorship) First Quarter 2020 Form 10-Q 104
In our condensed consolidated balance sheets, certain assets and liabilities are measured at fair value on a nonrecurring 

basis; that is, the instruments are not measured at fair value on an ongoing basis but are subject to fair value adjustments in 

certain circumstances (for example, when we evaluate loans for impairment). We had no Level 1 assets or liabilities held as of 

March 31, 2020 or December 31, 2019 that were measured at fair value on a nonrecurring basis. We held $4 million and $274 

million in Level 2 assets as of March 31, 2020 and December 31, 2019, respectively, comprised of mortgage loans held for 

sale and mortgage loans held for investment that were impaired. We had no Level 2 liabilities that were measured at fair value 

on a nonrecurring basis as of March 31, 2020 or December 31, 2019.

The following table displays valuation techniques for our Level 3 assets measured at fair value on a nonrecurring basis. The 

significant unobservable inputs related to these techniques primarily relate to collateral dependent valuations. The related 

ranges and weighted averages are not meaningful when aggregated as they vary significantly from property to property. 

Fair Value Measurements 

as of

Valuation 

Techniques

March 31, 

2020

December 31, 

2019

(Dollars in millions)

Nonrecurring fair value measurements:

Mortgage loans held for sale, at lower of cost or fair value Consensus $ 1,767 $ 471

Single Vendor 1,886 605

Total mortgage loans held for sale, at lower of cost or fair value 3,653 1,076

 Single-family mortgage loans held for investment, at amortized cost Internal Model 1,491 555

 Multifamily mortgage loans held for investment, at amortized cost

Asset Manager 

Estimate — 24

Various 52 16

Total multifamily mortgage loans held for investment, at amortized cost 52 40

Acquired property, net:(1)

Single-family Accepted Offers 106 101

Appraisals 356 362

Walk Forwards 189 240

Internal Model 113 164

Various 52 51

Total single-family 816 918

Multifamily Various 7 9

Total nonrecurring assets at fair value $ 6,019 $ 2,598

(1)

The most commonly used techniques in our valuation of acquired property are a proprietary home price model and third-party valuations 

(both current and walk forward). Based on the number of properties measured as of March 31, 2020, these methodologies comprised 

approximately 81% of our valuations, while accepted offers comprised approximately 14% of our valuations. Based on the number of 

properties measured as of December 31, 2019, these methodologies comprised approximately 85% of our valuations, while accepted 

offers comprised approximately 12% of our valuations.

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 2019 Form 10-K for information on the valuation control processes and the valuation techniques 

we use for fair value measurement and disclosure as well as our basis for classifying these measurements as Level 1, Level 2 

or Level 3 of the valuation hierarchy in more specific situations. We made no material changes to the valuation control 

processes or the valuation techniques for the three months ended March 31, 2020.

Notes to Condensed Consolidated Financial Statements | Fair Value

Fannie Mae (In conservatorship) First Quarter 2020 Form 10-Q 105
Fair Value of Financial Instruments

The following table displays the carrying value and estimated fair value of our financial instruments. The fair value of financial 

instruments we disclose includes commitments to purchase multifamily and single-family mortgage loans that we do not record 

in our condensed consolidated balance sheets. The fair values of these commitments are included as “Mortgage loans held for 

investment, net of allowance for loan losses.” The disclosure excludes all non-financial instruments; therefore, the fair value of 

our financial assets and liabilities does not represent the underlying fair value of our total consolidated assets and liabilities.

As of March 31, 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 $ 128,708 $ 116,308 $ 12,400 $ — $ — $ 128,708

Federal funds sold and securities 

purchased under agreements to 

resell or similar arrangements 7,775 — 7,775 — — 7,775

Trading securities 52,941 44,727 8,052 162 — 52,941

Available-for-sale securities 2,289 — 1,521 768 — 2,289

Mortgage loans held for sale 8,103 — 86 8,402 — 8,488

Mortgage loans held for investment, 

net of allowance for loan losses 3,354,707 — 3,395,898 118,612 — 3,514,510

Advances to lenders 8,971 — 8,969 2 — 8,971

Derivative assets at fair value 2,771 — 4,661 247 (2,137) 2,771

Guaranty assets and buy-ups 127 — — 271 — 271

Total financial assets $3,566,392 $ 161,035 $ 3,439,362 $ 128,464 $ (2,137) $3,726,724

Financial liabilities:

Short-term debt:

Of Fannie Mae $ 58,337 $ — $ 58,388 $ — $ — $ 58,388

Long-term debt:

Of Fannie Mae 170,121 — 176,634 2,215 — 178,849

Of consolidated trusts 3,334,098 — 3,440,638 31,767 — 3,472,405

Derivative liabilities at fair value 3,809 — 6,386 30 (2,607) 3,809

Guaranty obligations 141 — — 99 — 99

Total financial liabilities $3,566,506 $ — $ 3,682,046 $ 34,111 $ (2,607) $3,713,550

Notes to Condensed Consolidated Financial Statements | Fair Value

Fannie Mae (In conservatorship) First Quarter 2020 Form 10-Q 106
As of December 31, 2019

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 $ 61,407 $ 50,057 $ 11,350 $ — $ — $ 61,407

