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, 2013

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 No.: 0-50231

Federal National Mortgage Association 

(Exact name of registrant as specified in its charter) 

Fannie Mae

Federally chartered corporation 52-0883107

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

3900 Wisconsin Avenue, NW

Washington, DC

20016

(Zip Code)

(Address of principal executive offices)

Registrant’s telephone number, including area code:

(202) 752-7000

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 and posted on its corporate Web site, if any, every 

Interactive Data File required to be submitted and posted 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 and post such 

files). Yes No 

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

smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting 

company” in Rule 12b-2 of the Exchange Act. 

Large accelerated filer Accelerated filer 

Non-accelerated filer 

(Do not check if a smaller reporting company)

Smaller reporting company 

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, 2013, there were 1,158,077,970 shares of common stock of the registrant outstanding.
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TABLE OF CONTENTS

Page

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

Item 1.

Item 2.

Item 3.

Item 4.

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

Item 1.

Item 1A.

Item 2.

Item 3.

Item 4.

Item 5.

Item 6.

Financial Statements

Condensed Consolidated Balance Sheets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81

Condensed Consolidated Statements of Operations and Comprehensive Income . . . . . . . . . . . . . . . . . 82

Condensed Consolidated Statements of Cash Flows. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83

Note 1—Summary of Significant Accounting Policies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84

Note 2—Consolidations and Transfers of Financial Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88

Note 3—Mortgage Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90

Note 4—Allowance for Loan Losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96

Note 5—Investments in Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98

Note 6—Financial Guarantees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104

Note 7—Acquired Property, Net. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 107

Note 8—Short-Term Borrowings and Long-Term Debt. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 107

Note 9—Derivative Instruments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 110

Note 10—Income Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 113

Note 11—Loss Per Share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 114

Note 12—Segment Reporting. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 114

Note 13—Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 117

Note 14—Concentrations of Credit Risk . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 118

Note 15—Netting Arrangements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 119

Note 16—Fair Value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 122

Note 17—Commitments and Contingencies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 149

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

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

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

Legislative and Regulatory Developments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

Critical Accounting Policies and Estimates. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

Consolidated Results of Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

Business Segment Results. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27

Consolidated Balance Sheet Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34

Supplemental Non-GAAP Information—Fair Value Balance Sheets. . . . . . . . . . . . . . . . . . . . . . . . . . . 37

Liquidity and Capital Management. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40

Off-Balance Sheet Arrangements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48

Risk Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49

Forward-Looking Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77

Quantitative and Qualitative Disclosures about Market Risk . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 153

Controls and Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 153

155

Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 155

Risk Factors. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 156

Unregistered Sales of Equity Securities and Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 157

Defaults Upon Senior Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 158

Mine Safety Disclosures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 158

Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 158

Exhibits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 158
ii

MD&A TABLE REFERENCE

Table Description Page

1 Treasury Draws and Senior Preferred Stock Dividend Payments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

2 Selected Credit Characteristics of Single-Family Conventional Loans Held, by Acquisition Period. . . . . 5

3 Single-Family Acquisitions Statistics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

4 Credit Statistics, Single-Family Guaranty Book of Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

5 Summary of Condensed Consolidated Results of Operations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

6 Analysis of Net Interest Income and Yield . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

7 Rate/Volume Analysis of Changes in Net Interest Income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18

8 Impact of Nonaccrual Loans on Net Interest Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19

9 Fair Value Gains, Net. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20

10 Total Loss Reserves. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21

11 Allowance for Loan Losses and Reserve for Guaranty Losses (Combined Loss Reserves). . . . . . . . . . . . 22

12 Nonperforming Single-Family and Multifamily Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23

13 Credit Loss Performance Metrics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25

14 Single-Family Credit Loss Sensitivity. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26

15 Single-Family Business Results . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27

16 Multifamily Business Results . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29

17 Capital Markets Group Results . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31

18 Capital Markets Group’s Mortgage Portfolio Activity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32

19 Capital Markets Group’s Mortgage Portfolio Composition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33

20 Summary of Condensed Consolidated Balance Sheets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35

21 Summary of Mortgage-Related Securities at Fair Value. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36

22 Comparative Measures—GAAP Change in Stockholders’ Equity (Deficit) and Non-GAAP Change in

Fair Value of Net Assets (Net of Tax Effect). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37

23 Supplemental Non-GAAP Consolidated Fair Value Balance Sheets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39

24 Activity in Debt of Fannie Mae. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42

25 Outstanding Short-Term Borrowings and Long-Term Debt. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44

26 Maturity Profile of Outstanding Debt of Fannie Mae Maturing Within One Year. . . . . . . . . . . . . . . . . . . 45

27 Maturity Profile of Outstanding Debt of Fannie Mae Maturing in More Than One Year. . . . . . . . . . . . . . 46

28 Cash and Other Investments Portfolio. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46

29 Fannie Mae Credit Ratings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47

30 Composition of Mortgage Credit Book of Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50

31 Risk Characteristics of Single-Family Conventional Business Volume and Guaranty Book of Business. 52

32 Selected Credit Characteristics of Single-Family Conventional Loans Acquired under HARP and Refi

Plus . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55

33 Delinquency Status of Single-Family Conventional Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57

34 Single-Family Serious Delinquency Rates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58

35 Single-Family Conventional Serious Delinquency Rate Concentration Analysis . . . . . . . . . . . . . . . . . . . 59

36 Statistics on Single-Family Loan Workouts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60

37 Percentage of Loan Modifications That Were Current or Paid Off at One and Two Years PostModification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61

38 Single-Family Foreclosed Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61

39 Single-Family Foreclosed Property Status . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62

40 Multifamily Lender Risk-Sharing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
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Table Description Page

41 Multifamily Guaranty Book of Business Key Risk Characteristics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63

42 Multifamily Concentration Analysis. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64

43 Multifamily Foreclosed Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65

44 Repurchase Request Activity. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67

45 Outstanding Repurchase Requests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67

46 Mortgage Insurance Coverage. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69

47 Rescission Rates of Mortgage Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70

48 Estimated Mortgage Insurance Benefit. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71

49 Unpaid Principal Balance of Financial Guarantees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71

50 Credit Loss Exposure of Risk Management Derivative Instruments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73

51 Interest Rate Sensitivity of Net Portfolio to Changes in Interest Rate Level and Slope of Yield Curve . . 76

52 Derivative Impact on Interest Rate Risk (50 Basis Points). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
1

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 

delegated specified authorities to our Board of Directors and has delegated to management the authority to conduct our 

day-to-day operations. 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 describe the rights and powers 

of the conservator, key provisions of our agreements with the U.S. Department of the Treasury (“Treasury”), and their

impact on shareholders in our Annual Report on for the year ended December 31, 2012 (“2012 

in “Business—Conservatorship and Treasury Agreements.”

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 and the more detailed 

information in our 2012 Form 10-K.

This report contains forward-looking statements that are based on management’s current expectations and are subject to 

significant uncertainties and changes in circumstances. Please review “Forward-Looking Statements” for more information 

on the forward-looking statements in this report. Our actual results may differ materially from those reflected in our forwardlooking statements due to a variety of factors including, but not limited to, those discussed in “Risk Factors” and elsewhere 

in this report and in “Risk Factors” in our 2012 Form 10-K. 

You can find a “Glossary of Terms Used in This Report” in the “MD&A” of our 2012 Form 10-K. 

INTRODUCTION

Fannie Mae is a government-sponsored enterprise (“GSE”) that was chartered by Congress in 1938. Our public mission is to 

support liquidity and stability in the secondary mortgage market, where existing mortgage-related assets are purchased and 

sold, and increase the supply of affordable housing. Our charter does not permit us to originate loans and lend money directly 

to consumers in the primary mortgage market. However, as the leading source of residential mortgage credit in the secondary 

market, we indirectly enable families to buy, refinance or rent a home. Our most significant activity is securitizing mortgage 

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

MBS. We also purchase mortgage loans and mortgage-related securities. We use the term “acquire” in this report to refer to 

both our securitizations and our purchases of mortgage-related assets. We obtain funds to support our business activities by 

issuing a variety of debt securities in the domestic and international capital markets. 

We have taken a number of actions in conservatorship to strengthen our financial performance, including reducing losses on 

our legacy book of business, building a profitable new book of business with responsible underwriting standards and pricing 

for risk. These actions are supporting the housing recovery and strengthening our financial performance. As a result of our 

actions and continued improvement in the housing market, our financial results for the first quarter of 2013 showed 

significant improvement compared with our results for the first quarter of 2012, and, although our earnings will vary from 

quarter to quarter, we expect our annual earnings to remain strong over the next few years. We recorded net income of $58.7 

billion for the first quarter of 2013, which reflects a benefit for federal income taxes of $50.6 billion that resulted from our 

release of the substantial majority of our valuation allowance against our deferred tax assets. Our pre-tax income for the first 

quarter of 2013, which does not reflect the deferred tax valuation allowance release, was $8.1 billion. In the second quarter of 

2013, we will pay Treasury a senior preferred stock dividend of $59.4 billion, which equals the excess of our net worth over a 

$3.0 billion capital reserve applicable in 2013 under the terms of our senior preferred stock purchase agreement with 

Treasury. With this dividend payment, we will have paid $95.0 billion in dividends to Treasury. We have received a total of 

$116.1 billion in funds from Treasury under the senior preferred stock purchase agreement since 2008. 

Like the mortgage finance industry we serve, Fannie Mae is undergoing significant transformation. Since entering into 

conservatorship in September 2008, our senior management, constituencies and priorities have changed. More than 80% of 

our current senior management team, and every member of our management committee, has been hired or promoted into 

their current role since we entered into conservatorship. More than half of our employees were hired after conservatorship 

began. Moreover, instead of being run for the benefit of shareholders, our company is managed in the overall interest of 
2

taxpayers, which is consistent with the substantial public investment in us. Ultimately, we help fill the role of enabling 

families to buy, refinance or rent a home. We have provided approximately $3.5 trillion in liquidity to the housing market 

since the beginning of 2009. By keeping liquidity flowing, we support the housing recovery, which strengthens the U.S. 

economy.

Our conservatorship has no specified termination date, and we do not know when or how the conservatorship will be 

terminated, whether we will continue to exist following conservatorship, or what changes to our business structure will be 

made during or following the conservatorship. Our agreements with Treasury that provide for financial support also include 

covenants that significantly restrict our business activities. We provide additional information on the conservatorship, the 

provisions of our agreements with Treasury, and their impact on our business in our in “Business—

Conservatorship and Treasury Agreements” and “Risk Factors.” We discuss the uncertainty of our future and its impact on us 

in “Executive Summary—Outlook” in this report and in “Risk Factors” in our 

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

commitment under a senior preferred stock purchase agreement to provide us with funds to maintain a positive net worth 

under specified conditions, the U.S. government does not guarantee our securities or other obligations.

Our common stock is traded in the over-the-counter market and quoted on the OTC Bulletin Board under the symbol 

“FNMA.” Our debt securities are actively traded in the over-the-counter market.

EXECUTIVE SUMMARY

We are focused on paying Treasury for taxpayers’ investment in Fannie Mae, which can be accomplished by supporting the 

economic recovery, helping struggling homeowners and laying the foundation for a better housing finance system going 

forward.

Our actions to accomplish these objectives are having a positive impact:

• Financial Results and Treasury Dividend Payments. We experienced significant improvement in our financial results 

for the first quarter of 2013, as compared with the first quarter of 2012. Our pre-tax income of $8.1 billion for the 

first quarter of 2013 was the largest quarterly pre-tax income in our history. With our net income of $58.7 billion for 

the first quarter of 2013, which reflects the benefit for federal income taxes of $50.6 billion that resulted from the 

release of our deferred tax assets valuation allowance, we ended the quarter with a positive net worth of $62.4 

billion as of March 31, 2013. We will pay $59.4 billion of that net worth as a dividend to Treasury in the second 

quarter of 2013. We expect to remain profitable for the foreseeable future.

• Providing Liquidity and Support to the Mortgage Market. We continued to be a leading provider of liquidity to the 

mortgage market in the first quarter of 2013. As described below under “Contributions to the Housing and Mortgage 

Markets Since Entering Conservatorship—2013 Acquisitions and Market Share,” we remained the largest single 

issuer of mortgage-related securities in the secondary market during the quarter and remained a constant source of 

liquidity in the multifamily market.

• Strong New Book of Business. Single-family loans we have acquired since the beginning of 2009 constituted 69% of 

our single-family guaranty book of business as of March 31, 2013, while the single-family loans we acquired prior 

to 2009 constituted 31% of our single-family book of business. We refer to the single-family loans we have acquired 

since the beginning of 2009 as our “new single-family book of business” and the single-family loans we acquired 

prior to 2009 as our “legacy book of business.” As described below in “Strengthening Our Book of Business—

Credit Risk Profile,” we expect that our new single-family book of business will be profitable over its lifetime.

• Expected Increases in Guaranty Fee Revenue. Because we increased our guaranty fees in 2012 on loans acquired 

after the increase, we expect to benefit from receiving significantly more revenue from guaranty fees in future 

periods than we have in prior periods, even after we remit some of this revenue to Treasury as we are required to do 

under the Temporary Payroll Tax Cut Continuation Act of 2011 (the “TCCA”). We expect the rising guaranty fee 

revenue we receive for managing the credit risk on loans underlying Fannie Mae MBS held by third parties will in a 

number of years become the primary source of our revenues. This will particularly be the case as we reduce the size 

of our retained mortgage portfolio to comply with the terms of the senior preferred stock purchase agreement. Our 

“retained mortgage portfolio” refers to the mortgage-related assets we hold excluding those that are held by 

consolidated MBS trusts owned by third parties. If current housing market conditions continue and if we are not 

required to sell more of our retained mortgage portfolio assets than we currently anticipate selling, we expect 

increases in revenue from guaranty fees will generally offset expected declines in the revenues we generate from the 
3

difference between the interest income earned on the assets in our retained mortgage portfolio and the interest 

expense associated with the debt funding of those assets. We discuss expected changes in our guaranty fee revenue 

in “Strengthening Our Book of Business—Guaranty Fees on Recently Acquired Single-Family Loans,” and in 

“Outlook—Future Revenues and Profitability.”

• Credit Performance. Our single-family serious delinquency rate has declined from its peak of 5.59% as of 

February 28, 2010, and was 3.02% as of March 31, 2013, compared with 3.29% as of December 31, 2012. See 

“Credit Performance” below for additional information about the credit performance of the mortgage loans in our 

single-family guaranty book of business.

• Reducing Credit Losses and Helping Homeowners. We continued to execute on our strategies for reducing credit 

losses on our legacy book of business, which are addressed in “Business—Executive Summary—Reducing Credit 

Losses on Our Legacy Book of Business” in our 2012 As part of our strategy to reduce defaults, we 

provided more than 63,000 loan workouts in the first quarter of 2013 to help homeowners stay in their homes or 

otherwise avoid foreclosure.

• Helping to Build a New Housing Finance System. We continued our efforts to help build a new housing finance 

system, including pursuing the strategic goals identified by our conservator: build a new infrastructure for the 

secondary mortgage market; gradually contract our dominant presence in the marketplace while simplifying and 

shrinking our operations; and maintain foreclosure prevention activities and credit availability for new and 

refinanced mortgages. We discuss these goals in our 2012 Form 10-K in “Business—Executive Summary—Helping 

to Build a New Housing Finance System.” In March 2013, the Acting Director of FHFA released 2013 corporate 

performance goals and related targets for Fannie Mae and Freddie Mac, referred to as the 2013 conservatorship 

scorecard, that build upon these strategic goals. See our Current Report on Form 8-K filed with the SEC on March 8, 

2013 for a description of the 2013 conservatorship scorecard.

Summary of Our Financial Performance 

We recognized comprehensive income of $59.3 billion in the first quarter of 2013, consisting of net income of $58.7 billion

and other comprehensive income of $654 million. In comparison, we recognized comprehensive income of $3.1 billion in the 

first quarter of 2012, consisting of net income of $2.7 billion and other comprehensive income of $362 million.

Our net income in the first quarter of 2013 was driven primarily by the release of the substantial majority of our valuation 

allowance against our deferred tax assets, which resulted in a benefit for federal income taxes of $50.6 billion in our 

condensed consolidated statements of operations and comprehensive income. We discuss the factors that led to our 

conclusion to release the valuation allowance against our deferred tax assets in “Critical Accounting Policies and Estimates—

Deferred Tax Assets” and “Note 10, Income Taxes.”

Our pre-tax income, which excludes the benefit for federal income taxes, was $8.1 billion in the first quarter of 2013 

compared with $2.7 billion in the first quarter of 2012. The increase in our pre-tax income for the first quarter of 2013 

compared with the first quarter of 2012 was primarily due to the recognition of credit-related income of $1.2 billion in the 

first quarter of 2013 compared with credit-related expenses of $2.3 billion in the first quarter of 2012. This result was 

primarily driven by an increase in home prices, including higher average sales prices on our real estate owned (“REO”) 

properties as the ratio of net proceeds to unpaid principal balance improved to 65% for the first quarter of 2013 compared 

with 56% for the first quarter of 2012. The improvement in our credit results was also due to a decline in the number of 

delinquent loans in our single family guaranty book of business. The number of seriously delinquent loans decreased 19%

and the number of “early stage” delinquent loans (loans that are 30 to 89 days past due) decreased 7% compared with the first 

quarter of 2012. 

In addition, net interest income increased $1.1 billion in the first quarter of 2013 compared with the first quarter of 2012. The 

increase in net interest income was driven, in large part, by a reduction in the amount of interest income not recognized for 

nonaccrual mortgage loans, which resulted from a 19% decline in the number of seriously delinquent loans and our resolution 

agreement with Bank of America in the first quarter of 2013. The resolution agreement resulted in the recognition of $518 

million of unamortized cost basis adjustments on loans repurchased by Bank of America. See “Note 20, Subsequent Events” 

in our 2012 Form 10-K for additional information on this agreement. 

We recognized other comprehensive income of $654 million in the first quarter of 2013 compared with other comprehensive 

income of $362 million in the first quarter of 2012. The other comprehensive income recognized in the first quarter of 2013 

and 2012 was driven by a decrease in unrealized losses on non-agency available-for-sale securities primarily due to 

narrowing of credit spreads.

See “Consolidated Results of Operations” for more information on our results.
4

Net Worth

Our net worth increased to $62.4 billion as of March 31, 2013 from $7.2 billion as of December 31, 2012, primarily due to 

our comprehensive income of $59.3 billion, partially offset by our payment to Treasury of a $4.2 billion senior preferred 

stock dividend during the first quarter of 2013.

As a result of our positive net worth as of March 31, 2013, we are not requesting a draw from Treasury under the senior 

preferred stock purchase agreement. The aggregate liquidation preference on the senior preferred stock remains at $117.1 

billion. Our dividend payment for the second quarter of 2013 will be $59.4 billion, which is calculated based on our net worth 

of $62.4 billion as of March 31, 2013 less the applicable capital reserve amount of $3.0 billion. As of June 30, 2013, we will 

have paid $95.0 billion in dividends to Treasury.

Table 1 below displays our Treasury draws and senior preferred stock dividend payments to Treasury since entering 

conservatorship on September 6, 2008.

Table 1: Treasury Draws and Senior Preferred Stock Dividend Payments

2008 2009 2010 2011 2012

2013 (first

quarter)

Cumulative

Total

(Dollars in billions)

Treasury draws(1)(2)

. . . . . . . . . . . . . $ (15.2) $ (60.0) $ (15.0) $ (25.9) $ — $ — $ (116.1)

Senior preferred stock dividends(3)

. — 2.5 7.7 9.6 11.6 4.2 35.6

__________

(1) Represents the total draws received from Treasury based on our quarterly net worth deficits for the periods presented. Draw requests are 

funded in the quarter following each quarterly net worth deficit.

(2) Treasury draws do not include the initial $1.0 billion liquidation preference of the senior preferred stock, for which we did not receive 

any cash proceeds.

(3) Represents total quarterly cash dividends paid to Treasury during the periods presented.

The funding we have received under the senior preferred stock purchase agreement with Treasury provided us with the 

capital and liquidity needed to maintain our ability to fulfill our mission of providing liquidity and support to the nation’s 

housing finance markets and to avoid a trigger of mandatory receivership under the Federal Housing Finance Regulatory 

Reform Act of 2008 (the “2008 Reform Act”). We have not received funds from Treasury since the first quarter of 2012. 

Through March 31, 2013, we have requested cumulative draws totaling $116.1 billion. Under the senior preferred stock 

purchase agreement, dividend payments cannot be used to offset prior Treasury draws. Accordingly, while we have paid 

Treasury $35.6 billion in dividends, Treasury still maintains a liquidation preference of $117.1 billion on the senior preferred 

stock. 

Total Loss Reserves

Our total loss reserves consist of (1) our allowance for loan losses, (2) our allowance for accrued interest receivable, (3) our 

allowance for preforeclosure property taxes and insurance receivables, and (4) our reserve for guaranty losses. Our total loss 

reserves, which reflect our estimate of the probable losses we have incurred in our guaranty book of business, including 

concessions we granted borrowers upon modification of their loans, decreased to $60.2 billion as of March 31, 2013 from 

$62.6 billion as of December 31, 2012. Our total loss reserve coverage to total nonperforming loans was 25% as of March 31, 

2013 and December 31, 2012.

Strengthening Our Book of Business

Credit Risk Profile 

While making it possible for families to purchase, refinance or rent a home, we are setting responsible credit standards to 

protect homeowners as well as taxpayers. Since 2009, we have seen the effect of actions we took, beginning in 2008, to 

significantly strengthen our underwriting and eligibility standards and change our pricing to promote sustainable 

homeownership and stability in the housing market. While we do not yet know how the single-family loans we have acquired 

since January 1, 2009 will ultimately perform, given their strong credit risk profile and based on their performance so far, we 

expect that in the aggregate these loans, which constitute a growing majority of our single-family guaranty book of business, 

will be profitable over their lifetime, by which we mean that we expect our fee income on these loans to exceed our credit 

losses and administrative costs for them. In contrast, we expect that the single-family loans we acquired from 2005 through 

2008, in the aggregate, will not be profitable over their lifetime. 
5

Our expectations regarding the ultimate performance of our loans are based on numerous expectations and assumptions, 

including those relating to expected changes in home prices, borrower behavior, public policy and other macroeconomic 

factors. If future conditions are more unfavorable than our expectations, our new single-family book of business could 

become unprofitable. See “Outlook—Factors that Could Cause Actual Results to be Materially Different from Our Estimates 

and Expectations” and “Risk Factors” for a discussion of factors that could cause our expectations regarding the performance 

of the loans in our new single-family book of business to change.

Table 2 below displays information regarding the credit characteristics of the loans in our single-family conventional 

guaranty book of business as of March 31, 2013 by acquisition period, which illustrates the improvement in the credit risk 

profile of loans we acquired beginning in 2009 compared with loans we acquired in 2005 through 2008.

Table 2: Selected Credit Characteristics of Single-Family Conventional Loans Held,by Acquisition Period

As of March 31, 2013

% of 

Single-Family Current Current

Conventional Estimated Mark-to-Market Serious 

Guaranty Book Mark-to-Market LTV Ratio Delinquency

of Business(1) LTV Ratio >100%(2) Rate(3)

New Single-Family Book of Business . . . . . . . . . . . . . . . 69 % 70 % 6 % 0.35 %

Legacy Book of Business:

2005-2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 96 40 9.77

2004 and prior . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 56 6 3.57

Total Single-Family Book of Business. . . . . . . . . . . . . . 100 % 74 % 13 % 3.02 %

__________

(1) 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 March 31, 2013.

(2) The majority of loans in our new single-family book of business as of March 31, 2013 with mark-to-market LTV ratios over 100% were 

loans acquired under the Home Affordable Refinance Program. See “Risk Management—Credit Risk Management—Single-Family 

Mortgage Credit Risk Management—HARP and Refi Plus Loans” for more information on our recent acquisitions of loans with high 

LTV ratios.

(3) The serious delinquency rates for loans acquired in more recent years will be higher after the loans have aged, but we do not expect 

them to approach the levels of the March 31, 2013 serious delinquency rates of loans in our legacy book of business. 

Whether the loans we acquire in the future will exhibit an overall credit profile and performance similar to our more recent 

acquisitions will depend on a number of factors, including our future pricing and eligibility standards and those of mortgage 

insurers and the Federal Housing Administration (“FHA”), the percentage of loan originations representing refinancings, our 

future objectives, government policy, market and competitive conditions, and the volume and characteristics of loans we 

acquire under the Home Affordable Refinance Program (“HARP”).

More detailed information on the risk characteristics of loans in our single-family book of business appears in “Table 31: 

Risk Characteristics of Single-Family Conventional Business Volume and Guaranty Book of Business.” Information about 

the impact of HARP on the credit characteristics our new single-family book of business appears in “Risk Management—

Credit Risk Management—Single-Family Mortgage Credit Risk Management—HARP and Refi Plus Loans” and in “Table 

32: Selected Credit Characteristics of Single-Family Conventional Loans Acquired under HARP and Refi Plus” in that 

section. 

Guaranty Fees on Recently Acquired Single-Family Loans

Table 3 below displays information regarding our average charged guaranty fee on single-family loans we acquired in the 

first quarter of 2013 and 2012, as well as the volume of our single-family Fannie Mae MBS issuances, which is indicative of 

the volume of single-family loans we acquired. 

Table 3: Single-Family Acquisitions Statistics

For the Three Months Ended March 31,

2013 2012

Single-family average charged guaranty fee on new acquisitions (in basis points)(1)(2)

. . 54.4 28.9

Single-family Fannie Mae MBS issuances(in millions)(3)

. . . . . . . . . . . . . . . . . . . . . . . . $ 221,865 $ 196,755
6

__________

(1) Pursuant to the TCCA, effective April 1, 2012, we increased the guaranty fee on all single-family residential mortgages delivered to us 

on or after that date for securitization by 10 basis points; the incremental revenue is remitted to Treasury. In our single-family business 

results, the resulting revenue is included in guaranty fee income, and the expense is included in other expenses. This increase in 

guaranty fee is included in the single-family charged guaranty fee.

(2) Calculated based on the average contractual fee rate for our single-family guaranty arrangements entered into during the period plus the 

recognition of any upfront cash payments ratably over an estimated average life, expressed in basis points.

(3) Reflects unpaid principal balance of Fannie Mae MBS issued and guaranteed by the Single-Family segment during the period.

The revenue we receive from guaranty fees depends on the volume of our single-family acquisitions, the charged guaranty 

fee at acquisition and the life of the loans. Because we increased our guaranty fees in 2012 on loans acquired after the 

increase, we expect to benefit from receiving significantly more revenue from guaranty fees in future periods than we have in 

prior periods, even after we remit some of this revenue to Treasury as we are required to do under the TCCA. The increase in 

our average charged guaranty fee on newly acquired single-family loans from the first quarter of 2012 to the first quarter of 

2013 was primarily attributable to the 10 basis point increase on April 1, 2012 mandated by the TCCA, from which the 

incremental revenue is remitted to Treasury, and an average additional increase of 10 basis points implemented during the 

fourth quarter of 2012. These changes to guaranty fee pricing may help to encourage greater investment by banks and other 

investors in mortgage loans and mortgage-related securities, which is one of the goals set forth in FHFA’s strategic plan for 

Fannie Mae’s and Freddie Mac’s conservatorships. See “Business—Legislative and Regulatory Developments—Changes to 

Our Single-Family Guaranty Fee Pricing and Revenue” in our 2012 for more information on changes to our 

guaranty fee pricing. 

Credit Performance

Table 4 presents information for each of the last five quarters about the credit performance of mortgage loans in our singlefamily guaranty book of business and our workouts. The term “workouts” refers to home retention solutions and foreclosure 

alternatives. The workout information in Table 4 does not reflect repayment plans and forbearances that have been initiated 

but not completed, nor does it reflect trial modifications that have not become permanent.
7

Table 4: Credit Statistics, Single-Family Guaranty Book of Business(1)

2013 2012

Q1

Full

Year Q4 Q3 Q2 Q1

(Dollars in millions)

As of the end of each period:

Serious delinquency rate(2)

. . . . . . . . . . . . . . . . . . . . . . . . 3.02 % 3.29 % 3.29 % 3.41 % 3.53 % 3.67 %

Seriously delinquent loan count. . . . . . . . . . . . . . . . . . . . 527,529 576,591 576,591 599,430 622,052 650,918

Nonperforming loans(3). . . . . . . . . . . . . . . . . . . . . . . . . . $ 236,988 $ 247,823 $ 247,823 $ 250,678 $ 240,472 $ 243,981

Foreclosed property inventory:

Number of properties(4). . . . . . . . . . . . . . . . . . . . . . . . 101,449 105,666 105,666 107,225 109,266 114,157

Carrying value. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 9,263 $ 9,505 $ 9,505 $ 9,302 $ 9,421 $ 9,721

Combined loss reserves(5). . . . . . . . . . . . . . . . . . . . . . . . . $ 56,626 $ 58,809 $ 58,809 $ 63,100 $ 63,365 $ 69,633

Total loss reserves(6). . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 59,114 $ 61,396 $ 61,396 $ 65,685 $ 66,694 $ 73,119

During the period:

Foreclosed property (number of properties):

Acquisitions(4). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38,717 174,479 41,112 41,884 43,783 47,700

Dispositions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (42,934) (187,341) (42,671) (43,925) (48,674) (52,071)

Credit-related income (expenses)(7). . . . . . . . . . . . . . . . . $ 1,034 $ 919 $ 2,419 $ (2,130) $ 3,015 $ (2,385)

Credit losses(8). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,503 $ 14,392 $ 2,174 $ 3,485 $ 3,778 $ 4,955

REO net sales prices to unpaid principal balance(9). . . . . 65 % 59 % 62 % 61 % 59 % 56 %

Short sales net sales price to unpaid principal balance(10) 64 % 61 % 63 % 61 % 60 % 58 %

Loan workout activity (number of loans):

Home retention loan workouts(11). . . . . . . . . . . . . . . . . . . 47,635 186,741 44,044 45,936 41,226 55,535

Short sales and deeds-in-lieu of foreclosure . . . . . . . . . . 16,126 88,732 19,184 23,322 24,013 22,213

Total loan workouts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63,761 275,473 63,228 69,258 65,239 77,748

Loan workouts as a percentage of delinquent loans in 

our guaranty book of business(12)

. . . . . . . . . . . . . . . . . 27.53 % 26.38 % 24.22 % 25.18 % 24.14 % 28.85 %

__________

(1) Our single-family guaranty book of business consists of (a) single-family mortgage loans of Fannie Mae, (b) single-family mortgage 

loans underlying Fannie Mae MBS and (c) other credit enhancements that we provide on single-family mortgage assets, such as longterm standby commitments. It excludes non-Fannie Mae mortgage-related securities held in our retained mortgage portfolio for which 

we do not provide a guaranty.

(2) Calculated based on the number of single-family conventional loans that are 90 days or more past due and loans that have been referred 

to foreclosure but not yet foreclosed upon, divided by the number of loans in our single-family conventional guaranty book of business. 

We include all of the single-family conventional loans that we own and those that back Fannie Mae MBS in the calculation of the 

single-family serious delinquency rate.

(3) Represents the total amount of nonperforming loans, including troubled debt restructurings (“TDR”). A TDR is a restructuring of a 

mortgage loan in which a concession is granted to a borrower experiencing financial difficulty. We generally classify loans as 

nonperforming when the payment of principal or interest on the loan is 60 days or more past due. 

(4) Includes held-for-use properties (properties that we do not intend to sell or that are not ready for immediate sale in their current 

condition), which are reported in our condensed consolidated balance sheets as a component of “Other assets” and acquisitions through 

deeds-in-lieu of foreclosure.

(5) Consists of the allowance for loan losses for loans recognized in our condensed consolidated balance sheets and the reserve for 

guaranty losses related to both single-family loans backing Fannie Mae MBS that we do not consolidate in our condensed consolidated 

balance sheets and single-family loans that we have guaranteed under long-term standby commitments. For additional information on 

the change in our loss reserves see “Consolidated Results of Operations—Credit-Related (Income) Expenses— Benefit (Provision) for 

Credit Losses.”

(6) Consists of (a) the combined loss reserves, (b) allowance for accrued interest receivable and (c) allowance for preforeclosure property 

taxes and insurance receivables.

(7) Consists of (a) the provision (benefit) for credit losses and (b) foreclosed property (income) expense.

(8) Consists of (a) charge-offs, net of recoveries and (b) foreclosed property (income) expense, adjusted to exclude the impact of fair value 

losses resulting from credit-impaired loans acquired from MBS trusts.
8

(9) Calculated as the amount of sale proceeds received on disposition of REO properties during the respective period, excluding those 

subject to repurchase requests made to our seller/servicers divided by the aggregate unpaid principal balance (“UPB”) of the related 

loans at the time of foreclosure. Net sales price represents the contract sale price less selling costs for the property and other charges 

paid by the seller at closing.

(10) Calculated as the amount of sale proceeds received on properties sold in short sale transactions during the respective period divided by 

the aggregate UPB of the related loans. Net sales price represents the contract sales price less the selling costs for the property and other 

charges paid by the seller at the closing, including borrower relocation incentive payments and subordinate lien(s) negotiated payoffs.

(11) Consists of (a) modifications, which do not include trial modifications, loans to certain borrowers who have received bankruptcy relief 

that are classified as TDRs, or repayment and forbearance plans that have been initiated but not completed and (b) repayment plans and 

forbearances completed. See “Table 36: Statistics on Single-Family Loan Workouts” in “Risk Management—Credit Risk Management

—Single-Family Mortgage Credit Risk Management—Problem Loan Management—Loan Workout Metrics” for additional information 

on our various types of loan workouts.

(12) Calculated based on annualized problem loan workouts during the period as a percentage of delinquent loans in our single-family 

guaranty book of business as of the end of the period.

We discuss our strategies and the actions we are taking to minimize our credit losses in “Risk Management—Credit Risk 

Management—Single-Family Mortgage Credit Risk Management” in both this report and our 2012 Form 10-K.

Contributions to the Housing and Mortgage Markets Since Entering Conservatorship

Liquidity and Support Activities

We have provided approximately $3.5 trillion in liquidity to the housing market since 2009, enabling families to buy, 

refinance or rent a home. Since we entered into conservatorship in September 2008, we have provided critical liquidity and 

support to the U.S. mortgage market in a number of important ways:

• We serve as a stable source of liquidity for purchases of homes and financing of multifamily rental housing, as well 

as for refinancing existing mortgages. The approximately $3.5 trillion in liquidity we have provided to the mortgage 

market from 2009 through the first quarter of 2013 through our purchases and guarantees of loans enabled borrowers 

to complete 10.6 million mortgage refinancings and 2.9 million home purchases and provided financing for 1.8 

million units of multifamily housing.

• We strengthened our underwriting and eligibility standards to support sustainable homeownership. As a result, our 

new single-family book of business has a strong credit risk profile. Our support enables borrowers to have access to 

a variety of mortgage products, including long-term, fixed-rate mortgages, such as the prepayable 30-year fixed-rate 

mortgage, which protects homeowners from interest rate swings.

• Through our loan workout efforts from 2009 through the first quarter of 2013, which included providing 921,986

loan modifications, we helped 1.3 million homeowners stay in their homes or otherwise avoid foreclosure. These 

efforts helped to support neighborhoods, home prices and the housing market. 

• We helped borrowers refinance loans, including through our Refi PlusTM initiative, which offers refinancing 

flexibility to eligible Fannie Mae borrowers and includes HARP. From April 1, 2009, the date we began accepting 

delivery of Refi Plus loans, through March 31, 2013, we acquired approximately 3.2 million Refi Plus loans. 

Refinancings delivered to us through Refi Plus in the first quarter of 2013 reduced borrowers’ monthly mortgage 

payments by an average of $246. Some borrowers’ monthly payments increased as they took advantage of the ability 

to refinance through Refi Plus to reduce the term of their loan, to switch from an adjustable-rate mortgage to a fixedrate mortgage or to switch from an interest-only mortgage to a fully amortizing mortgage.

• We support affordability in the multifamily rental market. Over 85% of the multifamily units we financed from 2009 

through 2012 were affordable to families earning at or below the median income in their area.

• In addition to purchasing and guaranteeing loans, we provide funds to the mortgage market through short-term 

financing and other activities. These activities are described in more detail in our 2012 in “Business—

Business Segments—Capital Markets.”

2013 Acquisitions and Market Share 

As the leading provider of residential mortgage credit, we enable families to buy, refinance or rent a home. In the first quarter 

of 2013, we purchased or guaranteed approximately $240 billion in single-family and multifamily loans, measured by unpaid 

principal balance, which includes $9.3 billion in delinquent loans we purchased from our single-family MBS trusts. Our 

activities enabled our lender customers to finance approximately 1.0 million single-family conventional loans and loans for 

approximately 143,000 units in multifamily properties during the first quarter of 2013. 
9

One of FHFA’s strategic goals for our conservatorship involves gradually contracting our dominant presence in the 

marketplace. Despite this goal, our market share remained large in the first quarter of 2013 as we have continued to meet the 

needs of the single-family mortgage market in the absence of substantial private capital. We remained the largest single issuer 

of mortgage-related securities in the secondary market during the first quarter of 2013, with an estimated market share of new 

single-family mortgage-related securities issuances of 48% in the first quarter of 2013 and the fourth quarter of 2012, 

compared with 51% in the first quarter of 2012. 

We remain a constant source of liquidity in the multifamily market. We owned or guaranteed approximately 22% of the 

outstanding debt on multifamily properties as of December 31, 2012 (the latest date for which information is available).

Housing and Mortgage Market and Economic Conditions

Economic growth accelerated in the first quarter of 2013 compared with the fourth quarter of 2012. The inflation-adjusted 

U.S. gross domestic product, or GDP, rose by 2.5% on an annualized basis in the first quarter of 2013, according to the 

Bureau of Economic Analysis advance estimate, compared with an increase of 0.4% in the fourth quarter of 2012. While 

signs of a slowdown were clearly visible late in the first quarter of 2013, partly due to the impact of sequestration, we expect 

the slowdown to be temporary and are forecasting that growth will pick up modestly in the second half of 2013. The U.S. 

government may reach the limit on its borrowing authority later this year, but we do not yet know what the impact or timing 

of this will be, although the limit is not expected to be reached before the fall of 2013. The overall economy gained an 

estimated 618,000 jobs in the first quarter. According to the U.S. Bureau of Labor Statistics over the last 12 months ending 

in March 2013, the economy created 2.1 million non-farm jobs. The unemployment rate was 7.6% in March 2013, compared 

with 7.8% in December 2012. We expect that housing will continue to recover if the employment market continues to 

improve.

Housing activity showed improvement during the first quarter of 2013. Total existing home sales averaged 4.9 million units 

annualized in the first quarter of 2013, a 0.8% increase from the fourth quarter of 2012, according to data from the National 

Association of REALTORS®. Sales of foreclosed homes and preforeclosure, or “short,” sales (together, “distressed sales”) 

accounted for 21% of existing home sales in March 2013, compared with 24% in December 2012 and 29% in March 2012. 

New single-family home sales strengthened during the first quarter of 2013, averaging an annualized rate of 424,000 units, an 

11% increase from the fourth quarter of 2012, according to the Bureau of the Census.

During first quarter of 2013, the number of months’ supply, or the inventory/sales ratio, of available existing homes and of 

new homes each remained below its historical average, with existing homes declining to 4.5 months and new homes 

declining to 4.3 months, marking the lowest quarterly reading for each measure since the second quarter of 2005.

The overall mortgage market serious delinquency rate, which has trended down since peaking in the fourth quarter of 2009, 

remained historically high at 6.8% as of December 31, 2012, according to the Mortgage Bankers Association National 

Delinquency Survey. We provide information about Fannie Mae’s serious delinquency rate, which also decreased, in “Credit 

Performance.” 

We estimate that home prices on a national basis declined by an estimated 19.3% from their peak in the third quarter of 2006 

to the first quarter of 2013, based on our home price index, but increased by an estimated 5.9% from the first quarter of 2012 

to the first quarter of 2013. Our home price estimates are based on preliminary data and are subject to change as additional 

data become available. The decline in home prices that began in 2006 left many homeowners with “negative equity” in their 

homes, which means their principal mortgage balance exceeds the current market value of their home. This increases the 

likelihood that borrowers will abandon their mortgage obligations and that the loans will become delinquent and proceed to 

foreclosure. According to CoreLogic, Inc. the number of residential properties with mortgages in a negative equity position in 

the fourth quarter of 2012 was approximately 10.4 million, down from 12.1 million in the fourth quarter of 2011. The 

percentage of properties with mortgages in a negative equity position in the fourth quarter of 2012 was 21.5%, down from 

25.2% in the fourth quarter of 2011 and its peak of 25.7% reached in the fourth quarter of 2009.

During the first quarter of 2013, the national multifamily sector continued to benefit from rental demand despite a slowdown 

during the latter part of 2012. Underlying fundamentals, which include factors such as vacancy rates and rents, remain stable 

and the estimated vacancy rate is at a historically low level. Preliminary third-party data for the first quarter of 2013 indicate 

that the national multifamily vacancy rate for institutional investment-type apartment properties decreased to an estimated 

5.25% as of March 31, 2013, compared with an estimated 5.50% as of December 31, 2012 and an estimated 6.0% as of 

March 31, 2012. 

In addition, preliminary third-party data indicate that asking rents increased in the first quarter of 2013 by an estimated 0.5%

on a national basis. Ongoing multifamily rental demand is also reflected in an estimated positive net absorption (that is, the 
10

net change in the number of occupied rental units after deducting new supply added during the period) of approximately 

36,000 units during the first quarter, according to preliminary data from Reis, Inc.

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 continued improvement in these fundamentals have helped boost 

property values; as a result, there has been an increase in new multifamily construction development in a number of 

metropolitan areas. 

Over 180,000 new multifamily units are expected to be completed and become available this year, according to Axiometrics, 

Inc. Most of this new construction is concentrated in certain metropolitan areas, which could result in localized, short-term 

oversupply. In addition, if the employment market does not continue to improve, future rent growth is likely to slow and 

vacancy rates are likely to increase. Multifamily properties located in areas affected by federal government sequestration cuts 

may be particularly impacted by adverse conditions in the employment market.

Outlook

Financial Results and Dividend Payments to Treasury. We experienced significant improvement in our financial results for 

the first quarter of 2013, as compared with the first quarter of 2012. After paying Treasury a $4.2 billion quarterly dividend 

during the first quarter of 2013, we ended the quarter with a positive net worth of $62.4 billion as of March 31, 2013. Our 

pre-tax income for the first quarter of 2013, which does not reflect the deferred tax valuation allowance release, was $8.1 

billion. While our earnings will vary from quarter to quarter, we expect to remain profitable for the foreseeable future. 

Because loans remain in our book of business for a number of years, the credit quality of and guaranty fees we charge on the 

loans we acquire in a particular year affects our results for a period of years after we acquire them. Accordingly, we expect 

the improvements in the credit quality of our loan acquisitions since 2009 and the increases in our charged guaranty fees on 

recently acquired loans to benefit our results for years to come, especially because these loans have relatively low interest 

rates, making them less likely to be refinanced than loans with higher interest rates. 

In compliance with our dividend obligation to Treasury, we will retain only a limited amount of any future earnings because 

we must pay Treasury each quarter the amount, if any, by which our net worth as of the end of the immediately preceding 

fiscal quarter exceeds an applicable capital reserve amount. This capital reserve amount is $3.0 billion for each quarter of 

2013 and decreases annually until it reaches zero in 2018. 

One of our objectives is to pay taxpayers for their investment in our company. Through March 31, 2013, we have received a 

total of $116.1 billion under the senior preferred stock purchase agreement. This funding has provided us with the capital and 

liquidity needed to fulfill our mission of providing liquidity and support to the nation’s housing finance markets and to avoid 

a trigger of mandatory receivership under the 2008 Reform Act. We have not received funds from Treasury under the 

agreement since the first quarter of 2012. Under the terms of the senior preferred stock purchase agreement, dividend 

payments cannot be used to offset prior Treasury draws, and we are not permitted to pay down draws we have made under the 

agreement except in limited circumstances. Accordingly, Treasury still maintains a liquidation preference of $117.1 billion on 

the senior preferred stock, even though we have paid $35.6 billion in dividends through March 31, 2013 and, with our 

dividend payment of $59.4 billion in the second quarter of 2013, we will have paid $95.0 billion in dividends. Because we 

expect our annual earnings to remain strong over the next few years, we expect that the amount of dividends we pay Treasury 

will ultimately exceed the amounts we have drawn.

Overall Market Conditions. We expect that single-family mortgage loan delinquency and severity rates will continue their 

downward trend, but that single-family delinquency, default and severity rates will remain high compared with pre-housing 

crisis levels. Despite multifamily sector improvement at the national level, we expect certain local markets and properties will 

continue to exhibit weak fundamentals. We expect the level of multifamily foreclosures for 2013 overall will generally 

remain commensurate with 2012 levels. Conditions may worsen if the unemployment rate increases on either a national or 

regional basis.

We forecast that total originations in the U.S. single-family mortgage market in 2013 will decrease from 2012 levels by 

approximately 15% from an estimated $1.92 trillion to $1.63 trillion and that the amount of originations in the U.S. singlefamily mortgage market that are refinancings will decrease from an estimated $1.40 trillion in 2012 to $1.01 trillion in 2013. 

Our forecast of a decrease in refinancings is based in part on our expectation that mortgage rates will rise later this year. In 

the first quarter of 2013, refinancings comprised approximately 83% of our single-family business volume, compared with 

approximately 79% for all of 2012.

Home Prices. We estimate that home prices on a national basis declined by an estimated 19.3% from their peak in the third 

quarter of 2006 to the first quarter of 2013, based on our home price index, but increased by an estimated 5.9% from the first 

quarter of 2012 to the first quarter of 2013. The percentage of loans in our single-family conventional guaranty book of 
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business with an unpaid principal balance greater than the current estimated value of the underlying home decreased to 13%

as of March 31, 2013 from 19% as of March 31, 2012. Although home price growth may not continue at 2012 levels, we 

expect that, if current market trends continue, home prices will increase on a national basis overall in 2013. Future home 

price changes may be very different from our expectations as a result of significant inherent uncertainty in the current market 

environment, including uncertainty about the effect of actions the federal government has taken and may take with respect to 

tax policies, spending cuts, mortgage finance programs and policies and housing finance reform; the management of the 

Federal Reserve’s MBS holdings; the impact of those actions on and changes generally in unemployment and the general 

economic and interest rate environment; and the impact on the U.S. economy of global economic conditions. Because of 

these uncertainties, the actual home price changes we experience may differ significantly from our expectations. We also 

expect significant regional variation in the timing and rate of home price growth. 

Credit Losses. Our credit losses, which include our charge-offs, net of recoveries, reflect our realization of losses on our 

loans. We realize losses on loans, through our charge-offs, when foreclosure sales are completed or when we accept short 

sales or deeds-in-lieu of foreclosure. We expect our credit losses to remain elevated in 2013 relative to pre-housing crisis 

levels. In addition, to the extent the slow pace of foreclosures continues in 2013, our realization of some credit losses will be 

delayed. 

Loss Reserves. Our total loss reserves were $60.2 billion as of March 31, 2013, down from their peak of $76.9 billion as of 

December 31, 2011. We expect our loss reserves will remain significantly elevated relative to historical levels for an extended 

period because (1) we expect future defaults on loans that we acquired prior to 2009 and the resulting charge-offs will occur 

over a period of years and (2) a significant portion of our reserves represents concessions granted to borrowers upon 

modification of their loans and our reserves will continue to reflect these concessions until the loans are fully repaid or 

default.

Future Revenues and Profitability. Historically, we have generated the majority of our net revenues from the difference 

between the interest income earned on the assets in our retained mortgage portfolio and the interest expense associated with 

the debt funding of those assets. As we discuss in our 2012 in “Conservatorship and Treasury Agreements—

Treasury Agreements—Covenants under Treasury Agreements,” we are required to reduce the size of our retained mortgage 

portfolio each year until we hold no more than $250 billion in mortgage assets by the end of 2018. As we reduce the size of 

our retained mortgage portfolio, our revenues generated by our retained mortgage portfolio assets will also decrease. If 

current housing market conditions continue and if we are not required to sell more of our retained mortgage portfolio assets 

than we currently anticipate selling, we expect that these declines in our revenues will generally be offset by rising guaranty 

fee revenue received for managing the credit risk on loans underlying Fannie Mae MBS held by third parties. We recognize 

almost all of our guaranty fee revenue in net interest income in our condensed consolidated statements of operations and 

comprehensive income. We expect that, in a number of years, guaranty fees will become the primary source of our revenues 

as a result of both the shrinking of our retained mortgage portfolio and the impact of guaranty fee increases in 2011 and 2012. 

Any future increases in guaranty fees will likely further increase our guaranty fee revenue. The amount of our guaranty fee 

revenue in future periods will be impacted by many factors, including adjustments to guaranty fee pricing we may make in 

the future, which we discuss in our 2012 in “Legislative and Regulatory Developments—Changes to Our SingleFamily Guaranty Fee Pricing and Revenue.”

In addition to our expectation that our guaranty fee revenue will increase in future periods, we also expect our credit losses 

will decrease as a result of the higher credit quality of our new book of business, the decrease in our legacy book and 

anticipated positive home price growth, which reduces the level of defaults we expect on our new book of business and our 

legacy book and lowers severity at the time of charge-off.

Uncertainty Regarding our Future Status. There is significant uncertainty regarding the future of our company, including 

how long the company will continue to be in its current form, the extent of our role in the market, 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. We expect this uncertainty to continue. 

In 2011, Treasury and the Department of Housing and Urban Development (“HUD”) released a report to Congress on 

reforming America’s housing finance market. The report states that the Administration will work with FHFA to determine the 

best way to responsibly wind down both Fannie Mae and Freddie Mac. We cannot predict the prospects for the enactment, 

timing or content of legislative proposals regarding long-term reform of the GSEs. See “Legislative and Regulatory 

Developments” in this report and “Business—Legislative and Regulatory Developments” in our 2012 for 

discussions of recent legislative reform of the financial services industry and proposals for GSE reform that could affect our 

business. See “Risk Factors” in our 2012 for a discussion of the risks to our business relating to the uncertain 

future of our company.
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Factors that Could Cause Actual Results to be Materially Different from Our Estimates and Expectations. We present a 

number of estimates and expectations in this executive summary, including estimates and expectations regarding our future 

financial results and profitability, our future dividend payments to Treasury, our future revenues from guaranty fees, the 

profitability and performance of single-family loans we have acquired, our future acquisitions, our future REO inventory, our 

future delinquency, default and severity rates, our future credit losses and loss reserves, future housing market conditions, 

performance and volumes and future home prices. These estimates and expectations are forward-looking statements based on 

our current assumptions regarding numerous factors, especially future home prices and the future performance of our loans. 

Our future estimates of our performance, as well as the actual amounts, may differ materially from our current estimates and 

expectations as a result of: the timing and level of, as well as regional variation in, home price changes; changes in interest 

rates, unemployment rates and other macroeconomic and housing market variables; our future guaranty fee pricing; our 

future serious delinquency rates; future legislative or regulatory requirements that have a significant impact on our business, 

such as a requirement that we implement a principal forgiveness program; future updates to our models relating to our loss 

reserves, including the assumptions used by these models; future changes to accounting policies relating to our loss reserves; 

significant changes in modification and foreclosure activity; changes in borrower behavior, such as an increasing number of 

underwater borrowers who strategically default on their mortgage loan; the effectiveness of our loss mitigation strategies, 

management of our REO inventory and pursuit of contractual remedies; whether our counterparties meet their obligations in 

full; changes in the fair value of our assets and liabilities; impairments of our assets; changes in generally accepted 

accounting principles (“GAAP”); credit availability; natural and other disasters; and other factors, including those discussed 

in “Forward-Looking Statements,” “Risk Factors” and elsewhere in this report. Due to the large size of our guaranty book of 

business, even small changes in these factors could have a significant impact on our financial results for a particular period.

LEGISLATIVE AND REGULATORY DEVELOPMENTS

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

forth in “Business—Legislative and Regulatory Developments” and “Business—Our Charter and Regulation of Our 

Activities” in our 2012 Form 10-K. Also see “Risk Factors” in our 2012 Form 10-K for a discussion of risks relating to 

legislative and regulatory matters.

GSE Reform

Policymakers and others have focused significant attention in recent years on how to reform the nation’s housing finance 

system, including what role, if any, the GSEs should play. The Dodd-Frank Wall Street Reform and Consumer Protection Act 

(the “Dodd-Frank Act”), which was signed into law in July 2010, calls for enactment of meaningful structural reforms of 

Fannie Mae and Freddie Mac. The Dodd-Frank Act also required the Treasury Secretary to submit a report to Congress with 

recommendations for ending the conservatorships of Fannie Mae and Freddie Mac.

The Administration’s February 2011 report on the future of housing finance reform identifies a number of policy steps that 

could be used to wind down Fannie Mae and Freddie Mac, reduce the government’s role in housing finance and help bring 

private capital back to the mortgage market. These steps include (1) increasing guaranty fees, (2) gradually increasing the 

level of required down payments so that any mortgages insured by Fannie Mae or Freddie Mac eventually have at least a 

10% down payment, (3) reducing conforming loan limits to those established in the 2008 Reform Act, (4) encouraging 

Fannie Mae and Freddie Mac to pursue additional credit loss protection and (5) reducing Fannie Mae’s and Freddie Mac’s 

retained mortgage portfolios, consistent with Treasury’s senior preferred stock purchase agreements with the companies. In 

addition, the report outlines three potential options for a new long-term structure for the housing finance system following the 

wind-down of Fannie Mae and Freddie Mac. The first option would privatize housing finance almost entirely. The second 

option would add a government guaranty mechanism that could scale up during times of crisis. The third option would 

involve the government offering catastrophic reinsurance behind private mortgage guarantors. 

In 2012, the Acting Director of FHFA provided a strategic plan for Fannie Mae and Freddie Mac’s conservatorships. On 

March 4, 2013, the Acting Director of FHFA released the 2013 Conservatorship Scorecard for Fannie Mae and Freddie Mac, 

which details specific priorities that build upon the goals in the strategic plan. At that time, FHFA announced that, to further 

the goal of building a common securitization platform that would be able to function like a market utility, a new business 

entity will be established by Fannie Mae and Freddie Mac that will be separate from the two companies. The new business 

entity will be designed to operate as a replacement for some of Fannie Mae and Freddie Mac’s legacy infrastructure. The 

scorecard also established priorities relating to the goal that we contract our dominant presence in the marketplace. In support 

of this goal, FHFA set as goals that we (1) demonstrate the viability of multiple types of risk transfer transactions involving 

single-family mortgages with at least $30 billion of unpaid principal balances in 2013, (2) reduce the unpaid principal 

balance of new multifamily business relative to 2012 by at least 10% by tightening underwriting, adjusting pricing and 
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limiting product offerings, while not increasing the proportion of our retained risk and (3) sell 5% of the assets we held in our 

retained mortgage portfolio as of December 31, 2012 that are not agency securities. 

During the last congressional session, several bills were introduced in the House of Representatives and the Senate to reform 

the housing finance system. These bills would have placed the GSEs into receivership after a period of time and either 

granted federal charters to new entities to engage in activities similar to those currently engaged in by the GSEs or left 

secondary mortgage market activities to entities in the private sector. 

In addition, numerous bills were referred to the Committee on Financial Services of the House of Representatives on discrete 

topics related to the activities and operations of the enterprises. Of these bills, only legislation that would have placed GSE 

employees on a government pay scale was approved by the full Committee. 

Congress passed two bills that were signed into law relating to GSE operations or activities. These bills increased the 

guaranty fees of the GSEs in order to offset the cost of a two month extension of the payroll tax cut in 2012 and prohibited 

the payment of bonuses to senior executives at the GSEs during conservatorship. In addition, the House, but not the Senate, 

passed legislation that would have placed GSE obligations on the federal budget and made them subject to the debt ceiling, as 

well as required receipts and disbursements of the GSEs to be counted in the federal budget. For legislation to be considered 

in the congressional session that convened in January 2013 and runs through 2014, any previously introduced legislation 

must be reintroduced and begin the legislative process again. 

During the current congressional session, the Senate passed an amendment to its budget resolution that would make it more 

difficult for Congress to require an increase in our guaranty fees to offset government spending. In addition, legislation has 

been introduced in the Senate (the “Jumpstart GSE Reform Act”), but not yet acted upon, that would prohibit an increase in 

guaranty fees to offset spending unrelated to the business operations at the GSEs. That legislation would also prohibit 

Treasury from disposing of its senior preferred stock of the GSEs until legislation has been enacted that includes specific 

instruction for its disposition.

We expect Congress to continue consideration of housing finance reform in the current congressional session, including 

hearings on GSE reform and the consideration of legislation that may alter the housing finance reform system or the activities 

or operations of the GSEs. 

In sum, there continues to be uncertainty regarding the future of our company, including how long the company will continue 

to exist in its current form, the extent of our role in the market, 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. See “Risk Factors” in 

our 2012 Form 10-K for discussions of the risks to our business relating to the uncertain future of our company and of how 

the uncertain future of our company may adversely affect our ability to retain and recruit well-qualified employees, including 

senior management.

Dodd-Frank Act—Ability to Repay

The Dodd-Frank Act requires creditors to determine that borrowers have a “reasonable ability to repay” mortgage loans prior 

to making such loans. On January 10, 2013, the Consumer Financial Protection Bureau (the “CFPB”) issued a final rule 

pursuant to the Dodd-Frank Act that, among others things, requires creditors to determine a borrower’s “ability to repay” a 

mortgage loan under Regulation Z, which implements the Truth in Lending Act. If a creditor fails to comply, a borrower may 

be able to offset amounts owed in a foreclosure proceeding or recoup monetary damages. The rule offers several options for 

complying with the ability to repay requirement, including making loans that meet certain terms and characteristics (so-called 

“qualified mortgages”), which may provide creditors with special protection from liability. While Fannie Mae and Freddie 

Mac remain in conservatorship or, if earlier, until January 10, 2021, a loan will generally be a qualified mortgage under the 

rule if, among other things, (1) the points and fees paid in connection with the loan do not exceed 3% of the total loan 

amount, (2) the loan term does not exceed 30 years, (3) the loan is fully amortizing with no negative amortization, interestonly or balloon features and (4) the loan conforms to the standards set forth in Fannie Mae’s or Freddie Mac’s single-family 

selling guides or is determined to be eligible for purchase by Fannie Mae’s or Freddie Mac’s automated underwriting system. 

There are comparable provisions for loans insured or guaranteed by FHA, the VA or the Department of Agriculture. A loan 

that is not eligible for sale to a GSE pursuant to its selling guide or automated underwriting system can still be a qualified 

mortgage if it meets the other criteria listed above, the debt-to-income ratio on the loan does not exceed 43% using the 

maximum interest rate applicable in the first five years of the loan, taking into account all-mortgage related obligations, and 

the borrower’s income and assets are verified in accordance with the method prescribed in the rule. There is some uncertainty 

regarding the timing and final provisions of the rule as a result of legal challenges to the appointment of the CFPB’s director.

In May 2013, FHFA directed Fannie Mae and Freddie Mac to limit our acquisition of single-family loans to loans that are 

qualified mortgages, or that are exempt from the ability-to-repay rule, such as loans made to investors. This prohibition will 
14

be effective for loans with application dates on or after the effective date of the ability-to-repay rule, which is scheduled for 

January 10, 2014. We are currently evaluating the potential impact of the rule and the uncertainty surrounding its adoption on 

our business.

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 the 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 2012 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. Management has discussed any significant changes in judgments and assumptions in 

applying our critical accounting policies with the Audit Committee of our Board of Directors. See “Risk Factors” in our 2012 

Form 10-K for a discussion of the risks associated with the need for management to make judgments and estimates in 

applying our accounting policies and methods. We have identified four of our accounting policies as critical because they 

involve 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. These critical accounting policies and estimates are as follows:

• Fair Value Measurement

• Total Loss Reserves

• Other-Than-Temporary Impairment of Investment Securities

• Deferred Tax Assets

See “MD&A—Critical Accounting Policies and Estimates” in our 2012 Form 10-K for a detailed discussion of these critical 

accounting policies and estimates. We also describe any significant changes in the judgments and assumptions we made 

during the first three months of 2013 in applying our critical accounting policies and significant changes to critical estimates.

