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, 2015

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, 2015, there were 1,158,082,750 shares of common stock of the registrant outstanding.
i

TABLE OF CONTENTS

Page

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

Item 1. Financial Statements

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

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

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

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

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

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

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

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

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

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

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

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

Note 10—Earnings (Loss) Per Share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Note 11—Segment Reporting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Note 12—Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Note 13—Concentrations of Credit Risk . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Note 14—Netting Arrangements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Note 15—Fair Value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Note 16—Commitments and Contingencies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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

Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Executive Summary. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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

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

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

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

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

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

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

Risk Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Impact of Future Adoption of New Accounting Pronouncements . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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

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

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

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

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

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

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

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

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

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

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

69

70

71

72

76

78

84

87

92

93

94

95

98

98

101

102

106

108

132

1

1

2

15

16

17

25

32

35

39

40

65

65

135

135

137

137

138

139

140

140

140

140
ii

MD&A TABLE REFERENCE

Table Description Page

1 Credit Statistics, Single-Family Guaranty Book of Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

2 Single-Family Acquisitions Statistics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

3 Summary of Condensed Consolidated Results of Operations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

4 Analysis of Net Interest Income and Yield . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18

5 Rate/Volume Analysis of Changes in Net Interest Income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19

6 Fair Value Losses, Net. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20

7 Total Loss Reserves. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21

8 Changes in Combined Loss Reserves . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21

9 Troubled Debt Restructurings and Nonaccrual Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23

10 Credit Loss Performance Metrics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24

11 Single-Family Business Results . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25

12 Multifamily Business Results . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27

13 Capital Markets Group Results . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29

14 Capital Markets Group’s Mortgage Portfolio Activity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30

15 Capital Markets Group’s Mortgage Portfolio Composition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31

16 Capital Markets Group’s Mortgage Portfolio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32

17 Summary of Condensed Consolidated Balance Sheets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33

18 Summary of Mortgage-Related Securities at Fair Value. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34

19 Activity in Debt of Fannie Mae. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36

20 Outstanding Short-Term Borrowings and Long-Term Debt. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37

21 Cash and Other Investments Portfolio. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38

22 Composition of Mortgage Credit Book of Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41

23 Selected Credit Characteristics of Single-Family Conventional Guaranty Book of Business, by

Acquisition Period. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42

24 Representation and Warranty Status of Single-Family Conventional Loans Acquired in 2013-2015 . . . . 44

25 Credit Risk Transferred Pursuant to CAS Issuances. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45

26 Risk Characteristics of Single-Family Conventional Business Volume and Guaranty Book of Business. 46

27 Delinquency Status and Activity of Single-Family Conventional Loans . . . . . . . . . . . . . . . . . . . . . . . . . . 51

28 Single-Family Conventional Seriously Delinquent Loan Concentration Analysis. . . . . . . . . . . . . . . . . . . 52

29 Statistics on Single-Family Loan Workouts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53

30 Single-Family Foreclosed Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54

31 Single-Family Foreclosed Property Status . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55

32 Multifamily Lender Risk-Sharing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56

33 Multifamily Guaranty Book of Business Key Risk Characteristics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56

34 Multifamily Foreclosed Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57

35 Mortgage Insurance Coverage. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59

36 Interest Rate Sensitivity of Net Portfolio to Changes in Interest Rate Level and Slope of Yield Curve . . 64

37 Derivative Impact on Interest Rate Risk (50 Basis Points). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
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 Form 10-K for the year ended December 31, 2014 (“2014 Form 10-K”) 

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 2014 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 our 2014 Form 10-K. 

You can find a “Glossary of Terms Used in This Report” in the “MD&A” of our 2014 Form 10-K. 

INTRODUCTION

Fannie Mae is a government-sponsored enterprise (“GSE”) that was chartered by Congress in 1938. We serve an essential 

role in the functioning of the U.S. housing market and are investing in improvements to the U.S. housing finance system. Our 

public mission is to support liquidity and stability in the secondary mortgage market, where existing mortgage-related assets 

are purchased and sold, and to increase the supply of affordable housing. Our charter does not permit us to originate loans or 

lend money directly to consumers in the primary mortgage market. 

Fannie Mae provides reliable, large-scale access to affordable mortgage credit and indirectly enables families to buy, 

refinance or rent homes. We securitize mortgage loans originated by lenders into Fannie Mae mortgage-backed securities that 

we guarantee, which we refer to as Fannie Mae MBS. One of our key functions is to evaluate, price and manage the credit 

risk on the loans and securities that we guarantee. We also purchase mortgage loans and mortgage-related securities, 

primarily for securitization and sale at a later date. 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, which attracts global capital to the United States housing market. 

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

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

following the conservatorship, or what ownership interest, if any, our current common and preferred stockholders will hold in 

us after the conservatorship is terminated. In addition, our agreements with Treasury that provide for financial support 

include covenants that significantly restrict our business activities and provide for dividends to accrue at a rate equal to our 

net worth less a capital reserve amount, which continues to decrease annually until it reaches zero, allowing us to retain only 

a limited and decreasing amount of our net worth. We provide additional information on the conservatorship, the provisions 

of our agreements with Treasury, and their impact on our business in our 2014 Form 10-K in “Business—Conservatorship 

and Treasury Agreements” and “Risk Factors.” We discuss the uncertainty of our future in “Executive Summary—Outlook” 

and “Risk Factors” in this report. We discuss proposals for housing finance reform that could materially affect our business in 

“Business—Housing Finance Reform” in our 2014 Form 10-K.

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.
2

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

Our Strategy

We are focused on: 

• achieving strong financial and credit performance; 

• supporting the housing recovery by providing reliable, large-scale access to affordable mortgage credit for qualified 

borrowers and helping struggling homeowners; 

• serving customer needs and improving our business efficiency; and 

• helping to build a sustainable housing finance system.

Achieving strong financial and credit performance 

We continued to achieve strong financial and credit performance in the first quarter of 2015:

• Financial Performance. We reported net income of $1.9 billion for the first quarter of 2015, compared with net 

income of $5.3 billion for the first quarter of 2014. See “Summary of Our Financial Performance” below for an 

overview of our financial performance for the first quarter of 2015, compared with the first quarter of 2014. We 

expect to remain profitable on an annual basis for the foreseeable future; however, certain factors, such as changes in 

interest rates or home prices, could result in significant volatility in our financial results from quarter to quarter or 

year to year. For more information regarding our expectations for our future financial performance, see “Outlook—

Financial Results” and “Outlook—Revenues” below.

• Dividend Payments to Treasury. With our expected June 2015 dividend payment to Treasury, we will have paid a 

total of $138.2 billion in dividends to Treasury on our senior preferred stock. The aggregate amount of draws we 

have received from Treasury to date under the senior preferred stock purchase agreement is $116.1 billion. Under 

the terms of the senior preferred stock purchase agreement, dividend payments do not offset prior Treasury draws. 

See “Treasury Draws and Dividend Payments” and “Outlook—Dividend Obligations to Treasury” below for more 

information regarding our dividend payments to Treasury.

• Book of Business and Credit Performance. Beginning in 2008, we made changes to strengthen our underwriting and 

eligibility standards that have improved the credit quality of our single-family guaranty book of business and 

contributed to improvement in our credit performance. Our single-family serious delinquency rate has decreased 

each quarter since the first quarter of 2010, and was 1.78% as of March 31, 2015, compared with 1.89% as of 

December 31, 2014. Single-family seriously delinquent loans are loans that are 90 days or more past due or in the 

foreclosure process. See “Single-Family Guaranty Book of Business” below for information on the credit 

performance of the mortgage loans in our single-family guaranty book of business and on our single-family 

acquisitions.

Our business model has changed significantly since we entered into conservatorship in 2008 and continues to evolve. To meet 

the requirements of our senior preferred stock purchase agreement with Treasury, our retained mortgage portfolio has 

declined substantially since entering conservatorship and will continue to decline until 2018, which has resulted in, and is 

expected to continue to result in, declines in our net revenues from our retained mortgage portfolio. In addition, the amount 

of guaranty fee income we receive for managing the credit risk of loans in our book of business has increased significantly 

since entering into conservatorship and we expect will continue to increase over the next several years. See “Outlook—

Revenues” for more information on the shift in, and future expectations regarding, the sources of our revenue. Our business 

also continues to evolve as a result of our efforts to build a safer and sustainable housing finance system and to pursue the 

strategic goals identified by our conservator. For example, we have begun to transfer a portion of the existing credit risk on 

our single-family guaranty book of business in order to reduce the risk to taxpayers of future borrower defaults, and we 

expect to continue engaging in economically sensible ways to expand our offerings of credit risk transfer transactions in the 

future. See “Helping to Build a Sustainable Housing Finance System” below and in our 2014 Form 10-K in “Business—

Executive Summary” for a discussion of our credit risk transfer transactions and other efforts to build a safer and sustainable 

housing finance system.
3

We remain under conservatorship and subject to the restrictions of the senior preferred stock purchase agreement with 

Treasury. As a result of the senior preferred stock purchase agreement and directives from our conservator, we are not 

permitted to retain our net worth (other than a limited amount that will decrease to zero by 2018), rebuild our capital position 

or pay dividends or other distributions to stockholders other than Treasury. See “Business—Conservatorship and Treasury 

Agreements” in our 2014 Form 10-K for more information regarding our conservatorship and our senior preferred stock 

purchase agreement with Treasury. In addition, the future of our company remains uncertain. Congress continues to consider 

options for reform of the housing finance system, including the GSEs, and we cannot predict the prospects for the enactment, 

timing or final content of housing finance reform legislation. See “Business—Housing Finance Reform” in our 2014 Form 

10-K for information on recent proposals for housing finance reform.

Supporting the housing recovery by providing reliable, large-scale access to affordable mortgage credit for qualified 

borrowers and helping struggling homeowners

We continued our efforts to support the housing recovery in the first quarter of 2015. We remained the largest single issuer of 

mortgage-related securities in the single-family secondary market during the first quarter of 2015 and a continuous source of 

liquidity in the multifamily market. We also continued to help struggling homeowners. In the first quarter of 2015, we 

provided approximately 34,000 loan workouts to help homeowners stay in their homes or otherwise avoid foreclosure. We 

discuss our activities to support the housing and mortgage markets in “Contributions to the Housing and Mortgage Markets” 

below.

Serving customer needs and improving our business efficiency

We continued to work on initiatives to better serve our customers’ needs and improve our business efficiency in the first

quarter of 2015. These initiatives include revising and clarifying our representation and warranty framework to reduce 

lenders’ repurchase risk, simplifying our business processes, and updating our infrastructure. We discuss these initiatives in 

“Serving Customer Needs and Improving Our Business Efficiency” below and in our 2014 Form 10-K in “Business—

Executive Summary.”

Helping to build a sustainable housing finance system

We continued to help lay the foundation for a safer and sustainable housing finance system in the first quarter of 2015. Our 

efforts included pursuing the strategic goals and objectives identified by our conservator, as well as investing in 

enhancements to our business and infrastructure. We discuss these efforts, as well as FHFA’s 2014 Strategic Plan for the 

Conservatorships of Fannie Mae and Freddie Mac and FHFA’s related 2015 conservatorship scorecard, in “Helping to Build a 

Sustainable Housing Finance System” below and in our 2014 Form 10-K in “Business—Executive Summary.”

Summary of Our Financial Performance 

Comprehensive Income

We recognized comprehensive income of $1.8 billion in the first quarter of 2015, consisting of net income of $1.9 billion and 

other comprehensive loss of $92 million. In comparison, we recognized comprehensive income of $5.7 billion in the first 

quarter of 2014, consisting of net income of $5.3 billion and other comprehensive income of $372 million. The decrease in 

comprehensive income was primarily driven by revenue of $4.1 billion recognized in the first quarter of 2014 resulting from 

settlement agreements resolving certain lawsuits relating to private-label mortgage-related securities (“PLS”) sold to us. The 

decrease in comprehensive income was also attributable to a decline in credit-related income and an increase in fair value 

losses.

Credit-related income decreased to $60 million in the first quarter of 2015 from $1.0 billion in the first quarter of 2014. This 

decrease was primarily due to less income in the first quarter of 2015 from resolution agreements relating to representation 

and warranty matters compared with the first quarter of 2014. 

Fair value losses increased to $1.9 billion in the first quarter of 2015 from $1.2 billion in the first quarter of 2014. This 

increase was primarily driven by risk management derivative fair value losses as a result of larger declines in longer-term 

swap rates during the first quarter of 2015, which caused larger decreases in the fair value of our pay-fixed derivatives.

We expect volatility from period to period in our financial results from a number of factors, particularly changes in market 

conditions that result in fluctuations in the estimated fair value of the financial instruments that we mark to market through 

our earnings. These instruments include derivatives and certain securities. The estimated fair value of our derivatives and 

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

spreads and implied volatility, as well as activity related to these financial instruments. We use derivatives to manage the 

interest rate risk exposure of our net portfolio, which consists of our retained mortgage portfolio, cash and other investments 
4

portfolio, and outstanding debt of Fannie Mae. Some of these financial instruments in our net portfolio are not recorded at 

fair value in our condensed consolidated financial statements, and as a result we may experience accounting gains or losses 

due to changes in interest rates or other market conditions that may not be indicative of the economic interest rate risk 

exposure of our net portfolio. See “Risk Management—Market Risk Management, Including Interest Rate Risk 

Management” for more information. In addition, our credit-related income or expense can vary substantially from period to 

period primarily due to changes in home prices, borrower payment behavior and economic conditions.

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

Net Worth

Our net worth decreased to $3.6 billion as of March 31, 2015 from $3.7 billion as of December 31, 2014 primarily due to our 

payment to Treasury of $1.9 billion in senior preferred stock dividends, offset by our comprehensive income of $1.8 billion

during the first quarter of 2015. Our expected dividend payment of $1.8 billion for the second quarter of 2015 is calculated 

based on our net worth of $3.6 billion as of March 31, 2015 less the applicable capital reserve amount of $1.8 billion.

Single-Family Guaranty Book of Business

Credit Performance

We continued to achieve strong credit performance in the first quarter of 2015. In addition to acquiring loans with strong 

credit profiles, as we discuss below in “Recently Acquired Single-Family Loans,” we continued to execute on our strategies 

for reducing credit losses, such as helping eligible Fannie Mae borrowers with high loan-to-value (“LTV”) ratio loans 

refinance into more sustainable loans through the Administration’s Home Affordable Refinance Program® (“HARP®”), 

offering borrowers loan modifications that can significantly reduce their monthly payments, pursuing foreclosure alternatives 

and managing our real estate owned (“REO”) inventory to appropriately manage costs and maximize sales proceeds. As we 

work to reduce credit losses, we also seek to assist struggling homeowners, help stabilize communities and support the 

housing market.

Table 1 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 both home retention solutions (loan 

modifications and other solutions that enable a borrower to stay in his or her home) and foreclosure alternatives (short sales 

and deeds-in-lieu of foreclosure). The workout information in Table 1 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.
5

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

2015 2014

Q1

Full

Year Q4 Q3 Q2 Q1

(Dollars in millions)

As of the end of each period:

Serious delinquency rate(2)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.78 % 1.89 % 1.89 % 1.96 % 2.05 % 2.19 %

Seriously delinquent loan count. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 308,546 329,590 329,590 340,897 357,267 383,810

Foreclosed property inventory:

Number of properties(3)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79,319 87,063 87,063 92,386 96,796 102,398

Carrying value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 8,915 $ 9,745 $ 9,745 $ 10,209 $ 10,347 $ 10,492

Total loss reserves(4)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32,532 37,762 37,762 39,330 41,657 44,760

During the period:

Credit-related (expense) income(5)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (7) $ 3,625 $ 94 $ 748 $ 1,781 $ 1,002

Credit losses(6)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,373 5,978 1,616 1,738 1,497 1,127

REO net sales prices to unpaid principal balance(7)

. . . . . . . . . . . . . . . 70 % 69 % 69 % 69 % 69 % 68 %

Short sales net sales price to unpaid principal balance(8)

. . . . . . . . . . . 73 % 72 % 72 % 72 % 72 % 71 %

Loan workout activity (number of loans):

Home retention loan workouts(9)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28,568 130,132 27,610 30,584 33,639 38,299

Short sales and deeds-in-lieu of foreclosure . . . . . . . . . . . . . . . . . . . . 5,657 34,480 6,845 7,992 9,516 10,127

Total loan workouts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34,225 164,612 34,455 38,576 43,155 48,426

Loan workouts as a percentage of delinquent loans in our guaranty 

book of business(10). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21.71 % 23.20 % 20.45 % 22.46 % 24.69 % 25.70 %

__________

(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 or in the foreclosure process, 

divided by the number of loans in our single-family conventional guaranty book of business. 

(3) Includes acquisitions through deeds-in-lieu of foreclosure. Also includes held for use properties, which are reported in our condensed 

consolidated balance sheets as a component of “Other assets.” 

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

taxes and insurance receivable. Effective January 1, 2015, we charged off accrued interest receivable associated with loans on 

nonaccrual status and eliminated the related allowance in connection with our change in accounting policy related to the treatment of 

interest previously accrued, but not collected, at the date that loans are placed on nonaccrual status. See “Note 1, Summary of 

Significant Accounting Policies” for more information on this policy change. 

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

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

losses resulting from credit-impaired loans acquired from MBS trusts. As discussed in “Outlook” and in “Consolidated Results of 

Operations—Credit Loss Performance Metrics,” our credit losses in the first quarter of 2015 included charge-offs of (1) $1.8 billion in 

loans held for investment and $724 million in preforeclosure property taxes and insurance receivable that we recognized on January 1, 

2015 upon our adoption of FHFA’s Advisory Bulletin AB 2012-02, “Framework for Adversely Classifying Loans, Other Real Estate 

Owned, and Other Assets and Listing Assets for Special Mention” (the “Advisory Bulletin”) and (2) $1.1 billion in accrued interest 

receivable that we recognized on January 1, 2015 upon our adoption of a change in accounting policy related to loans placed on 

nonaccrual.

(7) 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 sellers or servicers, divided by the aggregate unpaid principal balance of the related loans at 

the time of foreclosure. Net sales price represents the contract sales price less selling costs for the property and other charges paid by 

the seller at closing.

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

the aggregate unpaid principal balance of the related loans. Net sales price represents the contract sales price less the selling costs for 
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the property and other charges paid by the seller at the closing, including borrower relocation incentive payments and subordinate lien

(s) negotiated payoffs.

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

that are classified as troubled debt restructurings (“TDRs”), or repayment plans or forbearances that have been initiated but not 

completed and (b) repayment plans and forbearances completed. See “Table 29: 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.

(10) Calculated based on annualized problem loan workouts during the period as a percentage of the average balance of delinquent loans in 

our single-family guaranty book of business. 

Beginning in 2008, we took actions to significantly strengthen our underwriting and eligibility standards and change our 

pricing to promote sustainable homeownership and stability in the housing market. These actions have improved the credit 

quality of our book of business and contributed to improvement in our credit performance. For information on the credit risk 

profile of our single-family guaranty book of business, see “Risk Management—Credit Risk Management—Single-Family 

Mortgage Credit Risk Management,” including “Table 26: Risk Characteristics of Single-Family Conventional Business 

Volume and Guaranty Book of Business.” For a discussion of revisions we made to our eligibility criteria in 2014 to address a 

targeted segment of creditworthy borrowers while imposing eligibility requirements that we expect will limit the effect of 

their loans on our overall credit risk, see “Providing Targeted Access to Credit Opportunities for Creditworthy Borrowers.” 

We continue to experience disproportionately higher credit losses and serious delinquency rates from single-family loans 

originated in 2005 through 2008 than from loans originated in other years. Single-family loans originated in 2005 through 

2008 constituted 12% of our single-family book of business as of March 31, 2015 but constituted 59% of our seriously 

delinquent loans as of March 31, 2015 and drove 67% of our credit losses in the first quarter of 2015. For information on the 

credit performance of our single-family book of business based on loan vintage, see “Table 15: Credit Loss Concentration 

Analysis” in our 2014 Form 10-K in “MD&A—Consolidated Results of Operations—Credit-Related Income—Credit Loss 

Performance Metrics” and “Table 28: Single-Family Conventional Seriously Delinquent Loan Concentration Analysis” in this 

report in “Risk Management—Credit Risk Management—Single-Family Mortgage Credit Risk Management.” For 

information on certain credit characteristics of our single-family book of business based on the period in which we acquired 

the loans, see “Table 23: Selected Credit Characteristics of Single-Family Conventional Guaranty Book of Business, by 

Acquisition Period” in “Risk Management—Credit Risk Management—Single-Family Mortgage Credit Risk Management.”

We provide additional information on our credit-related income in “Consolidated Results of Operations—Credit-Related 

Income” and on the credit performance of mortgage loans in our single-family book of business in “Risk Management—

Credit Risk Management—Single-Family Mortgage Credit Risk Management.”

We provide more information on our efforts to reduce our credit losses in “Risk Management—Credit Risk Management—

Single-Family Mortgage Credit Risk Management” and “Risk Management—Credit Risk Management—Institutional 

Counterparty Credit Risk Management” in both this report and our 2014 Form 10-K. See also “Risk Factors” in our 2014

Form 10-K, where we describe factors that may adversely affect the success of our efforts, including our reliance on third 

parties to service our loans, conditions in the foreclosure environment, and risks relating to our mortgage insurer 

counterparties.

Recently Acquired Single-Family Loans

Table 2 below displays information regarding our average charged guaranty fee on and select risk characteristics of the 

single-family loans we acquired in each of the last five quarters. Table 2 also displays the volume of our single-family Fannie 

Mae MBS issuances for these periods, which is indicative of the volume of single-family loans we acquired in these periods.
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Table 2: Single-Family Acquisitions Statistics

2015 2014

Q1 Q4 Q3 Q2 Q1

(Dollars in millions)

Single-family average charged guaranty fee on new 

acquisitions (in basis points)(1)(2). . . . . . . . . . . . . . . . . . 61.2 62.5 63.5 62.6 63.0

Single-family Fannie Mae MBS issuances . . . . . . . . . . . $110,994 $109,045 $105,563 $ 84,096 $ 76,972

Select risk characteristics of single-family conventional 

acquisitions:(3)

Weighted average FICO® credit score at origination. . . 748 745 744 744 741

FICO credit score at origination less than 660. . . . . . . . 5 % 6 % 7 % 7 % 8 %

Weighted average original LTV ratio(4)

. . . . . . . . . . . . . 74 % 76 % 77 % 77 % 77 %

Original LTV ratio over 80%(4)(5)

. . . . . . . . . . . . . . . . . . 26 % 30 % 32 % 32 % 31 %

Original LTV ratio over 95%(4)(6)

. . . . . . . . . . . . . . . . . . 2 % 2 % 3 % 4 % 7 %

Loan purpose:

Purchase. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37 % 50 % 57 % 54 % 45 %

Refinance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63 % 50 % 43 % 46 % 55 %

__________

(1) Includes the impact of a 10 basis point guaranty fee increase implemented pursuant to the Temporary Payroll Tax Cut Continuation Act 

of 2011 (the “TCCA”), the incremental revenue from which must be remitted to Treasury. The resulting revenue is included in guaranty 

fee income and the expense is recognized as “TCCA fees.” 

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

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

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

(5) We purchase loans with original LTV ratios above 80% as part of our mission to serve the primary mortgage market and provide 

liquidity to the housing finance 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%.

(6) Approximately 58% of the greater than 95% LTV ratio loans we acquired in the first quarter of 2015 were acquired pursuant to HARP. 

See “Risk Management—Credit Risk Management—Single-Family Mortgage Credit Risk Management” for information on HARP

loans. 

The decrease in our average charged guaranty fee on newly-acquired single-family loans in the first quarter of 2015 as 

compared with the first quarter of 2014 was driven primarily by a decrease in loan level price adjustments charged on our 

acquisitions in the first quarter of 2015, as these acquisitions included a lower proportion of loans with higher LTV ratios and 

a lower proportion of loans with lower FICO credit scores than our acquisitions in the first quarter of 2014. Loan level price 

adjustments refer to one-time cash fees that we charge at the time we acquire a loan based on the credit characteristics of the 

loan. See “Legislative and Regulatory Developments—Changes to Our Single-Family Guaranty Fee Pricing” for information 

on changes to our guaranty fee pricing.

The decrease in our acquisitions of loans with higher LTV ratios in the first quarter of 2015 as compared with the first quarter 

of 2014 was primarily due to an increase in the percentage of our acquisitions consisting of refinance loans, given the 

decrease in mortgage rates, and a corresponding decrease in the percentage of our acquisitions consisting of home purchase 

loans. Home purchase loans typically have higher LTV ratios than non-HARP refinance loans. In addition, an increase in 

refinance volume as a result of decreased mortgage rates resulted in an increase in borrowers with higher FICO credit scores 

in the first quarter of 2015 compared with the first quarter of 2014. The single-family loans we acquired in the first quarter of 

2015 continued to have a strong credit profile, with a weighted average original LTV ratio of 74% and a weighted average 

FICO credit score of 748. For more information on the credit risk profile of our single-family conventional loan acquisitions 

in the first quarter of 2015, see “Risk Management—Credit Risk Management—Single-Family Mortgage Credit Risk 

Management,” including “Table 26: Risk Characteristics of Single-Family Conventional Business Volume and Guaranty 

Book of Business” in that section.
8

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 guaranty fee pricing and any impact of that pricing on 

the volume and mix of loans we acquire; our future eligibility standards and those of mortgage insurers, the Federal Housing 

Administration (“FHA”) and the Department of Veterans Affairs (“VA”), the percentage of loan originations representing 

refinancings, changes in interest rates, our future objectives and activities in support of those objectives, including actions we 

may take to reach additional underserved creditworthy borrowers, government policy, market and competitive conditions, and 

the volume and characteristics of HARP loans we acquire in the future. In addition, if our lender customers retain more of the 

higher-quality loans they originate, it could negatively affect the credit risk profile of our new single-family acquisitions. 

Providing Targeted Access to Credit Opportunities for Creditworthy Borrowers 

Pursuant to FHFA’s 2014 and 2015 conservatorship scorecards and our statutory mission, we are continuing to work to 

increase access to mortgage credit for creditworthy borrowers, consistent with the full extent of our applicable credit 

requirements and risk management practices. As part of this effort, we are encouraging lenders to originate loans across the 

full range of credit eligibility for those borrowers meeting our credit requirements. Some actions we are taking in this regard 

include: providing additional clarity regarding seller and servicer representations and warranties and remedies for poor 

servicing performance; making new quality control tools available to lenders; conducting increased outreach to lenders and 

other industry stakeholders to increase awareness of our available products and programs and to identify potential 

opportunities to enhance our products and programs to serve this important creditworthy segment; and conducting consumer 

research to provide industry partners with information to support their efforts to reach underserved market segments. 

As part of meeting this scorecard objective, in 2014 we worked with FHFA to revise our eligibility criteria to address a 

targeted segment of creditworthy borrowers—those who can afford a mortgage but who lack resources for a substantial down 

payment—in a responsible manner by taking into account factors that would compensate for the high LTV ratios of their 

loans. Specifically, we changed our eligibility requirements to increase our maximum LTV ratio from 95% to 97% for loans 

meeting certain criteria. Although higher LTV ratio loans typically present a higher credit risk than lower LTV ratio loans, we 

expect our acquisition of these loans under our revised eligibility criteria will not materially affect our overall credit risk 

because we expect that (1) these loans will constitute a small portion of our acquisitions overall and (2) our eligibility 

requirements for these loans will limit their effect on our overall credit risk. In addition, we have experience managing the 

credit risk associated with loans with LTV ratios in this range. In the first quarter of 2015, under our newly revised eligibility 

criteria, we acquired approximately 2,100 single-family loans with 95.01% to 97% LTV ratios from 370 lenders. These loans 

represented less than 1% of the single-family loans we acquired in the first quarter of 2015. While we expect the volume of 

loans we acquire under these criteria to increase, we expect they will continue to constitute only a small portion of our 

acquisitions overall. Our eligibility requirements for these loans include compensating factors and risk mitigants, which 

reduce the incidence of loans with multiple higher-risk characteristics, or “risk layering.” For purchase transactions, at least 

one borrower on the loan must be a first-time home buyer and occupy the property as his or her principal residence. In some 

cases, we also require the borrower to receive housing counseling before obtaining the loan. Eligibility for refinance 

transactions is limited to existing Fannie Mae loans to provide support for borrowers who may not otherwise be eligible for 

our Refi PlusTM initiative. For both purchase and refinance loans, the loans must have fixed-rate terms and must be 

underwritten through Desktop Underwriter®, our proprietary automated underwriting system. Desktop Underwriter provides 

a comprehensive credit risk assessment on loan applications submitted through the system, assessing risk layers and 

compensating factors, and denying loan applications that do not meet our eligibility requirements. We require mortgage 

insurance or other appropriate credit enhancement for all non-HARP loans with LTV ratios greater than 80%.

To the extent we are able to encourage lenders to increase access to mortgage credit, we may acquire a greater number of 

single-family loans with higher risk characteristics than we acquired in recent periods; however, we expect our single-family 

acquisitions will continue to have a strong overall credit risk profile given our current underwriting and eligibility standards 

and product design. We actively monitor on an ongoing basis the credit risk profile and credit performance of our singlefamily loan acquisitions, in conjunction with housing market and economic conditions, to determine if our pricing, eligibility 

and underwriting criteria accurately reflect the risk associated with loans we acquire or guarantee.

Contributions to the Housing and Mortgage Markets 

Liquidity and Support Activities

As the largest provider of residential mortgage credit in the United States, we indirectly enable families to buy, refinance or 

rent homes. During the first quarter of 2015, we continued to provide critical liquidity and support to the U.S. mortgage 

market in a number of important ways:
9

• 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. We provided approximately $124 billion in liquidity to the mortgage market 

in the first quarter of 2015 through our purchases of loans and guarantees of loans and securities. This liquidity 

enabled borrowers to complete approximately 320,000 mortgage refinancings and approximately 190,000 home 

purchases, and provided financing for approximately 134,000 units of multifamily housing. 

• Our role in the market enables qualified borrowers to have reliable access to affordable mortgage credit, including a 

variety of conforming mortgage products such as the prepayable 30-year fixed-rate mortgage that protects 

homeowners from fluctuations in interest rates.

• We provided approximately 34,000 loan workouts in the first quarter of 2015 to help homeowners stay in their 

homes or otherwise avoid foreclosure. Our loan workout efforts have helped to stabilize neighborhoods, home prices 

and the housing market. 

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

flexibility to eligible borrowers who are current on their loans, whose loans are owned or guaranteed by us and who 

meet certain additional criteria. We acquired approximately 54,000 Refi Plus loans in the first quarter of 2015. 

Refinancings delivered to us through Refi Plus in the first quarter of 2015 reduced borrowers’ monthly mortgage 

payments by an average of $177. 

• We support affordability in the multifamily rental market. Over 80% of the multifamily units we financed in the first

quarter of 2015 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 our 2014 Form 10-K in “Business—Business 

Segments—Capital Markets.”

2015 Market Share 

We remained the largest single issuer of mortgage-related securities in the secondary market during the first quarter of 2015, 

with an estimated market share of new single-family mortgage-related securities issuances of 40%, unchanged from the 

fourth quarter of 2014 and down slightly from 41% in the first quarter of 2014. 

We remained a continuous source of liquidity in the multifamily market in the first quarter of 2015. We owned or guaranteed 

approximately 19% of the outstanding debt on multifamily properties as of December 31, 2014 (the latest date for which 

information is available).

Serving Customer Needs and Improving Our Business Efficiency

We are undertaking various initiatives to better serve our customers’ needs and improve our business efficiency. We are 

committed to providing our lender partners with the products, services and tools they need to serve the market efficiently and 

profitably. To further this commitment, we are focused on revising and clarifying our representation and warranty framework 

to reduce lenders’ repurchase risk, and making our customers’ interactions with us simpler and more efficient. 

As part of these initiatives, in January 2015, we made Collateral UnderwriterTM freely available to lenders, giving them 

access to the same appraisal review tool we use so that they can address potential appraisal issues prior to delivering a loan to 

us. In April 2015, we announced that Collateral Underwriter had been integrated with Desktop Underwriter, which we believe 

will enhance our lenders’ risk management and underwriting capabilities. See “Risk Management—Credit Risk Management

—Single-Family Mortgage Credit Risk Management—Single-Family Acquisition and Servicing Policies and Underwriting 

and Servicing Standards” for more information on Desktop Underwriter.

See “Business—Executive Summary—Serving Customer Needs and Improving Our Business Efficiency” in our 2014 Form 

10-K for a discussion of other actions we have taken and are taking to better serve our customer needs and improve our 

business efficiency.

Helping to Build a Sustainable Housing Finance System

We continue to invest significant resources towards helping to build a safer and sustainable housing finance system, primarily 

through pursuing the strategic goals identified by our conservator. FHFA’s current strategic goals are to:

• Maintain, in a safe and sound manner, credit availability and foreclosure prevention activities for new and 

refinanced mortgages to foster liquid, efficient, competitive and resilient national housing finance markets.

• Reduce taxpayer risk through increasing the role of private capital in the mortgage market.
10

• Build a new single-family securitization infrastructure for use by Fannie Mae and Freddie Mac and adaptable for 

use by other participants in the secondary market in the future.

In January 2015, FHFA released annual corporate performance objectives for Fannie Mae and Freddie Mac, referred to as the 

2015 conservatorship scorecard, which details specific priorities for implementing FHFA’s strategic goals, including 

objectives designed to further the goal of reforming the housing finance system. We describe below some of the actions we 

have taken in 2015 pursuant to the mandates of the scorecard in order to build the policies and infrastructure for a sustainable 

housing finance system. 

Credit Risk Transfer Transactions: Connecticut Avenue SecuritiesTM. FHFA’s 2015 conservatorship scorecard includes an 

objective relating to credit risk transfer transactions. The goal of these transactions is, to the extent economically sensible, to 

transfer a limited portion of the existing credit risk on a portion of our single-family guaranty book of business in order to 

reduce the risk to taxpayers of future borrower defaults. Our primary method of achieving this objective has been through the 

issuance of our Connecticut Avenue SecuritiesTM (“CAS”), which transfer some of the credit risk associated with losses on 

the underlying mortgage loans to investors in these securities. During the first quarter of 2015, we issued $1.5 billion in CAS, 

transferring some of the credit risk on single-family mortgages with an unpaid principal balance of $50.2 billion. See “Risk 

Management—Credit Risk Management—Single-Family Mortgage Credit Risk Management—Risk Sharing Transactions” 

for more information on CAS. 

Nonperforming Loan Sales. Another objective included in FHFA’s 2015 conservatorship scorecard relates to implementing 

key loss mitigation activities, including those that enable borrowers to stay in their homes and avoid foreclosure where 

possible. These activities include developing and executing strategies to reduce the number of severely aged delinquent loans 

we hold, considering tools such as nonperforming loan (“NPL”) sales. The strategies should help improve outcomes in 

hardest hit markets. On March 2, 2015, FHFA announced enhanced requirements for NPL sales by Fannie Mae and Freddie 

Mac. In the announcement, the Director of FHFA indicated FHFA’s expectation that, with these enhanced requirements, NPL

sales will result in favorable outcomes for borrowers and local communities. We plan to build NPL sales into a programmatic 

offering. In April 2015, we began marketing our first bulk NPL sale. 

Mortgage Insurance. FHFA’s 2015 conservatorship scorecard also includes an objective relating to implementing final 

mortgage insurer eligibility requirements. These reforms are intended to strengthen our mortgage insurer counterparties and 

reduce the risk to taxpayers of future defaults by mortgage insurers on their obligations to the GSEs. On April 17, 2015, we 

announced and published updated eligibility standards for approved private mortgage insurers. The new standards include 

enhanced financial requirements and are designed to ensure that mortgage insurers have sufficient liquid assets to pay all 

claims under a hypothetical future stress scenario. The new standards also set forth enhanced operational performance 

expectations and define remedial actions that may be imposed should an approved mortgage insurer fail to comply with the 

revised requirements. See “Risk Management—Credit Risk Management—Institutional Counterparty Credit Risk 

Management” for additional information on these new standards.

Single Security. FHFA’s 2014 and 2015 conservatorship scorecards include objectives relating to the development of a single 

mortgage-backed security for Fannie Mae and Freddie Mac. FHFA believes a single security would increase liquidity in the 

housing finance market. The development of the single security is expected to be a multi-year initiative. In the first quarter of 

2015, we worked on a variety of issues relating to the implementation of the single security, including accounting matters, 

communication planning, risk assessments, legal and contractual issues, trust matters, disclosures, and system development 

and testing work with the common securitization platform. See “Housing Finance Reform—Conservator Developments” in 

our 2014 Form 10-K for information on FHFA’s single security proposal and the common securitization platform and “Risk 

Factors” in our 2014 Form 10-K for a discussion of the risks to our business associated with a single security for Fannie Mae 

and Freddie Mac.

For more information on FHFA’s 2015 conservatorship scorecard objectives, see our Current Report on Form 8-K filed with 

the Securities and Exchange Commission (“SEC”) on January 20, 2015. For more information on our initiatives in pursuit of 

these objectives, see “Business—Executive Summary—Helping to Build a Sustainable Housing Finance System” in our 2014 

Form 10-K.