Federal funds sold and securities 

purchased under agreements to 

resell or similar arrangements 13,578 — 13,578 — — 13,578

Trading securities 48,123 39,501 8,576 46 — 48,123

Available-for-sale securities 2,404 — 1,612 792 — 2,404

Mortgage loans held for sale 6,773 — 229 7,054 — 7,283

Mortgage loans held for investment, 

net of allowance for loan losses 3,327,389 — 3,270,535 127,650 — 3,398,185

Advances to lenders 6,453 — 6,451 2 — 6,453

Derivative assets at fair value 271 — 1,360 199 (1,288) 271

Guaranty assets and buy-ups 142 — — 305 — 305

Total financial assets $3,466,540 $ 89,558 $ 3,313,691 $ 136,048 $ (1,288) $3,538,009

Financial liabilities:

Federal funds purchased and 

securities sold under agreements 

to repurchase $ 478 $ — $ 478 $ — $ — $ 478

Short-term debt:

Of Fannie Mae 26,662 — 26,667 — — 26,667

Long-term debt:

Of Fannie Mae 155,585 — 164,144 401 — 164,545

Of consolidated trusts 3,285,139 — 3,312,763 31,827 — 3,344,590

Derivative liabilities at fair value 435 — 2,092 37 (1,694) 435

Guaranty obligations 154 — — 97 — 97

Total financial liabilities $3,468,453 $ — $ 3,506,144 $ 32,362 $ (1,694) $3,536,812

For a detailed description and classification of our financial instruments, see “Note 15, Fair Value” in our 2019 Form 10-K.

Fair Value Option

We elected the fair value option for loans and debt that contain embedded derivatives that would otherwise require bifurcation. 

Additionally, we elected the fair value option for our credit risk-sharing securities accounted for as debt of Fannie Mae issued 

under our CAS series prior to January 1, 2016. Under the fair value option, we elected to carry these instruments at fair value 

instead of bifurcating the embedded derivative from such instruments. 

Interest income for the mortgage loans is recorded in “Interest income—Mortgage loans” and interest expense for the debt 

instruments is recorded in “Interest expense—Long-term debt” in our condensed consolidated statements of operations and 

comprehensive income. 

Notes to Condensed Consolidated Financial Statements | Fair Value

Fannie Mae (In conservatorship) First Quarter 2020 Form 10-Q 107
The following table displays the fair value and unpaid principal balance of the financial instruments for which we have made 

fair value elections.

As of

March 31, 2020 December 31, 2019

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 $ 7,701 $ 4,752 $ 22,855 $ 7,825 $ 5,687 $ 21,880

Unpaid principal balance 7,261 4,860 20,219 7,514 5,200 19,653

(1)

Includes nonaccrual loans with a fair value of $121 million and $129 million as of March 31, 2020 and December 31, 2019, respectively. 

The difference between unpaid principal balance and the fair value of these nonaccrual loans as of March 31, 2020 and December 31, 

2019 was $20 million and $11 million, respectively. Includes loans that are 90 days or more past due with a fair value of $73 million and 

$80 million as of March 31, 2020 and December 31, 2019, respectively. The difference between unpaid principal balance and the fair value 

of these 90 or more days past due loans as of March 31, 2020 and December 31, 2019 was $16 million and $10 million, respectively.

Changes in Fair Value under the Fair Value Option Election

We recorded gains of $151 million and $113 million for the three months ended March 31, 2020 and March 31, 2019, 

respectively, from changes in the fair value of loans recorded at fair value in “Fair value losses, net” in our condensed 

consolidated statements of operations and comprehensive income. 

We recorded gains of $262 million and losses of $330 million for the three months ended March 31, 2020 and March 31, 2019, 

respectively, from changes in the fair value of long-term debt recorded at fair value in “Fair value losses, net” in our condensed 

consolidated statements of operations and comprehensive income.

13. Commitments and Contingencies

We are party to various types of legal actions and proceedings, including actions brought on behalf of various classes of 

claimants. We also are subject to regulatory examinations, inquiries and investigations, and other information gathering 

requests. In some of the matters, indeterminate amounts are sought. Modern pleading practice in the U.S. permits 

considerable variation in the assertion of monetary damages or other relief. Jurisdictions may permit claimants not to specify 

the monetary damages sought or may permit claimants to state only that the amount sought is sufficient to invoke the 

jurisdiction of the trial court. This variability in pleadings, together with our and our counsel’s actual experience in litigating or 

settling claims, leads us to conclude that the monetary relief that may be sought by plaintiffs bears little relevance to the merits 

or disposition value of claims. 

We have substantial and valid defenses to the claims in the proceedings described below and intend to defend these matters 

vigorously. However, legal actions and proceedings of all types are subject to many uncertain factors that generally cannot be 

predicted with assurance. Accordingly, the outcome of any given matter and the amount or range of potential loss at particular 

points in time is frequently difficult to ascertain. Uncertainties can include how fact finders will evaluate documentary evidence 

and the credibility and effectiveness of witness testimony, and how courts will apply the law. Disposition valuations are also 

subject to the uncertainty of how opposing parties and their counsel may view the evidence and applicable law.

On a quarterly basis, we review relevant information about all pending legal actions and proceedings for the purpose of 

evaluating and revising our contingencies, accruals and disclosures. We establish an accrual only for matters when a loss is 

probable and we can reasonably estimate the amount of such loss. We are often unable to estimate the possible losses or 

ranges of losses, particularly for proceedings that are in their early stages of development, where plaintiffs seek indeterminate 

or unspecified damages, where there may be novel or unsettled legal questions relevant to the proceedings, or where 

settlement negotiations have not occurred or progressed. Given the uncertainties involved in any action or proceeding, 

regardless of whether we have established an accrual, the ultimate resolution of certain of these matters may be material to 

our operating results for a particular period, depending on, among other factors, the size of the loss or liability imposed and the 

level of our net income or loss for that period. 