Deferred Tax Assets 

We recognize deferred tax assets and liabilities for future tax consequences arising from differences between the carrying 

amounts of existing assets and liabilities under GAAP and their respective tax bases, and for net operating loss carryforwards 

and tax credit carryforwards. We evaluate the recoverability of our deferred tax assets, weighing all positive and negative 

evidence, and are required to establish or maintain a valuation allowance for these assets if we determine that it is more likely 

than not that some or all of the deferred tax assets will not be realized. The weight given to the evidence is commensurate 

with the extent to which the evidence can be objectively verified. If negative evidence exists, positive evidence is necessary 

to support a conclusion that a valuation allowance is not needed.

Our framework for assessing the recoverability of deferred tax assets requires us to weigh all available evidence, including:

• the sustainability of recent profitability required to realize the deferred tax assets;

• whether or not there are cumulative net losses in our consolidated statements of operations in recent years;

• unsettled circumstances that, if unfavorably resolved, would adversely affect future operations and profit levels 

on a continuing basis in future years; and

• the carryforward periods for net operating losses and tax credits.

After weighing all of the evidence, we determined that the positive evidence in favor of releasing the valuation allowance, 

particularly the evidence that was objectively verifiable, outweighed the negative evidence against releasing the allowance as 

of March 31, 2013. Therefore, we concluded that it is more likely than not that our deferred tax assets, except the deferred tax 

assets relating to capital loss carryforwards, will be realized. As a result, we have released the valuation allowance on our 

deferred tax assets as of March 31, 2013, except for amounts that will be released against income before federal income taxes 

for the remainder of the year. However, we will retain $491 million of the valuation allowance that pertains to our capital loss 

carryforwards, which we believe will expire unused. The release of the valuation allowance resulted in the recognition of 

$50.6 billion as a benefit for federal income taxes in our condensed consolidated statements of operations and comprehensive 

income in the first quarter of 2013.
15

The positive evidence that weighed in favor of releasing the allowance as of March 31, 2013 and ultimately outweighed the 

negative evidence against releasing the allowance was the following: 

• our profitability in 2012 and the first quarter of 2013 and our expectations regarding the sustainability of these 

profits;

• our three-year cumulative income position as of March 31, 2013;

• the strong credit profile of the loans we have acquired since 2009;

• the significant size of our guaranty book of business and our contractual rights for future revenue from this book 

of business;

• our taxable income for 2012 and our expectations regarding the likelihood of future taxable income; and

• that our net operating loss carryforwards will not expire until 2030 through 2031 and we expect to utilize all of 

these carryforwards within the next few years.

As discussed in our 2012 Form 10-K in “MD&A—Critical Accounting Policies and Estimates—Deferred Tax Assets,” 

releasing all or a portion of the valuation allowance in any period after December 31, 2012 will not reduce the funding 

available to us under the senior preferred stock purchase agreement and therefore would not result in regulatory actions that 

would limit our business operations to ensure our safety and soundness. In addition, we transitioned from a three-year 

cumulative loss position over the three years ended December 31, 2012 to a three-year cumulative income position over the 

three years ended March 31, 2013. The change in these conditions during the first quarter of 2013 removed negative evidence 

that supported maintaining the valuation allowance against our net deferred tax assets as of December 31, 2012. The balance 

of our net deferred tax assets was $49.7 billion as of March 31, 2013 compared with a net deferred tax liability of $509 

million as of December 31, 2012.

We expect that the remaining valuation allowance not related to capital loss carryforwards will be reduced against income 

before federal income taxes throughout the remaining quarters of 2013 until that amount is reduced to zero as of December 

31, 2013. The timing of the reduction of this remaining valuation allowance will be determined by the timing of our 

estimated income recognition for 2013. 

Income before federal income taxes recorded in the remainder of 2013 may be greater or less than our current estimate. If 

income before federal income taxes recorded for the remainder of 2013 is greater than our current estimate, we will recognize 

a provision for federal income taxes in subsequent periods of 2013. Conversely, if income before federal income taxes 

recorded for the remainder of 2013 is lower than our current estimate, we will recognize an additional benefit for income 

taxes in subsequent periods of 2013. Starting in 2014, we expect that our effective tax rate will approach the statutory tax 

rate. 

CONSOLIDATED RESULTS OF OPERATIONS

This section provides a discussion of our condensed consolidated results of operations for the periods indicated and should be 

read together with our condensed consolidated financial statements, including the accompanying notes.
16

Table 5 displays a summary of our condensed consolidated results of operations for the periods indicated.

Table 5: Summary of Condensed Consolidated Results of Operations

For the Three Months

Ended March 31,

2013 2012 Variance

(Dollars in millions)

Net interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 6,304 $ 5,197 $ 1,107

Fee and other income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 568 375 193

Net revenues. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,872 5,572 1,300

Investment gains, net. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 118 116 2

Fair value gains, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 834 283 551

Administrative expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (641) (564) (77)

Credit-related income (expenses)

Benefit (provision) for credit losses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 957 (2,000) 2,957

Foreclosed property income (expense) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 260 (339) 599

Total credit-related income (expenses) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,217 (2,339) 3,556

Other non-interest expenses(1). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (286) (350) 64

Income before federal income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,114 2,718 5,396

Benefit for federal income taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50,571 — 50,571

Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58,685 2,718 55,967

Less: Net loss attributable to noncontrolling interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 1 (1)

Net income attributable to Fannie Mae . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 58,685 $ 2,719 $ 55,966

Total comprehensive income attributable to Fannie Mae. . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 59,339 $ 3,081 $ 56,258

__________

(1) Consists of net other-than-temporary impairments, debt extinguishment losses, net and other expenses.

Net Interest Income

Table 6 displays an analysis of our net interest income, average balances, and related yields earned on assets and incurred on 

liabilities for the periods indicated. For most components of the average balances, we use a daily weighted average of 

amortized cost. When daily average balance information is not available, such as for mortgage loans, we use monthly 

averages. Table 7 displays the change in our net interest income between periods and the extent to which that variance is 

attributable to: (1) changes in the volume of our interest-earning assets and interest-bearing liabilities or (2) changes in the 

interest rates of these assets and liabilities.
17

Table 6: Analysis of Net Interest Income and Yield

For the Three Months Ended March 31,

2013 2012

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 . . . . . . . . . . . . . . . . . . . . . $ 345,077 $ 3,830 4.44 % $ 378,344 $ 3,569 3.77 %

Mortgage loans of consolidated trusts. . . . . . . . . . . . . . . . 2,669,149 25,394 3.81 2,600,221 29,001 4.46

Total mortgage loans(1)

. . . . . . . . . . . . . . . . . . . . . . . . . . 3,014,226 29,224 3.88 2,978,565 32,570 4.37

Mortgage-related securities. . . . . . . . . . . . . . . . . . . . . . . . 236,309 2,683 4.54 288,449 3,458 4.80

Elimination of Fannie Mae MBS held in retained

mortgage portfolio. . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(152,986) (1,797) 4.70 (186,214) (2,305) 4.95

Total mortgage-related securities, net. . . . . . . . . . . . . . . 83,323 886 4.25 102,235 1,153 4.51

Non-mortgage securities(2)

. . . . . . . . . . . . . . . . . . . . . . . . . 42,879 13 0.12 68,936 23 0.13

Federal funds sold and securities purchased under

agreements to resell or similar arrangements . . . . . . . . 69,804 27 0.15 37,485 13 0.14

Advances to lenders. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,085 30 1.97 5,050 25 1.96

Total interest-earning assets. . . . . . . . . . . . . . . . . . . . . . . . . . . $3,216,317 $30,180 3.75 % $3,192,271 $33,784 4.23 %

Interest-bearing liabilities:

Short-term debt(3)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 112,790 $ 42 0.15 % $ 133,307 $ 41 0.12 %

Long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 513,910 2,675 2.08 578,155 3,185 2.20

Total short-term and long-term funding debt . . . . . . . . . 626,700 2,717 1.73 711,462 3,226 1.81

Debt securities of consolidated trusts . . . . . . . . . . . . . . . . 2,754,427 22,956 3.33 2,666,552 27,666 4.15

Elimination of Fannie Mae MBS held in retained

mortgage portfolio. . . . . . . . . . . . . . . . . . . . . . . . . . . . . (152,986) (1,797) 4.70 (186,214) (2,305) 4.95

Total debt securities of consolidated trusts held by third

parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,601,441 21,159 3.25 2,480,338 25,361 4.09

Total interest-bearing liabilities. . . . . . . . . . . . . . . . . . . . . . . . $3,228,141 $23,876 2.96 % $3,191,800 $28,587 3.58 %

Net interest income/net interest yield . . . . . . . . . . . . . . . . . . . $ 6,304 0.78 % $ 5,197 0.65 %

Net interest income/net interest yield of consolidated trusts(4) 2,438 0.37 % 1,335 0.21 %

As of March 31,

2013 2012

Selected benchmark interest rates(5)

3-month LIBOR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.28 % 0.47 %

2-year swap rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.42 0.58

5-year swap rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.95 1.27

30-year Fannie Mae MBS par coupon rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.62 3.06

__________

(1) Includes mortgage loans on nonaccrual status. Interest income on nonaccrual mortgage loans is recognized when cash is received.

(2) Includes cash equivalents.

(3) Includes federal funds purchased and securities sold under agreements to repurchase.

(4) Net interest income of consolidated trusts represents interest income from mortgage loans of consolidated trusts less interest expense from 

debt securities of consolidated trusts. Net interest yield is calculated based on net interest income from consolidated trusts divided by 

average balance of mortgage loans of consolidated trusts. 

(5) Data from British Bankers’Association, Thomson Reuters Indices and Bloomberg L.P.
18

Table 7: Rate/Volume Analysis of Changes in Net Interest Income

For the Three Months Ended 

March 31, 2013 vs. 2012

Total Variance Due to:(1)

Variance Volume Rate

(Dollars in millions)

Interest income:

Mortgage loans of Fannie Mae . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 261 $ (332) $ 593

Mortgage loans of consolidated trusts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (3,607) 752 (4,359)

Total mortgage loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (3,346) 420 (3,766)

Total mortgage-related securities, net. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (267) (204) (63)

Non-mortgage securities(2)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (10) (8) (2)

Federal funds sold and securities purchased under agreements to resell or similar arrangements. . . . . 14 12 2

Advances to lenders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 5 —

Total interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (3,604) 225 (3,829)

Interest expense:

Short-term debt(3)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 (7) 8

Long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (510) (341) (169)

Total short-term and long-term funding debt. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (509) (348) (161)

Total debt securities of consolidated trusts held by third parties. . . . . . . . . . . . . . . . . . . . . . . . . . . . . (4,202) 1,281 (5,483)

Total interest expense. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (4,711) 933 (5,644)

Net interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,107 $ (708) $ 1,815

__________

(1) Combined rate/volume variances are allocated to both rate and volume based on the relative size of each variance.

(2) Includes cash equivalents.

(3) Includes federal funds purchased and securities sold under agreements to repurchase.

Net interest income increased in the first quarter of 2013, compared with the first quarter of 2012, primarily due to 

accelerated net amortization income on loans and debt of consolidated trusts, lower interest expense on funding debt, a 

reduction in the amount of interest income not recognized for nonaccrual mortgage loans, higher interest income on mortgage 

loans of Fannie Mae as a result of our resolution agreement with Bank of America and higher guaranty fees. These factors 

were partially offset by lower interest income on mortgage loans of Fannie Mae and securities. The primary drivers of these 

changes were:

• accelerated net amortization income related to mortgage loans and debt of consolidated trusts driven by a high 

volume of prepayments due to declining interest rates;

• higher interest income on mortgage loans of Fannie Mae as a result of our resolution agreement with Bank of 

America. Upon settlement of the resolution agreement in the first quarter of 2013, the basis adjustments on the 

loans repurchased by Bank of America were recognized into interest income;

• higher coupon interest income recognized on mortgage loans due to a reduction in the amount of interest income 

not recognized for nonaccrual mortgage loans. The balance of nonaccrual loans in our condensed consolidated 

balance sheet declined as we continued to complete a high number of loan workouts and foreclosures, and fewer 

loans became seriously delinquent;

• higher guaranty fees primarily due to the 10 basis point increase related to the TCCA, which increased guaranty 

fees on all single-family residential mortgages delivered to Fannie Mae starting on April 1, 2012. The incremental 

guaranty fees are remitted to Treasury and recorded in “Other expenses” in our condensed consolidated statements 

of operations and comprehensive income; and

• lower interest income on mortgage loans of Fannie Mae and mortgage securities due to lower mortgage rates and a 

decrease in their average balance, as we continue to manage our retained mortgage portfolio to the requirements of 

the senior preferred stock purchase agreement. This decrease in interest income was partially offset by lower 

interest expense on funding debt due to lower borrowing rates and funding needs, which allowed us to continue to 

replace higher-cost debt with lower-cost debt.
19

Net unamortized premiums on debt of consolidated trusts exceeded net unamortized premiums on the related mortgage loans 

by $19.8 billion as of March 31, 2013, compared with $16.8 billion as of December 31, 2012. These cost basis adjustments 

will be amortized as income over the contractual life of the underlying loans as a component of net interest income. 

The increase is primarily due to continued high refinancing volumes, which have significantly increased our portfolio 

securitization transactions.

We had $15.1 billion in net unamortized discounts and other cost basis adjustments on mortgage loans of Fannie Mae 

included in our condensed consolidated balance sheets as of March 31, 2013 compared with $15.8 billion as of December 31, 

2012. The extent to which we may record these discounts and other cost basis adjustments as income in future periods will be 

based on the actual performance of the loans.

Table 8 displays the interest income not recognized for loans on nonaccrual status and the resulting reduction in our net 

interest yield on total interest earning assets for the periods indicated.

Table 8: Impact of Nonaccrual Loans on Net Interest Income

For the Three Months Ended March 31, 

2013 2012

Interest 

Income not 

Recognized 

for

Nonaccrual 

Loans(1)

Reduction 

in Net 

Interest 

Yield(2)

Interest 

Income not 

Recognized 

for

Nonaccrual 

Loans(1)

Reduction 

in Net 

Interest 

Yield(2)

(Dollars in millions)

Mortgage loans of Fannie Mae . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (651) $ (982)

Mortgage loans of consolidated trusts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (112) (180)

Total mortgage loans. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (763) (10)bps $(1,162) (15)bps

__________

(1) Amount includes cash received for loans on nonaccrual status.

(2) Calculated based on annualized interest income not recognized divided by total interest-earning assets, expressed in basis points.

For a discussion of the interest income from the assets we have purchased and the interest expense from the debt we have 

issued, see the discussion of our Capital Markets group’s net interest income in “Business Segment Results.”

Fee and Other Income

Fee and other income includes transaction fees, technology fees and multifamily fees. Fee and other income increased in the 

first quarter of 2013 compared with the first quarter of 2012 primarily as a result of higher yield maintenance fees related to a 

large multifamily loan prepayment in the first quarter of 2013. 
20

Fair Value Gains, Net

Table 9 displays the components of our fair value gains and losses. 

Table 9: Fair Value Gains, Net

For the Three Months

Ended March 31,

2013 2012

(Dollars in millions)

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

Net contractual interest expense accruals on interest rate swaps . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (200) $ (374)

Net change in fair value during the period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 631 553

Total risk management derivatives fair value gains, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 431 179

Mortgage commitment derivatives fair value gains (losses), net. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 131 (205)

Total derivatives fair value gains (losses), net. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 562 (26)

Trading securities gains, net. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 396 284

Other, net(1)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (124) 25

Fair value gains, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 834 $ 283

2013 2012

5-year swap rate:

As of January 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.86% 1.22%

As of March 31 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.95% 1.27% 

__________

(1) Consists of debt fair value gains (losses), net; debt foreign exchange gains (losses), net; and mortgage loans fair value gains (losses), 

net.

We can expect high levels of period-to-period volatility in our results of operations and financial condition due to changes in 

market conditions that result in periodic fluctuations in the estimated fair value of financial instruments that we mark to 

market through our earnings. These instruments include trading securities and derivatives. The estimated fair value of our 

trading securities and derivatives may fluctuate substantially from period to period because of changes in interest rates, credit 

spreads and interest rate volatility, as well as activity related to these financial instruments. While the estimated fair value of 

our derivatives that serve to 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.

Risk Management Derivatives Fair Value Gains, Net

Risk management derivative instruments are an integral part of our interest rate risk management strategy. We supplement 

our issuance of debt securities with derivative instruments to further reduce duration risk, which includes prepayment risk. 

We recognized risk management derivative fair value gains in the first quarter of 2013 and 2012 primarily as a result of 

increases in the fair value of our pay-fixed derivatives due to increases in swap rates during the periods. Risk management 

derivative gains in the first quarter of 2013 were greater than the gains in the first quarter of 2012, primarily due to larger 

increases in swap rates in the first quarter of 2013 compared with the first quarter of 2012.

We present, by derivative instrument type, the fair value gains and losses on our derivatives for the three months ended 

March 31, 2013 and 2012 in “Note 9, Derivative Instruments.”

Mortgage Commitment Derivatives Fair Value Gains (Losses), Net

We recognized fair value gains on our mortgage commitments in the first quarter of 2013 primarily due to gains on 

commitments to sell mortgage-related securities as a result of a decrease in prices as interest rates increased during the 

commitment period. We recognized fair value losses on our mortgage commitments in the first quarter of 2012 primarily due 

to losses on commitments to sell mortgage-related securities as a result of an increase in prices as interest rates decreased 

during the commitment period. 
21

Trading Securities Gains, Net

Gains from our trading securities in the first quarter of 2013 were primarily driven by higher prices on Alt-A and subprime 

private label securities, primarily due to the narrowing of credit spreads on these securities as well as an improvement in the 

credit outlook of certain financial guarantors of these securities. Gains from trading securities in the first quarter of 2012 were 

primarily due to the narrowing of credit spreads on commercial mortgage-backed securities (“CMBS”).

Credit-Related (Income) Expenses

We refer to our (benefit) provision for loan losses and guaranty losses collectively as our “(benefit) provision for credit 

losses.” Credit-related (income) expenses consist of our (benefit) provision for credit losses and foreclosed property (income) 

expense.

Benefit (Provision) for Credit Losses

Our total loss reserves provide for an estimate of credit losses incurred in our guaranty book of business, including 

concessions we granted borrowers upon modification of their loans, as of each balance sheet date. We establish our loss 

reserves through our provision for credit losses for losses that we believe have been incurred and will eventually be reflected 

over time in our charge-offs. When we determine that a loan is uncollectible, typically upon foreclosure, we record a chargeoff against our loss reserves. We record recoveries of previously charged-off amounts as a reduction to charge-offs.

Table 10 displays the components of our total loss reserves and our total fair value losses previously recognized on loans 

purchased out of unconsolidated MBS trusts reflected in our condensed consolidated balance sheets. Because these fair value 

losses lowered our recorded loan balances, we have fewer inherent losses in our guaranty book of business and consequently 

require lower total loss reserves. For these reasons, we consider these fair value losses as an “effective reserve,” apart from 

our total loss reserves, to the extent that we expect to realize these amounts as credit losses on the acquired loans in the 

future. The fair value losses shown in Table 10 represent credit losses we expect to realize in the future or amounts that will 

eventually be recovered, either through net interest income for loans that cure or through foreclosed property income for 

loans where the sale of the collateral exceeds our recorded investment in the loan. We exclude these fair value losses from our 

credit loss calculation as described in “Credit Loss Performance Metrics.”

Table 10: Total Loss Reserves

As of

March 31,

2013

December 31,

2012

(Dollars in millions)

Allowance for loan losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 56,461 $58,795

Reserve for guaranty losses(1)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,203 1,231

Combined loss reserves . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57,664 60,026

Allowance for accrued interest receivable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,602 1,737

Allowance for preforeclosure property taxes and insurance receivable(2)

. . . . . . . . . . . . . . . . . . . . 903 866

Total loss reserves . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60,169 62,629

Fair value losses previously recognized on acquired credit-impaired loans(3)

. . . . . . . . . . . . . . . . . 12,762 13,694

Total loss reserves and fair value losses previously recognized on acquired creditimpaired loans. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 72,931 $76,323

__________

(1) Amount included in “Other liabilities” in our condensed consolidated balance sheets.

(2) Amount included in “Other assets” in our condensed consolidated balance sheets.

(3) Represents the fair value losses on loans purchased out of unconsolidated MBS trusts reflected in our condensed consolidated balance 

sheets.

The following table displays changes in the total allowance for loan losses, reserve for guaranty losses and the total combined 

loss reserves for the periods indicated.
22

Table 11: Allowance for Loan Losses and Reserve for Guaranty Losses (Combined Loss Reserves)

For the Three Months 

Ended March 31,

2013 2012

(Dollars in millions)

Changes in combined loss reserves:

Allowance for loan losses:

Beginning balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 58,795 $ 72,156

(Benefit) provision for loan losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (984) 1,980

Charge-offs(1)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2,720) (4,796)

Recoveries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,272 486

Other(2)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98 283

Ending balance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 56,461 $ 70,109

Reserve for guaranty losses:

Beginning balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,231 $ 994

Provision for guaranty losses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 20

Charge-offs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (56) (51)

Recoveries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 34

Ending balance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,203 $ 997

Combined loss reserves:

Beginning balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 60,026 $ 73,150

Total (benefit) provision for credit losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (957) 2,000

Charge-offs(1)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2,776) (4,847)

Recoveries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,273 520

Other(2)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98 283

Ending balance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 57,664 $ 71,106

As of

March 31,

2013

December 31,

2012

(Dollars in millions)

Allocation of combined loss reserves:

Balance at end of each period attributable to:

Single-family. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 56,626 $ 58,809

Multifamily . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,038 1,217

Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 57,664 $ 60,026

Single-family and multifamily combined loss reserves as a percentage of applicable

guaranty book of business:

Single-family. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.00% 2.08%

Multifamily . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.51 0.59

Combined loss reserves as a percentage of:

Total guaranty book of business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.90% 1.97%

Recorded investment in nonperforming loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23.99 23.92

_________

(1) Includes accrued interest of $115 million and $273 million for the three months ended March 31, 2013 and 2012, respectively.

(2) Amounts represent the net activity recorded in our allowances for accrued interest receivable and preforeclosure property taxes and 

insurance receivable from borrowers. The provision for credit losses, charge-offs, recoveries and transfer activity included in this table 
23

reflects all changes for both the allowance for loan losses and the valuation allowances for accrued interest and preforeclosure property 

taxes and insurance receivable that relate to the mortgage loans.

Our provision, and in some cases benefit, for credit losses continues to be a key driver of our results for each period 

presented. The amount of our provision for credit losses varies from period to period based on changes in actual and expected 

home prices, borrower payment behavior, the types and volumes of loss mitigation activities and foreclosures completed, and 

actual and estimated recoveries from our lender and mortgage insurer counterparties. See “Risk Management—Credit Risk 

Management—Institutional Counterparty Credit Risk Management” for information on mortgage insurers and outstanding 

mortgage seller/servicer repurchase obligations. In addition, our provision for credit losses and our loss reserves can be 

impacted by updates to our allowance for loan loss models that we use to estimate our loss reserves.

We recognized a benefit for credit losses of $957 million in the first quarter of 2013 compared with a provision for credit 

losses of $2.0 billion in the first quarter of 2012. This result was driven by an increase in home prices, including the sales 

prices of our REO properties in the first quarter of 2013, and lower single-family delinquency rates. Home prices increased in 

the first quarter of 2013, which decreases the likelihood that loans will default and reduces the amount of credit losses on 

loans that default. Sales prices on dispositions of our REO properties improved in the first quarter of 2013 as a result of 

strong demand compared with the prior year. We received net proceeds from our REO sales equal to 65% of the loans’ unpaid 

principal balance in the first quarter of 2013, compared with 56% in the first quarter of 2012. The increase in sales prices 

contributed to a reduction in the single-family initial charge-off severity rate to 27.18% for the first quarter of 2013 from 

33.43% for the first quarter of 2012. The decrease in our charge-off severity rate indicates a lower amount of credit loss at 

foreclosure and, accordingly, a lower provision for credit loss.

The number of seriously delinquent loans declined 19% to approximately 528,000 as of March 31, 2013 from approximately 

651,000 as of March 31, 2012 and the number of early stage delinquent loans declined 7% to approximately 392,000 as of 

March 31, 2013 from approximately 419,000 as of March 31, 2012. The reduction in the number of delinquent loans is due, 

in part, to our efforts since 2009 to improve our underwriting standards and the credit quality of our single-family guaranty 

book of business, which has resulted in a decrease in the number of loans becoming delinquent. A decline in the number of 

loans becoming delinquent or seriously delinquent reduces our total loss reserves and provision for credit losses.

We discuss our expectations regarding our future loss reserves in “Executive Summary—Outlook—Loss Reserves.”

Nonperforming Loans

Our balance of nonperforming single-family loans remained high as of March 31, 2013 due to high levels of loans modified 

as TDRs. When a TDR occurs, the loan may return to a current status, but it will continue to be classified as a nonperforming 

loan as the loan is not performing in accordance with its original terms. Table 12 displays the composition of our 

nonperforming loans, which includes our single-family and multifamily held-for-investment and held-for-sale mortgage 

loans. For information on the impact of TDRs and other individually impaired loans on our allowance for loan losses, see 

“Note 3, Mortgage Loans.” 

Table 12: Nonperforming Single-Family and Multifamily Loans

As of

March 31,

2013

December 31,

2012

(Dollars in millions)

On-balance sheet nonperforming loans including loans in consolidated Fannie Mae MBS

trusts:

Nonaccrual loans. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 105,204 $ 114,761

TDRs on accrual status . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 135,079 136,064

Total on-balance sheet nonperforming loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 240,283 250,825

Off-balance sheet nonperforming loans in unconsolidated Fannie Mae MBS trusts(1)

. . . . . . . . 61 72

Total nonperforming loans. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 240,344 250,897

Allowance for loan losses and allowance for accrued interest receivable related to

individually impaired on-balance sheet nonperforming loans. . . . . . . . . . . . . . . . . . . . . . . . (45,479) (45,776)

Total nonperforming loans, net of allowance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 194,865 $ 205,121

Accruing on-balance sheet loans past due 90 days or more(2)

. . . . . . . . . . . . . . . . . . . . . . . . . . . $ 768 $ 3,580
24

For the Three Months Ended

March 31,

2013 2012

(Dollars in millions)

Interest related to on-balance sheet nonperforming loans:

Interest income forgone(3)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,998 $ 2,300

Interest income recognized for the period(4)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,451 1,433

__________

(1) Represents loans that would meet our criteria for nonaccrual status if the loans had been on-balance sheet.

(2) Recorded investment in loans that, as of the end of each period, are 90 days or more past due and continuing to accrue interest. As of 

December 31, 2012, includes loans with a recorded investment of $2.8 billion which were repurchased in January 2013 pursuant to our 

resolution agreement with Bank of America. These loans were returned to accrual status to reflect the change in our assessment of 

collectibility resulting from this agreement. Also includes 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.

(3) Represents the amount of interest income we did not record but would have recorded during the period for on-balance sheet 

nonperforming loans as of the end of each period had the loans performed according to their original contractual terms.

(4) Represents interest income recognized during the period for on-balance sheet loans classified as nonperforming as of the end of each 

period. Primarily includes amounts accrued while the loans were performing and cash payments received on nonaccrual loans.

Foreclosed Property (Income) Expense 

We recognized foreclosed property income of $260 million in the first quarter of 2013 compared with recording foreclosed 

property expense of $339 million in the first quarter of 2012 primarily due to improved sales prices on dispositions of our 

REO properties, resulting from strong demand in markets with limited REO supply. Additionally, we recognized foreclosed 

property income resulting from cash received under the terms of the resolution agreements with Bank of America and GMAC 

in the first quarter of 2013 related to previously charged off loans. See “MD&A—Risk Management—Credit Risk 

Management—Institutional Counterparty Credit Risk Management” and “Note 20, Subsequent Events” in our 2012 Form 10-

K for additional information on these agreements.

Credit Loss Performance Metrics

Our credit-related (income) expenses should be considered in conjunction with our credit loss performance metrics. Our 

credit loss performance metrics, however, are not defined terms within GAAP and may not be calculated in the same manner 

as similarly titled measures reported by other companies. Because management does not view changes in the fair value of our 

mortgage loans as credit losses, we adjust our credit loss performance metrics for the impact associated with our acquisition 

of credit-impaired loans from unconsolidated MBS trusts. We also exclude interest forgone on nonperforming loans, otherthan-temporary impairment losses resulting from deterioration in the credit quality of our mortgage-related securities and 

accretion of interest income on acquired credit-impaired loans from credit losses. We believe that credit loss performance 

metrics may be useful to investors as the losses are presented as a percentage of our book of business and have historically 

been used by analysts, investors and other companies within the financial services industry. Moreover, by presenting credit 

losses with and without the effect of fair value losses associated with the acquisition of credit-impaired loans, investors are 

able to evaluate our credit performance on a more consistent basis among periods. Table 13 displays the components of our 

credit loss performance metrics as well as our average single-family and multifamily default rates and initial charge-off 

severity rates. 
25

Table 13: Credit Loss Performance Metrics

For the Three Months Ended March 31,

2013 2012

Amount Ratio(1) Amount Ratio(1)

(Dollars in millions)

Charge-offs, net of recoveries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,503 19.8 bps $4,327 56.8 bps

Foreclosed property (income) expense. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (260) (3.4) 339 4.5

Credit losses including the effect of fair value losses on acquired credit-impaired loans . 1,243 16.4 4,666 61.3

Plus: Impact of acquired credit-impaired loans on charge-offs and foreclosed property 

expense(2)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 255 3.4 425 5.6

Credit losses and credit loss ratio. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,498 19.8 bps $5,091 66.9 bps

Credit losses attributable to:

Single-family. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,503 $4,955

Multifamily . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (5) 136

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,498 $5,091

Single-family default rate. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.32 % 0.41 %

Single-family initial charge-off severity rate(3)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27.18 % 33.43 %

Average multifamily default rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.03 % 0.15 %

Average multifamily initial charge-off severity rate(3)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . 34.49 % 43.95 %

__________

(1) Basis points are based on the annualized amount for each line item presented divided by the average guaranty book of business during 

the period.

(2) Includes fair value losses from acquired credit-impaired loans.

(3) Single-family and multifamily rates exclude fair value losses on credit-impaired loans acquired from MBS trusts and any costs, gains or 

losses associated with REO after initial acquisition through final disposition; single-family rate excludes charge-offs from short sales 

and third-party sales.

Credit losses decreased in the first quarter of 2013 compared with the first quarter of 2012 primarily due to improved sales 

prices of our REO properties and lower REO acquisitions primarily driven by lower delinquencies in 2013. In addition, 

during the first quarter of 2013, we entered into agreements with Bank of America and GMAC relating to repurchase requests 

that resulted in recoveries of previously charged off loans. See “MD&A—Risk Management—Credit Risk Management—

Institutional Counterparty Credit Risk Management” and “Note 20, Subsequent Events” in our 2012 Form 10-K for 

additional information on these agreements.

The slow pace of foreclosures has continued to impact the amount of charge-offs for the periods presented and we expect 

delays in foreclosures to continue for the remainder of 2013, which will postpone our realization of credit losses. Despite the 

slow pace of foreclosures, we expect our credit losses to remain elevated in 2013 relative to pre-housing crisis levels. 

Our new single-family book of business accounted for approximately 6% of our single-family credit losses for the first 

quarter of 2013 compared with 3% of these losses for the first quarter of 2012. Credit losses on mortgage loans typically do 

not peak until the third through sixth years following origination; however, this range can vary based on many factors, 

including changes in macroeconomic conditions and foreclosure timelines. We provide more detailed credit performance 

information, including serious delinquency rates by geographic region and foreclosure activity, in “Risk Management—

Credit Risk Management—Mortgage Credit Risk Management.”

Regulatory Hypothetical Stress Test Scenario

Under a September 2005 agreement with FHFA’s predecessor, the Office of Federal Housing Enterprise Oversight, we are 

required to disclose on a quarterly basis the present value of the change in future expected credit losses from our existing 

single-family guaranty book of business from an immediate 5% decline in single-family home prices for the entire United 

States followed by a return to the average of the possible growth rate paths used in our internal credit pricing models. The 

sensitivity results represent the difference between future expected credit losses under our base case scenario, which is 

derived from our internal home price path forecast, and a scenario that assumes an instantaneous nationwide 5% decline in 

home prices.
26

Table 14 displays the credit loss sensitivities as of the dates indicated for first-lien single-family loans that are in our retained 

mortgage portfolio or underlying Fannie Mae MBS, before and after consideration of projected credit risk sharing proceeds, 

such as private mortgage insurance claims and other credit enhancements.

Table 14: Single-Family Credit Loss Sensitivity(1)

As of

March 31,

2013

December 31,

2012

(Dollars in millions)

Gross single-family credit loss sensitivity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 14,680 $ 13,508

Less: Projected credit risk sharing proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,457) (2,206)

Net single-family credit loss sensitivity. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 13,223 $ 11,302

Single-family loans in our retained mortgage portfolio and loans underlying Fannie Mae MBS. $ 2,768,644 $ 2,765,460

Single-family net credit loss sensitivity as a percentage of outstanding single-family loans in

our retained mortgage portfolio and Fannie Mae MBS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.48% 0.41%

__________

(1) Represents total economic credit losses, which consist of credit losses and forgone interest. Calculations are based on 98% of our total 

single-family guaranty book of business as of March 31, 2013 and December 31, 2012. The mortgage loans and mortgage-related 

securities that are included in these estimates consist of: (a) single-family Fannie Mae MBS (whether held in our retained mortgage 

portfolio or held by third parties), excluding certain whole loan REMICs and private-label wraps; (b) single-family mortgage loans, 

excluding mortgages secured only by second liens, subprime mortgages, manufactured housing chattel loans and reverse mortgages; 

and (c) long-term standby commitments. We expect the inclusion in our estimates of the excluded products may impact the estimated 

sensitivities set forth in this table.

Because these sensitivities represent hypothetical scenarios, they should be used with caution. Our regulatory stress test 

scenario is limited in that it assumes an instantaneous uniform 5% nationwide decline in home prices, which is not 

representative of the historical pattern of changes in home prices. Changes in home prices generally vary on a regional, as 

well as a local, basis. In addition, these stress test scenarios are calculated independently without considering changes in 

other interrelated assumptions, such as unemployment rates or other economic factors, which are likely to have a significant 

impact on our future expected credit losses.

Federal Income Taxes 

We recognized a benefit for federal income taxes of $50.6 billion in the first quarter of 2013 due to the release of the 

substantial majority of the valuation allowance against our deferred tax assets. We did not recognize a provision or benefit for 

income taxes in the first quarter of 2012. We discuss the factors that led us to release our valuation allowance against our 

deferred tax assets in “Critical Accounting Policies and Estimates—Deferred Tax Assets” and “Note 10, Income Taxes.”
27

BUSINESS SEGMENT RESULTS

Results of our three business segments are intended to reflect each segment as if it were a stand-alone business. Under our 

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

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

segments. In addition, because we apply accounting methods that differ from our condensed consolidated results for segment 

reporting purposes, we include an eliminations/adjustments category to reconcile our business segment results and the 

activity related to our consolidated trusts to our condensed consolidated results of operations. We describe the management 

reporting and allocation process used to generate our segment results in “Note 13, Segment Reporting” in our 2012 Form 10-

K.

In this section, we summarize our segment results for the first quarter of 2013 and 2012 in the tables below and provide a 

comparative discussion of these results. This section should be read together with our comparative discussion of our 

condensed consolidated results of operations in “Consolidated Results of Operations.” See “Note 12, Segment Reporting” for 

a reconciliation of our segment results to our condensed consolidated results.

During the first quarter of 2013, we released the substantial majority of our valuation allowance against our deferred tax 

assets, except for the portion of the valuation allowance that pertains to our capital loss carryforwards. This resulted in a 

significant benefit for income taxes during the first quarter of 2013. See “Critical Accounting Policies and Estimates—

Deferred Tax Assets” and “Note 10, Income Taxes” for additional information regarding the factors that led to our conclusion 

to release the valuation allowance against our deferred tax assets. The benefit for income taxes allocated to each business 

segment represents the release of the valuation allowance against deferred tax assets that primarily are directly attributable to 

that segment based on the nature of the item.

Single-Family Business Results

Table 15 displays the financial results of our Single-Family business for the periods indicated. For a discussion on SingleFamily credit risk management, including information on serious delinquency rates and loan workouts, see “Risk 

Management—Credit Risk Management—Single-Family Mortgage Credit Risk Management.” The primary source of 

revenue for our Single-Family business is guaranty fee income. Expenses and other items that impact income or loss 

primarily include credit-related income (expenses), net interest income (loss) and administrative expenses.

Table 15: Single-Family Business Results

For the Three Months Ended March 31,

2013 2012 Variance

(Dollars in millions)

Net interest income (loss)(1)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 520 $ (379) $ 899

Guaranty fee income(2)(3)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,375 1,911 464

Credit-related income (expenses)(4)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,034 (2,385) 3,419

Other expenses(3)(5)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (608) (415) (193)

Income (loss) before federal income taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,321 (1,268) 4,589

Benefit for federal income taxes(6)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31,578 — 31,578

Net income (loss) attributable to Fannie Mae. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 34,899 $ (1,268) $36,167

Other key performance data:

Single-family effective guaranty fee rate (in basis points)(3)(7)

. . . . . . . . . . . . . . . . . . . . 33.5 26.8

Single-family average charged guaranty fee on new acquisitions (in basis points)(3)(8)

. 54.4 28.9

Average single-family guaranty book of business(9)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . $2,834,490 $2,850,007

Single-family Fannie Mae MBS issuances(10)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 221,865 $ 196,755
28

__________

(1) Primarily includes the cost to reimburse the Capital Markets group for interest income not recognized for loans in our retained 

mortgage portfolio on nonaccrual status, the cost to reimburse MBS trusts for interest income not recognized for loans in consolidated 

trusts on nonaccrual status and income from cash payments received on loans that have been placed on nonaccrual status.

(2) Guaranty fee income is included in fee and other income in our condensed consolidated statements of operations and comprehensive 

income.

(3) Pursuant to the TCCA, effective April 1, 2012, we increased the guaranty fee on all single-family residential mortgages delivered to us 

on or after that date for securitization by 10 basis points, and the incremental revenue must be remitted to Treasury. The resulting 

revenue is included in guaranty fee income and the expense is included in other expenses. This increase in guaranty fee is also included 

in the single-family charged guaranty fee.

(4) Consists of the benefit (provision) for credit losses and foreclosed property income (expense).

(5) Consists of investment gains, net, fair value losses, net, fee and other income, administrative expenses and other expenses.

(6) The 2013 benefit represents the release of the substantial majority of our valuation allowance against the portion of our deferred tax 

assets that we attribute to our single-family segment based on the nature of the item.

(7) Calculated based on annualized Single-Family segment guaranty fee income divided by the average single-family guaranty book of 

business, expressed in basis points.

(8) Calculated based on the average contractual fee rate for our single-family guaranty arrangements entered into during the period plus the 

recognition of any upfront cash payments ratably over an estimated average life, expressed in basis points.

(9) Consists of single-family mortgage loans held in our retained mortgage portfolio, single-family mortgage loans held by consolidated 

trusts, single-family Fannie Mae MBS issued from unconsolidated trusts held by either third parties or within our retained mortgage 

portfolio and other credit enhancements that we provide on single-family mortgage assets. Excludes non-Fannie Mae mortgage-related 

securities held in our retained mortgage portfolio for which we do not provide a guaranty.

(10) Reflects unpaid principal balance of Fannie Mae MBS issued and guaranteed by the Single-Family segment during the period.

Pre-tax income in the first quarter of 2013 compared with pre-tax loss in the first quarter of 2012 was primarily due to creditrelated income in the first quarter of 2013 compared with credit-related expenses in the first quarter of 2012, driven primarily 

by a significant improvement in the profile of our single-family book of business resulting from an increase in actual home 

prices, including the sales prices of our REO properties in the first quarter of 2013, and lower single-family delinquency 

rates. Our single-family credit-related income represents the substantial majority of our consolidated activity. We provide a 

discussion of our credit-related income (expenses) and credit losses in “Consolidated Results of Operations—Credit-Related 

(Income) Expenses.”

Net interest income in the first quarter of 2013 compared with net interest loss in the first quarter of 2012 was primarily due 

to a reduction in the amount of interest income not recognized for nonaccrual mortgage loans in our condensed consolidated 

balance sheets as we continued to complete a high number of loan workouts and foreclosures. In addition, as loans with 

stronger credit profiles become a larger portion of our single-family guaranty book of business, a smaller percentage of our 

loans are becoming seriously delinquent. Net interest income during the first quarter of 2013 was positively impacted by our 

resolution agreement with Bank of America, which resulted in the recovery of unamortized cost basis adjustments on the 

loans repurchased by Bank of America. See “Note 20, Subsequent Events” in our 2012 Form 10-K for additional information 

on this agreement.

Guaranty fee income increased in the first quarter of 2013 compared with the first quarter of 2012 due to the impact of price 

increases and higher amortization income on risk-based fees. As described in “Business—Legislative and Regulatory 

Developments—Changes to Our Single-Family Guaranty Fee Pricing and Revenue” in our 2012 Form 10-K, in December 

2011, Congress enacted the 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, rather than retaining the incremental revenue. Effective April 1, 

2012, the guaranty fee on all single-family residential mortgages delivered to Fannie Mae and Freddie Mac on or after that 

date for securitization was increased by 10 basis points; accordingly, the single-family average charged guaranty fee 

increased. The resulting revenue is included in guaranty fee income, and the expense is included in other expenses. We 

recorded other expenses of $186 million for the first quarter of 2013 for this obligation due to Treasury. We expect the 

guaranty fees collected and expenses incurred to increase in the future.

Net income in the first quarter of 2013 included a benefit for federal income taxes that represents the release of the substantial 

majority of the valuation allowance against the portion of our deferred tax assets that we attributed to our single-family 

segment. Those assets primarily related to the allowance for loan losses and guaranty fee income.

The increase in the single-family average charged guaranty fee on new acquisitions in the first quarter of 2013 compared with 

the first quarter of 2012 was primarily due to the 10 basis point TCCA increase noted above, which is remitted to Treasury, 
29

and an additional average increase of 10 basis points implemented during the fourth quarter of 2012. These increases in our 

guaranty fee pricing may help to encourage greater investment by banks and other investors in mortgage loans and mortgagerelated securities, which is one of the goals set forth in FHFA’s strategic plan, as well as to more appropriately price for the 

credit risk taken. We expect that any future increases to guaranty fee pricing will further increase our guaranty fee revenue.

Our estimated market share of new single-family mortgage-related securities issuances, which excludes previously 

securitized mortgages, remained high at 48% for the first quarter of 2013. Despite our continued high market share, our 

average single-family guaranty book of business remained flat in the first quarter of 2013 compared with the first quarter of 

2012, primarily due to the decline in U.S. residential mortgage debt outstanding. 

Multifamily Business Results

Multifamily business results primarily reflect our multifamily guaranty business. Our multifamily business results also 

include activity relating to our low-income housing tax credit (“LIHTC”) and equity investments. Although we are no longer 

making new LIHTC or equity investments, we continue to make contractually required contributions for our legacy 

investments. Activity from multifamily products is also reflected in the Capital Markets group results, which include net 

interest income related to multifamily loans and securities, gains and losses from the sale of multifamily Fannie Mae MBS 

and re-securitizations and other miscellaneous income.

Table 16 displays the financial results of our Multifamily business for the periods indicated. The primary sources of revenue 

for our multifamily business are guaranty fee income and fee and other income. Expenses and other items that impact income 

or loss primarily include credit-related income and administrative expenses.

Table 16: Multifamily Business Results

For the Three Months Ended March 31,

2013 2012 Variance

(Dollars in millions)

Guaranty fee income(1)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 291 $ 243 $ 48

Fee and other income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51 47 4

Gains from partnership investments(2)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59 11 48

Credit-related income(3)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 183 46 137

Other expenses(4)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (73) (68) (5)

Income before federal income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 511 279 232

Benefit for federal income taxes(5)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,988 — 7,988

Net income attributable to Fannie Mae. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 8,499 $ 279 $8,220

Other key performance data:

Multifamily effective guaranty fee rate (in basis points)(6)

. . . . . . . . . . . . . . . . . . . . . . . . . 56.6 49.6

Average multifamily guaranty book of business(7)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 205,800 $ 196,019

Multifamily new business volumes(8)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 8,216 $ 7,159

Multifamily units financed from new business volumes . . . . . . . . . . . . . . . . . . . . . . . . . . 143,000 117,000

Multifamily Fannie Mae MBS issuances(9)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 9,074 $ 8,851

Multifamily Fannie Mae structured securities issuances (issued by Capital Markets 

group) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,236 $ 2,238

Additional net interest income earned on Fannie Mae multifamily mortgage loans and 

MBS (included in Capital Markets group’s results)(10)

. . . . . . . . . . . . . . . . . . . . . . . . . . $ 198 $ 204

Average Fannie Mae multifamily mortgage loans and MBS in Capital Markets group’s 

mortgage portfolio(11)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 85,715 $ 103,989
30

As of

March 31,

2013

December 31,

2012

(Dollars in millions)

Multifamily serious delinquency rate. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.39 % 0.24 %

Percentage of multifamily guaranty book of business with credit enhancement. . . . . . . . . . 90 % 90 %

Multifamily Fannie Mae MBS outstanding(12)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $134,985 $128,477

__________

(1) Guaranty fee income is included in fee and other income in our condensed consolidated statements of operations and comprehensive 

income.

(2) Gains from partnership investments are included in other expenses in our condensed consolidated statements of operations and 

comprehensive income. Gains from partnership investments are reported using the equity method of accounting. As a result, net income 

attributable to noncontrolling interest from partnership investments is not included in income for the Multifamily segment.

(3) Consists of the benefit for credit losses and foreclosed property income (expense).

(4) Consists of net interest loss, investment gains, administrative expenses and other income (expenses).

(5) The 2013 benefit represents the release of the substantial majority of our valuation allowance against the portion of our deferred tax 

assets that we attribute to our multifamily segment based on the nature of the item.

(6) Calculated based on annualized Multifamily segment guaranty fee income divided by the average multifamily guaranty book of 

business, expressed in basis points.

(7) Consists of multifamily mortgage loans held in our retained mortgage portfolio, multifamily mortgage loans held by consolidated trusts, 

multifamily Fannie Mae MBS issued from unconsolidated trusts and other credit enhancements that we provide on multifamily 

mortgage assets. Excludes non-Fannie Mae mortgage-related securities held in our retained mortgage portfolio for which we do not 

provide a guaranty.

(8) Reflects unpaid principal balance of multifamily Fannie Mae MBS issued (excluding portfolio securitizations) and multifamily loans 

purchased during the period.

(9) Reflects unpaid principal balance of multifamily Fannie Mae MBS issued during the period. Includes (a) issuances of new MBS, 

(b) Fannie Mae portfolio securitization transactions of $825 million and $1.6 billion for the three months ended March 31, 2013 and 

2012, respectively, and (c) conversions of adjustable-rate loans to fixed-rate loans and discount MBS (“DMBS”) to MBS of $44 million

and $163 million for the three months ended March 31, 2013 and 2012, respectively.

(10) Interest expense estimate is based on allocated duration-matched funding costs. Net interest income was reduced by guaranty fees 

allocated to Multifamily from the Capital Markets Group on multifamily loans in Fannie Mae’s retained mortgage portfolio.

(11) Based on unpaid principal balance.

(12) Includes $27.3 billion and $28.1 billion of Fannie Mae multifamily MBS held in the retained mortgage portfolio, the vast majority of 

which have been consolidated to loans in our condensed consolidated balance sheets, as of March 31, 2013 and December 31, 2012, 

respectively, and $1.3 billion of Fannie Mae MBS collateralized by bonds issued by state and local housing finance agencies as of 

March 31, 2013 and December 31, 2012, respectively.

Pre-tax income increased in the first quarter of 2013 compared with the first quarter of 2012, primarily due to increased 

credit-related income, increased guaranty fee income and increased gains from partnership investments.

Credit-related income increased in the first quarter of 2013 compared with the first quarter of 2012, primarily due to 

improvements in the sales prices of our REO properties and reductions to our total loss reserves resulting from an 

improvement in national multifamily market fundamentals.

Guaranty fee income increased in the first quarter of 2013 compared with the first quarter of 2012 as we continue to acquire 

loans with higher guaranty fees. Loans with higher guaranty fees have become a larger part of our multifamily guaranty book 

of business, while loans with lower guaranty fees continue to liquidate.

Gains from partnership investments increased in the first quarter of 2013 compared with the first quarter of 2012 as stronger 

national multifamily market fundamentals resulted in improved property-level operating performance and increased gains on 

the sale of investments.

Net income in the first quarter of 2013 included a benefit for federal income taxes that represents the release of the substantial 

majority of the valuation allowance against the portion of our deferred tax assets that we attributed to our multifamily 

segment. Those assets primarily related to partnership and other equity investment losses and credits.

We remain a constant source of liquidity in the multifamily market. We owned or guaranteed approximately 22% of the 

outstanding debt on multifamily properties as of December 31, 2012 (the latest date for which information is available).
31

Capital Markets Group Results

Table 17 displays the financial results of our Capital Markets group for the periods indicated. Following the table we discuss 

the Capital Markets group’s financial results and describe the Capital Markets group’s mortgage portfolio. For a discussion of 

the debt issued by the Capital Markets group to fund its investment activities, see “Liquidity and Capital Management.” For a 

discussion of the derivative instruments that the Capital Markets group uses to manage interest rate risk, see “Risk 

Management—Market Risk Management, Including Interest Rate Risk Management—Derivative Instruments” in our 2012 

Form 10-K and “Note 9, Derivative Instruments” in this report and our 2012 Form 10-K. The primary sources of revenue for 

our Capital Markets group are net interest income and fee and other income. Expenses and other items that impact income or 

loss primarily include fair value gains, investment gains, allocated guaranty fee expense and administrative expenses.

Table 17: Capital Markets Group Results

For the Three Months Ended March 31,

2013 2012 Variance

(Dollars in millions)

Net interest income(1)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,742 $ 3,541 $ (799)

Investment gains, net(2)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,349 1,007 342

Fair value gains, net(3)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 875 170 705

Fee and other income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 349 180 169

Other expenses(4)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (435) (594) 159

Income before federal income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,880 4,304 576

Benefit for federal income taxes(5)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,005 — 11,005

Net income attributable to Fannie Mae . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $15,885 $ 4,304 $11,581

__________

(1) Includes contractual interest income, excluding recoveries, on nonaccrual loans received from the Single-Family segment of $1.1 

billion and $1.4 billion for the three months ended March 31, 2013 and 2012, respectively. The Capital Markets group’s net interest 

income is reported based on the mortgage-related assets held in the segment’s retained mortgage portfolio and excludes interest income 

on mortgage-related assets held by consolidated MBS trusts that are owned by third parties and the interest expense on the 

corresponding debt of such trusts.

(2) We include the securities that we own regardless of whether the trust has been consolidated in reporting of gains and losses on 

securitizations and sales of available-for-sale securities.

(3) Includes fair value gains or losses on derivatives and trading securities that we own, regardless of whether the trust has been 

consolidated.

(4) Includes allocated guaranty fee expense, debt extinguishment losses, net, administrative expenses, net other-than-temporary 

impairments and other income (expenses). Gains or losses related to the extinguishment of debt issued by consolidated trusts are 

excluded from the Capital Markets group’s results because purchases of securities are recognized as such.

(5) The 2013 benefit represents the release of the substantial majority of our valuation allowance against the portion of our deferred tax 

assets that we attribute to our Capital Markets group based on the nature of the item. 

Pre-tax income increased in the first quarter of 2013 compared with the first quarter of 2012 primarily due to increased fair 

value gains and increased investment gains, partially offset by a decrease in net interest income. 

Fair value gains increased in the first quarter of 2013 compared with the first quarter of 2012 primarily due to derivatives fair 

value gains in the first quarter of 2013 compared with derivatives fair value losses in the first quarter of 2012. The derivatives 

fair value gains and losses that are reported for the Capital Markets group are consistent with the gains and losses reported in 

our condensed consolidated statements of operations and comprehensive income. We discuss our derivatives fair value gains 

in “Consolidated Results of Operations—Fair Value Gains, Net.”

Investment gains increased in the first quarter of 2013 compared with the first quarter of 2012 primarily due to a higher 

volume of portfolio securitizations. In the first quarter of 2013, the continuation of low mortgage rates and high acquisitions 

of HARP loans contributed to elevated portfolio securitization volumes.

The decrease in net interest income in the first quarter of 2013 compared with the first quarter of 2012 was primarily due to a 

decrease in the balance of mortgage-related securities and lower interest rates on loans in our Capital Market group’s 

mortgage portfolio. This decrease in interest income on our interest-earning mortgage assets was partially offset by a decline 
32

in interest expense due to lower funding needs and lower borrowing rates, which allowed us to continue to replace highercost debt with lower-cost debt.

We supplement our issuance of debt securities with derivative instruments to further reduce duration risk, which includes 

prepayment risk. The effect of these derivatives, in particular the periodic net interest expense accruals on interest rate swaps, 

is not reflected in the Capital Markets group’s net interest income but is included in our results as a component of “Fair value 

gains, net” and is displayed in “Table 9: Fair Value Gains, Net.” If we had included the economic impact of adding the net 

contractual interest accruals on our interest rate swaps in our Capital Markets group’s interest expense, the Capital Markets 

group’s net interest income would have decreased by $200 million in the first quarter of 2013 compared with a decrease of 

$374 million in the first quarter of 2012.

Net income in the first quarter of 2013 included a benefit for federal income taxes that represents the release of the substantial 

majority of the valuation allowance against the portion of our deferred tax assets that we attributed to our Capital Markets 

group. Those assets primarily related to debt and derivative instruments and mortgage and mortgage-related assets.

The Capital Markets Group’s Mortgage Portfolio

The Capital Markets group’s mortgage portfolio, which we also refer to as our retained mortgage portfolio, consists of 

mortgage loans and mortgage-related securities that we own. Mortgage-related securities held by the Capital Markets group 

include Fannie Mae MBS and non-Fannie Mae mortgage-related securities. The Fannie Mae MBS that we own are 

maintained as securities on the Capital Markets group’s balance sheets. Mortgage-related assets held by consolidated MBS 

trusts that are owned by third-parties are not included in the Capital Markets group’s mortgage portfolio.

The amount of mortgage assets that we may own is restricted by our senior preferred stock purchase agreement with 

Treasury. By December 31 of each year, we are required to reduce our mortgage assets to 85% of the maximum allowable 

amount that we were permitted to own as of December 31 of the immediately preceding calendar year, until the amount of 

our mortgage assets reaches $250 billion. Under the agreement, the maximum allowable amount of mortgage assets we may 

own as of December 31, 2013 is $552.5 billion. As of March 31, 2013, we owned $597.8 billion in mortgage assets, 

compared with $633.1 billion as of December 31, 2012. Additionally, our 2013 conservatorship scorecard includes a goal to 

sell 5% of the assets we held in our retained mortgage portfolio as of December 31, 2012 that are not agency securities. See 

“Legislative and Regulatory Developments” for additional information regarding our 2013 conservatorship scorecard.

Table 18 displays our Capital Markets group’s mortgage portfolio activity for the periods indicated.

Table 18: Capital Markets Group’s Mortgage Portfolio Activity(1)

For the Three Months

Ended March 31,

2013 2012

(Dollars in millions)

Mortgage loans:

Beginning balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $371,708 $398,271

Purchases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72,264 53,925

Securitizations(2). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (64,787) (38,372)

Liquidations(3). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (27,186) (19,047)

Mortgage loans, ending balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 351,999 394,777

Mortgage securities:

Beginning balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 261,346 310,143

Purchases(4). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,462 4,971

Securitizations(2). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64,787 38,372

Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (75,207) (41,246)

Liquidations(3). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (14,608) (15,354)

Mortgage securities, ending balance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 245,780 296,886

Total Capital Markets group’s mortgage portfolio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $597,779 $691,663
33

__________

(1) Based on unpaid principal balance.

(2) Includes portfolio securitization transactions that do not qualify for sale treatment under GAAP.

(3) Includes scheduled repayments, prepayments, foreclosures and lender repurchases.

(4) Includes purchases of Fannie Mae MBS issued by consolidated trusts.

Table 19 displays the composition of the Capital Markets group’s mortgage portfolio as of March 31, 2013 and December 31, 

2012. 

Table 19: Capital Markets Group’s Mortgage Portfolio Composition(1)

As of

March 31, December 31,

2013 2012

(Dollars in millions)

Capital Markets group’s mortgage loans:

Single-family loans:

Government insured or guaranteed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 40,763 $ 40,886

Conventional:

Long-term, fixed-rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 230,428 240,791

Intermediate-term, fixed-rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,906 10,460

Adjustable-rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16,568 18,008

Total single-family conventional. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 256,902 269,259

Total single-family loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 297,665 310,145

Multifamily loans:

Government insured or guaranteed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 305 312

Conventional:

Long-term, fixed-rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,172 3,245

Intermediate-term, fixed-rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41,785 45,662

Adjustable-rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,072 12,344

Total multifamily conventional. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54,029 61,251

Total multifamily loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54,334 61,563

Total Capital Markets group’s mortgage loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 351,999 371,708

Capital Markets group’s mortgage-related securities:

Fannie Mae . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 170,208 183,964

Freddie Mac . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,170 11,274

Ginnie Mae . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,244 1,049

Alt-A private-label securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16,463 17,079

Subprime private-label securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,759 15,093

CMBS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,190 20,587

Mortgage revenue bonds. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,030 8,486

Other mortgage-related securities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,716 3,814

Total Capital Markets group’s mortgage-related securities(2)

. . . . . . . . . . . . . . . . . . . . . . . . . . . 245,780 261,346

Total Capital Markets group’s mortgage portfolio. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $597,779 $633,054

__________

(1) Based on unpaid principal balance.

(2) The fair value of these mortgage-related securities was $254.1 billion and $269.9 billion as of March 31, 2013 and December 31, 2012, 

respectively.
34

The Capital Markets group’s mortgage portfolio decreased as of March 31, 2013 compared with December 31, 2012

primarily due to sales and liquidations, partially offset by purchases of delinquent loans from MBS trusts, as discussed below. 

Although the Capital Markets group’s mortgage portfolio decreased overall period over period, purchases, securitizations and 

sales activity increased in the first quarter of 2013 compared with the first quarter of 2012 primarily due to the continuation 

of low interest rates and the implementation of changes to HARP. Liquidations of loans were higher in the first quarter of 

2013 compared with the first quarter of 2012 due to Bank of America’s repurchase of loans pursuant to our resolution 

agreement.

We expect to continue to purchase loans from MBS trusts as they become four or more consecutive monthly payments 

delinquent subject to market conditions, economic benefit, servicer capacity, and other factors including the limit on the 

mortgage assets that we may own pursuant to the senior preferred stock purchase agreement. We purchased approximately 

59,000 delinquent loans with an unpaid principal balance of $9.3 billion from our single-family MBS trusts in the first three 

months of 2013. As of March 31, 2013, the total unpaid principal balance of all loans in single-family MBS trusts that were 

delinquent for four or more consecutive monthly payments was $3.1 billion. 

As a result of purchasing these delinquent loans and our portfolio declining to meet the requirements of our senior preferred 

stock purchase agreement with Treasury, an increasing portion of the Capital Market group’s mortgage portfolio is comprised 

of nonperforming loans. The total unpaid principal balance of nonperforming loans in the Capital Markets group’s mortgage 

portfolio was $222.8 billion or 37% of the Capital Markets group’s mortgage portfolio as of March 31, 2013, compared with 

$230.3 billion or 36% of the Capital Markets group’s mortgage portfolio as of December 31, 2012. This population includes 

loans that have been modified and classified as TDRs, of which $129.2 billion as of March 31, 2013 and $130.2 billion as of 

December 31, 2012 were TDRs on accrual status, as well as unmodified delinquent loans that are on nonaccrual status in our 

consolidated financial statements. 

CONSOLIDATED BALANCE SHEET ANALYSIS

This section provides a discussion of our condensed consolidated balance sheets as of the dates indicated and should be read 

together with our condensed consolidated financial statements, including the accompanying notes. 
35

Table 20 displays a summary of our condensed consolidated balance sheets as of March 31, 2013 and December 31, 2012.