Treasury Draws and Dividend Payments

From 2009 through the first quarter of 2012, we received a total of $116.1 billion from Treasury under the senior preferred 

stock purchase agreement. This funding 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 

Federal Housing Finance Regulatory Reform Act of 2008 (the “2008 Reform Act”). In addition, a portion of the $116.1 

billion we received from Treasury was drawn to pay dividends to Treasury because, prior to 2013, our dividend payments on 

the senior preferred stock accrued at an annual rate of 10%, and we were directed by our conservator to pay these dividends 
11

to Treasury each quarter even when we did not have sufficient income to pay the dividend. We have not received funds from 

Treasury under the agreement since the first quarter of 2012. As of the date of this filing, the maximum amount of remaining 

funding under the agreement is $117.6 billion. From 2008 through the first quarter of 2015, we paid a total of $136.4 billion

in dividends to Treasury on the senior preferred stock. Under the terms of the senior preferred stock purchase agreement, 

dividend payments do not offset prior Treasury draws, and we are not permitted to pay down draws we have made under the 

agreement except in limited circumstances. Accordingly, the current aggregate liquidation preference of the senior preferred 

stock is $117.1 billion, due to the initial $1.0 billion liquidation preference of the senior preferred stock (for which we did not 

receive cash proceeds) and the $116.1 billion we have drawn from Treasury. 

The Director of FHFA directs us to make dividend payments on the senior preferred stock on a quarterly basis. We expect to 

pay Treasury an additional senior preferred stock dividend of $1.8 billion by June 30, 2015 for the second quarter of 2015.

Housing and Mortgage Market and Economic Conditions 

Economic growth slowed in the first quarter of 2015 compared with the fourth quarter of 2014. According to the U.S. Bureau 

of Economic Analysis advance estimate, the inflation-adjusted U.S. gross domestic product, or GDP, rose by 0.2% on an 

annualized basis in the first quarter of 2015, compared with an increase of 2.2% in the fourth quarter of 2014. The overall 

economy gained an estimated 591,000 non-farm jobs in the first quarter of 2015. According to the U.S. Bureau of Labor 

Statistics, over the 12 months ending in March 2015, the economy created an estimated 3.1 million non-farm jobs. The 

unemployment rate was 5.5% in March 2015, compared with 5.6% in December 2014. 

According to the Federal Reserve, total U.S. residential mortgage debt outstanding, which includes $9.9 trillion of singlefamily debt outstanding, was estimated to be approximately $10.9 trillion as of December 31, 2014 (the latest date for which 

information is available), compared with $10.8 trillion as of September 30, 2014. 

Housing sales were mixed, with existing home sales declining and new home sales rising, during the first quarter of 2015 as 

compared with the fourth quarter of 2014. Total existing home sales averaged 5.0 million units annualized in the first quarter 

of 2015, a 1.8% decrease from the fourth quarter of 2014, according to data from the National Association of REALTORS®. 

Sales of foreclosed homes and preforeclosure, or “short,” sales (together, “distressed sales”) accounted for 10% of existing 

home sales in March 2015, compared with 11% in December 2014 and 14% in March 2014. According to the U.S. Census 

Bureau, new single-family home sales increased during the first quarter of 2015, averaging an annualized rate of 513,000

units, a 8.8% increase from the fourth quarter of 2014. 

The number of months’ supply, or the inventory/sales ratio, of available existing homes and of new homes increased in the 

first quarter of 2015. According to the U.S. Census Bureau, the months’ supply of new single-family unsold homes was 5.3

months as of March 31, 2015, compared with 5.1 months as of December 31, 2014. According to the National Association of 

REALTORS®, the months’ supply of existing single-family unsold homes was 4.6 months as of March 31, 2015, compared 

with a 4.4 months’ supply as of December 31, 2014. 

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

remained above long-term averages at 4.2% as of March 31, 2015, according to the Mortgage Bankers Association National 

Delinquency Survey, compared with 4.5% as of December 31, 2014. We provide information about Fannie Mae’s serious 

delinquency rate, which also decreased in the first quarter of 2015, in “Single-Family Guaranty Book of Business—Credit 

Performance.” 

Based on our home price index, we estimate that home prices on a national basis increased by 0.4% in the first quarter of 

2015, following increases of 4.6% in 2014 and 8.0% in 2013. Despite the recent increases in home prices, we estimate that, 

through March 31, 2015, home prices on a national basis remained 9.9% below their peak in the third quarter of 2006. Our 

home price estimates are based on preliminary data and are subject to change as additional data become available. 

Many homeowners continue to have “negative equity” in their homes as a result of declines in home prices since 2006, which 

means their mortgage principal 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 2014 rose slightly, reflecting the typical weakness in home values during the final quarter of the year, increasing to 

approximately 5.4 million from 5.2 million in the third quarter of 2014, but still below the 6.6 million residential properties 

with mortgages in a negative equity position in the fourth quarter of 2013. The percentage of properties with mortgages in a 

negative equity position in the fourth quarter of 2014 was 10.8%, up from 10.4% in the third quarter of 2014 but down from 

13.4% in the fourth quarter of 2013.

Thirty-year fixed-rate mortgage rates ended the quarter at 3.69% for the week of April 2, 2015, down from 3.87% for the 

week of December 31, 2014, according to the Freddie Mac Primary Mortgage Market Survey®.
12

During the first quarter of 2015, the multifamily sector continued to exhibit stable fundamentals, according to preliminary 

third-party data, with flat vacancy levels and positive rent growth. The national multifamily vacancy rate for institutional 

investment-type apartment properties was an estimated 5.0% as of March 31, 2015, the same rate as of both December 31, 

2014 and March 31, 2014. 

National asking rents increased by an estimated 0.5% during both the first quarter of 2015 and the fourth quarter of 2014. 

Continued demand for multifamily rental units was reflected in the estimated positive net absorption (that is, the net change 

in the number of occupied rental units during the time period) of approximately 37,000 units during the first quarter of 2015, 

according to preliminary data from Reis, Inc., compared with approximately 41,000 units during the fourth quarter of 2014.

As a result of the continued demand for multifamily rental units over the past few years, there has been an increase in the 

amount of new multifamily construction development nationally. Approximately 340,000 new multifamily units are expected 

to be completed this year. The bulk of this new supply is concentrated in a limited number of metropolitan areas. We believe 

this increase in supply will result in a temporary slowdown in net absorption rates, occupancy levels and effective rents in 

those areas throughout 2015. In addition, because estimated multifamily rent growth has outpaced wage growth over the past 

few years, ongoing multifamily rental housing affordability remains a concern. Nevertheless, we expect overall national 

rental market supply and demand to remain in balance over the longer term, based on expected construction completions, 

expected obsolescence, positive rental household formation trends and expected increases in the population of 20- to 34-year 

olds, which is the primary age group that tends to rent multifamily housing.

Outlook

Uncertainty Regarding our Future Status. We expect continued significant uncertainty regarding the future of our company 

and the housing finance system, 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, what ownership interest, if any, our current common and preferred stockholders will 

hold in us after the conservatorship is terminated and whether we will continue to exist following conservatorship.

We cannot predict the prospects for the enactment, timing or final content of housing finance reform legislation. See 

“Business—Housing Finance Reform” in our 2014 Form 10-K, for a discussion of proposals for reform of the housing 

finance system, including the GSEs, that could materially affect our business, including proposals to wind down Fannie Mae 

and Freddie Mac. See “Risk Factors” in both this report and in our 2014 Form 10-K for a discussion of the risks to our 

business relating to the uncertain future of our company.

Financial Results. Our financial results continued to be strong in the first quarter of 2015, with net income of $1.9 billion. We 

expect to remain profitable on an annual basis for the foreseeable future; however, we expect our earnings in 2015 and future 

years will be substantially lower than our earnings for 2014, primarily due to our expectation of substantially lower income 

from resolution agreements, continued declines in net interest income from our retained mortgage portfolio assets and lower 

credit-related income. In addition, certain factors, such as changes in interest rates or home prices, could result in significant 

volatility in our financial results from quarter to quarter or year to year. Our future financial results also will be affected by a 

number of other factors, including: our guaranty fee rates; the volume of single-family mortgage originations in the future; 

the size, composition and quality of our retained mortgage portfolio and guaranty book of business; and economic and 

housing market conditions. Our expectations for our future financial results do not take into account the impact on our 

business of potential future legislative or regulatory changes, which could have a material impact on our financial results, 

particularly the enactment of housing finance reform legislation as noted in “Uncertainty Regarding our Future Status” 

above.

Under the terms of the senior preferred stock, our capital reserve will decline by $600 million each year until it reaches zero 

in 2018. Although we expect to remain profitable on an annual basis for the foreseeable future, due to our declining capital 

reserve, our expectation of substantially lower earnings in future years than our earnings for 2014, and the potential for 

significant volatility in our financial results, we could experience a net worth deficit in a future quarter, particularly as our 

capital reserve approaches zero. If that were to occur, we would be required to draw additional funds from Treasury under the 

senior preferred stock purchase agreement in order to avoid being placed into receivership. See “Risk Factors” in our 2014

Form 10-K for a discussion of the risks associated with our declining capital reserves.

Revenues. We currently have two primary sources of revenues: (1) the guaranty fees we receive for managing the credit risk 

on loans underlying Fannie Mae MBS held by third parties; and (2) the difference between interest income earned on the 

assets in our retained mortgage portfolio and the interest expense associated with the debt that funds those assets. Our 

“retained mortgage portfolio” refers to the mortgage-related assets we own (which excludes the portion of assets held by 

consolidated MBS trusts that back mortgage-related securities owned by third parties). In recent years, an increasing portion 

of our net interest income has been derived from guaranty fees rather than from our retained mortgage portfolio assets, due to 

the impact of guaranty fee increases and the shrinking of our retained mortgage portfolio. We estimate that a majority of our 
13

net interest income in the first quarter of 2015 was derived from guaranty fees on loans underlying our Fannie Mae MBS. We 

expect that guaranty fees will continue to account for an increasing portion of our net interest income.

We expect continued decreases in the size of our retained mortgage portfolio, which will continue to negatively impact our 

net interest income and net revenues; however, we also expect increases in our guaranty fee revenues will partially offset the 

negative impact of the decline in our retained mortgage portfolio. We expect our guaranty fee revenues to increase over the 

next several years, as loans with lower guaranty fees liquidate from our book of business and are replaced with new loans 

with higher guaranty fees. The extent to which the positive impact of increased guaranty fee revenues will offset the negative 

impact of the decline in the size of our retained mortgage portfolio will depend on many factors, including: changes to 

guaranty fee pricing we may make in the future and their impact on our competitive environment and guaranty fee revenues; 

the size, composition and quality of our guaranty book of business; the life of the loans in our guaranty book of business; the 

size, composition and quality of our retained mortgage portfolio, including the pace at which we are required by our 

conservator to reduce the size of our portfolio and the types of assets we are required to sell; economic and housing market 

conditions, including changes in interest rates; our market share; and legislative and regulatory changes.

Dividend Obligations to Treasury. We expect to retain only a limited amount of any future net worth because we are required 

by the dividend provisions of the senior preferred stock and quarterly directives from our conservator to 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 $1.8 billion for each quarter of 2015 and continues to 

decrease by $600 million annually until it reaches zero in 2018. 

As described in “Legal Proceedings” and “Note 16, Commitments and Contingencies,” several lawsuits have been filed by 

preferred and common stockholders of Fannie Mae and Freddie Mac against the United States, Treasury and/or FHFA

challenging actions taken by the defendants relating to the senior preferred stock purchase agreements and the 

conservatorships of Fannie Mae and Freddie Mac, including challenges to the net worth sweep dividend provisions of the 

senior preferred stock. We cannot predict the course or the outcome of these lawsuits, or the actions the U.S. government 

(including Treasury or FHFA) may take in response to any ruling or finding in any of these lawsuits.

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

their downward trend, but at a slower pace than in recent years. We expect that single-family serious delinquency and 

severity rates will remain high compared with pre-housing crisis levels because it will take some time for the remaining 

delinquent loans with high mark-to-market LTV ratios originated prior to 2009 to work their way through the foreclosure 

process. Despite steady demand and stable fundamentals at the national level, the multifamily sector may continue to exhibit 

below average fundamentals in certain local markets and with certain properties. 

We forecast that total originations in the U.S. single-family mortgage market in 2015 will increase from 2014 levels by 

approximately 14%, from an estimated $1.2 trillion in 2014 to $1.4 trillion in 2015, and that the amount of originations in the 

U.S. single-family mortgage market that are refinancings will increase from an estimated $507 billion in 2014 to $609 billion

in 2015. 

Home Prices. Based on our home price index, we estimate that home prices on a national basis increased by 0.4% in the first

quarter of 2015. We expect the rate of home price appreciation in 2015 to be similar to the rate in 2014. 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 recent and future changes in mortgage rates; actions the federal 

government has taken and may take with respect to fiscal policies, mortgage finance programs and policies, and housing 

finance reform; the Federal Reserve’s purchases and sales of mortgage-backed securities; 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 and political conditions. 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. For the vast majority of our single-family loans, we charge off a loan at the time of foreclosure or other liquidation 

event (such as when we accept a short sale or deed-in-lieu of foreclosure). However, under our approach to adopting on 

January 1, 2015 the charge-off provisions of FHFA’s Advisory Bulletin AB 2012-02, “Framework for Adversely Classifying 

Loans, Other Real Estate Owned, and Other Assets and Listing Assets for Special Mention” (the “Advisory Bulletin”), we 

began to charge off a portion of a relatively small subset of delinquent loans (as well as preforeclosure property taxes and 

insurance receivable that pertain to the loans) that are deemed uncollectible prior to foreclosure. The charge-off portion is 

classified as a “loss” pursuant to the Advisory Bulletin. Our credit losses in the first quarter of 2015 were impacted by 

implementation of these provisions, as well as by our implementation, effective January 1, 2015, of a change in our 

accounting policy for the treatment of interest previously accrued, but not collected, at the date that loans are placed on 
14

nonaccrual status. Upon adopting this accounting policy change, we charged off the accrued interest receivable balance on 

our nonaccrual loans. Our credit losses were $5.4 billion in the first quarter of 2015, compared with $1.6 billion in the fourth 

quarter of 2014 and $1.1 billion in the first quarter of 2014. Our credit losses in the first quarter of 2015 included (1) $1.8 

billion in charge-offs of loans held for investment and $724 million in charge-offs of preforeclosure property taxes and 

insurance receivable that we recognized on January 1, 2015 under our approach to adopting the charge-off provisions of the 

Advisory Bulletin and (2) $1.1 billion in charge-offs we recognized on January 1, 2015 upon our implementation of the 

change in our accounting policy for nonaccrual loans. Because the increase in our charge-off amounts in the first quarter of 

2015 compared with the first quarter of 2014 was driven primarily by our initial adoption of the Advisory Bulletin’s chargeoff provisions and our initial implementation of our accounting policy change, we expect our credit losses to resume their 

downward trend in future quarters. See “Business—Our Charter and Regulation of Our Activities—FHFAAdvisory Bulletin 

Regarding Framework for Adversely Classifying Loans” in our 2014 Form 10-K for further information about this Advisory 

Bulletin. See “Note 1, Summary of Significant Accounting Policies” for information about our change in accounting principle 

for nonaccrual loans.

Loss Reserves. Our total loss reserves consist of (1) our allowance for loan losses, (2) our allowance for preforeclosure 

property taxes and insurance receivable and (3) our reserve for guaranty losses. Prior to our implementation on January 1, 

2015 of the change in our accounting policy for nonaccrual loans, our total loss reserves also included an allowance for 

accrued interest receivable. Our total loss reserves were $32.9 billion as of March 31, 2015, down from $38.2 billion as of 

December 31, 2014. The decrease in our total loss reserves during the first quarter of 2015 was significantly impacted by our 

approach to adopting the charge-off provisions of the Advisory Bulletin and our implementation of the change in our 

accounting policy for nonaccrual loans. The charge-offs of held-for-investment loans, preforeclosure property taxes and 

insurance receivable and accrued interest receivable described above in “Credit Losses” reduced our allowance for loan 

losses, our allowance for preforeclosure property taxes and insurance receivable and our allowance for accrued interest 

receivable. We expect our approach to adopting the Advisory Bulletin’s charge-off provisions and our charge-offs resulting 

from implementing our change in accounting policy for nonaccrual loans will decrease the amount of future charge-offs on 

these same loans from what they otherwise would have been.

Although our loss reserves have declined substantially from their peak and are expected to decline further, we expect our loss 

reserves will remain elevated relative to the levels experienced prior to the 2008 housing crisis 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. 

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 regarding our future performance, including estimates and 

expectations regarding our future financial results and profitability, the level and sources of our future revenues and net 

interest income, our future dividend payments to Treasury, the level and credit characteristics of, and the credit risk posed by, 

our future acquisitions, our future credit losses and our future loss reserves. We also present a number of estimates and 

expectations in this executive summary regarding future housing market conditions, including expectations regarding future 

single-family loan delinquency and severity rates, future mortgage originations, future refinancings, future home prices and 

future conditions in the multifamily market. These estimates and expectations are forward-looking statements based on our 

current assumptions regarding numerous factors. Our future estimates of our performance and housing market conditions, as 

well as the actual results, 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 and the impact of that pricing on our guaranty 

fee revenues and competitive environment; our future serious delinquency rates; our future objectives and activities in 

support of those objectives, including actions we may take to reach additional underserved creditworthy borrowers; future 

legislative or regulatory requirements or changes that have a significant impact on our business, such as a requirement that 

we implement a principal forgiveness program or the enactment of housing finance reform legislation; actions we may be 

required to take by FHFA, as our conservator or as our regulator, such as changes in the type of business we do or 

implementation of a single GSE security; future updates to our models relating to our loss reserves, including the 

assumptions used by these models; future changes to our accounting policies; significant changes in modification and 

foreclosure activity; the volume and pace of future NPL sales and their impact on our results and serious delinquency rates; 

changes in borrower behavior, such as an increasing number of underwater borrowers who strategically default on their 

mortgage loans; 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; resolution or settlement agreements we may 

enter into with our counterparties; changes in the fiscal and monetary policies of the Federal Reserve, including any change 

in the Federal Reserve’s policy towards the reinvestment of principal payments of mortgage-backed securities or any future 
15

sales of such securities; changes in the fair value of our assets and liabilities; changes in generally accepted accounting 

principles (“GAAP”); credit availability; global political risks; natural disasters, terrorist attacks, pandemics or other major 

disruptive events; information security breaches; and other factors, including those discussed in “Forward-Looking 

Statements,” “Risk Factors” and elsewhere in this report and in our 2014 Form 10-K. 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—Housing Finance Reform” and “Business—Our Charter and Regulation of Our Activities” in our 2014

Form 10-K. Also see “Risk Factors” in this report and in our 2014 Form 10-K for a discussion of risks relating to legislative 

and regulatory matters.

Changes to Our Single-Family Guaranty Fee Pricing 

On April 17, 2015, FHFA announced the results of its review of single-family guaranty fees that Fannie Mae and Freddie 

Mac charge lenders. FHFA determined that current fees, on average, are at an appropriate level and that it would also be 

appropriate to make some modest changes to our single-family loan level price adjustments, or LLPAs, which are one-time 

cash fees that we charge at the time we acquire a loan based on the credit characteristics of the loan. Specifically, FHFA

directed us to eliminate the 25 basis point adverse market delivery charge that has been assessed on all single-family 

mortgages purchased by us since 2008, and to attempt to replace the revenue that resulted from the adverse market delivery 

charge with targeted increases in LLPAs to address various risk-based and access-to-credit considerations. These targeted 

increases include small increases in LLPAs for loans with both lower LTV ratios and higher FICO credit scores, as well as for 

loans with certain risk attributes (that is, cash-out refinances, investment properties, loans with secondary financing, and 

jumbo conforming loans). The fee changes will become effective for whole loans we purchase on or after September 1, 2015 

and for loans we acquire in lender swap transactions for Fannie Mae MBS with issue dates on or after September 1, 2015. 

In its announcement, FHFA stated that, since all of the guaranty fee changes are small, FHFA does not expect the adjustments 

to cause any material changes to our loan volume in any of the loan categories and expects the small changes to be revenue 

neutral. It is possible that, by reducing the differentiation in our pricing for loans with differing risk characteristics, these 

changes in our LLPAs could increase or decrease our credit risk in the event of a shift in the mix of single-family loans we 

acquire. For example, pricing increases could result in some of our lender customers retaining lower credit risk loans for their 

portfolio or delivering them to our competitors instead of delivering the loans to us. For more information on the potential 

impact of changes to our single-family guaranty fee pricing on our credit risk profile, revenues and business, as well as a 

discussion of risks associated with FHFA’s ability to direct us to change our guaranty fee pricing and our dependence on 

FHFA to approve changes to our national LLPAs, see our discussion of the effect of conservatorship on our business activities 

in “Risk Factors” in our 2014 Form 10-K.

FHFA Communication on Compensation

The Board of Directors of Fannie Mae received a communication on executive compensation from FHFA Director Melvin L. 

Watt as follows:

“Fannie Mae is authorized to submit a proposal for FHFA review and consideration on executive compensation for the 

position of Fannie Mae Chief Executive Officer (CEO) to address the Board’s obligation and FHFA’s conservatorship 

and supervisory objectives of providing for CEO retention; effective succession planning for the CEO position; and 

continuity, efficiency and stability of operations during this extended period of conservatorship in which the future of the 

Enterprise is uncertain and the Enterprise is engaged in market transformative work. Any proposal submitted under this 

authorization must be consistent with meeting the above objectives; may not propose adjustment of CEO compensation 

before the third anniversary date of the current CEO (June 5, 2015); and may not propose compensation for the CEO that 

is higher than the 25th percentile of the market, using the agreed-upon comparator group for FHFA evaluation of 

compensation of Fannie Mae’s executive officers. 

A proposal must comply with applicable law, including 12 USC 4518(a) and 4518a, and must be consistent with Fannie 

Mae’s charter act, 12 USC 1723a(d)(2). In particular, compensation must be reasonable and comparable with similar 

positions at similar companies and must take into consideration Fannie Mae’s status in conservatorship and FHFA’s 

statutory power as conservator to preserve and conserve assets, 12 USC 4617(b). Recommendations must include pay for 

performance aspects and may not include a ‘bonus.’”
16

Affordable Housing Allocations 

The Federal Housing Enterprises Financial Safety and Soundness Act of 1992, as amended by the 2008 Reform Act, 

(together, the “GSE Act”) requires us and Freddie Mac to set aside each year an amount equal to 4.2 basis points for each 

dollar of the unpaid principal balance of our total new business purchases to fund HUD’s Housing Trust Fund and Treasury’s 

Capital Magnet Fund. New business purchases consist of single-family and multifamily whole mortgage loans purchased 

during the period and single-family and multifamily mortgage loans underlying Fannie Mae MBS issued during the period 

pursuant to lender swaps. These allocations were temporarily suspended by FHFA in November 2008, but in December 2014 

FHFA ended the temporary suspension effective for 2015. As a result, we are required to set aside amounts during each year 

and to allocate or otherwise transfer these amounts within 60 days after the end of the year, unless we have made a draw from 

Treasury under the terms of the senior preferred stock purchase agreement based on a net worth deficit for any quarter of the 

year, or unless such allocation or transfer would cause us to have to make a draw from Treasury, in which case we will make 

no allocation or transfer for that year and the amounts accrued for that year will be reversed. In December 2014 FHFA issued 

an interim final rule prohibiting Fannie Mae and Freddie Mac from passing through the cost of these allocations to the 

originators of mortgage loans that we purchase or securitize, and in March 2015 FHFA issued a final rule continuing this 

rule. In the first quarter of 2015, our new business purchases totaled $124.0 billion, which resulted in our recording $52 

million as an expense in our condensed consolidated statements of operations and comprehensive income. We expect to 

allocate these funds, plus additional amounts to be accrued based on our new business purchases in subsequent quarters of 

2015, in February 2016. See “Business—Our Charter and Regulation of Our Activities—The GSE Act—Affordable Housing 

Allocations” in our 2014 Form 10-K for more information regarding these allocations. 

2014 Housing Goals Performance

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

or location. Our single-family performance is measured against the lower of benchmarks established by FHFA or goalsqualifying originations in the primary mortgage market. Multifamily goals are established as a number of units to be 

financed. 

For 2014, we believe we met all of our single-family benchmarks with the exception of the very low-income families home 

purchase goal. We believe we also met both of our 2014 multifamily goals. Final performance results will be calculated and 

published by FHFA after the release in the fall of 2015 of data reported by primary market originators under the Home 

Mortgage Disclosure Act (“HMDA”). To determine whether we met our very low-income families home purchase goal, 

FHFA will compare our performance with that of the market. We will be in compliance with the single-family very lowincome families home purchase goal if we meet the market share measure. See “Business—Our Charter and Regulation of 

Our Activities—The GSE Act—Housing Goals and Duty to Serve Undeserved Markets—Housing Goals for 2012 to 2014” in 

our 2014 Form 10-K for a more detailed discussion of our housing goals.

Dodd-Frank Act—FHFA Rule Regarding Stress Testing

Pursuant to an FHFA rule issued in 2013 implementing a provision of the Dodd-Frank Act, we are required to conduct an 

annual stress test, based on our data as of September 30, using three different scenarios of financial conditions provided by 

FHFA: baseline, adverse and severely adverse. As required by the rule, we published our most recent stress test results for the 

severely adverse scenario on our Web site on April 30, 2015. 

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 2014 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 2014 

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 three of our accounting policies as critical because they 

involve significant judgments and assumptions about highly complex and inherently uncertain matters, and the use of 
17

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; and

• Deferred Tax Assets.

See “MD&A—Critical Accounting Policies and Estimates” in our 2014 Form 10-K for a discussion of these critical 

accounting policies and estimates.

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.

Table 3 displays a summary of our condensed consolidated results of operations for the periods indicated.

Table 3: Summary of Condensed Consolidated Results of Operations

For the Three Months

Ended March 31,

2015 2014 Variance

(Dollars in millions)

Net interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 5,067 $ 4,738 $ 329

Fee and other income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 308 4,355 (4,047)

Net revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,375 9,093 (3,718)

Investment gains, net. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 342 95 247

Fair value losses, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,919) (1,190) (729)

Administrative expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (723) (672) (51)

Credit-related income

Benefit for credit losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 533 774 (241)

Foreclosed property (expense) income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (473) 262 (735)

Total credit-related income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60 1,036 (976)

Other non-interest expenses(1). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (377) (453) 76

Income before federal income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,758 7,909 (5,151)

Provision for federal income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (870) (2,584) 1,714

Net income attributable to Fannie Mae . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,888 $ 5,325 $ (3,437)

Total comprehensive income attributable to Fannie Mae . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,796 $ 5,697 $ (3,901)

__________

(1) Consists of TCCA fees, debt extinguishment gains, net, and other expenses, net.

Net Interest Income

We currently have two primary sources of net interest income: (1) the guaranty fees we receive for managing the credit risk 

on loans underlying Fannie Mae MBS held by third parties, which we refer to as mortgage loans of consolidated trusts; and 

(2) the difference between interest income earned on the assets in our retained mortgage portfolio and the interest expense 

associated with the debt that funds those assets.

Table 4 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 5 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.
18

Table 4: Analysis of Net Interest Income and Yield

For the Three Months Ended March 31,

2015 2014

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 . . . . . . . . . . . . . . . . . . . . . . $ 271,127 $ 2,422 3.57 % $ 296,018 $ 2,634 3.56 %

Mortgage loans of consolidated trusts. . . . . . . . . . . . . . . . . 2,783,994 24,622 3.54 2,771,950 25,954 3.75

Total mortgage loans(1)

. . . . . . . . . . . . . . . . . . . . . . . . . . . 3,055,121 27,044 3.54 3,067,968 28,588 3.73

Mortgage-related securities. . . . . . . . . . . . . . . . . . . . . . . . . 121,734 1,426 4.69 157,595 1,819 4.62

Elimination of Fannie Mae MBS held in retained

mortgage portfolio. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (83,587) (947) 4.53 (107,798) (1,258) 4.67

Total mortgage-related securities, net. . . . . . . . . . . . . . . . 38,147 479 5.02 49,797 561 4.51

Non-mortgage securities(2)

. . . . . . . . . . . . . . . . . . . . . . . . . 43,941 12 0.11 33,626 6 0.07

Federal funds sold and securities purchased under

agreements to resell or similar arrangements . . . . . . . . . 33,409 12 0.14 33,395 5 0.06

Advances to lenders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,001 21 2.10 3,213 19 2.37

Total interest-earning assets . . . . . . . . . . . . . . . . . . . . . . . . . . . $3,174,619 $27,568 3.47 % $3,187,999 $29,179 3.66 %

Interest-bearing liabilities:

Short-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 98,043 $ 29 0.12 % $ 62,931 $ 20 0.13 %

Long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 358,182 1,957 2.19 442,368 2,345 2.12

Total short-term and long-term funding debt . . . . . . . . . . 456,225 1,986 1.74 505,299 2,365 1.87

Debt securities of consolidated trusts . . . . . . . . . . . . . . . . . 2,849,447 21,462 3.01 2,822,418 23,334 3.31

Elimination of Fannie Mae MBS held in retained

mortgage portfolio. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (83,587) (947) 4.53 (107,798) (1,258) 4.67

Total debt securities of consolidated trusts held by third

parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,765,860 20,515 2.97 2,714,620 22,076 3.25

Total interest-bearing liabilities. . . . . . . . . . . . . . . . . . . . . . . . . $3,222,085 $22,501 2.79 % $3,219,919 $24,441 3.04 %

Net interest income/net interest yield . . . . . . . . . . . . . . . . . . . . $ 5,067 0.64 % $ 4,738 0.59 %

As of March 31,

2015 2014

Selected benchmark interest rates

3-month LIBOR. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.27 % 0.23 %

2-year swap rate. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.81 0.55

5-year swap rate. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.53 1.80

10-year swap rate. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.02 2.84

30-year Fannie Mae MBS par coupon rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.65 3.44

__________

(1) Average balance includes mortgage loans on nonaccrual status. Interest income not recognized for loans on nonaccrual status was $412 

million for the first quarter of 2015 compared with $527 million for the first quarter of 2014. Effective January 1, 2015, we changed our 

policy for the treatment of interest previously accrued, but not collected, at the date loans are placed on nonaccrual status. See “Note 1, 

Summary of Significant Accounting Policies” for information on this policy change.

(2) Includes cash equivalents.
19

Table 5: Rate/Volume Analysis of Changes in Net Interest Income

For the Three Months Ended

March 31, 2015 vs. 2014

Total Variance Due to:(1)

Variance Volume Rate

(Dollars in millions)

Interest income:

Mortgage loans of Fannie Mae . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (212) $ (222) $ 10

Mortgage loans of consolidated trusts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,332) 112 (1,444)

Total mortgage loans. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,544) (110) (1,434)

Total mortgage-related securities, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (82) (145) 63

Non-mortgage securities(2)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 2 4

Federal funds sold and securities purchased under agreements to resell or similar arrangements . . . . . 7 — 7

Advances to lenders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 4 (2)

Total interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (1,611) $ (249) $ (1,362)

Interest expense:

Short-term debt. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 10 (1)

Long-term debt. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (388) (458) 70

Total short-term and long-term funding debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (379) (448) 69

Total debt securities of consolidated trusts held by third parties. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,561) 497 (2,058)

Total interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (1,940) $ 49 $ (1,989)

Net interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 329 $ (298) $ 627

__________

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

(2) Includes cash equivalents.

Net interest income and net interest yield increased in the first quarter of 2015 compared with the first quarter of 2014, 

primarily due to an increase in net amortization income as a result of an increase in prepayments on mortgage loans held by 

consolidated trusts. Higher guaranty fee income also contributed to an increase in net interest income as loans with higher 

guaranty fees have become a larger part of our guaranty book of business. We recognize almost all of our guaranty fee 

revenue in net interest income due to the consolidation of the substantial majority of loans underlying our MBS trusts on our 

balance sheet. The increase in net interest income was partially offset by a decline in the average balance of our retained 

mortgage portfolio, as we continued to reduce this portfolio pursuant to the requirements of our senior preferred stock 

purchase agreement with Treasury and FHFA’s additional portfolio cap. The average balance of our retained mortgage 

portfolio was 13% lower in the first quarter of 2015 than in the first quarter of 2014. See “Business Segment Results—The 

Capital Markets Group’s Mortgage Portfolio” for more information about our retained mortgage portfolio.

Fee and Other Income

Fee and other income includes transaction fees, technology fees, multifamily fees and other miscellaneous income. Fee and 

other income decreased in the first quarter of 2015 compared with the first quarter of 2014 due to revenue of $4.1 billion 

recognized in the first quarter of 2014 as a result of settlement agreements resolving certain lawsuits relating to PLS sold to 

us. 

Investment Gains, Net

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

losses recognized on the securitization of loans and securities from our retained mortgage portfolio and net other-thantemporary impairments recognized on our investments. Investment gains increased in the first quarter of 2015 compared with 

the first quarter of 2014 primarily due to an increase in the amount of non-agency mortgage-related securities sold in the first 

quarter of 2015 compared with the amount of such securities that were sold in the first quarter of 2014.
20

Fair Value Losses, Net

Table 6 displays the components of our fair value gains and losses. 

Table 6: Fair Value Losses, Net

For the Three Months

Ended March 31,

2015 2014

(Dollars in millions)

Risk management derivatives fair value losses attributable to:

Net contractual interest expense accruals on interest rate swaps. . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (229) $ (199)

Net change in fair value during the period. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,285) (741)

Total risk management derivatives fair value losses, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,514) (940)

Mortgage commitment derivatives fair value losses, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (239) (345)

Total derivatives fair value losses, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,753) (1,285)

Trading securities gains, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36 145

Other, net(1)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (202) (50)

Fair value losses, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $(1,919) $(1,190)

__________

(1) Consists of debt fair value gains (losses), net, which includes gains (losses) on CAS; debt foreign exchange gains (losses), net; and 

mortgage loans fair value gains (losses), net.

Risk Management Derivatives Fair Value Losses, 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 interest rate risk. Risk management derivative 

fair value losses increased in the first quarter of 2015 compared with the first quarter of 2014 primarily as a result of larger 

declines in longer-term swap rates, which caused larger decreases in the fair value of our pay-fixed derivatives.

We present, by derivative instrument type, the fair value gains and losses, net on our derivatives for the three months ended 

March 31, 2015 and 2014 in “Note 9, Derivative Instruments.”

Mortgage Commitment Derivatives Fair Value Losses, Net

We recognized fair value losses on our mortgage commitments in the first quarter of 2015 and 2014 primarily due to losses 

on commitments to sell mortgage-related securities driven by an increase in prices as interest rates decreased during the 

commitment periods.

Credit-Related Income

We refer to our benefit (expense) for loan losses and guaranty losses collectively as our “benefit for credit losses.” Creditrelated income consists of our benefit for credit losses and foreclosed property expense (income).

Benefit for Credit Losses

Table 7 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 7 represent credit losses we expect to realize in the future or 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.”
21

Table 7: Total Loss Reserves

As of

March 31,

2015

December 31,

2014

(Dollars in millions)

Allowance for loan losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $31,820 $35,541

Reserve for guaranty losses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 678 1,246

Combined loss reserves . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32,498 36,787

Other(1)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 375 1,386

Total loss reserves. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32,873 38,173

Fair value losses previously recognized on acquired credit-impaired loans(2)

. . . . . . . . . . . . . . . . 9,440 9,864

Total loss reserves and fair value losses previously recognized on acquired credit-impaired

loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $42,313 $48,037

__________

(1) Includes allowances for accrued interest receivable and preforeclosure property taxes and insurance receivable. Effective January 1, 

2015, we charged off accrued interest receivable associated with loans on nonaccrual status and eliminated the related allowance in 

connection with the our change in accounting policy related to the treatment of interest previously accrued, but not collected, at the date 

that loans are placed on nonaccrual status. See “Note 1, Summary of Significant Accounting Policies” for more information on this 

policy change. 

(2) Represents the fair value losses on loans purchased out of unconsolidated MBS trusts reflected in our condensed consolidated balance 

sheets.

Table 8 displays changes in our combined loss reserves.

Table 8: Changes in Combined Loss Reserves

For the Three Months

Ended March 31,

2015 2014

(Dollars in millions)

Changes in combined loss reserves:

Beginning balance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 36,787 $ 45,295

Benefit for credit losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (533) (774)

Charge-offs(1)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (5,389) (1,627)

Recoveries. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 622 392

Other(2)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,011 145

Ending balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 32,498 $ 43,431
22

As of

March 31,

2015

December 31,

2014

(Dollars in millions)

Allocation of combined loss reserves:

Balance at end of each period attributable to:

Single-family. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 32,157 $ 36,383

Multifamily . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 341 404

 Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 32,498 $ 36,787

Single-family and multifamily combined loss reserves as a percentage of applicable

guaranty book of business:

Single-family. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.13% 1.28%

Multifamily . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.16 0.20

Combined loss reserves as a percentage of:

Total guaranty book of business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.07% 1.20%

Recorded investment in nonaccrual loans. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57.21 56.63

_________

(1) Includes charge-offs of (1) $1.8 billion in loans held for investment and $724 million in preforeclosure property taxes and insurance 

receivable in connection with our adoption of the Advisory Bulletin and (2) $1.1 billion in accrued interest receivable in connection 

with our adoption of a change in accounting principle related to the treatment of interest previously accrued, but not collected, at the 

date that loans are placed on nonaccrual status. See “Note 1, Summary of Significant Accounting Policies” for more information on this 

policy change. 