In addition to the matters specifically described below, we are involved in a number of legal and regulatory proceedings that 

arise in the ordinary course of business that we do not expect will have a material impact on our business or financial 

condition. We have also advanced fees and expenses of certain current and former officers and directors in connection with 

various legal proceedings pursuant to our bylaws and indemnification agreements.

Notes to Condensed Consolidated Financial Statements | Fair Value

Fannie Mae (In conservatorship) First Quarter 2020 Form 10-Q 108
Senior Preferred Stock Purchase Agreements Litigation

A consolidated putative class action (“In re Fannie Mae/Freddie Mac Senior Preferred Stock Purchase Agreement Class Action 

Litigations”) and two non-class action lawsuits, Arrowood Indemnity Company v. Fannie Mae and Fairholme Funds v. FHFA, 

filed by Fannie Mae and Freddie Mac shareholders against us, FHFA as our conservator, and Freddie Mac are pending in the 

U.S. District Court for the District of Columbia. The lawsuits challenge the August 2012 amendment to each company’s senior 

preferred stock purchase agreement with Treasury. 

Plaintiffs filed amended complaints in all three lawsuits on November 1, 2017 alleging that the net worth sweep dividend 

provisions of the senior preferred stock that were implemented pursuant to the August 2012 amendments nullified certain of 

the shareholders’ rights, particularly the right to receive dividends. Plaintiffs seek unspecified damages, equitable and 

injunctive relief, and costs and expenses, including attorneys’ fees. Plaintiffs in the class action seek to represent several 

classes of preferred and/or common shareholders of Fannie Mae and/or Freddie Mac who held stock as of the public 

announcement of the August 2012 amendments. On September 28, 2018, the court dismissed all of the plaintiffs’ claims 

except for their claims for breach of an implied covenant of good faith and fair dealing. 

On May 21, 2018, a plaintiff in a non-class action case, Angel v. Federal Home Loan Mortgage Corporation, filed a complaint 

for declaratory relief and compensatory damages against Fannie Mae (including certain members of its Board of Directors), 

Freddie Mac (including certain members of its Board of Directors) and FHFA, as conservator, in the U.S. District Court for the 

District of Columbia. Plaintiff in that case asserts claims for breach of contract, breach of implied covenants of good faith and 

fair dealing, and aiding and abetting the federal government in avoiding an alleged implicit guarantee of dividend payments. 

On March 6, 2019, the court granted defendants’ motion to dismiss and on March 18, 2019, plaintiff moved to alter or amend 

the judgment and to file an amended complaint. On May 24, 2019, the court denied this motion. On April 24, 2020, the U.S. 

Court of Appeals for the District of Columbia Circuit affirmed the lower court’s judgment.

Given the stage of these lawsuits, the substantial and novel legal questions that remain, and our substantial defenses, we are 

currently unable to estimate the reasonably possible loss or range of loss arising from this litigation.

Notes to Condensed Consolidated Financial Statements | Commitments and Contingencies

Fannie Mae (In conservatorship) First Quarter 2020 Form 10-Q 109
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 Interest-Rate 

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 as in effect as of March 31, 

2020, the end of the period covered by this report. As a result of management’s evaluation, our Chief Executive Officer and 

Chief Financial Officer concluded that our disclosure controls and procedures were not effective at a reasonable assurance 

level as of March 31, 2020 or as of the date of filing this report. 

Our disclosure controls and procedures were not effective as of March 31, 2020 or as of the date of filing this report because 

they did not adequately ensure the accumulation and communication to management of information known to FHFA that is 

needed to meet our disclosure obligations under the federal securities laws. As a result, we were not able to rely upon the 

disclosure controls and procedures that were in place as of March 31, 2020 or as of the date of this filing, and we continue to 

have a material weakness in our internal control over financial reporting. This material weakness is described in more detail 

below under “Description of Material Weakness.” Based on discussions with FHFA and the structural nature of this material 

weakness, we do not expect to remediate this material weakness while we are under conservatorship.

Description of Material Weakness

The Public Company Accounting Oversight Board’s Auditing Standard 2201 defines a material weakness as a deficiency, or a 

combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material 

misstatement of the company’s annual or interim financial statements will not be prevented or detected on a timely basis.

Management has determined that we continued to have the following material weakness as of March 31, 2020 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 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 

Quantitative and Qualitative Disclosures about Market Risk

Fannie Mae First Quarter 2020 Form 10-Q 110
Act, FHFA is limited in its ability to design and implement a complete set of disclosure controls and procedures 

relating to Fannie Mae, particularly with respect to current reporting pursuant to Form 8-K. Similarly, as a regulated 

entity, we are limited in our ability to design, implement, operate and test the controls and procedures for which FHFA

is responsible.

Due to these circumstances, we have not been able to update our disclosure controls and procedures in a manner that 

adequately ensures the accumulation and communication to management of information known to FHFA that is needed to 

meet our disclosure obligations under the federal securities laws, including disclosures affecting our condensed consolidated 

financial statements. As a result, we did not maintain effective controls and procedures designed to ensure complete and 

accurate disclosure as required by GAAP as of March 31, 2020 or as of the date of filing this report. Based on discussions with 

FHFA and the structural nature of this weakness, we do not expect to remediate this material weakness while we are under 

conservatorship.