Table 20: Summary of Condensed Consolidated Balance Sheets

As of

March 31,

2013

December 31,

2012 Variance

(Dollars in millions)

Assets

Cash and cash equivalents and federal funds sold and securities purchased under 

agreements to resell or similar arrangements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 102,763 $ 53,617 $ 49,146

Restricted cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57,231 67,919 (10,688)

Investments in securities(1). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 112,720 103,876 8,844

Mortgage loans:

Of Fannie Mae . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 336,936 355,936 (19,000)

Of consolidated trusts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,678,161 2,652,265 25,896

Allowance for loan losses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (56,461) (58,795) 2,334

Mortgage loans, net of allowance for loan losses. . . . . . . . . . . . . . . . . . . . . . . . . . 2,958,636 2,949,406 9,230

Deferred tax assets, net. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49,738 — 49,738

Other assets(2). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39,587 47,604 (8,017)

Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,320,675 $ 3,222,422 $ 98,253

Liabilities and equity

Debt:

Of Fannie Mae . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 630,260 $ 615,864 $ 14,396

Of consolidated trusts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,602,283 2,573,653 28,630

Other liabilities(3). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25,764 25,681 83

Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,258,307 3,215,198 43,109

Senior preferred stock. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 117,149 117,149 —

Other deficit(4). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (54,781) (109,925) 55,144

Total equity. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62,368 7,224 55,144

Total liabilities and equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,320,675 $ 3,222,422 $ 98,253

__________

(1) Includes $28.4 billion as of March 31, 2013 and $18.0 billion as of December 31, 2012 of non-mortgage-related securities that are 

included in our other investments portfolio, which we present in “Table 28: Cash and Other Investments Portfolio.”

(2) Consists of accrued interest receivable, net; acquired property, net; and other assets.

(3) Consists of accrued interest payable, federal funds purchased and securities sold under agreements to repurchase, and other liabilities.

(4) Consists of preferred stock, common stock, accumulated deficit, accumulated other comprehensive income, treasury stock, and 

noncontrolling interest.

Cash and Other Investments Portfolio

Our cash and other investments portfolio consists of cash and cash equivalents, federal funds sold and securities purchased 

under agreements to resell or similar arrangements, and investments in non-mortgage-related securities. See “Liquidity and 

Capital Management—Liquidity Management—Cash and Other Investments Portfolio” for additional information on our 

cash and other investments portfolio.

Restricted Cash

Restricted cash primarily includes unscheduled borrower payments received by the servicer or consolidated trusts due to be 

remitted to the MBS certificateholders in the subsequent month. Our restricted cash decreased as of March 31, 2013

compared with the balance as of December 31, 2012, resulting from a decrease in unscheduled payments received.
36

Investments in Mortgage-Related Securities

Our investments in mortgage-related securities are classified in our condensed consolidated balance sheets as either trading or 

available-for-sale and are measured at fair value. Unrealized and realized gains and losses on trading securities are included 

as a component of “Fair value gains, net” and unrealized gains and losses on available-for-sale securities are included in 

“Other comprehensive income” in our condensed consolidated statements of operations and comprehensive income. Realized 

gains and losses on available-for-sale securities are recognized when securities are sold in “Investment gains, net” in our 

condensed consolidated statements of operations and comprehensive income. We recognize the credit component of otherthan-temporary impairments of debt securities we own in “Net other-than-temporary impairments” and the noncredit 

component in “Other comprehensive income” in our condensed consolidated statements of operations and comprehensive 

income for those securities that we do not intend to sell and for which it is not more likely than not that we will be required to 

sell before recovery. 

Table 21 displays the fair value of our investments in mortgage-related securities, including trading and available-for-sale 

securities, as of the dates indicated. We classify private-label securities as Alt-A, subprime, CMBS or manufactured housing 

if the securities were labeled as such when issued. We have also invested in subprime private-label mortgage-related 

securities that we have resecuritized to include our guaranty (“wraps”).

Table 21: Summary of Mortgage-Related Securities at Fair Value

As of

March 31,

2013

December 31,

2012

(Dollars in millions)

Mortgage-related securities:

Fannie Mae. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 15,179 $ 16,683

Freddie Mac . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,007 12,173

Ginnie Mae. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,388 1,188

Alt-A private-label securities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,583 12,405

Subprime private-label securities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,314 8,766

CMBS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22,604 22,923

Mortgage revenue bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,016 8,517

Other mortgage-related securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,223 3,271

Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 84,314 $ 85,926

See “Note 5, Investments in Securities” for additional information on our investments in mortgage-related securities, 

including the composition of our trading and available-for-sale securities at amortized cost and fair value and the gross 

unrealized gains and losses related to our available-for-sale securities as of March 31, 2013 and December 31, 2012. 

Mortgage Loans

The increase in mortgage loans, net of the allowance for loan losses, as of March 31, 2013 compared with the balance as of 

December 31, 2012 was primarily driven by securitization activity from our lender swap and portfolio securitization 

programs. For additional information on our mortgage loans, see “Note 3, Mortgage Loans.” For additional information on 

the mortgage loan purchase and sale activities reported by our Capital Markets group, see “Business Segment Results—

Capital Markets Group Results.” 

Deferred Tax Assets, Net

We recognize deferred tax assets and liabilities for future tax consequences arising from differences between the carrying 

amounts of existing assets and liabilities under GAAP and their respective tax bases, and for net operating loss carryforwards 

and tax credit carryforwards. For additional information on our deferred tax assets and liabilities, see “Note 10, Income 

Taxes.”

Debt 

Debt of Fannie Mae is the primary means of funding our mortgage investments. We provide 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 in “Liquidity and 
37

Capital Management—Liquidity Management—Debt Funding.” Also see “Note 8, Short-Term Borrowings and Long-Term 

Debt” for additional information on our outstanding debt.

Debt of consolidated trusts represents the amount of Fannie Mae MBS issued from consolidated trusts and held by third-party 

certificateholders. The increase in debt of consolidated trusts as of March 31, 2013 compared with the balance as of 

December 31, 2012 was primarily driven by securitization activity from our lender swap and portfolio securitization 

programs.

Stockholders’ Equity (Deficit)

Our net equity increased as of March 31, 2013 compared with December 31, 2012. See “Table 22: Comparative Measures—

GAAP Change in Stockholders’ Equity (Deficit) and Non-GAAP Change in Fair Value of Net Assets (Net of Tax Effect)” for 

details of the change in our net equity.

SUPPLEMENTAL NON-GAAP INFORMATION—FAIR VALUE BALANCE SHEETS

As part of our disclosure requirements with FHFA, we disclose on a quarterly basis supplemental non-GAAP consolidated 

fair value balance sheets, which reflect our assets and liabilities at estimated fair value. 

Table 22 summarizes changes in our stockholders’ equity (deficit) reported in our GAAP condensed consolidated balance 

sheets and in the estimated fair value of our net assets in our non-GAAP consolidated fair value balance sheets for the three 

months ended March 31, 2013. The estimated fair value of our net assets is calculated based on the difference between the 

fair value of our assets and the fair value of our liabilities, adjusted for noncontrolling interests. We use various valuation 

techniques to estimate fair value, some of which incorporate internal assumptions that are subjective and involve a high 

degree of management judgment. We describe the specific valuation techniques used to determine fair value and disclose the 

carrying value and fair value of our financial assets and liabilities in “Note 16, Fair Value.”

Table 22: Comparative Measures—GAAP Change in Stockholders’ Equity (Deficit) and Non-GAAP Change in Fair 

Value of Net Assets (Net of Tax Effect)

For the Three Months 

Ended March 31, 2013

(Dollars in millions)

GAAP consolidated balance sheets:

Fannie Mae stockholders’ equity as of December 31, 2012(1)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 7,183

Total comprehensive income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59,339

Senior preferred stock dividend paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (4,224)

Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29

Fannie Mae stockholders’ equity as of March 31, 2013(1)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 62,327

Non-GAAP consolidated fair value balance sheets:

Estimated fair value of net assets as of December 31, 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (66,492)

Senior preferred stock dividend paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (4,224)

Senior preferred stock dividend payable(2)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (59,368)

Increase in deferred tax assets, net(3)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49,738

Change in estimated fair value of net assets excluding the senior preferred stock dividend paid, the 

senior preferred stock dividend payable and the increase in deferred tax assets . . . . . . . . . . . . . . . . . . 23,083

Increase in estimated fair value of net assets, net. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,229

Estimated fair value of net assets as of March 31, 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (57,263)

__________

(1) Our net worth, as defined under the senior preferred stock purchase agreement, is equivalent to the “Total equity (deficit)” amount 

reported in our condensed consolidated balance sheets, which consists of “Total Fannie Mae stockholders’ equity (deficit)” and 

“Noncontrolling interest.”

(2) Represents the dividend payment we will pay Treasury under the senior preferred stock purchase agreement, which, for purposes of our 

non-GAAP fair value balance sheets, we present as a liability.
38

(3) Represents an increase in the carrying value of our deferred tax assets as of March 31, 2013 compared with December 31, 2012, as we 

released the substantial majority of our valuation allowance against our deferred tax assets in the first quarter of 2013.

During the first quarter of 2013, the estimated fair value of our net assets (excluding the senior preferred stock dividend paid, 

the senior preferred stock dividend payable and the increase in deferred tax assets) increased by approximately $23 billion. 

This increase was primarily driven by an improvement in credit-related items due to overall improved housing market and 

economic conditions, including higher actual and expected home prices experienced in the first quarter of 2013, which 

lowered the expected losses on our guaranty book of business. We estimate that home prices increased by 1.1% in the first 

quarter of 2013. Changes in single-family home prices, regardless of magnitude, may cause volatility in our fair value 

measurements due to our $2.8 trillion single-family guaranty book of business. In addition, the income from the interest 

spread between our mortgage assets and associated debt and derivatives contributed approximately $6 billion to the increase 

in the estimated fair value of our net assets.

Cautionary Language Relating to Supplemental Non-GAAP Financial Measures

In reviewing our non-GAAP consolidated fair value balance sheets, there are a number of important factors and limitations to 

consider. The estimated fair value of our net assets is calculated as of a particular point in time based on our existing assets 

and liabilities. It does not incorporate other factors that may have a significant impact on our long-term fair value, including 

revenues generated from future business activities in which we expect to engage, the value from our foreclosure and loss 

mitigation efforts or the impact that legislation or potential regulatory actions may have on us. As a result, the estimated fair 

value of our net assets presented in our non-GAAP consolidated fair value balance sheets does not represent an estimate of 

our net realizable value, liquidation value or our market value as a whole. Amounts we ultimately realize from the disposition 

of assets or settlement of liabilities may vary materially from the estimated fair values presented in our non-GAAP

consolidated fair value balance sheets.

In addition, the fair value of our net assets presented in our fair value balance sheet does not represent an estimate of the 

value we expect to realize from operating the company, primarily because:

• The estimated fair value of our credit exposures significantly exceeds the projected credit losses we would expect to 

incur if we were to retain the credit exposure, as fair value takes into account certain assumptions about liquidity 

and required rates of return that a market participant may demand in assuming a credit obligation, and

• The fair value of our net assets reflects a point in time estimate of the fair value of our existing assets and liabilities, 

and does not incorporate the value associated with new business that may be added in the future. 

The fair value of our net assets is not a measure defined within GAAP and may not be comparable to similarly titled measures 

reported by other companies.

Supplemental Non-GAAP Consolidated Fair Value Balance Sheets

We display our non-GAAP fair value balance sheets as of the dates indicated in Table 23.
39

Table 23: Supplemental Non-GAAP Consolidated Fair Value Balance Sheets

As of March 31, 2013 As of December 31, 2012

GAAP

Carrying

Value

Fair Value 

Adjustment(1)

Estimated

Fair Value

GAAP

Carrying

Value

Fair Value 

Adjustment(1)

Estimated

Fair Value

(Dollars in millions)

Assets:

Cash and cash equivalents . . . . . . . . . . . $ 80,644 $ — $ 80,644 $ 89,036 $ — $ 89,036

Federal funds sold and securities

purchased under agreements to resell

or similar arrangements. . . . . . . . . . . 79,350 — 79,350 32,500 — 32,500

Trading securities. . . . . . . . . . . . . . . . . . 52,391 — 52,391 40,695 — 40,695

Available-for-sale securities. . . . . . . . . . 60,329 — 60,329 63,181 — 63,181

Mortgage loans:

Mortgage loans held for sale. . . . . . . . 455 13 468 464 11 475

Mortgage loans held for investment,

net of allowance for loan losses:

Of Fannie Mae . . . . . . . . . . . . . . . . 287,033 (27,436) 259,597 305,025 (33,837) 271,188

Of consolidated trusts. . . . . . . . . . . 2,671,148 102,562 (2) 2,773,710 (3) 2,643,917 118,511 (2) 2,762,428 (3)

Total mortgage loans. . . . . . . . . . . . . . 2,958,636 75,139 3,033,775 (4) 2,949,406 84,685 3,034,091 (4)

Advances to lenders. . . . . . . . . . . . . . . . 4,442 (54) 4,388 (5)(6) 7,592 (84) 7,508 (5)(6)

Derivative assets at fair value . . . . . . . . 519 — 519 (5)(6) 435 — 435 (5)(6)

Guaranty assets and buy-ups, net. . . . . . 308 380 688 (5)(6) 327 365 692 (5)(6)

Total financial assets. . . . . . . . . . . . . . 3,236,619 75,465 3,312,084 (7) 3,183,172 84,966 3,268,138 (7)

Credit enhancements . . . . . . . . . . . . . . . 498 972 1,470 (5)(6) 488 997 1,485 (5)(6)

Deferred tax assets, net . . . . . . . . . . . . . 49,738 — 49,738 (8) — — —

Other assets . . . . . . . . . . . . . . . . . . . . . . 33,820 (233) 33,587 (5)(6) 38,762 (244) 38,518 (5)(6)

Total assets . . . . . . . . . . . . . . . . . . . . . $ 3,320,675 $ 76,204 $ 3,396,879 $ 3,222,422 $ 85,719 $ 3,308,141

Liabilities:

Federal funds purchased and securities

sold under agreements to repurchase. $ 218 $ — $ 218 $ — $ — $ —

 Short-term debt:

Of Fannie Mae. . . . . . . . . . . . . . . . . . 115,285 16 115,301 105,233 20 105,253

Of consolidated trusts . . . . . . . . . . . . 3,009 — 3,009 3,483 — 3,483

 Long-term debt:

Of Fannie Mae. . . . . . . . . . . . . . . . . . 514,975 (9) 23,004 537,979 510,631 (9) 24,941 535,572

Of consolidated trusts . . . . . . . . . . . . 2,599,274 (9) 110,282 (2) 2,709,556 2,570,170 (9) 131,009 (2) 2,701,179

Derivative liabilities at fair value. . . . . . 780 — 780 (10)(11) 705 — 705 (10)(11)

Guaranty obligations . . . . . . . . . . . . . . . 565 2,165 2,730 (10)(11) 599 2,514 3,113 (10)(11)

Total financial liabilities. . . . . . . . . . . 3,234,106 135,467 3,369,573 (7) 3,190,821 158,484 3,349,305 (7)

Senior preferred stock dividend payable — 59,368 59,368 (12) — — —

Other liabilities. . . . . . . . . . . . . . . . . . . . 24,201 959 25,160 (10)(11) 24,377 910 25,287 (10)(11)

Total liabilities . . . . . . . . . . . . . . . . . . 3,258,307 195,794 3,454,101 3,215,198 159,394 3,374,592

Equity (deficit):

Fannie Mae stockholders’ equity

(deficit):

Senior preferred(13)

. . . . . . . . . . . . . . . . . 117,149 — 117,149 117,149 — 117,149

Preferred. . . . . . . . . . . . . . . . . . . . . . . . . 19,130 (16,804) 2,326 19,130 (17,938) 1,192

Common. . . . . . . . . . . . . . . . . . . . . . . . . (73,952) (102,786) (176,738) (14) (129,096) (55,737) (184,833)

Total Fannie Mae stockholders’

equity (deficit)/non-GAAP fair

value of net assets . . . . . . . . . . . . $ 62,327 $ (119,590) $ (57,263) $ 7,183 $ (73,675) $ (66,492)

Noncontrolling interest . . . . . . . . . . . 41 — 41 41 — 41

Total equity (deficit) . . . . . . . . . . . . . 62,368 (119,590) (57,222) 7,224 (73,675) (66,451)

Total liabilities and equity (deficit). . $ 3,320,675 $ 76,204 $ 3,396,879 $ 3,222,422 $ 85,719 $ 3,308,141
40

__________

Explanation and Reconciliation of Non-GAAP Measures to GAAP Measures

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

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

(2) Fair value of consolidated loans is impacted by credit risk, which has no corresponding impact on the consolidated debt.

(3) Includes certain mortgage loans that we elected to report at fair value in our GAAP condensed consolidated balance sheets of $12.6 

billion and $10.8 billion as of March 31, 2013 and December 31, 2012, respectively.

(4) Performing loans had a fair value of $2.9 trillion and an unpaid principal balance of $2.8 trillion as of March 31, 2013 and 

December 31, 2012. Nonperforming loans, which for the purposes of our non-GAAP fair value balance sheets consists of loans that are 

delinquent by one or more payments, had a fair value of $111.4 billion and an unpaid principal balance of $179.1 billion as 

of March 31, 2013 compared with a fair value of $112.3 billion and an unpaid principal balance of $189.9 billion as of December 31, 

2012. See “Note 16, Fair Value” for additional information on valuation techniques for performing and nonperforming loans.

(5) The following line items: (a) Advances to lenders; (b) Derivative assets at fair value; (c) Guaranty assets and buy-ups, net; (d) Credit 

enhancements; and (e) Other assets, together consist of the following assets presented in our GAAP condensed consolidated balance 

sheets: (a) Accrued interest receivable, net; (b) Acquired property, net; and (c) Other assets.

(6) “Other assets” include the following GAAP condensed consolidated balance sheets line items: (a) Accrued interest receivable, net and 

(b) Acquired property, net. The carrying value of these items in our GAAP condensed consolidated balance sheets totaled $19.3 billion

and $19.7 billion as of March 31, 2013 and December 31, 2012, respectively. “Other assets” in our GAAP condensed consolidated 

balance sheets include the following: (a) Advances to lenders; (b) Derivative assets at fair value; (c) Guaranty assets and buy-ups, net; 

and (d) Credit enhancements. The carrying value of these items totaled $5.8 billion and $8.8 billion as of March 31, 2013 and 

December 31, 2012, respectively. 

(7) We estimated the fair value of these financial instruments in accordance with the fair value accounting guidance as described in “Note 

16, Fair Value.”

(8) The amount included in “estimated fair value” of deferred tax assets, net represents the GAAP carrying value and does not reflect fair 

value.

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

of $14.1 billion and $12.4 billion as of March 31, 2013 and December 31, 2012, respectively. 

(10) The following line items: (a) Derivative liabilities at fair value; (b) Guaranty obligations; and (c) Other liabilities, consist of the 

following liabilities presented in our GAAP condensed consolidated balance sheets: (a) Accrued interest payable and (b) Other 

liabilities.

(11) “Other liabilities” include Accrued interest payable in our GAAP condensed consolidated balance sheets. The carrying value of this 

item in our GAAP condensed consolidated balance sheets totaled $11.2 billion and $11.3 billion as of March 31, 2013 and 

December 31, 2012, respectively. We assume that certain other liabilities, such as deferred revenues, have no fair value. Although we 

report the “Reserve for guaranty losses” as part of “Other liabilities” in our GAAP condensed consolidated balance sheets, it is 

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

value balance sheets. “Other liabilities” in our GAAP condensed consolidated balance sheets include the following: (a) Derivative 

liabilities at fair value and (b) Guaranty obligations. The carrying value of these items totaled $1.3 billion as of March 31, 2013 and 

December 31, 2012. 

(12) Represents the dividend payment we will pay to Treasury under the senior preferred stock purchase agreement, which, for purposes of 

our non-GAAP fair balance sheets, we present as a liability.

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

GAAP carrying value, and does not reflect fair value.

(14) Includes the dividend payment we will pay to Treasury under the senior preferred stock purchase agreement, which, for purposes of our 

non-GAAP fair value balance sheets, we present as a liability.

LIQUIDITY AND CAPITAL MANAGEMENT

Liquidity Management

Our business activities require that we maintain adequate liquidity to fund our operations. Our liquidity risk management 

policy is designed to address our liquidity risk. Liquidity risk is the risk that we will not be able to meet our funding 

obligations in a timely manner. Liquidity risk management involves forecasting funding requirements, maintaining sufficient 

capacity to meet our needs based on our ongoing assessment of financial market liquidity and adhering to our regulatory 

requirements. 

Our treasury function is responsible for implementing our liquidity and contingency planning strategies. We conduct liquidity 

contingency planning to prepare for an event in which our access to the unsecured debt markets becomes limited. We plan for 
41

alternative sources of liquidity that are designed to allow us to meet our cash obligations without relying upon the issuance of 

unsecured debt. While our liquidity contingency planning attempts to address stressed market conditions, we believe that our 

liquidity contingency plan may be difficult or impossible to execute for a company of our size and circumstances.

See “Liquidity and Capital Management—Liquidity Management—Liquidity Risk Management Practices and Contingency 

Planning” in our 2012 Form 10-K for a discussion of our liquidity contingency plans. Also see “Risk Factors” in our 2012 

Form 10-K for a description of the risks associated with our liquidity risk and liquidity contingency planning.

Our liquidity position could be adversely affected by many factors, both internal and external to our business, including: 

actions taken by our conservator, the Federal Reserve, U.S. Treasury or other government agencies; legislation relating to us 

or our business; a U.S. government payment default on its debt obligations; a downgrade in the credit ratings of our senior 

unsecured debt or the U.S government’s debt from the major ratings organizations; a systemic event leading to the 

withdrawal of liquidity from the market; an extreme market-wide widening of credit spreads; public statements by key policy 

makers; a significant decline in our net worth; potential investor concerns about the adequacy of funding available to us 

under the senior preferred stock purchase agreement; loss of demand for our debt, or certain types of our debt, from a major 

group of investors; a significant credit event involving one of our major institutional counterparties; a sudden catastrophic 

operational failure in the financial sector; or elimination of our GSE status. 

Debt Funding

We fund our business primarily through the issuance of short-term and long-term debt securities in the domestic and 

international capital markets. Because debt issuance is our primary funding source, we are subject to “roll-over,” or 

refinancing, risk on our outstanding debt.

We have a diversified funding base of domestic and international investors. Purchasers of our debt securities are 

geographically diversified and include fund managers, commercial banks, pension funds, insurance companies, foreign 

central banks, corporations, state and local governments, and other municipal authorities.

Our debt funding needs may vary from quarter to quarter depending on market conditions and are influenced by anticipated 

liquidity needs, the size of our retained mortgage portfolio and our dividend payment obligations to Treasury. Under the 

senior preferred stock purchase agreement, we are required to reduce our retained mortgage portfolio to $552.5 billion by 

December 31, 2013 and, by December 31 of each year thereafter, to 85% of the maximum allowable amount that we were 

permitted to own as of December 31 of the immediately preceding calendar year, until the amount of our mortgage assets 

reaches $250 billion. 

Fannie Mae Debt Funding Activity

Table 24 displays the activity in debt of Fannie Mae for the periods indicated. This activity excludes the debt of consolidated 

trusts and intraday loans. The reported amounts of debt issued and paid off during the period represent the face amount of the 

debt at issuance and redemption, respectively. 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.
42

Table 24: Activity in Debt of Fannie Mae

For the Three Months 

Ended March 31,

2013 2012

(Dollars in millions)

Issued during the period:

Short-term:

Amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 84,711 $ 45,594

Weighted-average interest rate. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.13% 0.11%

Long-term:

Amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 62,708 $ 59,464

Weighted-average interest rate. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.00% 1.45%

Total issued:

Amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 147,419 $ 105,058

Weighted-average interest rate. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.50% 0.87%

Paid off during the period:(1)

Short-term:

Amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 74,419 $ 81,506

Weighted-average interest rate. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.14% 0.12%

Long-term:

Amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 58,651 $ 71,310

Weighted-average interest rate. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.14% 2.51%

Total paid off:

Amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 133,070 $ 152,816

Weighted-average interest rate. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.02% 1.24%

__________

(1) Consists of all payments on debt, including regularly scheduled principal payments, payments at maturity, payments resulting from 

calls and payments for any other repurchases. Calls and repurchases of zero-coupon debt are reported at original face value, which does 

not equal the amount of actual cash payment.

Overall debt funding activity increased in the first three months of 2013 compared with the first three months of 2012. This 

increase was primarily due to the possible need to pay a significant dividend payment to Treasury in 2013. See “Executive 

Summary—Summary of Our Financial Performance—Net Worth” for additional information on our dividend calculation. 

Our debt funding activity is influenced by the size of our retained mortgage portfolio, anticipated liquidity needs and our 

dividend payment to Treasury. We will fund our second quarter dividend payment of $59.4 billion primarily through the 

issuance of debt securities. Based on our liquidity position as of May 9, 2013, we believe we have sufficient funds to make 

this payment.

We believe that continued federal government support of our business and the financial markets, as well as our status as a 

GSE, are essential to maintaining our access to debt funding. Changes or perceived changes in federal government support of 

our business and the financial markets or our status as a GSE could materially and adversely affect our liquidity, financial 

condition and results of operations. For more information on GSE reform, see “Legislative and Regulatory Developments—

GSE Reform” and “Risk Factors” in this report and in our 2012 Form 10-K.

In addition, due to our reliance on the U.S. government’s support, our access to debt funding or the cost of our debt funding 

could be materially adversely affected by a change or perceived change in the creditworthiness of the U.S. government. A

downgrade in our credit ratings could reduce demand for our debt securities and increase our borrowing costs. See our 

discussion of credit ratings in “Risk Factors” in our 2012 Form 10-K for information about factors that may lead to the U.S. 

government’s long-term debt rating being lowered, and “Credit Ratings” for further discussion of our dependence on our 

credit ratings.

Future changes or disruptions in the financial markets could significantly change the amount, mix and cost of funds we 

obtain, which also could increase our liquidity and roll-over risk and have a material adverse impact on our liquidity, 
43

financial condition and results of operations. See “Risk Factors” in our 2012 Form 10-K for a discussion of the risks we face 

relating to (1) the uncertain future of our company; (2) our reliance on the issuance of debt securities to obtain funds for our 

operations and the relative cost to obtain these funds; and (3) our liquidity contingency plans.

Outstanding Debt

Total outstanding debt of Fannie Mae includes federal funds purchased and securities sold under agreements to repurchase 

and short-term and long-term debt, excluding debt of consolidated trusts. 

As of March 31, 2013, our outstanding short-term debt, based on its original contractual maturity, as a percentage of our total 

outstanding debt increased to 18% from 17% as of December 31, 2012. For information on our outstanding debt maturing 

within one year, including the current portion of our long-term debt, as a percentage of our total debt, see “Maturity Profile of 

Outstanding Debt of Fannie Mae.” In addition, the weighted-average interest rate on our long-term debt, based on its original 

contractual maturity, decreased to 2.12% as of March 31, 2013 from 2.25% as of December 31, 2012.

Pursuant to the terms of the senior preferred stock purchase agreement, we are prohibited from issuing debt without the prior 

consent of Treasury if it would result in our aggregate indebtedness exceeding our outstanding debt limit, which is 120% of 

the amount of mortgage assets we were allowed to own on December 31 of the immediately preceding calendar year. Our 

debt limit under the senior preferred stock purchase agreement was reduced to $780.0 billion in 2013. As of March 31, 2013, 

our aggregate indebtedness totaled $635.7 billion, which was $144.3 billion below our debt limit. The calculation of our 

indebtedness for purposes of complying with our debt limit reflects the unpaid principal balance and excludes debt basis 

adjustments and debt of consolidated trusts. Because of our debt limit, we may be restricted in the amount of debt we issue to 

fund our operations.
44

Table 25 displays information as of the dates indicated on our outstanding short-term and long-term debt based on its original 

contractual terms. 

Table 25: Outstanding Short-Term Borrowings and Long-Term Debt(1)

As of

March 31, 2013 December 31, 2012

Maturities Outstanding

WeightedAverage

Interest

Rate Maturities Outstanding

WeightedAverage

Interest

Rate

(Dollars in millions)

Federal funds purchased and securities sold 

under agreements to repurchase(2). . . . . . . — $ 218 —% — $ — —%

Short-term debt:

Fixed-rate:

Discount notes . . . . . . . . . . . . . . . . . . . — $ 114,815 0.14% — $ 104,730 0.15%

Foreign exchange discount notes . . . . . — 470 1.57 — 503 1.61

Total short-term debt of Fannie Mae(3)

. . . . . 115,285 0.15 105,233 0.16

Debt of consolidated trusts. . . . . . . . . . . . — 3,009 0.14 — 3,483 0.15

Total short-term debt . . . . . . . . . . . . . . . . . . . $ 118,294 0.15% $ 108,716 0.16%

Long-term debt:

Senior fixed:

Benchmark notes and bonds. . . . . . . . 2013 - 2030 $ 242,018 2.48% 2013 - 2030 $ 251,768 2.59%

Medium-term notes(4)

. . . . . . . . . . . . . 2013 - 2023 181,264 1.26 2013 - 2022 172,288 1.35

Foreign exchange notes and bonds. . . 2021 - 2028 648 5.41 2021 - 2028 694 5.44

Other(5)(6)

. . . . . . . . . . . . . . . . . . . . . . . 2013 - 2038 40,525 4.90 2013 - 2038 40,819 4.99

Total senior fixed . . . . . . . . . . . . . 464,455 2.22 465,569 2.35

Senior floating:

Medium-term notes(4)

. . . . . . . . . . . . . 2013 - 2019 44,056 0.24 2013 - 2019 38,633 0.27

Other(5)(6)

. . . . . . . . . . . . . . . . . . . . . . . 2020 - 2037 348 7.68 2020 - 2037 365 8.22

Total senior floating . . . . . . . . . . . 44,404 0.28 38,998 0.33

Subordinated fixed:

Qualifying subordinated. . . . . . . . . . . 2013 - 2014 2,523 5.00 2013 - 2014 2,522 5.00

Subordinated debentures(7)

. . . . . . . . . 2019 3,272 9.92 2019 3,197 9.92

Total subordinated fixed. . . . . . . . 5,795 7.78 5,719 7.75

Secured borrowings(8)

. . . . . . . . . . . . . . . 2021 - 2022 321 1.86 2021 - 2022 345 1.87

Total long-term debt of Fannie Mae(9)

. . . . . . 514,975 2.12 510,631 2.25

Debt of consolidated trusts(6)

. . . . . . . . . . 2013 - 2053 2,599,274 3.28 2013 - 2052 2,570,170 3.36

Total long-term debt. . . . . . . . . . . . . . . . . . . . $ 3,114,249 3.09% $ 3,080,801 3.18%

Outstanding callable debt of Fannie Mae(10)

. $ 186,553 1.54% $ 177,784 1.64%

__________

(1) Outstanding debt amounts and weighted-average interest rates reported in this table include the effect of unamortized discounts, 

premiums and other cost basis adjustments. Reported amounts include fair value gains and losses associated with debt that we elected 

to carry at fair value. The unpaid principal balance of outstanding debt of Fannie Mae, which excludes unamortized discounts, 

premiums and other cost basis adjustments, and debt of consolidated trusts, totaled $636.0 billion and $621.8 billion as of March 31, 

2013 and December 31, 2012, respectively.

(2) Securities sold under agreements to repurchase represent agreements to repurchase securities for a specified price, with repayment 

generally occurring on the following day.
45

(3) Short-term 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. Reported amounts include a net unamortized discount, fair value adjustments and other 

cost basis adjustments of $44 million and $33 million as of March 31, 2013 and December 31, 2012, respectively.

(4) Includes long-term debt with an original contractual maturity of greater than 1 year and up to 10 years, excluding zero-coupon debt.

(5) Includes long-term debt that is not included in other debt categories.

(6) Includes a portion of structured debt instruments that is reported at fair value.

(7) Consists of subordinated debt with an interest deferral feature.

(8) Represents remaining liability for transfer of financial assets from our condensed consolidated balance sheets that did not qualify as a 

sale.

(9) Long-term debt of Fannie Mae consists of borrowings with an original contractual maturity of greater than one year. Reported amounts 

include the current portion of long-term debt that is due within one year, which totaled $103.1 billion and $103.2 billion as of 

March 31, 2013 and December 31, 2012, respectively. Reported amounts also include a net unamortized discount, fair value 

adjustments and other cost basis adjustments of $5.6 billion and $6.0 billion as of March 31, 2013 and December 31, 2012, 

respectively. The unpaid principal balance of long-term debt of Fannie Mae, which excludes unamortized discounts, premiums, fair 

value adjustments and other cost basis adjustments and amounts related to debt of consolidated trusts, totaled $520.5 billion and $516.5 

billion as of March 31, 2013 and December 31, 2012, respectively.

(10) Consists of long-term callable debt of Fannie Mae that can be paid off in whole or in part at our option or the option of the investor at 

any time on or after a specified date. Includes the unpaid principal balance, and excludes unamortized discounts, premiums and other 

cost basis adjustments.

Maturity Profile of Outstanding Debt of Fannie Mae

Table 26 displays the maturity profile, as of March 31, 2013, of our outstanding debt maturing within one year, by month, 

including amounts we have announced for early redemption. Our outstanding debt maturing within one year, including the 

current portion of our long-term debt, increased as a percentage of our total outstanding debt, excluding debt of consolidated 

trusts, to 35% as of March 31, 2013, compared with 34% as of December 31, 2012. The weighted-average maturity of our 

outstanding debt that is maturing within one year was 139 days as of March 31, 2013, compared with 130 days as of 

December 31, 2012.

Table 26: Maturity Profile of Outstanding Debt of Fannie Mae Maturing Within One Year(1)

_________

(1) Includes unamortized discounts, premiums and other cost basis adjustments of $96 million as of March 31, 2013. Excludes debt of 

consolidated trusts maturing within one year of $4.8 billion as of March 31, 2013.
46

Table 27 displays the maturity profile, as of March 31, 2013, of the portion of our long-term debt that matures in more than 

one year, on a quarterly basis for one year and on an annual basis thereafter, excluding amounts we have announced for early 

redemption within one year. The weighted-average maturity of our outstanding debt maturing in more than one year was 

approximately 60 months as of March 31, 2013 and approximately 61 months as of December 31, 2012.

Table 27: Maturity Profile of Outstanding Debt of Fannie Mae Maturing in More Than One Year(1)

_______

(1) Includes unamortized discounts, premiums and other cost basis adjustments of $5.5 billion as of March 31, 2013. Excludes debt of 

consolidated trusts of $2.6 trillion as of March 31, 2013.

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. We also may use proceeds from our mortgage assets to pay our debt obligations.

Cash and Other Investments Portfolio

Our cash and other investments portfolio increased from December 31, 2012 to March 31, 2013 due to the possible need to 

pay a significant dividend payment to Treasury in 2013. See “Executive Summary—Summary of Our Financial Performance

—Net Worth” for additional information on our dividend payment. The balance of our cash and other investments portfolio 

fluctuates based on changes in our cash flows, overall liquidity in the fixed income markets and our liquidity risk 

management policies and practices. See “Risk Management—Credit Risk Management—Institutional Counterparty Credit 

Risk Management—Issuers of Investments Held in our Cash and Other Investments Portfolio” for additional information on 

the risks associated with the assets in our cash and other investments portfolio.

Table 28 displays information on the composition of our cash and other investments portfolio as of the dates indicated.

Table 28: Cash and Other Investments Portfolio

As of

March 31,

2013

December 31,

2012

(Dollars in millions)

Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 23,413 $ 21,117

Federal funds sold and securities purchased under agreements to resell or similar arrangements. . . 79,350 32,500

U.S. Treasury securities(1). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28,406 17,950

Total cash and other investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $131,169 $ 71,567

__________

(1) Excludes $12.9 billion and $1.1 billion of U.S. Treasury securities which are a component of cash equivalents as of March 31, 2013 and 

December 31, 2012, respectively, as these securities had a maturity at the date of acquisition of three months or less.
47

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 

Ratings Services (“S&P”), Moody’s Investors Service (“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. We cannot predict whether one or more of these ratings agencies will 

lower our debt ratings in the future. See “Risk Factors” for a discussion of the possibility of further downgrades and the risks 

to our business relating to a decrease in our 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. 

Table 29 displays the credit ratings issued by the three major credit rating agencies as of May 2, 2013. 

Table 29: Fannie Mae Credit Ratings

As of May 2, 2013

S&P Moody’s Fitch

Long-term senior debt. . . . . . . . . . . . . . . . . . . . . . . AA+ Aaa AAA

Short-term senior debt. . . . . . . . . . . . . . . . . . . . . . . A-1+ P-1 F1+

Qualifying subordinated debt . . . . . . . . . . . . . . . . . A Aa2 AAPreferred stock. . . . . . . . . . . . . . . . . . . . . . . . . . . . . C Ca C/RR6

Bank financial strength rating . . . . . . . . . . . . . . . . . — E+ —

Outlook . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Negative Negative Negative

(for Long Term

Senior Debt and

Qualifying

Subordinated Debt)

(for Long Term

Senior Debt and

Qualifying

Subordinated Debt)

(for AAA rated Long

Term Issuer Default

Rating)

Cash Flows

Three Months Ended March 31, 2013. Cash and cash equivalents increased from December 31, 2012 by $2.3 billion to $23.4 

billion as of March 31, 2013. The activity during the period reflected our possible need to pay a significant dividend payment 

to Treasury in 2013 as we deployed funds received from loan repayments and the issuance of debt securities into securities 

purchased under agreements to resell and other short-term investments. Net cash generated from investing activities totaled 

$100.1 billion, resulting primarily from proceeds received from repayments of loans held for investment and proceeds related 

to the Bank of America resolution agreement. These net cash inflows were largely offset by net cash used in operating 

activities of $6.4 billion and net cash used in financing activities of $91.4 billion. Net cash used in financing activities was 

primarily driven by debt redemptions in excess of proceeds received from the issuance of debt of consolidated trusts and a 

dividend payment made to Treasury under the senior preferred stock purchase agreement; partially offset by net proceeds 

from the issuance of debt of Fannie Mae.

Three Months Ended March 31, 2012. Cash and cash equivalents increased from December 31, 2011 by $4.5 billion to $22.0

billion as of March 31, 2012. Net cash generated from investing activities totaled $157.5 billion, resulting primarily from 

proceeds received from repayments of loans held for investment. These net cash inflows were offset by net cash used in 

operating activities of $114 million and net cash used in financing activities of $152.9 billion primarily attributable to a 

significant amount of debt redemptions in excess of proceeds received from the issuances of debt as well as proceeds 

received from Treasury under the senior preferred stock purchase agreement. 

Capital Management

Regulatory Capital

FHFA has announced that, during the conservatorship, our existing statutory and FHFA-directed regulatory capital 

requirements will not be binding and that FHFA will not issue quarterly capital classifications. We submit capital reports to 

FHFA and FHFA monitors our capital levels. The deficit of core capital over statutory minimum capital was $88.3 billion as 

of March 31, 2013 and $141.2 billion as of December 31, 2012. 
48

Under the terms of the senior preferred stock purchase agreement, starting January 1, 2013, we are required to pay Treasury 

each quarter a dividend, when, as and if declared, equal to the excess of our net worth as of the end of the preceding quarter 

over an applicable capital reserve. Therefore, we do not expect to eliminate our deficit of core capital over statutory 

minimum capital. We expect to pay Treasury a dividend of $59.4 billion by June 30, 2013. Accordingly, our deficiency of 

core capital over statutory minimum capital on a pro forma basis as of March 31, 2013, adjusted for the dividend to be paid 

by June 30, 2013, is $147.7 billion. 

Senior Preferred Stock Purchase Agreement 

As a result of the covenants under the senior preferred stock purchase agreement, Treasury’s ownership of the warrant to 

purchase up to 79.9% of the total shares of our common stock outstanding and the uncertainty regarding our future, we 

effectively no longer have access to equity funding except through draws under the senior preferred stock purchase 

agreement. 

Under the senior preferred stock purchase agreement, Treasury made a commitment to provide funding, under certain 

conditions, to eliminate deficits in our net worth. We have received a total of $116.1 billion from Treasury pursuant to the 

senior preferred stock purchase agreement as of March 31, 2013. The aggregate liquidation preference of the senior preferred 

stock, including the initial aggregate liquidation preference of $1.0 billion, remains at $117.1 billion. 

While we had a positive net worth as of March 31, 2013, in some future periods we could have a net worth deficit and in such 

case would be required to obtain additional funding from Treasury pursuant to the senior preferred stock purchase agreement. 

The amount of remaining available funding under the senior preferred stock purchase agreement is $117.6 billion as of 

March 31, 2013.

We are not permitted to redeem the senior preferred stock prior to the termination of Treasury’s funding commitment under 

the senior preferred stock purchase agreement. Moreover, we are not permitted to pay down the liquidation preference of the 

outstanding shares of senior preferred stock except to the extent of (1) accrued and unpaid dividends previously added to the 

liquidation preference and not previously paid down; and (2) quarterly commitment fees previously added to the liquidation 

preference and not previously paid down. In addition, if we issue any shares of capital stock for cash while the senior 

preferred stock is outstanding, the net proceeds of the issuance must be used to pay down the liquidation preference of the 

senior preferred stock; however, the liquidation preference of each share of senior preferred stock may not be paid down 

below $1,000 per share prior to the termination of Treasury’s funding commitment. Following the termination of Treasury’s 

funding commitment, we may pay down the liquidation preference of all outstanding shares of senior preferred stock at any 

time, in whole or in part. The limited circumstances under which Treasury’s funding commitment will terminate are described 

in “Business—Conservatorship and Treasury Agreements” in our 2012 Form 10-K. 

Dividends

Our first quarter dividend of $4.2 billion was declared by FHFA and paid by us on March 29, 2013. For each dividend period 

from January 1, 2013 through and including December 31, 2017, when, as and if declared, the dividend amount will be the 

amount, if any, by which our net worth as of the end of the immediately preceding fiscal quarter exceeds an applicable capital 

reserve amount. The applicable capital reserve amount will be $3.0 billion for 2013 and will be reduced by $600 million each 

year until it reaches zero on January 1, 2018. For each dividend period beginning in 2018, the dividend amount will be the 

entire amount of our net worth, if any, as of the end of the immediately preceding fiscal quarter. Based on the terms of the 

senior preferred stock purchase agreement with Treasury, we expect to pay Treasury a dividend for the second quarter of 

2013 of $59.4 billion by June 30, 2013. Accordingly, our net worth, on a pro forma basis as of March 31, 2013, adjusted for 

the dividend to be paid by June 30, 2013, is $3.0 billion, the applicable capital reserve amount. See “Risk Factors” for a 

discussion of the risks relating to our dividend obligations to Treasury on the senior preferred stock.

OFF-BALANCE SHEET ARRANGEMENTS

Our maximum potential exposure to credit losses relating to our outstanding and unconsolidated Fannie Mae MBS and other 

financial guarantees is primarily represented by the unpaid principal balance of the mortgage loans underlying outstanding 

and unconsolidated Fannie Mae MBS and other financial guarantees of $50.8 billion as of March 31, 2013 and $53.1 billion

as of December 31, 2012.

We also provide assistance to housing finance agencies under the temporary credit and liquidity facilities programs in which 

Treasury has purchased participation interests. For a description of these programs, see “MD&A—Off-Balance Sheet 

Arrangements—Treasury Housing Finance Agency Initiative” in our 2012 Form 10-K.
49

RISK MANAGEMENT

Our business activities expose us to the following three major categories of financial risk: credit risk, market risk (including 

interest rate and liquidity risk) and operational risk. We seek to actively monitor and manage these risks by using an 

established risk management framework. Our risk management framework is intended to provide the basis for the principles 

that govern our risk management activities. In addition to these financial risks, there is significant uncertainty regarding the 

future of our company, including how long we will continue to be in existence, which we discuss in more detail in 

“Legislative and Regulatory Developments—GSE Reform” in this report and in “Risk Factors” in our 2012 Form 10-K. This 

uncertainty, along with limitations on our employee compensation arising from our conservatorship, could affect our ability 

to retain and hire qualified employees. We are also subject to a number of other risks that could adversely impact our 

business, financial condition, earnings and cash flow, including model, legal, regulatory and compliance, reputational, 

strategic and execution risks that may arise due to a failure to comply with laws, regulations or ethical standards and codes of 

conduct applicable to our business activities and functions.

In this section we provide an update on our management of our major risk categories. For a more complete discussion of the 

financial risks we face and how we manage credit risk, market risk and operational risk, see “MD&A—Risk Management” 

and “Risk Factors” in our 2012 Form 10-K and in this report.

Credit Risk Management

We are generally subject to two types of credit risk: mortgage credit risk and institutional counterparty credit risk. Mortgage 

credit risk is the risk that a borrower will fail to make required mortgage payments. Institutional counterparty credit risk is the 

risk that our institutional counterparties may fail to fulfill their contractual obligations to us, including seller/servicers who 

are obligated to repurchase loans from us or reimburse us for losses in certain circumstances. 

Mortgage Credit Risk Management

We are exposed to credit risk on our mortgage credit book of business because we either hold mortgage assets, have issued a 

guaranty in connection with the creation of Fannie Mae MBS backed by mortgage assets or provided other credit 

enhancements on mortgage assets. While our mortgage credit book of business includes all of our mortgage-related assets, 

both on- and off-balance sheet, our guaranty book of business excludes non-Fannie Mae mortgage-related securities held in 

our retained mortgage portfolio for which we do not provide a guaranty. We provide information on the performance of nonFannie Mae mortgage-related securities held in our retained mortgage portfolio, including the impairment that we have 

recognized on these securities, in “Note 5, Investments in Securities.”

Mortgage Credit Book of Business

Table 30 displays the composition of our mortgage credit book of business as of the dates indicated. Our total single-family 

mortgage credit book of business accounted for 93% of our total mortgage credit book of business as of March 31, 2013 and 

December 31, 2012.
50

Table 30: Composition of Mortgage Credit Book of Business(1)

As of March 31, 2013 As of December 31, 2012

SingleFamily Multifamily TotalSingleFamily Multifamily Total

(Dollars in millions)

Mortgage loans and Fannie Mae MBS(2)

. . . . . . . . . . . $ 2,802,596 $ 187,737 $ 2,990,333 $ 2,797,909 $ 188,418 $ 2,986,327

Unconsolidated Fannie Mae MBS, held by third 

parties(3)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,775 1,487 16,262 15,391 1,524 16,915

Other credit guarantees(4)

. . . . . . . . . . . . . . . . . . . . . . . 18,333 16,196 34,529 19,977 16,238 36,215

Guaranty book of business. . . . . . . . . . . . . . . . . . . $ 2,835,704 $ 205,420 $ 3,041,124 $ 2,833,277 $ 206,180 $ 3,039,457

Agency mortgage-related securities(5)

. . . . . . . . . . . . . 12,383 32 12,415 12,294 32 12,326

Other mortgage-related securities(6)

. . . . . . . . . . . . . . . 36,289 26,870 63,159 37,524 27,535 65,059

Mortgage credit book of business . . . . . . . . . . . . . . $ 2,884,376 $ 232,322 $ 3,116,698 $ 2,883,095 $ 233,747 $ 3,116,842

Guaranty Book of Business Detail:

Conventional Guaranty Book of Business(7)

. . . . . . $ 2,768,395 $ 203,467 $ 2,971,862 $ 2,764,903 $ 204,112 $ 2,969,015

Government Guaranty Book of Business(8)

. . . . . . . $ 67,309 $ 1,953 $ 69,262 $ 68,374 $ 2,068 $ 70,442

__________

(1) Based on unpaid principal balance. 

(2) Consists of mortgage loans and Fannie Mae MBS recognized in our condensed consolidated balance sheets. The principal balance of 

resecuritized Fannie Mae MBS is included only once in the reported amount.

(3) Reflects unpaid principal balance of unconsolidated Fannie Mae MBS, held by third-party investors. The principal balance of 

resecuritized Fannie Mae MBS is included only once in the reported amount.

(4) Consists of single-family and multifamily credit enhancements that we have provided and that are not otherwise reflected in the table.

(5) Consists of mortgage-related securities issued by Freddie Mac and Ginnie Mae.

(6) Consists primarily of mortgage revenue bonds, Alt-A and subprime private-label securities and CMBS.

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

or one of its agencies. 

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

its agencies. 

In the following sections, we discuss the mortgage credit risk of the single-family and multifamily loans in our guaranty book 

of business. The credit statistics reported below, unless otherwise noted, pertain generally to the portion of our guaranty book 

of business for which we have access to detailed loan-level information, which constituted approximately 99% of each of our 

single-family conventional guaranty book of business and our multifamily guaranty book of business, excluding defeased 

loans as of March 31, 2013 and December 31, 2012. We typically obtain this data from the sellers or servicers of the 

mortgage loans in our guaranty book of business and receive representations and warranties from them as to the accuracy of 

the information. While we perform various quality assurance checks by sampling loans to assess compliance with our 

underwriting and eligibility criteria, we do not independently verify all reported information and we rely on lender 

representations regarding the accuracy of the characteristics of loans in our guaranty book of business. See “Risk Factors” in 

our 2012 Form 10-K for a discussion of the risk that we could experience mortgage fraud as a result of this reliance on lender 

representations.

Single-Family Mortgage Credit Risk Management

Our strategy in managing single-family mortgage credit risk consists of four primary components: (1) our acquisition and 

servicing policies along with our underwriting and servicing standards, including the use of credit enhancements; 

(2) portfolio diversification and monitoring; (3) management of problem loans; and (4) REO management. These approaches 

may increase our expenses and may not be effective in reducing our credit-related expenses or credit losses. We provide 

information on our credit-related expenses and credit losses in “Consolidated Results of Operations—Credit-Related 

(Income) Expenses.”

In evaluating our single-family mortgage credit risk, we closely monitor changes in housing and economic conditions and the 

impact of those changes on the credit risk profile and performance of our single-family mortgage credit book of business. We 

regularly review and provide updates to our underwriting standards and eligibility guidelines that take into consideration 
51

changing market conditions. The credit risk profile of our single-family mortgage credit book of business is influenced by, 

among other things, the credit profile of the borrower, features of the loan such as loan product type and the type of property 

securing the loan, the housing market and the general economy. We focus more on those loans that we believe pose a higher 

risk of default, which typically have been loans associated with higher mark-to-market LTV ratios, loans to borrowers with 

lower FICO credit scores and certain higher risk loan product categories, such as Alt-A loans. These and other factors affect 

both the amount of expected credit loss on a given loan and the sensitivity of that loss to changes in the economic 

environment.

The single-family credit statistics we focus on and report in the sections below generally relate to our single-family 

conventional guaranty book of business, which represents the substantial majority of our total single-family guaranty book of 

business. We believe we have limited credit exposure on our government loans, the majority of which are reverse mortgage 

loans insured by the federal government through FHA. The outstanding unpaid principal balance of reverse mortgage loans 

and Fannie Mae MBS backed by reverse mortgage loans in our guaranty book of business was $50.0 billion as of March 31, 

2013 and $50.2 billion as of December 31, 2012. 

Single-Family Acquisition and Servicing Policies and Underwriting and Servicing Standards 

As part of our efforts to mitigate future credit losses, we review delinquent and defaulted loans for compliance with our 

requirements. We use the information obtained from these loan quality reviews to provide feedback to lenders on possible 

areas for correction in their origination practices. In addition, we conduct reviews on random samples of performing loans 

soon after acquisition, in order to identify loans that may not have met our underwriting or eligibility requirements. We refer 

to these loans as having “underwriting defects.” By identifying loans with underwriting defects earlier in their lifecycle, we 

can provide earlier feedback to lenders, which may lead to systemic improvements in the loan origination process.

Performance for the random sample is measured using a significant findings rate, which represents the proportion of loans in 

the sample population with underwriting defects. The significant findings rate does not necessarily indicate how well the 

loans will ultimately perform or the extent to which the loans will become subject to repurchase requests. Instead, we use it to 

estimate the percentage of loans we acquired that may have had a significant error in the underwriting process.

Based on these reviews, we believe that over the last three years the percentage of loans we acquired that have underwriting 

defects has been reduced. As of March 31, 2013, the preliminary estimate of the non-Refi Plus loans we acquired in the 

twelve months ended September 30, 2012 that had underwriting defects was approximately 2.4%, compared with 

approximately 3.4% for loans acquired in the twelve months ended September 30, 2011 and approximately 5.2% for loans 

acquired in the twelve months ended September 30, 2010. These estimates are subject to change, perhaps materially, as we 

work through reconciliation of loans with defects acquired during these periods with originators.

Beginning in 2013, and in conjunction with our new representations and warranties framework, we have changed the way we 

review loan files in order to provide lenders with better and earlier feedback on underwriting defects. Our new framework, 

which is part of FHFA’s seller-servicer contract harmonization initiative, seeks to provide lenders a higher degree of certainty 

and clarity regarding their repurchase exposure and liability on future deliveries, as well as consistency around repurchase 

timelines and remedies. As a result of this new framework, we have made changes in our quality control process that move 

the primary focus of our quality control reviews from the time a loan defaults to shortly after the time the loan is delivered to 

us. We will also take advantage of recent advancements in tools and data-gathering. We do not yet know what impact this 

change will have on our significant findings rates, but it may limit the comparability between prior and future periods.

Table 31 displays our single-family conventional business volumes and our single-family conventional guaranty book of 

business for the periods indicated, based on certain key risk characteristics that we use to evaluate the risk profile and credit 

quality of our single-family loans.
52

Table 31: Risk Characteristics of Single-Family Conventional Business Volume and Guaranty Book of Business(1)

Percent of Single-Family

Conventional Business Volume(2)

For the

Three Months

Ended

March 31,

Percent of Single-Family

Conventional Guaranty

Book of Business(3)(4)

As of

2013 2012 March 31, 2013 December 31, 2012

Original LTV ratio:(5)

<= 60% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 % 29 % 23 % 23 %

60.01% to 70% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 16 15 15

70.01% to 80% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33 35 38 39

80.01% to 90%(6). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 9 10 10

90.01% to 100%(6). . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 7 10 10

100.01% to 125%(6). . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 4 3 2

Greater than 125%(6). . . . . . . . . . . . . . . . . . . . . . . . . . . 4 — 1 1

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100 % 100 % 100 % 100 %

Weighted average . . . . . . . . . . . . . . . . . . . . . . . . . . . 75 % 70 % 73 % 73 %

Average loan amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $211,454 $214,216 $ 158,200 $157,512

Estimated mark-to-market LTV ratio:(7)

<= 60% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29 % 28 %

60.01% to 70% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 15

70.01% to 80% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 22

80.01% to 90% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 13

90.01% to 100% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 9

100.01% to 125%. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 8

Greater than 125% . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 5

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100 % 100 %

Weighted average. . . . . . . . . . . . . . . . . . . . . . . . . . . 74 % 75 %

Product type:

Fixed-rate:(8)

Long-term. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76 % 72 % 72 % 72 %

Intermediate-term. . . . . . . . . . . . . . . . . . . . . . . . . . . 22 24 17 17

Interest-only . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . * * 1 1

Total fixed-rate. . . . . . . . . . . . . . . . . . . . . . . . . . . 98 96 90 90

Adjustable-rate:

Interest-only . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . * * 3 3

Other ARMs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 4 7 7

Total adjustable-rate . . . . . . . . . . . . . . . . . . . . . . . 2 4 10 10

Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100 % 100 % 100 % 100 %

Number of property units:

1 unit. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98 % 98 % 97 % 97 %

2-4 units . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 2 3 3

Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100 % 100 % 100 % 100 %

Property type:

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

Condo/Co-op . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 9 9 9

Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100 % 100 % 100 % 100 %
53

Percent of Single-Family

Conventional Business Volume(2)

For the

Three Months

Ended

March 31,

Percent of Single-Family

Conventional Guaranty

Book of Business(3)(4)

As of

2013 2012 March 31, 2013 December 31, 2012

Occupancy type:

Primary residence. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88 % 89 % 89 % 89 %

Second/vacation home . . . . . . . . . . . . . . . . . . . . . . . . . 4 4 4 4

Investor. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 7 7 7

Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100 % 100 % 100 % 100 %

FICO credit score at origination:

< 620. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 % 1 % 3 % 3 %

620 to < 660 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 2 6 6

660 to < 700 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 6 12 12

700 to < 740 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 15 19 20

>= 740 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71 76 60 59

Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100 % 100 % 100 % 100 %

Weighted average . . . . . . . . . . . . . . . . . . . . . . . . . . 757 763 743 742

Loan purpose:

Purchase . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 % 17 % 27 % 28 %

Cash-out refinance . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 16 23 24

Other refinance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68 67 50 48

Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100 % 100 % 100 % 100 %

Geographic concentration:(9)

Midwest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 % 15 % 15 % 15 %

Northeast . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 19 19 19

Southeast . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 19 23 23

Southwest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 15 16 16

West . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33 32 27 27

Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100 % 100 % 100 % 100 %

Origination year:

< = 2004 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 % 13 %

2005 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 5

2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 5

2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 7

2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 5

2009 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 11

2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 13

2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 15

2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28 26

2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 —

Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100 % 100 %

__________

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

(1) We reflect second lien mortgage loans in the original LTV ratio calculation only when we own both the first and second lien mortgage 

loans or we own only the second lien mortgage loan. Second lien mortgage loans represented less than 0.5% of our single-family 

conventional guaranty book of business as of March 31, 2013 and December 31, 2012. Second lien mortgage loans held by third parties 

are not reflected in the original LTV or mark-to-market LTV ratios in this table.

(2) Calculated based on unpaid principal balance of single-family loans for each category at time of acquisition. Single-family business 

volume refers to both single-family mortgage loans we purchase for our retained mortgage portfolio and single-family mortgage loans 

we guarantee.
54

(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) Our single-family conventional guaranty book of business includes jumbo-conforming and high-balance loans that represented 

approximately 5% of our single-family conventional guaranty book of business as of March 31, 2013 and December 31, 2012. See 

“Business—Our Charter and Regulation of Our Activities—Charter Act—Loan Standards” and “Risk Management—Credit Risk 

Management—Single Family Mortgage Credit Risk Management—Credit Profile Summary” in our 2012 Form 10-K for additional 

information on loan limits.

(5) 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.

(6) We purchase loans with original LTV ratios above 80% to fulfill our mission to serve the primary mortgage market and provide 

liquidity to the housing system. Except as permitted under HARP, our charter generally requires primary mortgage insurance or other 

credit enhancement for loans that we acquire that have an LTV ratio over 80%.

(7) 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.

(8) 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. Loans with interest-only terms are included in the interest-only category regardless of their 

maturities.

(9) Midwest consists of IL, IN, IA, MI, MN, NE, ND, OH, SD and WI. Northeast includes 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.

Credit Profile Summary

The single-family loans we purchased or guaranteed during the first quarter of 2013 have a strong credit profile with a 

weighted average original LTV ratio of 75%, a weighted average FICO credit score of 757, and a product mix with a 

significant percentage of fully amortizing fixed-rate mortgage loans. The average original LTV ratio of single-family loans 

we acquired in the first quarter of 2013, excluding HARP loans, was 68%, compared with 113% for HARP loans. The 

weighted average FICO credit score of the single-family mortgage loans we acquired in the first quarter of 2013, excluding 

HARP loans, was 762, compared with 727 for HARP loans.

The credit profile of our future acquisitions will depend on many factors, including our future pricing and eligibility 

standards and those of mortgage insurers and FHA, the percentage of loan originations representing refinancings, our future 

objectives, government policy, market and competitive conditions, and the volume and characteristics of loans we acquire 

under HARP. We expect the ultimate performance of all our loans will be affected by borrower behavior, public policy and 

macroeconomic trends, including unemployment, the economy and home prices.

The increase in our weighted average original LTV ratio in the first quarter of 2013 compared with the first quarter of 2012 

was primarily due to an increase in acquisitions of refinancings of loans with LTV ratios above 125% under HARP, which we 

discuss below. In addition, the increase in our weighted average original LTV ratio in the first quarter of 2013 was driven by 

an increase in acquisitions of home purchase mortgages with LTV ratios greater than 80%, primarily as a result of: (1) most 

mortgage insurance companies lowering their premiums in 2012 for loans with higher credit scores; and (2) FHA

implementing price increases in its annual mortgage insurance premium in 2012. These price changes improved the 

economics of purchasing private mortgage insurance as compared with purchasing FHA insurance and helped drive an 

increase in our acquisition of loans with LTV ratios over 80%. The home purchase mortgages with LTV ratios greater than 

80% that we acquired have otherwise strong credit profiles, with weighted average FICO scores of 753.