(2) Amounts represent changes in other loss reserves which are offset by amounts reflected in benefit for credit losses, charge-offs and 

recoveries. 

The amount of our benefit or 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 mortgage insurer counterparties. See “Risk Management—Credit Risk Management

—Institutional Counterparty Credit Risk Management” for information on mortgage insurers. In addition, our benefit or 

provision for credit losses and our loss reserves can be impacted by updates to the models, assumptions and data used in 

determining our allowance for loan losses.

We recognized a benefit for credit losses in the first quarter of 2015 primarily due to an increase in actual and forecasted 

home prices, a decline in actual and projected interest rates and the liquidation of mortgage loans. Our approach to the 

adoption of the charge-off provisions of the Advisory Bulletin on January 1, 2015 had no impact on the amount of benefit for 

credit losses that we recognized in the first quarter of 2015.

We recognized a benefit for credit losses in the first quarter of 2014 primarily due to a decline in mortgage interest rates as 

well as an increase in home prices.

We discuss our expectations regarding our future loss reserves in “Executive Summary—Outlook—Loss Reserves.”
23

Troubled Debt Restructurings and Nonaccrual Loans

Table 9 displays the composition of loans restructured in a troubled debt restructuring (“TDR”) that are on accrual status and 

loans on nonaccrual status. The table includes our recorded investment in 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 9: Troubled Debt Restructurings and Nonaccrual Loans

As of

March 31,

2015

December 31,

2014

(Dollars in millions)

TDRs on accrual status:

Single-family . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $145,784 $144,649

Multifamily. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 638 645

Total TDRs on accrual status. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $146,422 $145,294

Nonaccrual loans:

Single-family . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 55,997 $ 64,136

Multifamily. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 807 823

Total nonaccrual loans. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 56,804 $ 64,959

Accruing on-balance sheet loans past due 90 days or more(1)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 569 $ 585

For the Three Months

Ended March 31,

2015 2014

(Dollars in millions)

Interest related to on-balance sheet TDRs and nonaccrual loans:

Interest income forgone(2). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,666 $ 1,760

Interest income recognized for the period(3). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,323 1,369

__________

(1) Includes loans that, as of the end of each period, are 90 days or more past due and continuing to accrue interest. The majority of these 

amounts consists of loans insured or guaranteed by the U.S. government and loans for which we have recourse against the seller in the 

event of a default.

(2) Represents the amount of interest income we did not recognize, but would have recognized during the period for nonaccrual loans and 

TDRs on accrual status as of the end of each period had the loans performed according to their original contractual terms.

(3) Represents interest income recognized during the period for loans classified as either nonaccrual loans or TDRs on accrual status as of 

the end of each period. Includes primarily amounts accrued while the loans were performing and cash payments received on nonaccrual 

loans.

Foreclosed Property (Expense) Income

We recognized foreclosed property expense in the first quarter of 2015 compared with foreclosed property income in the first 

quarter of 2014. This change was due to income recognized as a result of resolutions of representation and warranty matters 

in the first quarter of 2014. In addition, we incurred more expenses related to our foreclosed properties and recognized lower 

income from outstanding deferred payment obligations from mortgage insurers in the first quarter of 2015 compared with the 

first quarter of 2014. 

Credit Loss Performance Metrics

Our credit-related income 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 nonaccrual loans and TDRs, 

other-than-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 
24

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 10 displays the components of our 

credit loss performance metrics as well as our single-family and multifamily initial charge-off severity rates. 

Table 10: Credit Loss Performance Metrics

For the Three Months Ended March 31,

2015 2014

Amount Ratio(1) Amount Ratio(1)

(Dollars in millions)

Charge-offs, net of recoveries. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,212 15.9 bps $ 1,235 16.0 bps

Adoption of Advisory Bulletin and change in accounting principle(2)

. . . . . . . . . . . . . . . . . 3,555 46.6 — —

Foreclosed property expense (income) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 473 6.2 (262) (3.4)

Credit losses including the effect of fair value losses on acquired credit-impaired loans . . 5,240 68.7 973 12.6

Plus: Impact of acquired credit-impaired loans on charge offs and foreclosed property 

expense (income)(3)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 136 1.8 160 2.1

Credit losses and credit loss ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 5,376 70.5 bps $ 1,133 14.7 bps

Credit losses attributable to:

Single-family . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 5,373 $ 1,127

Multifamily . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 6

 Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 5,376 $ 1,133

Single-family initial charge-off severity rate(4)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17.99 % 20.31 %

Multifamily initial charge-off severity rate(4)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23.60 % 29.91 %

__________

(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 charge-offs of (1) $1.8 billion in loans held for investment and $724 million in preforeclosure property taxes and insurance 

receivable in connection with our adoption of the Advisory Bulletin and (2) $1.1 billion in accrued interest receivable in connection 

with our adoption of a change in accounting principle related to the treatment of interest previously accrued, but not collected, at the 

date that loans are placed on nonaccrual status. See “Note 1, Summary of Significant Accounting Policies” for more information on this 

policy change. 

(3) Includes fair value losses from acquired credit-impaired loans.

(4) 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 prior to 

foreclosure and other liquidations, short sales and third-party sales. Multifamily rate is net of risk-sharing agreements.

Credit losses and our credit loss ratio increased in the first quarter of 2015 compared with the first quarter of 2014 primarily 

due to our adoption of the Advisory Bulletin beginning on January 1, 2015 as well as a change in our accounting policy for 

nonaccrual loans.

We discuss our expectations regarding our future credit losses in “Executive Summary—Outlook—Credit Losses.”

Other Non-Interest Expenses

Other non-interest expenses decreased in the first quarter of 2015 compared with the first quarter of 2014 primarily due to 

higher gains from the sale of partnership investments. These gains were partially offset by an increase in expenses related to 

TCCA fees in the first quarter of 2015 compared with the first quarter of 2014 due to an increase in the percentage of loans in 

our single-family guaranty book of business subject to TCCA fees. We expect the guaranty fees collected and expenses 

incurred under the TCCA to continue to increase in the future.
25

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 2014 Form 10-

K.

In this section, we summarize our segment results for the first quarter of 2015 and 2014 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 11, Segment Reporting” for 

a reconciliation of our segment results to our condensed consolidated results.

Single-Family Business Results

Table 11 displays the financial results of our Single-Family business for the periods indicated. For a discussion of 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. Other items that impact income or loss primarily include 

credit-related (expense) income, TCCA fees and administrative expenses.

Table 11: Single-Family Business Results

For the Three Months Ended March 31,

2015 2014 Variance

(Dollars in millions)

Guaranty fee income(1)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,040 $ 2,870 $ 170

Credit-related (expense) income(2)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (7) 1,002 (1,009)

TCCA fees(1)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (382) (322) (60)

Other expenses(3)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (539) (514) (25)

Income before federal income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,112 3,036 (924)

Provision for federal income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (581) (927) 346

Net income attributable to Fannie Mae. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,531 $ 2,109 $ (578)

Other key performance data:

Securitization Activity/New Business

Single-family Fannie Mae MBS issuances. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 110,994 $ 76,972

Credit Guaranty Activity

Average single-family guaranty book of business(4)

. . . . . . . . . . . . . . . . . . . . . . . . $ 2,845,125 $ 2,884,653

Single-family effective guaranty fee rate (in basis points)(1)(5)

. . . . . . . . . . . . . . . . 42.7 39.8

Single-family average charged guaranty fee on new acquisitions (in basis 

points)(1)(6)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61.2 63.0

Single-family serious delinquency rate, at end of period(7)

. . . . . . . . . . . . . . . . . . . 1.78 % 2.19 %

Market

Single-family mortgage debt outstanding, at end of period (total U.S. market)(8)

. $ 9,862,066 $ 9,851,200

30-year mortgage rate, at end of period(9)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.69 % 4.40 %

__________

(1) Includes the impact of a 10 basis point guaranty fee increase implemented pursuant to the TCCA, the incremental revenue from which 

must be remitted to Treasury. The resulting revenue is included in guaranty fee income and the expense is recognized as “TCCA fees.” 

(2) Consists of the benefit for credit losses and foreclosed property (expense) income.
26

(3) Consists of net interest income (loss), investment gains (losses), net, fair value (losses) gains, net, (losses) gains from partnership 

investments, fee and other income (expense), administrative expenses and other (expenses) income.

(4) 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.

(5) Calculated based on annualized Single-Family segment guaranty fee income divided by the average single-family guaranty book of 

business, expressed in basis points.

(6) 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.

(7) Calculated based on the number of single-family conventional loans that are 90 days or more past due or in the foreclosure process, 

divided by the number of loans in our single-family conventional guaranty book of business. 

(8) Information labeled as of March 31, 2015 is as of December 31, 2014 and is based on the Federal Reserve’s March 2015 mortgage debt 

outstanding release, the latest date for which the Federal Reserve has estimated mortgage debt outstanding for single-family residences. 

Prior period amounts may have been changed to reflect revised historical data from the Federal Reserve.

(9) Based on Freddie Mac’s Primary Mortgage Market Survey®

rate for the last week in the period, which represents the national average 

mortgage commitment rate to a qualified borrower exclusive of any fees and points required by the lender. 

Pre-tax income decreased in the first quarter of 2015 compared with the first quarter of 2014 primarily due to credit-related 

expense in the first quarter of 2015 compared with credit-related income in the first quarter of 2014. 

We recognized single-family credit-related expense in the first quarter of 2015 compared with credit-related income in the 

first quarter of 2014 due to income recognized as a result of resolutions of representation and warranty matters in the first 

quarter of 2014. In addition, we incurred more expenses related to our foreclosed properties and recognized lower income 

from outstanding deferred payment obligations from mortgage insurers in the first quarter of 2015 compared with the first 

quarter of 2014. See “Consolidated Results of Operations—Credit-Related Income” for more information on the drivers of 

our credit-related income.

Guaranty fee income and our effective guaranty fee rate increased in the first quarter of 2015 compared with the first quarter 

of 2014 as loans with higher guaranty fees have become a larger part of our single-family guaranty book of business 

primarily due to the cumulative impact of guaranty fee price increases implemented in 2012.

TCCA fees increased in the first quarter of 2015 compared with the first quarter of 2014, as single-family loans acquired 

since the implementation of the TCCA-related guaranty fee increase constituted a larger portion of our single-family guaranty 

book of business in the first quarter of 2015.

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”) investments and equity investments. Although we 

are not currently 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 held in our retained mortgage portfolio, gains and losses from 

the sale of multifamily Fannie Mae MBS, mortgage loans and re-securitizations, and other miscellaneous income.

Table 12 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, which includes yield maintenance income. 

Other items that affect income or loss primarily include credit-related income and administrative expenses.
27

Table 12: Multifamily Business Results

For the Three Months Ended March 31,

2015 2014 Variance

(Dollars in millions)

Guaranty fee income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 340 $ 311 $ 29

Fee and other income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51 24 27

Gains from partnership investments(1)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 212 45 167

Credit-related income(2)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67 34 33

Other expenses(3)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (117) (93) (24)

Income before federal income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 553 321 232

(Provision) benefit for federal income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (70) 9 (79)

Net income attributable to Fannie Mae . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 483 $ 330 $ 153

Other key performance data:

Securitization Activity/New Business

Multifamily new business volume(4)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 10,364 $ 3,520

Multifamily units financed from new business volume. . . . . . . . . . . . . . . . . . . . . . . . . . . . 134,000 72,000

Multifamily Fannie Mae MBS issuances(5)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 11,418 $ 4,879

Multifamily Fannie Mae structured securities issuances (issued by Capital Markets

group) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,434 $ 3,262

Multifamily Fannie Mae MBS outstanding, at end of period(6)

. . . . . . . . . . . . . . . . . . . . . . $173,507 $150,693

Credit Guaranty Activity

Average multifamily guaranty book of business(7)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $205,003 $199,829

Multifamily effective guaranty fee rate (in basis points)(8)

. . . . . . . . . . . . . . . . . . . . . . . . . 66.3 62.3

Multifamily credit loss ratio (in basis points)(9)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.6 1.2

Multifamily serious delinquency rate, at end of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.09 % 0.10 %

Percentage of multifamily guaranty book of business with credit enhancement, at end of

period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93 % 91 %

Fannie Mae percentage of total multifamily mortgage debt outstanding, at end of 

period(10)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 % 20 %

Portfolio Data

Average Fannie Mae multifamily mortgage loans and Fannie Mae MBS in Capital 

Markets group’s portfolio(11)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 39,801 $ 56,655

Additional net interest income and yield maintenance income earned on Fannie Mae 

multifamily mortgage loans and MBS (included in Capital Markets group’s results)(12) $ 170 $ 167

__________

(1) 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.

(2) Consists of the benefit for credit losses and foreclosed property (expense) income.

(3) Consists of net interest income (loss), investment gains (losses), net, administrative expenses and other (expenses) income.

(4) Reflects unpaid principal balance of multifamily Fannie Mae MBS issued (excluding portfolio securitizations) and multifamily loans 

purchased during the period.

(5) Reflects unpaid principal balance of multifamily Fannie Mae MBS issued during the period. Includes (a) issuances of new MBS and 

(b) Fannie Mae portfolio securitization transactions of $1.1 billion and $1.4 billion for the three months ended March 31, 2015 and 

2014, respectively. 

(6) Includes $16.4 billion and $20.5 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, 2015 and 2014, respectively.
28

(7) Our Multifamily guaranty book of business consists of (a) multifamily mortgage loans of Fannie Mae, (b) multifamily mortgage loans 

underlying Fannie Mae MBS, and (c) other credit enhancements that we provide on multifamily mortgage assets. It excludes nonFannie Mae mortgage-related securities held in our retained mortgage portfolio for which we do not provide a guaranty.

(8) Calculated based on annualized Multifamily segment guaranty fee income divided by the average multifamily guaranty book of 

business, expressed in basis points.

(9) Calculated based on annualized Multifamily segment credit losses divided by the average multifamily guaranty book of business, 

expressed in basis points. 

(10) Includes mortgage loans and Fannie Mae MBS guaranteed by the Multifamily segment. Information labeled as of March 31, 2015 is as 

of December 31, 2014 and is based on the Federal Reserve’s March 2015 mortgage debt outstanding release, the latest date for which 

the Federal Reserve has estimated mortgage debt outstanding for multifamily residences. Prior period amounts may have been changed 

to reflect revised historical data from the Federal Reserve.

(11) Based on unpaid principal balance.

(12) 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 our retained mortgage portfolio. Yield maintenance 

income represents the investor portion of fees earned as a result of prepayments of multifamily loans and MBS in our retained mortgage 

portfolio. A portion of yield maintenance income is reported in multifamily business results to the extent attributable to our multifamily 

guaranty business.

Pre-tax income increased in the first quarter of 2015 compared with the first quarter of 2014 primarily due to an increase in 

gains on partnership investments, credit-related income and guaranty fee income. 

Guaranty fee income increased in the first quarter of 2015 compared with the first quarter of 2014 as 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. 

Credit-related income increased in the first quarter of 2015 compared with the first quarter of 2014 primarily driven by 

improvements in property valuations and loss severity trends. 

Gains from partnership investments increased in the first quarter of 2015 compared with the first quarter of 2014 as a result 

of sales of investments in markets with strong multifamily fundamentals.

Capital Markets Group Results

Table 13 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 retained 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—Measurement of Interest 

Rate Risk” in our 2014 Form 10-K and “Note 9, Derivative Instruments” in this report and our 2014 Form 10-K. The primary 

sources of revenue for our Capital Markets group are net interest income and fee and other income. Other items that impact 

income or loss primarily include fair value gains and losses, investment gains and losses, as well as allocated guaranty fee 

expense and administrative expenses.
29

Table 13: Capital Markets Group Results

For the Three Months Ended March 31,

2015 2014 Variance

(Dollars in millions)

Net interest income(1)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,602 $ 1,830 $ (228)

Investment gains, net(2)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,509 1,285 224

Fair value losses, net(3)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,970) (1,337) (633)

Fee and other income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55 4,133 (4,078)

Other expenses(4)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (378) (410) 32

Income before federal income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 818 5,501 (4,683)

Provision for federal income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (219) (1,666) 1,447

Net income attributable to Fannie Mae . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 599 $ 3,835 $ (3,236)

__________

(1) Includes contractual interest income, excluding recoveries, on nonaccrual loans received from the Single-Family segment of $559 

million and $743 million for the three months ended March 31, 2015 and 2014, 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 gains, net, administrative expenses, and other 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.

Pre-tax income decreased in the first quarter of 2015 compared with the first quarter of 2014 primarily due to lower fee and 

other income and net interest income, as well as higher fair value losses in the first quarter of 2015. 

Fee and other income decreased in the first quarter of 2015 compared with the first quarter of 2014 due to revenue of $4.1 

billion recognized in the first quarter of 2014 as a result of settlement agreements resolving certain lawsuits relating to PLS 

sold to us. 

Investment gains increased in the first quarter of 2015 compared with the first quarter of 2014 primarily due to an increase in 

the amount of non-agency mortgage-related securities sold in the first quarter of 2015 compared with the amount of such 

securities that were sold in the first quarter of 2014.

Fair value losses in the first quarter of 2015 were primarily due to fair value losses on our risk management derivatives. The 

derivatives fair value losses that are reported for the Capital Markets group are consistent with the losses reported in our 

condensed consolidated statements of operations and comprehensive income. We discuss our derivatives fair value losses in 

“Consolidated Results of Operations—Fair Value Losses, Net.”

The decrease in net interest income in the first quarter of 2015 compared with the first quarter of 2014 was primarily due to a 

decline in the average balance of our retained mortgage portfolio as we continued to reduce this portfolio pursuant to the 

requirements of our senior preferred stock purchase agreement with Treasury and FHFA’s additional portfolio cap.

We supplement our issuance of debt securities with derivative instruments to further reduce interest rate 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 losses, net” and is displayed 

in “Table 6: Fair Value Losses, Net.”

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. The portion of assets held by consolidated MBS trusts 
30

that back mortgage-related securities 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 in 2018. Under the agreement, the maximum allowable amount of mortgage assets 

we are permitted to own as of December 31, 2015 is $399.2 billion. 

In 2014, FHFA requested that we submit a revised portfolio plan outlining how we will reduce the portfolio each year to 90% 

of the annual limit under our senior preferred stock purchase agreement with Treasury. FHFA’s request noted that we may 

seek FHFA permission to increase this cap to 95% of the annual limit under our senior preferred stock purchase agreement 

with Treasury upon written request and with a documented basis for exception, such as changed market conditions. 

Accordingly, under our revised portfolio plan, we plan to reduce our mortgage portfolio to no more than $359.3 billion as of 

December 31, 2015, in compliance with both our senior preferred stock purchase agreement with Treasury and FHFA’s 

request.

As we continue to reduce the size of our retained mortgage portfolio, our revenues generated by our retained mortgage 

portfolio will continue to decrease. As of March 31, 2015, we owned $411.7 billion in mortgage assets, compared with 

$413.3 billion as of December 31, 2014. For additional information on the terms of the senior preferred stock purchase 

agreement with Treasury, see “Business—Conservatorship and Treasury Agreements—Treasury Agreements” in our 2014 

Form 10-K.

Table 14 displays our Capital Markets group’s mortgage portfolio activity based on unpaid principal balance.

Table 14: Capital Markets Group’s Mortgage Portfolio Activity

For the Three Months

Ended March 31,

2015 2014

(Dollars in millions)

Mortgage loans:

Beginning balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 285,610 $ 314,664

Purchases. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48,788 30,900

Securitizations(1)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (42,757) (26,543)

Liquidations and sales(2)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (10,239) (13,032)

Mortgage loans, ending balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 281,402 305,989

Mortgage securities:

Beginning balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 127,703 176,037

Purchases(3)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,690 3,530

Securitizations(1)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42,757 26,543

Sales. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (43,668) (37,242)

Liquidations(2)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (5,200) (7,145)

Mortgage securities, ending balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 130,282 161,723

Total Capital Markets group’s mortgage portfolio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 411,684 $ 467,712

__________

(1) Includes portfolio securitization transactions that do not qualify for sale treatment under GAAP.

(2) Includes scheduled repayments, prepayments, foreclosures, and lender repurchases. 

(3) Includes purchases of Fannie Mae MBS issued by consolidated trusts.
31

Table 15 displays the composition of the unpaid principal balance of the Capital Markets group’s mortgage portfolio and our 

assessment of the liquidity of these assets. Our assessment is based on the liquidity within the markets in which the assets are 

traded, the issuers of the assets and the nature of the collateral underlying the assets. Our unsecuritized mortgage loans, PLS 

and other non-agency securities are considered less liquid. Fannie Mae securities that are collateralized by non-agency 

mortgage-related securities are also considered to be less liquid.

Table 15: Capital Markets Group’s Mortgage Portfolio Composition

As of

March 31, 2015 December 31, 2014

More

Liquid

Less

Liquid Total

More

Liquid

Less

Liquid Total

(Dollars in millions)

Mortgage loans:

Single-family loans:

Government insured or guaranteed. . . . . . . . . . . . $ — $ 35,855 $ 35,855 $ — $ 36,442 $ 36,442

Conventional. . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 224,697 224,697 — 225,800 225,800

Total single-family loans . . . . . . . . . . . . . . . . . . . . . . — 260,552 260,552 — 262,242 262,242

Multifamily loans:

Government insured or guaranteed. . . . . . . . . . . . — 240 240 — 243 243

Conventional. . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 20,610 20,610 — 23,125 23,125

Total multifamily loans . . . . . . . . . . . . . . . . . . . . . . . — 20,850 20,850 — 23,368 23,368

Total mortgage loans . . . . . . . . . . . . . . . . . . . . . . . . . — 281,402 281,402 — 285,610 285,610

Mortgage-related securities:

Fannie Mae . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86,804 12,195 98,999 80,377 12,442 92,819

Freddie Mac . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,445 — 6,445 6,368 — 6,368

Ginnie Mae . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 596 — 596 572 — 572

Alt-A private-label securities . . . . . . . . . . . . . . . . — 6,105 6,105 — 7,745 7,745

Subprime private-label securities . . . . . . . . . . . . . — 7,494 7,494 — 8,913 8,913

CMBS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 3,646 3,646 — 3,686 3,686

Mortgage revenue bonds. . . . . . . . . . . . . . . . . . . . — 4,025 4,025 — 4,556 4,556

Other mortgage-related securities. . . . . . . . . . . . . — 2,972 2,972 — 3,044 3,044

Total mortgage-related securities(1)

. . . . . . . . . . . . . . $ 93,845 $ 36,437 $ 130,282 $ 87,317 $ 40,386 $ 127,703

Total Capital Markets group’s mortgage portfolio. . . $ 93,845 $ 317,839 $ 411,684 $ 87,317 $325,996 $ 413,313

__________

(1) The fair value of these mortgage-related securities was $137.4 billion as of March 31, 2015 and $133.5 billion as of December 31, 

2014.

The Capital Markets group’s mortgage portfolio decreased as of March 31, 2015 compared with December 31, 2014, as we 

reduce the size of our retained mortgage portfolio to comply with the requirement of our senior preferred stock purchase 

agreement with Treasury and FHFA’s request to further cap our portfolio.
32

The loans we purchased in the first quarter of 2015 included $3.9 billion in delinquent loans we purchased from our singlefamily MBS trusts. We expect to continue purchasing 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 amount of mortgage assets that we may own pursuant to the senior preferred stock purchase agreement and 

FHFA’s portfolio plan requirements. As a result of purchasing these loans, an increasing portion of the Capital Markets 

group’s mortgage portfolio is comprised of loans restructured in a TDR and nonaccrual loans. Table 16 displays the 

composition of loans restructured in a TDR that were on accrual status, loans on nonaccrual status and all other mortgagerelated assets in our Capital Markets group’s mortgage portfolio.

Table 16: Capital Markets Group’s Mortgage Portfolio

As of

March 31, 2015 December 31, 2014

Unpaid

Principal

Balance

Percent

of total

Unpaid

Principal

Balance

Percent

of total

(Dollars in millions)

TDRs on accrual status. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $142,075 35% $140,828 34%

Nonaccrual loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54,901 13 58,597 14

All other mortgage-related assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 214,708 52 213,888 52

Total Capital Markets group’s mortgage portfolio. . . . . . . . . . . . . . . . . . . . . . . $411,684 100% $413,313 100%

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. 
33

Table 17 displays a summary of our condensed consolidated balance sheets as of the dates indicated.

Table 17: Summary of Condensed Consolidated Balance Sheets

As of

March 31,

2015

December 31,

2014 Variance

(Dollars in millions)

Assets

Cash and cash equivalents and federal funds sold and securities purchased under

agreements to resell or similar arrangements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 44,090 $ 52,973 $ (8,883)

Restricted cash. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41,439 32,542 8,897

Investments in securities(1). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59,018 62,158 (3,140)

Mortgage loans:

Of Fannie Mae. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 266,289 272,666 (6,377)

Of consolidated trusts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,778,647 2,782,369 (3,722)

Allowance for loan losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (31,820) (35,541) 3,721

Mortgage loans, net of allowance for loan losses . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,013,116 3,019,494 (6,378)

Deferred tax assets, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41,983 42,206 (223)

Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38,467 38,803 (336)

Total assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,238,113 $ 3,248,176 $ (10,063)

Liabilities and equity

Debt:

Of Fannie Mae. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 448,740 $ 460,443 $ (11,703)

Of consolidated trusts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,763,891 2,761,712 2,179

Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21,886 22,301 (415)

Total liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,234,517 3,244,456 (9,939)

Total equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,596 3,720 (124)

Total liabilities and equity. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,238,113 $ 3,248,176 $ (10,063)

__________

(1) Includes $19.4 billion as of March 31, 2015 and $19.5 billion as of December 31, 2014 of U.S. Treasury securities that are included in 

our other investments portfolio, which we present in “Table 21: Cash and Other Investments Portfolio.”

Cash and Other Investments Portfolio

Our cash and other investments portfolio consists of cash and cash equivalents, securities purchased under agreements to 

resell or similar arrangements, and investments in U.S. Treasury 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 servicers of loans backing consolidated trusts 

due to be remitted to the MBS certificateholders in the subsequent month. Our restricted cash increased as of March 31, 2015 

compared with the balance as of December 31, 2014 primarily as a result of an increase in prepayments received on mortgage 

loans in March 2015 compared with prepayments received in December 2014.
34

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. Table 18 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 PLS as Alt-A, subprime or 

CMBS 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 (which we refer to as “wraps”).

Table 18: Summary of Mortgage-Related Securities at Fair Value

As of

March 31,

2015

December 31,

2014

(Dollars in millions)

Mortgage-related securities:

Fannie Mae . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 10,366 $ 10,579

Freddie Mac . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,980 6,897

Ginnie Mae . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 672 642

Alt-A private-label securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,297 6,598

Subprime private-label securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,484 6,547

CMBS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,848 3,912

Mortgage revenue bonds. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,302 4,745

Other mortgage-related securities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,702 2,772

Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 39,651 $ 42,692

The decrease in mortgage-related securities at fair value from December 31, 2014 to March 31, 2015 was primarily driven by 

sales of PLS in the first three months of 2015.

Mortgage Loans

The decrease in mortgage loans from December 31, 2014 to March 31, 2015 was primarily due to liquidations outpacing 

acquisition volumes. 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.” 

The decrease in our allowance for loan losses from December 31, 2014 to March 31, 2015 was primarily due to our approach 

to adopting the charge-off provisions of the Advisory Bulletin on January 1, 2015. See “Consolidated Results of Operations

—Credit-Related Income” for more information concerning the adoption of the Advisory Bulletin.

Debt 

Debt of Fannie Mae is the primary means of funding our mortgage investments. The decrease in debt of Fannie Mae from 

December 31, 2014 to March 31, 2015 was primarily driven by lower funding needs, as our retained mortgage portfolio 

decreased. 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 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 from December 31, 2014 to March 31, 2015 was primarily 

driven by sales of Fannie Mae MBS, which are accounted for as reissuances of debt of consolidated trusts in our condensed 

consolidated balance sheets, since the MBS certificate ownership is transferred from us to a third party.

Total Equity

Total equity decreased as of March 31, 2015 compared with December 31, 2014 due to our payment of senior preferred stock 

dividends to Treasury during the first quarter of 2015, partially offset by comprehensive income recognized during the first 

quarter of 2015. 
35

LIQUIDITY AND CAPITAL MANAGEMENT

Liquidity Management

Our business activities require that we maintain adequate liquidity to fund our operations. Our liquidity risk management 

framework 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 hold a portfolio 

of highly liquid investments and maintain access to alternative sources of liquidity which are designed to provide near term 

availability of cash in the event that our access to the debt markets becomes limited. 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 in our circumstances.

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.

This section supplements and updates information regarding liquidity risk management contained in our 2014 Form 10-K. 

See “MD&A—Liquidity and Capital Management—Liquidity Management” and “Risk Factors” in our 2014 Form 10-K for 

additional information, including discussions of our primary sources and uses of funds, our liquidity risk management 

practices and liquidity contingency planning, factors that influence our debt funding activity, factors that may impact our 

access to or the cost of our debt funding, and factors that could adversely affect our liquidity.

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. 

Our debt funding needs and debt funding activity 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. See “Business Segment Results—Capital Markets Group Results—The Capital Markets Group’s Mortgage 

Portfolio” for information about our retained mortgage portfolio, our requirement to reduce the size of our retained mortgage 

portfolio and our portfolio reduction plan.

Fannie Mae Debt Funding Activity

Table 19 displays the activity in debt of Fannie Mae. 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.
36

Table 19: Activity in Debt of Fannie Mae

For the Three Months 

Ended March 31,

2015 2014

(Dollars in millions)

Issued during the period:

Short-term:

Amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 52,111 $ 32,438

Weighted-average interest rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.12% 0.05%

Long-term:(1)

Amount: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 16,723 $ 8,060

Weighted-average interest rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.63% 1.63%

Total issued:

Amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 68,834 $ 40,498

Weighted-average interest rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.49% 0.37%

Paid off during the period:(2)

Short-term:

Amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 57,726 $ 39,272

Weighted-average interest rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.07% 0.08%

Long-term:

Amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 23,163 $ 49,117

Weighted-average interest rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.81% 1.85%

Total paid off:

Amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 80,889 $ 88,389

Weighted-average interest rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.28% 1.06%

__________

(1) Includes credit risk-sharing securities issued under our CAS series. For additional information on our credit risk sharing transactions, 

see “Risk Management—Credit Risk Management—Single-Family Mortgage Credit Risk Management—Single-Family Acquisition 

and Servicing Policies and Underwriting and Servicing Standards—Risk-Sharing Transactions.”

(2) Consists of all payments on debt, including regularly scheduled principal payments, payments at maturity, payments resulting from 

calls and payments for any other repurchases. Repurchases of debt and early retirements of zero-coupon debt are reported at original 

face value, which does not equal the amount of actual cash payment.

Outstanding Debt

Total outstanding debt of Fannie Mae includes short-term and long-term debt, excluding debt of consolidated trusts. Shortterm debt of Fannie Mae consists of borrowings with an original contractual maturity of one year or less and, therefore, does 

not include the current portion of long-term debt. Long-term debt of Fannie Mae consists of borrowings with an original 

contractual maturity of greater than one year.

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 under the senior preferred stock purchase agreement on December 31 

of the immediately preceding calendar year. Our debt limit under the senior preferred stock purchase agreement was reduced 

to $563.6 billion in 2015. As of March 31, 2015, our aggregate indebtedness totaled $452.3 billion, which was $111.3 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.
37

Table 20 displays information as of the dates indicated on our outstanding short-term and long-term debt based on its original 

contractual terms. 

Table 20: Outstanding Short-Term Borrowings and Long-Term Debt(1)

As of

March 31, 2015 December 31, 2014

Maturities Outstanding

WeightedAverage

Interest

Rate Maturities Outstanding

WeightedAverage

Interest

Rate

(Dollars in millions)

Federal funds purchased and securities sold 

under agreements to repurchase(2). . . . . . . — $ 87 —% — $ 50 —%

Short-term debt of Fannie Mae . . . . . . . . . . . — $ 99,349 0.14% — $ 105,012 0.11%

Debt of consolidated trusts . . . . . . . . . . . — 1,463 0.12 — 1,560 0.09

Total short-term debt . . . . . . . . . . . . . . . . . . . $ 100,812 0.14% $ 106,572 0.11%

Long-term debt:

Senior fixed:

Benchmark notes and bonds . . . . . . . 2015 - 2030 $ 170,531 2.44% 2015 - 2030 $ 173,010 2.41%

Medium-term notes(3)

. . . . . . . . . . . . . 2015 - 2025 116,246 1.44 2015 - 2024 114,556 1.42

Foreign exchange notes and bonds . . 2021 - 2028 590 5.37 2021 - 2028 619 5.44

Other . . . . . . . . . . . . . . . . . . . . . . . . . 2015 - 2038 31,555 4.57 2015 - 2038 32,322 4.63

Total senior fixed. . . . . . . . . . . . . 318,922 2.29 320,507 2.29

Senior floating:

Medium-term notes(3)

. . . . . . . . . . . . . 2015 - 2019 18,419 0.18 2015 - 2019 24,469 0.15

Connecticut Avenue Securities(4)

. . . . 2023 - 2025 7,530 3.10 2023 - 2024 6,041 2.97

Other(5)

. . . . . . . . . . . . . . . . . . . . . . . . 2020 - 2037 391 7.89 2020 - 2037 363 8.71

Total senior floating. . . . . . . . . . . 26,340 1.10 30,873 0.81

Subordinated debentures . . . . . . . . . . . . 2019 3,940 9.84 2019 3,849 9.93

Secured borrowings(6)

. . . . . . . . . . . . . . . 2021 - 2022 189 1.91 2021 - 2022 202 1.90

Total long-term debt of Fannie Mae . . . . . . . 349,391 2.29 355,431 2.24

Debt of consolidated trusts(5)

. . . . . . . . . 2015 - 2054 2,762,428 2.91 2015 - 2054 2,760,152 3.02

Total long-term debt . . . . . . . . . . . . . . . . . . . $ 3,111,819 2.84% $ 3,115,583 2.93%

Outstanding callable debt of Fannie Mae(7)

. . $ 114,993 1.81% $ 114,990 1.79%

__________

(1) Outstanding debt amounts and weighted-average interest rates reported in this table include the effects of discounts, premiums and 

other cost basis adjustments. Reported outstanding amounts include fair value gains and losses associated with debt that we elected to 

carry at fair value. Reported amounts for total debt of Fannie Mae include unamortized discounts and premiums, other cost basis 

adjustments and fair value adjustments of $3.7 billion and $4.1 billion as of March 31, 2015 and December 31, 2014, respectively. 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 $452.5 billion and $464.6 billion as of March 31, 2015 and December 31, 2014, 

respectively. 

(2) Represents agreements to repurchase securities for a specified price, with repayment generally occurring on the following day. 

(3) Includes long-term debt with an original contractual maturity of greater than 1 year and up to 10 years, excluding zero-coupon debt.

(4) Credit risk-sharing securities that transfer a portion of the credit risk on specified pools of mortgage loans in our single-family guaranty 

book of business to the investors in these securities. Connecticut Avenue Securities are reported at fair value. For additional information 

on our credit risk sharing transactions, see “Risk Management—Credit Risk Management—Single-Family Mortgage Credit Risk 

Management—Single-Family Acquisition and Servicing Policies and Underwriting and Servicing Standards—Risk-Sharing 

Transactions.”

(5) Includes a portion of structured debt instruments that is reported at fair value.

(6) Represents remaining liability resulting from the transfer of financial assets from our condensed consolidated balance sheets that did 

not qualify as a sale. 
38

(7) Consists of the unpaid principal balance of long-term callable debt of Fannie Mae that can be paid off in whole or in part at our option 

at any time on or after a specified date.

Maturity Profile of Outstanding Debt of Fannie Mae

Our outstanding short-term debt, as a percentage of our total outstanding debt, was 22% as of March 31, 2015 compared with 

23% as of December 31, 2014. The weighted-average interest rate on our long-term debt increased to 2.29% as of March 31, 

2015 from 2.24% as of December 31, 2014.

Our outstanding debt maturing within one year, including the current portion of our long-term debt and amounts we have 

announced for early redemption, as a percentage of our total outstanding debt, excluding debt of consolidated trusts, was 36%

as of March 31, 2015 and 37% as of December 31, 2014. The weighted-average maturity of our outstanding debt that is 

maturing within one year was 133 days as of March 31, 2015, compared with 131 days as of December 31, 2014. The 

weighted-average maturity of our outstanding debt maturing in more than one year was approximately 60 months as of 

March 31, 2015, compared with approximately 61 months as of December 31, 2014. 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

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—Counterparty Credit Exposure 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 21 displays information on the composition of our cash and other investments portfolio.