Mitigating Actions Related to Material Weakness

As described above under “Description of Material Weakness,” we continue to have a material weakness in our internal control 

over financial reporting relating to our disclosure controls and procedures. However, we and FHFA have engaged in the 

following practices intended to permit accumulation and communication to management of information needed to meet our 

disclosure obligations under the federal securities laws:

• FHFA has established the Division of Resolutions, which is intended to facilitate operation of the company with the 

oversight of the conservator.

• We have provided drafts of our SEC filings to FHFA personnel for their review and comment prior to filing. We also 

have provided drafts of external press releases, statements and speeches to FHFA personnel for their review and 

comment prior to release.

• FHFA personnel, including senior officials, have reviewed our SEC filings prior to filing, including this quarterly report 

on Form 10-Q for the quarter ended March 31, 2020 (“First Quarter 2020 Form 10-Q”), and engaged in discussions 

regarding issues associated with the information contained in those filings. Prior to filing our First Quarter 2020

Form 10-Q, FHFA provided Fannie Mae management with written acknowledgment that it had reviewed the First 

Quarter 2020 Form 10-Q, and it was not aware of any material misstatements or omissions in the First Quarter 2020

Form 10-Q and had no objection to our filing the First Quarter 2020 Form 10-Q.

• Our senior management meets regularly with senior leadership at FHFA, including, but not limited to, the Director.

• FHFA representatives attend meetings frequently with various groups within the company to enhance the flow of 

information and to provide oversight on a variety of matters, including accounting, credit and market risk 

management, external communications and legal matters.

• Senior officials within FHFA’s Office of the Chief Accountant have met frequently with our senior finance executives 

regarding our accounting policies, practices and procedures.

Changes in Internal Control Over Financial Reporting

Management has evaluated, with the participation of our Chief Executive Officer and Chief Financial Officer, whether any 

changes in our internal control over financial reporting that occurred during our last fiscal quarter have materially affected, or 

are reasonably likely to materially affect, our internal control over financial reporting. Below we describe changes in our internal 

control over financial reporting since December 31, 2019 that management believes have materially affected, or are 

reasonably likely to materially affect, our internal control over financial reporting: 

• Overview. In the ordinary course of business, we review our system of internal control over financial reporting and 

make changes that we believe will improve these controls and increase efficiency, while continuing to ensure that we 

maintain effective internal controls. Changes may include implementing new, more efficient systems, automating 

manual processes and updating existing systems. For example, we are currently implementing changes to various 

financial system applications in stages across the company. As we continue to implement these changes, each 

implementation may become a significant component of our internal control over financial reporting.

• Implementation of the CECL standard. We began using new and enhanced models, new systems and enhanced 

business processes related to our adoption of the CECL standard as of January 1, 2020. In connection with the 

adoption and related business process changes, we redesigned multiple existing controls that were previously 

considered effective with new or modified controls and, in some cases, removed controls that are no longer 

applicable. We will continue to monitor and test these new and modified controls for adequate design and operating 

effectiveness. These new and enhanced models, systems, business processes and controls were fully implemented 

in January 2020 and were used to prepare our first quarter 2020 condensed consolidated financial statements 

included in this report.

Controls and Procedures

Fannie Mae First Quarter 2020 Form 10-Q 111
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 2019 Form 10-K. We also provide information regarding material legal proceedings in “Note 13, 

Commitments and Contingencies,” which is incorporated herein by reference. In addition to the matters specifically described 

or incorporated by reference in this item, we are involved in a number of legal and regulatory proceedings that arise in the 

ordinary course of business that we do not expect will have a material impact on our business or financial condition. However, 

litigation claims and proceedings of all types are subject to many factors and their outcome and effect on our business and 

financial condition generally cannot be predicted accurately. 

We establish an accrual for legal claims only when a loss is probable and we can reasonably estimate the amount of such 

loss. The actual costs of resolving legal claims may be substantially higher or lower than the amounts accrued for those 

claims. If certain of these matters are determined against us, FHFA or Treasury, it could have a material adverse effect on our 

results of operations, liquidity and financial condition, including our net worth. 

Senior Preferred Stock Purchase Agreements Litigation 

Between June 2013 and August 2018, preferred and common stockholders of Fannie Mae and Freddie Mac filed lawsuits in 

multiple federal courts against one or more of the United States, Treasury and FHFA, challenging actions taken by the 

defendants relating to the Fannie Mae and Freddie Mac senior preferred stock purchase agreements and the conservatorships 

of Fannie Mae and Freddie Mac. Some of these lawsuits also contain claims against Fannie Mae and Freddie Mac. The legal 

claims being advanced by one or more of these lawsuits include challenges to the net worth sweep dividend provisions of the 

senior preferred stock that were implemented pursuant to August 2012 amendments to the agreements, the payment of 

dividends to Treasury under the net worth sweep dividend provisions, and FHFA’s decision to require Fannie Mae and Freddie 

Mac to draw funds from Treasury in order to pay dividends to Treasury prior to the August 2012 amendments. Some of the 

lawsuits also challenge the constitutionality of FHFA’s structure. The plaintiffs seek various forms of equitable and injunctive 

relief, including rescission of the August 2012 amendments, as well as damages. The cases that remain pending after 

December 31, 2019 are as follows:

District of Columbia. Fannie Mae is a defendant in three cases pending in the U.S. District Court for the District of Columbia—a 

consolidated putative class action and two additional cases. In all three cases, Fannie Mae and Freddie Mac stockholders filed 

amended complaints on November 1, 2017 against us, FHFA as our conservator and Freddie Mac. On September 28, 2018, 

the court dismissed all of the plaintiffs’ claims in these cases, except for their claims for breach of an implied covenant of good 

faith and fair dealing. In a fourth case that was filed in the U.S. District Court for the District of Columbia on May 21, 2018, the 

court granted defendants’ motion to dismiss on March 6, 2019, and on March 18, 2019, plaintiff moved to alter or amend the 

judgment and to file an amended complaint. On May 24, 2019, the court denied this motion. On April 24, 2020, the U.S. Court 

of Appeals for the District of Columbia Circuit affirmed the lower court’s judgment. All four cases are described in “Note 13, 

Commitments and Contingencies.”

Southern District of Texas (Collins v. Mnuchin). On October 20, 2016, preferred and common stockholders filed a complaint 

against FHFA and Treasury in the U.S. District Court for the Southern District of Texas. On May 22, 2017, the court dismissed 

the case. On September 6, 2019, the U.S. Court of Appeals for the Fifth Circuit, sitting en banc, affirmed the district court’s 

dismissal of claims against Treasury, but reversed the dismissal of claims against FHFA. The court held that plaintiffs could 

pursue their claim that FHFA exceeded its statutory powers as conservator when it implemented the net worth sweep 

provisions of the senior preferred stock purchase agreements in August 2012. The court also held that the provision of the 

Housing and Economic Recovery Act that insulates the FHFA Director from removal without cause violates constitutional 

separation of powers principles and, thus, that the FHFA Director may be removed by the president for any reason. The court 

held that the appropriate remedy for this violation is to declare the provision severed from the statute. Plaintiffs have requested 

that the Supreme Court review the constitutional claim, arguing that the relief granted by Fifth Circuit is insufficient, and the 

government has requested review of the decision to allow the plaintiffs’ statutory claims to go forward. 

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. 

District of Minnesota. On June 22, 2017, preferred and common stockholders of Fannie Mae and Freddie Mac filed a 

complaint for declaratory and injunctive relief against FHFA and Treasury in the U.S. District Court for the District of Minnesota. 

The court dismissed the case on July 6, 2018, and plaintiffs filed a notice of appeal with the U.S. Court of Appeals for the 

Eighth Circuit on July 10, 2018.

Eastern District of Pennsylvania. On August 16, 2018, common stockholders of Fannie Mae and Freddie Mac filed a complaint 

for declaratory and injunctive relief against FHFA and Treasury in the U.S. District Court for the Eastern District of 

Other Information

Fannie Mae First Quarter 2020 Form 10-Q 112
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 pursing 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 March 9, 2020, the court 

certified the case for appeal to the U.S. Court of Appeals for the Federal Circuit. Both the government and the Fairholme 

Funds plaintiffs filed petitions with the U.S. Court of Appeals for the Federal Circuit on March 19, 2020 requesting that the court 

hear the appeal.

Item 1A. Risk Factors

In addition to the information in this report, you should carefully consider the risks relating to our business that we identify in 

“Risk Factors” in our 2019 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 2019 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 forwardlooking statements we make. We believe the risks described in the sections of this report and our 2019 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.

The COVID-19 outbreak has adversely affected our business, financial results and financial condition, and we expect 

that it will continue to do so. The adverse impact of the COVID-19 outbreak on our business, financial results and 

financial condition could be materially greater than we currently anticipate.

The rapid global outbreak of COVID-19, a new respiratory disease caused by a novel coronavirus, has caused substantial 

financial market volatility in recent weeks and has significantly adversely affected both the U.S. and the global economy. On 

March 11, 2020, the World Health Organization characterized COVID-19 as a pandemic, and on March 13, 2020, President 

Trump declared the COVID-19 outbreak in the United States a national emergency. The COVID-19 outbreak in the United 

States has expanded in recent weeks, and has resulted in stay-at-home orders, school closures and widespread business 

shutdowns across the country. These shutdowns and other reductions in business activity have substantially increased 

unemployment levels. While the federal government is taking many actions to reduce the negative economic impact of the 

COVID-19 outbreak, as described in “Executive Summary—COVID-19 Impact—Economic Impact,” the extent to which these 

actions will mitigate the short-term and long-term negative impacts of the COVID-19 outbreak on the U.S. economy and our 

business is unclear. The outbreak has already resulted in a contraction in U.S. GDP for the first quarter of 2020, and could 

result in a sustained drop in the level of U.S. economic activity.