The prolonged and severe decline in home prices from 2006 through the first quarter of 2012 resulted in an increase in the 

overall estimated weighted average mark-to-market LTV ratio of our single-family conventional guaranty book of business. If 

home prices were to decline, more loans would have mark-to-market LTV ratios greater than 100%, which increases the risk 

of delinquency and default. However, in the first quarter of 2013, as home prices continued to increase, the estimated 

weighted average mark-to-market LTV ratio of our single-family conventional guaranty book of business decreased. As of 

March 31, 2013, the estimated weighted average mark-to market LTV ratio of our single-family conventional guaranty book 

of business was 74% compared with 75% as of December 31, 2012 and 80% as of March 31, 2012. The portion of our singlefamily conventional guaranty book of business with an estimated mark-to-market LTV ratio greater than 100% was 13% as of 

March 31, 2013 and December 31, 2012, compared with 19% as of March 31, 2012.
55

HARP and Refi Plus Loans

Since 2009, our acquisitions have included a significant number of loans that are refinancings of existing Fannie Mae loans 

under HARP, which was designed to expand refinancing opportunities for borrowers who may otherwise be unable to 

refinance their mortgage loans due to a decline in home values. The loans we acquire under HARP have higher LTV ratios 

than we would otherwise permit, greater than 100% in some cases. We offer HARP under our Refi Plus initiative, which 

offers additional refinancing flexibility to eligible borrowers who are current on their loans and whose loans are owned or 

guaranteed by us and meet certain additional criteria. Refi Plus includes but is not limited to HARP, under which we allow 

our borrowers who have mortgage loans with current LTV ratios greater than 80% to refinance their mortgages without 

obtaining new mortgage insurance in excess of what is already in place. Under HARP, we were previously authorized to 

acquire loans only if their current LTVs did not exceed 125% for fixed-rate loans and did not exceed 105% for adjustable-rate 

mortgages. Changes to HARP implemented in the first half of 2012 extended refinancing flexibility to eligible borrowers 

with loans that have LTV ratios greater than 125% for fixed-rate loans, which make the benefits of HARP available to a 

greater number of borrowers. In addition to the high LTV ratios that characterize HARP loans, some borrowers for HARP and 

Refi Plus loans also have lower FICO credit scores and/or may provide less documentation than we would otherwise require. 

On April 11, 2013, FHFA announced the extension of the ending date for HARP to December 31, 2015. 

Loans we acquire under Refi Plus in general and HARP in particular represent refinancings of loans that are already in our 

guaranty book of business. The credit risk associated with the acquired loans essentially replaces the credit risk that we 

already held prior to the refinancing. These loans may not perform as well as the other loans we have acquired since the 

beginning of 2009. However, we expect these loans will perform better than the loans they replace because HARP and Refi 

Plus loans should either reduce the borrowers’ monthly payments or provide more stable terms than the borrowers’ old loans 

(for example, by refinancing into a mortgage with a fixed interest rate instead of an adjustable rate). 

As a result of continued low mortgage rates, the percentage of acquisitions that are refinanced loans, including loans acquired 

under our Refi Plus initiative, which includes HARP, remains elevated. Due to the increase in the volume of HARP loans 

with higher LTV ratios, the weighted average LTV ratio at origination for our acquisitions in the first quarter of 2013 was 

75%, compared with 70% for our acquisitions in the first quarter of 2012. HARP loans constituted approximately 16% of our 

total single-family acquisitions in the first quarter of 2013, compared with approximately 12% of total single-family 

acquisitions in the first quarter of 2012.

We expect that if interest rates remain low we will continue to acquire a high volume of refinancings under HARP for the 

program’s duration or until there is no longer a large population of borrowers with loans that have high LTV ratios who are 

willing to refinance and would benefit from refinancing. In particular, we expect to acquire many refinancings with LTV

ratios greater than 125%, because borrowers were unable to refinance loans with LTV ratios greater than 125% in large 

numbers under HARP until the second quarter of 2012. Approximately 4% of our total single-family conventional business 

volume for the first quarter of 2013 consisted of HARP refinanced loans with LTV ratios greater than 125% at the time of 

acquisition.

Table 32 displays the serious delinquency rates and current mark-to-market LTV ratios as of March 31, 2013 of single-family 

loans we acquired under HARP and Refi Plus, compared with the other single-family loans we acquired since the beginning 

of 2009.

Table 32: Selected Credit Characteristics of Single-Family Conventional Loans Acquired under HARP and Refi Plus

As of March 31, 2013

Percentage

of New Book

Current

Mark-toMarket 

LTV Ratio

> 100%

FICO Credit 

Score at 

Origination(1)

Serious

Delinquency

Rate

HARP(2)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14% 38% 739 0.88%

Other Refi Plus(3)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 * 753 0.33

Total Refi Plus. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 21 745 0.59

Non-Refi Plus(4)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74 1 762 0.26

Total new book of business(5)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% 6% 758 0.35%

__________

* Represents less than 0.5%.

(1) In the case of refinancings, represents FICO credit score at the time of the refinancing.
56

(2) HARP loans have LTV ratios at origination in excess of 80%. In the fourth quarter of 2012, we revised our presentation of the data to 

reflect all loans under our Refi Plus program with LTV ratios at origination in excess of 80% as HARP loans. Previously we did not 

reflect loans that were backed by second homes or investor properties as HARP loans.

(3) Other Refi Plus includes all other Refi Plus loans that are not HARP loans.

(4) Includes primarily other refinancings and home purchase mortgages.

(5) Refers to single-family mortgage loans we have acquired since the beginning of 2009.

Alt-A and Subprime Loans

We classify certain loans as subprime or Alt-A so that we can discuss our exposure to subprime and Alt-A loans in this 

Form 10-Q and elsewhere. However, there is no universally accepted definition of subprime or Alt-A loans. Our single-family 

conventional guaranty book of business includes loans with some features that are similar to Alt-A loans or subprime loans 

that we have not classified as Alt-A or subprime because they do not meet our classification criteria.

We do not rely solely on our classifications of loans as Alt-A or subprime to evaluate the credit risk exposure relating to these 

loans in our single-family conventional guaranty book of business. For more information about the credit risk characteristics 

of loans in our single-family guaranty book of business, see “Note 3, Mortgage Loans,” and “Note 6, Financial Guarantees.”

Our exposure to Alt-A and subprime loans included in our single-family conventional guaranty book of business, based on 

the classification criteria described in this section, does not include (1) our investments in private-label mortgage-related 

securities backed by Alt-A and subprime loans or (2) resecuritizations, or wraps, of private-label mortgage-related securities 

backed by Alt-A mortgage loans that we have guaranteed. As a result of our decision to discontinue the purchase of newly 

originated Alt-A loans, except for those that represent the refinancing of a loan we acquired prior to 2009, we expect our 

acquisitions of Alt-A mortgage loans to continue to be minimal in future periods and the percentage of the book of business 

attributable to Alt-A to continue to decrease over time. We are also not currently acquiring newly originated subprime loans, 

although we are acquiring refinancings of existing Fannie Mae subprime loans in connection with our Refi Plus initiative. 

Unlike the loans they replace, these refinancings are not included in our reported subprime loans because they do not meet 

our classification criteria for subprime loans.

We have classified a mortgage loan as Alt-A if and only if the lender that delivered the loan to us classified the loan as Alt-A, 

based on documentation or other features. We have classified a mortgage loan as subprime if and only if the loan was 

originated by a lender specializing in subprime business or by a subprime division of a large lender; however, we exclude 

loans originated by these lenders from the subprime classification if we acquired the loans in accordance with our standard 

underwriting criteria, which typically require compliance by the seller with our Selling Guide (including standard 

representations and warranties) and/or evaluation of the loans through our Desktop Underwriter® system. The unpaid 

principal balance of Alt-A loans included in our single-family conventional guaranty book of business of $147.8 billion as of 

March 31, 2013, represented approximately 5.4% of our single-family conventional guaranty book of business. The unpaid 

principal balance of subprime loans included in our single-family conventional guaranty book of business of $4.8 billion as 

of March 31, 2013, represented approximately 0.2% of our single-family conventional guaranty book of business.

Problem Loan Management

Our problem loan management strategies are primarily focused on reducing defaults to avoid losses that would otherwise 

occur and pursuing foreclosure alternatives to attempt to minimize the severity of the losses we incur. If a borrower does not 

make required payments, or is in jeopardy of not making payments, we work with the servicers of our loans to offer workout 

solutions to minimize the likelihood of foreclosure as well as the severity of loss. Our loan workouts reflect our various types 

of home retention solutions, including loan modifications, repayment plans and forbearances, and foreclosure alternatives, 

including short sales and deeds-in-lieu of foreclosure. When appropriate, we seek to move to foreclosure expeditiously.

Loan modifications involve changes to the original mortgage terms such as product type, interest rate, amortization term, 

maturity date and/or unpaid principal balance. Additionally, we currently offer up to twelve months of forbearance for those 

homeowners who are unemployed as an additional tool to help homeowners avoid foreclosure.

Foreclosure alternatives may be more appropriate if the borrower has experienced a significant adverse change in financial 

condition due to events such as unemployment or reduced income, divorce, or unexpected issues like medical bills and is 

therefore no longer able to make the required mortgage payments. Since the cost of foreclosure can be significant to both the 

borrower and Fannie Mae, to avoid foreclosure and satisfy the first-lien mortgage obligation, our servicers work with a 

borrower to accept a deed-in-lieu of foreclosure whereby the borrower voluntarily signs over the title to their property to the 

servicer or sells the home prior to foreclosure in a short sale. These alternatives are designed to reduce our credit losses while 

helping borrowers avoid having to go through a foreclosure. We work to obtain the highest price possible for the properties 
57

sold in short sales and, in the first quarter of 2013, we received net sales proceeds from our short sale transactions equal to 

64% of the loans’ unpaid principal balance, compared with 58% in the first quarter of 2012.

In the following section, we present statistics on our problem loans, describe specific efforts undertaken to manage these 

loans and prevent foreclosures and provide metrics regarding the performance of our loan workout activities. Unless 

otherwise noted, single-family delinquency data is calculated based on number of loans. We include single-family 

conventional loans that we own and that back Fannie Mae MBS in the calculation of the single-family delinquency rate. 

Seriously delinquent loans are loans that are 90 days or more past due or in the foreclosure process. Percentage of book 

outstanding calculations are based on the unpaid principal balance of loans for each category divided by the unpaid principal 

balance of our total single-family guaranty book of business for which we have detailed loan-level information.

Problem Loan Statistics

The following table displays the delinquency status of loans in our single-family conventional guaranty book of business 

(based on number of loans) as of the dates indicated.

Table 33: Delinquency Status of Single-Family Conventional Loans

As of

March 31,

2013

December 31,

2012

March 31,

2012

Delinquency status:

30 to 59 days delinquent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.72% 1.96% 1.78%

60 to 89 days delinquent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.53 0.66 0.59

Seriously delinquent. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.02 3.29 3.67

Percentage of seriously delinquent loans that have been delinquent for

more than 180 days . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74% 72% 73%

Our single-family serious delinquency rate has decreased each quarter since the first quarter of 2010. The decrease in our 

serious delinquency rate is primarily the result of home retention solutions, foreclosure alternatives and completed 

foreclosures, as well as our acquisition of loans with stronger credit profiles since the beginning of 2009. Our new singlefamily book of business represented 69% of our single-family guaranty book of business as of March 31, 2013.

Although our serious delinquency rate has decreased, our serious delinquency rate and the period of time that loans remain 

seriously delinquent continue to be negatively impacted by the length of time required to complete a foreclosure. High levels 

of foreclosures, changes in state foreclosure laws, new federal and state servicing requirements imposed by regulatory actions 

and legal settlements, and the need for servicers to adapt to these changes have lengthened the time it takes to foreclose on a 

mortgage loan in many states. Longer foreclosure timelines result in these loans remaining in our book of business for a 

longer time, which has caused our serious delinquency rate to decrease more slowly in the last few years than it would have if 

the pace of foreclosures had been faster. We believe the slow pace of foreclosures will continue to negatively affect our 

single-family serious delinquency rates, foreclosure timelines and credit-related expenses (income). Other factors such as the 

pace of loan modifications, changes in home prices, unemployment levels and other macroeconomic conditions also 

influence serious delinquency rates. We expect the number of our single-family loans in our legacy book of business that are 

seriously delinquent to remain above pre-2008 levels for years.

Table 34 displays a comparison, by geographic region and by loans with and without credit enhancement, of the serious 

delinquency rates as of the dates indicated for single-family conventional loans in our single-family guaranty book of 

business. Serious delinquency rates vary by geographic region due to many factors including regional home prices, 

unemployment, economic conditions and state foreclosure timelines.
58

Table 34: Single-Family Serious Delinquency Rates

As of

March 31, 2013 December 31, 2012 March 31, 2012

Percentage 

ofBook 

Outstanding

Serious

Delinquency 

Rate

Percentage 

ofBook 

Outstanding

Serious

Delinquency 

Rate

Percentage 

ofBook 

Outstanding

Serious

Delinquency 

Rate

Single-family conventional delinquency 

rates by geographic region:(1)

Midwest . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 % 2.61% 15 % 2.92% 15 % 3.39%

Northeast. . . . . . . . . . . . . . . . . . . . . . . . . . . 19 4.30 19 4.40 19 4.30

Southeast. . . . . . . . . . . . . . . . . . . . . . . . . . . 23 4.38 23 4.78 23 5.36

Southwest . . . . . . . . . . . . . . . . . . . . . . . . . . 16 1.56 16 1.76 16 2.10

West . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 2.00 27 2.28 27 2.72

Total single-family conventional loans . 100 % 3.02% 100 % 3.29% 100 % 3.67%

Single-family conventional loans:

Credit enhanced . . . . . . . . . . . . . . . . . . . . . 14 % 6.43% 14 % 7.09% 14 % 8.35%

Non-credit enhanced. . . . . . . . . . . . . . . . . . 86 2.49 86 2.70 86 2.93

Total single-family conventional loans . 100 % 3.02% 100 % 3.29% 100 % 3.67%

__________

(1) See footnote 9 to “Table 31: Risk Characteristics of Single-Family Conventional Business Volume and Guaranty Book of Business” for 

states included in each geographic region.

While loans across our single-family guaranty book of business have been affected by the weak market conditions, loans in 

certain states, certain higher-risk loan categories, such as Alt-A loans and loans with higher mark-to-market LTVs, and our 

2005 through 2008 loan vintages continue to exhibit higher than average delinquency rates and/or account for a 

disproportionate share of our credit losses. California, Florida, Arizona, Nevada and some states in the Midwest experienced 

more significant declines in home prices coupled with unemployment rates that remain high.

Table 35 displays the serious delinquency rates and other financial information for our single-family conventional loans with 

some of these higher-risk characteristics as of the dates indicated. The reported categories are not mutually exclusive.
59

Table 35: Single-Family Conventional Serious Delinquency Rate Concentration Analysis

As of 

March 31, 2013 December 31, 2012 March 31, 2012

Unpaid

Principal

Balance

Percentage

of Book

Outstanding

Serious

Delinquency

Rate

Estimated 

Mark-toMarket 

LTV

Ratio (1) 

Unpaid

Principal

Balance

Percentage

of Book

Outstanding

Serious

Delinquency

Rate

Estimated 

Mark-toMarket 

LTV

Ratio (1) 

Unpaid

Principal

Balance

Percentage

of Book

Outstanding

Serious

Delinquency

Rate

Estimated 

Mark-toMarket 

LTV

Ratio (1) 

(Dollars in millions)

States:

Arizona . . . . . . . . . . . . . . $ 65,432 2% 1.85% 83% $ 65,277 2% 2.14% 88% $ 66,544 2% 3.22% 105%

California . . . . . . . . . . . . 526,451 19 1.46 69 523,602 19 1.69 73 523,745 19 2.24 81

Florida. . . . . . . . . . . . . . . 163,063 6 9.36 93 165,377 6 10.06 96 173,178 6 11.35 106

Nevada . . . . . . . . . . . . . . 26,885 1 6.01 111 27,206 1 6.70 117 28,405 1 7.06 138

Select Midwest states(2)

. 277,501 10 3.17 81 278,455 10 3.51 81 283,725 10 4.02 85

All other states . . . . . . . . 1,701,248 62 2.65 71 1,697,209 62 2.85 71 1,701,671 62 3.01 74

Product type:

Alt-A. . . . . . . . . . . . . . . . 147,806 5 10.80 94 155,469 6 11.36 96 175,908 6 12.03 103

Subprime. . . . . . . . . . . . . 4,785 * 19.49 105 5,035 * 20.60 107 5,609 * 21.67 113

Vintages:

2005 . . . . . . . . . . . . . . . . 126,555 5 7.71 88 139,204 5 7.79 90 178,996 7 7.23 97

2006 . . . . . . . . . . . . . . . . 125,476 5 11.96 103 138,040 5 12.15 105 176,489 6 11.58 113

2007 . . . . . . . . . . . . . . . . 176,168 6 12.71 105 195,308 7 12.99 107 253,587 9 12.27 114

2008 . . . . . . . . . . . . . . . . 109,742 4 6.67 87 124,747 5 6.63 88 176,632 6 5.74 94

All other vintages . . . . . . 2,222,639 80 1.25 68 2,159,827 78 1.36 69 1,991,564 72 1.49 70

Estimated mark-to-market

LTV ratio:

Greater than 100%(1)

. . . . 347,879 13 12.83 126 374,010 13 13.42 128 515,774 19 12.77 130

Select combined risk

characteristics:

Original LTV ratio > 90%

and FICO score < 620 . . 19,972 1 13.14 112 19,416 1 14.76 113 18,663 1 16.83 117

__________

* Percentage is less than 0.5%.

(1) Second lien mortgage loans held by third parties are not included in the calculation of the estimated mark-to-market LTV ratios.

(2) Consists of Illinois, Indiana, Michigan and Ohio.

Loan Workout Metrics

Table 36 displays statistics on our single-family loan workouts that were completed, by type, for the periods indicated. These 

statistics include loan modifications but do not include trial modifications, loans to certain borrowers who have received 

bankruptcy relief that are classified as TDRs, or repayment and forbearance plans that have been initiated but not completed.
60

Table 36: Statistics on Single-Family Loan Workouts

For the Three Months Ended March 31,

2013 2012

Unpaid

Principal

Balance

Number of

Loans

Unpaid

Principal

Balance

Number of

Loans

(Dollars in millions)

Home retention strategies:

Modifications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 7,917 43,153 $ 8,881 46,671

Repayment plans and forbearances completed(1). . . . . . . . . . . . . . . 575 4,482 1,292 8,864

Total home retention strategies. . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,492 47,635 10,173 55,535

Foreclosure alternatives:

Short sales. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,593 12,139 4,009 18,614

Deeds-in-lieu of foreclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 660 3,987 613 3,599

Total foreclosure alternatives. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,253 16,126 4,622 22,213

Total loan workouts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $11,745 63,761 $14,795 77,748

Loan workouts as a percentage of single-family guaranty book of 

business(2). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.66 % 1.46 % 2.07 % 1.75 %

__________

(1) 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.

(2) Calculated based on annualized loan workouts during the period as a percentage of our single-family guaranty book of business as of the 

end of the period.

The volume of home retention solutions completed in the first quarter of 2013 decreased compared with the first quarter of 

2012, primarily due to a decline in the number of delinquent loans in the first quarter of 2013, compared with the first quarter 

of 2012.

Despite the decline in the number of delinquent loans, the volume of trial modifications we initiated in the first quarter of 

2013 increased compared with the first quarter of 2012 as a result of our increased efforts to make home retention solutions 

available to more distressed borrowers. During the first quarter of 2013, we initiated approximately 44,200 trial 

modifications, including Home Affordable Modification Program (“HAMP”) and non-HAMP, compared with approximately 

41,100 trial modifications during the first quarter of 2012. We also initiated other types of workouts, such as repayment plans 

and forbearances.

HAMP guidance directs servicers either to cancel or to convert trial modifications after three or four monthly payments, 

depending on the borrower’s circumstances. As of March 31, 2013, 57% of our HAMP trial modifications had been 

converted to permanent HAMP modifications since the inception of the program. The conversion rate for HAMP

modifications since June 1, 2010, when servicers became required to perform a full verification of a borrower’s eligibility 

prior to offering a HAMP trial modification, was 87% as of March 31, 2013. The average length of a trial period for HAMP

modifications initiated after June 1, 2010 was four months.

We continue to work with our servicers to implement our home retention and foreclosure prevention initiatives. Our approach 

to workouts continues to focus on the large number of borrowers facing financial hardships. Accordingly, the vast majority of 

loan modifications we have completed since 2009 have been concentrated on deferring or lowering the borrowers’ monthly 

mortgage payments to allow borrowers to work through their hardships. On March 27, 2013, FHFA announced that we and 

Freddie Mac will offer a new simplified loan modification solution. Under this streamlined modification initiative, beginning 

July 1, 2013, our servicers will be required to offer loan modifications to eligible borrowers who are at least 90 days 

delinquent on their mortgages without requiring financial or hardship documentation. Eligible borrowers must demonstrate a 

willingness and ability to pay by making three on-time trial payments, after which the mortgage will be permanently 

modified. This program is scheduled to expire on August 1, 2015.

Table 37 displays the percentage of our loan modifications completed during the first quarter of 2012, all of 2011 and the last 

nine months of 2010 that were current or paid off one year after modification, as well as the percentage of our loan 

modifications completed during the first quarter of 2011 and the last nine months of 2010 that were current or paid off two 

years after modification. 
61

Table 37: Percentage of Loan Modifications That Were Current or Paid Off at One and Two Years Post-Modification(1)

2012 2011 2010

Q1 Q4 Q3 Q2 Q1 Q4 Q3 Q2

One Year Post-Modification 

HAMP Modifications . . . . . . . . . . . . . . . . . . . . . . . 79% 78% 78% 78% 77% 74% 74% 74%

Non-HAMP Modifications . . . . . . . . . . . . . . . . . . . 70 66 68 69 69 67 67 65

Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73 71 72 75 74 69 70 70

Two Years Post-Modification 

HAMP Modifications . . . . . . . . . . . . . . . . . . . . . . . 74% 70% 69% 68%

Non-HAMP Modifications . . . . . . . . . . . . . . . . . . . 67 64 63 61

Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71 65 65 65

__________

(1) Excludes loans that were classified as subprime ARMs that were modified into fixed-rate mortgages. Modifications do not reflect loans 

currently in trial modifications.

There is significant uncertainty regarding the ultimate long term success of our current modification efforts. We believe the 

performance of our workouts will be highly dependent on economic factors, such as unemployment rates, household wealth 

and income, and home prices. Modifications, even those with reduced monthly payments, may also not be sufficient to help 

borrowers with second liens and other significant non-mortgage debt obligations. FHFA, other agencies of the U.S. 

government or Congress may ask us to undertake new initiatives to support the housing and mortgage markets should our 

current modification efforts ultimately not perform in a manner that results in the stabilization of these markets. See “Risk 

Factors” in our 2012 Form 10-K for a discussion of efforts we may be required or asked to undertake and their potential 

effect on us.

REO Management

Foreclosure and REO activity affect the amount of credit losses we realize in a given period. Table 38 displays our 

foreclosure activity, by region, for the periods indicated. Regional REO acquisition and charge-off trends generally follow a 

pattern that is similar to, but lags, that of regional delinquency trends.

Table 38: Single-Family Foreclosed Properties

For the Three Months

Ended March 31,

2013 2012

Single-family foreclosed properties (number of properties):

Beginning of period inventory of single-family foreclosed properties (REO)(1)

. . . . . . . . . . . . . . 105,666 118,528

Acquisitions by geographic area:(2)

Midwest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,983 14,713

Northeast. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,454 3,219

Southeast. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,294 15,470

Southwest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,317 7,946

West . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,669 6,352

Total properties acquired through foreclosure(1). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38,717 47,700

Dispositions of REO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (42,934) (52,071)

End of period inventory of single-family foreclosed properties (REO)(1)

. . . . . . . . . . . . . . . . . . . . 101,449 114,157

Carrying value of single-family foreclosed properties (dollars in millions)(3)

. . . . . . . . . . . . . . . . . $ 9,263 $ 9,721

Single-family foreclosure rate(4)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.89 % 1.07 %

__________

(1) Includes held for use properties, which are reported in our condensed consolidated balance sheets as a component of “Other assets” and 

acquisitions through deeds-in-lieu of foreclosure.
62

(2) See footnote 9 to “Table 31: Risk Characteristics of Single-Family Conventional Business Volume and Guaranty Book of Business” for 

states included in each geographic region.

(3) Excludes foreclosed property claims receivables, which are reported in our condensed consolidated balance sheets as a component of 

“Acquired property, net.”

(4) 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 guaranty book of business as of the end of each respective period.

The number of properties acquired through foreclosure declined in the first quarter of 2013 compared with the first quarter of 

2012 due to a decline in the number of seriously delinquent loans in our single-family book of business. The slow pace of 

foreclosures, caused by continuing foreclosure process issues encountered by our servicers and changing legislative, 

regulatory and judicial requirements, continues to impact the number of foreclosure acquisitions for the periods presented.

We continue to manage our REO inventory to minimize costs and maximize sales proceeds. However, as we are unable to 

market and sell a large portion of our inventory, the pace at which we can dispose of our properties slows, resulting in higher 

foreclosed property expenses related to costs associated with ensuring that the property is vacant and costs of maintaining the 

property.

Table 39 displays the current status of our single-family foreclosed property inventory, including the percentage of our 

inventory that we are unable to market, as of the dates indicated. 

Table 39: Single-Family Foreclosed Property Status

Percent of Single-Family

Foreclosed Properties

As of

March 31,

2013

December 31,

2012

Available-for-sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 % 28 %

Offer accepted(1)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 17

Appraisal stage(2)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 10

Unable to market:

Redemption status(3)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 11

Occupied status(4)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 14

Rental property(5)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 5

Properties being repaired. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 7

Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 8

Total unable to market. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42 45

Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100 % 100 %

__________

(1) Properties for which an offer has been accepted, but the property has not yet been sold. 

(2) Properties that are pending appraisals and being prepared to be listed for sale. 

(3) Properties that are within the period during which state laws allows the former mortgagor and second lien holders to redeem the 

property. 

(4) Properties that are still occupied, and for which the eviction process is not yet complete. 

(5) Properties with a tenant living in the home under our Tenant in Place or Deed for Lease programs.

Multifamily Mortgage Credit Risk Management

The credit risk profile of our multifamily mortgage credit book of business is influenced by the structure of the financing, the 

type and location of the property, the condition and value of the property, the financial strength of the borrower and lender, 

market and sub-market trends and growth, and the current and anticipated cash flows from the property. These and other 

factors affect both the amount of expected credit loss on a given loan and the sensitivity of that loss to changes in the 

economic environment. We provide information on our credit-related income (expenses) and credit losses in “Business 

Segment Results—Multifamily Business Results.”
63

Multifamily Acquisition Policy and Underwriting Standards

Our Multifamily business, together with our Enterprise Risk Management division, which provides independent risk 

oversight of the Multifamily business, is responsible for pricing and managing the credit risk on multifamily mortgage loans 

we purchase and on Fannie Mae MBS backed by multifamily loans (whether held in our retained mortgage portfolio or held 

by third parties). Our primary multifamily delivery channel is the Delegated Underwriting and Servicing, or DUS®, program, 

which is comprised of multiple lenders that span the spectrum from large financial institutions to smaller independent 

multifamily lenders. Multifamily loans that we purchase or that back Fannie Mae MBS are either underwritten by a Fannie 

Mae-approved lender or subject to our underwriting review prior to closing, depending on the product type and/or loan size. 

Loans delivered to us by DUS lenders and their affiliates represented 89% of our multifamily guaranty book of business as of 

March 31, 2013 and 88% as of December 31, 2012. 

We use various types of credit enhancement arrangements for our multifamily loans, including lender risk-sharing, lender 

repurchase agreements, pool insurance, subordinated participations in mortgage loans or structured pools, cash and letter of 

credit collateral agreements, and cross-collateralization/cross-default provisions. The most prevalent form of credit 

enhancement on multifamily loans is lender risk-sharing. Lenders in the DUS program typically share in loan-level credit 

losses in one of two ways: (1) they bear losses up to the first 5% of the unpaid principal balance of the loan and share in 

remaining losses up to a prescribed limit; or (2) they share up to one-third of the credit losses on an equal basis with us. NonDUS lenders typically share or absorb credit losses based on a negotiated percentage of the loan or the pool balance. 

Table 40 displays the percentage of the unpaid principal balance of loans in our multifamily guaranty book of business with 

lender risk-sharing and with no recourse to the lender as of the dates indicated.

Table 40: Multifamily Lender Risk-Sharing

As of

March 31,

2013

December 31,

2012

Lender risk-sharing

DUS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76% 73%

Non-DUS negotiated. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 8

No recourse to the lender. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 19

At the time of our purchase or guarantee of multifamily mortgage loans, we and our lenders rely on sound underwriting 

standards, which often include third-party appraisals and cash flow analysis. Our standards for multifamily loans specify 

maximum original LTV and minimum original debt service coverage ratio (“DSCR”) values that vary based on loan 

characteristics. Our experience has been that original LTV and DSCR values have been reliable indicators of future credit 

performance.

Table 41 displays original LTV and DSCR metrics for our multifamily guaranty book of business as of the dates indicated. 

Table 41: Multifamily Guaranty Book of Business Key Risk Characteristics

As of

March 31,

2013

December 31,

2012

March 31,

2012

Weighted average original LTV. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66 % 66 % 66 %

Original LTV greater than 80% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 4 4

Original DSCR less than or equal to 1.10 . . . . . . . . . . . . . . . . . . . . . . . . 7 8 8

Multifamily Portfolio Diversification and Monitoring

Diversification within our multifamily mortgage credit book of business by geographic concentration, term-to-maturity, 

interest rate structure, borrower concentration, and credit enhancement coverage are important factors that influence credit 

performance and help reduce our credit risk.
64

We and our lenders monitor the performance and risk concentrations of our multifamily loans and the underlying properties 

on an ongoing basis throughout the life of the loan: at the loan, property, and portfolio levels. We closely monitor loans with 

an estimated current DSCR below 1.0, as that is an indicator of heightened default risk. The percentage of loans in our 

multifamily guaranty book of business with a current DSCR less than 1.0 was approximately 5% as of March 31, 2013 and 

December 31, 2012.

Problem Loan Management and Foreclosure Prevention

Although the serious delinquency rate increased as of March 31, 2013 compared with December 31, 2012, primarily due to 

one large cross-collateralized group of loans becoming delinquent, in general the number of multifamily loans at risk of 

becoming seriously delinquent has continued to decrease as early-stage delinquencies have declined significantly since the 

housing crisis. Since delinquency rates are a lagging indicator, we expect to continue to incur additional credit losses. We 

periodically refine our underwriting standards in response to market conditions and implement proactive portfolio 

management and monitoring which are each designed to keep credit losses to a low level relative to our multifamily guaranty 

book of business.

Problem Loan Statistics

We classify multifamily loans as seriously delinquent when payment is 60 days or more past due. We include the unpaid 

principal balance of multifamily loans that we own or that back Fannie Mae MBS and any housing bonds for which we 

provide credit enhancement in the calculation of the multifamily serious delinquency rate.

Table 42 displays a comparison of our multifamily serious delinquency rates for loans acquired through our DUS program 

versus loans not acquired through our DUS program.

Table 42: Multifamily Concentration Analysis

As of

March 31, 2013 December 31, 2012 March 31, 2012

Percentage of

Book

Outstanding

Serious

Delinquency

Rate

Percentage of

Book

Outstanding

Serious

Delinquency

Rate

Percentage of

Book

Outstanding

Serious

Delinquency

Rate

DUS small balance loans(1)

. . . . . . . . . . . . . . . . 8 % 0.34 % 8 % 0.32 % 8 % 0.42 %

DUS non small balance loans(2)

. . . . . . . . . . . . 77 0.34 76 0.17 73 0.25

Non-DUS small balance loans(1)

. . . . . . . . . . . 7 0.96 7 1.02 8 1.22

Non-DUS non small balance loans(2)

. . . . . . . . 8 0.46 9 0.21 11 0.55

Total multifamily loans. . . . . . . . . . . . . . . . . 100 % 0.39 % 100 % 0.24 % 100 % 0.37 %

________

(1) Loans with original unpaid principal balances of up to $3 million as well as loans in high cost markets with original unpaid principal 

balances up to $5 million. 

(2) Loans with original unpaid principal balances greater than $3 million as well as loans in high cost markets with original unpaid principal 

balances greater than $5 million. 

The DUS loans in our guaranty book of business have lower delinquency rates when compared with the non-DUS loans in 

our guaranty book primarily due to the DUS model, which has several features that more closely align our interests with 

those of the lenders. Multifamily loans with an original balance of up to $3 million nationwide or $5 million in high cost 

markets, which we refer to as small balance loans, not acquired through our DUS program, continue to represent a 

disproportionately large share of delinquencies, but they are generally covered by loss sharing arrangements that limit the 

credit losses we incur.

Small balance non-DUS loans continue to exhibit higher delinquencies than small balance loans acquired through DUS 

lenders. These small balance non-DUS loans account for 16% of our multifamily serious delinquencies and 7% of our 

multifamily guaranty book of business as of March 31, 2013 compared with 29% of our multifamily serious delinquencies 

and 7% of our multifamily guaranty book of business as of December 31, 2012. These small balance non-DUS loan 

acquisitions mainly occurred in 2007 and 2008, but have been less than 2% of the unpaid principal balance of our total 

multifamily acquisitions since 2008. Although our 2007 and early 2008 acquisitions were underwritten to our then-current 

credit standards and required borrower equity, they were acquired near the peak of multifamily housing values. During the 

second half of 2008, our underwriting standards were adjusted to reflect the evolving market trends at that time.
65

REO Management

Foreclosure and REO activity affect the level of our credit losses. Table 43 displays our held for sale multifamily REO 

activity for the periods indicated. 

Table 43: Multifamily Foreclosed Properties

For the Three

Months Ended

March 31,

2013 2012

Multifamily foreclosed properties (number of properties):

Beginning of period inventory of multifamily foreclosed properties (REO) . . . . . . . . . . . . . . . . . . . . . . . . . 128 260

Total properties acquired through foreclosure. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 61

Transfers to held for sale(1)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 —

Dispositions of REO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (26) (58)

End of period inventory of multifamily foreclosed properties (REO) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 122 263

Carrying value of multifamily foreclosed properties (dollars in millions). . . . . . . . . . . . . . . . . . . . . . . . . . . $ 298 $ 646

________

(1) Represents the transfer of properties from held for use to held for sale. Held-for-use properties are reported in our condensed 

consolidated balance sheets as a component of “Other assets.”

The decrease in our multifamily properties acquired through foreclosure reflects the continued improvement of national 

multifamily market fundamentals in the first quarter of 2013.

Institutional Counterparty Credit Risk Management

We rely on our institutional counterparties to provide services and credit enhancements, risk sharing agreements with lenders 

and financial guaranty contracts that are critical to our business. Institutional counterparty credit risk is the risk that these 

institutional counterparties may fail to fulfill their contractual obligations to us, including mortgage sellers/servicers who are 

obligated to repurchase loans from us or reimburse us for losses in certain circumstances and service our loans based on 

established guidelines. Defaults by a counterparty with significant obligations to us could result in significant financial losses 

to us. 

See “MD&A—Risk Management—Credit Risk Management—Institutional Counterparty Credit Risk Management” and 

“Risk Factors” in our 2012 Form 10-K for additional information about our institutional counterparties, including 

counterparty risk we face from mortgage originators and investors, from debt security and mortgage dealers, and from 

document custodians.

Mortgage Sellers/Servicers

Our primary exposures to institutional counterparty risk are with mortgage sellers/servicers that service the loans we hold in 

our retained mortgage portfolio or that back our Fannie Mae MBS, as well as mortgage sellers/servicers that are obligated to 

repurchase loans from us or reimburse us for losses in certain circumstances. We rely on mortgage sellers/servicers to meet 

our servicing standards and fulfill their servicing and repurchase obligations.

Our business with our mortgage sellers/servicers is concentrated. Our five largest single-family mortgage servicers, including 

their affiliates, serviced approximately 54% of our single-family guaranty book of business as of March 31, 2013, compared 

with approximately 57% as of December 31, 2012. Our largest mortgage servicer is Wells Fargo Bank, N.A., which, together 

with its affiliates, serviced approximately 18% of our single-family guaranty book of business as of March 31, 2013 and 

December 31, 2012. We had two other mortgage servicers, Bank of America, N.A. and JPMorgan Chase Bank, N.A., that, 

with their affiliates, each serviced over 10% of our single-family guaranty book of business as of March 31, 2013 and 

December 31, 2012. In addition, Wells Fargo Bank, N.A. serviced over 10% of our multifamily guaranty book of business as 

of March 31, 2013 and December 31, 2012.

If we determine that a mortgage loan did not meet our underwriting or eligibility requirements, loan representations or 

warranties were violated, or a mortgage insurer rescinded coverage, then our mortgage sellers/servicers are obligated to either 

repurchase the loan or foreclosed property, or to reimburse us for our losses. If the collateral property relating to such a loan 

has been foreclosed upon and we have accepted an offer from a third party to purchase the property, or if a loan is in the 
66

process of being liquidated or has been liquidated, we require the mortgage seller/servicer to reimburse us for our losses. We 

may consider additional facts and circumstances when determining whether to require a mortgage seller/servicer to reimburse 

us for our losses instead of repurchasing the related loan or foreclosed property. On an economic basis, we are made whole 

for our losses regardless of whether the mortgage seller/servicer repurchases the loan or reimburses us for our losses. We 

consider the anticipated benefits from these types of recoveries when we establish our allowance for loan losses. We refer to 

our demands that mortgage sellers/servicers meet these obligations collectively as “repurchase requests.” In addition, we 

charge our primary mortgage servicers a compensatory fee for servicing delays within their control when they fail to comply 

with established loss mitigation and foreclosure timelines in our Servicing Guide. Compensatory fees are intended to 

compensate us for damages attributed to these servicing delays and to emphasize the importance of the mortgage servicer’s 

performance.

Mortgage sellers/servicers may not meet the terms of their repurchase obligations, and we may be unable to recover on all 

outstanding loan repurchase obligations resulting from their breaches of contractual obligations. Failure by a significant 

mortgage seller/servicer, or a number of mortgage sellers/servicers, to fulfill repurchase obligations to us could result in a 

significant increase in our credit losses and credit-related expenses, and have a material adverse effect on our results of 

operations and financial condition. In addition, actions we take to pursue our contractual remedies could increase our costs, 

reduce our revenues, or otherwise have a material adverse effect on our results of operations or financial condition. We 

estimate our allowance for loan losses assuming the benefit of repurchase demands only from those counterparties we 

determine have the financial capacity to fulfill this obligation. Accordingly, as of March 31, 2013, in estimating our 

allowance for loan losses, we assumed no benefit from repurchase demands due to us from mortgage sellers/servicers that, in 

our view, lacked the financial capacity to honor their contractual obligations.

On January 6, 2013, we entered into a comprehensive agreement (the “resolution agreement”) with Bank of America, which 

resolved certain repurchase requests arising from breaches of selling representations and warranties for loans originated 

between 2000 and 2008. Bank of America agreed, among other things, to a resolution which included a cash payment to us of 

$3.6 billion in January 2013 related to repurchase requests and the repurchase of approximately 29,500 loans from us for an 

aggregate repurchase price of $6.6 billion, subject to a reconciliation process, which is ongoing. The resolution agreement 

addressed $11.3 billion of unpaid principal balance of our outstanding repurchase requests with Bank of America as of 

December 31, 2012, of which $8.9 billion were over 120 days past due. Accordingly, the amount of our outstanding 

repurchase requests to Bank of America decreased substantially in the first quarter of 2013 to 10% of our total repurchase 

requests outstanding as of March 31, 2013, compared with 73% as of December 31, 2012.

In connection with the resolution agreement, we also approved Bank of America’s request to transfer servicing of 

approximately 941,000 loans to two specialty mortgage servicers and resolved outstanding and certain future compensatory 

fees owed by Bank of America due to servicing delays. Bank of America made an initial payment to us of $1.3 billion in 

January 2013. We are working with Bank of America in completing a loan review process as specified in the compensatory 

fee agreement to mutually determine the final amount of compensatory fees owed. 

Table 44 displays repurchase request activity, measured by unpaid principal balance, during the first three months of 2013 

and 2012. The dollar amounts of our outstanding repurchase requests provided below are based on the unpaid principal 

balance of the loans underlying the repurchase request issued, not the actual amount we have requested from the lenders. In 

some cases, we allow lenders to remit payment equal to our loss, including imputed interest, on the loan after we have 

disposed of the REO, which is less than the unpaid principal balance of the loan. As a result, we expect our actual cash 

receipts relating to these outstanding repurchase requests to be significantly lower than the unpaid principal balance of the 

loan. Amounts relating to repurchase requests originating from missing documentation or loan files are excluded from the 

total requests outstanding until we receive the missing documents and loan files and a full underwriting review is completed.
67

Table 44: Repurchase Request Activity

For the Three Months Ended March 31,

2013 2012

(Dollars in millions)

Beginning outstanding repurchase requests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 16,013 $ 10,400

Issuances. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,908 6,556

Collections(1). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (12,499) (2,361)

Other resolutions(1)(2). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (9,103) (2,105)

Total successfully resolved. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (21,602) (4,466)

Cancellations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (257) (337)

Ending outstanding repurchase requests. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 4,062 $ 12,153

__________

(1) Includes the impact of our January 6, 2013 resolution agreement with Bank of America, which addressed $11.3 billion of the total 

outstanding repurchase request balance as of December 31, 2012 and substantially resolved our outstanding and expected future 

repurchase requests on specified single-family loans originated between 2000 and 2008 that were delivered to us by Bank of America. 

(2) Primarily includes repurchase requests that were successfully resolved through negotiated settlements and the lender taking corrective 

action with or without a pricing adjustment. Also includes resolutions through indemnification or future repurchase agreements and 

loans in which no further repurchase or reimbursement for loss was required from the mortgage seller/servicer.

The increase in “Other resolutions” activity during the first quarter of 2013 compared with the first quarter of 2012 was 

primarily due to the resolution of certain repurchase requests with Bank of America without the underlying loans being 

repurchased. As of March 31, 2013, less than 0.25% of the loans in our new single-family book of business, which were 

acquired after 2008, have been subject to a repurchase request, compared with approximately 3% of single-family 

loans acquired between 2005 and 2008 that have been subject to a repurchase request. As of March 31, 2013, we have 

completed loan reviews for potential underwriting defects on approximately 80% of the loans we acquired between 2005 and 

2008 through our standard whole loan and MBS acquisitions that we currently intend to review. We expect to complete our 

review of the remaining population by the end of 2013. We plan to issue repurchase requests as and when appropriate, and 

lenders will continue to be responsible for their contractual obligations related to these loans.

Table 45 displays our top five mortgage sellers/servicers by outstanding repurchase requests based on the unpaid principal 

balance of the loans underlying repurchase requests issued as of March 31, 2013 and December 31, 2012. Table 45 also 

displays the mortgage sellers’/servicers’ balance and percentage of our repurchase requests to that mortgage seller/servicer 

that were over 120 days outstanding, and the mortgage sellers’/servicers’ repurchase requests outstanding over 120 days as a 

percentage of our total repurchase requests outstanding over 120 days, as of March 31, 2013 and December 31, 2012. 

Table 45: Outstanding Repurchase Requests(1)

Outstanding Repurchase Requests as of

March 31, 2013 December 31, 2012

Total

Outstanding

Balance(3)

Over 120 Days(2) Total

Outstanding

Balance(3)

Over 120 Days(2)

Balance(3) % % of Total Balance(3) % % of Total

(Dollars in millions)

Mortgage Seller/Servicer

Counterparty:

CitiMortgage(4)

. . . . . . . . . . . . . . . . $ 887 $ 199 22% 13 % $ 909 $ 284 31% 3 %

Wells Fargo Bank, N.A.(4)

. . . . . . . . 678 356 53 24 758 358 47 3

JPMorgan Chase Bank, N.A. . . . . . 561 66 12 4 688 173 25 2

Bank of America, N.A. . . . . . . . . . . 392 296 75 20 11,735 9,163 78 84

SunTrust Bank, Inc.(4)

. . . . . . . . . . . 366 145 40 10 494 224 45 2

Other(4)

. . . . . . . . . . . . . . . . . . . . . . 1,178 443 38 29 1,429 724 51 6

Total . . . . . . . . . . . . . . . . . . . . . . . . $ 4,062 $1,505 100 % $16,013 $10,926 100 %
68

__________

(1) Amounts relating to repurchase requests originating from missing documentation or loan files are excluded from the outstanding 

repurchase requests until we receive the missing documents and loan files and a full underwriting review is completed.

(2) Measured from the repurchase request date. For lenders remitting after the property is disposed, the number of days outstanding is 

adjusted to allow for final loss determination.

(3) Based on the unpaid principal balance of the loans underlying the repurchase request issued. In some cases, lenders remit payment 

equal to our loss on sale of the loan as REO, which includes imputed interest, and is significantly lower than the unpaid principal 

balance of the loan. Also includes repurchase requests resulting from the rescission of mortgage insurance coverage.

(4) Mortgage seller/servicer has entered into an agreement with us relating to some of the reported amounts. The agreement extended the 

time for resolving certain outstanding repurchase requests and/or provided for the mortgage seller/servicer to post collateral to us.

We continue to aggressively pursue our contractual rights associated with outstanding repurchase requests. Failure by a 

mortgage seller/servicer to repurchase a loan or to otherwise make us whole for our losses may result in the imposition of 

certain sanctions including, but not limited to:

• requiring the posting of collateral, 

• denying transfer of servicing requests or denying pledged servicing requests,

• modifying or suspending any contract or agreement with a lender, or 

• suspending or terminating a lender or imposing some other formal sanction on a lender.

If we are unable to resolve these matters to our satisfaction, we may seek additional remedies. If we are unable to resolve our 

repurchase requests, either through collection or additional remedies, we will not recover the losses we have recognized from 

the associated loans.

As described in “Credit Risk Management—Single-Family Mortgage Credit Risk Management,” we implemented a new 

representation and warranty framework on January 1, 2013. With the implementation of these changes we will review a 

larger sample of loans near the time of acquisition for compliance with our underwriting and eligibility requirements. As a 

result, a greater proportion of our repurchase requests in the future may be issued on performing loans, as compared with our 

currently outstanding repurchase requests, the substantial majority of which relate to loans that are either nonperforming or 

have been foreclosed upon.

Mortgage Insurers

We are generally required, pursuant to our charter, to obtain credit enhancement on single-family conventional mortgage 

loans that we purchase or securitize with LTV ratios over 80% at the time of purchase. We use several types of credit 

enhancement to manage our single-family mortgage credit risk, including primary and pool mortgage insurance coverage. 

Table 46 displays our risk in force for the primary and pool mortgage insurance coverage on single-family loans in our 

guaranty book of business and our insurance in force for our mortgage insurer counterparties as of March 31, 2013 and 

December 31, 2012. The table includes our top nine mortgage insurer counterparties, which provided over 99% of our total 

mortgage insurance coverage on single-family loans in our guaranty book of business as of March 31, 2013 and 

December 31, 2012. See “Risk Management—Credit Risk Management—Institutional Counterparty Risk Management—

Mortgage Insurers” in our 2012 Form 10-K for a discussion on the credit ratings of our mortgage insurers. 
69

Table 46: Mortgage Insurance Coverage

Risk in Force(1) Insurance in Force(2)

As of As of

As of March 31, 2013 December 31, As of March 31, 2013 December 31,

Primary Pool Total 2012 Primary Pool Total 2012

(Dollars in millions)

Counterparty:(3)

Mortgage Guaranty Insurance Corp. . $ 19,650 $ 312 $19,962 $ 20,089 $ 77,528 $ 2,649 $ 80,177 $ 82,346

Radian Guaranty, Inc. . . . . . . . . . . . . 18,676 105 18,781 18,126 75,492 853 76,345 73,746

United Guaranty Residential 

Insurance Co. . . . . . . . . . . . . . . . . 17,794 74 17,868 17,182 71,354 586 71,940 69,185

Genworth Mortgage Insurance Corp. 13,655 18 13,673 13,626 54,842 158 55,000 54,764

PMI Mortgage Insurance Co.(4)

. . . . . 8,296 64 8,360 8,901 33,472 928 34,400 36,743

Republic Mortgage Insurance Co.(4)

. 6,494 235 6,729 7,142 25,749 2,785 28,534 30,402

CMG Mortgage Insurance Co.(5)

. . . . 2,478 — 2,478 2,340 10,402 — 10,402 9,823

Triad Guaranty Insurance Corp.(4)

. . . 1,941 285 2,226 2,368 7,225 1,943 9,168 9,895

Essent Guaranty, Inc.. . . . . . . . . . . . . 2,189 — 2,189 1,724 9,129 — 9,129 7,148

Others . . . . . . . . . . . . . . . . . . . . . . . . 191 — 191 197 1,087 — 1,087 1,118

Total. . . . . . . . . . . . . . . . . . . . . . . . . . $ 91,364 $1,093 $92,457 $ 91,695 $366,280 $ 9,902 $376,182 $ 375,170

Total as a percentage of singlefamily guaranty book of business. 3 % 3 % 13 % 13 %

__________

(1) Risk in force is generally the maximum potential loss recovery under the applicable mortgage insurance policies in force and is 

based on the loan level insurance coverage percentage and, if applicable, any aggregate pool loss limit, as specified in the policy. 

(2) Insurance in force represents the unpaid principal balance of single-family loans in our guaranty book of business covered under the 

applicable mortgage insurance policies.

(3) Insurance coverage amounts provided for each counterparty may include coverage provided by consolidated affiliates and subsidiaries 

of the counterparty.

(4) These mortgage insurers are under various forms of supervised control by their state regulators and are in run-off.

(5) CMG Mortgage Insurance Company is a joint venture owned by PMI Mortgage Insurance Co. and CUNA Mutual Insurance Society.

As of May 9, 2013, of our primary mortgage insurers:

• PMI Mortgage Insurance Co. (“PMI”), Republic Mortgage Insurance Company (“RMIC”) and Triad Guaranty 

Insurance Corporation (“Triad”) are under various forms of supervised control by their state regulators and are in 

run-off. A mortgage insurer that is in run-off continues to collect renewal premiums and process claims on its 

existing insurance business, but no longer writes new insurance, which increases the risk that the mortgage insurer 

will pay only in part or fail to pay our claims under existing insurance policies. These three mortgage insurers 

provided a combined $17.3 billion, or 19%, of our risk in force mortgage insurance coverage of our single-family 

guaranty book of business as of March 31, 2013.

• Genworth Mortgage Insurance Corporation (“Genworth”) is operating pursuant to waivers it received from the 

regulators of state regulatory capital requirements applicable to its main insurance writing entity, as its capital is 

below applicable state regulatory capital requirements. The parent company of Genworth announced a plan in 

January 2013 designed to reduce its risk-to-capital and ensure continued ability to write new business. The actions 

under the plan have received regulatory approval and include contributing additional capital and reorganizing 

the holding company structure for the U.S. mortgage insurance subsidiaries. Additionally, the plan includes a 

contingency for using an entity other than the existing main insurance writing entity for writing new business in all 

50 states. Prior to the announcement, we entered into an agreement with Genworth that provided our approval for 

those elements of Genworth’s plan that required our approval. 

• Mortgage Guaranty Insurance Corporation (“MGIC”) and Radian Guaranty, Inc. (“Radian”) disclosed that they 

received additional capital contributions in March 2013 to supplement their capital positions, which resulted in their 

meeting the regulatory capital requirements of all jurisdictions where they conduct business. 

Although the financial condition of some of our primary mortgage insurer counterparties continues to improve, there is still 

significant risk that these counterparties will fail to fulfill their obligations to pay our claims under insurance policies. If we 
70

determine that it is probable that we will not collect all of our claims from one or more of these mortgage insurer 

counterparties, or if we have already made that determination and our estimate of the shortfall increases, it could result in an 

increase in our loss reserves, which could adversely affect our earnings, liquidity, financial condition and net worth.

The payment of claims by RMIC, PMI and Triad have been partially deferred pursuant to orders from their state 

regulators. State regulators could take additional corrective actions against these entities. PMI is now paying 55% of all valid 

claims and 45% is deferred as a policyholder claim. This is an increase from the 50% it previously paid and is retroactive for 

all claims previously paid at 50%. While our remaining mortgage insurers have continued to pay claims owed to us in full, 

there can be no assurance that they will continue to do so given their current financial condition. In addition, we cannot 

predict when or if these mortgage insurers’ regulators will allow them to begin paying their deferred policyholder claims and/

or increase or decrease the amount of cash they pay on claims.

Some mortgage insurers have explored corporate restructurings designed to provide relief from risk-to-capital limits in 

certain states. We have approved several restructurings so that certain of our mortgage insurer counterparties or their 

subsidiaries could continue to write new business. During the first quarter of 2013, we approved an application from National 

Mortgage Insurance Corporation, a new mortgage insurer, requesting eligibility to do business with us.

The number of mortgage loans for which our mortgage insurer counterparties have rescinded coverage decreased but 

remained high first quarter of 2013. In those cases where the mortgage insurer has rescinded coverage, we require the 

mortgage seller/servicer to repurchase the loan or indemnify us against loss. The table below displays cumulative rescission 

rates as of March 31, 2013, by the period in which the claim was filed. We do not present information for claims filed in the 

most recent two quarters to allow sufficient time for a substantial percentage of the claims filed to be resolved.

Table 47: Rescission Rates of Mortgage Insurance

As of March 31, 2013

Cumulative Rescission 

Rate(1)

Cumulative Claims 

Resolution Percentage(2)

Primary mortgage insurance claims filed in:

First nine months of 2012. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4% 60%

2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 79

2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 94

Pool mortgage insurance claim filed in:

First nine months of 2012. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10% 87%

2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 97

2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 99

__________

(1) Represents claims filed during the period where coverage was rescinded as of March 31, 2013, divided by total claims filed during the 

same period. Denied claims are excluded from the rescinded population.

(2) Represents claims filed during the period that were resolved as of March 31, 2013, divided by the total claims filed during the same 

period. Claims resolved mainly consist of claims for which we have settled and claims for which coverage has been rescinded by the 

mortgage insurer.

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 only probable 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 result in an increase in our loss reserves.

The following table displays our estimated benefit from mortgage insurers as of March 31, 2013 and December 31, 2012 that 

reduces our total loss reserves.
71

Table 48: Estimated Mortgage Insurance Benefit

As of

March 31, 2013 December 31, 2012

(Dollars in millions)

Contractual mortgage insurance benefit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 9,227 $ 9,993

Less: Collectibility adjustment(1). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 614 708

Estimated benefit included in total loss reserves . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 8,613 $ 9,285

__________

(1) Represents an adjustment that reduces the contractual benefit for our assessment of our mortgage insurer counterparties’ inability to 

fully pay the contractual mortgage insurance claims.

When an insured loan subsequently goes into foreclosure, we charge off the loan, eliminating any previously-recorded loss 

reserves, and record REO and a mortgage insurance receivable for the claim proceeds deemed probable of recovery, as 

appropriate. However, if a mortgage insurer rescinds, cancels or denies insurance coverage, the initial receivable becomes 

due from the mortgage seller/servicer. We had outstanding receivables of $2.7 billion as of March 31, 2013 and $3.7 billion

as of December 31, 2012 related to amounts claimed on insured, defaulted loans, of which $633 million as of March 31, 2013

and $1.1 billion as of December 31, 2012 was due from our mortgage sellers/servicers. We assessed the total outstanding 

receivables for collectibility, and they were recorded net of a valuation allowance of $547 million as of March 31, 2013 and 

$551 million as of December 31, 2012 in “Other assets.” The valuation allowance reduces our claim receivable to the amount 

that we consider probable of collection. We received proceeds from mortgage insurers (and, in cases where policies were 

rescinded or canceled or coverage was denied by the mortgage insurer, from mortgage sellers/servicers) for single-family 

loans of $2.1 billion for the first quarter of 2013, compared with $1.3 billion for the first quarter of 2012.

Financial Guarantors

We are the beneficiary of financial guarantees on non-agency securities held in our retained mortgage portfolio and on nonagency securities that have been resecuritized to include a Fannie Mae guaranty and sold to third parties. Table 49 displays 

the total unpaid principal balance of guaranteed non-agency securities in our retained mortgage portfolio as of March 31, 

2013 and December 31, 2012.

Table 49: Unpaid Principal Balance of Financial Guarantees

As of

March 31, 2013 December 31, 2012

(Dollars in millions)

Alt-A private-label securities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 844 $ 928

Subprime private-label securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,230 1,264

Mortgage revenue bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,290 4,374

Other mortgage-related securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 286 292

Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $6,650 $6,858

With the exception of Ambac Assurance Corporation (“Ambac”), none of our financial guarantor counterparties has failed to 

repay us for claims under guaranty contracts. Based on the stressed financial condition of our non-governmental financial 

guarantor counterparties, we believe that all but one of these counterparties may not be able to fully meet their obligations to 

us in the future. Pursuant to a court order, effective August 31, 2012, Ambac pays 25% on all filed claims that are valid. 

Ambac provided coverage on $2.9 billion, or 44%, of our total non-governmental guarantees, as of March 31, 2013. We 

model our securities for impairments without assuming the benefit of non-governmental financial guarantees. We then adjust 

results for those external financial guarantees from guarantors that we determine are creditworthy, although we continue to 

seek collection of any amounts due to us from all counterparties. As of March 31, 2013, when modeling our securities for 

impairments we did not adjust the results to assume the benefit of external financial guarantees from any non-governmental 

counterparties. See “Note 5, Investments in Securities” for a further discussion of our model methodology and key inputs 

used to determine other-than-temporary-impairment.

We are also the beneficiary of financial guarantees included in securities issued by Freddie Mac, the federal government and 

its agencies that totaled $27.1 billion as of March 31, 2013 and $27.3 billion as of December 31, 2012.
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Lenders with Risk Sharing

We enter into risk sharing agreements with lenders pursuant to which the lenders agree to bear all or some portion of the 

credit losses on the covered loans. Our maximum potential loss recovery from lenders under these risk sharing agreements on 

single-family loans was $11.4 billion as of March 31, 2013, compared with $11.9 billion as of December 31, 2012. As of 

March 31, 2013 and December 31, 2012, 55% of our maximum potential loss recovery on single-family loans was from three

lenders. Our maximum potential loss recovery from lenders under risk sharing agreements on DUS and non-DUS 

multifamily loans was $37.5 billion as of March 31, 2013, compared with $36.4 billion as of December 31, 2012. As of 

March 31, 2013 and December 31, 2012, 35% of our maximum potential loss recovery on multifamily loans was from three

DUS lenders.

Although market conditions have improved, unfavorable market conditions prior to 2012 adversely affected the liquidity and 

financial condition of our lender counterparties. The percentage of single-family recourse obligations from lenders with 

investment grade credit ratings (based on the lower of S&P, Moody’s and Fitch ratings) was 52% as of March 31, 2013, 

compared with 51% as of December 31, 2012. The recourse obligations from lender counterparties rated below investment 

grade was 22% as of March 31, 2013 and December 31, 2012. The remaining recourse obligations were from lender 

counterparties that were not rated by rating agencies, which was 26% as of March 31, 2013, compared with 27% as of 

December 31, 2012. Given the stressed financial condition of some of our single-family lenders, we expect in some cases we 

will recover less than the amount the lender is obligated to provide us under our risk sharing arrangement with them. 

Depending on the financial strength of the counterparty, we may require a lender to pledge collateral to secure its recourse 

obligations.