Table 21: Cash and Other Investments Portfolio

As of

March 31,

2015

December 31,

2014

(Dollars in millions)

Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 23,860 $ 22,023

Federal funds sold and securities purchased under agreements to resell or similar arrangements . 20,230 30,950

U.S. Treasury securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19,367 19,466

Total cash and other investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 63,457 $ 72,439

Credit Ratings

As of March 31, 2015, our credit ratings have not changed since we filed our 2014 Form 10-K. For additional information on 

our credit ratings, see “Management’s Discussion and Analysis—Liquidity and Capital Management—Fannie Mae Credit 

Ratings” in our 2014 Form 10-K.

Cash Flows

Three Months Ended March 31, 2015. Cash and cash equivalents increased by $1.8 billion from $22.0 billion as of 

December 31, 2014 to $23.9 billion as of March 31, 2015. The increase in the balance was primarily driven by cash inflows 

from (1) issuances of long-term debt of consolidated trusts resulting from the sale of Fannie Mae MBS to third parties, (2) 

proceeds from repayment of loans of Fannie Mae, (3) the sale of our REO inventory and (4) proceeds from sale and 

liquidations of mortgage-related securities.

Partially offsetting these cash inflows were cash outflows from (1) acquiring mortgage loans and providing advances to 

lenders, and (2) the acquisition of delinquent loans out of MBS trusts. 

Three Months Ended March 31, 2014. Cash and cash equivalents decreased by $5.2 billion from $19.2 billion as of December 

31, 2013 to $14.1 billion as of March 31, 2014. The decrease in the balance was primarily driven by cash outflow from (1) 

acquiring mortgage loans and providing advances to lenders; (2) payments to redeem funding debt, which outpaced 

issuances, due to lower funding needs, (3) acquisition of delinquent loans out of MBS trusts, and (4) the payment of 

dividends to Treasury under our senior preferred stock purchase agreement.
39

Partially offsetting these cash outflows were cash inflows from issuances of long-term debt of consolidated trusts resulting 

from the sale of Fannie Mae MBS to third parties.

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 our core capital over statutory minimum capital was $142.2 

billion as of March 31, 2015 and December 31, 2014. 

Under the terms of the senior preferred stock, 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 amount. Therefore, we do not expect to eliminate our deficit of core capital over statutory 

minimum capital. We expect to pay Treasury a dividend of $1.8 billion by June 30, 2015.

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 significant 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 deficiencies 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, 2015. 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, 2015 and have not received funds from Treasury under the agreement 

since the first quarter of 2012, we will be required to obtain additional funding from Treasury pursuant to the senior preferred 

stock purchase agreement if we have a net worth deficit in future periods. As of the date of this filing, the amount of 

remaining available funding under the senior preferred stock purchase agreement is $117.6 billion. For additional 

information, see “Business—Conservatorship and Treasury Agreements—Treasury Agreements—Senior Preferred Stock 

Purchase Agreement and Related Issuance of Senior Preferred Stock and Common Stock Warrant—Senior Preferred Stock 

Purchase Agreement” in our 2014 Form 10-K. 

Our first quarter 2015 dividend of $1.9 billion was declared by FHFA and subsequently paid by us on March 31, 2015. 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 capital reserve amount is $1.8 billion for dividend periods in 2015 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, we expect to pay Treasury a dividend for the second quarter of 2015 of $1.8 

billion by June 30, 2015. The Director of FHFA directs us to make dividend payments on the senior preferred stock on a 

quarterly basis.

See “Risk Factors” in our 2014 Form 10-K for a discussion of the risks relating to our dividend obligations to Treasury on the 

senior preferred stock. See “Business—Conservatorship and Treasury Agreements—Treasury Agreements” in our 2014 Form 

10-K for more information on the terms of the senior preferred stock and our senior preferred stock purchase agreement with 

Treasury.

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 $30.9 billion as of March 31, 2015 and $31.7 billion

as of December 31, 2014.

For a description of our off-balance sheet arrangements, see “MD&A—Off-Balance Sheet Arrangements” in our 2014 Form 

10-K.
40

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 actively monitor and manage these risks by using an established risk 

management framework. In addition to our exposure to credit, market and operational 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 “Risk Factors” in this report and in “Business—Housing Finance Reform” in our 2014 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 human capital, model, legal, regulatory and compliance, reputational, strategic and execution risks. 

These risks 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 

primary risks we face and how we manage credit risk, market risk and operational risk, see “MD&A—Risk Management” in 

our 2014 Form 10-K and “Risk Factors” in this report and our 2014 Form 10-K. 

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.

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 22 displays the composition of our mortgage credit book of business based on unpaid principal balance. Our singlefamily mortgage credit book of business accounted for 93% of our mortgage credit book of business as of March 31, 2015

and December 31, 2014. 
41

Table 22: Composition of Mortgage Credit Book of Business

As of

March 31, 2015 December 31, 2014

SingleFamily Multifamily TotalSingleFamily Multifamily Total

(Dollars in millions)

Mortgage loans and Fannie Mae MBS(1)

. . . . . . . . . . . $ 2,822,162 $ 191,016 $ 3,013,178 $ 2,837,211 $ 187,300 $ 3,024,511

Unconsolidated Fannie Mae MBS, held by third 

parties(2)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,344 1,260 12,604 11,660 1,267 12,927

Other credit guarantees(3)

. . . . . . . . . . . . . . . . . . . . . . . 3,840 14,414 18,254 4,033 14,748 18,781

Guaranty book of business . . . . . . . . . . . . . . . . . . . . $ 2,837,346 $ 206,690 $ 3,044,036 $ 2,852,904 $ 203,315 $ 3,056,219

Agency mortgage-related securities(4)

. . . . . . . . . . . . . 7,036 8 7,044 6,932 8 6,940

Other mortgage-related securities(5)

. . . . . . . . . . . . . . . 16,819 7,423 24,242 19,973 7,970 27,943

Mortgage credit book of business . . . . . . . . . . . . . . $ 2,861,201 $ 214,121 $ 3,075,322 $ 2,879,809 $ 211,293 $ 3,091,102

Guaranty Book of Business Detail:

Conventional Guaranty Book of Business(6)

. . . . . . $ 2,781,224 $ 205,163 $ 2,986,387 $ 2,795,666 $ 201,763 $ 2,997,429

Government Guaranty Book of Business(7)

. . . . . . . $ 56,122 $ 1,527 $ 57,649 $ 57,238 $ 1,552 $ 58,790

__________

(1) 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.

(2) The principal balance of resecuritized Fannie Mae MBS is included only once in the reported amount.

(3) Consists of single-family and multifamily credit enhancements that we have provided and that are not otherwise reflected in the table.

(4) Consists of mortgage-related securities issued by Freddie Mac and Ginnie Mae.

(5) Primarily includes mortgage revenue bonds, Alt-A and subprime PLS and CMBS.

(6) 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.

(7) 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, 2015 and December 31, 2014. 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 2014 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 expense or credit losses. We provide 

information on our credit-related income and credit losses in “Consolidated Results of Operations—Credit-Related Income.” 

For information on how we evaluate and factors that affect our single-family mortgage credit risk, see “MD&A—Risk 

Management—Credit Risk Management—Single-Family Mortgage Credit Risk Management” in our 2014 Form 10-K. 

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.
42

Single-Family Acquisition and Servicing Policies and Underwriting and Servicing Standards

Our Single-Family business, with the oversight of our Enterprise Risk Management division, is responsible for pricing and 

managing credit risk relating to the portion of our single-family mortgage credit book of business consisting of single-family 

mortgage loans and Fannie Mae MBS backed by single-family mortgage loans (whether held in our portfolio or held by third 

parties). Desktop Underwriter®, our proprietary automated underwriting system which measures credit risk by assessing the 

primary risk factors of a mortgage, is used to evaluate the majority of the loans we purchase or securitize. For information on 

our single-family acquisition and servicing policies and on our underwriting and servicing standards, see “MD&A—Risk 

Management—Credit Risk Management—Single-Family Mortgage Credit Risk Management—Single-Family Acquisition 

and Servicing Policies and Underwriting and Servicing Standards” in our 2014 Form 10-K.

Table 23 below displays information regarding the credit characteristics of the loans in our single-family conventional 

guaranty book of business by acquisition period.

Table 23: Selected Credit Characteristics of Single-Family Conventional Guaranty Book of Business, by Acquisition 

Period

As of March 31, 2015

% of SingleFamily 

Conventional 

Guaranty Book 

of Business(1)

Current 

Estimated Markto-Market LTV

Ratio(2)

Current 

Estimated Markto-Market LTV

Ratio>100%(3)

Serious 

Delinquency 

Rate(4)

2009-2015 acquisitions, excluding HARP and other Refi

Plus loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63 % 60 % * % 0.23 %

HARP loans(5) 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 87 20 1.07

Other Refi Plus loans(6) 

. . . . . . . . . . . . . . . . . . . . . . . . . . . 8 51 * 0.39

2005-2008 acquisitions. . . . . . . . . . . . . . . . . . . . . . . . . . . 12 81 22 7.82

2004 and prior acquisitions. . . . . . . . . . . . . . . . . . . . . . . . 6 48 2 3.19

Total Single-Family Book of Business. . . . . . . . . . . . . . 100 % 64 % 5 % 1.78 %

__________

* Represents less than 0.5%

(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, 2015.

(2) The aggregate estimated mark-to-market LTV ratio is based on the unpaid principal balance of the loans as of the end of the applicable 

period divided by the estimated current value of the properties, 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.

(3) The current estimated mark-to-market LTV ratio greater than 100% is based on the unpaid principal balance of the loans with mark-tomarket LTV ratios greater than 100% for each category as of the end of the applicable period divided by the aggregate unpaid principal 

balance of loans for each category in our single-family conventional guaranty book of business as of March 31, 2015.

(4) 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, 2015 serious delinquency rates of loans acquired in 2005 through 2008. 

(5) HARP loans, which we began to acquire in 2009, 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.

(6) Other Refi Plus loans, which we began to acquire in 2009, includes all other Refi Plus loans that are not HARP loans.

Beginning with loans delivered in 2013, and in conjunction with our new representation and warranty framework, we have 

made changes in our quality control process that move the primary focus of our quality control review from the time a loan 

defaults to shortly after the loan is delivered to us. We have implemented new tools to help identify loans delivered to us that 

may not have met our underwriting or eligibility guidelines and use these tools to help select discretionary samples of 

performing loans for quality control review shortly after delivery. We also select random samples of performing loans for 

quality control review shortly after delivery. For a discussion of our new representation and warranty framework, see 

“MD&A—Risk Management—Credit Risk Management—Single-Family Mortgage Credit Risk Management—SingleFamily Acquisition and Servicing Policies and Underwriting and Servicing Standards” in our 2014 Form 10-K. 

We derive an eligibility defect rate from our random reviews, which represents the proportion of loans in the sample 

population with underwriting defects that would make them potentially ineligible for delivery to us. The eligibility defect rate 
43

does not necessarily indicate how well the loans will ultimately perform. Instead, we use the eligibility defect rate to estimate 

the percentage of loans we acquired that potentially had a significant error in the underwriting process. As of March 31, 2015, 

the eligibility defect rate for our single-family non-Refi Plus loan acquisitions made during the twelve months ended March 

31, 2014 was 1.47%. Because of enhancements to the sampling methodology of our random reviews that we implemented in 

2013, the eligibility defect rate for our 2013 and 2014 loan acquisitions is not directly comparable to the “significant findings 

rate” we reported on our acquisitions in prior periods. We continue to work with lenders to reduce the number of defects 

identified.

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 and/or servicers are obligated to 

either repurchase the loan or foreclosed property, reimburse us for our losses or provide other remedies, unless the loan is 

eligible for representation and warranty relief under our new representation and warranty framework described below. We 

refer to our demands that mortgage sellers and servicers meet these obligations collectively as repurchase requests. See 

“MD&A—Risk Management—Credit Risk Management—Institutional Counterparty Credit Risk Management—Mortgage 

Sellers and Servicers” in our 2014 Form 10-K for a discussion of our mortgage sellers and servicers’ repurchase obligations. 

As of March 31, 2015, we have issued repurchase requests on approximately 0.41% of the $76.4 billion of unpaid principal 

balance of single-family loans delivered to us in the first quarter of 2014, for which reviews have been substantially 

completed.

The dollar amounts of our outstanding repurchase requests are based on the unpaid principal balance of the loans underlying 

the repurchase request, 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 related REO, which is 

substantially 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 loans. Amounts relating to 

repurchase requests originating from missing documentation or loan files, where a full file review could not be completed are 

excluded from the total requests outstanding until we receive the missing documentation or loan files and a full underwriting 

review is completed. Total outstanding repurchase requests as of March 31, 2015 were $1.3 billion, compared with $1.0 

billion as of December 31, 2014.

Representation and Warranty Framework

Our representation and warranty framework for single-family mortgage loans delivered on or after January 1, 2013 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. Under the framework, lenders are relieved of repurchase 

liability for loans that meet specific payment history requirements and other eligibility requirements. For example, a lender 

would not be required to repurchase a mortgage loan in breach of certain underwriting and eligibility representations and 

warranties if the borrower has made timely payments for 36 months following the delivery date (or, for Refi Plus loans, 

including HARP loans, for 12 months following the delivery date), and the loan meets other specified eligibility 

requirements. For single-family loans delivered on or after July 1, 2014 the 36-month timely payment history requirement is 

relaxed to permit two instances of 30-day delinquency and adds an alternative path to relief if there is a satisfactory 

conclusion of a quality control review. For more information on our quality control process and our representation and 

warranty framework, see “MD&A—Risk Management—Credit Risk Management—Single-Family Mortgage Credit Risk 

Management—Single-Family Acquisition and Servicing Policies and Underwriting and Servicing Standards” in our 2014 

Form 10-K. 

We continue to work with FHFA to identify opportunities to enhance our representation and warranty framework, providing 

the mortgage finance industry with more certainty and transparency regarding selling representation and warranty 

obligations. 

As of March 31, 2015, approximately 31% of the outstanding loans in our single-family conventional guaranty book of 

business were acquired under the new representation and warranty framework. Table 24 below displays information 

regarding the relief status of single-family conventional loans, based on payment history, delivered to us beginning in 2013 

under the new representation and warranty framework. 
44

Table 24: Representation and Warranty Status of Single-Family Conventional Loans Acquired in 2013-2015

As of March 31, 2015

Refi Plus Non-Refi Plus Total

Unpaid

Principal

Balance

Number of

Loans

Unpaid

Principal

Balance

Number of

Loans

Unpaid

Principal

Balance

Number of

Loans

(Dollars in millions)

Single-family conventional loans that:

Obtained relief . . . . . . . . . . . . . . . . . . . . . $ 151,388 1,006,648 $ — — $ 151,388 1,006,648

Remain eligible for relief . . . . . . . . . . . . . 41,338 278,947 845,408 4,060,497 886,746 4,339,444

Are not eligible for relief . . . . . . . . . . . . . 3,000 19,004 9,344 47,277 12,344 66,281

Total outstanding loans acquired under the

new representation and warranty

framework . . . . . . . . . . . . . . . . . . . . . . . . $ 195,726 1,304,599 $ 854,752 4,107,774 $1,050,478 5,412,373

As of March 31, 2015, approximately 19% of loans acquired under the new representation and warranty framework had 

obtained relief. Providing lenders with relief from repurchasing loans for breaches of certain representations and warranties 

on loans acquired beginning in 2013 that meet specified eligibility requirements shifts some of the risk of non-compliance 

with our requirements back to us. However, we believe that we have taken appropriate steps to mitigate this risk, including 

moving the primary focus of our quality control reviews to shortly after the time the loans are delivered to us. We also retain 

the right to review any defaulted loans that were not previously reviewed and have not obtained relief, in addition to retaining 

the right to review all loans for any violations of life of loan representations and warranties.

Risk-Sharing Transactions

FHFA’s 2015 conservatorship scorecard includes an objective to transact credit risk transfers on single-family mortgages with 

at least $150 billion of unpaid principal balance, adjusted for the amount of credit risk transferred. In meeting this objective, 

we must utilize at least two types of risk transfer structures. Our primary method of achieving this objective has been through 

the issuance of CAS, which transfers some of the credit risk associated with losses on the underlying mortgage loans to 

investors in these securities. During the first quarter of 2015, we issued $1.5 billion in CAS, transferring some of the credit 

risk on single-family mortgages with an unpaid principal balance of $50.2 billion. 

In a CAS transaction, we create a reference pool consisting of recently acquired single-family mortgage loans included in our 

single-family guaranty book of business in our condensed consolidated balance sheet. We then create a hypothetical 

securitization structure with notional credit risk positions, or tranches (that is, first loss, mezzanine and senior). We receive 

cash and issue CAS (which relate to the mezzanine loss position) to investors, which we recognize as “Debt of Fannie Mae” 

in our condensed consolidated balance sheets. 

We are obligated to make payments of principal and interest on the CAS, and we recognize the interest paid as “Long-term 

debt interest expense” in our condensed consolidated statements of operations and comprehensive income. The principal 

balance of the CAS is reduced as a result of principal liquidations of loans in the reference pool or when certain specified 

credit events (such as a loan becoming 180 days delinquent) occur on the loans in the reference pool. In turn, these credit 

events may reduce the total amount of payments we ultimately make on the CAS. However, principal reductions will first 

occur on the first loss position, which is retained by us, until it is fully reduced before the CAS begin participating in 

reductions to the principal balances. As the reference pools underlying CAS issued to date consist of recently acquired singlefamily mortgage loans (loans in the reference pools underlying the transactions in the first quarter of 2015 were acquired 

between September and November 2013), we have recognized minimal credit losses on loans in these reference pools to date.
45

Table 25 displays the credit risk transferred to third parties and retained by Fannie Mae pursuant to our CAS transactions 

since 2013. 

Table 25: Credit Risk Transferred Pursuant to CAS Issuances

At Issuance

As of March 31,

2015

Retained by Fannie Mae

Transferred

to Third

Parties

First

Loss

Position

Mezzanine

Loss

Position

Senior Loss

Position

Mezzanine

Loss

Position

Total

Reference

Pool

Total 

Outstanding 

Reference Pool(1)

(Dollars in millions)

2015 CAS issuances:

CAS 2015 C01 . . . . . . . . . . . . . . . . . . . . . $ 257 $ 78 $ 48,389 $ 1,469 $ 50,193 $ 49,252

Prior CAS issuances:

2014 issuances . . . . . . . . . . . . . . . . . . . . . $ 845 $ 355 $ 215,175 $ 5,849 $ 222,224 $ 209,495

2013 issuances . . . . . . . . . . . . . . . . . . . . . 80 47 25,954 675 26,756 23,876

Total prior CAS issuances . . . . . . . . . . . . . $ 925 $ 402 $ 241,129 $ 6,524 $ 248,980 $ 233,371

Total CAS issuances. . . . . . . . . . . . . . . . . . $ 1,182 $ 480 $ 289,518 $ 7,993 $ 299,173 $ 282,623

Total outstanding reference pool as a percentage of single-family conventional guaranty book of

business. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10.16 %

__________

(1) Includes $7.5 billion outstanding for the mezzanine loss tranche transferred to third parties as of March 31, 2015.

Single-Family Portfolio Diversification and Monitoring

Diversification within our single-family mortgage credit book of business by product type, loan characteristics and geography 

is an important factor that influences credit quality and performance and may reduce our credit risk. We monitor various loan 

attributes, in conjunction with housing market and economic conditions, to determine if our pricing, eligibility and 

underwriting criteria accurately reflect the risk associated with loans we acquire or guarantee. For additional information on 

key loan attributes, see “MD&A—Risk Management—Credit Risk Management—Single-Family Mortgage Credit Risk 

Management—Single-Family Portfolio Diversification and Monitoring” in our 2014 Form 10-K.

Table 26 displays our single-family conventional business volumes and our single-family conventional guaranty book of 

business, based on certain key risk characteristics that we use to evaluate the risk profile and credit quality of our singlefamily loans. 
46

Table 26: 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

2015 2014 March 31, 2015 December 31, 2014

Original LTV ratio:(5)

<= 60%. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 % 17 % 21 % 21 %

60.01% to 70%. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 13 14 14

70.01% to 80%. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40 39 38 38

80.01% to 90%(6). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 12 11 11

90.01% to 100%(6). . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 15 11 11

100.01% to 125%(6). . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 3 3 3

Greater than 125%(6). . . . . . . . . . . . . . . . . . . . . . . . . . . * 1 2 2

Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100 % 100 % 100 % 100 %

Weighted-average . . . . . . . . . . . . . . . . . . . . . . . . . . . 74 % 77 % 75 % 75 %

Average loan amount. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $221,682 $193,053 $ 159,832 $ 159,997

Estimated mark-to-market LTV ratio:(7)

<= 60%. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42 % 42 %

60.01% to 70%. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 19

70.01% to 80%. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 18

80.01% to 90%. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 10

90.01% to 100%. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 6

100.01% to 125% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 4

Greater than 125% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 1

Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100 % 100 %

Weighted-average . . . . . . . . . . . . . . . . . . . . . . . . . . . 64 % 64 %

Product type:

Fixed-rate:(8)

Long-term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80 % 75 % 74 % 74 %

Intermediate-term . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 20 17 17

Interest-only . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — — 1 1

Total fixed-rate . . . . . . . . . . . . . . . . . . . . . . . . . . . 97 95 92 92

Adjustable-rate:

Interest-only . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — * 2 2

Other ARMs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 5 6 6

Total adjustable-rate . . . . . . . . . . . . . . . . . . . . . . . 3 5 8 8

Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100 % 100 % 100 % 100 %

Number of property units:

1 unit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97 % 96 % 97 % 97 %

2-4 units . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 4 3 3

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100 % 100 % 100 % 100 %

Property type:

Single-family homes . . . . . . . . . . . . . . . . . . . . . . . . . . . 90 % 89 % 91 % 91 %

Condo/Co-op . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 11 9 9

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100 % 100 % 100 % 100 %
47

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

2015 2014 March 31, 2015 December 31, 2014

Occupancy type:

Primary residence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88 % 85 % 88 % 88 %

Second/vacation home . . . . . . . . . . . . . . . . . . . . . . . . . 4 4 4 4

Investor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 11 8 8

Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100 % 100 % 100 % 100 %

FICO credit score at origination:

< 620(9). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 % 2 % 2 % 3 %

620 to < 660 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 6 6 5

660 to < 700 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 14 12 12

700 to < 740 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 21 19 19

>= 740. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63 57 61 61

Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100 % 100 % 100 % 100 %

Weighted-average. . . . . . . . . . . . . . . . . . . . . . . . . . . 748 741 744 744

Loan purpose:

Purchase . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37 % 45 % 31 % 31 %

Cash-out refinance . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 16 20 20

Other refinance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44 39 49 49

Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100 % 100 % 100 % 100 %

Geographic concentration:(10)

Midwest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 % 14 % 15 % 15 %

Northeast. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 16 19 19

Southeast. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 21 22 22

Southwest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 19 16 16

West . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34 30 28 28

Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100 % 100 % 100 % 100 %

Origination year:

<= 2006. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 % 13 %

2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 4

2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 2

2009 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 6

2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 9

2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 10

2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 24

2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 21

2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 11

2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 —

Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100 % 100 %

__________

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

(1) 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.

(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, 2015 and December 31, 2014. See 

“Business—Our Charter and Regulation of Our Activities—Charter Act—Loan Standards” and “MD&A—Risk Management—Credit 
48

Risk Management—Single-Family Mortgage Credit Risk Management—Credit Profile Summary—Jumbo Conforming and HighBalance Loans” in our 2014 Form 10-K for information on our 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% as part of our mission to serve the primary mortgage market and provide 

liquidity to the housing finance 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) Loans acquired after 2009 with FICO credit scores below 620 consist primarily of the refinance of existing loans under our Refi Plus 

initiative.

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

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

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

Credit Profile Summary

Overview

Our acquisitions in the first quarter of 2015 continued to have a strong credit profile with a weighted average original LTV of 

74% compared with 77% in the first quarter of 2014. Our acquisition of loans with original LTV ratios over 80% decreased to 

26% in the first quarter of 2015, compared with 31% in the first quarter of 2014. This decrease was primarily due to an 

increase in our acquisitions of refinancing loans, which increased to 63% in the first quarter of 2015, compared with 55% in 

the first quarter of 2014, and a corresponding decline in our acquisitions of home purchase mortgage loans. The weighted 

average FICO credit score of our acquisitions increased to 748 in the first quarter of 2015, compared with 741 in the first 

quarter of 2014. Our acquisitions of loans with FICO credit scores at origination of 740 or above increased to 63% in the first 

quarter of 2015, compared with 57% in the first quarter of 2014. Our acquisition of loans with FICO credit scores at 

origination of less than 700 decreased to 17% in the first quarter of 2015, compared with 22% in the first quarter of 2014. 

The credit profile of our future acquisitions will depend on many factors, including our future guaranty fee pricing and any 

impact of that pricing on the volume and mix of loans we acquire; our future eligibility standards and those of mortgage 

insurers, FHA and VA, the percentage of loan originations representing refinancings, changes in interest rates, our future 

objectives and activities in support of those objectives, including actions we may take to reach additional underserved 

creditworthy borrowers, government policy, market and competitive conditions, and the volume and characteristics of HARP

loans we acquire in the future. 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. In addition, if lender 

customers retain more of the higher-quality loans they originate, it could negatively affect the credit profile of our new singlefamily acquisitions. We discuss our efforts to increase access to mortgage credit for creditworthy borrowers in “Executive 

Summary—Single-Family Guaranty Book of Business—Recently Acquired Single-Family Loans.”

HARP and Refi Plus Loans

Since 2009, we have offered HARP under our Refi Plus initiative, 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. HARP offers 

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. Under HARP, we allow our borrowers who have mortgage loans that have note dates 

prior to June 2009 with current LTV ratios greater than 80% to refinance their mortgages without obtaining new mortgage 

insurance in excess of what is already in place. Accordingly, HARP loans have LTV ratios at origination in excess of 80%. 

HARP loans cannot (1) be an adjustable-rate mortgage loan, if the initial fixed period is less than five years; (2) have an 

interest only feature, which permits the payment of interest without a payment of principal; (3) be a balloon mortgage loan; 

or (4) have the potential for negative amortization. In April 2013, FHFA announced the extension of the ending date for 

HARP to December 31, 2015. 

The loans we acquire under HARP have higher LTV ratios than we would otherwise permit, greater than 100% in some cases. 

Since 2012, we have acquired HARP loans with LTV ratios greater than 125% for fixed-rate loans of eligible borrowers. In 
49

addition to the high LTV ratios that characterize HARP loans, some borrowers for HARP and Refi Plus loans may also have 

lower FICO credit scores and may provide less documentation than we would otherwise require. As of March 31, 2015, 

HARP loans, which constituted 11% of our single-family book of business, had a weighted average FICO credit score at 

origination of 731 compared with 744 for loans in our single-family book of business overall.

Loans we acquire under Refi Plus and HARP represent refinancings of loans that are already in our guaranty book of 

business. The credit risk associated with the newly acquired loans essentially replaces the credit risk on the loans that we 

already held prior to the refinancing. These loans have higher risk profiles and higher serious delinquency rates than 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). 

The percentage of our acquisitions that are refinanced loans, including loans acquired under our Refi Plus initiative, which 

includes HARP, increased during the first quarter of 2015 as a result of the decline in mortgage interest rates during the 

quarter. HARP loans constituted approximately 3% of our total single-family acquisitions in the first quarter of 2015, 

compared with approximately 10% of total single-family acquisitions in the first quarter of 2014. 

We expect the volume of refinancings under HARP to continue to decline, due to a decrease in the population of borrowers 

with loans that have high LTV ratios who are willing to refinance and would benefit from refinancing. 

For information on the serious delinquency rates and current mark-to-market LTV ratios as of March 31, 2015 of singlefamily loans we acquired under HARP and Refi Plus, compared with other single-family loans we have acquired, see “Table 

23: Selected Credit Characteristics of Single-Family Conventional Guaranty Book of Business, by Acquisition Period.”

Alt-A Loans

We classify certain loans as Alt-A so that we can discuss our exposure to Alt-A loans in this Form 10-Q and elsewhere. 

However, there is no universally accepted definition of Alt-A loans. Our single-family conventional guaranty book of 

business includes loans with some features that are similar to Alt-A loans that we have not classified as Alt-A because they do 

not meet our classification criteria.

We do not rely solely on our classifications of loans as Alt-A 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 “Table 26: Risk Characteristics of Single-Family Conventional Business 

Volume and Guaranty Book of Business,” “Note 3, Mortgage Loans,” and “Note 13, Concentrations of Credit Risk.”

Our exposure to Alt-A 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 loans or (2) resecuritizations, or wraps, of private-label mortgage-related securities backed by Alt-A mortgage loans 

that we have guaranteed. See “Note 5, Investments in Securities” for more information on our exposure to private label 

mortgage-related securities backed by Alt-A 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. The unpaid principal balance of Alt-A loans included in our single-family 

conventional guaranty book of business of $113.5 billion as of March 31, 2015, represented approximately 4% of our singlefamily conventional guaranty book of business.

See “MD&A—Risk Management—Credit Risk Management—Single-Family Mortgage Credit Risk Management—SingleFamily Portfolio Diversification and Monitoring” in our 2014 Form 10-K for a discussion of other types of loans, including 

jumbo conforming loans, high balance loans, adjustable-rate mortgages and fixed-rate interest only mortgages.

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.

We seek to improve the servicing of our delinquent loans through a variety of means, including improving our 

communications with and training of our servicers, directing servicers to contact borrowers at an earlier stage of delinquency 
50

and improve their telephone communications with borrowers, and holding our servicers accountable for following our 

requirements. In 2011, we issued new standards for mortgage servicers regarding the management of delinquent loans, 

default prevention and foreclosure time frames under FHFA’s directive to align GSE policies for servicing delinquent 

mortgages. The new standards, reinforced by new incentives and compensatory fees, require servicers to take a more 

consistent approach for homeowner communications, loan modifications and other workouts, and, when necessary, 

foreclosures.

In addition to the new standards, we are taking other steps to improve the servicing of our delinquent loans, which 

included transferring servicing on loan populations that include loans with higher-risk characteristics to special servicers with 

which we have worked to develop high-touch protocols for servicing these loans. We believe retaining special servicers to 

service these loans using high-touch protocols will reduce our future credit losses on the transferred loan portfolio. We 

continue to work with some of our servicers to test and implement high-touch servicing protocols designed for managing 

higher-risk loans, which include lower ratios of loans per servicer employee, beginning borrower outreach strategies earlier in 

the delinquency cycle and establishing a single point of contact for distressed borrowers.

The efforts of our mortgage servicers are critical in keeping people in their homes and preventing foreclosures. We continue 

to work with our servicers to implement our foreclosure prevention initiatives effectively and to find ways to enhance our 

workout protocols and their workflow processes. 

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 those 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.
51

Problem Loan Statistics

Table 27 displays the delinquency status of loans in our single-family conventional guaranty book of business (based on 

number of loans) and changes in the balance of seriously delinquent loans in our single-family conventional guaranty book of 

business.

Table 27: Delinquency Status and Activity of Single-Family Conventional Loans

As of

March 31,

2015

December 31,

2014

March 31,

2014

Delinquency status:

30 to 59 days delinquent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.26% 1.47% 1.40%

60 to 89 days delinquent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.36 0.43 0.40

Seriously delinquent (“SDQ”). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.78 1.89 2.19

Percentage of SDQ loans that have been delinquent for more than 180 days . 72% 70% 74%

Percentage of SDQ loans that have been delinquent for more than two years. 34 34 37

For the Three Months Ended

March 31,

2015 2014

Single-family SDQ loans (number of loans):

Beginning balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 329,590 418,837

Additions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67,358 79,318

Removals:

Modifications and other loan workouts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (25,883) (35,078)

Liquidations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (30,075) (42,073)

Cured or less than 90 days delinquent. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (32,444) (37,194)

Total removals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (88,402) (114,345)

Ending balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 308,546 383,810

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, improved loan payment performance, as well as our acquisition of loans with stronger credit profiles since the 

beginning of 2009. Loans we acquired since 2009 comprised 82% of our single-family guaranty book of business and had a 

serious delinquency rate of 0.36% as of March 31, 2015. 

Although our single-family serious delinquency rate has decreased, the pace of declines in our single-family serious 

delinquency rate has slowed in recent months and we expect this trend to continue. Our single-family 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 in some states. 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 a number of states, particularly in New 

York, Florida and New Jersey. 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 in certain areas of the country will continue 

to negatively affect our single-family serious delinquency rates, foreclosure timelines and credit-related income (expense). 

Other factors such as the pace of loan modifications, the timing and volume of any NPL sales we make, 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 book of business that are seriously delinquent to remain above pre-2008 levels for 

years.

Certain higher-risk loan categories, such as Alt-A loans and loans with higher mark-to-market LTV ratios, and our 2005 

through 2008 loan vintages continue to exhibit higher than average delinquency rates and/or account for a higher share of our 

credit losses. Our 2005 to 2008 loan vintages represented approximately 48% of the loans added to our seriously delinquent 
52

loan population as of March 31, 2015. In addition, loans in certain states such as Florida, Illinois, New Jersey and New York 

have exhibited higher than average delinquency rates and/or account for a higher share of our credit losses.

Table 28 displays the serious delinquency rates for, and the percentage of our total seriously delinquent single-family 

conventional loans represented by, the specified loan categories. We also include information for our loans in California, as 

this state accounts for a large share of our single-family conventional guaranty book of business. The reported categories are 

not mutually exclusive.

Table 28: Single-Family Conventional Seriously Delinquent Loan Concentration Analysis

As of

March 31, 2015 December 31, 2014 March 31, 2014

Percentage

of Book

Outstanding

Percentage 

of Seriously 

Delinquent 

Loans(1)

Serious

Delinquency

Rate

Percentage

of Book

Outstanding

Percentage 

of Seriously 

Delinquent 

Loans(1)

Serious

Delinquency

Rate

Percentage

of Book

Outstanding

Percentage 

of Seriously 

Delinquent 

Loans(1)

Serious

Delinquency

Rate

States:

California . . . . . . 20% 5% 0.66% 20% 5% 0.70% 20% 6% 0.86%

Florida . . . . . . . . 6 14 3.91 6 15 4.42 6 18 6.12

Illinois . . . . . . . . 4 6 2.20 4 6 2.36 4 6 2.79

New Jersey. . . . . 4 10 5.62 4 10 5.78 4 9 6.08

New York. . . . . . 5 11 4.04 5 10 4.17 5 9 4.31

All other states . . 61 54 1.43 61 54 1.52 61 52 1.70

Product type:

Alt-A . . . . . . . . . 4 18 7.41 4 18 7.77 5 19 8.72

Vintages:

2004 and prior . . 7 27 3.17 7 28 3.26 9 28 3.36

2005 . . . . . . . . . . 3 12 5.94 3 12 6.18 3 13 6.81

2006 . . . . . . . . . . 3 16 9.14 3 16 9.61 3 18 10.58

2007 . . . . . . . . . . 4 23 10.34 4 23 10.79 5 24 11.53

2008 . . . . . . . . . . 2 8 6.05 2 8 6.27 3 8 6.40

2009 . . . . . . . . . . 6 3 1.00 6 3 1.00 7 3 0.95

2010 . . . . . . . . . . 8 3 0.59 9 3 0.59 10 2 0.55

2011 . . . . . . . . . . 9 2 0.42 10 2 0.42 11 1 0.35

2012 . . . . . . . . . . 23 3 0.28 24 3 0.27 25 2 0.19

2013 . . . . . . . . . . 20 3 0.25 21 2 0.22 23 1 0.07

2014 . . . . . . . . . . 12 * 0.07 11 * 0.04 1 — —

2015 . . . . . . . . . . 3 — — — — — — — —

Estimated mark-tomarket LTV

ratio:

<= 60%. . . . . . . . 42 23 0.85 42 23 0.88 38 19 0.92

60.01% to 70%. . 19 12 1.29 19 12 1.36 19 11 1.39

70.01% to 80%. . 18 14 1.62 18 14 1.75 19 13 1.75

80.01% to 90%. . 10 14 2.76 10 14 3.04 11 13 3.15

90.01% to 100%. 6 12 4.08 6 12 4.59 6 13 4.86

Greater than 100%. 5 25 10.43 5 25 10.98 7 31 11.27

Credit 

enhancement(2):

Credit enhanced . 16 26 3.21 16 27 3.47 15 27 4.27

Non-credit

enhanced . . . . 84 74 1.53 84 73 1.62 85 73 1.85

__________

 * Represents less than 0.5% of single-family conventional business volume or book of business.
53

(1) Calculated based on the number of single-family loans that were seriously delinquent for each category divided by the total number of 

single-family conventional loans that were seriously delinquent.

(2) Refers to loans included in an agreement used to reduce credit risk by requiring collateral, letters of credit, mortgage insurance, 

corporate guarantees, or other agreements to provide an entity with some assurance that it will be compensated to some degree in the 

event of a financial loss. 