We expect the impact of the COVID-19 outbreak to continue to negatively affect our financial results and contribute to lower 

net income in 2020 than in 2019. We could have a net loss in one or more future periods or possibly could have a net worth 

deficit that requires a draw from Treasury under the senior preferred stock purchase agreement. Our forecasts and 

expectations relating to the impact of the COVID-19 outbreak are subject to many uncertainties and may change, perhaps 

substantially, from our current forecasts and expectations. It is difficult to assess or predict the impact of this unprecedented 

event on our business, financial results or financial condition. Factors that will impact the extent to which the COVID-19 

outbreak affects our business, financial results and financial condition include: the duration, spread and severity of the 

outbreak; the actions taken to contain the virus or treat its impact, including government actions to mitigate the economic 

impact of the outbreak; the nature and extent of the forbearance and modification options we offer borrowers affected by the 

outbreak; accounting elections and estimates relating to the impact of the COVID-19 outbreak; borrower and renter behavior in 

response to the outbreak and its economic impact; how quickly and to what extent normal economic and operating conditions 

can resume, including whether any future outbreaks interrupt economic recovery; and how quickly and to what extent affected 

borrowers, renters and counterparties can recover from the negative economic impact of the outbreak. 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 

Other Information

Fannie Mae First Quarter 2020 Form 10-Q 113
COVID-19 outbreak 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. As a result, we expect that current and future declines in economic activity and 

resulting higher unemployment rates will likely lead to significantly higher rates of delinquencies and may ultimately 

lead to significantly higher defaults on the mortgage loans in our guaranty book of business. Because of this 

expectation, our credit-related expenses were substantially higher in the first quarter of 2020. As there is significant 

uncertainty associated with the impact of the COVID-19 outbreak, we may ultimately experience greater losses than 

we currently expect and also may have high credit-related expenses in future quarters. Moreover, at FHFA's direction 

and/or as required by the CARES Act, we are taking a number of actions to help borrowers affected by the COVID-19 

outbreak that we expect will adversely affect our financial results and financial condition, including requiring that our 

servicers: 

◦ provide up to 12 months of forbearance to single-family borrowers impacted by COVID-19-related financial 

hardships who request forbearance; 

◦ provide up to 3 months of forbearance to eligible multifamily borrowers impacted by COVID-19-related 

financial hardships on the condition that such borrowers suspend evictions and other penalties relating to 

late payments during the forbearance period; and

◦ suspend foreclosures and foreclosure-related activities for single-family loans (other than for vacant or 

abandoned properties) through at least May 17, 2020.

The CARES Act also instituted a temporary moratorium through July 25, 2020 on tenant evictions for nonpayment of 

rent that applies to any single-family or multifamily property that secures a mortgage loan we own or guarantee, which 

is likely to adversely affect the ability of some of our borrowers to make payments on their loans.

If a large number of borrowers cannot repay the amounts owed at the end of their forbearance plans or over time, or 

fail to qualify for modifications, this could result in significantly higher defaults on the mortgage loans in our guaranty 

book of business. Some states and localities have also implemented or are considering borrower and renter 

protections that are more extensive than the CARES Act requirements and our requirements. 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 could limit our 

ability to complete foreclosures.

In addition, we expect the economic dislocation resulting from the COVID-19 outbreak will likely negatively affect 

housing activities, home price growth and multifamily property valuation growth, and could lead to declines in home 

prices and multifamily property valuations. If this occurs, it would increase the amount of our loss in the event a 

borrower defaults on their loan. Lower home prices and multifamily property valuations would likely also lead to 

deterioration in loan performance and changes in borrower behavior, and potentially prohibit some borrowers from 

being able to refinance 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 outbreak is also affecting the credit quality of our new loan acquisitions. Some of the new single-family 

loans we are acquiring beginning May 1, 2020 are already receiving payment forbearance. In addition, due to CARES 

Act provisions prohibiting lenders from reporting previously-current borrowers receiving COVID-19-related payment 

accommodations as delinquent to the credit bureaus, we may not have 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 of April 29, 2020, according to the U.S. Centers for Disease 

Control and Prevention, there were more than 1 million reported cases of COVID-19 in the United States, and many 

public health experts expect this number to continue to increase. While we have succession plans in place, they may 

not be effective. If a significant number of our executives or other employees, or their 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. 

Since mid-March, we have required nearly all of our workforce to work remotely, which we refer to as telework. In 

addition, nearly all of our workforce is located in a geographic region where the state or local government has issued 

a stay-at-home order and/or closed schools; these orders and closures may be extended in whole or in part for 

several weeks or months. The strain on our workforce and our business operations caused by this shift in the work 

and home environment may result in business interruptions, significantly reduced productivity and other adverse 

impacts on our operations. While our technological systems to date have continued to function with our workforce 

working remotely, this telework arrangement increases the risk of technological or cybersecurity incidents that 

negatively affect our business operations. This telework arrangement, as well as the risk that a significant number of 

employees or their family members could contract COVID-19 and our reliance on third parties for some functions, 

also could adversely affect our ability to maintain effective controls and procedures, which could result in material 

errors in our reported results or disclosures that are not complete or accurate.

Other Information

Fannie Mae First Quarter 2020 Form 10-Q 114
• Increased counterparty credit and operational risk. The economic dislocation caused by the COVID-19 outbreak could 

lead to default by one or more of our institutional counterparties on their obligations to us. If a counterparty were to 

default on its obligations to us, it could result in significant financial losses. Counterparty defaults could also 

negatively impact our ability to operate our business, as we outsource some of our critical functions to third parties, 

such as mortgage servicing, single-family Fannie Mae MBS issuance and administration, and certain technology 

functions. 