As noted in “Multifamily Mortgage Credit Risk Management,” our primary multifamily delivery channel is our DUS 

program, which is comprised of lenders that range from large depositories to independent non-bank financial institutions. As 

of March 31, 2013, approximately 39% of the unpaid principal balance of loans in our multifamily guaranty book of business 

serviced by our DUS lenders was from institutions with an external investment grade credit rating or a guaranty from an 

affiliate with an external investment grade credit rating, compared with approximately 40% as of December 31, 2012. Given 

the recourse nature of the DUS program, the lenders are bound by eligibility standards that dictate, among other items, 

minimum capital and liquidity levels, and the posting of collateral at a highly rated custodian to secure a portion of the 

lenders’ future obligations. We actively monitor the financial condition of these lenders to help ensure the level of risk 

remains within our standards and to ensure required capital levels are maintained and are in alignment with actual and 

modeled loss projections. 

Custodial Depository Institutions

A total of $65.5 billion in deposits for single-family payments were received and held by 291 institutions during the month of 

March 2013 and a total of $74.0 billion in deposits for single-family payments were received and held by 292 institutions 

during the month of December 2012. Of these total deposits, 95% as of March 31, 2013, compared with 93% as of 

December 31, 2012, were held by institutions rated as investment grade by S&P, Moody’s and Fitch. Our transactions with 

custodial depository institutions are concentrated. Our six largest custodial depository institutions held 87% of these deposits 

as of March 31, 2013 and December 31, 2012. 

If a custodial depository institution were to fail while holding remittances of borrower payments of principal and interest due 

to us in our custodial account, we would be an unsecured creditor of the depository for balances in excess of the deposit 

insurance protection and might not be able to recover all of the principal and interest payments being held by the depository 

on our behalf, or there might be a substantial delay in receiving these amounts. If this were to occur, we would be required to 

replace these amounts with our own funds to make payments that are due to Fannie Mae MBS certificateholders. 

Accordingly, the insolvency of one of our principal custodial depository counterparties could result in significant financial 

losses to us. During the month of March 2013, approximately $6.2 billion, or 9%, of our total deposits for single-family 

payments received and held by these institutions was in excess of the deposit insurance protection limit compared with 

approximately $7.2 billion, or 10%, in the month of December 2012. These amounts can vary as they are calculated based on 

individual payments of mortgage borrowers and we must estimate which borrowers are paying their regular principal and 

interest payments and other types of payments, such as prepayments from refinancing or sales.

Issuers of Investments Held in our Cash and Other Investments Portfolio

Our cash and other investments portfolio consists of cash and cash equivalents, federal funds sold and securities purchased 

under agreements to resell or similar arrangements and U.S. Treasury securities. Our cash and other investment 

counterparties are primarily financial institutions and the Federal Reserve Bank. As of March 31, 2013, we held a $1.0 billion

short-term unsecured deposit with a financial institution that had a short-term credit rating of P-2 from Moody’s (based on the 
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lowest credit rating issued by S&P, Moody’s and Fitch). We held no unsecured positions with financial institutions as of 

December 31, 2012. See “Liquidity and Capital Management—Liquidity Management—Cash and Other Investments 

Portfolio” for more detailed information on our cash and other investments portfolio. 

Derivative Counterparty Credit Exposure

Our derivative counterparty credit exposure relates principally to interest rate derivatives 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 at a higher cost or we may be unable to find a suitable replacement. We 

manage our counterparty credit exposure through master netting arrangements, which we normally enter into with 

counterparties with which we deal on an over-the-counter basis. These arrangements allow us to net derivative asset and 

liabilities with the same counterparty. We also manage our derivative counterparty exposure by requiring counterparties to 

post collateral, which includes cash, U.S. Treasury securities, agency debt and agency mortgage-related securities.

We estimate our exposure to credit loss on derivative instruments by calculating the replacement cost, on a present value 

basis, to settle at current market prices all outstanding derivative contracts in a net gain position at the counterparty level 

where the right of legal offset exists. For derivative instruments where the right of legal offset does not exist, we calculate the 

replacement cost of the outstanding derivative contracts in a gain position at the transaction level.

The fair value of derivatives in a gain position is included in our condensed consolidated balance sheets in “Other assets.” 

Table 50 below displays our counterparty credit exposure on outstanding risk management derivative instruments in a gain 

position by counterparty credit ratings and the number of counterparties for over-the-counter derivatives as of March 31, 

2013 and December 31, 2012. Also displayed below are the notional amounts outstanding for all risk management derivatives 

for the periods indicated.

Table 50: Credit Loss Exposure of Risk Management Derivative Instruments

As of March 31, 2013

Credit Rating(1)

AA+/

AA/AA- A+/A/ABBB+/BBB/BBB- Subtotal(2)

ExchangeTraded/

Cleared(3) Other(4) Total

(Dollars in millions)

Credit loss exposure(5). . . . . . . . . . . . . . . $ — $ 39 $ — $ 39 $ 175 $ 36 $ 250

Less: Collateral held(6). . . . . . . . . . . . . . — 39 — 39 171 — 210

Exposure net of collateral. . . . . . . . . . . . $ — $ — $ — $ — $ 4 $ 36 $ 40

Additional information:

Notional amount . . . . . . . . . . . . . . . . $ 28,468 $ 627,747 $ 48,270 $ 704,485 $ 48,345 $ 372 $ 753,202

Number of counterparties(7). . . . . . . . 4 11 1 16

As of December 31, 2012

Credit Rating(1)

AA+/

AA/AA- A+/A/ABBB+/BBB/BBB- Subtotal(2)

ExchangeTraded/

Cleared(3) Other(4) Total

(Dollars in millions)

Credit loss exposure(5). . . . . . . . . . . . . . . $ — $ 48 $ — $ 48 $ 171 $ 27 $ 246

Less: Collateral held(6). . . . . . . . . . . . . . — 48 — 48 163 — 211

Exposure net of collateral. . . . . . . . . . . . $ — $ — $ — $ — $ 8 $ 27 $ 35

Additional information:

Notional amount . . . . . . . . . . . . . . . . $ 22,703 $ 600,028 $ 40,350 $ 663,081 $ 38,426 $ 447 $ 701,954

Number of counterparties(7). . . . . . . . 4 11 1 16

__________

(1) We manage collateral requirements based on the lower credit rating of the legal entity, as issued by S&P and Moody’s. The credit rating 

reflects the equivalent S&P’s rating for any ratings based on Moody’s scale.

(2) We had credit loss exposure to one counterparty with a notional balance of $6.4 billion and $5.9 billion as of March 31, 2013 and 

December 31, 2012, respectively.
74

(3) Represents contracts entered through an agent on our behalf with a derivatives clearing organization.

(4) Includes mortgage insurance contracts and swap credit enhancements accounted for as derivatives. 

(5) Represents the exposure to credit loss on derivative instruments, which we estimate using the fair value of all outstanding derivative 

contracts in a gain position. We net derivative gains and losses with the same counterparty where a legal right of offset exists under an 

enforceable master netting agreement. This table excludes mortgage commitments accounted for as derivatives.

(6) Represents cash and non-cash collateral posted by our counterparties to us. Does not include collateral held in excess of exposure. We 

reduce the value of non-cash collateral in accordance with the counterparty agreements to help ensure recovery of any loss through the 

disposition of the collateral.

(7) Represents counterparties with which we have an enforceable master netting arrangements.

Under the Dodd-Frank Act we are required to submit all new interest rate swaps to a derivatives clearing organization, 

beginning June 10, 2013. In anticipation of those requirements, we have cleared interest rate swap transactions with the 

Chicago Mercantile Exchange, Inc. (“CME”), a derivatives clearing organization. As a result, we are exposed to the 

institutional credit risk of CME and its members that execute and submit our transactions for clearing. Our institutional credit 

risk exposure to the CME or other comparable clearinghouses, exchanges or trading facilities, as well as their members, will 

increase in the future.

See “Note 9, Derivative Instruments” and “Note 15, Netting Arrangements” for additional information on our derivative 

contracts as of March 31, 2013 and December 31, 2012.

Market Risk Management, Including Interest Rate Risk Management

We are subject to market risk, which includes interest rate risk, spread risk and liquidity risk. These risks arise from our 

mortgage asset investments. Interest rate risk is the risk of loss in value or expected future earnings that may result from 

changes to interest rates. Spread risk is the resulting impact of changes in the spread between our mortgage assets and our 

debt and derivatives we use to hedge our position. Liquidity risk is the risk that we will not be able to meet our funding 

obligations in a timely manner. We describe our sources of interest rate risk exposure and our strategy for managing interest 

rate risk and spread risk in “MD&A—Risk Management—Market Risk Management, Including Interest Rate Risk 

Management” in our 2012 Form 10-K.

Measurement of Interest Rate Risk

Below we present two quantitative metrics that provide estimates of our interest rate exposure: (1) fair value sensitivity of net 

portfolio to changes in interest rate levels and slope of yield curve; and (2) duration gap. The metrics presented are calculated 

using internal models that require standard assumptions regarding interest rates and future prepayments of principal over the 

remaining life of our securities. These assumptions are derived based on the characteristics of the underlying structure of the 

securities and historical prepayment rates experienced at specified interest rate levels, taking into account current market 

conditions, the current mortgage rates of our existing outstanding loans, loan age and other factors. On a continuous basis, 

management makes judgments about the appropriateness of the risk assessments and will make adjustments as necessary to 

properly assess our interest rate exposure and manage our interest rate risk. The methodologies used to calculate risk 

estimates are periodically changed on a prospective basis to reflect improvements in the underlying estimation process.

Interest Rate Sensitivity to Changes in Interest Rate Level and Slope of Yield Curve

As part of our disclosure commitments with FHFA, we disclose on a monthly basis the estimated adverse impact on the fair 

value of our net portfolio that would result from the following hypothetical situations:

• A 50 basis point shift in interest rates.

• A 25 basis point change in the slope of the yield curve.

In measuring the estimated impact of changes in the level of interest rates, we assume a parallel shift in all maturities of the 

U.S. LIBOR interest rate swap curve.

In measuring the estimated impact of changes in the slope of the yield curve, we assume a constant 7-year rate and a shift of 

16.7 basis points for the 1-year rate and 8.3 basis points for the 30-year rate. We believe the aforementioned interest rate 

shocks for our monthly disclosures represent moderate movements in interest rates over a one-month period.

Duration Gap

Duration gap measures the price sensitivity of our assets and liabilities to changes in interest rates by quantifying the 

difference between the estimated durations of our assets and liabilities. Our duration gap analysis reflects the extent to which 

the estimated maturity and repricing cash flows for our assets are matched, on average, over time and across interest rate 
75

scenarios to the estimated cash flows of our liabilities. A positive duration gap indicates that the duration of our assets 

exceeds the duration of our liabilities. We disclose duration gap on a monthly basis under the caption “Interest Rate Risk 

Disclosures” in our Monthly Summary, which is available on our website and announced in a press release.

While our goal is to reduce the price sensitivity of our net portfolio to movements in interest rates, various factors can 

contribute to a duration gap that is either positive or negative. For example, changes in the market environment can increase 

or decrease the price sensitivity of our mortgage assets relative to our liabilities because of prepayment uncertainty associated 

with our assets. In a declining interest rate environment, prepayment rates tend to accelerate, thereby shortening the duration 

and average life of the fixed rate mortgage assets we hold in portfolio. Conversely, when interest rates increase, prepayment 

rates generally slow, which extends the duration and average life of our mortgage assets. Our debt and derivative instrument 

positions are used to manage the interest rate sensitivity of our mortgage assets. As a result, the degree to which the interest 

rate sensitivity of our assets is offset will be dependent upon, among other factors, the mix of funding and other derivative 

instruments we use at any given point in time.

The sensitivity measures presented in Table 51, which we disclose on a quarterly basis as part of our disclosure commitments 

with FHFA, are an extension of our monthly sensitivity measures. There are three primary differences between our monthly 

sensitivity disclosure and the quarterly sensitivity disclosure presented below: (1) the quarterly disclosure is expanded to 

include the sensitivity results for larger rate level shocks of plus or minus 100 basis points; (2) the monthly disclosure reflects 

the estimated pre-tax impact on the market value of our net portfolio calculated based on a daily average, while the quarterly 

disclosure reflects the estimated pre-tax impact calculated based on the estimated financial position of our net portfolio and 

the market environment as of the last business day of the quarter; and (3) the monthly disclosure shows the most adverse pretax impact on the market value of our net portfolio from the hypothetical interest rate shocks, while the quarterly disclosure 

includes the estimated pre-tax impact of both up and down interest rate shocks.

Table 51 displays the pre-tax market value profile of our net portfolio as of March 31, 2013 and December 31, 2012. In 

addition, Table 51 also provides the average, minimum, maximum and standard deviation for duration gap and for the most 

adverse market value impact on the net portfolio for non-parallel and parallel interest rate shocks for the three months ended 

March 31, 2013 and 2012. The effective duration gap was approximately zero months for the first three months of 2013 and 

2012.
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Table 51: Interest Rate Sensitivity of Net Portfolio to Changes in Interest Rate Level and Slope of Yield Curve(1)

As of

March 31, 2013 December 31, 2012

(Dollars in billions)

Rate level shock:

-100 basis points. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 0.3 $ 0.8

-50 basis points. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 0.2

+50 basis points . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (0.1) 0.1

+100 basis points . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (0.5) —

Rate slope shock:

-25 basis points (flattening) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — —

+25 basis points (steepening) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — —

For the Three Months Ended March 31, 2013

Duration 

Gap

Rate Slope Shock

25 Bps

Rate Level Shock

50 Bps

Exposure

(In months) (Dollars in billions)

Average. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.0 $ — $ —

Minimum . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (0.3) — (0.1)

Maximum . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.5 — 0.2

Standard deviation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.2 — 0.1

For the Three Months Ended March 31, 2012

Duration 

Gap

Rate Slope Shock 

25 Bps

Rate Level Shock 

50 Bps

Exposure

(In months) (Dollars in billions)

Average. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (0.1) $ — $ —

Minimum . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (0.9) — —

Maximum . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.4 0.1 0.2

Standard deviation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.3 — 0.1

__________

(1) Computed based on changes in LIBOR swap rates.

A majority of the interest rate risk associated with our mortgage-related securities and loans is hedged with our debt 

issuances, which includes callable debt. 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. Table 52 displays an example of how derivatives impacted the net market value 

exposure for a 50 basis point parallel interest rate shock.
77

From March 31, 2013 to December 31, 2012, as displayed below in Table 52, debt issuance hedged a majority of the interest 

rate risk associated with our mortgage-related securities and loans. As displayed in Table 51, derivatives were also used to 

maintain a low interest rate risk exposure as the average duration gap was zero months.

Table 52: Derivative Impact on Interest Rate Risk (50 Basis Points)

As of

March 31, 2013 December 31, 2012

(Dollars in billions)

Before Derivatives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 0.1 $ (0.5)

After Derivatives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (0.1) 0.1

Effect of Derivatives. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (0.2) 0.6

Other Interest Rate Risk Information

The interest rate risk measures discussed above exclude the impact of changes in the fair value of our net guaranty assets 

resulting from changes in interest rates. We exclude our guaranty business from these sensitivity measures based on our 

current assumption that the guaranty fee income generated from future business activity will largely replace guaranty fee 

income lost due to mortgage prepayments.

In “MD&A—Risk Management—Market Risk Management, Including Interest Rate Risk Management—Measurement of 

Interest Rate Risk—Other Interest Rate Risk Information” in our 2012 Form 10-K, we provided additional interest rate 

sensitivities including separate disclosure of the potential impact on the fair value of our trading assets and other financial 

instruments. As of March 31, 2013, these sensitivities were relatively unchanged compared with December 31, 2012. The fair 

value of our trading financial instruments and our other financial instruments as of March 31, 2013 and December 31, 2012 

can be found in “Note 16, Fair Value.”

Liquidity Risk Management

See “Liquidity and Capital Management—Liquidity Management” for a discussion on how we manage liquidity risk.

Operational Risk Management

See “Risk Management—Operational Risk Management” in our 2012 Form 10-K for more information on our framework for 

managing operational risk.

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, our senior management may from time to time make 

forward-looking statements 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,” or similar words. 

Among the forward-looking statements in this report are statements relating to: 

• Our expectation that, although our earnings will vary from quarter to quarter, our annual earnings will remain strong 

over the next few years and we will remain profitable for the foreseeable future;

• Our expectation that we will pay Treasury a senior preferred stock dividend of $59.4 billion in the second quarter of 

2013;

• Our expectation that the single-family loans we have acquired since the beginning of 2009, in the aggregate, will be 

profitable over their lifetime, by which we mean that we expect our fee income on these loans to exceed our credit 

losses and administrative costs for them; 

• Our expectation, as a result of our having increased our guaranty fees in 2012 on loans acquired after the increase, 

that we will benefit from receiving significantly more revenue from guaranty fees in future periods than we have in 

prior periods, even after we remit some of this revenue to Treasury as we are required to do under the TCCA;

• Our expectation that the rising guaranty fee revenue we receive for managing the credit risk on loans underlying 

Fannie Mae MBS held by third parties will in a number of years become the primary source of our revenues;
78

• Our expectation that, if current housing market conditions continue and if we are not required to sell more of our 

retained mortgage portfolio assets than we currently anticipate selling, revenues from guaranty fees will generally 

offset expected declines in the revenues we generate from the difference between the interest income earned on the 

assets in our retained mortgage portfolio and the interest expense associated with the debt funding of those assets;

• Our expectation that the single-family loans we acquired from 2005 through 2008, in the aggregate, will not be 

profitable over their lifetime; 

• Our expectation that the serious delinquency rates for single-family loans acquired in more recent years will be 

higher after the loans have aged, but will not be as high as the March 31, 2013 serious delinquency rates of loans in 

our legacy book of business;

• Our expectation that the U.S. government will not reach the limit on its borrowing authority before the fall of 2013;

• Our expectation that the housing market will continue to recover if the employment market continues to improve;

• Our expectation that over 180,000 new multifamily units will be completed and become available this year, which 

could result in an over-supply of units in certain metropolitan areas;

• Our expectation that, if the employment market does not continue to improve, future rent growth for multifamily 

properties is likely to slow and multifamily vacancy rates are likely to increase, particularly in state and local 

economies that are affected by sequestration cuts;

• Our expectation that improvements in the credit quality of our loan acquisitions since 2009 and increases in our 

charged guaranty fees on recently acquired loans will benefit our results for years to come, especially because these 

loans have relatively low interest rates, making them less likely to be refinanced than loans with higher interest 

rates;

• Our expectation that, in compliance with our dividend obligation to Treasury, we will retain only a limited amount 

of any future earnings we have because we must pay Treasury each quarter the amount, if any, by which our net 

worth as of the end of the immediately preceding fiscal quarter exceeds an applicable capital reserve amount;

• Our expectation that the amount of dividends we pay Treasury will ultimately exceed the amounts we have drawn;

• Our expectation that single-family mortgage loan delinquency and severity rates will continue their downward trend, 

but that single-family delinquency, default and severity rates will remain high compared with pre-housing crisis 

levels; 

• Our expectation that certain local multifamily markets and rental properties will continue to exhibit weak 

fundamentals, despite multifamily sector improvement at the national level;

• Our expectation that multifamily foreclosures for 2013 overall will remain generally commensurate with 2012 

levels, although conditions may worsen if the unemployment rate increases on either a national or regional basis;

• Our forecast that total originations in the U.S. single-family mortgage market in 2013 will decrease from 2012 levels 

by approximately 15% from an estimated $1.92 trillion to $1.63 trillion;

• Our forecast, which is based on our expectation that mortgage rates will rise later this year, that the amount of 

originations in the U.S. single-family mortgage market that are refinancings will decrease from an estimated $1.40 

trillion in 2012 to $1.01 trillion in 2013;

• Our expectation that home prices may increase on a national basis overall in 2013, if current market trends continue, 

although home price growth may not continue at 2012 levels;

• Our expectation of significant regional variation in the timing and rate of home price growth;

• Our expectation that our credit losses will remain elevated in 2013 relative to pre-housing crisis levels;

• Our expectation that, to the extent the slow pace of foreclosures continues in 2013, our realization of some credit 

losses will be delayed;

• Our belief that our total loss reserves peaked at $76.9 billion as of December 31, 2011;

• Our expectation that our loss reserves will remain significantly elevated relative to historical levels for an extended 

period because (1) we expect future defaults on loans we acquired prior to 2009 and the resulting charge-offs will 

occur over a period of years and (2) a significant portion of our reserves represents concessions granted to borrowers 

upon modification of their loans and our reserves will continue to reflect these concessions until the loans are fully 

repaid or in default; 
79

• Our expectation that revenues generated from the difference between the interest income earned on the assets in our 

retained mortgage portfolio and the interest expense associated with the debt funding of those assets will decrease as 

we reduce the size of our retained mortgage portfolio;

• Our expectation that any future increases in guaranty fees will likely further increase our guaranty fee revenue;

• Our expectation that our credit losses will decrease as a result of the higher credit quality of our new book of 

business, the decrease in our legacy book and anticipated positive home price growth, which reduces the level of 

defaults we expect on our new book of business and our legacy book and lowers severity at the time of charge-off;

• Our expectation that uncertainty regarding the future of our company will continue;

• Our expectation that Congress will continue consideration of housing finance reform in the current congressional 

session, including hearings on GSE reform, and the consideration of legislation that may alter the housing finance 

reform system or the activities or operations of the GSEs;

• Our conclusion that it is more likely than not that our deferred tax assets, except the deferred tax assets relating to 

capital loss carryforwards, will be realized;

• Our belief that our capital loss carryforwards will expire unused;

• Our expectation that we will utilize all of our net operating loss carryforwards within the next few years;

• Our expectation that the portion of our remaining deferred tax asset valuation allowance not related to capital loss 

carryforwards will be reduced against income before federal income taxes throughout the remaining quarters of 

2013 until that amount is reduced to zero as of December 31, 2013;

• Our expectation of high levels of period-to-period volatility in our results of operations and financial condition due 

to changes in market conditions that result in periodic fluctuations in the estimated fair value of financial 

instruments that we mark to market through our earnings;

• Our expectation that we will continue to purchase loans from MBS trusts as they become four or more consecutive 

monthly payments delinquent subject to market conditions, economic benefit, servicer capacity and other factors 

including the limit on the mortgage assets that we may own pursuant to the senior preferred stock purchase 

agreement;

• Our intention to repay our short-term and long-term debt obligations as they become due primarily through proceeds 

from the issuance of additional debt securities;

• Our belief that our liquidity contingency plan may be difficult or impossible to execute for a company of our size 

and circumstances;

• Our expectation that we may use proceeds from our mortgage assets to pay our debt obligations;

• Our belief that continued federal government support of our business and the financial markets, as well as our status 

as a GSE, are essential to maintaining our access to debt funding;

• Our belief that changes or perceived changes in federal government support of our business and the financial 

markets or our status as a GSE could materially and adversely affect our liquidity, financial condition and results of 

operations;

• Our expectations regarding our credit ratings and their impact on us as set forth in “MD&A—Liquidity and Capital 

Management—Liquidity Management—Credit Ratings”;

• Our belief that we have limited credit exposure on government loans;

• Our expectation that the ultimate performance of all our loans will be affected by numerous factors, including 

changes in home prices, borrower behavior, public policy and other macroeconomic factors;

• Our belief that loans we acquire under HARP may not perform as well as the other loans we have acquired since the 

beginning of 2009, but they will perform better than the loans they replace because they should reduce the 

borrowers’ monthly payments and/or provide more stable terms than the borrowers’ old loans (for example, by 

refinancing into a mortgage with a fixed interest rate instead of an adjustable rate);

• Our expectation that if interest rates remain low, we will continue to acquire a high volume of refinancings under 

HARP for the program’s duration or until there is no longer a large population of borrowers with high LTV loans 

who are willing to refinance and would benefit from refinancing; 

• Our expectation that we will acquire many refinancings with LTV ratios greater than 125%;
80

• Our expectation that our acquisitions of Alt-A mortgage loans (which are limited to refinancings of existing Fannie 

Mae loans) will continue to be minimal in future periods and the percentage of the book of business attributable to 

Alt-A will continue to decrease over time;

• Our expectation that the slow pace of foreclosures will continue to negatively affect our single-family serious 

delinquency rates, foreclosure timelines and credit-related expenses (income);

• Our expectation that the number of our single-family loans in our legacy book of business that are seriously 

delinquent will remain well above pre-2008 levels for years;

• Our expectation that we may be unable to recover on all outstanding loan repurchase obligations resulting from 

mortgage sellers/servicers’ breaches of contractual obligations;

• Our expectation that, by the end of 2013, we will complete loan reviews for potential underwriting defects on all of 

the loans we acquired between 2005 and 2008 through our standard whole loan and MBS acquisitions that 

we currently intend to review; 

• Our expectation that, with the implementation of our new representation and warranty framework, a greater 

proportion of repurchase requests in the future may be issued on performing loans, as compared with our currently 

outstanding repurchase requests, the substantial majority of which relate to loans that are either nonperforming or 

have been foreclosed upon;

• Our belief that the financial condition of some of our primary mortgage insurer counterparties continues to improve;

• Our belief, based on the stressed financial condition of our non-governmental financial guarantor counterparties, that 

all but one of these counterparties may not be able to fully meet their obligations to us in the future;

• Our expectation, given the stressed financial condition of some of our single-family lenders, that in some cases we 

will recover less than the amount the lender is obligated to provide us under our risk sharing arrangement with the 

lender; and 

• Our expectation that, depending on the financial strength of a single-family lender with whom we have a risk 

sharing arrangement, we may require the lender to pledge collateral to secure its recourse obligations.

Forward-looking statements reflect our management’s 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, as well as our business plans. They are not guarantees of future performance. By their nature, forward-looking 

statements are subject to risks and uncertainties. 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 the forward-looking 

statements contained in this report, including, but not limited to, the following: the uncertainty of our future; legislative and 

regulatory changes affecting us; our future guaranty fee pricing; challenges we face in retaining and hiring qualified 

employees; the deteriorated credit performance of many loans in our guaranty book of business; the conservatorship and its 

effect on our business; the investment by Treasury and its effect on our business; adverse effects from activities we undertake 

to support the mortgage market and help borrowers; a decrease in our credit ratings; limitations on our ability to access the 

debt capital markets; further disruptions in the housing and credit markets; defaults by one or more institutional 

counterparties; our need to rely on third parties to fully achieve some of our corporate objectives; our reliance on mortgage 

servicers; guidance by the Financial Accounting Standards Board (“FASB”); operational control weaknesses; our reliance on 

models; the level and volatility of interest rates and credit spreads; changes in the structure and regulation of the financial 

services industry; natural or other disasters; and those factors described in “Risk Factors” in this report and in our 2012 

as well as the factors described in “Executive Summary—Outlook—Factors that Could Cause Actual Results to 

be Materially Different from our Estimates and Expectations” in this report. 

Readers are cautioned to place forward-looking statements in this report or that we make from time to time into proper 

context by carefully considering the factors discussed in “Risk Factors” in our 2012 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. 
81

Item 1. Financial Statements

FANNIE MAE

(In conservatorship)

Condensed Consolidated Balance Sheets — (Unaudited)

(Dollars in millions, except share amounts)

As of

March 31, December 31,

2013 2012

ASSETS

Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 23,413 $ 21,117

Restricted cash (includes $51,847 and $61,976, respectively, related to consolidated trusts). . . . . . . . . . . . . . . . . . . . 57,231 67,919

Federal funds sold and securities purchased under agreements to resell or similar arrangements . . . . . . . . . . . . . . . . 79,350 32,500

Investments in securities:

Trading, at fair value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52,391 40,695

Available-for-sale, at fair value (includes $762 and $935, respectively, related to consolidated trusts). . . . . . . . . 60,329 63,181

Total investments in securities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 112,720 103,876

Mortgage loans:

Loans held for sale, at lower of cost or fair value (includes $104 and $72, respectively, related to consolidated

trusts) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 455 464

Loans held for investment, at amortized cost:

Of Fannie Mae. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 336,585 355,544

Of consolidated trusts (includes $12,602 and $10,800, respectively, at fair value and loans pledged as

collateral that may be sold or repledged of $859 and $943, respectively) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,678,057 2,652,193

Total loans held for investment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,014,642 3,007,737

Allowance for loan losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (56,461) (58,795)

Total loans held for investment, net of allowance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,958,181 2,948,942

Total mortgage loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,958,636 2,949,406

Accrued interest receivable, net (includes $7,801 and $7,567, respectively, related to consolidated trusts). . . . . . . . . 9,160 9,176

Acquired property, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,149 10,489

Deferred tax assets, net. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49,738 —

Other assets (includes cash pledged as collateral of $1,289 and $1,222, respectively). . . . . . . . . . . . . . . . . . . . . . . . . 20,278 27,939

Total assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,320,675 $ 3,222,422

LIABILITIES AND EQUITY

Liabilities:

Accrued interest payable (includes $8,435 and $8,645, respectively, related to consolidated trusts). . . . . . . . . . . . . $ 11,163 $ 11,303

Federal funds purchased and securities sold under agreements to repurchase . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 218 —

Debt:

Of Fannie Mae (includes $770 and $793, respectively, at fair value) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 630,260 615,864

Of consolidated trusts (includes $13,345 and $11,647, respectively, at fair value). . . . . . . . . . . . . . . . . . . . . . . . . 2,602,283 2,573,653

Other liabilities (includes $406 and $1,059, respectively, related to consolidated trusts) . . . . . . . . . . . . . . . . . . . . . 14,383 14,378

Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,258,307 3,215,198

Commitments and contingencies (Note 17). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — —

Fannie Mae stockholders’ equity:

Senior preferred stock, 1,000,000 shares issued and outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 117,149 117,149

Preferred stock, 700,000,000 shares are authorized—555,374,922 shares issued and outstanding, respectively . . 19,130 19,130

Common stock, no par value, no maximum authorization—1,308,762,703 shares issued, respectively,

1,158,077,970 shares outstanding, respectively. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

687 687

Accumulated deficit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (68,276) (122,766)

Accumulated other comprehensive income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,038 384

Treasury stock, at cost, 150,684,733 shares, respectively . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (7,401) (7,401)

Total Fannie Mae stockholders’ equity. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62,327 7,183

Noncontrolling interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41 41

Total equity (See Note 1: Impact of U.S. Government Support and Earnings (Loss) per Share for information 

on our dividend obligation to Treasury). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

62,368 7,224

Total liabilities and equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,320,675 $ 3,222,422

See Notes to Condensed Consolidated Financial Statements
82

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,

2013 2012

Interest income:

Trading securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 226 $ 449

Available-for-sale securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 673 727

Mortgage loans (includes $25,394 and $29,001, respectively, related to consolidated trusts). . . . . . . . . . . . . . . . . . . . . . . . . . . 29,224 32,570

Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57 38

Total interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30,180 33,784

Interest expense:

Short-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43 42

Long-term debt (includes $21,158 and $25,360, respectively, related to consolidated trusts). . . . . . . . . . . . . . . . . . . . . . . . . . . 23,833 28,545

Total interest expense. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23,876 28,587

Net interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,304 5,197

Benefit (provision) for credit losses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 957 (2,000)

Net interest income after benefit (provision) for credit losses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,261 3,197

Investment gains, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 118 116

Net other-than-temporary impairments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (9) (64)

Fair value gains, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 834 283

Debt extinguishment losses, net. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (23) (34)

Fee and other income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 568 375

Non-interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,488 676

Administrative expenses:

Salaries and employee benefits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 317 306

Professional services. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 223 168

Occupancy expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46 43

Other administrative expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55 47

Total administrative expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 641 564

Foreclosed property (income) expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (260) 339

Other expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 254 252

Total expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 635 1,155

Income before federal income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,114 2,718

Benefit for federal income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50,571 —

Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58,685 2,718

Other comprehensive income:

Changes in unrealized gains on available-for-sale securities, net of reclassification adjustments and taxes. . . . . . . . . . . . . . . . 648 355

Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 7

Total other comprehensive income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 654 362

Total comprehensive income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59,339 3,080

Less: Comprehensive (income) loss attributable to noncontrolling interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 1

Total comprehensive income attributable to Fannie Mae . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 59,339 $ 3,081

Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 58,685 $ 2,718

Less: Net loss attributable to noncontrolling interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 1

Net income attributable to Fannie Mae . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58,685 2,719

Dividends distributed or available for distribution to senior preferred stockholder . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (59,368) (2,817)

Net loss attributable to common stockholders (Note 11). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (683) $ (98)

Loss per share—Basic and Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (0.12) $ (0.02)

Weighted-average common shares outstanding—Basic and Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,762 5,761

See Notes to Condensed Consolidated Financial Statements
83

FANNIE MAE

(In conservatorship)

Condensed Consolidated Statements of Cash Flows — (Unaudited)

(Dollars in millions)

For the Three Months

Ended March 31,

2013 2012

Net cash used in operating activities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (6,420) $ (114)

Cash flows provided by investing activities:

Purchases of trading securities held for investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2,021) (226)

Proceeds from maturities and paydowns of trading securities held for investment . . . . . . . . . . . . . . . . . . . . . . 659 756

Proceeds from sales of trading securities held for investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 781 413

Purchases of available-for-sale securities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — (9)

Proceeds from maturities and paydowns of available-for-sale securities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,689 2,929

Proceeds from sales of available-for-sale securities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 270 401

Purchases of loans held for investment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (60,504) (38,276)

Proceeds from repayments of loans held for investment of Fannie Mae . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18,470 6,856

Proceeds from repayments of loans held for investment of consolidated trusts. . . . . . . . . . . . . . . . . . . . . . . . . 201,345 174,954

Net change in restricted cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,688 (5,124)

Advances to lenders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (38,471) (26,131)

Proceeds from disposition of acquired property and preforeclosure sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,057 10,195

Net change in federal funds sold and securities purchased under agreements to resell or similar agreements . (46,850) 31,000

Other, net. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 (208)

Net cash provided by investing activities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100,120 157,530

Cash flows used in financing activities:

Proceeds from issuance of debt of Fannie Mae . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 155,561 167,848

Payments to redeem debt of Fannie Mae . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (141,422) (214,701)

Proceeds from issuance of debt of consolidated trusts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 122,408 80,933

Payments to redeem debt of consolidated trusts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (223,943) (188,730)

Payments of cash dividends on senior preferred stock to Treasury . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (4,224) (2,819)

Proceeds from senior preferred stock purchase agreement with Treasury . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 4,571

Other, net. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 216 (8)

Net cash used in financing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (91,404) (152,906)

Net increase in cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,296 4,510

Cash and cash equivalents at beginning of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21,117 17,539

Cash and cash equivalents at end of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 23,413 $ 22,049

Cash paid during the period for interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 27,824 $ 30,590

See Notes to Condensed Consolidated Financial Statements
FANNIE MAE

(In conservatorship)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

84

1. Summary of Significant Accounting Policies

Organization

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.

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 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 

has since delegated specified authorities to our Board of Directors and has delegated to management the authority to conduct 

our day-to-day operations. The conservator retains the authority to withdraw its delegations 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. The GSE Act, however, provides that mortgage loans and mortgage-related assets that have been transferred to a 

Fannie Mae mortgage-backed securities (“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. As of May 9, 2013, FHFA has not 

exercised this power.

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. FHFA issued a rule establishing a framework for 

conservatorship and receivership operations for the GSEs, which became effective in 2011. The rule established procedures 

for conservatorship and receivership, and priorities of claims for contract parties and other claimants. This rule is part of 

FHFA’s implementation of the powers provided by the Federal Housing Finance Regulatory Reform Act of 2008, and does 

not seek to anticipate or predict future conservatorships or receiverships.

FHFA has announced that, during the conservatorship, our existing statutory and FHFA-directed regulatory capital 

requirements will not be binding and that FHFA will not issue quarterly capital classifications. We submit capital reports to 

FHFA and FHFA monitors our capital levels. The deficit of core capital over statutory minimum capital was $88.3 billion as 

of March 31, 2013 and $141.2 billion as of December 31, 2012.

Under the terms of the senior preferred stock purchase agreement, starting January 1, 2013, we are required to pay Treasury 

each quarter a dividend, when, as and if declared, equal to the excess of our net worth as of the end of the preceding quarter 

over an applicable capital reserve. Therefore, we do not expect to eliminate our deficit of core capital over statutory minimum 

capital. We expect to pay Treasury a dividend of $59.4 billion by June 30, 2013. Accordingly, our deficiency of core capital 

over statutory minimum capital on a pro forma basis as of March 31, 2013, adjusted for the dividend to be paid by June 30, 

2013, is $147.7 billion.

The conservatorship has no specified termination date and there continues to be uncertainty regarding the future of our 

company, including how long the company will continue to exist in its current form, the extent of our role in the market, 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. 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 in receivership at his discretion at any time for other 

reasons, including conditions that FHFA has already asserted existed at the time the former Director of FHFA placed us into 

conservatorship. Placement into receivership would have a material adverse effect on holders of our common stock, preferred 
FANNIE MAE

(In conservatorship)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(UNAUDITED)

85

stock, debt securities and Fannie Mae MBS. 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. We are not aware of 

any plans of FHFA to significantly change our business model or capital structure in the near term.

Impact of U.S. Government Support

We continue to rely on support of Treasury to eliminate any net worth deficits we may experience in the future, which would 

otherwise trigger our being placed into receivership. Based on consideration of all the relevant conditions and events 

affecting our operations, including our reliance on the U.S. government, we continue to operate as a going concern and in 

accordance with our delegation of authority from FHFA.

Pursuant to the senior preferred stock purchase agreement, Treasury has committed to provide us with funding as described 

below to help us maintain a positive net worth thereby avoiding the mandatory receivership trigger described above. We have 

received a total of $116.1 billion from Treasury pursuant to the senior preferred stock purchase agreement as of March 31, 

2013. The aggregate liquidation preference of the senior preferred stock, including the initial aggregate liquidation preference 

of $1.0 billion, remains at $117.1 billion as of March 31, 2013.

In 2009, the maximum amount of Treasury’s funding commitment to us under the senior preferred stock purchase agreement 

was increased pursuant to an amendment to the agreement. The amendment provided that the $200 billion maximum amount 

of the commitment from Treasury would increase as necessary to accommodate any net worth deficiencies attributable to 

periods during 2010, 2011 and 2012. The amendment further provided that, to the extent we had a positive net worth as of 

December 31, 2012, the amount of funding available under the agreement would be reduced in accordance with a formula 

provided in the agreement.

As a result of our $7.2 billion positive net worth as of December 31, 2012, the amount of remaining available funding under 

the senior preferred stock purchase agreement is $117.6 billion, which was calculated by subtracting our cumulative draws 

under the agreement for periods through December 31, 2009 ($75.2 billion), as well as our positive net worth as of 

December 31, 2012 ($7.2 billion), from the $200 billion maximum funding amount under the agreement.

In August 2012, we, through FHFA acting on our behalf in its capacity as conservator, entered into an amendment to the 

senior preferred stock purchase agreement with Treasury. The amendment included, among other things, the following 

revision:

• Dividends. The method for calculating the amount of dividends we are required to pay Treasury on the senior 

preferred stock changed as of January 1, 2013. The method for calculating the amount of dividends payable on the 

senior preferred stock in effect prior to this amendment, which remained in effect through December 31, 2012, was 

to apply an annual dividend rate of 10% to the aggregate liquidation preference of the senior preferred stock. 

Effective January 1, 2013, when, as and if declared, the amount of dividends payable on the senior preferred stock 

for a dividend period will be determined based on our net worth as of the end of the immediately preceding fiscal 

quarter. For each dividend period from January 1, 2013 through and including December 31, 2017, the dividend 

amount will be the amount, if any, by which our net worth as of the end of the immediately preceding fiscal quarter 

exceeds an applicable capital reserve amount. If our net worth does not exceed the applicable capital reserve amount 

as of the end of a fiscal quarter, then no dividend amount will accrue or be payable for the applicable dividend 

period. The capital reserve amount will be $3.0 billion for 2013 and will be reduced by $600 million each year until 

it reaches zero on January 1, 2018. For each dividend period thereafter, the dividend amount will be the entire 

amount of our net worth, if any, as of the end of the immediately preceding fiscal quarter.

During the three months ended March 31, 2013, our first quarter dividend of $4.2 billion was declared by FHFA and paid by 

us on March 29, 2013 to Treasury. Based on the terms of the amended senior preferred stock purchase agreement with 

Treasury, we expect to pay Treasury a dividend of $59.4 billion by June 30, 2013. Accordingly, our net worth, on a pro forma 

basis as of March 31, 2013, adjusted for the dividend to be paid by June 30, 2013, is $3.0 billion.

We fund our business primarily through the issuance of short-term and long-term debt securities in the domestic and 

international capital markets. Because debt issuance is our primary funding source, we are subject to “roll-over,” or 

refinancing, risk on our outstanding debt. Our ability to issue long-term debt has been strong primarily due to actions taken 

by the federal government to support us and the financial markets.

We believe that continued federal government support of our business and the financial markets, as well as our status as a 

GSE, are essential to maintaining our access to debt funding. Changes or perceived changes in the federal government 

support of our business and the financial markets or our status as a GSE could materially and adversely affect our liquidity, 
FANNIE MAE

(In conservatorship)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(UNAUDITED)

86

financial condition and results of operations. In addition, due to our reliance on the U.S. government’s support, our access to 

debt funding or the cost of debt funding also could be materially adversely affected by a change or perceived change in the 

creditworthiness of the U.S. government. A downgrade in our credit ratings could reduce demand for our debt securities and 

increase our borrowing costs.

Basis of Presentation 

The accompanying unaudited interim condensed consolidated financial statements have been prepared in accordance with 

accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and 

with the SEC’s instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the 

information and note disclosures required by GAAP for complete consolidated financial statements. In the opinion of 

management, all adjustments of a normal recurring nature considered necessary for a fair presentation have been included. 

The accompanying condensed consolidated financial statements include our accounts as well as the accounts of other entities 

in which we have a controlling financial interest. All intercompany accounts and transactions have been eliminated. Results 

for the three months ended March 31, 2013 may not necessarily be indicative of the results for the year ending December 31, 

2013. The unaudited interim condensed consolidated financial statements as of and for the three months ended March 31, 

2013 should be read in conjunction with our audited consolidated financial statements and related notes included in our 

Annual Report on Form 10-K for the year ended December 31, 2012 (“2012 Form 10-K”), filed with the SEC on April 2, 

2013.

Related Parties

As a result of our issuance to Treasury of the 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, 2013, 

Treasury held an investment in our senior preferred stock with an aggregate liquidation preference of $117.1 billion. Our 

administrative expenses were reduced by $26 million and $22 million for the three months ended March 31, 2013 and 2012, 

respectively, due to reimbursements from Treasury and Freddie Mac for expenses incurred as program administrator for 

Treasury’s Home Affordable Modification Program (“HAMP”) and other initiatives under Treasury’s Making Home 

Affordable Program. 

Under the temporary credit and liquidity facilities (“TCLF”) program, we had $1.4 billion and $1.6 billion outstanding, 

which include principal and interest, of standby credit and liquidity support as of March 31, 2013 and December 31, 2012, 

respectively. Under the new issue bond (“NIB”) program, we had $5.8 billion and $6.1 billion outstanding of pass-through 

securities backed by single-family and multifamily housing bonds issued by housing finance agencies (“HFAs”) as of 

March 31, 2013 and December 31, 2012, respectively. Treasury will bear the initial losses of principal under the TCLF 

program and the NIB program up to 35% of the total original principal on a combined program-wide basis, and thereafter we 

will bear the losses of principal that are attributable to the TCLF and the securities we have issued. Treasury will also bear 

any losses of unpaid interest under the two programs. As of March 31, 2013, there had been no losses of principal or interest 

under the TCLF program or the NIB program.

The fee revenue and expense related to the Temporary Payroll Tax Cut Continuation Act of 2011 (“TCCA”) are recorded in 

“Mortgage loans interest income” and “Other expenses,” respectively, in our condensed consolidated statements of operations 

and comprehensive income. We recognized $186 million in other expenses relating to TCCA-related guaranty fees during the 

three months ended March 31, 2013 which have not been remitted to Treasury as of March 31, 2013. During the three months 

ended March 31, 2013, we have remitted TCCA-related guaranty fees of $134 million to Treasury for our obligations as of 

December 31, 2012.

FHFA’s control of both us and Freddie Mac has caused us and Freddie Mac to be related parties. No transactions outside of 

normal business activities have occurred between us and Freddie Mac. As of March 31, 2013 and December 31, 2012, we 

held Freddie Mac mortgage-related securities with a fair value of $12.0 billion and $12.2 billion, respectively, and accrued 

interest receivable of $48 million and $51 million, respectively. We recognized interest income on these securities held by us 

of $111 million and $153 million for the three months ended March 31, 2013 and 2012, respectively. In addition, Freddie 

Mac may be an investor in variable interest entities that we have consolidated, and we may be an investor in variable interest 

entities that Freddie Mac has consolidated.
FANNIE MAE

(In conservatorship)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(UNAUDITED)

87

Use of Estimates

Preparing condensed consolidated financial statements in accordance with GAAP requires management to make estimates 

and assumptions that affect our reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities as 

of the dates of our condensed consolidated financial statements, as well as our reported amounts of revenues and expenses 

during the reporting periods. Management has made significant estimates in a variety of areas including, but not limited to, 

valuation of certain financial instruments and other assets and liabilities, recoverability of our deferred tax assets, allowance 

for loan losses and reserve for guaranty losses, and other-than-temporary impairment of investment securities. Actual results 

could be different from these estimates.

As of March 31, 2013, we have concluded that it is more likely than not that our deferred tax assets, except the deferred tax 

assets relating to capital loss carryforwards, will be realized. As a result, we have released the valuation allowance on our 

deferred tax assets, but retained $491 million of the valuation allowance that pertains to our capital loss carryforwards. This 

conclusion was based upon the significance of the positive evidence of our ability to generate sufficient taxable income and 

utilize our net operating loss carryforwards. The release of the valuation allowance resulted in the recognition of $50.6 billion

in our benefit for income taxes in our condensed consolidated statements of operations and comprehensive income for the 

three months ended March 31, 2013. See “Note 10, Income Taxes,” for additional information regarding the factors that led 

to our conclusion to release the valuation allowance against our deferred tax assets.

Earnings (Loss) per Share

Earnings (loss) per share (“EPS”) is presented for both basic EPS and diluted EPS. We compute basic EPS by dividing net 

income (loss) available to common stockholders by the weighted-average number of shares of common stock outstanding 

during the period. In addition to common shares outstanding, the computation of basic EPS includes instruments for which 

the holder has (or is deemed to have) the present rights as of the end of the reporting period to share in current period 

earnings (loss) with common stockholders (i.e., participating securities and common shares that are currently issuable for 

little or no cost to the holder). We include in the denominator of our basic EPS computation the weighted-average number of 

shares of common stock that would be issued upon the full exercise of the warrant issued to Treasury. Diluted EPS includes 

all the components of basic EPS, plus the dilutive effect of common stock equivalents such as convertible securities and stock 

options, but excludes those common stock equivalents from the calculation of diluted EPS when the effect of inclusion, 

assessed individually, would be anti-dilutive. The calculation of income available to common stockholders and earnings per 

share is based on the underlying premise that all income after payment of dividends on preferred shares is available to and 

will be distributed to the common stockholders. However, as a result of our conservatorship status and the terms of the senior 

preferred stock purchase agreement, no amounts will be available to distribute as dividends to common or preferred 

stockholders (other than to Treasury as holder of the senior preferred stock).

Employee Retirement Benefits

We sponsor defined benefit plans for our employees that include qualified and nonqualified noncontributory plans. Pension 

plan benefits are based on years of credited service and a percentage of eligible compensation. In 2007, the defined benefit 

pension plans were amended to cease benefits accruals for employees that did not meet certain criteria to be grandfathered 

under the plan and to vest those employees in their frozen accruals. Effective June 30, 2013, the defined benefit pension plans 

will be further amended to cease benefit accruals for all employees. 

Adoption of New Accounting Guidance

Effective January 1, 2013, we retrospectively adopted guidance issued by the Financial Accounting Standards Board 

(“FASB”) on additional disclosures about derivatives, repurchase agreements and reverse repurchase agreements, and 

securities borrowing and lending transactions that are either offset on the balance sheet or subject to a master netting 

arrangement or similar agreement. The additional disclosures about these instruments are intended to enable investors to 

understand the effect or potential effect of those arrangements on the company’s financial positions. The required disclosures 

will enhance comparability between companies that prepare their financial statements in accordance with GAAP and those 

that follow international financial reporting standards. The updated guidance does not change existing offsetting eligibility 

criteria or the permitted balance sheet presentation for those instruments that meet the eligibility criteria. The adoption of this 

guidance did not have a material impact on our condensed consolidated financial statements; however, it required us to 

expand our disclosures. See “Note 15, Netting Arrangements,” for additional information regarding the impact upon adoption 

of this guidance.
FANNIE MAE

(In conservatorship)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(UNAUDITED)

88

Effective January 1, 2013, we prospectively adopted guidance issued by FASB related to disclosing amounts that have been 

reclassified out of Accumulated Other Comprehensive Income (“AOCI”). The new guidance does not change the current 

requirements for reporting or measuring net income or other comprehensive income in the financial statements. However, the 

new guidance does require entities to present information about amounts reclassified out of AOCI during the period and their 

corresponding effect on net income by specific line item. The adoption of this guidance did not have a material impact on our 

condensed consolidated financial statements; however, it required us to expand our AOCI disclosures. See “Note 13, Equity,” 

for additional information regarding the disclosures required upon adoption of this guidance.

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 trusts guaranteed by us via lender swap and portfolio securitization transactions, mortgage and asset-backed 

trusts that were not created by us, as well as housing partnerships that are established to finance the acquisition, construction, 

development or rehabilitation of affordable multifamily and single-family housing. 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.

As of March 31, 2013, we consolidated certain VIEs that were not consolidated as of December 31, 2012, generally due to 

increases in the amount of the certificates issued by the entity that are held in our portfolio (for example, when we hold a 

substantial portion of the securities issued by Fannie Mae multi-class resecuritization trusts). As a result of consolidating 

these entities, which had combined total assets of $973 million in unpaid principal balance as of March 31, 2013, we 

derecognized our investment in these entities and recognized the assets and liabilities of the consolidated entities at fair value. 

As of March 31, 2013, there were no VIEs that were deconsolidated that had been consolidated as of December 31, 2012.

Unconsolidated VIEs

We do not consolidate VIEs when we are not deemed to be the primary beneficiary. Our unconsolidated VIEs include 

securitization trusts, as well as other investment entities. The following table displays the carrying amount and classification 

of our assets and liabilities that relate to our involvement with unconsolidated mortgage backed-trusts as of March 31, 2013

and December 31, 2012, as well as our maximum exposure to loss and the total assets of those unconsolidated mortgage 

backed-trusts.

As of 

March 31, 2013 December 31, 2012

(Dollars in millions)

Assets and liabilities recorded in our condensed consolidated balance sheets related to 

mortgage-backed trusts:

Assets:

Available-for-sale securities(1). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 54,616 $ 57,004

Trading securities(1). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23,947 22,706

Other assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 137 145

Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,436) (1,449)

Net carrying amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 77,264 $ 78,406

Maximum exposure to loss(1)(2)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 85,533 $ 87,397

Total assets of unconsolidated mortgage-backed trusts(1). . . . . . . . . . . . . . . . . . . . . . . . . . . $ 585,532 $ 645,332

__________

(1) Contains securities recognized in our condensed consolidated balance sheets due to consolidation of certain multi-class resecuritization 

trusts.

(2) Our maximum exposure to loss generally represents the greater of our recorded investment in the entity or the unpaid principal balance 

of the assets covered by our guaranty. However, our securities issued by Fannie Mae multi-class resecuritization trusts that are not 

consolidated do not give rise to any additional exposure to loss as we already consolidate the underlying collateral.
FANNIE MAE

(In conservatorship)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(UNAUDITED)

89

Additionally, our maximum exposure to loss related to our involvement with limited partnership investments was $113 

million and $118 million as of March 31, 2013 and December 31, 2012, respectively. The total assets of these unconsolidated 

limited partnership investments were $11.6 billion and $11.7 billion as of March 31, 2013 and December 31, 2012, 

respectively.

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 portfolio in a portfolio securitization transaction. For the three months ended March 31, 2013 and 2012, 

the unpaid principal balance of portfolio securitizations was $69.4 billion and $41.7 billion, respectively.

The following table displays some key characteristics of the securities retained in unconsolidated portfolio securitization 

trusts as of March 31, 2013 and December 31, 2012. 

Fannie Mae

Single-class

MBS & Fannie

Mae Megas

REMICS & 

SMBS(1)

(Dollars in millions)

As of March 31, 2013

Unpaid principal balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 428 $ 8,030

Fair value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 475 9,229

Weighted-average coupon . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.21 % 5.51 %

Weighted-average loan age . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.7 years 5.0 years

Weighted-average maturity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22.2 years 14.1 years

As of December 31, 2012

Unpaid principal balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 456 $ 8,667

Fair value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 504 9,818

Weighted-average coupon . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.20 % 5.53 %

Weighted-average loan age . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.4 years 4.6 years

Weighted-average maturity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22.5 years 15.0 years

__________

(1) Consists of Real Estate Mortgage Investment Conduits (“REMICs”) and stripped mortgage-backed securities (“SMBS”).

For the three months ended March 31, 2013 and 2012, the principal and interest received on retained interests was $459 

million and $694 million, respectively.

Managed Loans

We define “managed loans” as on-balance sheet mortgage loans as well as mortgage loans that we have securitized in 

unconsolidated portfolio securitization trusts. The following table displays the unpaid principal balances of managed loans, 

including those managed loans that were delinquent as of March 31, 2013 and December 31, 2012.

As of

March 31, 2013 December 31, 2012

Unpaid

Principal

Balance

Principal Amount 

of Delinquent 

Loans(1)

Unpaid

Principal

Balance

Principal Amount 

of Delinquent 

Loans(1)

(Dollars in millions)

Loans held for investment:

Of Fannie Mae . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 350,959 $ 93,490 $ 370,354 $ 102,504

Of consolidated trusts. . . . . . . . . . . . . . . . . . . . . . . . . 2,631,689 14,510 2,607,880 17,829

Loans held for sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 451 135 459 135

Securitized loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,262 — 2,272 4

Total loans managed. . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,985,361 $ 108,135 $ 2,980,965 $ 120,472
FANNIE MAE

(In conservatorship)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(UNAUDITED)

90

__________

(1) Represents the unpaid principal balance of loans held for investment (“HFI”), loans held for sale (“HFS”) and securitized loans for 

which we are no longer accruing interest and loans 90 days or more delinquent which are continuing to accrue interest.

Qualifying Sales of Portfolio Securitizations

We consolidate the substantial majority of our single-class MBS trusts; therefore, these portfolio securitization transactions 

do not qualify for sale treatment. The assets and liabilities of consolidated trusts created via portfolio securitization 

transactions that do not qualify as sales are reported in our condensed consolidated balance sheets.

We recognize assets obtained and liabilities incurred in qualifying sales of portfolio securitizations at fair value. Proceeds 

from the initial sale of securities from portfolio securitizations were $176 million and $133 million for the three months 

ended March 31, 2013 and 2012, respectively. Our continuing involvement in the form of guaranty assets and guaranty 

liabilities with assets that were transferred into unconsolidated trusts is not material to our condensed consolidated financial 

statements.

Other Securitizations

We also completed other portfolio securitization transactions that did not qualify as sales during the three months ended 

March 31, 2012 and were accounted for as secured borrowings. Proceeds from these transactions were $421 million and were 

recorded as long-term debt of Fannie Mae in our condensed consolidated balance sheet. As of March 31, 2013, the fair value 

of trading securities underlying these transactions was $166 million, and the unpaid principal balance of mortgage loans of 

consolidated trusts underlying these transactions was $189 million. The related assets have been transferred to MBS trusts 

and are restricted solely for the purpose of servicing the related MBS. We did not complete any securitizations of this type 

during the three months ended March 31, 2013.

3. Mortgage Loans

The following table displays our mortgage loans as of March 31, 2013 and December 31, 2012.

As of

March 31, 2013 December 31, 2012

Of Fannie

Mae

Of

Consolidated

Trusts Total

Of Fannie

Mae

Of

Consolidated

Trusts Total

(Dollars in millions)

Single-family. . . . . . . . . . . . . . . . . . . . . . . . . . $ 297,066 $ 2,498,297 $ 2,795,363 $ 309,277 $ 2,480,999 $ 2,790,276

Multifamily . . . . . . . . . . . . . . . . . . . . . . . . . . . 54,239 133,497 187,736 61,464 126,953 188,417

Total unpaid principal balance of mortgage

loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 351,305 2,631,794 2,983,099 370,741 2,607,952 2,978,693

Cost basis and fair value adjustments, net. . . . (14,369) 46,367 31,998 (14,805) 44,313 29,508

Allowance for loan losses for loans held for

investment . . . . . . . . . . . . . . . . . . . . . . . . . . (49,553) (6,908) (56,461) (50,519) (8,276) (58,795)

Total mortgage loans . . . . . . . . . . . . . . $ 287,383 $ 2,671,253 $ 2,958,636 $ 305,417 $ 2,643,989 $ 2,949,406

Nonaccrual Loans 

We discontinue accruing interest on loans when we believe collectibility of principal or interest is not reasonably assured, 

which for single-family loans 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. We generally place multifamily loans on nonaccrual status when 

the loan is deemed to be individually impaired, unless the loan is well secured such that collectibility of principal and accrued 

interest is reasonably assured. 

When a loan is placed on nonaccrual status, interest previously accrued but not collected becomes part of our recorded 

investment in the loan and is collectively reviewed for impairment. For single-family loans, we recognize interest income for 

loans on nonaccrual status when cash is received. 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 single-family loan to accrual status at the point that the borrower has made sufficient payments to reduce their 

delinquency below our nonaccrual threshold. For modified single-family loans, the loan is not returned to accrual status until 
FANNIE MAE

(In conservatorship)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(UNAUDITED)

91

the borrower successfully makes all required payments during the trial period (generally three to four months) and the 

modification is made permanent. We generally return a multifamily loan to accrual status when the borrower cures the 

delinquency of the loan or we otherwise determine that the loan is well secured such that collectibility is reasonably assured. 

Aging Analysis

The following tables display an aging analysis of the total recorded investment in our HFI mortgage loans, excluding loans 

for which we have elected the fair value option, by portfolio segment and class as of March 31, 2013 and December 31, 2012. 

As of March 31, 2013(1)

30 - 59 

Days 

Delinquent

60 - 89

Days

Delinquent

Seriously 

Delinquent(2)

Total

Delinquent Current Total

Recorded

Investment

in Loans 90

Days or

More

Delinquent

and

Accruing

Interest

Recorded 

Investment 

in 

Nonaccrual 

Loans

(Dollars in millions)

Single-family:

Primary(3). . . . . . . . . . . . $ 34,276 $ 10,678 $ 61,396 $ 106,350 $ 2,456,907 $ 2,563,257 $ 104 $ 71,918

Government(4). . . . . . . . . 74 31 339 444 50,152 50,596 339 —

Alt-A. . . . . . . . . . . . . . . . 5,477 1,948 20,056 27,481 116,657 144,138 16 21,977

Other(5). . . . . . . . . . . . . . 2,344 813 7,519 10,676 53,546 64,222 36 8,244

Total single-family . . . . 42,171 13,470 89,310 144,951 2,677,262 2,822,213 495 102,139

Multifamily(6). . . . . . . . . . . 140 NA 822 962 189,260 190,222 1 2,609

Total. . . . . . . . . . . . . $ 42,311 $ 13,470 $ 90,132 $ 145,913 $ 2,866,522 $ 3,012,435 $ 496 $ 104,748

As of December 31, 2012(1)

30 - 59 

Days 

Delinquent

60 - 89

Days

Delinquent

Seriously 

Delinquent(2)

Total

Delinquent Current Total

Recorded 

Investment 

in Loans 90 

Days or

More 

Delinquent 

and 

Accruing 

Interest(7)

Recorded 

Investment 

in 

Nonaccrual 

Loans

(Dollars in millions)

Single-family:

Primary(3). . . . . . . . . . . . $ 39,043 $ 13,513 $ 67,737 $ 120,293 $ 2,424,022 $ 2,544,315 $ 2,162 $ 78,822

Government(4). . . . . . . . 82 40 340 462 50,408 50,870 340 —

Alt-A . . . . . . . . . . . . . . . 6,009 2,417 22,181 30,607 121,099 151,706 502 24,048

Other(5). . . . . . . . . . . . . 2,613 1,053 8,527 12,193 57,336 69,529 297 9,209

Total single-family . . . 47,747 17,023 98,785 163,555 2,652,865 2,816,420 3,301 112,079

Multifamily(6). . . . . . . . . . 178 NA 428 606 190,445 191,051 — 2,214

Total . . . . . . . . . . . . $ 47,925 $ 17,023 $ 99,213 $ 164,161 $ 2,843,310 $ 3,007,471 $ 3,301 $ 114,293

__________

(1) Recorded investment consists of unpaid principal balance, unamortized premiums, discounts and other cost basis adjustments, and 

accrued interest receivable.