Loan Workout Metrics

Table 29 displays statistics on our single-family loan workouts that were completed, by type. 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 or forbearance plans that have been initiated but not completed. As of March 31, 2015, 

there were approximately 40,400 loans in a trial modification period.

Table 29: Statistics on Single-Family Loan Workouts

For the Three Months Ended March 31,

2015 2014

Unpaid

Principal

Balance

Number of

Loans

Unpaid

Principal

Balance

Number of

Loans

(Dollars in millions)

Home retention strategies:

Modifications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 4,415 26,700 $ 6,191 36,044

Repayment plans and forbearances completed(1). . . . . . . . . . . . . . 257 1,868 296 2,255

Total home retention strategies. . . . . . . . . . . . . . . . . . . . . . . . . . . 4,672 28,568 6,487 38,299

Foreclosure alternatives:

Short sales. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 758 3,689 1,374 6,804

Deeds-in-lieu of foreclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 304 1,968 528 3,323

Total foreclosure alternatives . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,062 5,657 1,902 10,127

Total loan workouts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 5,734 34,225 $ 8,389 48,426

Loan workouts as a percentage of single-family guaranty book of

business. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.81 % 0.79 % 1.17 % 1.10 %

__________

(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.

The volume of home retention solutions completed in the first quarter of 2015 decreased compared with the first quarter of 

2014, primarily due to a decline in the number of delinquent loans in the first quarter of 2015, compared with the first quarter 

of 2014.

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. 

Our loan modifications can include a reduction in the borrower’s interest rate that is fixed for an initial period and may be 

followed by one or more annual interest rate increases. The majority of these rate reset modifications are performing loans 

that were modified under HAMP and have fixed interest rates for an initial five-year period followed by annual interest rate 

increases, of up to one percent per year, until the mortgage rate reaches the prevailing market rate at the time of modification. 

The outstanding unpaid principal balance of rate reset modifications in our guaranty book of business was $86.5 billion as of 

March 31, 2015. During the first quarter of 2015, approximately 12% of these modified loans experienced an interest rate 

reset to a weighted average interest rate of 3.21%. In anticipation of potential financial hardship related to interest rate 

increases, we have directed servicers to evaluate rate reset modifications for a re-modification if the loan is at imminent risk 

of default and the borrower requests a loan modification or if the loan becomes 60 days delinquent within the first 12 months 

after an interest rate adjustment. Additionally, for borrowers with HAMP modifications we extended “pay for performance” 

incentives, in the form of principal curtailment, to encourage borrowers to stay current on their mortgages after the initial 

interest rate reset and to reduce their monthly payments in cases where the borrower chooses to re-amortize their unpaid 
54

principal balance following receipt of the incentive. See “MD&A—Risk Management—Credit Portfolio Summary—

Mortgage Rate Resets” in our 2014 Form 10-K for information on the timing of these initial interest rate resets. 

There is significant uncertainty regarding the ultimate long term success of our 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 2014 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 30 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 30: Single-Family Foreclosed Properties

For the Three Months

Ended March 31,

2015 2014

Single-family foreclosed properties (number of properties):

Beginning of period inventory of single-family foreclosed properties (REO)(1)

. . . . . . . . . . . 87,063 103,229

Acquisitions by geographic area:(2)

Midwest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,428 7,542

Northeast. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,128 3,417

Southeast. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,006 13,524

Southwest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,387 4,097

West . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,367 3,316

Total properties acquired through foreclosure(1). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24,316 31,896

Dispositions of REO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (32,060) (32,727)

End of period inventory of single-family foreclosed properties (REO)(1)

. . . . . . . . . . . . . . . . . 79,319 102,398

Carrying value of single-family foreclosed properties (dollars in millions) . . . . . . . . . . . . . . . $ 8,915 $ 10,492

Single-family foreclosure rate(3)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.56 % 0.73 %

__________

(1) Includes acquisitions through deeds-in-lieu of foreclosure. Also includes held for use properties, which are reported in our condensed 

consolidated balance sheets as a component of “Other assets.”

(2) See footnote 10 to “Table 26: Risk Characteristics of Single-Family Conventional Business Volume and Guaranty Book of Business” 

for states included in each geographic region.

(3) Estimated based on the annualized total number of properties acquired through foreclosure or deeds-in-lieu of foreclosure as a 

percentage of the total number of loans in our single-family guaranty book of business as of the end of each respective period.

The continued decrease in the number of our seriously delinquent single-family loans, as well as lengthy foreclosure 

timelines in a number of states, have resulted in a reduction in the number of REO acquisitions in the first quarter of 2015 as 

compared with the first quarter of 2014.

We continue to manage our REO inventory to appropriately manage costs and maximize sales proceeds. However, we are 

unable to market and sell a large portion of our inventory, primarily due to occupancy and state or local redemption or 

confirmation periods, which extends the amount of time it takes to bring our properties to a marketable state and eventually 

dispose of them. This results in higher foreclosed property expenses, which include costs related to maintaining the property 

and ensuring that the property is vacant. Additionally, before we market our foreclosed properties, we may choose to repair 

them in order to maximize the sales price and increase the likelihood that an owner occupant will purchase. The percent of 
55

properties we repair prior to marketing has increased as a result of market demand and our continued focus on stabilizing 

neighborhoods and increasing opportunities for owner occupants to purchase. 

Table 31 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 31: Single-Family Foreclosed Property Status

Percent of Single-Family

Foreclosed Properties

As of

March 31,

2015

December 31,

2014

Available-for-sale. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 % 28 %

Offer accepted(1)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 17

Appraisal stage(2)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 13

Unable to market:

Occupied status(3)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 12

Redemption status(4)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 7

Properties being repaired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 13

Rental property(5)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 2

Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 8

Total unable to market. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40 42

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 still occupied, and for which the eviction process is not yet complete.

(4) Properties that are within the period during which state laws allow the former mortgagor and second lien holders to redeem the 

property.

(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, market and 

sub-market trends and growth, the current and anticipated cash flows from the property, as well as the financial strength of 

the lender. 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 and credit losses in 

“Business Segment Results—Multifamily Business Results.”

Multifamily Acquisition Policy and Underwriting Standards

Our 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), with oversight from our Enterprise Risk Management division. Our primary multifamily delivery channel is the 

Delegated Underwriting and Servicing, or DUS®, program, which consists of large financial institutions and independent 

mortgage 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, loan size, market 

and/or other factors. Loans delivered to us by DUS lenders and their affiliates represented 94% of our multifamily guaranty 

book of business as of March 31, 2015 and December 31, 2014. 

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 
56

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 32 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.

Table 32: Multifamily Lender Risk-Sharing

As of

March 31,

2015

December 31,

2014

Lender risk-sharing:

DUS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86% 85%

Non-DUS negotiated . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 3

No recourse to the lender . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 12

Our maximum potential loss recovery from lenders under current risk-sharing agreements represents over 20% of the unpaid 

principal balance of our multifamily guaranty book of business as of March 31, 2015. These risk-sharing agreements not only 

transfer credit risk, but also better align our interest with that of the lender.

At the time of our purchase or guarantee of multifamily mortgage loans, we and our lenders rely on sound underwriting 

standards, which generally include third-party appraisals and cash flow analysis. Our standards for multifamily loans specify 

maximum original LTV ratio and minimum original debt service coverage ratio (“DSCR”) values that vary based on loan 

characteristics. Our experience has been that original LTV ratio and DSCR values have been reliable indicators of future 

credit performance.

Table 33 displays original LTV ratio and DSCR metrics for our multifamily guaranty book of business. 

Table 33: Multifamily Guaranty Book of Business Key Risk Characteristics

As of

March 31,

2015

December 31,

2014

March 31,

2014

Weighted average original LTV ratio. . . . . . . . . . . . . . . . . . . . . . . . . . . . 66% 66% 66%

Original LTV ratio greater than 80% . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 3 3

Original DSCR less than or equal to 1.10. . . . . . . . . . . . . . . . . . . . . . . . . 9 8 7

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, loan size, and credit enhancement coverage are important factors that 

influence credit performance and help reduce our credit risk.

We and our lenders monitor the performance and risk characteristics 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, calculated based on unpaid principal balance, with a current DSCR less than 1.0 was 

approximately 3% as of March 31, 2015 and December 31, 2014. Our estimates of current DSCRs are based on the latest 

available income information for these properties. Although we use the most recently available results from our multifamily 

borrowers, there is a lag in reporting, which typically can range from 3 to 6 months but in some cases may be longer. 

Multifamily Problem Loan Management and Foreclosure Prevention

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 and delinquencies to a low level relative to our 

multifamily guaranty book of business. The multifamily serious delinquency rate increased slightly from 0.05% as of 

December 31, 2014 to 0.09% as of March 31, 2015. We classify multifamily loans as seriously delinquent when payment is 

60 days or more past due.
57

REO Management

Table 34 displays our held-for-sale multifamily REO activity. 

Table 34: Multifamily Foreclosed Properties

For the Three

Months Ended

March 31,

2015 2014

Multifamily foreclosed properties held for sale (number of properties):

Beginning of period inventory of multifamily foreclosed properties (REO) . . . . . . . . . . . . . . . . . . . . . . . . . 62 118

Total properties acquired through foreclosure. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 17

Transfers from held for sale(1)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (4) (1)

Dispositions of REO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (6) (17)

End of period inventory of multifamily foreclosed properties (REO) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58 117

Carrying value of multifamily foreclosed properties (dollars in millions). . . . . . . . . . . . . . . . . . . . . . . . . . . $ 343 $ 575

________

(1) Represents the transfer of properties between held for use and held for sale. Held for use properties are reported in our condensed 

consolidated balance sheets as a component of “Other assets.”

Institutional Counterparty Credit Risk Management

Institutional counterparty credit risk is the risk that our institutional counterparties may fail to fulfill their contractual 

obligations to us. 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 2014 Form 10-K for additional information about institutional counterparty risk, including counterparty 

risk we face from mortgage originators, investors and dealers, from debt security dealers, from document custodians and 

from mortgage fraud.

Mortgage Sellers and Servicers

One of our primary exposures to institutional counterparty risk is with mortgage servicers that service the loans we hold in 

our retained mortgage portfolio or that back our Fannie Mae MBS, as well as mortgage sellers and servicers that are 

obligated to repurchase loans from us or reimburse us for losses in certain circumstances. We rely on mortgage servicers to 

meet our servicing standards and fulfill their servicing obligations. We also rely on mortgage sellers and servicers to fulfill 

their repurchase obligations.

Our five largest single-family mortgage servicers, including their affiliates, serviced approximately 45% of our single-family 

guaranty book of business as of March 31, 2015, compared with approximately 46% as of December 31, 2014. Our largest 

mortgage servicer is Wells Fargo Bank, N.A., which, together with its affiliates, serviced approximately 18% of our singlefamily guaranty book of business as of March 31, 2015 and December 31, 2014. As of March 31, 2015 and December 31, 

2014, one additional mortgage servicer, JPMorgan Chase Bank, N.A., with its affiliates, serviced over 10% of our singlefamily guaranty book of business.

Our ten largest multifamily mortgage servicers, including their affiliates, serviced approximately 68% of our multifamily 

guaranty book of business as of March 31, 2015, compared with approximately 67% as of December 31, 2014. Wells Fargo 

Bank, N.A. serviced over 10% of our multifamily guaranty book of business as of March 31, 2015 and December 31, 2014. 

As of December 31, 2014, one additional mortgage servicer, Walker & Dunlop, LLC serviced over 10% of our multifamily 

guaranty book of business.

We have seen an increasing shift in our single-family servicing book from depository financial institution servicers to nondepository servicers. As of March 31, 2015, 19% of our total single-family guaranty book of business, including 55% of our 

delinquent single-family loans, were serviced by our five largest non-depository servicers, compared with 18% of our total 

single-family guaranty book of business, including 48% of our delinquent single-family loans as of March 31, 2014. Certain 

of these servicers’ growth in recent years is due to acquisitions from both depository and other non-depository servicers. The 

shift from depository to non-depository servicers poses additional risks to us because non-depository servicers may have a 

greater reliance on third-party sources of liquidity and may, in the event of significant increases in delinquent loan volumes, 

have less financial capacity to advance funds on our behalf or satisfy repurchase requests or compensatory fee obligations. In 
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addition, the rapid expansion of these servicers’ servicing portfolios results in increased operational risk, which could 

negatively impact their ability to effectively manage their servicing portfolios. In addition, regulatory bodies have been 

reviewing the activities of some of our largest non-depository servicers. See “Risk Factors” in our 2014 Form 10-K for a 

discussion of the risk of our reliance on servicers.

Some of our loans are serviced by subsidiaries and/or affiliates of Ocwen Financial Corporation (“Ocwen”). Ocwen has been 

the subject of regulatory scrutiny and actions, as well as rating agency downgrades. We are working with Ocwen on the 

orderly transfer of a substantial portion of the servicing of our loans. As of March 31, 2015, approximately 3% of our total 

single-family guaranty book of business was serviced by Ocwen.

Our five largest single-family mortgage sellers, including their affiliates, accounted for approximately 32% of our singlefamily business acquisition volume in the first quarter of 2015, compared with approximately 37% in the first quarter of 

2014. Our largest mortgage seller is Wells Fargo Bank, N.A., which, together with its affiliates, accounted for approximately 

13% of our single-family business acquisition volume in the first quarter of 2015 and 2014. A number of our largest singlefamily mortgage seller counterparties have reduced or eliminated their purchases of mortgage loans from mortgage brokers 

and correspondent lenders in recent years, resulting in a decline in our single-family mortgage seller concentration. As a 

result, we are acquiring a greater portion of our business volume directly from non-depository and smaller depository 

financial institutions that may not have the same financial strength or operational capacity as our largest mortgage seller 

counterparties. We could be required to absorb losses on defaulted loans that a failed mortgage seller is obligated to 

repurchase from us if we determine there was an underwriting eligibility breach. See “Risk Factors” in our 2014 Form 10-K 

for a discussion of the risks to our business due to changes in the mortgage industry.

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 and/or servicers are obligated to 

either repurchase the loan or foreclosed property, reimburse us for our losses or provide other remedies unless the loan has 

become eligible for relief under our new representation and warranty framework. We refer to our demands that mortgage 

sellers and servicers meet these obligations collectively as repurchase requests. See “MD&A—Risk Management—Credit 

Risk Management—Institutional Counterparty Credit Risk Management—Mortgage Sellers and Servicers” in our 2014 Form 

10-K for a discussion of our mortgage sellers and servicers’ repurchase obligations.

Mortgage sellers and 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 or servicer, or a number of mortgage sellers or servicers, to fulfill repurchase obligations to us could result in 

an increase in our credit losses and credit-related expense, and have an 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 an adverse effect on our results of operations or financial condition. As of March 31, 2015 and 

December 31, 2014, in estimating our allowance for loan losses, we assumed no benefit from repurchase demands due to us 

from mortgage sellers or servicers that, in our view, lacked the financial capacity to honor their contractual obligations. The 

unpaid principal balance of our outstanding repurchase requests was $1.3 billion as of March 31, 2015, compared with $1.0 

billion as of December 31, 2014. See “MD&A—Risk Management—Credit Risk Management—Single-Family Mortgage 

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

our 2014 Form 10-K for a discussion of our repurchase requests.

Credit Guarantors

We use various types of credit guarantors to manage our single-family mortgage credit risk, including mortgage insurers, 

financial guarantors, reinsurers and lenders with risk sharing. 

Mortgage Insurers

We are generally required, pursuant to our charter, to obtain credit enhancements 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 

enhancements to manage our single-family mortgage credit risk, including primary and pool mortgage insurance coverage. 

Table 35 displays our risk in force for mortgage insurance coverage on single-family loans in our guaranty book of business 

and our insurance in force for our mortgage insurer counterparties. The table includes our top ten 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, 2015 and December 31, 2014. In addition, for our mortgage insurer counterparties not 

approved to write new business, we have provided the percentage of their claims payments that the counterparties are 

currently deferring based on the direction of their state regulators, referred to as their deferred payment obligation. Both our 

risk in force and our insurance in force increased in 2014 primarily due to the increase in our acquisition of loans with LTV
59

ratios greater than 80%, which generally are required to carry mortgage insurance. As of March 31, 2015 and December 31, 

2014, approximately 1% of our total risk in force mortgage insurance coverage was pool insurance and approximately 2% of 

our total insurance in force mortgage insurance coverage was pool insurance. 

Table 35: Mortgage Insurance Coverage

Risk in Force(1) Insurance in Force(2)

As of As of Deferred

March 31, December 31, March 31, December 31, Payment

2015 2014 2015 2014 Obligation %(3)

(Dollars in millions)

Counterparty:(4)

Approved:

(5)

United Guaranty Residential Insurance Co. . . . . . . . . . $ 25,327 $ 25,018 $ 98,083 $ 96,906

Radian Guaranty, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . 24,348 24,284 95,929 95,845

Mortgage Guaranty Insurance Corp. . . . . . . . . . . . . . . 22,449 22,184 86,982 86,069

Genworth Mortgage Insurance Corp.. . . . . . . . . . . . . . 15,639 15,477 62,021 61,408

Essent Guaranty, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . 7,009 6,637 29,072 27,679

Arch Mortgage Insurance Co. . . . . . . . . . . . . . . . . . . . 3,177 3,049 12,843 12,267

National Mortgage Insurance Corp. . . . . . . . . . . . . . . . 663 468 7,007 6,286

Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 197 185 1,172 1,092

Total approved. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98,809 97,302 393,109 387,552

Not approved:

(5)

PMI Mortgage Insurance Co.(6)

. . . . . . . . . . . . . . . . . . 5,629 5,895 22,559 23,655 30%

(7)

Republic Mortgage Insurance Co.(6)(8)

. . . . . . . . . . . . . 4,585 4,796 18,445 19,393 —

(8)

Triad Guaranty Insurance Corp.(6)

. . . . . . . . . . . . . . . . 1,526 1,585 5,558 5,858 25%

Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 12 54 57

Total not approved. . . . . . . . . . . . . . . . . . . . . . . . . . . 11,751 12,288 46,616 48,963

Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 110,560 $ 109,590 $ 439,725 $ 436,515

Total as a percentage of single-family guaranty book of

business. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 % 4 % 15 % 15 %

__________

(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) Deferred payment obligation represents the percentage of cash payments on policyholder claims being deferred as directed by the 

insurer’s respective regulator in the state of domicile as of May 7, 2015.

(4) Insurance coverage amounts provided for each counterparty may include coverage provided by consolidated affiliates and subsidiaries 

of the counterparty.

(5) “Approved” mortgage insurers are counterparties approved to write new insurance with us. “Not approved” mortgage insurers are 

counterparties that are no longer approved to write new insurance with us.

(6) These mortgage insurers are under various forms of supervised control by their state regulators and are in run-off.

(7) Effective April 10, 2015, PMI increased its cash payments on policyholder claims from 67% to 70%, and subsequently paid sufficient 

amounts of its outstanding deferred payment obligations to bring payment on those claims to 70%. It is uncertain whether PMI will be 

permitted in the future to pay any remaining deferred policyholder claims or increase or decrease the amount of cash they pay on 

claims.

(8) Effective July 1, 2014, the terms of RMIC’s order regarding its deferred payment arrangements changed to no longer defer payments on 

policyholder claims and to increase its cash payments to 100%. In addition, RMIC paid us amounts equivalent to its outstanding 

deferred payment obligations to bring payment on our claims to 100%.

On April 17, 2015, Fannie Mae published updated eligibility standards for approved private mortgage insurers, pursuant to a 

directive issued by FHFA to both Fannie Mae and Freddie Mac. The new standards, effective immediately for new applicants 

and on December 31, 2015 for existing approved insurers, include enhanced financial requirements, including risk-based and 

minimum asset standards and are designed to ensure that mortgage insurers have sufficient liquid assets to pay all claims 
60

under a hypothetical future stress scenario. The new standards also set forth enhanced operational performance expectations 

and define remedial actions that may be imposed should an approved mortgage insurer fail to comply with the revised 

requirements. In addition, Fannie Mae and Freddie Mac established a framework and timelines for existing approved 

mortgage insurers to come into compliance with the new standards while they continue to insure new business eligible for 

delivery to us.

Although the financial condition of our primary mortgage insurer counterparties currently approved to write new business has 

improved in recent years, there is still risk that these counterparties may fail to fulfill their obligations to pay our claims under 

insurance policies. In addition, as shown in “Table 35: Mortgage Insurance Coverage,” three of our top mortgage insurer 

counterparties—PMI, RMIC and Triad—are currently under various forms of supervised control by their state regulators and 

are in run-off, which increases the risk that these counterparties will pay claims only in part or fail to pay claims at all under 

existing insurance policies.

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 amount by which our estimated benefit from mortgage insurance reduced our total loss reserves was $2.9 billion as of 

March 31, 2015 and $4.1 billion as of December 31, 2014.

When an insured loan held in our retained mortgage portfolio 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 or servicer. We had outstanding receivables of $1.5 

billion recorded in “Other assets” in our condensed consolidated balance sheets as of March 31, 2015 and $1.4 billion as of 

December 31, 2014 related to amounts claimed on insured, defaulted loans excluding government insured loans. Of this 

amount, $360 million as of March 31, 2015 and $269 million as of December 31, 2014 was due from our mortgage sellers or 

servicers. We assessed the total outstanding receivables for collectibility, and they are recorded net of a valuation allowance 

of $870 million as of March 31, 2015 and $799 million as of December 31, 2014. The valuation allowance reduces our claim 

receivable to the amount which is considered probable of collection as of March 31, 2015 and December 31, 2014.

Financial Guarantors

We are the beneficiary of non-governmental financial guarantees on non-agency securities held in our retained mortgage 

portfolio and on non-agency securities that have been resecuritized to include a Fannie Mae guaranty and sold to third parties. 

The total unpaid principal balance of guaranteed non-agency securities in our retained mortgage portfolio was $4.1 billion as 

of March 31, 2015 and $4.6 billion as of December 31, 2014. See “Note 16, Concentrations of Credit Risk—Financial 

Guarantors” in our 2014 Form 10-K for a further discussion of our exposure to financial guarantors.

We are also the beneficiary of financial guarantees included in securities issued by Freddie Mac, the federal government and 

its agencies that totaled $19.0 billion as of March 31, 2015 and $19.2 billion as of December 31, 2014.

Reinsurers

See “MD&A—Risk Management—Credit Risk Management—Institutional Counterparty Credit Risk Management—Credit 

Guarantors—Reinsurers” in our 2014 Form 10-K for information about reinsurers.

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 $8.5 billion as of March 31, 2015, compared with $8.9 billion as of December 31, 2014. As of 

March 31, 2015 and December 31, 2014, 47% 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 $42.9 billion as of March 31, 2015, compared with $41.7 billion as of December 31, 2014. As of 

March 31, 2015 and December 31, 2014, 32% of our maximum potential loss recovery on multifamily loans was from three

DUS lenders.

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 48% as of March 31, 2015, compared with 49% as of December 31, 2014. The 
61

percentage of recourse obligations from lender counterparties rated below investment grade was 23% as of March 31, 2015

and December 31, 2014. The percentage of remaining recourse obligations from lender counterparties that were not rated by 

rating agencies was 29% of as of March 31, 2015, compared with 28% as of December 31, 2014. 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 above in “Multifamily Mortgage Credit Risk Management—Multifamily Acquisition Policy and Underwriting 

Standards,” our primary multifamily delivery channel is our DUS program, which consists of lenders that range from large 

depositories to independent non-bank financial institutions. As of March 31, 2015 and December 31, 2014 approximately 

36% 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. 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 $39.3 billion in deposits for single-family payments were received and held by 270 institutions during the month of 

March 2015 and a total of $33.2 billion in deposits for single-family payments were received and held by 269 institutions 

during the month of December 2014. Of these total deposits, 93% as of March 31, 2015 and December 31, 2014, 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 82% of these deposits as of March 31, 2015, compared 

with 83% as of December 31, 2014.

We evaluate our custodial depository institutions to determine whether they are eligible to hold deposits on our behalf based 

on requirements specified in our Servicing Guide. 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 2015, approximately $3.8 billion, 

or 10%, 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 $2.4 billion, or 7%, during the month of December 2014. 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.

Counterparty Credit Exposure of Investments Held in our Cash and Other Investments Portfolio

Our cash and other investments portfolio consists of cash and cash equivalents, 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, 2015 and December 31, 2014, we held $2.0 billion

short-term unsecured deposits with two financial institutions that had short-term credit rating of A-1 from S&P (or its 

equivalent), based on the lowest credit rating issued by S&P, Moody’s and Fitch, and no other unsecured positions other than 

U.S. Treasury securities. 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 derivative contracts. We are exposed to the risk 

that a counterparty in a derivative transaction will default on payments due to us, which may require us to seek a replacement 

derivative from a different counterparty. This replacement may be at a higher cost, or we may be unable to find a suitable 

replacement. Historically, our risk management derivative transactions have been made pursuant to bilateral contracts with a 

specific counterparty governed by the terms of an International Swaps and Derivatives Association Inc. master agreement. 

Pursuant to regulations implementing the Dodd-Frank Act that became effective in June 2013, we are required to submit 

certain categories of new interest rate swaps to a derivatives clearing organization. We refer to our derivative transactions 
62

made pursuant to bilateral contracts as our over-the-counter (“OTC”) derivative transactions and our derivative transactions 

accepted for clearing by a derivatives clearing organization as our cleared derivative transactions.

We manage our derivative counterparty credit exposure relating to our OTC derivative transactions through enforceable 

master netting arrangements. These arrangements allow us to net derivative assets and liabilities with the same counterparty. 

We also manage our derivative counterparty exposure relating to our OTC derivative transactions by requiring counterparties 

to post collateral, which includes cash, U.S. Treasury securities, agency debt and agency mortgage-related securities.

Our cleared derivative transactions are submitted to a derivatives clearing organization on our behalf through a clearing 

member of the organization. A contract accepted by a derivatives clearing organization is governed by the terms of the 

clearing organization’s rules and arrangements between us and the clearing member of the clearing organization. As a result, 

we are exposed to the institutional credit risk of both the derivatives clearing organization and the member who is acting on 

our behalf. We manage our credit exposure relating to our cleared derivative transactions through enforceable master netting 

arrangements. These arrangements allow us to net our exposure to cleared derivatives by clearing organization and by 

clearing member. 

Our institutional credit risk exposure to derivatives clearing organizations and certain of their members will increase 

substantially in the future as cleared derivative contracts comprise a larger percentage of our derivative instruments. 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. 

The fair value of derivatives in a gain position is included in our condensed consolidated balance sheets in “Other assets.” 

Total exposure net of collateral represents the exposure to credit loss on derivative instruments less the cash and non-cash 

collateral posted by our counterparties to us. This does not include collateral held in excess of exposure. As of March 31, 

2015 and December 31, 2014, our total exposure net of collateral was $27 million. Most of our total exposure net of collateral 

consists of mortgage insurance contracts accounted for as derivatives as of March 31, 2015 and December 31, 2014.

As of March 31, 2015 and December 31, 2014, we had sixteen counterparties with which we may transact OTC derivative 

transactions, all of which were subject to enforceable master netting arrangements. We had outstanding notional amounts 

with all of these counterparties, and the highest concentration by our total outstanding notional amount was approximately 

9% as of March 31, 2015 and 11% as of December 31, 2014.

See “Note 9, Derivative Instruments” and “Note 14, Netting Arrangements” for additional information on our derivative 

contracts as of March 31, 2015 and December 31, 2014.

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 or basis 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 2014 Form 10-K.

Measurement of Interest Rate Risk

Below we present two quantitative metrics that provide estimates of our interest rate risk exposure: (1) fair value sensitivity 

of our net portfolio to changes in interest rate levels and slope of yield curve; and (2) duration gap. Our net portfolio consists 

of our retained mortgage portfolio assets; cash and other investment portfolio; our outstanding debt of Fannie Mae that is 

used to fund the retained mortgage portfolio assets and cash and other investment portfolio; mortgage commitments and risk 

management derivatives. Risk management derivatives along with our debt instruments are used to manage interest rate risk. 

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.
63

Interest Rate Sensitivity to Changes in Interest Rate Level and Slope of Yield Curve

Pursuant to a disclosure commitment 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 in our net portfolio 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 scenarios to those 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 Web site 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 the price sensitivity of 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 our net 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 retained mortgage 

portfolio and our investments in non-mortgage securities. As a result, the degree to which the interest rate sensitivity of our 

retained mortgage portfolio and our investments in non-mortgage securities is offset will be dependent upon, among other 

factors, the mix of funding and other risk management derivative instruments we use at any given point in time.

The market value sensitivities of our net portfolio are a function of both the duration and the convexity of our net portfolio. 

Duration provides a measure of the price sensitivity of a financial instrument to changes in interest rates while convexity 

reflects the degree to which the duration of the assets and liabilities in our net portfolio changes in response to a given change 

in interest rates. We use convexity measures to provide us with information about how quickly and by how much our net 

portfolio’s duration may change in different interest rate environments. The market value sensitivity of our net portfolio will 

depend on a number of factors, including the interest rate environment, modeling assumptions and the composition of assets 

and liabilities in our net portfolio, which vary over time. 

Results of Interest Rate Sensitivity Measures

The interest rate risk measures discussed below exclude the impact of changes in the fair value of our guaranty assets and 

liabilities 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.

Table 36 displays the pre-tax market value sensitivity of our net portfolio to changes in the level of interest rates and the slope 

of the yield curve as measured on the last day of each period presented. In addition, Table 36 also provides the daily average, 

minimum, maximum and standard deviation values for duration gap and for the most adverse market value impact on the net 

portfolio to changes in the level of interest rates and the slope of the yield curve for the three months ended March 31, 2015

and 2014. 

The sensitivity measures displayed in Table 36, which we disclose on a quarterly basis pursuant to a disclosure commitment 

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 
64

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 36: Interest Rate Sensitivity of Net Portfolio to Changes in Interest Rate Level and Slope of Yield Curve(1)

As of

March 31, 2015(2) December 31, 2014(2)

(Dollars in billions)

Rate level shock:

-100 basis points . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 0.4 $ 0.4

-50 basis points . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.1 0.1

+50 basis points . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (0.0) (0.1)

+100 basis points . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (0.1) (0.1)

Rate slope shock:

-25 basis points (flattening) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (0.0) 0.0

+25 basis points (steepening). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.0 (0.0)

For the Three Months Ended March 31, 2015(3)

Duration

Gap

Rate Slope Shock

25 Bps

Rate Level Shock

50 Bps

Exposure

(In months) (Dollars in billions)

Average . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.2 $ 0.0 $ 0.0

Minimum. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (0.5) 0.0 —

Maximum . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.1 0.1 0.1

Standard deviation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.4 0.0 0.0

For the Three Months Ended March 31, 2014(3)

Duration

Gap

Rate Slope Shock 

25 Bps

Rate Level Shock

50 Bps

Exposure

(In months) (Dollars in billions)

Average . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (0.1) $ 0.0 $ 0.1

Minimum. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (0.5) 0.0 0.0

Maximum . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.3 0.1 0.1

Standard deviation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.1 0.0 0.0

__________

(1) Computed based on changes in U.S. LIBOR interest rates swap curve.

(2) Measured on the last day of each period presented.

(3) Computed based on daily values during the period presented.

The market value sensitivity of our net portfolio varies across a range of interest rate shocks depending upon the duration and 

convexity profile of our net portfolio. The average duration gap was 0.2 months for the three months ended March 31, 2015, 

which is consistent with the average duration gap for the three months ended March 31, 2014. Because the effective duration 

gap of our net portfolio was close to zero months in the periods presented, convexity risk was the primary driver of the 

market value sensitivity of our net portfolio in those periods.

A majority of the interest rate risk associated with our mortgage-related securities and loans is hedged with our debt 

issuances, which include 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 37 displays an example of how derivatives impacted the net market value exposure 

for a 50 basis point parallel interest rate shock.
65

Table 37: Derivative Impact on Interest Rate Risk (50 Basis Points)(1)

As of

March 31, 2015 December 31, 2014

(Dollars in billions)

Before Derivatives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (1.7) $ (1.9)

After Derivatives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (0.0) (0.1)

Effect of Derivatives. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.7 1.8

__________

(1) Measured on the last day of each period presented.

Liquidity Risk Management

See “MD&A—Liquidity and Capital Management—Liquidity Management” in our 2014 Form 10-K and in this report for a 

discussion of how we manage liquidity risk.

Operational Risk Management

See “MD&A—Risk Management—Operational Risk Management” in our 2014 Form 10-K for information on operational 

risks that we face and our framework for managing operational risk.

IMPACT OF FUTURE ADOPTION OF NEW ACCOUNTING GUIDANCE

We identify and discuss the expected impact on our condensed consolidated financial statements of recently issued 

accounting guidance in “Note 1, Summary of Significant Accounting Policies.” 

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,” “will” or similar words. 

Among the forward-looking statements in this report are statements relating to: 

• Our expectation that we will remain profitable on an annual basis for the foreseeable future;

• Our expectation that our earnings in 2015 and future years will be substantially lower than our earnings for 2014, 

primarily due to our expectation of substantially lower income from resolution agreements, continued declines in net 

interest income from our retained mortgage portfolio assets and lower credit-related income;

• Our expectation that certain factors, such as changes in interest rates or home prices, could result in significant 

volatility in our financial results from quarter to quarter or year to year;

• Our expectation that our future financial results also will be affected by a number of other factors, including: our 

guaranty fee rates; the volume of single-family mortgage originations in the future; the size, composition and quality 

of our retained mortgage portfolio and guaranty book of business; and economic and housing market conditions; 

• Our expectation of volatility from period to period in our financial results from a number of factors, particularly 

changes in market conditions that result in periodic fluctuations in the estimated fair value of the financial 

instruments that we mark to market through our earnings;

• Our expectation that we will continue engaging in economically sensible ways to expand our offerings of credit risk 

transfer transactions in the future;

• Our expectation that we will pay Treasury a senior preferred stock dividend of $1.8 billion by June 30, 2015 for the 

second quarter of 2015;
66

• Our expectation that we will retain only a limited amount of any future net worth because we are required by the 

dividend provisions of the senior preferred stock and quarterly directives from our conservator to 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 our acquisition of single-family loans with 95.01% to 97% LTV ratios will not materially affect 

our overall credit risk because of our expectations that (1) these loans will constitute a small portion of our 

acquisitions overall, although their volume will increase, and (2) our eligibility requirements for these loans will 

limit their effect on our overall credit risk;

• Our expectation that our single-family acquisitions will continue to have a strong overall credit risk profile given 

our current underwriting and eligibility standards and product design;

• Our belief that Collateral Underwriter’s integration with Desktop Underwriter will enhance our lenders’ risk 

management and underwriting capabilities;

• The expectation that, with the enhanced requirements FHFA announced in March 2015, NPL sales will result in 

favorable outcomes for borrowers and local communities;

• Our plan to build NPL sales into a programmatic offering, and the outcome of the marketing efforts for our first bulk 

sale of NPL, which we began in April 2015;

• The estimate that there will be approximately 340,000 new multifamily units completed in 2015;

• Our belief that the increase in the supply of multifamily units concentrated in a limited number of metropolitan areas 

in 2015 will result in a temporary slowdown in net absorption rates, occupancy levels and effective rents in those 

areas throughout 2015;

• Our expectation that overall national rental market supply and demand will remain in balance over the longer term, 

based on expected construction completions, expected obsolescence, positive household formation trends and 

expected increases in the population of 20- to 34-year olds, which is the primary age group that tends to rent 

multifamily housing;

• Our expectation that significant uncertainty regarding the future of our company and the housing finance system will 

continue;

• Our expectation that the guaranty fees we receive for managing the credit risk on loans underlying Fannie Mae MBS 

held by third parties will continue to account for an increasing portion of our net interest income;

• Our expectation that continued decreases in the size of our retained mortgage portfolio will continue to negatively 

impact our net interest income and net revenues;

• Our expectation that increases in our guaranty fee revenues will partially offset the negative impact of the decline in 

our retained mortgage portfolio, 

• Our expectation that our guaranty fee revenues will increase over the next several years, as loans with lower 

guaranty fees liquidate from our book of business and are replaced with new loans with higher guaranty fees;

• Our expectation that the extent to which the positive impact of increased guaranty fee revenues will offset the 

negative impact of the decline in the size of our retained mortgage portfolio will depend on many factors, including: 

changes to guaranty fee pricing we may make in the future and their impact on our competitive environment and 

guaranty fee revenues; the size, composition and quality of our guaranty book of business; the nature and volume of 

transactions we enter into to transfer credit risk; the life of the loans in our guaranty book of business; the size, 

composition and quality of our retained mortgage portfolio, including the pace at which we are required by our 

conservator to reduce the size of our portfolio and the types of assets we are required to sell; economic and housing 

market conditions, including changes in interest rates; our market share; and legislative and regulatory changes;

• Our expectation that single-family mortgage loan serious delinquency and severity rates will continue their 

downward trend, but at a slower pace than in recent years;

• Our expectation that single-family serious delinquency and severity rates will remain high compared with prehousing crisis levels because it will take some time for the remaining delinquent loans with high mark-to-market 

LTV ratios originated prior to 2009 to work their way through the foreclosure process; 

• Our expectation that, despite steady demand and stable fundamentals at the national level, the multifamily sector 

may continue to exhibit below average fundamentals in certain local markets and with certain properties;
67

• Our forecast that total originations in the U.S. single-family mortgage market in 2015 will increase from 2014 levels 

by approximately 14%, from an estimated $1.2 trillion in 2013 to $1.4 trillion in 2014;

• Our forecast that the amount of originations in the U.S. single-family mortgage market that are refinancings will 

increase from an estimated $507 billion in 2014 to $609 billion in 2015;

• Our expectation that the rate of home price appreciation in 2015 will be similar to the rate in 2014;

• Our expectation of significant regional variation in the timing and rate of home price growth;

• Our expectation that our credit losses will resume their downward trend in future quarters;

• Our expectation that our approach to adopting the Advisory Bulletin’s charge-off provisions and our charge-offs 

resulting from implementing our change in accounting policy for nonaccrual loans will decrease the amount of 

future charge-offs on these same loans from what they otherwise would have been;

• Our expectation that, although our loss reserves have declined substantially from their peak and are expected to 

decline further, our loss reserves will remain elevated relative to the levels experienced prior to the 2008 housing 

crisis 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; 

• The expectations that, since all of the guaranty fee changes FHFA directed us to implement in April 2015 are small, 

the adjustments will not cause any material changes to our loan volume in any of the relevant loan categories and 

that the small changes will be revenue neutral;

• Our expectation that we will allocate $52 million that we accrued in the first quarter of 2015, plus additional 

amounts to be accrued based on our new business purchases in subsequent quarters of 2015, in February 2016 to 

HUD’s Housing Trust Fund and Treasury’s Capital Magnet Fund;

• Our expectation that guaranty fees collected and expenses incurred under the TCCA will continue to increase in the 

future;

• Our expectation that, as we continue to reduce the size of our retained mortgage portfolio, our revenues generated by 

our retained mortgage portfolio will decrease;

• Our belief that our liquidity contingency plan may be difficult or impossible to execute for a company of our size 

and in our circumstances;

• 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 expectation that we may also use proceeds from our mortgage assets to pay our debt obligations;

• Our expectation that we will not eliminate our deficit of core capital over statutory minimum capital;

• 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 approach the March 31, 2015 serious delinquency rates of loans 

acquired in 2005 through 2008;

• Our expectation that 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;

• Our expectation that loans we acquire under Refi Plus and HARP will perform better than the loans they replace 

because they 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);

• Our expectation that the volume of refinancings under HARP will continue to decline, due to a decrease in the 

population of borrowers with loans that have high LTV ratios who are willing to refinance and would benefit from 

refinancing; 

• Our belief that the slow pace of single-family foreclosures in certain areas of the country will continue to negatively 

affect our single-family serious delinquency rates, foreclosure timelines and credit-related income (expense);

• Our expectation that the number of our single-family loans in our book of business that are seriously delinquent will 

remain above pre-2008 levels for years;
68

• Our expectation that, as a result of allowing lenders to remit payments equal to our losses on loans after we have 

disposed of the related REO, our actual cash receipts relating to our outstanding repurchase requests will be 

significantly lower than the unpaid principal balance of the loans;

• Our belief that retaining special servicers to service loans using high-touch protocols will reduce our future credit 

losses on the transferred loan portfolio;

• 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 them, 

and our expectation that, depending on the financial strength of the counterparty, we may require a lender to pledge 

collateral to secure its recourse obligations; 

• Our expectation that we will not remediate the material weakness relating to our disclosure controls and procedures 

while we are in conservatorship; 

• Our expectation that Congress will continue to hold hearings and consider legislation on the future status of Fannie 

Mae and Freddie Mac, including proposals that would result in Fannie Mae’s liquidation or dissolution; and

• Our belief that changes or perceived changes in federal government support of our business or our status as a GSE 

could materially and adversely affect our liquidity, financial condition and results of operations.