For the majority of our single-family guaranty book of business, when borrowers do not pay their mortgages, our 

Single-Family Servicing Guide generally requires servicers to advance the missed scheduled principal and interest 

payments to MBS trusts for payment to MBS holders. As described in “MD&A—Legislation and Regulation,” currently 

this obligation continues until we purchase the loan from the MBS trust, but effective in August 2020, our servicers’

obligations to advance these payments will end after four months of missed borrower payments. Single-family 

servicers are also required to advance property tax and insurance payments to taxing authorities, hazard insurers and 

mortgage insurers. For nearly all of our multifamily guaranty book of business, when borrowers do not pay their 

mortgages, our Multifamily Selling and Servicing Guide requires lenders to advance the missed scheduled principal 

and interest payments to MBS trusts for payment to MBS holders for up to four months before they are eligible for 

reimbursement. If a large number of single-family or multifamily borrowers do not pay their mortgages as a result of 

the economic dislocation caused by the COVID-19 outbreak, our servicers may not have sufficient liquidity to 

advance the missed payments to MBS trusts. In such case, we would be required to make the payments, which could 

require us to obtain substantial additional funding. See below for a description of our increased liquidity risk. 

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. A large portion of our single-family and multifamily 

guaranty books of business are serviced by non-depository servicers. We believe the counterparty risks associated 

with our non-depository servicers are higher than the risks associated with our depository servicers, as our nondepository servicers typically have lower financial strength, liquidity and operational capacity than our depository 

servicers, which may negatively affect their ability to fully satisfy their financial obligations or to properly service the 

loans on our behalf. The actions we have taken to mitigate our credit risk exposure to mortgage servicers may not be 

sufficient to prevent us from experiencing significant financial losses or business interruptions in the event they 

cannot fulfill their obligations to us.

As noted above, the economic dislocation caused by the COVID-19 outbreak could lead to significantly higher 

defaults on mortgage loans. Although we strengthened the financial and operational requirements for our mortgage 

insurer counterparties in 2019 and our primary mortgage insurer counterparties approved to write new business for us 

currently meet these requirements, a substantially higher level of mortgage defaults could affect these counterparties' 

ability to fully meet their payment obligations to us.

• Increased liquidity risk. As described in “MD&A—Liquidity and Capital Management,” while market conditions 

improved in April, adverse market conditions in March limited our ability to issue debt with a maturity greater than two 

years. If market conditions limit our ability to issue longer-term debt, it could require that we fund longer-term assets 

with short-term debt, which would increase the roll-over risk on our outstanding debt. In addition, we expect our debt 

funding needs to increase in future periods, as significantly higher rates of loan delinquencies and an increase in 

forbearances and other loss mitigation activity driven by the COVID-19 outbreak require us to fund greater amounts 

of principal, interest, tax and insurance payments on delinquent loans and to purchase a larger volume of delinquent 

loans from MBS trusts. We also may continue to fund a high volume of whole loan conduit activity.

If substantial volatility in the financial markets continues or intensifies it could significantly adversely affect the 

amount, mix and cost of funds we obtain, as well as our liquidity position. If we are unable to issue both short- and 

long-term debt securities at attractive rates and in amounts sufficient to operate our business and meet our 

obligations, it likely would interfere with the operation of our business and have a material adverse effect on our 

liquidity, results of operations, financial condition and net worth. If the COVID-19 outbreak results in a sustained 

market liquidity crisis, our liquidity contingency plans may be difficult or impossible to execute. If we cannot access 

the unsecured debt markets, our ability to repay maturing indebtedness and fund our operations could be eliminated 

or significantly impaired. In this event, our alternative source of liquidity, our other investments portfolio, may not be 

sufficient to meet our liquidity needs. 

• Increased market risk. As described in “MD&A—Risk Management—Market Risk Management, Including InterestRate Risk Management,” the significant volatility in the financial markets makes it more challenging to manage our 

interest-rate risk. In addition, the overall decline in rates during the first quarter of 2020 resulted in declines in the fair 

value of some of the financial instruments that we mark to market through our earnings, which contributed to our fair 

value losses for the quarter. If this volatility continues or intensifies, it could further negatively affect our ability to 

manage our interest-rate risk and result in additional fair value losses. Furthermore, with the anticipated decline in 

borrower performance due to impact of the COVID-19 outbreak and increased uncertainty regarding the value of 

Other Information

Fannie Mae First Quarter 2020 Form 10-Q 115
mortgage-related assets in the current environment, we may have higher investment losses in future periods relating 

to decreases in the fair value of our loans that are held for sale.

• Limitations on ability to engage in new credit risk transfer transactions. In recent weeks, we have been significantly 

restricted in our ability to enter into credit risk transfer transactions due to detrimental market conditions as a result of 

the COVID-19 outbreak. We do not anticipate being able to enter into new credit risk transfer transactions until market 

conditions improve. Credit risk transfer transactions are an important tool that we use to manage the credit risk of our 

loan acquisitions, as well as to reduce our overall conservatorship capital requirements. If we continue to be unable to 

enter into new credit risk transfer transactions, it would impact our ability to reduce our credit risk exposure to the 

loans we acquire, which could negatively affect our financial results or require that we reduce the amount or type of 

loans we acquire, and also could result in higher conservatorship capital requirements.

• Suspension of nonperforming and reperforming loan sales. We do not anticipate entering into any new contracts for 

sales of nonperforming or reperforming loans in the near future because in recent weeks there has been insufficient 

investor interest in these transactions as a result of the COVID-19 outbreak. Our suspension of these transactions 

limits our ability to reduce the amount of nonperforming and reperforming loans in our retained mortgage portfolio, 

which has been a way for us to reduce our credit risk and conservatorship capital requirements.