(2) 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.

(3) Consists of mortgage loans that are not included in other loan classes.

(4) Consists of mortgage loans guaranteed or insured, in whole or in part, by the U.S. government or one of its agencies that are not Alt-A. 

Primarily consists of reverse mortgages which due to their nature are not aged and are included in the current column.

(5) Includes loans with higher-risk loan characteristics, such as interest-only loans and negative-amortizing loans that are neither 

government nor Alt-A.

(6) Multifamily loans 60-89 days delinquent are included in the seriously delinquent column.
FANNIE MAE

(In conservatorship)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(UNAUDITED)

92

(7) Includes loans with a recorded investment of $2.8 billion, which were repurchased in January 2013 pursuant to our resolution 

agreement with Bank of America. These loans were returned to accrual status to reflect the change in our assessment of collectability 

resulting from this agreement.

Credit Quality Indicators 

The following table displays the total recorded investment in our single-family HFI loans, excluding loans for which we have 

elected the fair value option, by class and credit quality indicator as of March 31, 2013 and December 31, 2012. The singlefamily credit quality indicator is updated quarterly. 

As of 

March 31, 2013(1)(2) December 31, 2012(1)(2)

Primary (3) Alt-A Other (4) Primary (3) Alt-A Other (4)

(Dollars in millions)

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

Less than or equal to 80% . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,740,861 $ 55,177 $21,416 $1,703,384 $ 57,419 $21,936

Greater than 80% and less than or equal to 90%. . . . . . . . . . . 341,143 17,388 6,752 346,018 18,313 7,287

Greater than 90% and less than or equal to 100%. . . . . . . . . . 218,014 16,333 7,004 219,736 16,930 7,369

Greater than 100% and less than or equal to 110% . . . . . . . . . 97,882 13,769 6,716 100,302 14,293 7,169

Greater than 110% and less than or equal to 120% . . . . . . . . 57,264 10,669 5,737 59,723 10,994 6,231

Greater than 120% and less than or equal to 125% . . . . . . . . 19,785 4,252 2,414 20,620 4,387 2,665

Greater than 125% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88,308 26,550 14,183 94,532 29,370 16,872

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $2,563,257 $144,138 $64,222 $2,544,315 $151,706 $69,529

__________

(1) Recorded investment consists of unpaid principal balance, unamortized premiums, discounts and other cost basis adjustments, and 

accrued interest receivable.

(2) Excludes $50.6 billion and $50.9 billion as of March 31, 2013 and December 31, 2012, respectively, of mortgage loans guaranteed or 

insured, in whole or in part, by the U.S. government or one of its agencies that are not Alt-A loans. The segment class is primarily 

reverse mortgages for which we do not calculate an estimated mark-to-market LTV.

(3) Consists of mortgage loans that are not included in other loan classes.

(4) Includes loans with higher-risk loan characteristics, such as interest-only loans and negative-amortizing loans that are neither 

government nor Alt-A.

(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.

The following table displays the total recorded investment in our multifamily HFI loans, excluding loans for which we have 

elected the fair value option, by credit quality indicator as of March 31, 2013 and December 31, 2012. The multifamily credit 

quality indicator is updated quarterly.

As of 

March 31, December 31,

2013(1) 2012(1)

(Dollars in millions)

Credit risk profile by internally assigned grade:(2)

Green . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $160,438 $154,235

Yellow(3). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16,435 21,304

Orange . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,886 14,199

Red . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,463 1,313

Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $190,222 $191,051

__________

(1) Recorded investment consists of unpaid principal balance, unamortized premiums, discounts and other cost basis adjustments, and 

accrued interest receivable.

(2) Green (loan with acceptable risk); yellow (loan with signs of potential weakness); orange (loan with a well defined weakness that may 

jeopardize the timely full repayment); and red (loan with a weakness that makes timely collection or liquidation in full more 

questionable based on existing conditions and values).
FANNIE MAE

(In conservatorship)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(UNAUDITED)

93

(3) Includes approximately $4.4 billion and $5.1 billion of unpaid principal balance as of March 31, 2013 and December 31, 2012, 

respectively, classified as yellow due to no available financial information.

Individually Impaired Loans

Individually impaired loans include troubled debt restructurings (“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. The following tables display the total recorded investment, unpaid principal balance, and related 

allowance as of March 31, 2013 and December 31, 2012 and interest income recognized and average recorded investment for 

the three months ended March 31, 2013 and 2012 for individually impaired loans.

As of

March 31, 2013 December 31, 2012

Unpaid

Principal

Balance

Total 

Recorded 

Investment (1)

Related

Allowance

for Loan

Losses

Related

Allowance

for

Accrued

Interest

Receivable

Unpaid

Principal

Balance

Total 

Recorded 

Investment (1)

Related

Allowance

for Loan

Losses

Related

Allowance

for

Accrued

Interest

Receivable

(Dollars in millions)

Individually impaired loans:

With related allowance recorded:

Single-family:

Primary(2)

. . . . . . . . . . . . . . . . . . . . . $ 133,620 $ 126,973 $ 28,492 $ 580 $ 132,754 $ 126,106 $ 28,610 $ 628

Government(3)

. . . . . . . . . . . . . . . . . 220 213 37 4 214 208 38 4

Alt-A . . . . . . . . . . . . . . . . . . . . . . . . 38,525 35,685 11,121 251 38,387 35,620 11,154 267

Other(4)

. . . . . . . . . . . . . . . . . . . . . . . 16,690 15,920 4,631 79 16,873 16,114 4,743 86

Total single-family . . . . . . . . . . . . 189,055 178,791 44,281 914 188,228 178,048 44,545 985

Multifamily . . . . . . . . . . . . . . . . . . . . . 2,716 2,740 505 16 2,449 2,471 489 13

Total individually impaired loans with 

related allowance recorded . . . . . . . 191,771 181,531 44,786 930 190,677 180,519 45,034 998

With no related allowance recorded:(5)

Single-family:

Primary(2)

. . . . . . . . . . . . . . . . . . . . . 11,739 9,719 — — 16,222 13,901 — —

Government(3)

. . . . . . . . . . . . . . . . . 109 110 — — 104 104 — —

Alt-A . . . . . . . . . . . . . . . . . . . . . . . . 2,880 1,857 — — 3,994 2,822 — —

Other(4)

. . . . . . . . . . . . . . . . . . . . . . . 800 596 — — 1,218 977 — —

Total single-family . . . . . . . . . . . . 15,528 12,282 — — 21,538 17,804 — —

Multifamily . . . . . . . . . . . . . . . . . . . . . 1,289 1,303 — — 2,056 2,068 — —

Total individually impaired loans with 

no related allowance recorded. . . . . 16,817 13,585 — — 23,594 19,872 — —

Total individually impaired loans(6)

. . . . $ 208,588 $ 195,116 $ 44,786 $ 930 $ 214,271 $ 200,391 $ 45,034 $ 998
FANNIE MAE

(In conservatorship)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(UNAUDITED)

94

For the Three Months Ended March 31,

2013 2012

Average

Recorded

Investment

Total 

Interest 

Income 

Recognized (7)

Interest

Income

Recognized

on a Cash

Basis

Average

Recorded

Investment

Total 

Interest 

Income 

Recognized (7)

Interest

Income

Recognized

on a Cash

Basis

(Dollars in millions)

Individually impaired loans:

With related allowance recorded:

Single-family:

Primary(2)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 125,968 $ 1,102 $ 173 $ 109,970 $ 973 $ 173

Government(3)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 208 3 — 260 3 —

Alt-A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35,534 277 39 31,509 253 39

Other(4)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15,984 109 14 15,255 110 18

Total single-family. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 177,694 1,491 226 156,994 1,339 230

Multifamily . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,607 31 — 2,673 31 —

Total individually impaired loans with related allowance 

recorded . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 180,301 1,522 226 159,667 1,370 230

With no related allowance recorded:(5)

Single-family:

Primary(2)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,830 641 59 6,608 184 54

Government(3)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 109 2 — 20 2 —

Alt-A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,078 175 10 1,558 51 15

Other(4)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 662 63 5 374 19 7

Total single-family. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,679 881 74 8,560 256 76

Multifamily . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,686 22 1 1,714 21 1

Total individually impaired loans with no related allowance 

recorded . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15,365 903 75 10,274 277 77

Total individually impaired loans(6)

. . . . . . . . . . . . . . . . . . . . . . . . $ 195,666 $ 2,425 $ 301 $ 169,941 $ 1,647 $ 307

__________

(1) Recorded investment consists of unpaid principal balance, unamortized premiums, discounts and other cost basis adjustments, and 

accrued interest receivable.

(2) Consists of mortgage loans that are not included in other loan classes.

(3) Consists of mortgage loans guaranteed or insured, in whole or in part, by the U.S. government or one of its agencies that are not Alt-A.

(4) Includes loans with higher-risk characteristics, such as interest-only loans and negative-amortizing loans that are neither government 

nor Alt-A.

(5) The discounted cash flows or collateral value equals or exceeds the carrying value of the loan and, as such, no valuation allowance is 

required.

(6) Includes single-family loans restructured in a TDR with a recorded investment of $189.2 billion and $193.4 billion as of March 31, 

2013 and December 31, 2012, respectively. Includes multifamily loans restructured in a TDR with a recorded investment of $1.1 billion

as of March 31, 2013 and December 31, 2012.

(7) Total single-family interest income recognized of $2.4 billion and $1.6 billion for the three months ended March 31, 2013 and 2012, 

respectively, consists of $1.4 billion and $1.2 billion of contractual interest and $941 million and $387 million of effective yield 

adjustments.

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 as TDRs loans to certain 

borrowers who have received bankruptcy relief.
FANNIE MAE

(In conservatorship)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(UNAUDITED)

95

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, 2013 and 2012, the average term extension of a single-family 

modified loan was 148 and 128 months, respectively, and the average interest rate reduction was 1.81 and 2.28 percentage 

points, respectively. 

The following table displays the number of loans and recorded investment in loans restructured in a TDR for the three 

months ended March 31, 2013 and 2012.

For the Three Months Ended March 31,

2013 2012

Number of

Loans

Recorded

Investment(1)

Number of

Loans

Recorded

Investment(1)

(Dollars in millions)

Single-family:

Primary(2). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38,251 $ 5,644 26,884 $ 4,587

Government(3). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90 11 110 14

Alt-A. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,110 1,223 4,645 967

Other(4). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,057 452 1,660 409

Total single-family. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47,508 7,330 33,299 5,977

Multifamily. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 33 13 68

Total troubled debt restructurings. . . . . . . . . . . . . . . . . . . . . . . . . . . . 47,516 $ 7,363 33,312 $ 6,045

__________

(1) Recorded investment consists of unpaid principal balance, unamortized premiums, discounts and other cost basis adjustments, and 

accrued interest receivable. Based on the nature of our modification programs, which do not include principal or past-due interest 

forgiveness, there is not a material difference between the recorded investment in our loans pre- and post- modification, therefore 

amounts represent recorded investment post-modification.

(2) Consists of mortgage loans that are not included in other loan classes.

(3) Consists of mortgage loans guaranteed or insured, in whole or in part, by the U.S. government or one of its agencies that are not Alt-A.

(4) Includes loans with higher-risk characteristics, such as interest-only loans and negative-amortizing loans that are neither government 

nor Alt-A.

The following table displays the number of loans and recorded investment in loans that had a payment default for the three 

months ended March 31, 2013 and 2012 and were modified in a TDR in the twelve months prior to the 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,

2013 2012

Number of

Loans

Recorded

Investment(1)

Number of

Loans

Recorded

Investment(1)

(Dollars in millions)

Single-family:

Primary(2). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,060 $1,867 11,872 $ 2,074

Government(3). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29 4 50 10

Alt-A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,672 484 2,243 466

Other(4). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 823 185 1,195 288

Total single-family . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15,584 2,540 15,360 2,838

Multifamily . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 15 1 2

Total TDRs that subsequently defaulted . . . . . . . . . . . . . . . . . . . . . . . 15,587 $2,555 15,361 $ 2,840
FANNIE MAE

(In conservatorship)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(UNAUDITED)

96

__________

(1) Recorded investment consists of unpaid principal balance, unamortized premiums, discounts and other cost basis adjustments, and 

accrued interest receivable. Represents our recorded investment in the loan at time of payment default.

(2) Consists of mortgage loans that are not included in other loan classes.

(3) Consists of mortgage loans guaranteed or insured, in whole or in part, by the U.S. government or one of its agencies that are not Alt-A.

(4) Includes loans with higher-risk characteristics, such as interest-only loans and negative-amortizing loans that are neither government 

nor Alt-A.

4. Allowance for Loan Losses

Our allowance for loan losses is a valuation allowance that reflects an estimate of incurred credit losses related to our 

recorded investment in both single-family and multifamily HFI loans. This population includes both HFI loans held by 

Fannie Mae and by consolidated Fannie Mae MBS trusts. When calculating our loan loss allowance, we consider only our net 

recorded investment in the loan at the balance sheet date, which includes the loan’s unpaid principal balance and accrued 

interest recognized while the loan was on accrual status and any applicable cost basis adjustments. We record charge-offs as a 

reduction to the allowance for loan losses when losses are confirmed through the receipt of assets in full satisfaction of a 

loan, such as the underlying collateral upon foreclosure or cash upon completion of a short sale. 

We aggregate single-family HFI loans that are not individually impaired based on similar risk characteristics, for purposes of 

estimating incurred credit losses and establishing a collective single-family loss reserve using an econometric model that 

derives an overall loss reserve estimate. We base our allowance and reserve methodology on historical events and trends, 

such as loss severity (in event of default), default rates, and recoveries from mortgage insurance contracts and other credit 

enhancements. In addition, management performs a review of the observable data used in its estimate to ensure it is 

representative of prevailing economic conditions and other events existing as of the balance sheet date. 

Individually impaired single-family loans currently include those restructured in a TDR and acquired credit-impaired loans. 

When a loan has been restructured, we measure impairment using a cash flow analysis discounted at the loan’s original 

effective interest rate. However, if we expect to recover our recorded investment in an individually impaired loan through 

probable foreclosure of the underlying collateral, we measure impairment based on the fair value of the collateral, reduced by 

estimated disposal costs and adjusted for estimated proceeds from mortgage, flood, or hazard insurance or similar sources. 

We identify multifamily loans for evaluation for impairment through a credit risk assessment process. Based on this 

evaluation, we determine for loans that are not in homogeneous pools whether or not a loan is individually impaired. If we 

determine that a multifamily loan is individually impaired, we generally measure impairment on that loan based on the fair 

value of the underlying collateral less estimated costs to sell the property. If we determine that an individual loan that was 

specifically evaluated for impairment is not individually impaired, we include the loan as part of a pool of loans with similar 

characteristics that are evaluated collectively for incurred losses. 
FANNIE MAE

(In conservatorship)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(UNAUDITED)

97

The following table displays changes in single-family, multifamily and total allowance for loan losses for the three months 

ended March 31, 2013 and 2012. 

For the Three Months Ended March 31,

2013 2012

Of

Fannie

Mae

Of

Consolidated

Trusts Total

Of

Fannie

Mae

Of

Consolidated

Trusts Total

(Dollars in millions)

Single-family allowance for loan losses:

Beginning balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 49,848 $ 7,839 $ 57,687 $ 56,294 $ 14,339 $ 70,633

(Benefit) provision for loan losses(1). . . . . . . . . . . . . . . . . . . . . (436) (403) (839) 1,400 620 2,020

Charge-offs(2). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2,670) (49) (2,719) (4,404) (263) (4,667)

Recoveries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,027 245 1,272 421 65 486

Transfers(3). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,123 (1,123) — 2,193 (2,193) —

Other(4). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75 25 100 204 62 266

Ending balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 48,967 $ 6,534 $ 55,501 $ 56,108 $ 12,630 $ 68,738

Multifamily allowance for loan losses:

Beginning balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 671 $ 437 $ 1,108 $ 1,015 $ 508 $ 1,523

(Benefit) provision for loan losses(1). . . . . . . . . . . . . . . . . . . . . (91) (54) (145) (17) (23) (40)

Charge-offs(2). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1) — (1) (129) — (129)

Transfers(3). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 (9) — 8 (8) —

Other(4). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2) — (2) 16 1 17

Ending balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 586 $ 374 $ 960 $ 893 $ 478 $ 1,371

Total allowance for loan losses:

Beginning balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 50,519 $ 8,276 $ 58,795 $ 57,309 $ 14,847 $ 72,156

(Benefit) provision for loan losses(1). . . . . . . . . . . . . . . . . . . . . (527) (457) (984) 1,383 597 1,980

Charge-offs(2)(5). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2,671) (49) (2,720) (4,533) (263) (4,796)

Recoveries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,027 245 1,272 421 65 486

Transfers(3). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,132 (1,132) — 2,201 (2,201) —

Other(4). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73 25 98 220 63 283

Ending balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 49,553 $ 6,908 $ 56,461 $ 57,001 $ 13,108 $ 70,109

__________

(1) (Benefit) provision for loan losses is included in benefit (provision) for credit losses in our condensed consolidated statements of 

operations and comprehensive income.

(2) While we purchase the substantial majority of loans that are four or more months delinquent from our MBS trusts, we do not exercise 

this option to purchase loans during a forbearance period. Charge-offs of consolidated trusts generally represent loans that remained in 

our consolidated trusts at the time of default.

(3) Includes transfers from trusts for delinquent loan purchases.

(4) Amounts represent the net activity recorded in our allowances for accrued interest receivable and preforeclosure property taxes and 

insurance receivable from borrowers. The (benefit) provision for credit losses, charge-offs, recoveries and transfer activity included in 

this table reflects all changes for both the allowance for loan losses and the valuation allowances for accrued interest and preforeclosure 

property taxes and insurance receivable that relate to the mortgage loans.

(5) Total charge-offs include accrued interest of $115 million and $273 million for the three months ended March 31, 2013 and 2012, 

respectively. 

As of March 31, 2013, the allowance for accrued interest receivable for loans of Fannie Mae was $1.4 billion and for loans of 

consolidated trusts was $168 million. As of December 31, 2012, the allowance for accrued interest receivable for loans of 

Fannie Mae was $1.5 billion and for loans of consolidated trusts was $192 million.
FANNIE MAE

(In conservatorship)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(UNAUDITED)

98

The following table displays the allowance for loan losses and total recorded investment in our HFI loans, excluding loans for 

which we have elected the fair value option, by impairment or reserve methodology and portfolio segment as of March 31, 

2013 and December 31, 2012.

As of

March 31, 2013 December 31, 2012

SingleFamily Multifamily TotalSingleFamily Multifamily Total

(Dollars in millions)

Allowance for loan losses by segment:

Individually impaired loans(1). . . . . . . . . . . . . . . . $ 44,281 $ 505 $ 44,786 $ 44,545 $ 489 $ 45,034

Collectively reserved loans . . . . . . . . . . . . . . . . . . 11,220 455 11,675 13,142 619 13,761

Total allowance for loan losses. . . . . . . . . . . . . $ 55,501 $ 960 $ 56,461 $ 57,687 $ 1,108 $ 58,795

Recorded investment in loans by segment:(2)

Individually impaired loans(1). . . . . . . . . . . . . . . . $ 191,073 $ 4,043 $ 195,116 $ 195,852 $ 4,539 $ 200,391

Collectively reserved loans . . . . . . . . . . . . . . . . . . 2,631,140 186,179 2,817,319 2,620,568 186,512 2,807,080

Total recorded investment in loans . . . . . . . . . $ 2,822,213 $ 190,222 $ 3,012,435 $ 2,816,420 $ 191,051 $ 3,007,471

__________

(1) Includes acquired credit-impaired loans.

(2) Recorded investment consists of unpaid principal balance, unamortized premiums, discounts and other cost basis adjustments, and 

accrued interest receivable.

5. Investments in Securities

Trading Securities

Trading securities are recorded at fair value with subsequent changes in fair value recorded as “Fair value gains, net” in our 

condensed consolidated statements of operations and comprehensive income. The following table displays our investments in 

trading securities as of March 31, 2013 and December 31, 2012.

As of

March 31, December 31,

2013 2012

(Dollars in millions)

Mortgage-related securities:

Fannie Mae . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 6,432 $ 6,248

Freddie Mac. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,375 2,793

Ginnie Mae . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 679 437

Alt-A private-label securities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,457 1,330

Subprime private-label securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,446 1,319

CMBS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,817 9,826

Mortgage revenue bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 661 675

Other mortgage-related securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 118 117

Total mortgage-related securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23,985 22,745

U.S. Treasury securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28,406 17,950

Total trading securities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 52,391 $ 40,695
FANNIE MAE

(In conservatorship)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(UNAUDITED)

99

The following table displays information about our net trading gains and losses for the three months ended March 31, 2013 

and 2012.

For the Three

Months Ended

March 31,

2013 2012

(Dollars in millions)

Net trading gains (losses):

Mortgage-related securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 391 $ 296

Non-mortgage-related securities(1)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 (12)

Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 396 $ 284

Net trading gains (losses) recorded in the period related to securities still held at period end:

Mortgage-related securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 392 $ 331

Non-mortgage-related securities(1)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 (12)

Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 397 $ 319

__________ s

(1) Consists of U.S. Treasury securities for the three months ended March 31, 2013 and U.S. Treasury securities and asset-backed securities 

for the three months ended March 31, 2012.

Available-for-Sale Securities

We measure available-for-sale (“AFS”) securities at fair value with unrealized gains and losses recorded net of tax as a 

component of “Other comprehensive income” and we record realized gains and losses from the sale of AFS securities in 

“Investment gains, net” in our condensed consolidated statements of operations and comprehensive income. 

The following table displays the gross realized gains, losses and proceeds on sales of AFS securities for the three months 

ended March 31, 2013 and 2012.

For the Three

Months Ended

March 31,

2013 2012

(Dollars in millions)

Gross realized gains. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 9 $ 18

Gross realized losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 9

Total proceeds(1)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94 268

__________ s

(1) Excludes proceeds from the initial sale of securities from new portfolio securitizations included in “Note 2, Consolidations and 

Transfers of Financial Assets.”
FANNIE MAE

(In conservatorship)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(UNAUDITED)

100

The following tables display the amortized cost, gross unrealized gains and losses and fair value by major security type for 

AFS securities we held as of March 31, 2013 and December 31, 2012.

As of March 31, 2013

Total 

Amortized 

Cost(1)

Gross

Unrealized

Gains

Gross 

Unrealized 

Losses - 

OTTI(2)

Gross 

Unrealized 

Losses - 

Other(3)

Total

Fair

Value

(Dollars in millions)

Fannie Mae. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 8,015 $ 740 $ — $ (8) $ 8,747

Freddie Mac . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,970 662 — — 8,632

Ginnie Mae. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 609 100 — — 709

Alt-A private-label securities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,968 620 (412) (50) 11,126

Subprime private-label securities. . . . . . . . . . . . . . . . . . . . . . . . . . . 7,882 477 (356) (135) 7,868

CMBS(4). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,910 883 — (6) 12,787

Mortgage revenue bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,325 138 (49) (59) 7,355

Other mortgage-related securities . . . . . . . . . . . . . . . . . . . . . . . . . . 3,238 124 (27) (230) 3,105

Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $57,917 $3,744 $ (844) $ (488) $ 60,329

As of December 31, 2012

Total 

Amortized 

Cost(1)

Gross

Unrealized

Gains

Gross 

Unrealized 

Losses - 

OTTI(2)

Gross 

Unrealized 

Losses - 

Other(3)

Total

Fair

Value

(Dollars in millions)

Fannie Mae . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 9,580 $ 871 $ — $ (16) $10,435

Freddie Mac. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,652 728 — — 9,380

Ginnie Mae . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 645 106 — — 751

Alt-A private-label securities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,356 452 (637) (96) 11,075

Subprime private-label securities . . . . . . . . . . . . . . . . . . . . . . . . . . 8,137 217 (669) (238) 7,447

CMBS(4). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,284 824 — (11) 13,097

Mortgage revenue bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,782 157 (45) (52) 7,842

Other mortgage-related securities . . . . . . . . . . . . . . . . . . . . . . . . . . 3,330 109 (18) (267) 3,154

Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $61,766 $3,464 $(1,369) $ (680) $63,181

__________ s

(1) Amortized cost consists of unpaid principal balance, unamortized premiums, discounts and other cost basis adjustments as well as the 

credit component of other-than-temporary impairments (“OTTI”) recognized in our condensed consolidated statements of operations 

and comprehensive income.

(2) Represents the noncredit component of other-than-temporary impairments losses recorded in “Accumulated other comprehensive 

income” as well as cumulative changes in fair value of securities for which we previously recognized the credit component of otherthan-temporary impairments.

(3) Represents the gross unrealized losses on securities for which we have not recognized an other-than-temporary impairment.

(4) Amortized cost includes $475 million and $527 million as of March 31, 2013 and December 31, 2012, respectively, of increases to the 

carrying amount from previous fair value hedge accounting.

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 that we held as of March 31, 2013 and December 31, 2012.
FANNIE MAE

(In conservatorship)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(UNAUDITED)

101

As of March 31, 2013

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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (1) $ 67 $ (7) $ 303

Alt-A private-label securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (8) 671 (454) 3,601

Subprime private-label securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (7) 198 (484) 4,218

CMBS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — — (6) 191

Mortgage revenue bonds. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (5) 266 (103) 1,187

Other mortgage-related securities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — — (257) 1,540

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (21) $1,202 $(1,311) $11,040

As of December 31, 2012

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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (5) $ 599 $ (11) $ 372

Alt-A private-label securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (18) 541 (715) 4,465

Subprime private-label securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (14) 243 (893) 5,058

CMBS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — — (11) 240

Mortgage revenue bonds. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (3) 127 (94) 1,198

Other mortgage-related securities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (3) 95 (282) 1,529

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (43) $1,605 $(2,006) $12,862

Other-Than-Temporary Impairments 

We recognize the credit component of other-than-temporary impairments of our debt securities in “Net other-than-temporary 

impairments” and the noncredit component in “Other comprehensive income” in our condensed consolidated statements of 

operations and comprehensive income for those securities that we do not intend to sell and for which it is not more likely 

than not that we will be required to sell before recovery.

The fair value of our securities varies from period to period due to changes in interest rates, in the performance of the 

underlying collateral and in the credit performance of the underlying issuer, among other factors. As of March 31, 2013, $1.3 

billion of gross unrealized losses on AFS securities had existed for a period of 12 consecutive months or longer. Gross 

unrealized losses on AFS securities as of March 31, 2013 include unrealized losses on securities with other-than-temporary 

impairment in which a portion of the impairment remains in “Accumulated other comprehensive income.” The securities with 

unrealized losses for 12 consecutive months or longer, on average, had a fair value as of March 31, 2013 that was 89% of 

their amortized cost basis. Based on our review for impairments of AFS securities, which includes an evaluation of the 

collectibility of cash flows and any intent or requirement to sell the securities, we have concluded that we do not have an 

intent to sell and we believe it is not more likely than not that we will be required to sell the securities. Additionally, our 

projections of cash flows indicate that we will recover these unrealized losses over the lives of the securities.

The following table displays our net other-than-temporary impairments by major security type recognized in our condensed 

consolidated statements of operations and comprehensive income for the three months ended March 31, 2013 and 2012.
FANNIE MAE

(In conservatorship)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(UNAUDITED)

102

For the Three

Months Ended

March 31,

2013 2012

(Dollars in millions)

Alt-A private-label securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 4 $ 43

Subprime private-label securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 19

Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 2

Net other-than-temporary impairments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 9 $ 64

The following table displays activity related to the unrealized credit component on debt securities held by us and recognized 

in our condensed consolidated statements of operations and comprehensive income for the three months ended March 31, 

2013 and 2012. For the three months ended March 31, 2013 and 2012, a related unrealized noncredit component of $33 

million and $16 million, respectively, was recognized in “Other comprehensive income.”

For the Three

Months Ended

March 31,

2013 2012

(Dollars in millions)

Balance, beginning of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 9,214 $ 8,915

Additions for the credit component on debt securities for which OTTI was not previously recognized . . . 5 —

Additions for the credit component on debt securities for which OTTI was previously recognized . . . . . . 4 64

Reductions for securities no longer in portfolio at period end. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2) —

Reductions for amortization resulting from changes in cash flows expected to be collected over the 

remaining life of the securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (85) (109)

Balance, end of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 9,136 $ 8,870

As of March 31, 2013, those debt securities with other-than-temporary impairment for which we recognized the credit 

component of other-than-temporary impairments in our condensed consolidated statements of operations and comprehensive 

income consisted predominantly of Alt-A and subprime private-label securities. We evaluate Alt-A (including option 

adjustable rate mortgage (“ARM”)) and subprime private-label securities for other-than-temporary impairment by 

discounting the projected cash flows from econometric models to estimate the portion of loss in value attributable to credit. 

Separate components of a third-party model project regional home prices, unemployment and interest rates. The model 

combines these factors with available current information regarding attributes of loans in pools backing the private-label 

mortgage-related securities to project prepayment speeds, conditional default rates, loss severities and delinquency rates. It 

incorporates detailed information on security-level subordination levels and cash flow priority of payments to project security 

level cash flows. We have recorded other-than-temporary impairments for the three months ended March 31, 2013 based on 

this analysis. For securities we determined were not other-than-temporarily impaired, we concluded that either the bond had 

no projected credit loss or, if we projected a loss, that the present value of expected cash flows was greater than the security’s 

cost basis.

The following table displays the modeled attributes, including default rates and severities, which are used to determine 

whether our senior interests in certain non-agency mortgage-related securities will experience a cash shortfall as of March 31, 

2013. Assumption of voluntary prepayment rates is also an input to the present value of expected losses.
FANNIE MAE

(In conservatorship)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(UNAUDITED)

103

As of March 31, 2013

Alt-A

Subprime Option ARM Fixed Rate Variable Rate Hybrid Rate

(Dollars in millions)

Vintage Year

2004 & Prior:

Unpaid principal balance . . . . . . . . . . . . . . . . . . . . $ 1,348 $ 428 $2,702 $ 418 $1,886

Weighted average collateral default(1)

. . . . . . . . . . 38.2% 33.7% 12.7% 23.4% 14.4%

Weighted average collateral severities(2)

. . . . . . . . 66.9 58.5 51.8 51.2 45.1

Weighted average voluntary prepayment rates(3). . 7.7 6.5 12.0 7.9 10.0

Average credit enhancement(4)

. . . . . . . . . . . . . . . . 52.1 10.0 12.1 23.3 9.0

2005:

Unpaid principal balance . . . . . . . . . . . . . . . . . . . . $ 126 $1,139 $ 978 $ 453 $1,993

Weighted average collateral default(1)

. . . . . . . . . . 65.2% 46.1% 34.4% 41.4% 28.7%

Weighted average collateral severities(2)

. . . . . . . . 70.7 63.7 61.1 59.7 52.1

Weighted average voluntary prepayment rates(3). . 3.1 5.3 7.5 6.5 7.2

Average credit enhancement(4)

. . . . . . . . . . . . . . . . 65.4 15.7 0.8 11.6 3.8

2006:

Unpaid principal balance . . . . . . . . . . . . . . . . . . . . $10,313 $ 955 $ 450 $1,354 $1,386

Weighted average collateral default(1)

. . . . . . . . . . 67.0% 59.5% 36.8% 46.5% 25.2%

Weighted average collateral severities(2)

. . . . . . . . 72.9 63.7 63.6 59.8 52.3

Weighted average voluntary prepayment rates(3). . 2.7 4.2 6.0 5.1 7.2

Average credit enhancement(4)

. . . . . . . . . . . . . . . . 12.3 8.3 0.1 0.6 —

2007 & After:

Unpaid principal balance . . . . . . . . . . . . . . . . . . . . $ 565 $ — $ — $ — $ 98

Weighted average collateral default(1)

. . . . . . . . . . 62.3% N/A N/A N/A 33.8%

Weighted average collateral severities(2)

. . . . . . . . 61.5 N/A N/A N/A 53.1

Weighted average voluntary prepayment rates(3). . 2.2 N/A N/A N/A 7.3

Average credit enhancement(4)

. . . . . . . . . . . . . . . . 26.5 N/A N/A N/A 20.9

Total:

Unpaid principal balance . . . . . . . . . . . . . . . . . . . . $12,352 $2,522 $4,130 $2,225 $5,363

Weighted average collateral default(1)

. . . . . . . . . . 63.6% 49.1% 20.4% 41.1% 22.9%

Weighted average collateral severities(2)

. . . . . . . . 71.7 62.8 55.3 58.2 49.7

Weighted average voluntary prepayment rates(3). . 3.3 5.1 10.3 5.9 8.2

Average credit enhancement(4)

. . . . . . . . . . . . . . . . 17.8 11.9 8.1 7.1 5.0

__________

(1) The expected remaining cumulative default rate of the collateral pool backing the securities, as a percentage of the current collateral 

unpaid principal balance, weighted by security unpaid principal balance.

(2) The expected remaining loss given default of the collateral pool backing the securities, calculated as the ratio of remaining cumulative 

loss divided by cumulative defaults, weighted by security unpaid principal balance.

(3) The average monthly voluntary prepayment rate, weighted by security unpaid principal balance.

(4) The average percent current credit enhancement provided by subordination of other securities. Excludes excess interest projections and 

monoline bond insurance.
FANNIE MAE

(In conservatorship)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(UNAUDITED)

104

Maturity Information

The following table displays the amortized cost and fair value of our AFS securities by major security type and remaining 

maturity, assuming no principal prepayments, as of March 31, 2013. 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, 2013

Total

Amortized

Cost

Total 

Fair

Value

One Year or Less

After One Year Through

Five Years

After Five Years

Through Ten Years After Ten Years

Amortized

Cost

Fair

Value

Amortized

Cost

Fair

Value

Amortized

Cost

Fair

Value

Amortized

Cost

Fair

Value

(Dollars in millions)

Fannie Mae . . . . . . . . . . . . . . . . . . . $ 8,015 $ 8,747 $ — $ — $ 248 $ 263 $ 505 $ 536 $ 7,262 $ 7,948

Freddie Mac . . . . . . . . . . . . . . . . . . . 7,970 8,632 — — 90 95 771 824 7,109 7,713

Ginnie Mae . . . . . . . . . . . . . . . . . . . 609 709 — — 1 2 9 10 599 697

Alt-A private-label securities. . . . . . 10,968 11,126 — — 14 14 152 155 10,802 10,957

Subprime private-label securities . . 7,882 7,868 — — — — — — 7,882 7,868

CMBS . . . . . . . . . . . . . . . . . . . . . . . 11,910 12,787 26 27 11,687 12,569 — — 197 191

Mortgage revenue bonds . . . . . . . . . 7,325 7,355 41 42 276 285 631 640 6,377 6,388

Other mortgage-related securities . . 3,238 3,105 — — — 6 43 42 3,195 3,057

Total. . . . . . . . . . . . . . . . . . . . . . . . . $ 57,917 $ 60,329 $ 67 $ 69 $ 12,316 $ 13,234 $ 2,111 $ 2,207 $ 43,423 $ 44,819

Accumulated Other Comprehensive Income

The following table displays our accumulated other comprehensive income by major categories as of March 31, 2013 and 

December 31, 2012.

As of

March 31, December 31,

2013 2012

(Dollars in millions)

Net unrealized gains on available-for-sale securities for which we have not recorded OTTI, net 

of tax. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,362 $ 1,399

Net unrealized gains (losses) on available-for-sale securities for which we have recorded 

OTTI, net of tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 220 (465)

Prior service cost and actuarial losses, net of amortization for defined benefit plans, net of tax . (515) (505)

Other losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (29) (45)

Accumulated other comprehensive income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,038 $ 384

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 guarantees expose us to credit losses on the mortgage loans or, in the case of 

mortgage-related securities, the underlying mortgage loans of the related securities. The contractual terms of our guarantees 

range from 30 days to 40 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. 

For those guarantees recognized in our condensed consolidated balance sheets, our maximum potential exposure under these 

guarantees is primarily comprised of the unpaid principal balance of the underlying mortgage loans, which totaled $48.2 

billion and $50.6 billion as of March 31, 2013 and December 31, 2012, respectively.

In addition, we had maximum potential exposure of $8.1 billion and $8.3 billion for other guarantees not recognized in our 

condensed consolidated balance sheets as of March 31, 2013 and December 31, 2012, respectively, which primarily 

represents the unpaid principal balance of loans underlying guarantees issued prior to the effective date of current accounting 

guidance on guaranty accounting. 
FANNIE MAE

(In conservatorship)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(UNAUDITED)

105

The maximum amount we could recover through available credit enhancements and recourse with third parties on guarantees 

recognized in our condensed consolidated balance sheets was $13.0 billion and $13.3 billion as of March 31, 2013 and 

December 31, 2012, respectively. The maximum amount we could recover through available credit enhancements and 

recourse with third parties on guarantees not recognized in our condensed consolidated balance sheets was $3.4 billion and 

$3.6 billion as of March 31, 2013 and December 31, 2012, respectively. 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 14, Concentrations of Credit Risk.”

The fair value of our guaranty obligations associated with the Fannie Mae MBS included in “Investments in securities” was 

$1.5 billion and $1.8 billion as of March 31, 2013 and December 31, 2012, respectively.

Risk Characteristics of our Book of Business

We gauge our performance risk under our guaranty based on the delinquency status of the mortgage loans we hold in 

portfolio, or in the case of mortgage-backed securities, the mortgage loans underlying the related securities.

For single-family loans, management monitors the serious delinquency rate, which is the percentage of single-family loans 90

days or more past due or in the foreclosure process, and loans that have higher risk characteristics, such as high mark-tomarket LTV ratios.

For multifamily loans, management monitors the serious delinquency rate, which is the percentage of loans 60 days or more 

past due, and other loans that have higher risk characteristics, to determine our overall credit quality indicator. Higher risk 

characteristics include, but are not limited to, original debt service coverage ratios (“DSCR”) below 1.10, current DSCR 

below 1.0, and high original and current estimated LTV ratios. We stratify multifamily loans into different internal risk 

categories based on the credit risk inherent in each individual loan.

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 these 

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.

The following tables display the current delinquency status and certain higher risk characteristics of our single-family 

conventional and total multifamily guaranty book of business as of March 31, 2013 and December 31, 2012.

As of March 31, 2013(1) As of December 31, 2012(1)

30 Days

Delinquent

60 Days

Delinquent

Seriously 

Delinquent(2)

30 Days

Delinquent

60 Days

Delinquent

Seriously 

Delinquent(2)

Percentage of single-family conventional guaranty 

book of business(3)

. . . . . . . . . . . . . . . . . . . . . . . . 1.54% 0.50% 3.33% 1.75% 0.63% 3.66%

Percentage of single-family conventional loans(4)

. . 1.72 0.53 3.02 1.96 0.66 3.29
FANNIE MAE

(In conservatorship)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(UNAUDITED)

106

As of

March 31, 2013(1) December 31, 2012(1)

Percentage of 

Single-Family

Conventional

Guaranty Book 

of Business(3)

Percentage 

Seriously 

Delinquent(2)(5)

Percentage of 

Single-Family

Conventional

Guaranty Book 

of Business(3)

Percentage 

Seriously 

Delinquent(2)(5)

Estimated mark-to-market loan-to-value ratio:

Greater than 100% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13% 12.83% 13% 13.42%

Geographical distribution:

Arizona . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 1.85 2 2.14

California . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 1.46 19 1.69

Florida . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 9.36 6 10.06

Nevada . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 6.01 1 6.70

Select Midwest states(6). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 3.17 10 3.51

All other states . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62 2.65 62 2.85

Product distribution:

Alt-A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 10.80 6 11.36

Subprime . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . * 19.49 * 20.60

Vintages:

2005. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 7.71 5 7.79

2006. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 11.96 5 12.15

2007. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 12.71 7 12.99

2008. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 6.67 5 6.63

All other vintages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80 1.25 78 1.36

Select combined risk characteristics:

Original LTV ratio > 90% and FICO score < 620. . . . . . . . . . . 1 13.14 1 14.76

__________

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

(1) Consists of the portion of our single-family conventional guaranty book of business for which we have detailed loan level information, 

which constituted approximately 99% of our total single-family conventional guaranty book of business as of March 31, 2013 and 

December 31, 2012.

(2) Consists of single-family conventional loans that were 90 days or more past due or in the foreclosure process, as of March 31, 2013 and 

December 31, 2012.

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

aggregate unpaid principal balance of loans in our single-family conventional guaranty book of business.

(4) Calculated based on the number of single-family conventional loans that were delinquent divided by the total number of loans in our 

single-family conventional guaranty book of business.

(5) Calculated based on the number of single-family conventional loans that were seriously delinquent divided by the total number of 

single-family conventional loans for each category included in our guaranty book of business.

(6) Consists of Illinois, Indiana, Michigan, and Ohio.

As of

March 31, 2013(1)(2) December 31, 2012(1)(2)

30 Days

Delinquent

Seriously 

Delinquent(3)

30 Days

Delinquent

Seriously 

Delinquent(3)

Percentage of multifamily guaranty book of business. . . . . . . . . . . . 0.07% 0.39% 0.23% 0.24%
FANNIE MAE

(In conservatorship)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(UNAUDITED)

107

As of

March 31, 2013(1) December 31, 2012(1)

Percentage of 

Multifamily 

Guaranty Book 

of Business(2)

Percentage 

Seriously 

Delinquent(3)(4)

Percentage of 

Multifamily 

Guaranty Book 

of Business(2)

Percentage 

Seriously 

Delinquent(3)(4)

Original loan-to-value ratio:

Greater than 80% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4% 0.41% 4% 0.36%

Less than or equal to 80% . . . . . . . . . . . . . . . . . . . . . . . . 96 0.39 96 0.24

Original debt service coverage ratio:

Less than or equal to 1.10. . . . . . . . . . . . . . . . . . . . . . . . . 7 1.75 8 0.22

Greater than 1.10 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93 0.30 92 0.25

Current debt service coverage ratio less than 1.0(5). . . . . . . . 5 3.73 5 2.11

__________

(1) Consists of the portion of our multifamily guaranty book of business for which we have detailed loan level information, which 

constituted approximately 99% of our total multifamily guaranty book of business as of March 31, 2013 and December 31, 2012

excluding loans that have been defeased.

(2) 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.

(3) Consists of multifamily loans that were 60 days or more past due as of the dates indicated.

(4) 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 guaranty book of business.

(5) 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 6 to 12 months.

7. Acquired Property, Net

Acquired property, net consists of held-for-sale foreclosed property received in full satisfaction of a loan, net of a valuation 

allowance for declines in the fair value of the properties after initial acquisition. We classify properties as held-for-sale when 

we intend to sell the property and are actively marketing it for sale. The following table displays the activity in acquired 

property, net of the related valuation allowance, for the three months ended March 31, 2013 and 2012. 

For the Three Months

Ended March 31,

2013 2012

(Dollars in millions)

Beginning Balance, January 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $10,489 $11,373

Additions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,676 3,705

Disposals. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (3,901) (4,300)

Write-downs, net of recoveries. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (115) (159)

Ending Balance, March 31(1). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $10,149 $10,619

__________

(1) Includes valuation allowance of $570 million and $790 million as of March 31, 2013 and 2012, respectively.

8. Short-Term Borrowings and Long-Term Debt

Short-Term Borrowings

The following table displays our outstanding short-term borrowings (borrowings with an original contractual maturity of one 

year or less) and weighted-average interest rates of these borrowings as of March 31, 2013 and December 31, 2012.
FANNIE MAE

(In conservatorship)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

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108

As of

March 31, 2013 December 31, 2012

Outstanding

WeightedAverage 

Interest Rate(1) Outstanding

WeightedAverage 

Interest Rate(1)

(Dollars in millions)

Federal funds purchased and securities sold under agreements to 

repurchase(2). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 218 —% $ — —%

Fixed-rate short-term debt:

Discount notes(3). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $114,815 0.14% $104,730 0.15%

Foreign exchange discount notes(4). . . . . . . . . . . . . . . . . . . . . . 470 1.57 503 1.61

Total short-term debt of Fannie Mae. . . . . . . . . . . . . . . . . . . 115,285 0.15 105,233 0.16

Debt of consolidated trusts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,009 0.14 3,483 0.15

Total short-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $118,294 0.15% $108,716 0.16%

__________

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

(2) Securities sold under agreements to repurchase represents agreements to repurchase securities for a specified price, with repayment 

generally occurring on the following day.

(3) Represents unsecured general obligations with maturities ranging from overnight to 360 days from the date of issuance.

(4) Represents foreign exchange discount notes we issue in the Euro commercial paper market with maturities ranging from 5 to 360 days 

which enable investors to hold short-term investments in different currencies. We do not incur foreign exchange risk on these 

transactions, as we simultaneously enter into foreign currency swaps that have the effect of converting debt that we issue in foreign 

denominated currencies into U.S. dollars.

Intraday Lines of Credit

We periodically use secured and unsecured intraday funding lines of credit provided by several large financial institutions. 

We post collateral which, in some circumstances, the secured party has the right to repledge to third parties. As these lines of 

credit are uncommitted intraday loan facilities, we may be unable to draw on them if and when needed. We had secured 

uncommitted lines of credit of $15.0 billion as of March 31, 2013 and December 31, 2012. We had no borrowings 

outstanding from these lines of credit and no unsecured uncommitted lines of credit as of March 31, 2013 and December 31, 

2012.
FANNIE MAE

(In conservatorship)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

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109

Long-Term Debt

Long-term debt represents borrowings with an original contractual maturity of greater than one year. The following table 

displays our outstanding long-term debt as of March 31, 2013 and December 31, 2012.

As of

March 31, 2013 December 31, 2012

Maturities Outstanding

WeightedAverage 

Interest 

Rate(1) Maturities Outstanding

WeightedAverage 

Interest 

Rate(1)

(Dollars in millions)

Senior fixed:

Benchmark notes and bonds. . . . . . . . . 2013 - 2030 $ 242,018 2.48% 2013 - 2030 $ 251,768 2.59%

Medium-term notes(2)

. . . . . . . . . . . . . . 2013 - 2023 181,264 1.26 2013 - 2022 172,288 1.35

Foreign exchange notes and bonds . . . 2021 - 2028 648 5.41 2021 - 2028 694 5.44

Other(3)(4)

. . . . . . . . . . . . . . . . . . . . . . . . 2013 - 2038 40,525 4.90 2013 - 2038 40,819 4.99

Total senior fixed . . . . . . . . . . . . . . 464,455 2.22 465,569 2.35

Senior floating:

Medium-term notes(2)

. . . . . . . . . . . . . . 2013 - 2019 44,056 0.24 2013 - 2019 38,633 0.27

Other(3)(4)

. . . . . . . . . . . . . . . . . . . . . . . . 2020 - 2037 348 7.68 2020 - 2037 365 8.22

Total senior floating . . . . . . . . . . . . 44,404 0.28 38,998 0.33

Subordinated fixed:

Qualifying subordinated. . . . . . . . . . . . 2013 - 2014 2,523 5.00 2013 - 2014 2,522 5.00

Subordinated debentures(5)

. . . . . . . . . . 2019 3,272 9.92 2019 3,197 9.92

Total subordinated fixed . . . . . . . . . 5,795 7.78 5,719 7.75

Secured borrowings(6)

. . . . . . . . . . . . . . . . 2021 - 2022 321 1.86 2021 - 2022 345 1.87

Total long-term debt of Fannie Mae(7)

. 514,975 2.12 510,631 2.25

Debt of consolidated trusts(4)

. . . . . . . . . . . 2013 - 2053 2,599,274 3.28 2013 - 2052 2,570,170 3.36

Total long-term debt . . . . . . . . . . . . $ 3,114,249 3.09% $ 3,080,801 3.18%

__________

(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 long-term debt that is not included in other debt categories.

(4) Includes a portion of structured debt instruments that is reported at fair value.

(5) Consists of subordinated debt issued with an interest deferral feature.

(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) Reported amounts include a net unamortized discount, fair value adjustments and other cost basis adjustments of $5.6 billion and $6.0 

billion as of March 31, 2013 and December 31, 2012, respectively.
FANNIE MAE

(In conservatorship)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

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110

9. Derivative Instruments

Derivative instruments are an integral part of our strategy in managing interest rate risk. Derivative instruments may be 

privately negotiated contracts, which are often referred to as over-the-counter (“OTC”) derivatives, or they may be listed and 

traded on an exchange. 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 derivatives we use for interest rate risk 

management purposes consist primarily of interest rate swaps and interest rate options. 

We enter into forward purchase and sale commitments that lock in the future delivery of mortgage loans and mortgagerelated securities at a fixed price or yield. Certain commitments to purchase mortgage loans and purchase or sell mortgagerelated 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 netted to the extent a legal right of offset exists and is enforceable by law at 

the counterparty level and are 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. We present cash flows from 

derivatives as operating activities in our condensed consolidated statements of cash flows.

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, 2013 and December 31, 2012.
FANNIE MAE

(In conservatorship)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

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111

As of March 31, 2013 As of December 31, 2012

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 . . . . . . . . . . . . . . . . . . $ 32,285 $ 775 $ 226,697 $ (15,712) $ 19,450 $ 270 $ 239,017 $ (18,237)

Receive-fixed . . . . . . . . . . . . . . 199,209 8,740 110,705 (572) 231,346 10,514 57,190 (200)

Basis . . . . . . . . . . . . . . . . . . . . . 18,699 124 8,200 (1) 23,199 151 1,700 —

Foreign currency . . . . . . . . . . . . 577 149 539 (67) 686 193 509 (45)

Swaptions:

Pay-fixed . . . . . . . . . . . . . . . . . . 32,550 114 50,575 (300) 33,050 102 36,225 (184)

Receive-fixed . . . . . . . . . . . . . . 15,720 3,332 50,575 (2,209) 15,970 3,572 36,225 (2,279)

Other(1)

. . . . . . . . . . . . . . . . . . . . . . . . 6,859 36 12 — 7,374 26 13 (1)

Total gross risk management

derivatives. . . . . . . . . . . . . . . . . 305,899 13,270 447,303 (18,861) 331,075 14,828 370,879 (20,946)

Accrued interest receivable

(payable) . . . . . . . . . . . . . . . . . . — 1,361 — (1,494) — 1,242 — (1,508)

Netting adjustment(2)

. . . . . . . . . . . — (14,334) — 19,911 — (15,791) — 22,046

Total net risk management

derivatives . . . . . . . . . . . . . . . $ 305,899 $ 297 $ 447,303 $ (444) $ 331,075 $ 279 $ 370,879 $ (408)

Mortgage commitment derivatives:

Mortgage commitments to

purchase whole loans . . . . . . . . $ 8,981 $ 29 $ 4,432 $ (12) $ 12,360 $ 27 $ 5,232 $ (8)

Forward contracts to purchase

mortgage-related securities. . . . 38,738 154 9,761 (24) 34,545 103 12,557 (23)

Forward contracts to sell

mortgage-related securities. . . . 15,553 39 72,213 (300) 18,886 26 75,477 (266)

Total mortgage commitment

derivatives . . . . . . . . . . . . . . . $ 63,272 $ 222 $ 86,406 $ (336) $ 65,791 $ 156 $ 93,266 $ (297)

Derivatives at fair value . . . . . . . $ 369,171 $ 519 $ 533,709 $ (780) $ 396,866 $ 435 $ 464,145 $ (705)

__________

(1) Includes interest rate caps, futures, swap credit enhancements and mortgage insurance contracts that we account for as derivatives. The 

mortgage insurance contracts have payment provisions that are not based on a notional amount.

(2) The netting adjustment represents the effect of the legal right to offset under legally enforceable master netting agreements to settle with 

the same counterparty on a net basis, including cash collateral posted and received. Cash collateral posted was $5.6 billion and $6.3 

billion as of March 31, 2013 and December 31, 2012, respectively. No cash collateral was received as of March 31, 2013 and 

December 31, 2012.
FANNIE MAE

(In conservatorship)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(UNAUDITED)

112

A majority of our derivative instruments contain provisions that require our senior unsecured debt to maintain a minimum 

credit rating from S&P and Moody’s. If our senior unsecured debt were to fall below established thresholds in our derivatives 

agreements, which range from A+ to BBB+, we could be required to provide additional collateral to or terminate transactions 

with certain counterparties. The aggregate fair value of all derivatives with credit-risk-related contingent features that were in 

a net liability position as of March 31, 2013 was $5.7 billion, for which we posted collateral of $5.6 billion in the normal 

course of business. Had all of the credit-risk-related contingency features underlying these agreements been triggered, an 

additional $145 million would have been required to be posted as collateral or immediately settle our positions based on the 

individual agreements and our fair value position as of March 31, 2013.

The aggregate fair value of all derivatives with credit risk-related contingent features that were in a net liability position as of 

December 31, 2012 was $6.4 billion, for which we posted collateral of $6.3 billion in the normal course of business. Had all 

of the credit risk-related contingency features underlying these agreements been triggered, an additional $159 million would 

have been required to be posted as collateral or to immediately settle our positions based on the individual agreements and 

our fair value position as of December 31, 2012.

We record all derivative gains and losses, including accrued interest, in “Fair value gains, 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, 2013 and 2012. 

For the

Three Months

Ended March 31,

2013 2012

(Dollars in millions)

Risk management derivatives:

Swaps:

Pay-fixed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,392 $ 1,175

Receive-fixed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (928) (918)

Basis. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (17) 38

Foreign currency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (66) 1

Swaptions:

Pay-fixed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 (22)

Receive-fixed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 (94)

Other(1). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 (1)

Total risk management derivatives fair value gains, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 431 179

Mortgage commitment derivatives fair value gains (losses), net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 131 (205)

Total derivatives fair value gains (losses), net. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 562 $ (26)

__________

(1) Includes interest rate caps, futures, swap credit enhancements and mortgage insurance contracts.

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 at a higher cost, or we may be unable to find a suitable replacement. We manage our 

counterparty credit exposure mainly through master netting arrangements, which allow us to net derivative assets and 

liabilities with the same counterparty, and by requiring counterparties to post collateral, which includes cash, U.S. Treasury 

securities, agency debt and agency mortgage-related securities.

See “Note 15, Netting Arrangements” for information on our rights to offset assets and liabilities as of March 31, 2013 and 

December 31, 2012.
FANNIE MAE

(In conservatorship)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(UNAUDITED)

113

10. Income Taxes

Deferred Tax Assets and Liabilities

We recognize deferred tax assets and liabilities for future tax consequences arising from differences between the carrying 

amounts of existing assets and liabilities under GAAP and their respective tax bases, and for net operating loss carryforwards 

and tax credit carryforwards. We evaluate the recoverability of our deferred tax assets, weighing all positive and negative 

evidence, and are required to establish or maintain a valuation allowance for these assets if we determine that it is more likely 

than not that some or all of the deferred tax assets will not be realized. The weight given to the evidence is commensurate 

with the extent to which the evidence can be objectively verified. If negative evidence exists, positive evidence is necessary 

to support a conclusion that a valuation allowance is not needed.

Our framework for assessing the recoverability of deferred tax assets requires us to weigh all available evidence, including:

• the sustainability of recent profitability required to realize the deferred tax assets;

• whether or not there are cumulative net losses in our consolidated statements of operations in recent years;

• unsettled circumstances that, if unfavorably resolved, would adversely affect future operations and profit levels 

on a continuing basis in future years; and

• the carryforward periods for net operating losses and tax credits.

After weighing all of the evidence, we determined that the positive evidence in favor of releasing the valuation allowance, 

particularly the evidence that was objectively verifiable, outweighed the negative evidence against releasing the allowance as 

of March 31, 2013. Therefore, we concluded that it is more likely than not that our deferred tax assets, except the deferred tax 

assets relating to capital loss carryforwards, will be realized. As a result, we have released the valuation allowance on our 

deferred tax assets as of March 31, 2013, except for amounts that will be released against income before federal income taxes 

for the remainder of the year. However, we will retain $491 million of the valuation allowance that pertains to our capital loss 

carryforwards, which we believe will expire unused. The release of the valuation allowance resulted in the recognition of 

$50.6 billion as a benefit for federal income taxes in our condensed consolidated statements of operations and comprehensive 

income for the three months ended March 31, 2013.

The positive evidence that weighed in favor of releasing the allowance as of March 31, 2013 and ultimately outweighed the 

negative evidence against releasing the allowance was the following: 

• our profitability in 2012 and for the three months ended March 31, 2013 and our expectations regarding the 

sustainability of these profits;

• our three-year cumulative income position as of March 31, 2013;

• the strong credit profile of the loans we have acquired since 2009;

• the significant size of our guaranty book of business and our contractual rights for future revenue from this book 

of business;

• our taxable income for 2012 and our expectations regarding the likelihood of future taxable income; and

• that our net operating loss carryforwards will not expire until 2030 through 2031 and we expect to utilize all of 

these carryforwards within the next few years.

As discussed in “Note 10, Income Taxes” in our 2012 Form 10-K, releasing all or a portion of the valuation allowance in any 

period after December 31, 2012 will not reduce the funding available to us under the senior preferred stock purchase 

agreement and therefore would not result in regulatory actions that would limit our business operations to ensure our safety 

and soundness. In addition, we transitioned from a three-year cumulative loss position over the three years ended December 

31, 2012 to a three-year cumulative income position over the three years ended March 31, 2013. The change in these 

conditions during the three months ended March 31, 2013 removed negative evidence that supported maintaining the 

valuation allowance against our net deferred tax assets as of December 31, 2012. The balance of our net deferred tax assets 

was $49.7 billion as of March 31, 2013 compared with a net deferred tax liability of $509 million as of December 31, 2012.

We expect that the remaining valuation allowance not related to capital loss carryforwards will be reduced against income 

before federal income taxes throughout the remaining periods of 2013 until that amount is reduced to zero as of December 
FANNIE MAE

(In conservatorship)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(UNAUDITED)

114

31, 2013. The timing of the reduction of this remaining valuation allowance will be determined by the timing of our 

estimated income recognition for 2013. 

Income before federal income taxes recorded in the remainder of 2013 may be greater or less than our current estimate. If 

income before federal income taxes recorded for the remainder of 2013 is greater than our current estimate, we will recognize 

a provision for federal income taxes in subsequent periods of 2013. Conversely, if income before federal income taxes 

recorded for the remainder of 2013 is lower than our current estimate, we will recognize an additional benefit for income 

taxes in subsequent periods of 2013. Starting in 2014, we expect that our effective tax rate will approach the statutory tax 

rate. 

11. Loss Per Share

The following table displays the computation of basic and diluted earnings (loss) per share of common stock for the three 

months ended March 31, 2013 and 2012. 

For the Three Months Ended 

March 31,

2013 2012

(Dollars and shares in millions, 

except per share amounts)

Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 58,685 $ 2,718

Less: Net loss attributable to noncontrolling interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 1

Net income attributable to Fannie Mae . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58,685 2,719

Dividends distributed or available for distribution to senior preferred stockholder(1)

. . . . . . . . (59,368) (2,817)

Net loss attributable to common stockholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (683) $ (98)

Weighted-average common shares outstanding—Basic and Diluted(2)

. . . . . . . . . . . . . . . . . . . 5,762 5,761

Loss per share—Basic and Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (0.12) $ (0.02)

__________

(1) Represents our required dividend payments to Treasury under the terms of the senior preferred stock purchase agreement, which are 

calculated based on our net worth as of March 31, 2013 less the applicable capital reserve amount of $3.0 billion for the three months 

ended March 31, 2013 and an annual dividend rate of 10% on the aggregate liquidation preference for the three months ended March 

31, 2012. 

(2) Includes 4.6 billion for the three months ended March 31, 2013 and 2012 of weighted-average shares of common stock that would be 

issued upon the full exercise of the warrant issued to Treasury from the date the warrant was issued through March 31, 2013.

In 2012, the terms of the senior preferred stock purchase agreement were amended to ultimately require the payment of our 

entire net worth to Treasury. We paid Treasury a senior preferred stock dividend on March 29, 2013 of $4.2 billion and will 

pay $59.4 billion by June 30, 2013, which will equal the excess of our net worth over a $3.0 billion capital reserve applicable 

in 2013 under the amended terms of our senior preferred stock purchase agreement.