Forward-looking statements reflect our management’s or in some cases FHFA’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; 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 and the impact of that pricing on our competitive environment and guaranty fee revenues; challenges we 

face in retaining and hiring qualified employees; our future serious delinquency rates; 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; actions we may be required to take by FHFA, as our conservator or as our regulator, such as changes in the type of 

business we do or implementation of a single GSE security; our future objectives and activities in support of those objectives, 

including actions we may take to reach additional underserved creditworthy borrowers; a decrease in our credit ratings; 

limitations on our ability to access the debt capital markets; disruptions in the housing and credit markets; significant changes 

in modification and foreclosure activity; the volume and pace of future NPL sales and their impact on our results and serious 

delinquency rates; changes in borrower behavior; the effectiveness of our loss mitigation strategies, management of our REO 

inventory and pursuit of contractual remedies; defaults by one or more institutional counterparties; resolution or settlement 

agreements we may enter into with our counterparties; our need to rely on third parties to fully achieve some of our corporate 

objectives; our reliance on mortgage servicers; changes in GAAP; guidance by the Financial Accounting Standards Board 

(“FASB”); future changes to our accounting policies; changes in the fair value of our assets and liabilities; operational control 

weaknesses; our reliance on models; future updates to our models, including the assumptions used by these models; the level 

and volatility of interest rates and credit spreads; changes in the fiscal and monetary policies of the Federal Reserve; changes 

in the structure and regulation of the financial services industry; credit availability; global political risks; natural disasters, 

terrorist attacks, pandemics or other major disruptive events; information security breaches; and those factors described in 

“Risk Factors” in this report and in our 2014 Form 10-K, 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 2014 Form 10-K and in this report. These 

forward-looking statements are representative only as of the date they are made, and we undertake no obligation to update 

any forward-looking statement as a result of new information, future events or otherwise, except as required under the federal 

securities laws. 
69

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,

2015 2014

ASSETS

Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 23,860 $ 22,023

Restricted cash (includes $36,921 and $27,515, respectively, related to consolidated trusts) . . . . . . . . . . . . . . . . . . . . . . . 41,439 32,542

Federal funds sold and securities purchased under agreements to resell or similar arrangements. . . . . . . . . . . . . . . . . . . . 20,230 30,950

Investments in securities:

Trading, at fair value. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31,286 31,504

Available-for-sale, at fair value (includes $468 and $596, respectively, related to consolidated trusts) . . . . . . . . . . . . 27,732 30,654

Total investments in securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59,018 62,158

Mortgage loans:

Loans held for sale, at lower of cost or fair value. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 613 331

Loans held for investment, at amortized cost:

Of Fannie Mae . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 265,700 272,360

Of consolidated trusts (includes $15,570 and $15,629, respectively, at fair value) . . . . . . . . . . . . . . . . . . . . . . . . . . 2,778,623 2,782,344

Total loans held for investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,044,323 3,054,704

Allowance for loan losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (31,820) (35,541)

Total loans held for investment, net of allowance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,012,503 3,019,163

Total mortgage loans. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,013,116 3,019,494

Accrued interest receivable, net (includes $7,259 and $7,169, respectively, related to consolidated trusts). . . . . . . . . . . . 7,990 8,193

Acquired property, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,518 10,618

Deferred tax assets, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41,983 42,206

Other assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,959 19,992

Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,238,113 $ 3,248,176

LIABILITIES AND EQUITY

Liabilities:

Accrued interest payable (includes $8,223 and $8,282, respectively, related to consolidated trusts). . . . . . . . . . . . . . . . $ 10,324 $ 10,232

Federal funds purchased and securities sold under agreements to repurchase . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87 50

Debt:

Of Fannie Mae (includes $7,920 and $6,403, respectively, at fair value) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 448,740 460,443

Of consolidated trusts (includes $21,373 and $19,483, respectively, at fair value) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,763,891 2,761,712

Other liabilities (includes $437 and $503, respectively, related to consolidated trusts) . . . . . . . . . . . . . . . . . . . . . . . . . . 11,475 12,019

Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,234,517 3,244,456

Commitments and contingencies (Note 16) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — —

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. . . . . . . . . . . . . . . . 19,130 19,130

Common stock, no par value, no maximum authorization—1,308,762,703 shares issued and 1,158,082,750 shares

outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

687 687

Accumulated deficit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (127,651) (127,618)

Accumulated other comprehensive income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,641 1,733

Treasury stock, at cost, 150,679,953 shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (7,401) (7,401)

Total Fannie Mae stockholders’ equity. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,555 3,680

Noncontrolling interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41 40

Total equity (See Note 1: Impact of U.S. Government Support for information on our dividend obligation to 

Treasury). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,596 3,720

Total liabilities and equity. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,238,113 $ 3,248,176

See Notes to Condensed Consolidated Financial Statements
70

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,

2015 2014

Interest income:

Trading securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 115 $ 127

Available-for-sale securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 376 440

Mortgage loans (includes $24,622 and $25,954, respectively, related to consolidated trusts). . . . . . . . . . . . . . . . . . . . . . . . . . . . 27,044 28,588

Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33 24

Total interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27,568 29,179

Interest expense:

Short-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29 20

Long-term debt (includes $20,515 and $22,076, respectively, related to consolidated trusts). . . . . . . . . . . . . . . . . . . . . . . . . . . . 22,472 24,421

Total interest expense. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22,501 24,441

Net interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,067 4,738

Benefit for credit losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 533 774

Net interest income after benefit for credit losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,600 5,512

Investment gains, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 342 95

Fair value losses, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,919) (1,190)

Debt extinguishment gains, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 —

Fee and other income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 308 4,355

Non-interest (loss) income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,261) 3,260

Administrative expenses:

Salaries and employee benefits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 351 325

Professional services. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 271 242

Occupancy expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43 50

Other administrative expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58 55

Total administrative expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 723 672

Foreclosed property expense (income) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 473 (262)

Temporary Payroll Tax Cut Continuation Act of 2011 (“TCCA”) fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 382 322

Other expenses, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 131

Total expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,581 863

Income before federal income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,758 7,909

Provision for federal income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (870) (2,584)

Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,888 5,325

Other comprehensive income:

Changes in unrealized gains on available-for-sale securities, net of reclassification adjustments and taxes. . . . . . . . . . . . . . . . . (91) 372

Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1) —

Total other comprehensive (loss) income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (92) 372

Total comprehensive income attributable to Fannie Mae . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,796 $ 5,697

Net income attributable to Fannie Mae . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,888 5,325

Dividends available for distribution to senior preferred stockholder (Note 10) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,796) (5,692)

Net income (loss) attributable to common stockholders (Note 10). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 92 $ (367)

Earnings (loss) per share:

Basic. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 0.02 $ (0.06)

Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.02 (0.06)

Weighted-average common shares outstanding:

Basic. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,762 5,762

Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,893 5,762

See Notes to Condensed Consolidated Financial Statements
71

FANNIE MAE

(In conservatorship)

Condensed Consolidated Statements of Cash Flows — (Unaudited)

(Dollars in millions)

For the Three Months

Ended March 31,

2015 2014

Net cash used in operating activities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (1,249) $ (1,321)

Cash flows provided by investing activities:

Proceeds from maturities and paydowns of trading securities held for investment . . . . . . . . . . . . . . . . . . . . . . . 296 333

Proceeds from sales of trading securities held for investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 483 486

Proceeds from maturities and paydowns of available-for-sale securities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,232 1,446

Proceeds from sales of available-for-sale securities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,171 35

Purchases of loans held for investment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (44,460) (24,486)

Proceeds from repayments and sales of loans acquired as held for investment of Fannie Mae . . . . . . . . . . . . . . 5,348 6,217

Proceeds from repayments and sales of loans acquired as held for investment of consolidated trusts . . . . . . . . 124,849 80,610

Net change in restricted cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (8,897) 4,412

Advances to lenders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (30,804) (20,501)

Proceeds from disposition of acquired property and preforeclosure sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,490 6,329

Net change in federal funds sold and securities purchased under agreements to resell or similar arrangements. 10,720 26,225

Other, net. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 154 (385)

Net cash provided by investing activities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66,582 80,721

Cash flows used in financing activities:

Proceeds from issuance of debt of Fannie Mae . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 114,467 69,086

Payments to redeem debt of Fannie Mae . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (126,608) (117,058)

Proceeds from issuance of debt of consolidated trusts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68,943 58,216

Payments to redeem debt of consolidated trusts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (118,409) (87,643)

Payments of cash dividends on senior preferred stock to Treasury . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,920) (7,191)

Other, net. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31 18

Net cash used in financing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (63,496) (84,572)

Net increase (decrease) in cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,837 (5,172)

Cash and cash equivalents at beginning of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22,023 19,228

Cash and cash equivalents at end of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 23,860 $ 14,056

Cash paid during the period for:

Interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 26,235 $ 26,567

Income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 425

See Notes to Condensed Consolidated Financial Statements
FANNIE MAE

(In conservatorship)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

72

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 conservatorship has no specified termination date and there continues to be significant uncertainty regarding our future, 

including how long we will continue to exist in our current form, the extent of our role in the market, what form we will 

have, what ownership interest, if any, our current common and preferred stockholders will hold in us after the conservatorship 

is terminated and whether we will continue to exist following conservatorship. Under the GSE Act, FHFA must place us into 

receivership if the Director of FHFA makes a written determination that our assets are less than our obligations or if we have 

not been paying our debts, in either case, for a period of 60 days. In addition, the Director of FHFA may place us in 

receivership at his discretion at any time for other reasons set forth in the GSE Act, including if we are undercapitalized and 

have no reasonable prospect of becoming adequately capitalized. Should we be placed into receivership, different 

assumptions would be required to determine the carrying value of our assets, which could lead to substantially different 

financial results. 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 from 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.

We believe that continued federal government support of our business, 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 or our 

status as a GSE could materially and adversely affect our liquidity, financial condition and results of operations.

Pursuant to the senior preferred stock purchase agreement, Treasury has committed to provide us with funding 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, 2015. The 

aggregate liquidation preference of the senior preferred stock, including the initial aggregate liquidation preference of $1.0 

billion, was $117.1 billion as of March 31, 2015. As of March 31, 2015, the amount of remaining funding available to us 

under the senior preferred stock purchase agreement was $117.6 billion.

Based on the terms of the senior preferred stock, we paid Treasury a dividend of $1.9 billion on March 31, 2015 based on our 

net worth of $3.7 billion as of December 31, 2014 less the applicable capital reserve of $1.8 billion. We expect to pay 
FANNIE MAE

(In conservatorship)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(UNAUDITED)

73

Treasury an additional dividend of $1.8 billion by June 30, 2015 based on our net worth of $3.6 billion as of March 31, 2015

less the applicable capital reserve amount of $1.8 billion. The capital reserve amount was $2.4 billion for dividend periods in 

2014. The capital reserve amount will continue to be reduced by $600 million each year until it reaches zero on January 1, 

2018.

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. To 

conform to our current period presentation, we have reclassified certain amounts reported in our prior periods’ condensed 

consolidated financial statements. Results for the three months ended March 31, 2015 may not necessarily be indicative of 

the results for the year ending December 31, 2015. The unaudited interim condensed consolidated financial statements as of 

and for the three months ended March 31, 2015 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, 2014 (“2014 

Form 10-K”), filed with the SEC on February 20, 2015.

Changes in Accounting Principle—Nonaccrual Loans

Effective January 1, 2015, we changed our policy for the treatment of interest previously accrued but not collected at the date 

both single-family and multifamily loans are placed on nonaccrual status. Specifically, interest previously accrued but not 

collected will be reversed through interest income at the date a loan is placed on nonaccrual status. Previously, when a loan 

was placed on nonaccrual status, interest previously accrued but not collected became part of each loan’s recorded investment 

and was reviewed either individually or collectively for impairment.

We also changed our policy for when a non-modified single-family loan is returned to accrual status. Effective January 1, 

2015, a non-modified single-family loan will be returned to accrual status at the point that the borrower brings the loan 

current. Previously, a non-modified single-family loan was returned to accrual status at the point that the borrower had made 

sufficient payments to reduce the delinquency status below our nonaccrual threshold of 60 days past due.

We have concluded that these changes in accounting principle are preferable as we align our nonaccrual policy with industry 

practice. This alignment increases comparability of our financial statements to these entities, resulting in improved financial 

reporting.

As these changes to our nonaccrual policy were not material to our financial statements, we wrote off the accrued interest 

receivable balance on our nonaccrual loans, as well as the corresponding allowance that related to that interest, as an 

adjustment to current period provision for loan losses and did not retrospectively adjust the condensed consolidated financial 

statements for this change.

Change in Accounting Principle—Loans Held for Sale

Effective January 1, 2015, we changed our policy for calculating the lower of cost or fair value adjustment on loans that have 

been designated as held for sale (“HFS”). Specifically, our lower of cost or fair value calculation will be performed at an 

individual loan level on the date of re-designation (if previously held for investment (“HFI”)) and for all subsequent periods 

in which a loan is classified as HFS. Previously, the initial lower of cost or fair value adjustment on the date of re-designation 

was calculated at a loan level whereas the subsequent lower of cost or fair value adjustments were calculated at a pool level. 

We have concluded that this change in accounting policy is preferable as it will align the unit of account that is used for both 

the initial and subsequent lower of cost or market measurements on our HFS portfolio. Additionally, by performing the lower 

of cost or fair value calculation at the loan level, the adjustment will be calculated on a more disaggregated basis. 
FANNIE MAE

(In conservatorship)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(UNAUDITED)

74

As this change in accounting policy is not material to our financial statements, we recorded the impact of this change in 

accounting principle as an adjustment to current period fair value losses and did not retrospectively adjust the consolidated 

financial statements for this change. 

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 $142.2 billion as 

of March 31, 2015 and December 31, 2014. 

Under the terms of the senior preferred stock, we are required to pay Treasury a dividend each quarter, 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 

amount. The Director of FHFA directs us to make dividend payments on the senior preferred stock on a quarterly basis. 

Therefore, we do not expect to eliminate our deficit of core capital over statutory minimum capital.

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, 2015, 

Treasury held an investment in our senior preferred stock with an aggregate liquidation preference of $117.1 billion. FHFA’s 

control of Fannie Mae and Freddie Mac has caused us, FHFA and Freddie Mac to be deemed related parties.

Our administrative expenses were reduced by $16 million and $17 million for the three months ended March 31, 2015 and 

2014, 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. 

During the three months ended March 31, 2015, we did not make any tax payments to the Internal Revenue Service (“IRS”), 

a bureau of Treasury. We made tax payments of $425 million during the three months ended March 31, 2014. We received a 

refund of $135 million from the IRS during the three months ended March 31, 2015 for income tax adjustments related to tax 

years 2004 through 2006.

Under the temporary credit and liquidity facilities (“TCLF”) program, we had $342 million and $390 million outstanding, 

which includes principal and interest, of standby credit and liquidity support as of March 31, 2015 and December 31, 2014, 

respectively. Under the new issue bond (“NIB”) program, we had $4.2 billion outstanding of pass-through securities backed 

by single-family and multifamily housing bonds issued by housing finance agencies (“HFAs”) as of March 31, 2015 and 

December 31, 2014. 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, 2015, 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 “TCCA fees,” respectively, in our condensed consolidated statements of operations and 

comprehensive income. We recognized $382 million and $322 million in TCCA fees during the three months ended 

March 31, 2015 and 2014, respectively, of which $382 million had not been remitted to Treasury as of March 31, 2015.

In connection with the GSE Act, and for the three months ended March 31, 2015, we accrued, but have not yet paid, $18 

million in expenses in connection with our funding obligation to Treasury’s Capital Magnet Fund. These expense accruals, 

which are classified in “Other expenses, net”, were measured as a portion of the product of 4.2 basis points and the unpaid 

principal balance of total new business purchases for the three months ended March 31, 2015.

As of March 31, 2015 and December 31, 2014, we held Freddie Mac mortgage-related securities with a fair value of $7.0 

billion and $6.9 billion, respectively. We recognized interest income on these securities held by us of $61 million and $78 

million for the three months ended March 31, 2015 and 2014, respectively. In addition, Freddie Mac may be an investor in 
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variable interest entities that we have consolidated, and we may be an investor in variable interest entities that Freddie Mac 

has consolidated.

The Housing and Economic Recovery Act of 2008 authorizes FHFA to establish an annual assessment for regulated entities, 

including Fannie Mae, which is payable on a semi-annual basis (April and October), for FHFA’s costs and expenses, as well 

as to maintain FHFA’s working capital. We recognized FHFA assessment fees, which are recorded in “Administrative 

expenses” in our condensed consolidated statements of operations and comprehensive income, of $28 million for the three 

months ended March 31, 2015 and 2014.

Fannie Mae and Freddie Mac established Common Securitization Solutions, LLC (“CSS”), a jointly owned limited liability 

company, to operate a common securitization platform. During the three months ended March 31, 2015, we contributed $13 

million of capital into CSS, and we made no contributions for the three months ended March 31, 2014. No other transactions 

outside of normal business activities have occurred between us and Freddie Mac during the three months ended March 31, 

2015 or 2014.

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 and 

allowance for loan losses. Actual results could be different from these estimates.

In April 2012, FHFA issued Advisory Bulletin AB 2012-02, “Framework for Adversely Classifying Loans, Other Real Estate 

Owned, and Other Assets and Listing Assets for Special Mention” (the “Advisory Bulletin”), which prescribes, among other 

things, classification of loans by risk category and provides guidance on when a loan should be charged off. The provisions of 

the Advisory Bulletin led us to re-evaluate our estimate of when a loan is deemed uncollectible. For the vast majority of our 

delinquent single-family loans, we will continue to charge-off the loan at the date of foreclosure or other liquidation event 

(such as a deed-in-lieu of foreclosure or a short sale). For a relatively small subset of delinquent loans deemed to be 

uncollectible prior to foreclosure based upon our historical data, we charge off the portion of the loan (including 

preforeclosure property taxes and insurance receivable that pertain to such loans) deemed to be uncollectible prior to the date 

of foreclosure or other liquidation event, which given our current credit analytics and historical data, is when the loans are 

excessively delinquent and the outstanding loan balance exceeds the fair value of the underlying property. This change in 

estimate resulted in the recognition on January 1, 2015 of (1) $1.8 billion in charge-offs of HFI loans, (2) $724 million in 

charge-offs of preforeclosure property taxes and insurance receivable and (3) a reduction to our allowance for loan losses and 

our allowance for preforeclosure property taxes and insurance receivable in amounts equal to charge-offs recognized in 

connection with HFI loans and preforeclosure property taxes and insurance receivable. We continue to enhance our data 

collection and analysis efforts to further refine our loss estimates as we obtain incremental information on the performance of 

our loans.

Fee and Other Income

Fee and other income includes transaction fees, technology fees, multifamily fees and other miscellaneous income. During 

the three months ended March 31, 2014, we recognized $4.1 billion in “Fee and other income” in our condensed consolidated 

statements of operations and comprehensive income resulting from settlement agreements resolving certain lawsuits relating 

to private-label mortgage-related securities (“PLS”) sold to us. There were no settlement agreements resolving PLS lawsuits 

during the three months ended March 31, 2015.

New Accounting Guidance

Effective January 1, 2015, we prospectively adopted guidance issued by the FASB clarifying when a creditor is considered to 

have received physical possession of residential real estate property collateralized by a consumer mortgage loan. The 

adoption of this guidance resulted in a clarification to our policy to align our definition of when we have taken physical 

possession of real estate with the new guidance; however it did not impact the timing of derecognition of loan receivable and 
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recognition of real estate property in our financial statements. The new guidance also requires us to disclose the recorded 

investment in consumer mortgage loans collateralized by residential real estate property that are in the process of foreclosure. 

See “Note 3, Mortgage Loans” for additional information regarding the disclosure required upon adoption of this guidance.

Effective January 1, 2015, we prospectively adopted guidance issued by the FASB related to the classification of government 

guaranteed mortgage loans upon foreclosure. The impact of the adoption was not material to the condensed consolidated 

balance sheets.

In February 2015, the FASB issued guidance regarding consolidation of legal entities such as limited partnerships, limited 

liability corporations and securitization structures. The guidance removes the specialized consolidation model surrounding 

limited partnerships and similar entities and amends the requirements that such entities must meet to qualify as voting interest 

entities. In addition, the guidance eliminates certain of the conditions for evaluating whether fees paid to a decision maker or 

service provider represent a variable interest. The new guidance is effective for us on January 1, 2016 with early adoption 

permitted. We are currently evaluating the potential impact of the new guidance on our consolidated financial statements.

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 and mortgage-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.

Unconsolidated VIEs

We do not consolidate VIEs when we are not deemed to be the primary beneficiary. Our unconsolidated VIEs include 

securitization trusts and limited partnerships. 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 well as our maximum exposure 

to loss and the total assets of these unconsolidated mortgage-backed trusts.
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As of

March 31, 2015 December 31, 2014

(Dollars in millions)

Assets and liabilities recorded in our condensed consolidated balance sheets related to

mortgage-backed trusts:

Assets:

Trading securities:

Fannie Mae securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 4,818 $ 4,790

Non-Fannie Mae securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,938 7,073

Total trading securities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,756 11,863

Available-for-sale securities:

Fannie Mae securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,939 5,043

Non-Fannie Mae securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,458 22,776

Total available-for-sale securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25,397 27,819

Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 107 111

Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (871) (1,440)

Net carrying amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 36,389 $ 38,353

Maximum exposure to loss. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 42,479 $ 45,311

Total assets of unconsolidated mortgage-backed trusts . . . . . . . . . . . . . . . . . . . . . . . . . . . $253,415 $253,554

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.

The total assets of our unconsolidated limited partnership investments were $5.7 billion and $5.8 billion as of March 31, 2015

and December 31, 2014, 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 retained mortgage portfolio in a portfolio securitization transaction. For the three months ended 

March 31, 2015 and 2014, the unpaid principal balance of portfolio securitizations was $48.9 billion and $32.5 billion, 

respectively.

We retain interests from the transfer and sale of mortgage-related securities to unconsolidated single-class and multi-class 

portfolio securitization trusts. As of March 31, 2015, the unpaid principal balance of retained interests was $6.1 billion and its 

related fair value was $7.5 billion. The unpaid principal balance of retained interests was $6.3 billion and its related fair value 

was $7.6 billion as of December 31, 2014. For the three months ended March 31, 2015 and 2014, the principal and interest 

received on retained interests was $350 million and $340 million, respectively.

Managed Loans

Managed loans are on-balance sheet mortgage loans, as well as mortgage loans that we have securitized in unconsolidated 

portfolio securitization trusts. The unpaid principal balance of securitized loans in unconsolidated portfolio securitization 

trusts, which are primarily loans that are guaranteed or insured, in whole or in part, by the U.S. government, was $1.7 billion

and $1.8 billion as of March 31, 2015 and December 31, 2014, respectively. For information on our on-balance sheet 

mortgage loans, see “Note 3, Mortgage Loans.”
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3. Mortgage Loans

We own single-family mortgage loans, which are secured by four or fewer residential dwelling units, and multifamily 

mortgage loans, which are secured by five or more residential dwelling units. We classify these loans as either HFI or HFS. 

We report the carrying value of HFI loans at the unpaid principal balance, net of unamortized premiums and discounts, other 

cost basis adjustments, and an allowance for loan losses. We report the carrying value of HFS loans at the lower of cost or 

fair value and record valuation changes in our condensed consolidated statements of operations and comprehensive income. 

We report the recorded investment of HFI loans at the unpaid principal balance, net of unamortized premiums and discounts, 

other cost basis adjustments, and accrued interest receivable.

For purposes of the single-family mortgage loan disclosures below, we define “primary” class as mortgage loans that are not 

included in other loan classes; “government” class as 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; and “other” class as 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 carrying value of our mortgage loans as of March 31, 2015 and December 31, 2014.

As of

March 31, 2015 December 31, 2014

Of Fannie

Mae

Of

Consolidated

Trusts Total

Of Fannie

Mae

Of

Consolidated

Trusts Total

(Dollars in millions)

Single-family . . . . . . . . . . . . . . . . . . . . . . . . $ 258,350 $ 2,558,761 $ 2,817,111 $ 262,116 $ 2,569,884 $ 2,832,000

Multifamily. . . . . . . . . . . . . . . . . . . . . . . . . . 20,714 170,302 191,016 23,255 164,045 187,300

Total unpaid principal balance of

mortgage loans. . . . . . . . . . . . . . . . . . . . 279,064 2,729,063 3,008,127 285,371 2,733,929 3,019,300

Cost basis and fair value adjustments, net . . (12,775) 49,584 36,809 (12,705) 48,440 35,735

Allowance for loan losses for loans held for

investment. . . . . . . . . . . . . . . . . . . . . . . . . (29,873) (1,947) (31,820) (33,117) (2,424) (35,541)

Total mortgage loans . . . . . . . . . . . . . $ 236,416 $ 2,776,700 $ 3,013,116 $ 239,549 $ 2,779,945 $ 3,019,494

During the three months ended March 31, 2015 and 2014, we redesignated loans with a carrying value of $330 million and 

$2.2 billion, respectively, from HFI to HFS. There were no sales of loans during the three months ended March 31, 2015. We 

sold loans with an unpaid principal balance of $1.0 billion during the three months ended March 31, 2014.

The recorded investment of single-family mortgage loans for which formal foreclosure proceedings are in process was $32.3 

billion as of March 31, 2015. As a result of our various loss mitigation and foreclosure prevention efforts, we expect that a 

portion of the loans in the process of formal foreclosure proceedings will not ultimately foreclose.

Nonaccrual Policy

We discontinue accruing interest on loans when we believe collectability of principal or interest is not reasonably assured, 

which for a single-family loan we have determined, based on our historical experience, to be when the loan becomes two 

months or more past due according to its contractual terms. We generally place a multifamily loan on nonaccrual status when 

the loan is deemed to be individually impaired, unless the loan is well secured such that collectability of principal and 

accrued interest is reasonably assured.

Effective January 1, 2015, we changed our policy for the treatment of interest previously accrued but not collected at the date 

both single-family and multifamily loans are placed on nonaccrual status. Specifically, interest previously accrued but not 

collected will be reversed through interest income at the date a loan is placed on nonaccrual status. Previously, when a loan 

was placed on nonaccrual status, interest previously accrued but not collected became part of the loan’s recorded investment 

and was reviewed either individually or collectively for impairment. 

We also changed our policy for when a non-modified single-family loan is returned to accrual status. Effective January 1, 

2015, a non-modified single-family loan will be returned to accrual status at the point that the borrower brings the loan 
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current. Previously, a non-modified single-family loan was returned to accrual status at the point that the borrower had made 

sufficient payments to reduce their delinquency status below our nonaccrual threshold of 60 days past due. We did not change 

our policy for returning modified single-family loans to accrual status. We return modified single-family loans to accrual 

status at the point that the borrower successfully makes all required payments during the trial period (generally three to four 

months) and modification is made permanent.

See “Note 1, Summary of Significant Accounting Policies” for additional information on such changes in accounting policy.

Changes to our nonaccrual policy were limited to those described above. For most single-family loans, we continue to 

recognize interest income for loans on nonaccrual status when cash is received. However, if a single-family loan was charged 

off prior to foreclosure, all payments received are applied on a cost recovery basis to reduce principal on the mortgage loan. 

We stop applying the cost recovery approach on those single-family loans when they are brought current either through 

borrower payments or modification and there has been a sufficient performance period to demonstrate that the borrower has 

the ability and intent to make the remaining payments on their mortgage loans.

For multifamily loans, we apply any payment received on a cost recovery basis to reduce principal on the mortgage loan 

unless the loan is determined to be well secured. We generally return a multifamily loan to accrual status and stop applying 

the cost recovery approach when the borrower cures the delinquency of the loan or we otherwise determine that the loan is 

well secured such that collectability is reasonably assured.

Aging Analysis

The following tables display an aging analysis of the total recorded investment in our HFI mortgage loans by portfolio 

segment and class as of March 31, 2015 and December 31, 2014, excluding loans for which we have elected the fair value 

option.

As of March 31, 2015

30 - 59 

Days 

Delinquent

60 - 89

Days

Delinquent

Seriously 

Delinquent(1)

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 . . . . . . . . . . . . . . $25,087 $ 7,045 $ 34,166 $ 66,298 $ 2,582,073 $ 2,648,371 $ 56 $ 41,132

Government(2). . . . . . . . . 54 18 298 370 44,211 44,581 298 —

Alt-A. . . . . . . . . . . . . . . . 3,743 1,321 9,429 14,493 93,801 108,294 7 10,743

Other . . . . . . . . . . . . . . . . 1,347 446 3,103 4,896 37,397 42,293 7 3,534

Total single-family. . . . 30,231 8,830 46,996 86,057 2,757,482 2,843,539 368 55,409

Multifamily(3). . . . . . . . . . . 98 N/A 135 233 192,795 193,028 — 807

Total. . . . . . . . . . . . . $ 30,329 $ 8,830 $ 47,131 $ 86,290 $ 2,950,277 $ 3,036,567 $ 368 $ 56,216
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As of December 31, 2014

30 - 59 

Days 

Delinquent

60 - 89

Days

Delinquent

Seriously 

Delinquent(1)

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 . . . . . . . . . . . . . $ 29,130 $ 8,396 $ 38,248 $ 75,774 $ 2,580,446 $ 2,656,220 $ 55 $ 46,556

Government(2). . . . . . . . 63 26 305 394 44,927 45,321 305 —

Alt-A . . . . . . . . . . . . . . . 4,094 1,414 11,603 17,111 95,650 112,761 8 13,007

Other . . . . . . . . . . . . . . . 1,520 516 3,763 5,799 38,460 44,259 6 4,259

Total single-family . . . 34,807 10,352 53,919 99,078 2,759,483 2,858,561 374 63,822

Multifamily(3). . . . . . . . . . 60 N/A 89 149 189,084 189,233 — 823

Total. . . . . . . . . . . . $ 34,867 $ 10,352 $ 54,008 $ 99,227 $ 2,948,567 $ 3,047,794 $ 374 $ 64,645

__________

(1) Single-family seriously delinquent loans are loans that are 90 days or more past due or in the foreclosure process. Multifamily seriously 

delinquent loans are loans that are 60 days or more past due.

(2) Primarily consists of reverse mortgages which, due to their nature, are not aged and are included in the current column.

(3) Multifamily loans 60-89 days delinquent are included in the seriously delinquent column.

Credit Quality Indicators 

The following table displays the total recorded investment in our single-family HFI loans by class and credit quality indicator 

as of March 31, 2015 and December 31, 2014, excluding loans for which we have elected the fair value option. 

As of

March 31, 2015(1) December 31, 2014(1)

Primary Alt-A Other Primary Alt-A Other

(Dollars in millions)

Estimated mark-to-market loan-to-value ratio:(2)

Less than or equal to 80% . . . . . . . . . . . . . . . . . . . . . . . . . . . . $2,126,305 $ 58,557 $21,584 $2,156,165 $ 60,851 $22,558

Greater than 80% and less than or equal to 90%. . . . . . . . . . . 270,619 14,661 5,756 261,709 15,151 6,046

Greater than 90% and less than or equal to 100%. . . . . . . . . . 154,066 12,135 5,023 140,778 12,490 5,236

Greater than 100% and less than or equal to 110% . . . . . . . . . 43,305 8,503 3,692 43,014 8,998 3,900

Greater than 110% and less than or equal to 120% . . . . . . . . 23,264 5,707 2,517 23,439 6,033 2,615

Greater than 120% and less than or equal to 125% . . . . . . . . 7,445 2,000 848 7,529 2,114 904

Greater than 125% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23,367 6,731 2,873 23,586 7,124 3,000

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $2,648,371 $108,294 $42,293 $2,656,220 $112,761 $44,259

__________

(1) Excludes $44.6 billion and $45.3 billion as of March 31, 2015 and December 31, 2014, 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 loan-to-value (“LTV”) ratio.

(2) 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.
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The following table displays the total recorded investment in our multifamily HFI loans by credit quality indicator as of 

March 31, 2015 and December 31, 2014, excluding loans for which we have elected the fair value option.

As of

March 31, December 31,

2015 2014

(Dollars in millions)

Credit risk profile by internally assigned grade:(1)

Pass. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 186,052 $182,079

Special Mention . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,015 3,070

Substandard . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,953 3,842

Doubtful . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 242

Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 193,028 $189,233

_________

(1) Pass (loan is current and adequately protected by the current financial strength and debt service capacity of the borrower); special 

mention (loan with signs of potential weakness); substandard (loan with a well defined weakness that jeopardizes the timely full 

repayment); and doubtful (loan with a weakness that makes collection or liquidation in full highly questionable and improbable based 

on existing conditions and values).
FANNIE MAE

(In conservatorship)

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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 unpaid principal balance, recorded investment and related 

allowance as of March 31, 2015 and December 31, 2014, and average recorded investment and interest income recognized 

for the three months ended March 31, 2015 and 2014, for individually impaired loans.