• Increased model and accounting estimate risk. Given the unprecedented nature and timing of the COVID-19 outbreak 

and its uncertain impact, we believe our model results relating to our allowance for loan losses currently cannot 

accurately capture the loan losses we will ultimately incur relating to COVID-19. For the first quarter of 2020, 

management used its judgment to increase our loss projections to reflect our current expectations relating to 

COVID-19’s impact on our loan losses, but this judgment may be inaccurate and we may ultimately experience 

greater losses, perhaps substantially, than we currently expect. The unprecedented nature of the COVID-19 outbreak 

may also negatively affect our ability to rely on models to effectively manage the risks to our business.

• Potential reduced demand for mortgages. The COVID-19 outbreak may reduce demand for both single-family and 

multifamily mortgage loans, which could reduce our future loan acquisitions and guaranty fee income. In addition, 

government and business closures relating to COVID-19 are likely to delay or prevent some closings on both new 

purchase loans and refinances.

• Increased risk of additional government action affecting our business. Federal, state and local governments have 

taken many actions that have or that we expect will adversely affect our financial results, such as the stay-at-home 

orders currently in place across the country and the loan forbearance requirements of the CARES Act. 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 outbreak 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 outbreak or expanding the amounts and types of businesses that are shut down. 

• Increased uncertainty relating to our exit from conservatorship. The COVID-19 outbreak could delay or prevent our 

exit from conservatorship, particularly as it may delay our ability to build and raise sufficient capital to exit 

conservatorship. In addition, as we, FHFA and Treasury focus on responding to the COVID-19 outbreak, it may 

reduce our and their capacity to work toward meeting other preconditions for exiting conservatorship.

• Increased risk of mortgage fraud. In response to the COVID-19 outbreak, we are offering certain temporary 

flexibilities relating to our Single-Family Selling Guide requirements. This could increase the risk of mortgage fraud 

relating to the loans we acquire during the COVID-19 outbreak. In addition, the CARES Act provides that a singlefamily borrower may obtain mortgage payment forbearance with no additional documentation required other than the 

borrower's attestation to a financial hardship caused by COVID-19, which creates the risk that borrowers who are not 

experiencing financial hardship may request a forbearance.

For more information on the risks to our business relating to borrower credit risk, counterparty credit risk, economic conditions, 

market risk, liquidity risk, operational risk, model risk and other types of risks described above, see “Risk Factors” in our 2019 

Form 10-K.

Other Information

Fannie Mae First Quarter 2020 Form 10-Q 116
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, other than as required by (and pursuant to) the terms of a binding agreement in effect on September 7, 2008, 

without the prior written consent of Treasury. During the quarter ended March 31, 2020, we did not sell any equity securities.

Information about Certain Securities Issuances by Fannie Mae

Pursuant to SEC regulations, public companies are required to disclose certain information when they incur a material direct 

financial obligation or become directly or contingently liable for a material obligation under an off-balance sheet arrangement. 

The disclosure must be made in a current report on Form 8-K under Item 2.03 or, if the obligation is incurred in connection with 

certain types of securities offerings, in prospectuses for that offering that are filed with the SEC.

Because the securities we issue are exempted securities under the Securities Act of 1933, we do not file registration 

statements or prospectuses with the SEC with respect to our securities offerings. To comply with the disclosure requirements 

of Form 8-K relating to the incurrence of material financial obligations, we report our incurrence of these types of obligations 

either in offering circulars or prospectuses (or supplements thereto) that we post on our website or in a current report on 

Form 8-K that we file with the SEC, in accordance with a “no-action” letter we received from the SEC staff in 2004. In cases 

where the information is disclosed in a prospectus or offering circular posted on our website, the document will be posted on 

our website within the same time period that a prospectus for a non-exempt securities offering would be required to be filed 

with the SEC.

The website address for disclosure about our debt securities is www.fanniemae.com/debtsearch. From this address, investors 

can access the offering circular and related supplements for debt securities offerings under Fannie Mae’s universal debt 

facility, including pricing supplements for individual issuances of debt securities.

Disclosure about our obligations pursuant to the MBS we issue, some of which may be off-balance sheet obligations, can be 

found at www.fanniemae.com/mbsdisclosure. From this address, investors can access information and documents about our 

MBS, including prospectuses and related prospectus supplements.

We are providing our website address solely for your information. Information appearing on our website is not incorporated into 

this report.

Our Purchases of Equity Securities

We did not repurchase any of our equity securities during the first quarter of 2020.

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, pursuant to the dividend provisions of the 

senior preferred stock and directives from our conservator, we are obligated to pay Treasury each quarter any dividends 

declared consisting of the amount, if any, by which our net worth as of the end of the immediately preceding fiscal quarter 

exceeds $25 billion. As a result, our net income is not available to common stockholders. For more information on the terms of 

the senior preferred stock purchase agreement and senior preferred stock, see “Business—Conservatorship, Treasury 

Agreements and Housing Finance Reform” in our 2019 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. 

Other Information

Fannie Mae First Quarter 2020 Form 10-Q 117
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.

Item 6. Exhibits

The exhibits listed below are being filed or furnished with or incorporated by reference into this report. 

Item Description

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.)

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

* The financial information contained in these XBRL documents is unaudited.

Other Information

Fannie Mae First Quarter 2020 Form 10-Q 118
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: May 1, 2020

By: /s/ Celeste M. Brown

Celeste M. Brown

Executive Vice President and

Chief Financial Officer

Date: May 1, 2020

Signatures

Fannie Mae First Quarter 2020 Form 10-Q 119