Weighted-average stock options to purchase approximately 1 million and 3 million shares of common stock were 

outstanding for the three months ended March 31, 2013 and 2012, respectively, and were excluded from the computation of 

diluted EPS in the table above as they would have been anti-dilutive.

12. Segment Reporting

Our three reportable segments are: Single-Family, Multifamily and Capital Markets. We use these three segments to generate 

revenue and manage business risk, and each segment is based on the type of business activities it performs. As a result of 

changes in our organizational structure in the second quarter of 2013, we are evaluating our segment reporting, and in the 

future, may change some of our management reporting and how we report our business segment results.

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

consolidated statements of operations and comprehensive income, as we separate the activity related to our consolidated 

trusts from the results generated by our three segments. Our business segment financial results include directly attributable 

revenues and expenses. Additionally, we allocate to each of our segments: (1) capital using FHFA minimum capital 

requirements adjusted for over- or under-capitalization; (2) indirect administrative costs; and (3) a provision or benefit for 

federal income taxes. In addition, we allocate intracompany guaranty fee income as a charge from the Single-Family and 
FANNIE MAE

(In conservatorship)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(UNAUDITED)

115

Multifamily segments to Capital Markets for managing the credit risk on mortgage loans held by the Capital Markets group. 

We also include an eliminations/adjustments category to reconcile our business segment financial results and the activity 

related to our consolidated trusts to net income in our condensed consolidated statements of operations and comprehensive 

income.

As of March 31, 2013, we released the valuation allowance for our deferred tax assets, except for the portion of the valuation 

allowance that pertains to our capital loss carryforwards. This resulted in a significant benefit for income taxes during the 

three months ended March 31, 2013. See “Note 10, Income Taxes” for additional information regarding the factors that led to 

our conclusion to release the valuation allowance against our deferred tax assets. The benefit for income taxes allocated to 

each business segment represents the release of the valuation allowance against deferred tax assets that primarily are directly 

attributable to that segment based on the nature of the item. For Single-Family, we attributed the benefit of the valuation 

allowance release against deferred tax assets primarily related to the allowance for loan losses and guaranty fee income. For 

Multifamily, we attributed the benefit of the valuation allowance release against deferred tax assets primarily related to 

partnership and other equity investment losses and credits. For the Capital Markets group, we attributed the benefit of the 

valuation allowance release against deferred tax assets primarily related to debt and derivative instruments and mortgage and 

mortgage-related assets.

The following tables display our business segment financial results for the three months ended March 31, 2013 and 2012. 

For the Three Months Ended March 31, 2013

Business Segments Other Activity/Reconciling Items

SingleFamily MultifamilyCapital

Markets

Consolidated 

Trusts(1)

Eliminations/ 

Adjustments(2)

Total

Results

(Dollars in millions)

Net interest income (loss) . . . . . . . . . . . . . . . . . . $ 520 $ (11) $ 2,742 $ 2,597 $ 456 (3) $ 6,304

Benefit for credit losses. . . . . . . . . . . . . . . . . . . . 781 176 — — — 957

Net interest income (loss) after benefit for 

credit losses . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,301 165 2,742 2,597 456 7,261

Guaranty fee income (expense). . . . . . . . . . . . . . 2,375 291 (299) (1,204)

(4) (1,109)(4) 54 (4)

Investment gains (losses), net . . . . . . . . . . . . . . . 2 7 1,349 (67) (1,173)

(5) 118

Net other-than-temporary impairments. . . . . . . . — — (9) — — (9)

Fair value (losses) gains, net. . . . . . . . . . . . . . . . (2) — 875 (204) 165 (6) 834

Debt extinguishment (losses) gains, net . . . . . . . — — (40) 17 — (23)

Gains from partnership investments . . . . . . . . . . — 59 — — — 59 (7)

Fee and other income (expense) . . . . . . . . . . . . . 172 51 349 (84) 26 514

Administrative expenses. . . . . . . . . . . . . . . . . . . (426) (70) (145) — — (641)

Foreclosed property income . . . . . . . . . . . . . . . . 253 7 — — — 260

Other (expenses) income. . . . . . . . . . . . . . . . . . . (354) 1 58 — (18) (313)

Income before federal income taxes. . . . . . . . . . 3,321 511 4,880 1,055 (1,653) 8,114

Benefit for federal income taxes(8)

. . . . . . . . . . . 31,578 7,988 11,005 — — 50,571

Net income attributable to Fannie Mae . . . . . $34,899 $ 8,499 $ 15,885 $ 1,055 $ (1,653) $58,685
FANNIE MAE

(In conservatorship)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(UNAUDITED)

116

For the Three Months Ended March 31, 2012

Business Segments Other Activity/Reconciling Items

SingleFamily MultifamilyCapital

Markets

Consolidated 

Trusts(1)

Eliminations/ 

Adjustments(2)

Total

Results

(Dollars in millions)

Net interest (loss) income . . . . . . . . . . . . . . . . . . $ (379) $ (7) $ 3,541 $ 1,569 $ 473 (3) $ 5,197

(Provision) benefit for credit losses . . . . . . . . . . (2,053) 53 — — — (2,000)

Net interest (loss) income after (provision)

benefit for credit losses. . . . . . . . . . . . . . . . . . (2,432) 46 3,541 1,569 473 3,197

Guaranty fee income (expense) . . . . . . . . . . . . . 1,911 243 (332) (1,159)

(4) (601)(4) 62 (4)

Investment gains, net . . . . . . . . . . . . . . . . . . . . . 1 6 1,007 27 (925)

(5) 116

Net other-than-temporary impairments . . . . . . . — — (64) — — (64)

Fair value (losses) gains, net. . . . . . . . . . . . . . . . (1) — 170 52 62 (6) 283

Debt extinguishment (losses) gains, net. . . . . . . — — (70) 36 — (34)

Gains from partnership investments. . . . . . . . . . — 11 — — (1) 10 (7)

Fee and other income (expense) . . . . . . . . . . . . . 200 47 180 (108) (6) 313

Administrative expenses. . . . . . . . . . . . . . . . . . . (380) (64) (120) — — (564)

Foreclosed property expense . . . . . . . . . . . . . . . (332) (7) — — — (339)

Other expenses . . . . . . . . . . . . . . . . . . . . . . . . . . (235) (3) (8) — (16) (262)

Net (loss) income . . . . . . . . . . . . . . . . . . . . . (1,268) 279 4,304 417 (1,014) 2,718

Less: Net loss attributable to noncontrolling

interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . — — — — 1

(9) 1

Net (loss) income attributable to Fannie

Mae . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (1,268) $ 279 $ 4,304 $ 417 $(1,013) $ 2,719

__________

(1) Represents activity related to the assets and liabilities of consolidated trusts in our condensed consolidated balance sheets.

(2) Represents the elimination of intercompany transactions occurring between the three business segments and our consolidated trusts, as 

well as other adjustments to reconcile to our consolidated results.

(3) Represents the amortization expense of cost basis adjustments on securities that we own in our retained mortgage portfolio that on a 

GAAP basis are eliminated.

(4) Represents the guaranty fees paid from consolidated trusts to the Single-Family and Multifamily segments. The adjustment to guaranty 

fee income in the Eliminations/Adjustments column represents the elimination of the amortization of deferred cash fees related to 

consolidated trusts that were re-established for segment reporting. Total guaranty fee income is included in fee and other income in our 

condensed consolidated statements of operations and comprehensive income.

(5) Primarily represents the removal of realized gains and losses on sales of Fannie Mae MBS classified as available-for-sale securities that 

are issued by consolidated trusts and retained in the Capital Markets group’s mortgage portfolio. The adjustment also includes the 

removal of securitization gains (losses) recognized in the Capital Markets segment relating to portfolio securitization transactions that 

do not qualify for sale accounting under GAAP.

(6) Represents the removal of fair value adjustments on consolidated Fannie Mae MBS classified as trading that are retained in the Capital 

Markets group’s mortgage portfolio.

(7) Gains from partnership investments are included in other expenses in our condensed consolidated statements of operations and 

comprehensive income.

(8) Represents the release of the valuation allowance for our deferred tax assets that primarily are directly attributable to each segment 

based on the nature of the item. 

(9) Represents the adjustment from equity method accounting to consolidation accounting for partnership investments that are consolidated 

in our condensed consolidated balance sheets.
FANNIE MAE

(In conservatorship)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(UNAUDITED)

117

13. Equity

The following table displays the activity in other comprehensive income, net of tax, by major categories for the three months 

ended March 31, 2013 and 2012.

For the Three Months

Ended

March 31,

2013 2012

(Dollars in millions)

Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 58,685 $ 2,718

Other comprehensive income, net of tax effect:

Changes in net unrealized gains on available-for-sale securities (net of tax of $349 and

$196, respectively) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 649 319

Reclassification adjustment for other-than-temporary impairments recognized in net income

(net of tax of $3 and $22, respectively) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 42

Reclassification adjustment for gains on available-for-sale securities included in net income

(net of tax of $3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(6) (6)

Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 7

Total other comprehensive income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 654 362

Total comprehensive income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 59,339 $ 3,080

The table below displays changes in accumulated other comprehensive income, net of tax, for the three months ended March 

31, 2013.

For the Three Months Ended March 31, 2013

Availablefor-Sale 

Securities(1) Other(2) Total

(Dollars in millions)

Beginning balance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 934 $ (550) $ 384

 Other comprehensive income before reclassifications . . . . . . . . . . . . . . . . . . . . . . . . 649 — 649

 Amounts reclassified from other comprehensive income. . . . . . . . . . . . . . . . . . . . . . (1) 6 5

 Net other comprehensive income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 648 6 654

Ending balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,582 $ (544) $1,038

__________

(1) The amounts reclassified from AOCI represent the gain or loss recognized in earnings due to a sale of an available-for-sale security or 

the recognition of a net impairment recognized in earnings.

(2) Primarily represents activity from our defined benefit pension plans.
FANNIE MAE

(In conservatorship)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(UNAUDITED)

118

The following table displays reclassifications from accumulated other comprehensive income, including the affected line item 

in our condensed consolidated statement of operations and comprehensive income for the three months ended March 31, 

2013.

For the Three Months Ended March 31, 2013

Available-for-Sale 

Securities Other

Gross Tax Net Gross Tax Net

(Dollars in millions)

Net other-than-temporary impairments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (9) $ 3 $ (6) $ — $ — $ —

Investment gains, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 (3) 5 — — —

Salaries and employee benefits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — — — 10 (4) 6

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (1) $ — $ (1) $ 10 $ (4) $ 6

14. Concentrations of Credit Risk

Mortgage Sellers/Servicers. 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 sellers/servicers are also obligated to repurchase loans or foreclosed properties, or reimburse us for losses if the 

foreclosed property has been sold, under certain circumstances, such as if it is determined that the mortgage loan did not meet 

our underwriting or eligibility requirements, if loan representations and warranties are violated or if mortgage insurers 

rescind coverage. Our business with mortgage servicers is concentrated. Our five largest single-family mortgage servicers, 

including their affiliates, serviced approximately 54% of our single-family guaranty book of business as of March 31, 2013, 

compared with approximately 57% as of December 31, 2012. Our ten largest multifamily mortgage servicers, including their 

affiliates, serviced approximately 66% of our multifamily guaranty book of business as of March 31, 2013, compared with 

approximately 67% as of December 31, 2012.

If a significant mortgage seller/servicer counterparty, or a number of mortgage sellers/servicers fails to meet their obligations 

to us, it could result in a significant increase in our credit losses and have a material adverse effect on our results of 

operations, liquidity, financial condition and net worth.

Mortgage Insurers. Mortgage insurance “risk in force” generally represents our maximum potential loss recovery under the 

applicable mortgage insurance policies. We had total mortgage insurance coverage risk in force of $92.5 billion and $91.7 

billion on the single-family mortgage loans in our guaranty book of business as of March 31, 2013 and December 31, 2012, 

respectively, which represented 3% of our single-family guaranty book of business as of March 31, 2013 and December 31, 

2012, respectively. Our primary mortgage insurance coverage risk in force was $91.4 billion and $90.5 billion as of 

March 31, 2013 and December 31, 2012, respectively. Our pool mortgage insurance coverage risk in force was $1.1 billion

and $1.2 billion as of March 31, 2013 and December 31, 2012, respectively. Our top six mortgage insurance companies 

provided 92% and 93% of our mortgage insurance as of March 31, 2013 and December 31, 2012, respectively.

As of May 9, 2013, three of our primary mortgage insurers—PMI Mortgage Insurance Co. (“PMI”), Triad Guaranty 

Insurance Corporation (“Triad”) and Republic Mortgage Insurance Company (“RMIC”)—are under various forms of 

supervised control by their state regulators and are in run-off. These three mortgage insurers provided a combined $17.3 

billion, or 19%, of our risk in force mortgage insurance coverage of our single-family guaranty book of business as of 

March 31, 2013.

Genworth Mortgage Insurance Corporation (“Genworth”) is operating pursuant to waivers it received from the regulators of 

state regulatory capital requirements applicable to its main insurance writing entity, as its capital has fallen below applicable 

state regulatory capital requirements. Genworth has obtained requisite approvals for a plan that includes receiving additional 

capital and will help reduce its risk-to-capital ratio. Mortgage Guaranty Insurance Corporation (“MGIC”) and Radian 

Guaranty, Inc. (“Radian”) have recently announced that they received additional capital contributions which enables them to 

meet the regulatory capital requirements. 

Although the financial condition of some of our mortgage insurer counterparties continued to improve, there is still 

significant risk that these counterparties will fail to fulfill their obligations to reimburse us for claims under insurance 

policies. If we determine that it is probable that we will not collect all of our claims from one or more of these mortgage 
FANNIE MAE

(In conservatorship)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(UNAUDITED)

119

insurer counterparties, it could result in an increase in our loss reserves, which could adversely affect our earnings, liquidity, 

financial condition and net worth. 

Our total loss reserves incorporate an estimated recovery amount from mortgage insurance coverage. We evaluate the 

financial condition of our mortgage insurer counterparties and adjust the contractually due mortgage insurance benefit for 

collectibility in order to ensure that our total loss reserves reflect probable losses as of the balance sheet date. The following 

table displays our estimated benefit from mortgage insurers as of March 31, 2013 and December 31, 2012 that reduces our 

total loss reserves.

As of

March 31, 2013 December 31, 2012

(Dollars in millions)

Contractual mortgage insurance benefit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 9,227 $ 9,993

Less: Collectibility adjustment(1). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 614 708

Estimated benefit included in total loss reserves. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 8,613 $ 9,285

__________

(1) Represents an adjustment that reduces the contractual benefit for our assessment of our mortgage insurer counterparties’ inability to 

fully pay the contractual mortgage insurance claims.

We had outstanding receivables of $2.7 billion recorded in “Other assets” in our condensed consolidated balance sheets as of 

March 31, 2013 and $3.7 billion as of December 31, 2012 related to amounts claimed on insured, defaulted loans, of which 

$633 million as of March 31, 2013 and $1.1 billion as of December 31, 2012 was due from our mortgage sellers/servicers. 

We assessed the total outstanding receivables for collectibility, and they are recorded net of a valuation allowance of $547 

million as of March 31, 2013 and $551 million as of December 31, 2012. The valuation allowance reduces our claim 

receivable to the amount which is considered probable of collection as of March 31, 2013 and December 31, 2012. We 

received proceeds from mortgage insurers (and, in cases where policies were rescinded or canceled or coverage was denied 

by the mortgage insurer, from mortgage sellers/servicers) for single-family loans of $2.1 billion for the three months ended 

March 31, 2013 and $1.3 billion for three months ended March 31, 2012.

For information on credit risk associated with our derivatives transactions and repurchase agreements refer to “Note 15, 

Netting Arrangements.”

15. 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 table below displays 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, 2013 and December 31, 2012.
FANNIE MAE

(In conservatorship)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(UNAUDITED)

120

As of March 31, 2013

Net Amount

Presented in

the Condensed

Consolidated

Balance Sheets

Amounts Not Offset in the

Condensed Consolidated

Balance Sheets

Gross

Amount

Gross 

Amount 

Offset(1)

Financial 

Instruments(2) Collateral(3)

Net

Amount

(Dollars in millions)

Assets:

OTC risk management derivatives . . . . . $ 14,374 $ (14,334) $ 40 $ — $ (39) $ 1

Mortgage related commitment

derivatives . . . . . . . . . . . . . . . . . . . . . . 222 — 222 (158) (1) 63

Total derivative assets. . . . . . . . . . . . . . $ 14,596 $ (14,334) $ 262 (4)$ (158) $ (40) $ 64

Securities purchased under agreements 

to resell or similar arrangements . . . . . $ 79,350 $ — $ 79,350 $ — $ (79,350) $ —

Total assets. . . . . . . . . . . . . . . . . . . . . $ 93,946 $ (14,334) $ 79,612 $ (158) $ (79,390) $ 64

Liabilities:

OTC risk management derivatives . . . . . $ (20,057) $ 19,911 $ (146) $ — $ — $ (146)

Mortgage related commitment

derivatives . . . . . . . . . . . . . . . . . . . . . . (336) — (336) 158 — (178)

Total derivative liabilities . . . . . . . . . . . $ (20,393) $ 19,911 $ (482)

(4)

$ 158 $ — $ (324)

Securities sold under agreements to

repurchase or similar arrangements. . . $ (218) $ — $ (218) $ — $ 218 $ —

Total liabilities . . . . . . . . . . . . . . . . . . $ (20,611) $ 19,911 $ (700) $ 158 $ 218 $ (324)

As of December 31, 2012

Net Amount

Presented in

the Condensed

Consolidated

Balance Sheets

Amounts Not Offset in the

Condensed Consolidated

Balance Sheets

Gross

Amount

Gross 

Amount 

Offset(1)

Financial 

Instruments (2) Collateral(3)

Net

Amount

(Dollars in millions)

Assets:

OTC risk management derivatives . . . . . $ 15,853 $ (15,791) $ 62 $ — $ (48) $ 14

Mortgage related commitment

derivatives . . . . . . . . . . . . . . . . . . . . . . 156 — 156 (92) (2) 62

Total derivative assets. . . . . . . . . . . . . . $ 16,009 $ (15,791) $ 218 (4)$ (92) $ (50) $ 76

Securities purchased under agreements 

to resell or similar arrangements(5)

. . . $ 45,750 $ — $ 45,750 $ — $ (45,750) $ —

Total assets. . . . . . . . . . . . . . . . . . . . . $ 61,759 $ (15,791) $ 45,968 $ (92) $ (45,800) $ 76

Liabilities:

OTC risk management derivatives . . . . . $ (22,204) $ 22,046 $ (158) $ — $ — $ (158)

Mortgage related commitment

derivatives . . . . . . . . . . . . . . . . . . . . . . (297) — (297) 92 — (205)

Total liabilities. . . . . . . . . . . . . . . . . . . . $ (22,501) $ 22,046 $ (455)

(4)

$ 92 $ — $ (363)
FANNIE MAE

(In conservatorship)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(UNAUDITED)

121

__________

(1) Represents the effect of the right to offset under legally enforceable master netting agreements 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 non-cash collateral posted or received that has neither been recognized nor offset in our condensed consolidated balance 

sheets. Does not include collateral held in excess of our exposure. 

(4) Excludes derivative assets of $257 million and $217 million and derivative liabilities of $298 million and $250 million recognized in 

our condensed consolidated balance sheets as of March 31, 2013 and December 31, 2012, respectively, that are not subject to an 

enforceable master netting arrangement or similar agreement.

(5) Includes $13.3 billion of Securities purchased under agreements to resell or similar arrangements classified as “cash and cash 

equivalents” in our condensed consolidated balance sheets as of December 31, 2012. 

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. The fair value of non-cash collateral accepted 

for over-the-counter risk management derivatives was $40 million and $54 million as of March 31, 2013 and December 31, 

2012, respectively. The fair value of non-cash collateral accepted for securities purchased under agreements to resell or 

similar arrangements was $80.1 billion and $46.2 billion of which $40.0 billion and $25.0 billion could be sold or repledged 

as of March 31, 2013 and December 31, 2012, respectively. None of the underlying collateral was sold or repledged as of 

March 31, 2013 and December 31, 2012. The fair value of non-cash collateral we pledged for securities sold under 

agreements to repurchase was $218 million as of March 31, 2013, which the counterparty was permitted to sell or repledge. 

We did not have any securities sold under agreements to repurchase as of December 31, 2012.

We determine our rights to offset the assets and liabilities presented above with the same counterparty, including collateral 

posted or received, based on the contractual arrangements entered into with our individual counterparties. The following is a 

description, under various agreements, of the nature of those rights and their effect or potential effect on our financial 

position.

The terms of our contracts for over-the-counter risk management derivatives are governed under master agreements of the 

International Swaps and Derivatives Association (“ISDA”). These agreements provide that all transactions entered into under 

the agreement with the counterparty constitute a single contractual relationship. An event of default by the counterparty 

allows the early termination of all outstanding transactions under the same ISDA agreement and we may offset all 

outstanding amounts related to the terminated transactions including collateral posted or received.

The terms of our contracts for mortgage commitment derivatives are primarily governed by the Fannie Mae Single-Family 

Selling Guide (“Guide”), for Fannie Mae-approved lenders, or Master Securities Forward Transaction Agreements 

(“MSFTA”), for counterparties that are not Fannie Mae-approved lenders. In the event of default by the counterparty, both the 

Guide and the MSFTA allow us to terminate all outstanding transactions under the applicable agreement and offset all 

outstanding amounts related to the terminated transactions including collateral posted or received. In addition, under the 

Guide, upon a lender event of default, we generally may offset any amounts owed to a lender against any amounts a lender 

may owe us under any other existing agreement, regardless of whether or not such other agreements are in default or 

payments are immediately due.

The terms of our contracts for securities purchased under agreements to resell and securities sold under agreements to 

repurchase are governed by Master Repurchase Agreements, which are based on the guidelines prescribed by the Securities 

Industry and Financial Markets Association. Master Repurchase Agreements provide that all transactions under the 

agreement constitute a single contractual relationship. An event of default by the counterparty allows the early termination of 

all outstanding transactions under the same agreement and we may offset all outstanding amounts related to the terminated 

transactions including collateral posted or received.

We also have securities purchased under agreements to resell which we transact through the Fixed Income Clearing 

Corporation (“FICC”). Under the rules of the FICC, all agreements for securities purchased under agreements to resell that 

are submitted to the FICC for clearing become transactions with the FICC that are subject to FICC clearing rules. In the event 

of a FICC default, all open positions at the FICC are closed and a net position is calculated.
FANNIE MAE

(In conservatorship)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(UNAUDITED)

122

16. 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 fair value 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. 

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 as of 

March 31, 2013 and December 31, 2012.
FANNIE MAE

(In conservatorship)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(UNAUDITED)

123

Fair Value Measurements as of March 31, 2013

Quoted Prices

in Active

Markets for

Identical Assets

(Level 1)

Significant

Other

Observable

Inputs

(Level 2)

Significant

Unobservable

Inputs

(Level 3)

Netting 

Adjustment(1)

Estimated

Fair Value

(Dollars in millions)

Recurring fair value measurements:

Assets:

Cash equivalents(2)

. . . . . . . . . . . . . . . . . . . . . . . . $ 12,900 $ — $ — $ — $ 12,900

Trading securities:

Mortgage-related securities:

Fannie Mae . . . . . . . . . . . . . . . . . . . . . . . . . . — 6,371 61 — 6,432

Freddie Mac . . . . . . . . . . . . . . . . . . . . . . . . . — 3,373 2 — 3,375

Ginnie Mae . . . . . . . . . . . . . . . . . . . . . . . . . . — 679 — — 679

Alt-A private-label securities . . . . . . . . . . . . — 993 464 — 1,457

Subprime private-label securities . . . . . . . . . — — 1,446 — 1,446

CMBS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 9,817 — — 9,817

Mortgage revenue bonds. . . . . . . . . . . . . . . . — — 661 — 661

Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — — 118 — 118

U.S. Treasury securities. . . . . . . . . . . . . . . . . . 28,406 — — — 28,406

Total trading securities . . . . . . . . . . . . . . . . . . . . . 28,406 21,233 2,752 — 52,391

Available-for-sale securities:

Mortgage-related securities:

Fannie Mae . . . . . . . . . . . . . . . . . . . . . . . . . . — 8,735 12 — 8,747

Freddie Mac . . . . . . . . . . . . . . . . . . . . . . . . . — 8,623 9 — 8,632

Ginnie Mae . . . . . . . . . . . . . . . . . . . . . . . . . . — 709 — — 709

Alt-A private-label securities . . . . . . . . . . . . — 5,014 6,112 — 11,126

Subprime private-label securities . . . . . . . . . — — 7,868 — 7,868

CMBS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 12,787 — — 12,787

Mortgage revenue bonds. . . . . . . . . . . . . . . . — 4 7,351 — 7,355

Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 6 3,099 — 3,105

Total available-for-sale securities. . . . . . . . . . . . . — 35,878 24,451 — 60,329

Mortgage loans of consolidated trusts . . . . . . . . . — 9,720 2,882 — 12,602

Other assets:

Risk management derivatives:

Swaps . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 11,031 118 — 11,149

Swaptions . . . . . . . . . . . . . . . . . . . . . . . . . . . — 3,446 — — 3,446

Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — — 36 — 36

Netting adjustment . . . . . . . . . . . . . . . . . . . . — — — (14,334) (14,334)

Mortgage commitment derivatives . . . . . . . . . — 221 1 — 222

Total other assets. . . . . . . . . . . . . . . . . . . . . . . . . . — 14,698 155 (14,334) 519

Total assets at fair value . . . . . . . . . . . . . . . . $ 41,306 $ 81,529 $ 30,240 $(14,334) $138,741
FANNIE MAE

(In conservatorship)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(UNAUDITED)

124

Fair Value Measurements as of March 31, 2013

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)

Liabilities:

Long-term debt:

Of Fannie Mae:

Senior fixed. . . . . . . . . . . . . . . . . . . . . . . . . . . $ — $ 387 $ — $ — $ 387

Senior floating . . . . . . . . . . . . . . . . . . . . . . . . — — 383 — 383

Total of Fannie Mae . . . . . . . . . . . . . . . . . . . . . — 387 383 — 770

Of consolidated trusts . . . . . . . . . . . . . . . . . . . . — 12,268 1,077 — 13,345

Total long-term debt. . . . . . . . . . . . . . . . . . . . . . . — 12,655 1,460 — 14,115

Other liabilities:

Risk management derivatives:

Swaps . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 17,689 157 — 17,846

Swaptions . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 2,509 — — 2,509

Netting adjustment . . . . . . . . . . . . . . . . . . . . . — — — (19,911) (19,911)

Mortgage commitment derivatives . . . . . . . . . . — 331 5 — 336

Total other liabilities. . . . . . . . . . . . . . . . . . . . . . . — 20,529 162 (19,911) 780

Total liabilities at fair value . . . . . . . . . . . . . . $ — $ 33,184 $ 1,622 $ (19,911) $ 14,895
FANNIE MAE

(In conservatorship)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(UNAUDITED)

125

Fair Value Measurements as of December 31, 2012

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)

Assets:

Cash equivalents(2). . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,150 $ — $ — $ — $ 1,150

Trading securities:

Mortgage-related securities:

Fannie Mae. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 6,180 68 — 6,248

Freddie Mac . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 2,791 2 — 2,793

Ginnie Mae. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 436 1 — 437

Alt-A private-label securities. . . . . . . . . . . . . . . . . — 1,226 104 — 1,330

Subprime private-label securities. . . . . . . . . . . . . . — — 1,319 — 1,319

CMBS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 9,826 — — 9,826

Mortgage revenue bonds . . . . . . . . . . . . . . . . . . . . — — 675 — 675

Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — — 117 — 117

U.S. Treasury securities . . . . . . . . . . . . . . . . . . . . . . 17,950 — — — 17,950

Total trading securities. . . . . . . . . . . . . . . . . . . . . . . . . 17,950 20,459 2,286 — 40,695

Available-for-sale securities:

Mortgage-related securities:

Fannie Mae. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 10,406 29 — 10,435

Freddie Mac . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 9,370 10 — 9,380

Ginnie Mae. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 751 — — 751

Alt-A private-label securities. . . . . . . . . . . . . . . . . — 4,511 6,564 — 11,075

Subprime private-label securities. . . . . . . . . . . . . . — — 7,447 — 7,447

CMBS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 13,097 — — 13,097

Mortgage revenue bonds . . . . . . . . . . . . . . . . . . . . — 5 7,837 — 7,842

Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 7 3,147 — 3,154

Total available-for-sale securities . . . . . . . . . . . . . . . . — 38,147 25,034 — 63,181

Mortgage loans of consolidated trusts . . . . . . . . . . . . . — 8,166 2,634 — 10,800

Other assets:

Risk management derivatives:

Swaps . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 12,224 146 — 12,370

Swaptions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 3,674 — — 3,674

Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — — 26 — 26

Netting adjustment . . . . . . . . . . . . . . . . . . . . . . . . . — — — (15,791) (15,791)

Mortgage commitment derivatives. . . . . . . . . . . . . . — 153 3 — 156

Total other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 16,051 175 (15,791) 435

Total assets at fair value . . . . . . . . . . . . . . . . . . . . . $ 19,100 $ 82,823 $ 30,129 $ (15,791) $ 116,261
FANNIE MAE

(In conservatorship)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(UNAUDITED)

126

Fair Value Measurements as of December 31, 2012

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)

Liabilities:

Long-term debt:

Of Fannie Mae:

Senior fixed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ — $ 393 $ — $ — $ 393

Senior floating. . . . . . . . . . . . . . . . . . . . . . . . . . . . . — — 400 — 400

Total of Fannie Mae. . . . . . . . . . . . . . . . . . . . . . . . . . — 393 400 — 793

Of consolidated trusts . . . . . . . . . . . . . . . . . . . . . . . . — 10,519 1,128 — 11,647

Total long-term debt. . . . . . . . . . . . . . . . . . . . . . . . . . . — 10,912 1,528 — 12,440

Other liabilities:

Risk management derivatives:

Swaps . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 19,836 154 — 19,990

Swaptions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 2,463 — — 2,463

Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 1 — — 1

 Netting adjustment . . . . . . . . . . . . . . . . . . . . . . . . . — — — (22,046) (22,046)

Mortgage commitment derivatives . . . . . . . . . . . . . . — 290 7 — 297

Total other liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . — 22,590 161 (22,046) 705

Total liabilities at fair value. . . . . . . . . . . . . . . . . . . $ — $ 33,502 $ 1,689 $ (22,046) $ 13,145

__________

(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 agreements to settle with the same counterparty on a net basis, including cash collateral 

posted and received.

(2) Cash equivalents are comprised of U.S. Treasuries that are classified as Level 1.

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) for the three months ended March 31, 2013 and 2012. The tables also display gains 

and losses due to changes in fair value, including both realized and unrealized gains and losses, recognized in our condensed 

consolidated statements of operations and comprehensive income for Level 3 assets and liabilities for the three months ended 

March 31, 2013 and 2012. When assets and liabilities are transferred between levels, we recognize the transfer as of the end 

of the period.
FANNIE MAE

(In conservatorship)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(UNAUDITED)

127

Fair Value Measurements Using Significant Unobservable Inputs (Level 3) 

For the Three Months Ended March 31, 2013

Total (Losses) or Gains 

(Realized/Unrealized) 

Net 

Unrealized 

(Losses) 

Gains 

Included in 

Net Income 

Related to 

Assets and 

Liabilities 

Still Held as 

of March 31, 

2013(5)

Balance, 

December 31, 

2012

Included

in Net

Income

Included in 

Other

Comprehensive 

Income(1) Purchases(2) Sales(2) Issues(3) Settlements(3)

Transfers 

out of 

Level 3(4)

Transfers 

into 

Level 3(4)

Balance, 

March 31, 

2013

(Dollars in millions)

Trading securities:

Mortgage-related:

Fannie Mae . . . $ 68 $ (3) $ — $ — $ — $ — $ (4) $ — $ — $ 61 $ (2)

Freddie Mac . . 2 — — — — — — — — 2 —

Ginnie Mae . . . 1 — — — — — (1) — — — —

 Alt-A privatelabel

securities . . . 104 95 — — — — (16) (44) 325 464 90

 Subprime

private-label

securities . . . 1,319 159 — — — — (32) — — 1,446 160

 Mortgage

revenue

bonds . . . . . . 675 (13) — — — — (1) — — 661 (13)

 Other . . . . . . . 117 2 — — — — (1) — — 118 1

Total trading

securities. . . . . . . $ 2,286 $ 240 $ — $ — $ — $ — $ (55) $ (44) $ 325 $ 2,752 $ 236

Available-for-sale

securities:

Mortgage-related:

Fannie Mae . . . $ 29 $ — $ — $ — $ — $ — $ (3) $ (14) $ — $ 12 $ —

Freddie Mac . . 10 — — — — — (1) — — 9 —

 Alt-A privatelabel

securities . . . 6,564 9 218 — — — (268) (1,192) 781 6,112 —

 Subprime

private-label

securities . . . 7,447 44 677 — — — (300) — — 7,868 —

 Mortgage

revenue

bonds . . . . . . 7,837 (2) (29) — (19) — (436) — — 7,351 —

Other. . . . . . . . 3,147 4 44 — — — (96) — — 3,099 —

Total available-forsale securities . . . $ 25,034 $ 55 $ 910 $ — $ (19) $ — $ (1,104) $ (1,206) $ 781 $ 24,451 $ —

Mortgage loans of

consolidated

trusts. . . . . . . . . . $ 2,634 $ 27 $ — $ 158 $ — $ — $ (112) $ (38) $ 213 $ 2,882 $ 22

Net derivatives. . . . . 14 (40) — — — — 23 — (4) (7) (18)

Long-term debt:

Of Fannie Mae:

Senior floating . $ (400) $ 17 $ — $ — $ — $ — $ — $ — $ — $ (383) $ 17

 Of consolidated

trusts . . . . . . . . (1,128) (54) — — — (15) 49 113 (42) (1,077) (55)

Total long-term debt. $ (1,528) $ (37) $ — $ — $ — $ (15) $ 49 $ 113 $ (42) $ (1,460) $ (38)
FANNIE MAE

(In conservatorship)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(UNAUDITED)

128

Fair Value Measurements Using Significant Unobservable Inputs (Level 3) 

For the Three Months Ended March 31, 2012

Total Gains or (Losses) 

(Realized/Unrealized) 

Net 

Unrealized 

Gains 

(Losses) 

Included in 

Net Income 

Related to 

Assets and 

Liabilities 

Still Held as 

of March 31, 

2012(5)

Balance,

December 31,

2011

Included

in Net

Income

Included in 

Other

Comprehensive 

Income(1) Purchases(2) Sales(2) Issues(3) Settlements(3)

Transfers 

out of 

Level 3(4)

Transfers 

into 

Level 3(4)

Balance, 

March 31, 

2012

(Dollars in millions)

Trading securities:

Mortgage-related:

Fannie Mae . . . . . $ 1,737 $ 5 $ — $ — $ (33) $ — $ (104) $ (1,581) $ 65 $ 89 $ —

Freddie Mac . . . . — — — — — — — — 2 2 —

Ginnie Mae . . . . . 9 — — — — — — (9) — — —

 Alt-A private

label securities. 345 13 — — — — (17) — 228 569 13

Subprime

private-label

securities . . . . . 1,280 59 — — — — (34) — — 1,305 59

Mortgage

revenue bonds . 724 (54) — — — — (2) — — 668 (55)

 Other. . . . . . . . . 143 (19) — — — — (1) — — 123 (19)

Total trading 

securities. . . . . . . $ 4,238 $ 4 $ — $ — $ (33) $ — $ (158) $ (1,590) $ 295 $ 2,756 $ (2)

Available-for-sale

securities:

Mortgage-related:

Fannie Mae . . . . . $ 946 $ — $ (8) $ 1 $ (1) $ — $ (16) $ (895) $ 10 $ 37 $ —

 Freddie Mac . . . . 12 — — — — — (1) — — 11 —

 Alt-A privatelabel securities. 7,256 (17) 166 — — — (262) (985) 978 7,136 —

 Subprime

private-label

securities . . . . . 7,586 35 303 — — — (329) — — 7,595 —

 Mortgage

revenue bonds . 10,247 2 (137) — (24) — (356) — — 9,732 —

 Other. . . . . . . . . 3,445 6 (26) — — — (83) — — 3,342 —

Total available-forsale securities . . . $ 29,492 $ 26 $ 298 $ 1 $ (25) $ — $ (1,047) $ (1,880) $ 988 $ 27,853 $ —

Mortgage loans of

consolidated

trusts. . . . . . . . . . $ 2,319 $ 73 $ — $ 245 $ — $ — $ (59) $ (318) $ 11 $ 2,271 $ 17

Net derivatives. . . . . 65 7 — — — (3) (25) — — 44 3

Long-term debt:

Of Fannie Mae:

Senior floating . $ (406) $ 7 $ — $ — $ — $ — $ — $ — $ — $ (399) $ 7

Of consolidated

trusts . . . . . . . . (765) (9) — — — (267) 28 110 (47) (950) (8)

Total long-term debt. $ (1,171) $ (2) $ — $ — $ — $ (267) $ 28 $ 110 $ (47) $ (1,349) $ (1)

_________

(1) Gains (losses) included in other comprehensive income are included in “Changes in unrealized gains on available-for-sale securities, 

net of reclassification adjustments and taxes” in the 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) Transfers out of Level 3 consisted primarily of Fannie Mae MBS and private-label mortgage-related securities backed by Alt-A loans. 

Prices for these securities were obtained from multiple third-party vendors supported by market observable inputs. Transfers into Level 

3 consisted primarily of private-label mortgage-related securities backed by Alt-A loans. Prices for these securities are based on inputs 

from a single source or inputs that were not readily observable.
FANNIE MAE

(In conservatorship)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(UNAUDITED)

129

(5) Amount represents temporary changes in fair value. Amortization, accretion and other-than-temporary impairments are not considered 

unrealized and are not included in this amount.

The following tables display realized and unrealized gains and losses included in our condensed consolidated statements of 

operations and comprehensive income for the three months ended March 31, 2013 and 2012, for our Level 3 assets and 

liabilities measured in our condensed consolidated balance sheets at fair value on a recurring basis. 

For the Three Months Ended March 31, 2013

Interest

Income

Fair Value 

Gains, net

Net OtherthanTemporary

Impairments Other Total

(Dollars in millions)

Total realized and unrealized gains (losses) included in net income . . $ 55 $ 192 $ (5) $ 3 $ 245

Net unrealized gains related to Level 3 assets and liabilities still held 

as of March 31, 2013. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ — $ 202 $ — $ — $ 202

For the Three Months Ended March 31, 2012

Interest

Income

Fair Value 

Gains, net

Net OtherthanTemporary

Impairments Other Total

(Dollars in millions)

Total realized and unrealized gains (losses) included in net income . . $ 66 $ 87 $ (51) $ 6 $ 108

Net unrealized gains related to Level 3 assets and liabilities still held 

as of March 31, 2012. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ — $ 17 $ — $ — $ 17

Nonrecurring Changes in Fair Value

The following tables display assets measured in our condensed consolidated balance sheets 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 for impairment) as of March 31, 2013 and December 31, 2012.

Fair Value Measurements as of March 31, 2013

Quoted

Prices in

Active

Markets for

Identical

Assets

(Level 1)

Significant

Other

Observable

Inputs

(Level 2)

Significant

Unobservable

Inputs

(Level 3)

Estimated

Fair Value

(Dollars in millions)

Nonrecurring fair value measurements:

Assets:

Mortgage loans held for sale, at lower of cost or fair value . . . . . . . . . . $ — $ 83 $ 124 $ 207

Single-family mortgage loans held for investment, at amortized cost:(1)

Of Fannie Mae . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — — 22,020 22,020

Of consolidated trusts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — — 161 161

Multifamily mortgage loans held for investment, at amortized cost. . . . — — 1,846 1,846

Acquired property, net:

Single-family . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — — 2,915 2,915

Multifamily . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — — 23 23

Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — — 135 135

Total nonrecurring fair value measurements . . . . . . . . . . . . . . . . . . . $ — $ 83 $27,224 $ 27,307
FANNIE MAE

(In conservatorship)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(UNAUDITED)

130

Fair Value Measurements as of December 31, 2012

Quoted

Prices in

Active

Markets for

Identical

Assets

(Level 1)

Significant

Other

Observable

Inputs

(Level 2)

Significant

Unobservable

Inputs

(Level 3)

Estimated

Fair Value

(Dollars in millions)

Assets:

Mortgage loans held for sale, at lower of cost or fair value . . . . . . . . . . $ — $104 $ 135 $ 239

Single-family mortgage loans held for investment, at amortized cost:(1)

Of Fannie Mae . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — — 23,314 23,314

Of consolidated trusts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — — 227 227

Multifamily mortgage loans held for investment, at amortized cost . . . — — 1,624 1,624

Acquired property, net:

Single-family . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — — 3,692 3,692

Multifamily . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — — 74 74

Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — — 384 384

Total nonrecurring fair value measurements . . . . . . . . . . . . . . . . . . . $ — $104 $29,450 $ 29,554

_________

(1) Excludes estimated recoveries from mortgage insurance proceeds.
FANNIE MAE

(In conservatorship)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(UNAUDITED)

131

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 as of March 31, 2013 and December 31, 2012.

Fair Value Measurements as of March 31, 2013

Valuation Techniques

Significant Unobservable 

Inputs(1) Range(1)

WeightedAverage(1)Fair

Value

(Dollars in millions)

Recurring fair value 

measurements:

Trading securities:

Mortgage-related securities:

Agency(2). . . . . . . . . . . . . . . . . . Consensus $ 63

Alt-A private-label securities. . . Discounted Cash Flow Default Rate (%) 4.8 - 17.0 12.0

Prepayment Speed (%) 0.6 - 3.4 1.7

Severity (%) 42.2 - 99.0 80.9

Spreads (bps) 320.0 - 567.0 497.2 324

Single Vendor Default Rate (%) 5.1 - 12.8 10.6

Prepayment Speed (%) 2.9 - 4.4 3.4

Severity (%) 63.8 - 83.1 77.8

Spreads (bps) 453.0 - 499.0 486.2 122

Consensus 18

Total Alt-A private-label 

securities. . . . . . . . . . . . . . . 464

Subprime private-label 

securities . . . . . . . . . . . . . . . . Consensus 462

Consensus Default Rate (%) 10.1 - 23.2 15.0

Prepayment Speed (%) 1.0 - 8.9 3.5

Severity (%) 66.5 - 88.4 79.3

Spreads (bps) 279.0 - 524.0 405.0 408

Discounted Cash Flow Default Rate (%) 12.3 - 18.8 15.9

Prepayment Speed (%) 0.8 - 5.8 3.2

Severity (%) 29.4 - 80.0 60.0

Spreads (bps) 276.0 - 474.0 372.5 367

Single Vendor 209

Total subprime private-label 

securities. . . . . . . . . . . . . . . 1,446

Mortgage revenue bonds . . . . . . Discounted Cash Flow Spreads (bps) 260.0 - 375.0 326.1 571

Single Vendor Spreads (bps) 70.0 - 260.0 223.9 90

Total mortgage revenue bonds. 661

Other. . . . . . . . . . . . . . . . . . . . . . Other 118

Total trading securities. . . . . . . . . . . $2,752
FANNIE MAE

(In conservatorship)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

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132

Fair Value Measurements as of March 31, 2013

Valuation Techniques

Significant Unobservable 

Inputs(1) Range(1)

Weighted 

Average(1)

Fair

Value

(Dollars in millions)

Available-for-sale securities:

Mortgage-related securities:

Agency(2). . . . . . . . . . . . . . . . . Other $ 21

Alt-A private-label securities . Consensus Default Rate (%) 0.0 - 12.8 2.5

Prepayment Speed (%) 0.2 - 30.4 12.8

Severity (%) 1.2 - 100.0 49.9

Spreads (bps) 276.0 - 631.0 416.6 2,582

Discounted Cash Flow Default Rate (%) 0.0 - 26.3 6.5

Prepayment Speed (%) 0.0 - 20.7 6.7

Severity (%) 6.7 - 96.3 56.8

Spreads (bps) 203.0 - 550.0 383.5 2,369

Consensus 1,089

Single Vendor 72

Total Alt-A private-label 

securities . . . . . . . . . . . . . 6,112

Subprime private-label 

securities . . . . . . . . . . . . . . Consensus 3,309

Consensus Default Rate (%) 0.0 - 22.1 13.7

Prepayment Speed (%) 0.0 - 12.6 3.9

Severity (%) 50.6 - 100.0 78.2

Spreads (bps) 212.0 - 539.0 372.1 2,652

Discounted Cash Flow Default Rate (%) 0.1 - 21.7 15.1

Prepayment Speed (%) 0.1 - 18.1 3.0

Severity (%) 15.7 - 100.0 77.5

Spreads (bps) 200.0 - 484.0 382.4 1,515

Single Vendor 324

Other 68

Total subprime private-label 

securities . . . . . . . . . . . . . 7,868

Mortgage revenue bonds. . . . . Single Vendor Spreads (bps) 48.0 - 469.0 129.4 3,846

Discounted Cash Flow Spreads (bps) 70.0 - 379.0 287.0 2,003

Single Vendor 1,366

Other 136

Total mortgage revenue 

bonds . . . . . . . . . . . . . . . . 7,351

Other . . . . . . . . . . . . . . . . . . . . Consensus 1,156

Discounted Cash Flow Default Rate (%) 4.0 - 10.0 5.0

Prepayment Speed (%) 0.4 - 10.0 3.0

Severity (%) 50.0 - 85.0 84.8

Spreads (bps) 424.0 - 1,082.0 584.1 897

Consensus Default Rate (%) 0.3 - 5.0 4.6

Prepayment Speed (%) 3.0 - 8.5 3.5

Severity (%) 85.0 - 100.0 86.3

Spreads (bps) 403.0 - 730.0 603.1 360

Other 686

Total other. . . . . . . . . . . . . . . 3,099

Total available-for-sale securities. $24,451
FANNIE MAE

(In conservatorship)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

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133

Fair Value Measurements as of March 31, 2013

Valuation Techniques

Significant Unobservable 

Inputs(1) Range(1)

Weighted 

Average(1)

Fair

Value

(Dollars in millions)

Mortgage loans of consolidated

trusts:

Single-family . . . . . . . . . . . . . Build-Up Default Rate (%) 0.1 - 92.0 20.9

Prepayment Speed (%) 3.4 - 44.8 17.2

Severity (%) 6.1 - 96.9 32.5 $ 1,910

Consensus 402

Consensus Default Rate (%) 0.0 - 8.1 6.4

Prepayment Speed (%) 0.0 - 14.3 7.6

Severity (%) 50.9 - 94.3 72.6

Spreads (bps) 373.0 - 715.0 497.9 237

Discounted Cash Flow Default Rate (%) 4.3 - 6.8 6.4

Prepayment Speed (%) 0.3 - 14.3 4.2

Severity (%) 57.0 - 89.7 81.9

Spreads (bps) 326.0 - 892.0 634.6 141

Total single-family. . . . . . . . 2,690

Multifamily. . . . . . . . . . . . . . . Build-Up Spreads (bps) 77.0 - 340.4 149.0 192

Total mortgage loans of 

consolidated trusts . . . . . . . . . $ 2,882

Net derivatives. . . . . . . . . . . . . . . Dealer Mark $ 111

Internal Model (118)

Total net derivatives . . . . . . . . . . $ (7)

Long-term debt:

Of Fannie Mae:

Senior floating . . . . . . . . . . . Discounted Cash Flow $ (383)

Of consolidated trusts. . . . . . . Consensus (464)

Discounted Cash Flow Default Rate (%) 4.0 - 10.0 6.3

Prepayment Speed (%) 0.0 - 100.0 47.8

Severity (%) 50.0 - 89.7 79.0

Spreads (bps) 82.1 - 892.0 424.8 (312)

Consensus Default Rate (%) 0.0 - 8.1 6.5

Prepayment Speed (%) 0.0 - 14.3 8.1

Severity (%) 50.0 - 94.3 67.8

Spreads (bps) 373.0 - 715.0 517.7 (204)

Other (97)

Total of consolidated trusts . . (1,077)

Total long-term debt. . . . . . . . . . . $(1,460)
FANNIE MAE

(In conservatorship)

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134

Fair Value Measurements as of December 31, 2012

Valuation Techniques

Significant Unobservable 

Inputs(1) Range(1)

WeightedAverage(1)Fair

Value

(Dollars in millions)

Trading securities:

Mortgage-related securities:

Agency(2). . . . . . . . . . . . . . . . . Consensus $ 44

Single Vendor 27

 Total agency . . . . . . . . . . . . . . 71

 Alt-A private-label securities . . Discounted Cash Flow Default Rate (%) 5.7 - 17.6 12.5

Prepayment Speed (%) 0.6 - 4.0 1.7

Severity (%) 65.0 - 70.0 67.6

Spreads (bps) 526.0 - 612.0 567.0 87

Other 17

 Total Alt-A private-label 

securities . . . . . . . . . . . . . . . . 104

 Subprime private-label 

securities . . . . . . . . . . . . . . . . . Consensus Default Rate (%) 10.9 - 23.0 16.0

Prepayment Speed (%) 0.3 - 7.9 2.6

Severity (%) 80.0 80.0

Spreads (bps) 427.0 - 657.0 488.5 544

Consensus 355

Discounted Cash Flow Default Rate (%) 14.1 - 20.4 18.7

Prepayment Speed (%) 3.4 - 8.3 5.6

Severity (%) 80.0 80.0

Spreads (bps) 422.0 - 637.0 564.8 236

Single Vendor 184

 Total subprime private-label 

securities . . . . . . . . . . . . . . . . 1,319

 Mortgage revenue bonds. . . . . . Discounted Cash Flow Spreads (bps) 260.0 - 375.0 320.4 636

Single Vendor 39

 Total mortgage revenue bonds. 675

 Other . . . . . . . . . . . . . . . . . . . . . Other 117

Total trading securities. . . . . . . . . . $2,286
FANNIE MAE

(In conservatorship)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

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135

Fair Value Measurements as of December 31, 2012

Valuation Techniques

Significant Unobservable 

Inputs(1) Range(1)

Weighted 

Average(1)

Fair

Value

(Dollars in millions)

Available-for-sale securities:

Mortgage-related securities:

Agency(2). . . . . . . . . . . . . . . Other $ 39

Alt-A private-label

securities. . . . . . . . . . . . . . Discounted Cash Flow Default Rate (%) 0.0 - 23.6 6.4

Prepayment Speed (%) 0.0 - 20.8 7.4

Severity (%) 50.0 - 70.0 57.2

Spreads (bps) 288.0 - 643.0 442.8 3,003

Consensus Default Rate (%) 0.0 - 17.7 3.6

Prepayment Speed (%) 0.2 - 41.3 10.0

Severity (%) 50.0 - 70.0 54.9

Spreads (bps) 300.0 - 634.0 429.0 2,285

Consensus 1,231

Single Vendor 45

Total Alt-A private-label 

securities. . . . . . . . . . . . . 6,564

Subprime private-label

securities. . . . . . . . . . . . . . Consensus Default Rate (%) 0.0 - 27.4 15.4

Prepayment Speed (%) 0.0 - 14.4 3.0

Severity (%) 65.0 - 80.0 77.8

Spreads (bps) 325.0 - 660.0 493.7 3,333

Consensus 2,326

Discounted Cash Flow Default Rate (%) 0.0 - 24.3 15.7

Prepayment Speed (%) 0.0 - 10.9 2.9

Severity (%) 65.0 - 80.0 76.7

Spreads (bps) 299.0 - 654.0 527.0 1,710

Other 78

Total subprime privatelabel securities . . . . . . . . 7,447

Mortgage revenue bonds . . . Single Vendor 5,721

Discounted Cash Flow Spreads (bps) 77.0 - 375.0 297.7 1,911

Other 205

Total mortgage revenue

bonds. . . . . . . . . . . . . . . 7,837

Other. . . . . . . . . . . . . . . . . . . Consensus 1,009

Discounted Cash Flow Default Rate (%) 4.0 - 10.0 5.0

Prepayment Speed (%) 0.2 - 10.0 3.0

Severity (%) 50.0 - 85.0 84.8

Spreads (bps) 431.0 - 1,154.0 588.6 916

Consensus Default Rate (%) 0.0 - 5.0 4.7

Prepayment Speed (%) 1.0 - 14.1 3.6

Severity (%) 65.0 - 85.0 83.8

Spreads (bps) 450.0 - 729.0 585.8 534

Other 688

Total other . . . . . . . . . . . . . 3,147

Total available-for-sale 

securities . . . . . . . . . . . . . . . . $ 25,034
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(In conservatorship)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

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136

Fair Value Measurements as of December 31, 2012

Valuation Techniques

Significant Unobservable 

Inputs(1) Range(1)

Weighted 

Average(1)

Fair

Value

(Dollars in millions)

Mortgage loans of consolidated 

trusts:. . . . . . . . . . . . . . . . . . .

Single-family . . . . . . . . . . . . Build-Up Default Rate (%) 0.1 - 99.3 18.4

Prepayment Speed (%) 4.4 - 92.0 19.4

Severity (%) 5.6 - 97.3 33.3 $ 1,698

Consensus 303

Consensus Default Rate (%) 0.0 - 9.0 6.4

Prepayment Speed (%) 1.7 - 14.4 10.4

Severity (%) 65.0 - 70.0 67.1

Spreads (bps) 468.0 - 851.0 567.9 302

Discounted Cash Flow Default Rate (%) 0.0 - 8.5 6.0

Prepayment Speed (%) 1.7 - 14.4 5.3

Severity (%) 65.0 - 70.0 65.0

Spreads (bps) 507.0 - 1,030.0 733.4 106

Single Vendor 50

Total single-family . . . . . . . 2,459

 Multifamily Build-Up Spreads (bps) 77.0 - 363.4 154.5 175

Total mortgage loans of

consolidated trusts . . . . . . . . $ 2,634

Net derivatives . . . . . . . . . . . . . Dealer Mark $ 144

Internal Model (130)

Total net derivatives . . . . . . . . . $ 14

Long-term debt:

Of Fannie Mae:

Senior floating . . . . . . . . . . . Discounted Cash Flow $ (400)

Of consolidated trusts. . . . . . . Consensus (370)

Discounted Cash Flow Default Rate (%) 0.0 - 10.0 5.8

Prepayment Speed (%) 0.0 - 100.0 36.9

Severity (%) 50.0 - 70.0 63.4

Spreads (bps) 98.0 - 1,030.0 331.4 (330)

Consensus Default Rate (%) 0.0 - 9.0 6.2

Prepayment Speed (%) 1.7 - 14.4 10.9

Severity (%) 65.0 - 70.0 67.5

Spreads (bps) 468.0 - 851.0 584.3 (271)

Single Vendor (157)

Total of consolidated trusts . . (1,128)

Total long-term debt . . . . . . . . . $(1,528)

_________

(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) Includes Fannie Mae, Freddie Mac and Ginnie Mae securities.

The following tables display valuation techniques for our Level 3 assets measured at fair value on a nonrecurring basis as of 

March 31, 2013 and December 31, 2012. 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.
FANNIE MAE

(In conservatorship)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

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137

Fair Value Measurements as of March 31, 2013

Valuation Techniques Fair Value

(Dollars in millions)

Nonrecurring fair value measurements:

Mortgage loans held for sale, at lower of cost or fair value . . . . . . . . . . . . . . . . Consensus $ 124

Single-family mortgage loans held for investment, at amortized cost:

Of Fannie Mae . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Internal Model 22,020

Of consolidated trusts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Internal Model 161

Multifamily mortgage loans held for investment, at amortized cost . . . . . . . . . Asset Manager Estimate 1,231

Broker Price Opinions 407

Appraisals 186

Other 22

Total multifamily mortgage loans held for investment, at amortized cost . . 1,846

Acquired property, net:

Single-family . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Appraisals 853

Accepted Offers 821

Internal Model 656

Walk Forwards 514

Other 71

Total single-family. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,915

Multifamily. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Broker Price Opinions 20

Accepted Offers 2

Appraisals 1

Total multifamily . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23

Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Internal Model 94

Broker Price Opinions 23

Appraisals 13

Walk Forwards 5

Total other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 135

Total nonrecurring assets at fair value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 27,224
FANNIE MAE

(In conservatorship)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

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138

Fair Value Measurements as of December 31, 2012

Valuation Techniques Fair Value

(Dollars in millions)

Mortgage loans held for sale, at lower of cost or fair value . . . . . . . . . . . . . . . . Consensus $ 135

Single-family mortgage loans held for investment, at amortized cost:

Of Fannie Mae . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Internal Model 23,314

Of consolidated trusts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Internal Model 227

Multifamily mortgage loans held for investment, at amortized cost . . . . . . . . . Appraisals 194

Broker Price Opinions 395

Asset Manager Estimate 1,001

Other 34

Total multifamily mortgage loans held for investment, at amortized cost . . 1,624

Acquired property, net:

Single-family . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Accepted Offers 787

Appraisals 467

Walk Forwards 1,348

Internal Model 1,014

Other 76

Total single-family. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,692

Multifamily. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Accepted Offers 20

Appraisals 8

Broker Price Opinions 46

Total multifamily . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74

Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Appraisals 8

Walk Forwards 43

Internal Model 203

Other 130

Total other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 384

Total nonrecurring assets at fair value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 29,450

We use valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs. The 

following is a description of 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.

Cash Equivalents, Trading Securities and Available-for-Sale Securities

These securities are recorded in our condensed consolidated balance sheets at fair value on a recurring basis. Fair value is 

measured using quoted market prices in active markets for identical assets, when available.

A description of our securities valuation techniques is as follows:

Single Vendor: This valuation technique utilizes one vendor price to estimate fair value. We generally validate these 

observations of fair value through the use of a discounted cash flow technique whose unobservable inputs (for example, 

default rates) are disclosed in the table above.

Consensus: This technique utilizes an average of two or more vendor prices for similar securities. We generally validate these 

observations of fair value through the use of a discounted cash flow technique whose unobservable inputs (for example, 

default rates) are disclosed in the table above.

Discounted Cash Flow: In the absence of prices provided by third-party pricing services supported by observable market 

data, we estimate the fair value of a portion of our securities using a discounted cash flow technique that uses inputs such as 

default rates, prepayment speeds, loss severity and spreads based on market assumptions where available.
FANNIE MAE

(In conservatorship)

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139

We classify securities whose values are based on quoted market prices in active markets for identical assets as Level 1 of the 

valuation hierarchy. We classify securities as Level 2 of the valuation hierarchy if quoted market prices in active markets for 

identical assets are not available. For all valuation techniques used for securities where there is limited activity or less 

transparency around these inputs to the valuation, these securities are classified as Level 3 of the valuation hierarchy.

For agency and private-label securities, an increase in unobservable prepayment speeds in isolation would generally result in 

an increase in fair value, and an increase in unobservable spreads, severity rates or default rates in isolation would generally 

result in a decrease in fair value. For mortgage revenue bonds classified as Level 3 of the valuation hierarchy, an increase in 

unobservable spreads would result in a decrease in fair value. Although the sensitivities of the fair value of our recurring 

Level 3 securities of the valuation hierarchy to various unobservable inputs are discussed above in isolation, 

interrelationships exist among these inputs such that a change in one unobservable input typically results in a change to one 

or more of the other inputs.

Mortgage Loans Held for Investment

The majority of HFI loans are reported in our condensed consolidated balance sheets at the principal amount outstanding, net 

of cost basis adjustments and an allowance for loan losses. We estimate the fair value of HFI loans using the build-up and 

consensus valuation techniques, as discussed below, for periodic disclosure of financial instruments as required by GAAP. 

For our remaining loans, which include those containing embedded derivatives that would otherwise require bifurcation and 

consolidated loans of senior-subordinated trust structures, we elected the fair value option and therefore, we record these 

loans at fair value in our condensed consolidated balance sheets. We measure these loans on a recurring basis using the buildup, consensus, discounted cash flow and single vendor price techniques. Certain impaired loans are measured at fair value on 

a nonrecurring basis by using the fair value of their underlying collateral. Specific techniques used include internal models, 

broker price opinions and appraisals.