As of

March 31, 2015 December 31, 2014

Unpaid

Principal

Balance

Total

Recorded

Investment

Related

Allowance

for Loan

Losses

Unpaid

Principal

Balance

Total

Recorded

Investment

Related

Allowance

for Loan

Losses

Related

Allowance

for Accrued

Interest

Receivable

(Dollars in millions)

Individually impaired loans:

With related allowance recorded:

Single-family:

Primary . . . . . . . . . . . . . . . . . . . . . . . . . . $ 122,873 $ 116,908 $ 18,954 $ 125,960 $ 120,221 $ 20,327 $ 309

Government. . . . . . . . . . . . . . . . . . . . . . . 282 286 58 281 285 46 12

Alt-A . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33,719 30,954 6,935 35,492 32,816 7,778 136

Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,896 13,165 2,715 14,667 13,947 3,049 38

Total single-family. . . . . . . . . . . . . . . . 170,770 161,313 28,662 176,400 167,269 31,200 495

Multifamily . . . . . . . . . . . . . . . . . . . . . . . . 1,210 1,217 146 1,230 1,241 175 6

Total individually impaired loans with

related allowance recorded . . . . . . . . . . 171,980 162,530 28,808 177,630 168,510 31,375 501

With no related allowance recorded:(1)

Single-family:

Primary . . . . . . . . . . . . . . . . . . . . . . . . . . 18,139 16,349 — 16,704 14,876 — —

Government. . . . . . . . . . . . . . . . . . . . . . . 60 55 — 61 57 — —

Alt-A . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,737 3,881 — 3,993 3,119 — —

Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,540 1,358 — 1,240 1,056 — —

Total single-family. . . . . . . . . . . . . . . . 24,476 21,643 — 21,998 19,108 — —

Multifamily . . . . . . . . . . . . . . . . . . . . . . . . 511 513 — 565 568 — —

Total individually impaired loans with no

related allowance recorded . . . . . . . . . . 24,987 22,156 — 22,563 19,676 — —

Total individually impaired loans(2)

. . . . . . . $ 196,967 $ 184,686 $ 28,808 $ 200,193 $ 188,186 $ 31,375 $ 501
FANNIE MAE

(In conservatorship)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(UNAUDITED)

83

For the Three Months Ended March 31,

2015 2014

Average

Recorded

Investment

Total 

Interest 

Income 

Recognized(3)

Interest

Income

Recognized

on a Cash

Basis

Average

Recorded

Investment

Total 

Interest 

Income 

Recognized(3)

Interest

Income

Recognized

on a Cash

Basis

(Dollars in millions)

Individually impaired loans:

With related allowance recorded:

Single-family:

Primary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 117,721 $ 1,034 $ 104 $ 123,465 $ 1,094 $ 140

Government. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 282 3 — 238 3 —

Alt-A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31,491 251 17 34,337 270 28

Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,416 94 7 14,910 103 11

Total single-family. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 162,910 1,382 128 172,950 1,470 179

Multifamily . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,229 3 — 2,086 23 —

Total individually impaired loans with related allowance

recorded . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 164,139 1,385 128 175,036 1,493 179

With no related allowance recorded:(1)

Single-family:

Primary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16,249 247 41 12,646 185 48

Government. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59 1 — 93 1 —

Alt-A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,736 44 7 2,520 41 10

Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,301 18 2 891 11 2

Total single-family. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21,345 310 50 16,150 238 60

Multifamily . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 541 1 — 1,826 20 —

Total individually impaired loans with no related allowance

recorded . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21,886 311 50 17,976 258 60

Total individually impaired loans(2)

. . . . . . . . . . . . . . . . . . . . . . . . . $ 186,025 $ 1,696 $ 178 $ 193,012 $ 1,751 $ 239

__________

(1) The discounted cash flows or collateral value equals or exceeds the carrying value of the loan and, as such, no valuation allowance is 

required.

(2) Includes single-family loans restructured in a TDR with a recorded investment of $181.9 billion and $185.2 billion as of March 31, 

2015 and December 31, 2014, respectively. Includes multifamily loans restructured in a TDR with a recorded investment of $705 

million and $716 million as of March 31, 2015 and December 31, 2014, respectively.

(3) Total single-family interest income recognized of $1.7 billion for the three months ended March 31, 2015 consists of $1.4 billion of 

contractual interest and $276 million of effective yield adjustments. Total single-family interest income recognized of $1.7 billion for 

the three months ended March 31, 2014 consists of $1.4 billion of contractual interest and $275 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 loans to certain borrowers 

who have received bankruptcy relief as TDRs.

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, 2015 and 2014, the average term extension of a single-family 
FANNIE MAE

(In conservatorship)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(UNAUDITED)

84

modified loan was 161 months and 159 months, respectively, and the average interest rate reduction was 0.77 and 1.23

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, 2015 and 2014.

For the Three Months Ended March 31,

2015 2014

Number of

Loans

Recorded

Investment

Number of

Loans

Recorded

Investment

(Dollars in millions)

Single-family:

Primary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21,407 $ 2,945 28,842 $ 4,110

Government . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74 8 62 8

 Alt-A. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,789 438 4,396 740

Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 590 108 1,038 219

Total single-family . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24,860 3,499 34,338 5,077

Multifamily . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 5 6 34

Total troubled debt restructurings . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24,863 $ 3,504 34,344 $ 5,111

The following table displays the number of loans and our recorded investment in these loans at the time of payment default 

for the three months ended March 31, 2015 and 2014 for loans that were restructured 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,

2015 2014

Number of

Loans

Recorded

Investment

Number of

Loans

Recorded

Investment

(Dollars in millions)

Single-family:

Primary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,723 $1,003 8,598 $1,310

Government. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 3 18 2

Alt-A. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,153 203 1,444 260

Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 304 66 504 115

Total single-family. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,200 1,275 10,564 1,687

Multifamily. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 4 4 14

Total TDRs that subsequently defaulted. . . . . . . . . . . . . . . . . . . . . . . . . . . 8,202 $1,279 10,568 $1,701

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 allowance for loan losses, we consider only 

our net recorded investment in the loan at the balance sheet date, which includes the loan’s unpaid principal balance 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. 
FANNIE MAE

(In conservatorship)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(UNAUDITED)

85

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 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 and other credit 

enhancements. 

We identify multifamily loans for evaluation for impairment through a credit risk assessment process. 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. We establish a collective loss reserve for all loans in our 

multifamily guaranty book of business that are not individually impaired using an internal model that applies loss factors to 

loans in similar risk categories. Our loss factors are developed based on our historical default and loss severity experience. 

The following table displays changes in single-family, multifamily and total allowance for loan losses for the three months 

ended March 31, 2015 and 2014. 
FANNIE MAE

(In conservatorship)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(UNAUDITED)

86

For the Three Months Ended March 31,

2015 2014

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 . . . . . . . . . . . . . . . . . . . . . . . . . $ 32,956 $ 2,221 $ 35,177 $ 40,202 $ 3,105 $ 43,307

Provision (benefit) for loan losses(1)

. . . . . . . . . . 205 (147) 58 (882) 38 (844)

Charge-offs(2)(5)

. . . . . . . . . . . . . . . . . . . . . . . . . . (5,328) (19) (5,347) (1,447) (101) (1,548)

Recoveries. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 614 8 622 320 71 391

Transfers(3)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 359 (359) — 420 (420) —

Other(4)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 953 51 1,004 133 9 142

Ending balance. . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 29,759 $ 1,755 $ 31,514 $ 38,746 $ 2,702 $ 41,448

Multifamily allowance for loan losses:

Beginning balance . . . . . . . . . . . . . . . . . . . . . . . . . $ 161 $ 203 $ 364 $ 319 $ 220 $ 539

Benefit for loan losses(1)

. . . . . . . . . . . . . . . . . . . (37) (13) (50) (12) (16) (28)

Charge-offs(2)(5)

. . . . . . . . . . . . . . . . . . . . . . . . . . (15) — (15) (51) — (51)

Other(4)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 2 7 2 1 3

Ending balance. . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 114 $ 192 $ 306 $ 258 $ 205 $ 463

Total allowance for loan losses:

Beginning balance. . . . . . . . . . . . . . . . . . . . . . . . . $ 33,117 $ 2,424 $ 35,541 $ 40,521 $ 3,325 $ 43,846

Provision (benefit) for loan losses(1)

. . . . . . . . . . 168 (160) 8 (894) 22 (872)

Charge-offs(2)(5)

. . . . . . . . . . . . . . . . . . . . . . . . . . (5,343) (19) (5,362) (1,498) (101) (1,599)

Recoveries. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 614 8 622 320 71 391

Transfers(3)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 359 (359) — 420 (420) —

Other(4)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 958 53 1,011 135 10 145

Ending balance . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 29,873 $ 1,947 $ 31,820 $ 39,004 $ 2,907 $ 41,911

__________

(1) Provision (benefit) for loan losses is included in “Benefit 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 changes in other loss reserves which are offset by amounts reflected in benefit for credit losses, charge-offs and 

recoveries. 

(5) Includes for the three months ended March 31, 2015 charge-offs of (1) $1.8 billion in HFI loans and $724 million in preforeclosure 

property taxes and insurance receivable in connection with our adoption of the Advisory Bulletin and (2) $1.1 billion in accrued interest 

receivable that were charged-off in connection with the our adoption of a change in accounting principle related to the treatment of 

interest previously accrued, but not collected, at the date that loans are placed on nonaccrual status.
FANNIE MAE

(In conservatorship)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(UNAUDITED)

87

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, 

2015 and December 31, 2014.

As of

March 31, 2015 December 31, 2014

SingleFamily Multifamily TotalSingleFamily Multifamily Total

(Dollars in millions)

Allowance for loan losses by segment:

Individually impaired loans(1)

. . . . . . . . . . . . $ 28,662 $ 146 $ 28,808 $ 31,200 $ 175 $ 31,375

Collectively reserved loans. . . . . . . . . . . . . . 2,852 160 3,012 3,977 189 4,166

Total allowance for loan losses . . . . . . . . $ 31,514 $ 306 $ 31,820 $ 35,177 $ 364 $ 35,541

Recorded investment in loans by segment:

Individually impaired loans(1)

. . . . . . . . . . . . $ 182,956 $ 1,730 $ 184,686 $ 186,377 $ 1,809 $ 188,186

Collectively reserved loans. . . . . . . . . . . . . . 2,660,583 191,298 2,851,881 2,672,184 187,424 2,859,608

Total recorded investment in loans . . . . . $ 2,843,539 $ 193,028 $ 3,036,567 $ 2,858,561 $ 189,233 $ 3,047,794

__________

(1) Includes acquired credit-impaired loans.

5. Investments in Securities

Trading Securities

Trading securities are recorded at fair value with subsequent changes in fair value recorded as “Fair value losses, net” in our 

condensed consolidated statements of operations and comprehensive income. The following table displays our investments in 

trading securities.

As of

March 31,

2015

December 31,

2014

(Dollars in millions)

Mortgage-related securities:

Fannie Mae . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 4,959 $ 4,940

Freddie Mac . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,723 1,369

Ginnie Mae . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 214 166

Alt-A private-label securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 833 920

Subprime private-label securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 876 1,307

CMBS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,478 2,515

Mortgage revenue bonds. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 742 722

Other mortgage-related securities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94 99

Total mortgage-related securities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,919 12,038

U.S. Treasury securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19,367 19,466

Total trading securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $31,286 $31,504
FANNIE MAE

(In conservatorship)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(UNAUDITED)

88

The following table displays information about our net trading gains and losses.

For the Three

Months Ended

March 31,

2015 2014

(Dollars in millions)

Net trading gains. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 36 $ 145

Net trading gains recognized in the period related to securities still held at period end . . . . . . . . . . . . . . . . 29 135

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 recognize realized gains and losses from the sale of AFS securities in 

“Investment gains, net” in our condensed consolidated statements of operations and comprehensive income. 

The following table displays the gross realized gains, losses and proceeds on sales of AFS securities.

For the Three

Months Ended

March 31,

2015 2014

(Dollars in millions)

Gross realized gains. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 400 $ 3

Gross realized losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 2

Total proceeds(1). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,112 35

__________

(1) Excludes proceeds from the initial sale of securities from new portfolio securitizations.

The following tables display the amortized cost, gross unrealized gains and losses, and fair value by major security type for 

AFS securities.

As of March 31, 2015

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. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 5,086 $ 336 $ — $ (15) $ 5,407

Freddie Mac . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,842 415 — — 5,257

Ginnie Mae. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 398 60 — — 458

Alt-A private-label securities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,649 819 (4) — 4,464

Subprime private-label securities. . . . . . . . . . . . . . . . . . . . . . . . . . . 3,572 1,045 — (9) 4,608

CMBS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,318 52 — — 1,370

Mortgage revenue bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,344 226 (8) (2) 3,560

Other mortgage-related securities . . . . . . . . . . . . . . . . . . . . . . . . . . 2,421 187 — — 2,608

Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $24,630 $ 3,140 $ (12) $ (26) $27,732
FANNIE MAE

(In conservatorship)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(UNAUDITED)

89

As of December 31, 2014

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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 5,330 $ 328 $ — $ (19) $ 5,639

Freddie Mac. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,100 428 — — 5,528

Ginnie Mae . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 416 60 — — 476

Alt-A private-label securities. . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,638 1,055 (15) — 5,678

Subprime private-label securities . . . . . . . . . . . . . . . . . . . . . . . . 4,103 1,161 (9) (15) 5,240

CMBS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,341 56 — — 1,397

Mortgage revenue bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,859 177 (8) (5) 4,023

Other mortgage-related securities . . . . . . . . . . . . . . . . . . . . . . . . 2,626 183 (23) (113) 2,673

Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 27,413 $ 3,448 $ (55) $ (152) $ 30,654

__________

(1) Amortized cost consists of unpaid principal balance, unamortized premiums, discounts and other cost basis adjustments as well as net 

other-than-temporary impairments (“OTTI”) recognized in “Investment gains, net” 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” in our condensed consolidated balance sheets, as well as cumulative changes in fair value of securities for which we 

previously recognized the credit component of OTTI.

(3) Represents the gross unrealized losses on securities for which we have not recognized OTTI.
FANNIE MAE

(In conservatorship)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(UNAUDITED)

90

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.

As of March 31, 2015

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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (2) $ 188 $ (13) $ 525

Alt-A private-label securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2) 100 (2) 30

Subprime private-label securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — — (9) 184

Mortgage revenue bonds. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2) 55 (8) 86

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (6) $ 343 $ (32) $ 825

As of December 31, 2014

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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ — $ 113 $ (19) $ 627

Alt-A private-label securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2) 171 (13) 112

Subprime private-label securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — — (24) 460

Mortgage revenue bonds. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2) 47 (11) 155

Other mortgage-related securities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 8 (136) 1,021

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (4) $ 339 $ (203) $ 2,375

Other-Than-Temporary Impairments 

We recognized $170 million and $51 million of OTTI for the three months ended March 31, 2015 and 2014, respectively, 

which are included in “Investment gains, net” in our condensed consolidated statements of operations and comprehensive 

income. During the first three months ended March 31, 2015, other-than-temporary impairments were primarily driven by a 

change in our intent to sell certain securities. As a result, we recognized the entire difference between the amortized cost basis 

of these securities and their fair value as OTTI.

The following table displays the modeled attributes, including default rates and severities, which were used to determine as of 

March 31, 2015 whether our senior interests in certain non-agency mortgage-related securities (including those we intend to 

sell) will experience a cash shortfall. An estimate 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)

91

As of March 31, 2015

Alt-A

Subprime Option ARM Fixed Rate Variable Rate Hybrid Rate

(Dollars in millions)

Vintage Year

2004 & Prior:

Unpaid principal balance . . . . . . . . . . . . . . . . . . . . . $ 105 $ 108 $ 758 $ 115 $ 296

Weighted average collateral default(1)

. . . . . . . . . . . 25.9% 24.9% 8.1% 16.5% 11.0%

Weighted average collateral severities(2)

. . . . . . . . . 54.7 55.0 44.3 38.0 33.7

Weighted average voluntary prepayment rates(3). . . 8.0 9.6 13.4 9.4 11.0

Average credit enhancement(4)

. . . . . . . . . . . . . . . . . 38.8 3.6 11.3 24.3 10.1

2005:

Unpaid principal balance . . . . . . . . . . . . . . . . . . . . . $ 7 $ 440 $ 689 $ 131 $ 508

Weighted average collateral default(1)

. . . . . . . . . . . 44.0% 30.0% 17.9% 26.2% 15.5%

Weighted average collateral severities(2)

. . . . . . . . . 65.0 54.2 46.0 54.1 39.2

Weighted average voluntary prepayment rates(3). . . 3.9 7.7 10.0 8.5 10.0

Average credit enhancement(4)

. . . . . . . . . . . . . . . . . 59.5 6.8 0.7 28.1 6.1

2006:

Unpaid principal balance . . . . . . . . . . . . . . . . . . . . . $ 5,850 $ 318 $ 363 $ 653 $ 786

Weighted average collateral default(1)

. . . . . . . . . . . 46.0% 36.3% 21.9% 23.3% 10.1%

Weighted average collateral severities(2)

. . . . . . . . . 63.3 35.5 53.2 37.2 38.4

Weighted average voluntary prepayment rates(3). . . 2.4 6.8 8.3 7.9 13.2

Average credit enhancement(4)

. . . . . . . . . . . . . . . . . 15.3 — 0.1 1.5 —

2007 & After:

Unpaid principal balance . . . . . . . . . . . . . . . . . . . . . $ 322 $ — $ — $ — $ —

Weighted average collateral default(1)

. . . . . . . . . . . 43.2% N/A N/A N/A N/A

Weighted average collateral severities(2)

. . . . . . . . . 20.7 N/A N/A N/A N/A

Weighted average voluntary prepayment rates(3). . . 1.4 N/A N/A N/A N/A

Average credit enhancement(4)

. . . . . . . . . . . . . . . . . 19.6 N/A N/A N/A N/A

Total:

Unpaid principal balance . . . . . . . . . . . . . . . . . . . . . $ 6,284 $ 866 $1,810 $ 899 $1,590

Weighted average collateral default(1)

. . . . . . . . . . . 45.5% 31.7% 14.6% 22.8% 12.0%

Weighted average collateral severities(2)

. . . . . . . . . 61.1 46.4 47.8 40.1 37.9

Weighted average voluntary prepayment rates(3). . . 2.5 7.6 11.0 8.1 11.8

Average credit enhancement(4)

. . . . . . . . . . . . . . . . . 15.9 3.9 5.0 8.3 3.8

__________

(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.
FANNIE MAE

(In conservatorship)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(UNAUDITED)

92

(4) The average percent current credit enhancement provided by subordination of other securities. Excludes excess interest projections and 

monoline bond insurance.

The following table displays activity related to the unrealized credit loss 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,

2015 2014

(Dollars in millions)

Balance, beginning of period. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 5,260 $ 7,904

Additions for the credit component on debt securities for which OTTI was not previously recognized . . . . — 1

Additions for the credit component on debt securities for which OTTI was previously recognized . . . . . . . 4 39

Reductions for securities no longer in portfolio at period end . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,093) (53)

Reductions for securities which we intend to sell or it is more likely than not that we will be required to

sell before recovery of amortized cost basis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,369) (698)

Reductions for amortization resulting from changes in cash flows expected to be collected over the

remaining life of the securities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (58) (97)

Balance, end of period. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,744 $ 7,096

Maturity Information

The following table displays the amortized cost and fair value of our AFS securities by major security type and remaining 

contractual maturity, assuming no principal prepayments, as of March 31, 2015. The contractual maturity of mortgage-backed 

securities is not a reliable indicator of their expected life because borrowers generally have the right to prepay their 

obligations at any time.

As of March 31, 2015

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. . . . . . . . . . . . . . . . . . . . . . $ 5,086 $ 5,407 $ — $ — $ 253 $ 264 $ 208 $ 226 $ 4,625 $ 4,917

Freddie Mac . . . . . . . . . . . . . . . . . . . . . 4,842 5,257 — — 260 274 444 485 4,138 4,498

Ginnie Mae. . . . . . . . . . . . . . . . . . . . . . 398 458 — — 1 1 59 67 338 390

Alt-A private-label securities. . . . . . . . 3,649 4,464 — — — — — — 3,649 4,464

Subprime private-label securities. . . . . 3,572 4,608 — — — — — — 3,572 4,608

CMBS. . . . . . . . . . . . . . . . . . . . . . . . . . 1,318 1,370 — — 1,244 1,296 — — 74 74

Mortgage revenue bonds . . . . . . . . . . . 3,344 3,560 14 14 106 108 272 274 2,952 3,164

Other mortgage-related securities . . . . 2,421 2,608 — — — — 34 38 2,387 2,570

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 24,630 $ 27,732 $ 14 $ 14 $ 1,864 $ 1,943 $ 1,017 $ 1,090 $ 21,735 $ 24,685

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 remaining contractual terms of our 

guarantees range from 30 days to 38 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. 
FANNIE MAE

(In conservatorship)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(UNAUDITED)

93

The following table displays our maximum exposure, guaranty obligation recognized in our condensed consolidated balance 

sheets and the maximum potential recovery from third parties through available credit enhancements and recourse related to 

our financial guarantees as of March 31, 2015 and December 31, 2014.

As of

March 31, 2015 December 31, 2014

Maximum 

Exposure

(1)

Guaranty

Obligation

Maximum 

Recovery(2)

Maximum 

Exposure

(1)

Guaranty

Obligation

Maximum 

Recovery(2)

(Dollars in millions)

Unconsolidated Fannie Mae MBS. . . . . . . . . . . $ 16,703 $ 209 $ 9,576 $ 17,184 $ 214 $ 9,775

Other guaranty arrangements(3). . . . . . . . . . . . . 18,254 158 4,431 18,781 168 4,447

 Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 34,957 $ 367 $ 14,007 $ 35,965 $ 382 $ 14,222

__________

(1) Primarily consists of the unpaid principal balance of the underlying mortgage loans.

(2) 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 13, Concentrations of Credit 

Risk.”

(3) Primarily consists of credit enhancements, long-term standby commitments, and our commitment under the TCLF program.

The fair value of our guaranty obligations associated with the Fannie Mae MBS included in “Investments in securities” in our 

condensed consolidated balance sheets was $769 million and $797 million as of March 31, 2015 and December 31, 2014, 

respectively. These Fannie Mae MBS consist primarily of private-label wraps where our guaranty arrangement is with an 

unconsolidated MBS trust.

7. Acquired Property, Net

Acquired property, net consists of held-for-sale foreclosed property received in 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, and the related valuation allowance, for the three months ended March 31, 2015 and 2014. 

For the Three Months

Ended March 31,

2015 2014

(Dollars in millions)

Beginning balance — Acquired property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 11,442 $ 12,307

Additions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,935 3,772

Disposals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (4,029) (3,335)

Ending balance — Acquired property. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,348 12,744

Beginning balance — Valuation allowance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (824) (686)

Increase in valuation allowance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (6) (98)

Ending balance — Valuation allowance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (830) (784)

Ending balance — Acquired property, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 9,518 $ 11,960
FANNIE MAE

(In conservatorship)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(UNAUDITED)

94

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, 2015 and December 31, 2014.

As of

March 31, 2015 December 31, 2014

Outstanding

WeightedAverage 

Interest Rate(1) Outstanding

WeightedAverage 

Interest Rate(1)

(Dollars in millions)

Federal funds purchased and securities sold under agreements to 

repurchase(2). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 87 —% $ 50 —%

Short-term debt of Fannie Mae . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 99,349 0.14% $105,012 0.11%

Debt of consolidated trusts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,463 0.12 1,560 0.09

Total short-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $100,812 0.14% $106,572 0.11%

__________

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

(2) Represents agreements to repurchase securities for a specified price, with repayment generally occurring on the following day.

Intraday Line of Credit

We periodically use a secured intraday funding line of credit provided by a large financial institution. We post collateral 

which, in some circumstances, the secured party has the right to repledge to third parties. As this line of credit is an 

uncommitted intraday loan facility, we may be unable to draw on it if and when needed. The line of credit under this facility 

was $15.0 billion as of March 31, 2015 and December 31, 2014. We had no borrowings outstanding from this line of credit as 

of March 31, 2015.
FANNIE MAE

(In conservatorship)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(UNAUDITED)

95

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, 2015 and December 31, 2014.

As of

March 31, 2015 December 31, 2014

Maturities Outstanding

WeightedAverage 

Interest 

Rate(1) Maturities Outstanding

WeightedAverage 

Interest 

Rate(1)

(Dollars in millions)

Senior fixed:

Benchmark notes and bonds. . . . . . . . . . . 2015 - 2030 $ 170,531 2.44% 2015 - 2030 $ 173,010 2.41%

Medium-term notes(2). . . . . . . . . . . . . . . . 2015 - 2025 116,246 1.44 2015 - 2024 114,556 1.42

Foreign exchange notes and bonds. . . . . . 2021 - 2028 590 5.37 2021 - 2028 619 5.44

Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2015 - 2038 31,555 4.57 2015 - 2038 32,322 4.63

Total senior fixed. . . . . . . . . . . . . . . . . 318,922 2.29 320,507 2.29

Senior floating:

Medium-term notes(2). . . . . . . . . . . . . . . . 2015 - 2019 18,419 0.18 2015 - 2019 24,469 0.15

Connecticut Avenue Securities(3). . . . . . . 2023 - 2025 7,530 3.10 2023 - 2024 6,041 2.97

Other(4). . . . . . . . . . . . . . . . . . . . . . . . . . . 2020 - 2037 391 7.89 2020 - 2037 363 8.71

Total senior floating. . . . . . . . . . . . . . . 26,340 1.10 30,873 0.81

Subordinated debentures . . . . . . . . . . . . . . . . 2019 3,940 9.84 2019 3,849 9.93

Secured borrowings(5). . . . . . . . . . . . . . . . . . 2021 - 2022 189 1.91 2021 - 2022 202 1.90

Total long-term debt of Fannie Mae(6)

. . . 349,391 2.29 355,431 2.24

Debt of consolidated trusts(4). . . . . . . . . . . . . 2015 - 2054 2,762,428 2.91 2015 - 2054 2,760,152 3.02

Total long-term debt. . . . . . . . . . . . . . . $ 3,111,819 2.84% $ 3,115,583 2.93%

__________

(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) Credit risk sharing securities that transfer a portion of the credit risk on specified pools of mortgage loans to the investors in these 

securities. Connecticut Avenue Securities are reported at fair value.

(4) Represents structured debt instruments that are reported at fair value.

(5) 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.

(6) Reported amounts include unamortized discounts and premiums, other cost basis adjustments and fair value adjustments of $3.6 billion

and $4.1 billion as of March 31, 2015 and December 31, 2014, respectively.

9. Derivative Instruments

Derivative instruments are an integral part of our strategy in managing interest rate risk. Derivative instruments may be 

privately-negotiated, bilateral contracts, or they may be listed and traded on an exchange. We refer to our derivative 

transactions made pursuant to bilateral contracts as our over-the-counter (“OTC”) derivative transactions and our derivative 

transactions accepted for clearing by a derivatives clearing organization as our cleared derivative transactions. We typically 

do not settle the notional amount of our risk management derivatives; rather, notional amounts provide the basis for 

calculating actual payments or settlement amounts. The derivatives we use for interest rate risk management purposes consist 

primarily of interest rate swaps and interest rate options. 
FANNIE MAE

(In conservatorship)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(UNAUDITED)

96

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. See “Note 15, Fair Value” for 

additional information on derivatives recorded at fair value. We present cash flows from derivatives as operating activities in 

our condensed consolidated statements of cash flows.

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, 2015 and December 31, 2014.

As of March 31, 2015 As of December 31, 2014

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 . . . . . . . . . . . . . . . . . . $ 17,739 $ 114 $ 144,469 $ (9,424) $ 41,965 $ 733 $ 123,557 $ (7,125)

Receive-fixed . . . . . . . . . . . . . . 141,195 5,508 97,104 (516) 67,629 4,486 157,272 (1,302)

Basis . . . . . . . . . . . . . . . . . . . . . 1,769 156 9,100 (3) 5,769 123 7,100 (2)

Foreign currency . . . . . . . . . . . . 328 132 260 (48) 344 144 273 (30)

Swaptions:

Pay-fixed . . . . . . . . . . . . . . . . . . 7,625 52 21,700 (79) 11,100 57 26,525 (175)

Receive-fixed . . . . . . . . . . . . . . — — 23,275 (968) 750 96 29,525 (816)

Other(1)

. . . . . . . . . . . . . . . . . . . . . . . . 1,060 27 12 (1) 1,071 28 12 (1)

Total gross risk management

derivatives. . . . . . . . . . . . . . . . . 169,716 5,989 295,920 (11,039) 128,628 5,667 344,264 (9,451)

Accrued interest receivable

(payable) . . . . . . . . . . . . . . . . . . — 917 — (1,232) — 749 — (1,013)

Netting adjustment(2)

. . . . . . . . . . . — (5,626) — 12,036 — (5,186) — 10,194

Total net risk management

derivatives . . . . . . . . . . . . . . . $ 169,716 $ 1,280 $ 295,920 $ (235) $ 128,628 $ 1,230 $ 344,264 $ (270)

Mortgage commitment derivatives:

Mortgage commitments to

purchase whole loans . . . . . . . . $ 10,387 $ 51 $ 1,493 $ (4) $ 6,157 $ 28 $ 428 $ —

Forward contracts to purchase

mortgage-related securities. . . . 59,334 341 6,748 (14) 43,533 223 6,112 (8)

Forward contracts to sell

mortgage-related securities. . . . 8,548 20 91,558 (549) 4,886 4 57,910 (336)

Total mortgage commitment

derivatives . . . . . . . . . . . . . . . $ 78,269 $ 412 $ 99,799 $ (567) $ 54,576 $ 255 $ 64,450 $ (344)

Derivatives at fair value . . . . . . . $ 247,985 $ 1,692 $ 395,719 $ (802) $ 183,204 $ 1,485 $ 408,714 $ (614)
FANNIE MAE

(In conservatorship)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(UNAUDITED)

97

__________

(1) Includes 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 arrangements to settle 

with the same counterparty on a net basis, including cash collateral posted and received. Cash collateral posted was $6.6 billion and 

$5.3 billion as of March 31, 2015 and December 31, 2014, respectively. Cash collateral received was $161 million and $245 million as 

of March 31, 2015 and December 31, 2014, respectively. 

A majority of our OTC derivative contracts 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 credit ratings were downgraded to established thresholds in 

these derivative contracts, 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 OTC derivatives with credit-risk-related 

contingent features that were in a net liability position was $3.1 billion and $2.6 billion as of March 31, 2015 and 

December 31, 2014, respectively, for which we posted collateral of $2.9 billion and $2.4 billion in the normal course of 

business as of March 31, 2015 and December 31, 2014, respectively. Had all of the credit-risk-related contingency features 

underlying these agreements been triggered, an additional $230 million and $269 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 

March 31, 2015 and December 31, 2014, respectively. A reduction in our credit ratings may also cause derivatives clearing 

organizations or their members to demand that we post additional collateral for our cleared derivative contracts.

We record all derivative gains and losses, including accrued interest, in “Fair value losses, net” in our condensed consolidated 

statements of operations and comprehensive income. The following table displays, by type of derivative instrument, the fair 

value gains and losses, net on our derivatives for the three months ended March 31, 2015 and 2014.

For the Three Months

Ended March 31,

2015 2014

(Dollars in millions)

Risk management derivatives:

Swaps:

Pay-fixed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (3,069) $ (2,118)

Receive-fixed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,847 1,465

Basis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32 35

Foreign currency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (29) 21

Swaptions:

Pay-fixed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91 (99)

Receive-fixed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (159) (42)

Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 (3)

Accrual of periodic settlements:

Pay-fixed interest-rate swaps . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (931) (903)

Receive-fixed interest-rate swaps . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 692 691

Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 13

Total risk management derivatives fair value losses, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (1,514) $ (940)

Mortgage commitment derivatives fair value losses, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (239) (345)

Total derivatives fair value losses, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (1,753) $ (1,285)
FANNIE MAE

(In conservatorship)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(UNAUDITED)

98

Derivative Counterparty Credit Exposure

Our derivative counterparty credit exposure relates principally to interest rate derivative contracts. We are exposed to the risk 

that a counterparty in a derivative transaction will default on payments due to us, which may require us to seek a replacement 

derivative from a different counterparty. This replacement may be at a higher cost, or we may be unable to find a suitable 

replacement. We manage our derivative counterparty credit exposure relating to our risk management derivative transactions 

mainly through enforceable master netting arrangements, which allow us to net derivative assets and liabilities with the same 

counterparty or clearing organization and clearing member. For our risk management derivative transactions, we require 

counterparties to post collateral, which may include cash, U.S. Treasury securities, agency debt and agency mortgage-related 

securities. 

See “Note 14, Netting Arrangements” for information on our rights to offset assets and liabilities.

10. Earnings (Loss) Per Share

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 common stockholders. 

However, as a result of our conservatorship status and the terms of the senior preferred stock, no amounts are available to 

distribute as dividends to common or preferred stockholders (other than to Treasury as holder of the senior preferred stock). 

The following table displays the computation of basic and diluted earnings (loss) per share of common stock for the three 

months ended March 31, 2015 and 2014. 

For the Three Months

Ended March 31,

2015 2014

(Dollars and shares in millions,

except per share amounts)

Net income attributable to Fannie Mae. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,888 $ 5,325

Dividends available for distribution to senior preferred stockholder(1)

. . . . . . . . . . . . . . . . . . . . . . (1,796) (5,692)

Net income (loss) attributable to common stockholders. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 92 $ (367)

Weighted-average common shares outstanding—Basic(2)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,762 5,762

Convertible preferred stock. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 131 —

Weighted-average common shares outstanding—Diluted(2)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,893 5,762

Earnings (loss) per share:

Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 0.02 $ (0.06)

Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.02 (0.06)

__________

(1) Dividends available for distribution for the three months ended March 31, 2015 and 2014 (relating to the dividend period for the three 

months ended June 30, 2015 and 2014) were calculated based on our net worth as of March 31, 2015 and 2014 less the applicable 

capital reserve. 

(2) Includes 4.6 billion for the three months ended March 31, 2015 and 2014 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, 2015 and 2014.

11. 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. 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 
FANNIE MAE

(In conservatorship)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(UNAUDITED)

99

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 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.

The following tables display our business segment financial results for the three months ended March 31, 2015 and 2014. 

For the Three Months Ended March 31, 2015

Business Segments Other Activity/Reconciling Items

SingleFamily MultifamilyCapital

Markets

Consolidated 

Trusts(1)

Eliminations/ 

Adjustments(2)

Total

Results

(Dollars in millions)

Net interest income (loss) . . . . . . . . . . . . . . . . . $ 9 $ (31) $ 1,602 $ 3,216 $ 271 (3) $ 5,067

Benefit for credit losses. . . . . . . . . . . . . . . . . . . 478 55 — — — 533

Net interest income after benefit for credit

losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

487 24 1,602 3,216 271 5,600

Guaranty fee income (expense)(4)

. . . . . . . . . . . 3,040 340 (227) (1,562)

(5) (1,560)(5) 31 (5)

Investment gains (losses), net . . . . . . . . . . . . . . — 9 1,509 (202) (974)

(6) 342

Fair value (losses) gains, net. . . . . . . . . . . . . . . (4) — (1,970) (2) 57 (7) (1,919)

Debt extinguishment gains, net. . . . . . . . . . . . . — — 2 6 — 8

(Losses) gains from partnership investments(8)

. (5) 212 — — — 207

Fee and other income (expense) . . . . . . . . . . . . 172 51 55 (79) 78 277

Administrative expenses. . . . . . . . . . . . . . . . . . (484) (88) (151) — — (723)

Foreclosed property (expense) income . . . . . . . (485) 12 — — — (473)

TCCA fees(4)

. . . . . . . . . . . . . . . . . . . . . . . . . . . (382) — — — — (382)

Other (expenses) income. . . . . . . . . . . . . . . . . . (227) (7) (2) — 26 (210)

Income before federal income taxes . . . . . . . . . 2,112 553 818 1,377 (2,102) 2,758

Provision for federal income taxes . . . . . . . . . . (581) (70) (219) — — (870)

Net income attributable to Fannie Mae . . . . $ 1,531 $ 483 $ 599 $ 1,377 $ (2,102) $ 1,888
FANNIE MAE

(In conservatorship)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(UNAUDITED)

100

For the Three Months Ended March 31, 2014

Business Segments Other Activity/Reconciling Items

SingleFamily MultifamilyCapital

Markets

Consolidated 

Trusts(1)

Eliminations/ 

Adjustments(2) Total

Results

(Dollars in millions)

Net interest (loss) income . . . . . . . . . . . . . . . . $ (48) $ (22) $ 1,830 $ 2,698 $ 280 (3) $ 4,738

Benefit for credit losses. . . . . . . . . . . . . . . . . . 745 29 — — — 774

Net interest income after benefit for credit

losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

697 7 1,830 2,698 280 5,512

Guaranty fee income (expense)(4)

. . . . . . . . . . 2,870 311 (246) (1,427)

(5) (1,463)(5) 45 (5)

Investment gains (losses), net . . . . . . . . . . . . . — 3 1,285 (58) (1,135)

(6) 95

Fair value (losses) gains, net. . . . . . . . . . . . . . (5) — (1,337) 48 104 (7) (1,190)

Debt extinguishment (losses) gains, net . . . . . — — (7) 7 — —

Gains from partnership investments(8)

. . . . . . — 45 — — — 45

Fee and other income (expense) . . . . . . . . . . . 144 24 4,133 (76) 85 4,310

Administrative expenses. . . . . . . . . . . . . . . . . (450) (73) (149) — — (672)

Foreclosed property income . . . . . . . . . . . . . . 257 5 — — — 262

TCCA fees(4)

. . . . . . . . . . . . . . . . . . . . . . . . . . (322) — — — — (322)

Other expenses . . . . . . . . . . . . . . . . . . . . . . . . (155) (1) (8) — (12) (176)

Income before federal income taxes . . . . . . . . 3,036 321 5,501 1,192 (2,141) 7,909

(Provision) benefit for federal income taxes. . (927) 9 (1,666) — — (2,584)

Net income attributable to Fannie Mae . . . $ 2,109 $ 330 $ 3,835 $ 1,192 $ (2,141) $ 5,325

__________

(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 in the Capital Markets group’s retained mortgage portfolio 

that on a GAAP basis are eliminated.