A description of our loan valuation techniques is as follows:

Build-Up: The fair value of performing loans represents an estimate of the prices we would receive if we were to securitize 

those loans and is determined based on comparisons to Fannie Mae MBS with similar characteristics, either on a pool or loan 

level. We use the observable market values of our Fannie Mae MBS determined primarily from third-party pricing services, 

quoted market prices in active markets for similar securities, and other observable market data as a base value. In the build-up 

valuation technique we start with the base value for our Fannie Mae MBS then we add or subtract the fair value of the 

associated guaranty asset, guaranty obligation (“GO”) and master servicing arrangement. We set the GO equal to the 

estimated fair value we would receive if we were to issue our guaranty to an unrelated party in a stand-alone arm’s length 

transaction at the measurement date. We estimate the fair value of the GO using our internal GO valuation models, which 

calculate the present value of expected cash flows based on management’s best estimate of certain key assumptions such as 

current mark-to-market LTV ratios, future house prices, default rates, severity rates and required rate of return. We may 

further adjust the model values based on our current market pricing when such transactions reflect credit characteristics that 

are similar to our outstanding GO. These loans are generally classified as Level 2 of the valuation hierarchy to the extent that 

significant inputs are observable. To the extent that unobservable inputs are significant, the loans are classified as Level 3 of 

the valuation hierarchy.

Consensus: The fair value of single-family nonperforming loans represents an estimate of the prices we would receive if we 

were to sell these loans in the nonperforming whole-loan market. These nonperforming loans are either two or more months 

delinquent, in an open modification period, or in a closed modification state (both performing and nonperforming in 

accordance with the loan’s modified terms). We calculate the fair value of nonperforming loans based on assumptions about 

key factors, including collateral value and mortgage insurance repayment. Collateral value is derived from the current 

estimated mark-to-market LTV ratio of the individual loan along with a state-level distressed property sales discount. The fair 

value of mortgage insurance is estimated by taking the loan level coverage and adjusting it by the expected claims paying 

ability of the associated mortgage insurer. The expected claims paying abilities used for estimating the fair value of mortgage 

insurance are consistent with our credit loss forecast. Using these assumptions, along with indicative bids for a representative 

sample of nonperforming loans, we estimate the fair value. The bids on sample loans are obtained from multiple active 

market participants. Fair value is estimated from the extrapolation of these indicative sample bids plus an amount for the 

recovery of any associated mortgage insurance estimated through our GO valuation models as described above. These loans 

are classified as Level 3 of the valuation hierarchy because significant inputs are unobservable.
FANNIE MAE

(In conservatorship)

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Discounted Cash Flow: We estimate the fair value of a portion of our senior-subordinated trust structures using discounted 

cash flow at the security level as a proxy for estimating loan fair value. This valuation technique uses unobservable inputs 

such as prepayment speeds, default rates, spreads, and loss severities to estimate the fair value of our securities. These inputs 

are weighted in a model that calculates the expected cash flow of the security which is used as the basis of fair value. These 

loans are classified as Level 3 of the valuation hierarchy because significant inputs are unobservable. 

Single Vendor: We estimate the fair value of a portion of our senior-subordinated trust structures using the single vendor 

valuation technique at the security level as a proxy for estimating loan fair value. This valuation technique estimates fair 

value based upon prices received from one specific vendor. These loans are classified as Level 3 of the valuation hierarchy 

because significant inputs are unobservable. 

Internal Model: We estimate the fair value of a portion of our single-family nonperforming loans using the value of the 

underlying collateral. The inputs into this internal model include property level data such as prior sales prices, tax assessment 

values, property characteristics, and historical foreclosure sales data. This internal model takes one of two approaches when 

valuing foreclosed properties. The first approach relies on comparable foreclosed property sales, where the value of the target 

property is the weighted average price of comparable foreclosed property sales. The weights in the comparable sales 

approach are determined by various factors such as geographic distance, transaction time, and the value difference. The 

second approach relies on model calibrations that consider the target property’s attributes such as prior sales prices, tax 

assessment values, and property characteristics to derive the foreclosed property values. In the second approach, we build 

separate predictive models for each Metropolitan Statistical Area (“MSA”). Specifically, we use data on prior sales prices, tax 

assessment values, property characteristics, and historical foreclosure sales to calibrate the models in each MSA. We can use 

the available data about that property and our MSA-level model to estimate the fair value for a given property. The majority 

of the internal model valuations come from the comparable sales approach. The determination of whether the internal model 

valuations in a particular geographic area should use the comparable sales approach or model calibration is based on the 

quarterly evaluation of these two approaches for valuation accuracy. The unobservable inputs used in this technique include 

model weights based upon geographic distance, transaction time, and metropolitan statistics. When a physical address is not 

available, we estimate fair value using state-average foreclosed property values. These loans are classified as Level 3 of the 

valuation hierarchy because significant inputs are unobservable. 

Appraisals: For a portion of our multifamily loans, we use appraisals to estimate the fair value of the loan. There are three 

approaches used to estimate fair value of a specific property: (1) cost, (2) income capitalization and (3) sales comparison. 

This technique uses an average of the three estimates. The cost approach uses the insurable value as a basis. The 

unobservable inputs used in this model include the estimated cost to construct or replace multifamily properties in the closest 

localities available. The income capitalization approach estimates the fair value using the present value of the future cash 

flow expectations by applying an appropriate overall capitalization rate to the forecasted net operating income. The 

significant unobservable inputs used in this calculation include rental income, fees associated with rental income, expenses 

associated with the property including taxes, payroll, insurance and other items, and capitalization rates, which are 

determined through market extraction and the debt service coverage ratio. The sales comparison approach compares the 

prices paid for similar properties, the prices asked by owners and offers made. The unobservable inputs to this methodology 

include ratios of sales prices to annual gross income, price paid per unit and adjustments made based on financing, conditions 

of sale, and physical characteristics of the property. These loans are classified as Level 3 of the valuation hierarchy because 

significant inputs are unobservable. 

Broker Price Opinion (“BPO”): For a portion of our multifamily loans, we use BPO to estimate the fair value of the loan. 

This technique uses both current property value and the property value adjusted for stabilization and market conditions. 

These approaches compute net operating income based on current rents and expenses and use a range of market capitalization 

rates to estimate property value. The unobservable inputs used in this technique are property net operating income and market 

capitalization rates to estimate property value. These loans are classified as Level 3 of the valuation hierarchy because 

significant inputs are unobservable. 

Asset Manager Estimate (“AME”): For a portion of our multifamily loans, AME is used to estimate the fair value of the loan. 

This technique uses the net operating income and tax assessments of the specific property as well as MSA-specific market 

capitalization rates and average per unit sales values to estimate property fair value. These loans are classified as Level 3 of 

the valuation hierarchy because significant inputs are unobservable. 
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An increase in prepayment speeds in isolation would generally result in an increase in the fair value of our mortgage loans 

classified as Level 3 of the valuation hierarchy, and an increase in severity rates, default rates, or spreads in isolation would 

generally result in a decrease in fair value. Although the sensitivities of the fair value of mortgage loans classified as Level 3 

of the valuation hierarchy to various unobservable inputs are discussed above in isolation, interrelationships exist among 

these inputs such that a change in one unobservable input typically results in a change to one or more of the other inputs. 

Acquired Property, Net and Other Assets

Acquired property, net represents foreclosed property received in full satisfaction of a loan net of a valuation allowance. 

Acquired property is initially recorded in our condensed consolidated balance sheets at its fair value less its estimated cost to 

sell. The initial fair value of foreclosed properties is determined using a hierarchy based on the reliability of available 

information. The hierarchy for single-family acquired property includes accepted offers, appraisals, broker price opinions and 

proprietary home price model values. The hierarchy for multifamily acquired property includes accepted offers, appraisals, 

and broker price opinions. We consider an accepted offer on a specific foreclosed property to be the best estimate of its fair 

value. If we have not accepted an offer on the property we use the highest available valuation methodology as described in 

our valuation hierarchy to determine fair value. While accepted offers represent an agreement in principle to transact, 

a significant portion of these agreements do not get executed for various reasons, and are therefore classified as Level 3 of the 

valuation hierarchy. 

Third-party valuations can be obtained from either an appraisal or a broker price opinion. These valuations are kept current 

using a monthly walk forward process that updates them for any change in the value of the property. When accepted offers or 

third-party valuations are not available, we generally utilize the home price values determined using an internal model. 

Subsequent to initial measurement, the foreclosed properties that we intend to sell are reported at the lower of the carrying 

amount or fair value less estimated costs to sell. Foreclosed properties classified as held for use, included in “Other Assets” in 

our condensed consolidated balance sheets, are depreciated and impaired when circumstances indicate that the carrying 

amount of the property is no longer recoverable. The fair values of our single-family foreclosed properties subsequent to 

initial measurement are determined using the same information hierarchy used for the initial fair value measurement. 

The most commonly used techniques in our valuation of acquired property are proprietary home price model and appraisals 

(both current and walk forward). Based on the number of properties measured as of March 31, 2013, these methodologies 

comprised approximately 73% of our valuations, while accepted offers comprised approximately 25% of our valuations. 

Based on the number of properties measured as of December 31, 2012, these methodologies comprised approximately 78%

of our valuations, while accepted offers comprised approximately 20% of our valuations.

Acquired property is classified as Level 3 of the valuation hierarchy because significant inputs are unobservable. 

A description of our acquired property valuation techniques is as follows: 

Single-family acquired property valuation techniques 

Appraisal: An appraisal is an estimate of the value of a specific property by a certified or licensed appraiser, in accordance 

with the Uniform Standards of Professional Appraisal Practice. Data most commonly used is from the local Multiple Listing 

Service and includes properties currently listed for sale, properties under contract, and closed transactions. The appraiser 

performs an analysis that starts with these data points and then adjusts for differences between the comparable properties and 

the property being appraised, to arrive at an estimated value for the specific property. Adjustments are made for differences 

between comparable properties for unobservable inputs such as square footage, location, and condition of the property. The 

appraiser typically uses recent historical data for the estimate of value. 

Broker Price Opinion: This technique provides an estimate of what the property is worth based upon a real estate broker’s 

knowledge. The broker uses research of pertinent data in the appropriate market, and a sales comparison approach that is 

similar to the appraisal process. The broker typically has insight into local market trends, such as the number of and terms of 

offers, lack of offers, increasing supply, shortage of inventory and overall interest in buying a home. This information, all of 

which is unobservable, is used along with recent and pending sales and current listings of similar properties to arrive at an 

estimate of value. 
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Appraisal and Broker Price Opinion Walk Forwards (“Walk Forwards”): We use these techniques to adjust appraisal and 

broker price opinion valuations for changing market conditions by applying a walk forward factor based on local price 

movements since the time the third-party value was obtained. The majority of third-party values are updated by comparing 

the difference in our internal home price model from the month of the original appraisal/broker price opinion to the current 

period and by applying the resulting percentage change to the original value. If a price is not determinable through our 

internal home price model, we use our zip code level home price index to update the valuations. 

Internal Model: We use an internal model to estimate fair value for distressed properties. The valuation methodology and 

inputs used are described under “Mortgage Loans Held for Investment.” 

Multifamily acquired property valuation techniques 

Appraisals: We use this method to estimate property values for distressed properties. The valuation methodology and inputs 

used are described under “Mortgage Loans Held for Investment.” 

Broker Price Opinions: We use this method to estimate property values for distressed properties. The valuation methodology 

and inputs used are described under “Mortgage Loans Held for Investment.” 

Derivatives Assets and Liabilities (collectively “Derivatives”)

Derivatives are recorded in our condensed consolidated balance sheets at fair value on a recurring basis. The valuation 

process for the majority of our risk management derivatives uses observable market data provided by third-party sources, 

resulting in Level 2 classification of the valuation hierarchy. 

A description of our derivatives valuation techniques is as follows: 

Internal Model: We use internal models to value interest rate swaps which are valued by referencing yield curves derived 

from observable interest rates and spreads to project and discount swap cash flows to present value. Option-based derivatives 

use an internal model that projects the probability of various levels of interest rates by referencing swaption volatilities 

provided by market makers/dealers. The projected cash flows of the underlying swaps of these option-based derivatives are 

discounted to present value using yield curves derived from observable interest rates and spreads. 

Dealer Mark: Certain highly complex structured swaps primarily use a single dealer mark due to lack of transparency in the 

market and may be modeled using observable interest rates and volatility levels as well as significant unobservable 

assumptions, resulting in Level 3 classification of the valuation hierarchy. Mortgage commitment derivatives that use 

observable market data, quotes and actual transaction price levels adjusted for market movement, are typically classified as 

Level 2 of the valuation hierarchy. To the extent mortgage commitment derivatives include adjustments for market movement 

that cannot be corroborated by observable market data, we classify them as Level 3 of the valuation hierarchy. 

Debt

The majority of debt of Fannie Mae is recorded in our condensed consolidated balance sheets at the principal amount 

outstanding, net of cost basis adjustments. We elected the fair value option for certain structured debt instruments, which are 

recorded in our condensed consolidated balance sheets at fair value on a recurring basis. 

We use third-party pricing services that reference observable market data such as interest rates and spreads to measure the fair 

value of debt, and thus classify that debt as Level 2 of the valuation hierarchy. 

A description of our debt valuation techniques is as follows: 

Discounted Cash Flow: For structured debt instruments that are not valued by third-party pricing services, cash flows are 

evaluated taking into consideration any structured derivatives through which we have swapped out of the structured features 

of the notes. The resulting cash flows are discounted to present value using a yield curve derived from market prices observed 

for Fannie Mae Benchmark Notes and adjusted to reflect fair values at the offer side of the market. Market swaption 

volatilities are also referenced for the valuation of callable structured debt instruments. Since the derivatives considered in the 

valuations of these structured debt instruments are classified as Level 3 of the valuation hierarchy, the valuations of the 

structured debt instruments result in a Level 3 classification. 

Consensus: Certain consolidated MBS debt with embedded derivatives is recorded in our condensed consolidated balance 

sheets at fair value on a recurring basis. Consolidated MBS debt is traded in the market as MBS assets. Accordingly, we 

estimate the fair value of our consolidated MBS debt using quoted market prices in active markets for similar liabilities when 

traded as assets. For a portion of our senior-subordinated trust structures, we estimate the fair value using the average of two 
FANNIE MAE

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or more vendor valuation techniques at the security level as a proxy for estimating debt fair value. This valuation technique 

estimates fair value based upon prices received from more than one vendor. These loans are classified as Level 3 of the 

valuation hierarchy because significant inputs are unobservable.

Single Vendor: Certain consolidated MBS debt with embedded derivatives is recorded in our condensed consolidated balance 

sheets at fair value on a recurring basis. Consolidated MBS debt is traded in the market as MBS assets. Accordingly, we 

estimate the fair value of our consolidated MBS debt using quoted market prices in active markets for similar liabilities when 

traded as assets. For a portion of our senior-subordinated trust structures, we estimate the fair value using the single vendor 

valuation technique at the security level as a proxy for estimating debt fair value. This valuation technique estimates fair 

value based upon prices received from one specific vendor. The valuation methodology and inputs used in estimating the fair 

value of MBS assets are described under “Cash Equivalents, Trading Securities and Available-for-Sale Securities.” These 

loans are classified as Level 3 of the valuation hierarchy because significant inputs are unobservable. 

Valuation Control Processes 

We have control processes that are designed to ensure that our fair value measurements are appropriate and reliable, that they 

are based on observable inputs wherever possible and that our valuation approaches are consistently applied and the 

assumptions used are reasonable. Our control processes consist of a framework that provides for a segregation of duties and 

oversight of our fair value methodologies and valuations, as well as validation procedures. 

The Pricing Group within our Finance Division is responsible for estimating the fair value of the majority of our financial 

assets and financial liabilities. These fair values are verified by our Price Verification Group, which is a control group 

separate from the group responsible for obtaining prices. Our Enterprise Risk Analytics Group develops models that are used 

in estimating the fair value of assets and liabilities for financial reporting purposes. In addition, our Model Oversight 

Committee (“MOC”) facilitates the cross-functional coordination and effectiveness of our modeling efforts in terms of 

research, model use and risk governance. The MOC is comprised of senior representatives from Underwriting and Pricing, 

Capital Markets, Credit Portfolio Management, Enterprise Risk Management and Finance and is co-chaired by our Chief 

Risk Officer and our Head of Enterprise Business Analytics. Our Model Risk Oversight Group is responsible for establishing 

risk management controls and for reviewing, validating and approving models used in the determination of fair value 

measurements for financial reporting. Fair value measurements for acquired property and collateral dependent loans are 

determined by other valuation groups in the Finance division. 

Our Valuation Oversight Committee (“VOC”) includes senior representation from our Capital Markets segment, our 

Enterprise Risk Office and our Finance division, and is responsible for providing overall governance for our valuation 

processes and results. The composition of the VOC is determined by the VOC chair, our Chief Financial Officer, with the 

objective of obtaining appropriate representation from Finance, Enterprise Risk Management and select business units within 

Fannie Mae. Based on its review of valuation methodologies and fair value results for various financial instruments used for 

financial reporting, the VOC is responsible for advising the VOC chair, who has the ultimate responsibility over all valuation 

processes and results. The VOC also reviews trend analysis for various financial assets and liabilities on a quarterly basis. 

We use third-party vendor prices and dealer quotes to estimate fair value of some of our financial assets and liabilities. Thirdparty vendor prices are primarily used to estimate fair value for trading securities, available-for-sale securities, debt of Fannie 

Mae, and consolidated MBS debt. Our Pricing Group performs various review and validation procedures prior to utilizing 

these prices in our fair value estimation process. We verify selected prices, using a variety of methods, including 

corroborating the prices by reference to other independent market data, such as non-binding broker or dealer quotations, 

relevant benchmark indices, and prices of similar instruments. We also review prices for reasonableness based on variations 

from prices provided in previous periods, comparing prices to internally estimated prices, using primarily a discounted cash 

flow approach, and conducting relative value comparisons based on specific characteristics of securities. 

We have discussions with the pricing services as part of our due diligence process in order to maintain a current 

understanding of the valuation processes and related assumptions and inputs that these vendors use in developing prices. The 

prices provided to us by third-party pricing services reflect the existence of market reliance upon credit enhancements, if any, 

and the current lack of liquidity in the marketplace. If we determine that a price provided to us is outside established 

parameters, we will further examine the price, including having follow-up discussions with the pricing service or dealer. If 

we conclude that a price is not valid, we will adjust the price for various factors, such as liquidity, bid-ask spreads and credit 

considerations. All of these procedures are executed before we use the prices in preparing our financial statements.
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Our Price Verification Group is responsible for performing monthly independent price verification, primarily related to 

financial assets and financial liabilities that are priced by our Pricing Group. This is generally accomplished by comparing the 

value that the Price Verification Group obtains through its own sources and methods with values provided by the Pricing 

Group. Alternatively, the Price Verification Group may perform reviews of the assumptions used by the Pricing Group to 

estimate the fair value of products we hold that have material estimation risk because observable market-based inputs do not 

exist. This group provides an update to the VOC on results, relevant market information and pricing trends, and significant 

valuation challenges and resolution of those challenges with the Pricing Group on a quarterly basis. 

We have an internal property valuation function that utilizes an internal model to compare the values received on a property 

and assign a risk rating based on several factors including the deviation between the various values. Property valuations with 

risk ratings above a specified threshold are reviewed for reasonableness by a team of property valuation experts. The internal 

model that is used to assign a risk rating and the threshold specified is subject to VOC oversight. In addition, our Quality 

Control Group reviews the overall work performed and inspects a portion of the properties in major markets, for which the 

third-party valuations are obtained, in order to assess the quality of the valuations. 

We calibrate the performance of our proprietary distressed home price model using actual offers in recently observed 

transactions. The model’s performance is reviewed on a monthly basis by the REO valuation team and compared quarterly to 

specific model performance thresholds. The results of the validation are regularly reviewed with the VOC. 

Our Appraisal Review Group reviews appraisals to determine whether they have been performed in accordance with 

appraisal standards and the results are consistent with our observed transactions on similar properties. We and/or third-party 

servicers review broker price opinions to determine whether the values provided are consistent with our observed transactions 

on similar properties. We conduct quarterly portfolio reviews, annual audits and periodic reviews of the counterparties that 

provide services to review broker price opinions. In addition, valuation results and trend analyses are reviewed at least 

monthly by REO management. 

Fair Value of Financial Instruments

The following table displays the carrying value and estimated fair value of our financial instruments as of March 31, 2013

and December 31, 2012. The fair value of financial instruments we disclose includes commitments to purchase multifamily 

and single-family mortgage loans, which are off-balance sheet financial instruments 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 certain financial instruments, such as plan obligations for pension and 

postretirement health care benefits, employee stock option and stock purchase plans, and also excludes all non-financial 

instruments. As a result, the fair value of our financial assets and liabilities does not represent the underlying fair value of our 

total consolidated assets and liabilities.
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As of March 31, 2013

Carrying

Value

Quoted

Price 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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 80,644 $ 80,644 $ — $ — $ — $ 80,644

Federal funds sold and securities purchased

under agreements to resell or similar

arrangements . . . . . . . . . . . . . . . . . . . . . . . 79,350 — 79,350 — — 79,350

Trading securities . . . . . . . . . . . . . . . . . . . . . 52,391 28,406 21,233 2,752 — 52,391

Available-for-sale securities . . . . . . . . . . . . . 60,329 — 35,878 24,451 — 60,329

Mortgage loans held for sale . . . . . . . . . . . . . 455 — 272 196 — 468

Mortgage loans held for investment, net of

allowance for loan losses:

Of Fannie Mae. . . . . . . . . . . . . . . . . . . . . 287,033 — 35,735 223,862 — 259,597

Of consolidated trusts . . . . . . . . . . . . . . . 2,671,148 — 2,548,254 225,456 — 2,773,710

Mortgage loans held for investment . . . . . . . 2,958,181 — 2,583,989 449,318 — 3,033,307

Advances to lenders. . . . . . . . . . . . . . . . . . . . 4,442 — 3,810 578 — 4,388

Derivative assets at fair value . . . . . . . . . . . . 519 — 14,698 155 (14,334) 519

Guaranty assets and buy-ups. . . . . . . . . . . . . 308 — — 688 — 688

Total financial assets . . . . . . . . . . . . . . . . . . . $ 3,236,619 $ 109,050 $ 2,739,230 $ 478,138 $ (14,334) $ 3,312,084

Financial liabilities:

Federal funds purchased and securities sold

under agreements to repurchase. . . . . . . . . $ 218 $ — $ 218 $ — $ — $ 218

Short-term debt:

 Of Fannie Mae . . . . . . . . . . . . . . . . . . . . . 115,285 — 115,301 — — 115,301

 Of consolidated trusts. . . . . . . . . . . . . . . . 3,009 — — 3,009 — 3,009

Long-term debt:

 Of Fannie Mae . . . . . . . . . . . . . . . . . . . . . 514,975 — 536,987 992 — 537,979

 Of consolidated trusts. . . . . . . . . . . . . . . . 2,599,274 — 2,694,300 15,256 — 2,709,556

Derivative liabilities at fair value . . . . . . . . . 780 — 20,529 162 (19,911) 780

Guaranty obligations . . . . . . . . . . . . . . . . . . . 565 — — 2,730 — 2,730

Total financial liabilities . . . . . . . . . . . . . . . . $ 3,234,106 $ — $ 3,367,335 $ 22,149 $ (19,911) $ 3,369,573
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As of December 31, 2012

Carrying

Value

Quoted

Price 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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 89,036 $ 75,786 $ 13,250 $ — $ — $ 89,036

Federal funds sold and securities purchased

under agreements to resell or similar

arrangements . . . . . . . . . . . . . . . . . . . . . . . 32,500 — 32,500 — — 32,500

Trading securities . . . . . . . . . . . . . . . . . . . . . 40,695 17,950 20,459 2,286 — 40,695

Available-for-sale securities . . . . . . . . . . . . . 63,181 — 38,147 25,034 — 63,181

Mortgage loans held for sale . . . . . . . . . . . . . 464 — 267 208 — 475

Mortgage loans held for investment, net of

allowance for loan losses:

Of Fannie Mae. . . . . . . . . . . . . . . . . . . . . 305,025 — 39,018 232,170 — 271,188

Of consolidated trusts . . . . . . . . . . . . . . . 2,643,917 — 2,528,004 234,424 — 2,762,428

Mortgage loans held for investment . . . . . . . 2,948,942 — 2,567,022 466,594 — 3,033,616

Advances to lenders. . . . . . . . . . . . . . . . . . . . 7,592 — 6,936 572 — 7,508

Derivative assets at fair value . . . . . . . . . . . . 435 — 16,051 175 (15,791) 435

Guaranty assets and buy-ups. . . . . . . . . . . . . 327 — — 692 — 692

Total financial assets . . . . . . . . . . . . . . . . . . . $ 3,183,172 $ 93,736 $ 2,694,632 $ 495,561 $ (15,791) $ 3,268,138

Financial liabilities:

Short-term debt:

 Of Fannie Mae . . . . . . . . . . . . . . . . . . . . . $ 105,233 $ — $ 105,253 $ — $ — $ 105,253

 Of consolidated trusts. . . . . . . . . . . . . . . . 3,483 — — 3,483 — 3,483

Long-term debt:

 Of Fannie Mae . . . . . . . . . . . . . . . . . . . . . 510,631 — 534,516 1,056 — 535,572

 Of consolidated trusts. . . . . . . . . . . . . . . . 2,570,170 — 2,685,008 16,171 — 2,701,179

Derivative liabilities at fair value . . . . . . . . . 705 — 22,590 161 (22,046) 705

Guaranty obligations . . . . . . . . . . . . . . . . . . . 599 — — 3,113 — 3,113

Total financial liabilities . . . . . . . . . . . . . . . . $ 3,190,821 $ — $ 3,347,367 $ 23,984 $ (22,046) $ 3,349,305

Financial Instruments for which fair value approximates carrying value—We hold certain financial instruments that are not 

carried at fair value but for which the carrying value approximates fair value due to the short-term nature and negligible 

credit risk inherent in them. These financial instruments include cash and cash equivalents, the majority of advances to 

lenders and federal funds and securities sold/purchased under agreements to repurchase/resell (exclusive of dollar roll 

repurchase transactions).

Federal funds and securities sold/purchased under agreements to repurchase/resell—The carrying value for the majority of 

these specific instruments approximates the fair value due to the short-term nature and the negligible inherent credit risk, as 

they involve the exchange of liquid collateral. Were we to calculate the fair value of these instruments we would use 

observable inputs resulting in Level 2 classification.

Mortgage Loans Held for Sale—Loans are reported at the lower of cost or fair value in our condensed consolidated balance 

sheets. The valuation methodology and inputs used in estimating the fair value of HFS loans are the same as for our HFI 

loans and are described under “Fair Value Measurement—Mortgage Loans Held for Investment” and these loans are 
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classified as Level 2 of the valuation hierarchy to the extent that significant inputs are observable. To the extent that 

significant inputs are unobservable, the loans are classified within Level 3 of the valuation hierarchy.

Advances to Lenders—The carrying value for the majority of our advances to lenders approximates fair value due to the 

short-term nature and the negligible inherent credit risk. Were we to calculate the fair value of these instruments we would 

use discounted cash flow models that use observable inputs such as spreads based on market assumptions, resulting in Level 

2 classification.

Advances to lenders also include loans for which the carrying value does not approximate fair value. These loans do not 

qualify for Fannie Mae MBS securitization and are valued using market-based techniques including credit spreads, severities 

and prepayment speeds for similar loans, through third-party pricing services or through a model approach incorporating both 

interest rate and credit risk simulating a loan sale via a synthetic structure. We classify these valuations as Level 3 given that 

significant inputs are not observable or are determined by extrapolation of observable points.

Guaranty Assets and Buy-ups—Guaranty assets related to our portfolio securitizations are recorded in our condensed 

consolidated balance sheets at fair value on a recurring basis and are classified within Level 3 of the valuation hierarchy. 

Guaranty assets in lender swap transactions are recorded in our condensed consolidated balance sheets at the lower of cost or 

fair value. These assets, which are measured at fair value on a nonrecurring basis, are classified within Level 3 of the fair 

value hierarchy.

We estimate the fair value of guaranty assets based on the present value of expected future cash flows of the underlying 

mortgage assets using management’s best estimate of certain key assumptions, which include prepayment speeds, forward 

yield curves, and discount rates commensurate with the risks involved. These cash flows are projected using proprietary 

prepayment, interest rate and credit risk models. Because guaranty assets are like an interest-only income stream, the 

projected cash flows from our guaranty assets are discounted using one-month LIBOR plus an option-adjusted spread that is 

calibrated using a representative sample of interest-only swaps that reference Fannie Mae MBS. We believe the remitted fee 

income is less liquid than interest-only swaps and more like an excess servicing strip. We take a further discount of the 

present value for these liquidity considerations. This discount is based on market quotes from dealers.

The fair value of the guaranty assets includes the fair value of any associated buy-ups, which is estimated in the same manner 

as guaranty assets but is recorded separately as a component of “Other assets” in our condensed consolidated balance sheets.

Guaranty Obligations—The fair value of all guaranty obligations, measured subsequent to their initial recognition, is our 

estimate of a hypothetical transaction price we would receive if we were to issue our guaranty to an unrelated party in a 

standalone arm’s-length transaction at the measurement date. These obligations are classified within Level 3. The valuation 

methodology and inputs used in estimating the fair value of the guaranty obligation are described under “Fair Value 

Measurement—Mortgage Loans Held for Investment, Build-up.”

HARP Loans—We measure the fair value of loans that are delivered under the Home Affordable Refinance Program 

(“HARP”) using a modified build-up approach while the loan is performing. Under this modified approach, we set the credit 

component of the consolidated loans (that is, the guaranty obligation) equal to the compensation we would currently receive 

for a loan delivered to us under the program because the total compensation for these loans is equal to their current exit price 

in the GSE securitization market. For a description of the build-up valuation methodology, refer to “Fair Value Measurement

—Mortgage Loans Held for Investment.” We will continue to use this pricing methodology as long as the HARP program is 

available to market participants. If, subsequent to delivery, the refinanced loan becomes past due or is modified as a part of a 

troubled debt restructuring, the fair value of the guaranty obligation is then measured consistent with other loans that have 

these characteristics.

The total compensation that we receive for the delivery of a HARP loan reflects the pricing that we are willing to offer 

because HARP is a part of a broader government program intended to provide assistance to homeowners and prevent 

foreclosures. If these benefits were not reflected in the pricing for these loans (that is, if the loans were valued using our 

standard build-up approach), the fair value disclosed in the table above would be lower by $9.2 billion as of March 31, 2013. 

The total fair value of the loans in our retained mortgage portfolio that have been refinanced under HARP as of March 31, 

2013 as presented in the table above is $279.8 billion.

Fair Value Option

We elected the fair value option for loans which contain embedded derivatives that would otherwise require bifurcation. 

Under the fair value option, we elected to carry these instruments at fair value instead of bifurcating the embedded derivative 

from the respective loan. 
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We elected the fair value option for all long-term structured debt instruments that are issued in response to specific investor 

demand and have interest rates that are based on a calculated index or formula and are economically hedged with derivatives 

at the time of issuance. By electing the fair value option for these instruments, we are able to eliminate the volatility in our 

results of operations that would otherwise result from the accounting asymmetry created by recording these structured debt 

instruments at cost while recording the related derivatives at fair value. 

We elected the fair value option for the financial assets and liabilities of the consolidated senior-subordinate trust structures. 

By electing the fair value option for these instruments, we are able to eliminate the volatility in our results of operations that 

would otherwise result from different accounting treatment between loans at cost and debt at cost. 

Interest income for the mortgage loans is recorded in “Mortgage loans interest income” and interest expense for the debt 

instruments is recorded in “Long-term debt interest expense” in our condensed consolidated statements of operations and 

comprehensive income. 

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, 2013 and December 31, 2012. 

As of

March 31, 2013 December 31, 2012

Loans of 

Consolidated 

Trusts(1)

Long-Term

Debt of

Fannie Mae

Long-Term Debt 

of Consolidated 

Trusts(2)

Loans of 

Consolidated 

Trusts(1)

Long-Term

Debt of

Fannie Mae

Long-Term Debt 

of Consolidated 

Trusts(2)

(Dollars in millions)

Fair value . . . . . . . . . . . . . . . . . . . $ 12,602 $ 770 $ 13,345 $ 10,800 $ 793 $ 11,647

Unpaid principal balance . . . . . . . 12,436 674 12,346 10,657 674 10,803

__________

(1) Includes nonaccrual loans with a fair value of $323 million and $273 million as of March 31, 2013 and December 31, 2012, 

respectively. The difference between unpaid principal balance and the fair value of these nonaccrual loans as of March 31, 2013 and 

December 31, 2012 is $127 million and $189 million, respectively. Includes loans that are 90 days or more past due with a fair value of 

$434 million and $386 million as of March 31, 2013 and December 31, 2012, respectively. The difference between unpaid principal 

balance and the fair value of these 90 or more days past due loans as of March 31, 2013 and December 31, 2012 is $135 million and 

$201 million, respectively.

(2) Includes interest-only debt instruments with no unpaid principal balance and a fair value of $93 million and $100 million as of March 

31, 2013 and December 31, 2012, respectively.

Changes in Fair Value under the Fair Value Option Election

The following table displays fair value gains and losses, net, including changes attributable to instrument-specific credit risk, 

for loans and debt for which the fair value election was made. Amounts are recorded as a component of “Fair value gains, 

net” in our condensed consolidated statements of operations and comprehensive income for the three months ended March 

31, 2013 and 2012.

For the Three Months Ended March 31,

2013 2012

Loans

Long-Term

Debt

Total

Gains

(Losses) Loans

Long-Term

Debt

Total 

Gains 

(Losses)

(Dollars in millions)

Changes in instrument-specific credit risk . . . . . . . . . . . . . . $ (65) $ (5) $ (70) $ 66 $ (2) $ 64

Other changes in fair value . . . . . . . . . . . . . . . . . . . . . . . . . . (157) 66 (91) (65) 60 (5)

Fair value (losses) gains, net. . . . . . . . . . . . . . . . . . . . . . . $ (222) $ 61 $ (161) $ 1 $ 58 $ 59

In determining the changes in the instrument-specific credit risk for loans, the changes in the associated credit-related 

components of these loans, primarily the guaranty obligation, were taken into consideration with the overall change in the fair 

value of the loans for which we elected the fair value option for financial instruments. In determining the changes in the 

instrument-specific credit risk for debt, the changes in Fannie Mae debt spreads to LIBOR that occurred during the period 

were taken into consideration with the overall change in the fair value of the debt for which we elected the fair value option 
FANNIE MAE

(In conservatorship)

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for financial instruments. Specifically, cash flows are evaluated taking into consideration any derivatives through which 

Fannie Mae has swapped out of the structured features of the notes and thus created a floating-rate LIBOR-based debt 

instrument. The change in value of these LIBOR-based cash flows based on the Fannie Mae yield curve at the beginning and 

end of the period represents the instrument-specific risk.

17. 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.

On a quarterly and annual basis, we review relevant information about all pending legal actions and proceedings for the 

purpose of evaluating and revising our contingencies, reserves and disclosures. 

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 trial and appellate courts will apply the law. Disposition 

valuations are also subject to the uncertainty of how opposing parties and their counsel view the evidence and applicable law. 

Further, FHFA adopted a regulation in 2011, which provides, in part, that while we are in conservatorship, FHFA will not pay 

claims by our current or former shareholders, unless the Director of FHFA determines it is in the interest of the 

conservatorship. The presence of this regulation and the Director of FHFA’s assertion that FHFA will not pay claims asserted 

in certain cases discussed below while we are in conservatorship creates additional uncertainty in those cases. 

We establish a reserve for those matters when a loss is probable and we can reasonably estimate the amount of such loss. 

Reserves have been established for certain of the matters noted below. These reserves did not have a material adverse effect 

on our financial statements. We note, however, that in light of the uncertainties involved in such actions and proceedings, 

there is no assurance that the ultimate resolution of these matters will not significantly exceed the reserves we have currently 

accrued. 

For the remaining legal actions or proceedings, including those where there is only a reasonable possibility that a loss may be 

incurred, we are not currently able to estimate the reasonably possible losses or ranges of losses and we have not established 

a reserve with respect to those actions or proceedings. 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 substantial or indeterminate 

damages, where there may be novel or unsettled legal questions relevant to the proceedings, or where settlement negotiations 

have not occurred or progressed. Further, as noted above, FHFA’s regulation and the Director of FHFA’s assertion creates 

additional uncertainty with respect to certain cases. 

Given the uncertainties involved in any action or proceeding, regardless of whether we have established a reserve, 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. Based on 

our current knowledge with respect to the matters described below, we believe we have valid defenses to the claims in these 

proceedings and intend to defend these matters vigorously regardless of whether or not we have recorded a loss reserve. 

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 advanced fees and expenses of certain current and former officers and directors in connection with 

various legal proceedings pursuant to indemnification agreements. 

In re Fannie Mae Securities Litigation

Fannie Mae is a defendant in a consolidated class action lawsuit initially filed in 2004 and currently pending in the U.S. 

District Court for the District of Columbia. In the consolidated complaint filed in 2005, lead plaintiffs Ohio Public 

Employees Retirement System and State Teachers Retirement System of Ohio allege that we and certain former officers, as 
FANNIE MAE

(In conservatorship)

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(UNAUDITED)

150

well as our former outside auditor, made materially false and misleading statements in violation of Sections 10(b) and 20(a) 

of the Securities Exchange Act of 1934, and SEC Rule 10b-5 promulgated thereunder. Plaintiffs contend that Fannie Mae’s 

accounting statements were inconsistent with GAAP requirements relating to hedge accounting and the amortization of 

premiums and discounts, and seek unspecified compensatory damages, attorneys’ fees, and other fees and costs. On 

January 7, 2008, the court defined the class as all purchasers of Fannie Mae common stock and call options and all sellers of 

publicly traded Fannie Mae put options during the period from April 17, 2001 through December 22, 2004. On October 17, 

2008, FHFA, as conservator for Fannie Mae, intervened in this case. In September and December 2010, plaintiffs served 

expert reports claiming damages to plaintiffs under various scenarios ranging cumulatively from $2.2 billion to $8.6 billion. 

In 2011, the parties filed various motions for summary judgment. On September 20, 2012, the court granted summary 

judgment to defendant Franklin D. Raines, Fannie Mae’s former Chief Executive Officer, on all claims against him. On 

October 16, 2012, the court granted summary judgment to defendant J. Timothy Howard, Fannie Mae’s former Chief 

Financial Officer, on all claims against him. On November 20, 2012, the court granted summary judgment to defendant 

Leanne Spencer, Fannie Mae’s former Controller, on all claims against her. 

On April 10, 2013, the parties reached an agreement in principle to settle this litigation, subject to court approval. Fannie 

Mae’s portion of the proposed settlement will not have a material impact on our results of operations or financial condition. 

On May 7, 2013, the parties filed a stipulation of settlement with the court.

2008 Class Action Lawsuits

Fannie Mae is a defendant in two consolidated class actions filed in 2008 and currently pending in the U.S. District Court for 

the Southern District of New York—In re Fannie Mae 2008 Securities Litigation and In re 2008 Fannie Mae ERISA

Litigation. On February 11, 2009, the Judicial Panel on Multidistrict Litigation ordered that the cases be coordinated for 

pretrial proceedings. 

In re Fannie Mae 2008 Securities Litigation 

In a consolidated amended complaint filed on June 22, 2009, lead plaintiffs Massachusetts Pension Reserves Investment 

Management Board and Boston Retirement Board (for common shareholders) and Tennessee Consolidated Retirement 

System (for preferred shareholders) allege that we, certain of our former officers, and certain of our underwriters violated 

Sections 12(a)(2) and 15 of the Securities Act of 1933. Lead plaintiffs also allege that we, certain of our former officers, and 

our outside auditor, violated Sections 10(b) (and Rule 10b-5 promulgated thereunder) and 20(a) of the Securities Exchange 

Act of 1934. Lead plaintiffs seek various forms of relief, including rescission, damages, interest, costs, attorneys’ and experts’

fees, and other equitable and injunctive relief. On October 13, 2009, the Court entered an order allowing FHFA to intervene. 

In 2009, the Court granted the defendants’ motion to dismiss the Securities Act claims as to all defendants. In 2010, the Court 

granted in part and denied in part the defendants’ motions to dismiss the Securities Exchange Act claims. As a result of the 

partial denial, some of the Securities Exchange Act claims remained pending against us and certain of our former officers. 

Fannie Mae filed its answer to the consolidated complaint on December 31, 2010. In 2011, lead plaintiffs filed motions to 

certify a class of persons who, between November 8, 2006 and September 5, 2008, inclusive, purchased or acquired 

(a) Fannie Mae common stock and options or (b) Fannie Mae preferred stock. 

Plaintiffs filed a second amended joint consolidated class action complaint on March 2, 2012 and added FHFA as a 

defendant. On August 30, 2012, the court denied defendants’ motions to dismiss the second amended complaint, allowing 

plaintiffs’ Securities Exchange Act claims premised on Fannie Mae’s subprime and Alt-A disclosures to proceed along with 

plaintiffs’ claims premised on Fannie Mae’s risk management disclosures. Fannie Mae filed its answer to the second amended 

complaint on October 29, 2012. Discovery is ongoing.

Given the stage of this lawsuit, the absence of a specified demand or claim by the plaintiff, and the substantial and novel legal 

questions that remain, we are currently unable to estimate the reasonably possible loss or range of loss arising from this 

litigation. 

In re 2008 Fannie Mae ERISA Litigation 

In a consolidated complaint filed in 2009, plaintiffs allege that certain of our current and former officers and directors, 

including former members of Fannie Mae’s Benefit Plans Committee and the Compensation Committee of Fannie Mae’s 

Board of Directors, as fiduciaries of Fannie Mae’s Employee Stock Ownership Plan (“ESOP”), breached their duties to ESOP

participants and beneficiaries by investing ESOP funds in Fannie Mae common stock when it was no longer prudent to 

continue to do so. Plaintiffs purport to represent a class of participants and beneficiaries of the ESOP whose accounts 
FANNIE MAE

(In conservatorship)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(UNAUDITED)

151

invested in Fannie Mae common stock beginning April 17, 2007. The plaintiffs seek unspecified damages, attorneys’ fees and 

other fees and costs, and injunctive and other equitable relief. On February 1, 2012, plaintiffs sought leave to amend their 

complaint to add new factual allegations and the court granted plaintiffs’ motion. Plaintiffs filed an amended complaint on 

March 2, 2012 adding two current Board members and then-CEO Michael J. Williams as defendants. On October 22, 2012, 

the court granted in part and denied in part defendants’ motions to dismiss. The court dismissed with prejudice claims against 

seven former and current directors and officers who joined the Board of Directors or Benefit Plans Committee after Fannie 

Mae was placed into conservatorship. The court allowed plaintiffs’ breach of fiduciary duty and failure to monitor claims to 

go forward, but dismissed plaintiffs’ conflict of interest claim. Discovery is ongoing.

Given the stage of this lawsuit, the absence of a specified demand or claim by the plaintiff, and the substantial and novel legal 

questions that remain, we are currently unable to estimate the reasonably possible loss or range of loss arising from this 

litigation. 

Comprehensive Investment Services v. Mudd, et al.

This individual securities action was originally filed on May 13, 2009, by plaintiff Comprehensive Investment Services, Inc. 

against certain of our former officers and directors, and certain of our underwriters in the U.S. District Court for the Southern 

District of Texas. On July 7, 2009, this case was transferred to the Southern District of New York for coordination with In re 

Fannie Mae 2008 Securities Litigation and In re 2008 Fannie Mae ERISA Litigation. Plaintiff filed an amended complaint on 

May 11, 2011 against us, certain of our former officers, and certain of our underwriters. The amended complaint alleges 

violations of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder; violations of 

Section 20(a) of the Securities Exchange Act of 1934; and violations of the Texas Business and Commerce Code, common 

law fraud, and negligent misrepresentation in connection with Fannie Mae’s May 2008 $2.0 billion offering of 8.25% noncumulative preferred Series T stock. Plaintiff seeks relief in the form of rescission, actual damages, punitive damages, 

interest, costs, attorneys’ and experts’ fees, and other equitable and injunctive relief. Plaintiff filed a second amended 

complaint on March 2, 2012. On August 30, 2012, the court denied defendants’ motions to dismiss the second amended 

complaint, allowing plaintiff’s Securities Exchange Act claims premised on Fannie Mae’s subprime and Alt-A disclosures 

and risk management disclosures to proceed. The court granted defendants’ motions to dismiss the state law claims, as well as 

the federal claims based on alleged violations of GAAP, and also dismissed two of our former officers from the action. On 

October 10, 2012, the court denied plaintiff’s motion for reconsideration of the court’s order dismissing plaintiff’s state law 

claims against certain underwriters of Fannie Mae’s Series T preferred stock. Fannie Mae filed its answer to the amended 

complaint on October 29, 2012. Discovery is ongoing.

Given the stage of this lawsuit, the absence of a specified demand or claim by the plaintiff, and the substantial and novel legal 

questions that remain, we are currently unable to estimate the reasonably possible loss or range of loss arising from this 

litigation.

Smith v. Fannie Mae, et al.

This individual securities action was originally filed on February 25, 2010, by plaintiff Edward Smith against Fannie Mae 

and certain of its former officers as well as several underwriters in the U.S. District Court for the Central District of 

California. On April 12, 2010, this case was transferred to the Southern District of New York for coordination with In re 

Fannie Mae 2008 Securities Litigation and In re 2008 Fannie Mae ERISA Litigation. Plaintiff filed an amended complaint on 

April 19, 2011, which alleges violations of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated 

thereunder; violations of Section 20(a) of the Securities Exchange Act of 1934; common law fraud and negligence claims; 

and California state law claims for misrepresentation in connection with Fannie Mae’s December 2007 $7.0 billion offering 

of 7.75% fixed-to-floating rate non-cumulative preferred Series S stock. Plaintiff seeks relief in the form of rescission, actual 

damages (including interest), and exemplary and punitive damages. Plaintiff filed a second amended complaint, allowing 

plaintiff’s Securities Exchange Act claims premised on Fannie Mae’s subprime and Alt-A disclosures and risk management 

disclosures to proceed, but granted defendants’ motions to dismiss the state law claims. On October 10, 2012, the court 

denied plaintiff’s motion for reconsideration of the court’s order dismissing plaintiff’s state law claims against certain 

underwriters of Fannie Mae’s Series S preferred stock. Fannie Mae filed its answer to the amended complaint on October 29, 

2012. Discovery is ongoing.

Given the stage of this lawsuit, the absence of a specified demand or claim by the plaintiff, and the substantial and novel legal 

questions that remain, we are currently unable to estimate the reasonably possible loss or range of loss arising from this 

litigation. 
FANNIE MAE

(In conservatorship)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(UNAUDITED)

152

Transfer Tax Litigation

We are involved in a number of lawsuits in multiple states regarding our right to claim an exemption under our charter from 

transfer taxes in connection with the recordation of deeds upon transfers of real property by sale or foreclosure. If any of 

these lawsuits are decided against us, we may be required to pay past transfer taxes, damages, fees and/or costs. Although we 

believe that our charter provides us with an exemption from these taxes and therefore we have a valid defense in these 

lawsuits, in March 2012 a federal district court in Michigan held in two cases that we are not exempt from Michigan transfer 

taxes under our charter. We, along with FHFA and Freddie Mac, filed appeals on these two decisions with the U.S. Court of 

Appeals for the Sixth Circuit, and oral argument was heard on May 2, 2013. Since these two adverse rulings in Michigan, a 

number of courts have agreed with our position that we are exempt from these transfer taxes under our charter. We do not 

expect the outcome of these lawsuits to have a material impact on our results of operations or financial condition.
153

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 Securities and Exchange 

Commission (“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, 2013, 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, 2013 or as of the date of filing this report.

Our disclosure controls and procedures were not effective as of March 31, 2013 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, 2013 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, it is likely that we will not remediate this material weakness while we are under conservatorship.

Description of Material Weakness

The Public Company Accounting Oversight Board’s Auditing Standard No. 5 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, 2013 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 2008 Reform 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 

2008 Reform 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 
154

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 2008 

Reform 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, 2013 or as of the date of 

filing this report. Based on discussions with FHFA and the structural nature of this weakness, it is likely that we will 

not remediate this material weakness while we are under conservatorship.

Mitigating Actions Relating 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 Office of Conservatorship Operations, 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 for the quarter ended March 31, 2013 (“First Quarter 2013 and engaged in 

discussions regarding issues associated with the information contained in those filings. Prior to filing our First 

Quarter 2013 FHFA provided Fannie Mae management with a written acknowledgment that it had 

reviewed the First Quarter 2013 and it was not aware of any material misstatements or omissions in the 

First Quarter 2013 and had no objection to our filing the First Quarter 2013 

• The Acting Director of FHFA and our Chief Executive Officer have been in frequent communication, typically 

meeting on at least a bi-weekly basis.

• 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

Overview

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 a change in our 

internal control over financial reporting since December 31, 2012 that management believes has materially affected, or is 

reasonably likely to materially affect, our internal control over financial reporting.

Change in Management

Effective April 3, 2013, David C. Benson, who previously served as Fannie Mae’s Executive Vice President—Capital 

Markets, Securitization & Corporate Strategy, became Fannie Mae’s Executive Vice President and Chief Financial Officer, 

succeeding Susan R. McFarland, who resigned as Fannie Mae’s Executive Vice President and Chief Financial Officer and 

became a senior adviser for a transition period that will end no later than June 30, 2013.
155

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 2012 Form 10-K. We also provide information regarding material legal proceedings in “Note 17, 

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 do not have a material impact on our business. Litigation claims and proceedings of all 

types are subject to many factors that generally cannot be predicted accurately. 

We record reserves for legal claims when losses associated with the claims become probable and the amounts can be 

reasonably estimated. The actual costs of resolving legal claims may be substantially higher or lower than the amounts 

reserved for those claims. For matters where the likelihood or extent of a loss is not probable or cannot be reasonably 

estimated, we do not recognize in our condensed consolidated financial statements the potential liability that may result from 

these matters. We presently cannot determine the ultimate resolution of the matters described below or incorporated by 

reference into this item or in our 2012 Form 10-K. We have recorded a reserve for legal claims related to those matters when 

we were able to determine a loss was both probable and reasonably estimable. If certain of these matters are determined 

against us, it could have a material adverse effect on our results of operations, liquidity and financial condition, including our 

net worth. 

FHFA Private-Label Mortgage-Related Securities Litigation: SDNY cases

As we disclosed in our 2012 in “Legal Proceedings,” in the third quarter of 2011, FHFA, as conservator for us 

and for Freddie Mac, filed 16 lawsuits on behalf of us and Freddie Mac against various financial institutions, their officers 

and affiliated and unaffiliated underwriters that were responsible for marketing and selling private-label mortgage-related 

securities to us. The lawsuits seek to recover losses we and Freddie Mac incurred on the securities. Fourteen of the lawsuits 

are pending in the U.S. District Court for the Southern District of New York (“SDNY”). These cases are against Bank of 

America Corp.; Barclays Bank PLC; Citigroup, Inc.; Credit Suisse Holdings (USA), Inc.; Deutsche Bank AG; First Horizon 

National Corporation; Goldman, Sachs & Co.; HSBC North America Holdings Inc.; JPMorgan Chase & Co.; Merrill 

Lynch & Co.; Morgan Stanley; Nomura Holding America Inc.; SG Americas, Inc.; and UBS Americas Inc. (“UBS”) and 

against certain related entities and individuals. The lawsuits allege that the defendants violated federal and state securities 

laws and, in some cases, committed fraud by making material misstatements and omissions regarding the characteristics of 

the loans underlying the securities in the offering documents for the securities that were sold to Fannie Mae and Freddie Mac. 

On December 21, 2011, FHFA filed an amended complaint in the UBS case. On January 20, 2012, defendants in the UBS 

case filed a motion to dismiss the amended complaint. On May 4, 2012, the court denied defendants’ motion to dismiss in the 

UBS case with respect to the federal and state securities law claims and granted defendants’ motion to dismiss with respect to 

the negligent misrepresentation claim. On June 13, 2012 and June 28, 2012, FHFA filed amended complaints in the non-UBS 

cases pending in the SDNY. Defendants in these cases filed motions to dismiss on July 13, 2012 and August 17, 2012. In a 

series of orders issued in November 2012, the district court denied, in large part, defendants’ motions to dismiss in the nonUBS cases. On November 26, 2012, the U.S. Court of Appeals for the Second Circuit heard the UBS defendants’ appeal of 

the district court’s May 4, 2012 order denying their motion to dismiss. On April 5, 2013, the Second Circuit affirmed the 

district court’s order.
156

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 2012 Form 10-K. This section supplements and updates that discussion. For a complete understanding 

of the subject, you should read both together. Please also refer to “MD&A—Risk Management” in this report and in our 2012 

Form 10-K 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 forwardlooking statements contained in this report. However, these are not the only risks we face. In addition to the risks we discuss 

below, we face risks and uncertainties not currently known to us or that we currently believe are immaterial. 

RISKS RELATING TO OUR BUSINESS

We may incur losses as a result of claims under our mortgage insurance policies not being paid in full or at all, and we 

may face business disruptions and increased concentration risk. 

We rely heavily on mortgage insurers to provide insurance against borrower defaults on single-family conventional mortgage 

loans with LTV ratios over 80% at the time of acquisition. Several of our mortgage insurer counterparties incurred losses in 

recent years, which may have increased the risk that these counterparties will fail to fulfill their obligations to pay in full our 

claims under insurance policies.

As of May 9, 2013, of our primary mortgage insurers:

• PMI, RMIC and Triad are under various forms of supervised control by their state regulators and are in run-off. A

mortgage insurer that is in run-off continues to collect renewal premiums and process claims on its existing 

insurance business, but no longer writes new insurance. 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. PMI, Triad and RMIC are currently paying 

only a portion of policyholder claims and deferring the remaining portion. Currently, PMI is paying 55% of claims 

under its mortgage guaranty insurance policies in cash and is deferring the remaining 45%, and both Triad and 

RMIC are paying 60% of claims in cash and deferring the remaining 40%. It is uncertain when, or if, regulators for 

PMI, Triad or RMIC will allow them to begin paying deferred policyholder claims and/or increase or decrease the 

amount of cash they pay on claims. These three mortgage insurers provided a combined $17.3 billion, or 19%, of 

our risk in force mortgage insurance coverage of our single-family guaranty book of business as of March 31, 2013. 

• Genworth is operating pursuant to waivers it received from the regulators of state regulatory capital requirements 

applicable to its main insurance writing entity, as its capital is below applicable state regulatory capital requirements. 

The parent company of Genworth announced a plan in January 2013 designed to reduce its risk-to-capital and ensure 

continued ability to write new business. The actions under the plan have received regulatory approval and 

include contributing additional capital and reorganizing the holding company structure for the U.S. mortgage 

insurance subsidiaries. Additionally, the plan includes a contingency for using an entity other than the existing main 

insurance writing entity for writing new business in all 50 states. Prior to the announcement, we entered into an 

agreement with Genworth that provided our approval for those elements of Genworth’s plan that required our 

approval. 

• MGIC and Radian disclosed that they received additional capital contributions in March 2013 to supplement their 

capital positions, which resulted in their meeting the regulatory capital requirements of all jurisdictions where they 

conduct business.

We do not know how long regulators will permit mortgage insurers that do not meet, or may fail to meet, state regulatory 

capital requirements to continue operating without obtaining additional capital. If a mortgage insurer counterparty is unable 

to generate or obtain sufficient capital to stay below its risk-to-capital limits and cannot secure and maintain a waiver from its 

state regulator, it will likely be placed into run-off or receivership. 

Some mortgage insurers have explored corporate restructurings designed to provide relief from risk-to-capital limits in 

certain states. We have approved several restructurings so that certain of our mortgage insurer counterparties or their 

subsidiaries could continue to write new business. A restructuring plan that would involve contributing capital to a subsidiary 

of a mortgage insurer would result in less liquidity available to the mortgage insurer to pay claims on its existing book of 

business and an increased risk that the mortgage insurer will not pay its claims in full in the future. 
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From time to time we assess our mortgage insurer counterparties’ ability to fulfill their obligations to us, and our loss reserves 

take into account this assessment. If our assessment indicates their ability to pay claims has deteriorated significantly or if our 

projected claim amounts have increased, it could result in a significant increase in our loss reserves and our credit losses. 

Beginning in 2007, many mortgage insurers stopped insuring new mortgages with certain higher risk characteristics such as 

higher LTV ratios, lower borrower FICO credit scores or select property types. Under HARP, we allow our borrowers who 

have mortgage loans with current LTV ratios above 80% to refinance their mortgages without obtaining new mortgage 

insurance in excess of what is already in place. Except as permitted under HARP, our charter specifically requires us to obtain 

credit enhancement on single-family conventional mortgage loans with loan-to-value ratios over 80% at the time of purchase. 

As a result, an inability to obtain mortgage insurance may inhibit our ability to serve and support the housing and mortgage 

markets, meet our housing goals and help borrowers remain in their homes by acquiring refinancings into more affordable 

loans. In addition, access to fewer mortgage insurer counterparties increases our concentration risk with the remaining 

mortgage insurers in the industry. 

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

Recent Sales of Unregistered 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, 2013, we did not issue 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 Web site 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 Web site, the document will be posted on 

our Web site within the same time period that a prospectus for a non-exempt securities offering would be required to be filed 

with the SEC.

The Web site 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 some of 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 Web site address solely for your information. Information appearing on our Web site 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 2013.

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 Acting Director of FHFA directs us to make dividend 

payments on the senior preferred stock on a quarterly basis.
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Restrictions under Senior Preferred Stock Purchase Agreement. The senior preferred stock purchase agreement prohibits us 

from declaring or paying any dividends on Fannie Mae equity securities without the prior written consent of Treasury. In 

addition, in 2012 the terms of the senior preferred stock purchase agreement were amended to ultimately require the payment 

of our entire net worth to Treasury. As a result, our net income will not be available to common stockholders.

Additional Restrictions Relating to Preferred Stock. Payment of dividends on our common stock is also subject to the prior 

payment of dividends on our preferred stock and our senior preferred stock. Payment of dividends on all outstanding 

preferred stock, other than the senior preferred stock, is also subject to the prior payment of dividends on the senior preferred 

stock. 

Statutory Restrictions. Under the Federal Housing Enterprises Financial Safety and Soundness Act of 1992, as amended by 

the 2008 Reform Act, (together, 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 GSE Act, we are not permitted to make a capital 

distribution if, after making the distribution, we would be undercapitalized, except the Director of FHFA 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. 

Restrictions Relating to Subordinated Debt. During any period in which we defer payment of interest on qualifying 

subordinated debt, we may not declare or pay dividends on, or redeem, purchase or acquire, our common stock or preferred 

stock. 

Item 3. Defaults Upon Senior Securities

None. 

Item 4. Mine Safety Disclosures

None.

Item 5. Other Information

None. 

Item 6. Exhibits

An index to exhibits has been filed as part of this report beginning on page E-1 and is incorporated herein by reference.
159

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/ Timothy J. Mayopoulos

Timothy J. Mayopoulos

President and Chief Executive Officer

Date: May 9, 2013

By: /s/ David C. Benson

David C. Benson

Executive Vice President and

Chief Financial Officer

Date: May 9, 2013
E-1

INDEX TO EXHIBITS

Item Description

3.1 Fannie Mae Charter Act (12 U.S.C. § 1716 et seq.) as amended through July 30, 2008 (Incorporated by

reference to Exhibit 3.1 to Fannie Mae’s Annual Report on Form 10-K, filed February 24, 2011.)

3.2 Fannie Mae Bylaws, as amended through January 30, 2009 (Incorporated by reference to Exhibit 3.2 to

Fannie Mae’s Annual Report on Form 10-K for the year ended December 31, 2008, filed February 26,

2009.)

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 XBRL Instance Document*

101. SCH XBRL Taxonomy Extension Schema*

101. CAL XBRL Taxonomy Extension Calculation*

101. DEF XBRL Taxonomy Extension Definition*

101. LAB XBRL Taxonomy Extension Label*

101. PRE XBRL Taxonomy Extension Presentation*

__________

* The financial information contained in these XBRL documents is unaudited. The information in these exhibits shall 

not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, or otherwise subject to the 

liabilities of Section 18, nor shall they be deemed incorporated by reference into any disclosure document relating to 

Fannie Mae, except to the extent, if any, expressly set forth by specific reference in such filing.
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