(4) Includes the impact of a 10 basis point guaranty fee increase implemented pursuant to the TCCA, the incremental revenue from which 

must be remitted to Treasury. The resulting revenue is included in guaranty fee income and the expense is recognized as “TCCA fees.” 

(5) 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 related to unconsolidated Fannie Mae 

MBS trusts and other credit enhancement arrangements is included in fee and other income in our condensed consolidated statements of 

operations and comprehensive income.

(6) 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 in the Capital Markets group’s retained 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.

(7) Represents the removal of fair value adjustments on consolidated Fannie Mae MBS classified as trading that are in the Capital Markets 

group’s retained mortgage portfolio.

(8) Gains from partnership investments are included in other expenses in our condensed consolidated statements of operations and 

comprehensive income.
FANNIE MAE

(In conservatorship)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(UNAUDITED)

101

12. Equity

The following table displays the activity in other comprehensive income (“OCI”), net of tax, by major categories for the three 

months ended March 31, 2015 and 2014.

For the Three Months

Ended March 31,

2015 2014

(Dollars in millions)

Net income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,888 $ 5,325

Other comprehensive income, net of tax effect:

Changes in net unrealized gains on AFS securities (net of tax of $13 and $184, respectively) . . . . . . 24 340

Reclassification adjustment for OTTI recognized in net income (net of tax of $60 and $18,

respectively) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 110 33

Reclassification adjustment for gains on AFS securities included in net income (net of tax of $121

and $-, respectively) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (225) (1)

Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1) —

Total other comprehensive (loss) income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (92) 372

Total comprehensive income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,796 $ 5,697

The following table displays our accumulated other comprehensive income (“AOCI”) by major categories as of March 31, 

2015 and December 31, 2014.

As of

March 31, December 31,

2015 2014

(Dollars in millions)

Net unrealized gains on AFS securities for which we have not recorded OTTI, net of tax. . . . . . $ 667 $ 592

Net unrealized gains on AFS securities for which we have recorded OTTI, net of tax. . . . . . . . . 1,363 1,529

Prior service cost and actuarial losses, net of amortization, net of tax . . . . . . . . . . . . . . . . . . . . . (359) (358)

Other losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (30) (30)

Accumulated other comprehensive income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,641 $ 1,733
FANNIE MAE

(In conservatorship)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(UNAUDITED)

102

The table below displays changes in AOCI, net of tax.

For the Three Months Ended March 31,

2015 2014

AFS(1) Other(2) Total AFS(1) Other Total

(Dollars in millions)

Beginning balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,121 $ (388) $ 1,733 $ 1,627 $ (424) $ 1,203

OCI before reclassifications. . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 — 24 340 — 340

Amounts reclassified from OCI. . . . . . . . . . . . . . . . . . . . . . . . . (115) (1) (116) 32 — 32

Net OCI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (91) (1) (92) 372 — 372

Ending balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,030 $ (389) $ 1,641 $ 1,999 $ (424) $ 1,575

__________

(1) The amounts reclassified from AOCI represent the gain or loss recognized in earnings due to a sale of an AFS security or the 

recognition of a net impairment recognized in earnings, which are recorded in “Investments gains, net” in our condensed consolidated 

statements of operations and comprehensive income.

(2) The amounts reclassified from AOCI represent activity from our defined benefit pension plans, which is recorded in “Salaries and 

employee benefits” in our condensed consolidated statements of operations and comprehensive income.

13. Concentrations of Credit Risk

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 our 

retained mortgage 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 loan-to-value (“LTV”) ratios.

For multifamily loans, management monitors the serious delinquency rate, which is the percentage of loans, based on unpaid 

principal balance, that are 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, current debt service coverage ratio 

(“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, 2015 and December 31, 2014.

As of

March 31, 2015(1) December 31, 2014(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)

. . . . . . . . . . . . . . . . . . . . . . . . 1.11% 0.33% 1.87% 1.27% 0.38% 1.99%

Percentage of single-family conventional loans(4)

. . 1.26 0.36 1.78 1.47 0.43 1.89
FANNIE MAE

(In conservatorship)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(UNAUDITED)

103

As of

March 31, 2015(1) December 31, 2014(1)

Percentage of 

Single-Family

Conventional

Guaranty Book 

of Business(3)

Seriously 

Delinquent 

Rate(2)

Percentage of 

Single-Family

Conventional

Guaranty Book 

of Business(3)

Seriously 

Delinquent 

Rate(2)

Estimated mark-to-market loan-to-value ratio:

Greater than 100% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5% 10.43% 5% 10.98%

Geographical distribution:

California . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 0.66 20 0.70

Florida . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 3.91 6 4.42

Illinois . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 2.20 4 2.36

New Jersey . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 5.62 4 5.78

New York . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 4.04 5 4.17

All other states . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61 1.43 61 1.52

Product distribution:

Alt-A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 7.41 4 7.77

Vintages:

2005. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 5.94 3 6.18

2006. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 9.14 3 9.61

2007. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 10.34 4 10.79

2008. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 6.05 2 6.27

All other vintages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88 0.85 88 0.88

__________

(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, 2015 and 

December 31, 2014.

(2) Consists of single-family conventional loans that were 90 days or more past due or in the foreclosure process as of March 31, 2015 and 

December 31, 2014.

(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.
FANNIE MAE

(In conservatorship)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(UNAUDITED)

104

As of

March 31, 2015(1)(2) December 31, 2014(1)(2)

30 Days

Delinquent

Seriously 

Delinquent(3)

30 Days

Delinquent

Seriously 

Delinquent(3)

Percentage of multifamily guaranty book of business. . . . . . . . . . . . 0.03% 0.09% 0.04% 0.05%

As of

March 31, 2015(1) December 31, 2014(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 LTV ratio:

Greater than 80% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3% 0.55% 3% 0.31%

Less than or equal to 80% . . . . . . . . . . . . . . . . . . . . . . . . 97 0.08 97 0.04

Current debt service coverage ratio less than 1.0(5). . . . . . . . 3 1.27 3 0.83

__________

(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, 2015 and December 31, 2014

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 3 to 6 months but in 

some cases may be longer.

Other Concentrations

Mortgage Sellers and 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 and servicers are also obligated to repurchase loans or foreclosed properties, reimburse us for losses or 

provide other remedies 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. However, under our revised representation and warranty framework, we no 

longer require repurchase for loans that have breaches of certain selling representations and warranties if they have met 

specified criteria for relief. Our business with mortgage servicers is concentrated. Our five largest single-family mortgage 

servicers, including their affiliates, serviced approximately 45% of our single-family guaranty book of business as of 

March 31, 2015, compared with 46% as of December 31, 2014. Our ten largest multifamily mortgage servicers, including 

their affiliates, serviced approximately 68% of our multifamily guaranty book of business as of March 31, 2015, compared 

with approximately 67% as of December 31, 2014.

If a significant mortgage seller or servicer counterparty, or a number of mortgage sellers or servicers, fails to meet their 

obligations to us, it could result in an increase in our credit losses and credit-related expense, 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 $110.6 billion and $109.6 

billion on the single-family mortgage loans in our guaranty book of business as of March 31, 2015 and December 31, 2014, 

respectively, which represented 4% of our single-family guaranty book of business as of March 31, 2015 and December 31, 
FANNIE MAE

(In conservatorship)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(UNAUDITED)

105

2014. Our primary mortgage insurance coverage risk in force was $109.8 billion and $108.7 billion as of March 31, 2015 and 

December 31, 2014, respectively. Our pool mortgage insurance coverage risk in force was $806 million and $852 million as 

of March 31, 2015 and December 31, 2014, respectively. Our top four mortgage insurance companies provided 79% of our 

mortgage insurance as of March 31, 2015 and December 31, 2014.

Of our largest 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. Entering run-off may close off a source of profits and liquidity that may have otherwise assisted 

a mortgage insurer in paying claims under insurance policies, and could also cause the quality and speed of its claims 

processing to deteriorate. These three mortgage insurers provided a combined $11.7 billion, or 11%, of our risk in force 

mortgage insurance coverage of our single-family guaranty book of business as of March 31, 2015.

Effective April 10, 2015, PMI increased its cash payments on policyholder claims from 67% to 70%, and subsequently paid 

sufficient amounts of its outstanding deferred payment obligations to bring payment on those claims to 70%. It is uncertain 

whether PMI will be permitted in the future to pay any remaining deferred policyholder claims or increase or decrease the 

amount of cash they pay on claims.

Although the financial condition of our mortgage insurer counterparties currently approved to write new business has 

improved in recent years, there is still risk that these counterparties may fail to fulfill their obligations to pay our 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 our 

mortgage insurer counterparties, it could result in an increase in our loss reserves, which could adversely affect our results of 

operations, liquidity, financial condition and net worth.

When we estimate the credit losses that are inherent in our mortgage loans and under the terms of our guaranty obligations 

we also consider the recoveries that we will receive on primary mortgage insurance, as mortgage insurance recoveries would 

reduce the severity of the loss associated with defaulted loans. We evaluate the financial condition of our mortgage insurer 

counterparties and adjust the contractually due recovery amounts to ensure that 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. As 

of March 31, 2015 and December 31, 2014, the amount by which our estimated benefit from mortgage insurance reduced our 

total loss reserves as of these dates was $2.9 billion and $4.1 billion, respectively.

We had outstanding receivables of $1.5 billion recorded in “Other assets” in our condensed consolidated balance sheets as of 

March 31, 2015 and $1.4 billion as of December 31, 2014 related to amounts claimed on insured, defaulted loans excluding 

government insured loans. Of this amount, $360 million as of March 31, 2015 and $269 million as of December 31, 2014

was due from our mortgage sellers or servicers. We assessed the total outstanding receivables for collectibility, and they are 

recorded net of a valuation allowance of $870 million as of March 31, 2015 and $799 million as of December 31, 2014. The 

valuation allowance reduces our claim receivable to the amount which is considered probable of collection as of March 31, 

2015 and December 31, 2014.

For information on credit risk associated with our derivative transactions and repurchase agreements refer to “Note 9, 

Derivative Instruments” and “Note 14, Netting Arrangements.”
FANNIE MAE

(In conservatorship)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(UNAUDITED)

106

14. 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, 2015 and December 31, 2014.

As of March 31, 2015

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 . . . . . . . . . . . . $ 5,705 $(5,705) $ — $ — $ — $ —

Cleared risk management derivatives . . . . . . . . . . 1,174 79 1,253 — — 1,253

Mortgage commitment derivatives . . . . . . . . . . . . 412 — 412 (227) (3) 182

Total derivative assets. . . . . . . . . . . . . . . . . . . . . 7,291 (5,626) 1,665 (4)(227) (3) 1,435

Securities purchased under agreements to resell 

or similar arrangements(5). . . . . . . . . . . . . . . . . 39,180 — 39,180 — (39,180) —

Total assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 46,471 $(5,626) $ 40,845 $ (227) $ (39,183) $ 1,435

Liabilities:

OTC risk management derivatives . . . . . . . . . . . . $ (8,658) $ 8,424 $ (234) $ — $ — $ (234)

Cleared risk management derivatives . . . . . . . . . . (3,612) 3,612 — — — —

Mortgage commitment derivatives . . . . . . . . . . . . (567) — (567) 227 — (340)

Total derivative liabilities. . . . . . . . . . . . . . . . . . (12,837) 12,036 (801)

(4)

227 — (574)

Securities sold under agreements to repurchase or

similar arrangements . . . . . . . . . . . . . . . . . . . . . (87) — (87) — 87 —

Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . $(12,924) $12,036 $ (888) $ 227 $ 87 $ (574)
FANNIE MAE

(In conservatorship)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(UNAUDITED)

107

As of December 31, 2014

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 . . . . . . . . . . . . $ 5,461 $(5,428) $ 33 $ — $ (33) $ —

Cleared risk management derivatives . . . . . . . . . . 927 242 1,169 — — 1,169

Mortgage commitment derivatives . . . . . . . . . . . . 255 — 255 (116) (7) 132

Total derivative assets. . . . . . . . . . . . . . . . . . . . . 6,643 (5,186) 1,457 (4)(116) (40) 1,301

Securities purchased under agreements to resell 

or similar arrangements(5). . . . . . . . . . . . . . . . . 47,550 — 47,550 — (47,550) —

Total assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 54,193 $(5,186) $ 49,007 $ (116) $ (47,590) $ 1,301

Liabilities:

OTC risk management derivatives . . . . . . . . . . . . $ (7,836) $ 7,567 $ (269) $ — $ — $ (269)

Cleared risk management derivatives . . . . . . . . . . (2,627) 2,627 — — — —

Mortgage commitment derivatives . . . . . . . . . . . . (344) — (344) 116 — (228)

Total derivative liabilities. . . . . . . . . . . . . . . . . . (10,807) 10,194 (613)

(4)

116 — (497)

Securities sold under agreements to repurchase or

similar arrangements . . . . . . . . . . . . . . . . . . . . . (50) — (50) — 50 —

Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . $(10,857) $10,194 $ (663) $ 116 $ 50 $ (497)

__________

(1) Represents the effect of the right to offset under legally enforceable master netting arrangements to settle with the same counterparty on 

a net basis, including cash collateral posted and received and accrued interest. 

(2) Mortgage commitment derivative amounts reflect where we have recognized both an asset and a liability with the same counterparty 

under an enforceable master netting arrangement but we have not elected to offset the related amounts in our condensed consolidated 

balance sheets.

(3) Represents collateral 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. The fair value of non-cash collateral accepted for OTC risk management 

derivatives was $5 million and $51 million as of March 31, 2015 and December 31, 2014, respectively. The fair value of non-cash 

collateral accepted for securities purchased under agreements to resell or similar arrangements was $39.3 billion and $47.6 billion, of 

which $31.9 billion and $41.9 billion could be sold or repledged as of March 31, 2015 and December 31, 2014, respectively. None of 

the underlying collateral was sold or repledged as of March 31, 2015 or December 31, 2014. The fair value of non-cash collateral we 

pledged for securities sold under agreements to repurchase was $87 million and $50 million as of March 31, 2015 and December 31, 

2014, respectively, which the counterparty was permitted to sell or repledge.

(4) Excludes derivative assets of $27 million and $28 million as of March 31, 2015 and December 31, 2014, respectively, and derivative 

liabilities of $1 million as of March 31, 2015 and December 31, 2014, recognized in our condensed consolidated balance sheets that are 

not subject to enforceable master netting arrangements.

(5) Includes $19.0 billion and $16.6 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 March 31, 2015 and December 31, 2014, respectively.

Derivative instruments are recorded at fair value and securities purchased under agreements to resell or similar arrangements 

are recorded at amortized cost in our condensed consolidated balance sheets.

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 and various rules 

and regulations that would govern the insolvency of a derivative counterparty. The following is a description, under various 

agreements, of the nature of those rights and their effect or potential effect on our financial position.
FANNIE MAE

(In conservatorship)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(UNAUDITED)

108

The terms of the majority of our contracts for OTC risk management derivatives are governed under master agreements of the 

International Swaps and Derivatives Association Inc. (“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 cleared derivatives are governed under the rules of the clearing organization and the agreement 

between us and the clearing member of that clearing organization. In the event of a clearing organization default, all open 

positions at the clearing organization are closed and a net position (on a clearing member by clearing member basis) is 

calculated. Unless otherwise transferred, in the event of a clearing member default, all open positions cleared through that 

clearing member are closed and a net position is calculated. 

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.

15. 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. 
FANNIE MAE

(In conservatorship)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(UNAUDITED)

109

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, 2015 and December 31, 2014.

Fair Value Measurements as of March 31, 2015

Quoted Prices

in Active

Markets for

Identical Assets

(Level 1)

Significant 

Other

Observable 

Inputs

(Level 2)

Significant 

Unobservable 

Inputs

(Level 3)

Netting 

Adjustment(1)

Estimated

Fair Value

(Dollars in millions)

Recurring fair value measurements:

Assets:

Trading securities:

Mortgage-related securities:

Fannie Mae . . . . . . . . . . . . . . . . . . . . . . . . . . $ — $ 4,957 $ 2 $ — $ 4,959

Freddie Mac . . . . . . . . . . . . . . . . . . . . . . . . . — 1,723 — — 1,723

Ginnie Mae . . . . . . . . . . . . . . . . . . . . . . . . . . — 214 — — 214

Alt-A private-label securities . . . . . . . . . . . . — 261 572 — 833

Subprime private-label securities . . . . . . . . . — — 876 — 876

CMBS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 2,478 — — 2,478

Mortgage revenue bonds. . . . . . . . . . . . . . . . — — 742 — 742

Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — — 94 — 94

Non-mortgage-related securities:

U.S. Treasury securities . . . . . . . . . . . . . . . . 19,367 — — — 19,367

Total trading securities . . . . . . . . . . . . . . . . . . . . . 19,367 9,633 2,286 — 31,286

Available-for-sale securities:

Mortgage-related securities:

Fannie Mae . . . . . . . . . . . . . . . . . . . . . . . . . . — 5,202 205 — 5,407

Freddie Mac . . . . . . . . . . . . . . . . . . . . . . . . . — 5,252 5 — 5,257

Ginnie Mae . . . . . . . . . . . . . . . . . . . . . . . . . . — 458 — — 458

Alt-A private-label securities . . . . . . . . . . . . — 1,978 2,486 — 4,464

Subprime private-label securities . . . . . . . . . — — 4,608 — 4,608

CMBS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 1,370 — — 1,370

Mortgage revenue bonds. . . . . . . . . . . . . . . . — — 3,560 — 3,560

Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 1 2,607 — 2,608

Total available-for-sale securities. . . . . . . . . . . . . — 14,261 13,471 — 27,732

Mortgage loans of consolidated trusts . . . . . . . . . — 13,760 1,810 — 15,570

Other assets:

Risk management derivatives:

Swaps . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 6,666 161 — 6,827

Swaptions . . . . . . . . . . . . . . . . . . . . . . . . . . . — 52 — — 52

Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — — 27 — 27

Netting adjustment . . . . . . . . . . . . . . . . . . . . — — — (5,626) (5,626)

Mortgage commitment derivatives . . . . . . . . . — 385 27 — 412

Total other assets. . . . . . . . . . . . . . . . . . . . . . . . . . — 7,103 215 (5,626) 1,692

Total assets at fair value . . . . . . . . . . . . . . . . $ 19,367 $ 44,757 $ 17,782 $ (5,626) $ 76,280
FANNIE MAE

(In conservatorship)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(UNAUDITED)

110

Fair Value Measurements as of March 31, 2015

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 floating . . . . . . . . . . . . . . . . . . . . . . . . $ — $ 7,529 $ 391 $ — $ 7,920

Total of Fannie Mae . . . . . . . . . . . . . . . . . . . . . — 7,529 391 — 7,920

Of consolidated trusts . . . . . . . . . . . . . . . . . . . . — 20,826 547 — 21,373

Total long-term debt. . . . . . . . . . . . . . . . . . . . . . . — 28,355 938 — 29,293

Other liabilities:

Risk management derivatives:

Swaps . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 11,078 145 — 11,223

Swaptions . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 1,047 — — 1,047

Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — — 1 — 1

Netting adjustment . . . . . . . . . . . . . . . . . . . . . — — — (12,036) (12,036)

Mortgage commitment derivatives . . . . . . . . . . — 564 3 — 567

Total other liabilities. . . . . . . . . . . . . . . . . . . . . . . — 12,689 149 (12,036) 802

Total liabilities at fair value . . . . . . . . . . . . . . $ — $ 41,044 $ 1,087 $ (12,036) $ 30,095
FANNIE MAE

(In conservatorship)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(UNAUDITED)

111

Fair Value Measurements as of December 31, 2014

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:

Trading securities:

Mortgage-related securities:

Fannie Mae. . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ — $ 4,635 $ 305 $ — $ 4,940

Freddie Mac . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 1,369 — — 1,369

Ginnie Mae. . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 166 — — 166

Alt-A private-label securities. . . . . . . . . . . . . . . — 323 597 — 920

Subprime private-label securities. . . . . . . . . . . . — — 1,307 — 1,307

CMBS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 2,515 — — 2,515

Mortgage revenue bonds . . . . . . . . . . . . . . . . . . — — 722 — 722

Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — — 99 — 99

Non-mortgage-related securities:

U.S. Treasury securities . . . . . . . . . . . . . . . . . . . 19,466 — — — 19,466

Total trading securities. . . . . . . . . . . . . . . . . . . . . . . 19,466 9,008 3,030 — 31,504

Available-for-sale securities:

Mortgage-related securities:

Fannie Mae. . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 5,639 — — 5,639

Freddie Mac . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 5,522 6 — 5,528

Ginnie Mae. . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 476 — — 476

Alt-A private-label securities. . . . . . . . . . . . . . . — 2,538 3,140 — 5,678

Subprime private-label securities. . . . . . . . . . . . — — 5,240 — 5,240

CMBS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 1,397 — — 1,397

Mortgage revenue bonds . . . . . . . . . . . . . . . . . . — — 4,023 — 4,023

Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 2 2,671 — 2,673

Total available-for-sale securities . . . . . . . . . . . . . . — 15,574 15,080 — 30,654

Mortgage loans of consolidated trusts . . . . . . . . . . . — 13,796 1,833 — 15,629

Other assets:

Risk management derivatives:

Swaps . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 6,085 150 — 6,235

Swaptions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 153 — — 153

Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — — 28 — 28

Netting adjustment . . . . . . . . . . . . . . . . . . . . . . . — — — (5,186) (5,186)

Mortgage commitment derivatives. . . . . . . . . . . . — 251 4 — 255

Total other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . — 6,489 182 (5,186) 1,485

Total assets at fair value . . . . . . . . . . . . . . . . . . . $ 19,466 $ 44,867 $ 20,125 $ (5,186) $ 79,272
FANNIE MAE

(In conservatorship)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(UNAUDITED)

112

Fair Value Measurements as of December 31, 2014

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 floating . . . . . . . . . . . . . . . . . . . . . . . . . . . $ — $ 6,040 $ 363 $ — $ 6,403

Total of Fannie Mae . . . . . . . . . . . . . . . . . . . . . . . . — 6,040 363 — 6,403

Of consolidated trusts . . . . . . . . . . . . . . . . . . . . . . . — 18,956 527 — 19,483

Total long-term debt. . . . . . . . . . . . . . . . . . . . . . . . . . — 24,996 890 — 25,886

Other liabilities:

Risk management derivatives:

Swaps . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 9,339 133 — 9,472

Swaptions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 991 — — 991

Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — — 1 — 1

 Netting adjustment . . . . . . . . . . . . . . . . . . . . . . . . — — — (10,194) (10,194)

Mortgage commitment derivatives . . . . . . . . . . . . . — 341 3 — 344

Total other liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . — 10,671 137 (10,194) 614

Total liabilities at fair value . . . . . . . . . . . . . . . . . $ — $ 35,667 $ 1,027 $(10,194) $ 26,500

__________

(1) Derivative contracts are reported on a gross basis by level. The netting adjustment represents the effect of the legal right to offset under 

legally enforceable master netting arrangements to settle with the same counterparty on a net basis, including cash collateral posted and 

received.

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, 2015 and 2014. 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, 2015 and 2014. 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)

113

Fair Value Measurements Using Significant Unobservable Inputs (Level 3)

For the Three Months Ended March 31, 2015

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, 2015(5)

Balance,

December 31,

2014

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, 

2015

(Dollars in millions)

Trading securities:

Mortgage-related:

Fannie Mae . . . . . . . $ 305 $ (27) $ — $ — $ — $ — $ — $ (278) $ 2 $ 2 $ (19)

 Alt-A private-label

securities . . . . . . . 597 8 — — — — (17) (44) 28 572 8

Subprime privatelabel securities. . . 1,307 1 — — (398) — (34) — — 876 107

Mortgage revenue

bonds . . . . . . . . . . 722 35 — — (12) — (3) — — 742 33

 Other . . . . . . . . . . . . 99 (2) — — — — (3) — — 94 (2)

Total trading securities. $ 3,030 $ 15 (6)(7) $ — $ — $ (410) $ — $ (57) $ (322) $ 30 $ 2,286 $ 127 (6)(7)

Available-for-sale

securities:

Mortgage-related:

Fannie Mae . . . . . . . $ — $ — $ — $ 239 $ (34) $ — $ — $ — $ — $ 205 $ —

Freddie Mac . . . . . . 6 — — — — — — (1) — 5 —

 Alt-A private-label

securities . . . . . . . 3,140 101 (78) — (556) — (124) (310) 313 2,486 —

 Subprime privatelabel securities. . . 5,240 180 (101) — (565) — (146) — — 4,608 —

 Mortgage revenue

bonds . . . . . . . . . . 4,023 23 52 — (162) — (376) — — 3,560 —

 Other . . . . . . . . . . . . 2,671 (138) 140 — — — (66) — — 2,607 —

Total available-for-sale

securities. . . . . . . . .

$ 15,080 $ 166

(6)(8)

$ 13 $ 239 $ (1,317) $ — $ (712) $ (311) $ 313 $ 13,471 $ —

Mortgage loans of

consolidated trusts . $ 1,833 $ 34

(6)(7)

$ — $ 3 $ — $ — $ (77) $ (57) $ 74 $ 1,810 $ 19

(6)(7)

Net derivatives . . . . . . . 45 27 (7) — — — — (6) — — 66 39 (7)

Long-term debt:

Of Fannie Mae:

Senior floating . . . $ (363) $ (28) $ — $ — $ — $ — $ — $ — $ — $ (391) $ (28)

Of consolidated

trusts . . . . . . . . . .

(527) (13) — — — — 9 50 (66) (547) (12)

Total long-term debt. . . $ (890) $ (41)

(7) $ — $ — $ — $ — $ 9 $ 50 $ (66) $ (938) $ (40)(7)
FANNIE MAE

(In conservatorship)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(UNAUDITED)

114

Fair Value Measurements Using Significant Unobservable Inputs (Level 3)

For the Three Months Ended March 31, 2014

Total (Losses) or Gains or

(Realized/Unrealized) Net Unrealized 

Gains (Losses) 

Included in Net 

Income Related 

to Assets and 

Liabilities Still 

Held as of 

March 31, 2014(5)

Balance, 

December 31,

2013

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,

2014

(Dollars in millions)

Trading securities:

Mortgage-related:

Fannie Mae . . . . . . . . $ 42 $ (1) $ — $ — $ — $ — $ (2) $ (39) $ — $ — $ —

Freddie Mac . . . . . . . 2 — — — — — — (2) — — —

 Alt-A private-label

securities . . . . . . . . 618 19 — — — — (16) (76) 110 655 17

Subprime privatelabel securities. . . . 1,448 76 — — — — (71) — — 1,453 76

Mortgage revenue

bonds . . . . . . . . . . . 565 40 — — — — (4) — — 601 40

 Other. . . . . . . . . . . . . 99 5 — — — — (2) — — 102 5

Total trading securities. . $ 2,774 $ 139

(7)

$ — $ — $ — $ — $ (95) $ (117) $ 110 $ 2,811 $ 138

(7)

Available-for-sale

securities:

Mortgage-related:

Fannie Mae . . . . . . . . $ 7 $ — $ — $ — $ — $ — $ — $ (2) $ — $ 5 $ —

Freddie Mac . . . . . . . 8 — — — — — — — — 8 —

 Alt-A private-label

securities . . . . . . . . 3,791 13 73 — — — (88) (609) 390 3,570 —

 Subprime privatelabel securities. . . . 7,068 33 219 — — — (290) — — 7,030 —

 Mortgage revenue

bonds . . . . . . . . . . . 5,253 (20) 193 — (19) — (401) — — 5,006 —

 Other. . . . . . . . . . . . . 2,885 3 41 — — — (85) — — 2,844 —

Total available-for-sale

securities. . . . . . . . . .

$ 19,012 $ 29

(6)(8)

$ 526 $ — $ (19) $ — $ (864) $ (611) $ 390 $ 18,463 $ —

Mortgage loans of

consolidated trusts . . $ 2,704 $ 25

(6)(7)

$ — $ 24 $ — $ — $ (81) $ (148) $ 84 $ 2,608 $ 11

(6)(7)

Net derivatives. . . . . . . . (40) 30 (7) — — — — (12) (1) — (23) 11 (7)

Long-term debt:

Of Fannie Mae:

Senior floating . . . . $ (955) $ (90) $ — $ — $ — $ (750) $ 20 $ 1,465 $ — $ (310) $ (44)

Of consolidated trusts . (518) (1) — — — — 18 19 (24) (506) (1)

Total long-term debt. . . . $ (1,473) $ (91)

(7) $ — $ — $ — $ (750) $ 38 $ 1,484 $ (24) $ (816) $ (45)(7)

__________

(1) Gains (losses) included in other comprehensive income are included in “Changes in unrealized gains on AFS, 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 private-label mortgage-related securities backed by Alt-A loans and credit risk sharing 

securities issued under our CAS series. Prices for these securities were obtained from multiple third-party vendors or dealers. Transfers 

out of Level 3 also occurred for mortgage loans of consolidated trusts for which unobservable inputs used in valuations became less 

significant. 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.

(5) Amount represents temporary changes in fair value. Amortization, accretion and OTTI are not considered unrealized and are not 

included in this amount.

(6) Gains (losses) are included in “Net interest income” in our condensed consolidated statements of operations and comprehensive 

income.
FANNIE MAE

(In conservatorship)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(UNAUDITED)

115

(7) Gains (losses) are included in “Fair value losses, net” in our condensed consolidated statements of operations and comprehensive 

income.

(8) Gains (losses) are included in “Investment gains, net” in our condensed consolidated statements of operations and comprehensive 

income.

The following table displays 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, 2015 and December 31, 2014.

Fair Value Measurements as of March 31, 2015

Fair

Value

Significant Valuation

Techniques

Significant 

Unobservable Inputs(1) Range(1)

Weighted - 

Average(1)

(Dollars in millions)

Recurring fair value measurements:

Trading securities:

Mortgage-related securities:

Agency(2). . . . . . . . . . . . . . . . . . . . . . . . $ 2 Other

Alt-A private-label securities(3). . . . . . . 95 Single Vendor Default Rate (%) 8.8 8.8

Prepayment Speed (%) 2.3 2.3

Severity (%) 82.2 82.2

Spreads (bps) 281.2 281.2

78 Consensus Default Rate (%) 4.7 - 14.2 6.3

Prepayment Speed (%) 2.5 - 13.2 4.3

Severity (%) 36.4 - 46.5 38.1

Spreads (bps) 230.0 - 253.6 249.6

372 Consensus

27 Other

Total Alt-A private-label securities. . . 572

Subprime private-label securities(3). . . . 322 Consensus Default Rate (%) 4.3 - 9.8 5.9

Prepayment Speed (%) 2.0 - 3.3 2.4

Severity (%) 65.0 - 95.0 82.9

Spreads (bps) 255.0 255.0

281 Consensus

121 Discounted Cash Flow Default Rate (%) 5.4 5.4

Prepayment Speed (%) 2.2 2.2

Severity (%) 60.7 60.7

Spreads (bps) 255.0 255.0

152 Other

Total subprime private-label securities 876

Mortgage revenue bonds. . . . . . . . . . . . . 723 Discounted Cash Flow Spreads (bps) 27.5 - 323.4 253.1

19 Other

Total mortgage revenue bonds. . . . . . . 742

Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94 Single Vendor Spreads (bps) 383.4 383.4

Total trading securities . . . . . . . . . . . . . . . . . $ 2,286
FANNIE MAE

(In conservatorship)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(UNAUDITED)

116

Fair Value Measurements as of March 31, 2015

Fair

Value

Significant Valuation

Techniques

Significant 

Unobservable Inputs(1) Range(1)

Weighted - 

Average(1)

(Dollars in millions)

Available-for-sale securities:

Mortgage-related securities:

Agency(2). . . . . . . . . . . . . . . . . . . . . . . . $ 210 Other

Alt-A private-label securities(3). . . . . . . 266 Single Vendor Default Rate (%) 1.7 - 10.4 4.7

Prepayment Speed (%) 0.4 - 9.1 4.5

Severity (%) 34.4 - 94.9 60.7

Spreads (bps) 190.1 - 330.0 246.5

784 Consensus Default Rate (%) 0.0 - 15.2 4.3

Prepayment Speed (%) 0.2 - 34.4 12.0

Severity (%) 15.9 - 95.0 65.3

Spreads (bps) 144.9 - 230.0 225.8

795 Consensus

224 Dealer Mark

243 Discounted Cash Flow Default Rate (%) 1.8 - 5.4 3.0

Prepayment Speed (%) 6.2 - 15.2 9.4

Severity (%) 35.0 - 64.0 54.6

Spreads (bps) 188.0 - 348.5 296.8

174 Other

Total Alt-A private-label securities. . . 2,486

Subprime private-label securities(3). . . . 286 Single Vendor

2,362 Consensus Default Rate (%) 1.0 - 91.8 6.6

Prepayment Speed (%) 0.1 - 21.5 2.4

Severity (%) 28.0 - 95.0 82.8

Spreads (bps) 145.0 - 255.0 208.9

1,233 Consensus

232 Dealer Mark Default Rate (%) 8.5 - 9.0 8.8

Prepayment Speed (%) 1.8 - 2.0 1.9

Severity (%) 77.8 - 95.0 86.9

Spreads (bps) 205.0 205.0

247 Dealer Mark

248 Other

Total subprime private-label securities 4,608

Mortgage revenue bonds . . . . . . . . . . . . 1,365 Single Vendor Spreads (bps) 10.0 - 466.6 71.3

229 Single Vendor

267 Dealer Mark Spreads (bps) 197.2 - 316.1 299.0

1,517 Discounted Cash Flow Spreads (bps) 10.0 - 396.6 244.6

182 Other

Total mortgage revenue bonds. . . . . . . 3,560

Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . 713 Consensus Default Rate (%) 0.0 - 5.0 4.2

Prepayment Speed (%) 3.0 - 14.2 4.3

Severity (%) 0.0 - 95.0 61.1

Spreads (bps) 205.0 - 428.3 289.2

206 Consensus

364 Dealer Mark Default Rate (%) 5.0 5.0

Prepayment Speed (%) 3.0 3.0

Severity (%) 85.0 85.0

Spreads (bps) 245.4 - 410.5 299.6
FANNIE MAE

(In conservatorship)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(UNAUDITED)

117

473 Dealer Mark

600 Discounted Cash Flow Default Rate (%) 0.0 - 1.8 0.0

Prepayment Speed (%) 0.0 - 8.0 0.0

Severity (%) 0.0 - 95.0 0.2

Spreads (bps) 230.0 - 336.0 321.8

251 Other

Total other . . . . . . . . . . . . . . . . . . . . . . 2,607

Total available-for-sale securities. . . . . . . . . $13,471

Fair Value Measurements as of March 31, 2015

Fair

Value

Significant Valuation

Techniques

Significant 

Unobservable Inputs(1) Range(1)

Weighted - 

Average(1)

(Dollars in millions)

Mortgage loans of consolidated trusts:

Single-family . . . . . . . . . . . . . . . . . . . . . . $ 900 Build-Up Default Rate (%) 0.0 - 98.0 14.9

Prepayment Speed (%) 3.8 - 99.7 16.9

Severity (%) 0.0 - 100.0 24.1

363 Consensus

360 Discounted Cash Flow Default Rate (%) 0.0 - 13.3 4.6

Prepayment Speed (%) 0.1 - 11.6 7.3

Severity (%) 53.3 - 95.0 80.3

Spreads (bps) 145.0 - 655.0 212.6

4 Other

Total single-family. . . . . . . . . . . . . . . . . 1,627

Multifamily. . . . . . . . . . . . . . . . . . . . . . . . 183 Build-Up Spreads (bps) 56.0 - 340.4 146.5

Total mortgage loans of consolidated trusts $ 1,810

Net derivatives. . . . . . . . . . . . . . . . . . . . . . . $ (119) Internal Model

160 Dealer Mark

25 Other

Total net derivatives . . . . . . . . . . . . . . . . . $ 66

Long-term debt:

Of Fannie Mae:

Senior floating. . . . . . . . . . . . . . . . . . . $ (391) Discounted Cash Flow

Total of Fannie Mae. . . . . . . . . . . . . . . . (391)

Of consolidated trusts(4). . . . . . . . . . . . . . (290) Consensus

(156) Discounted Cash Flow Default Rate (%) 0.0 - 5.0 2.3

Prepayment Speed (%) 0.1 - 100.0 30.8

Severity (%) 60.0 - 95.0 76.9

Spreads (bps) 66.0 - 655.0 245.8

(101) Other

Total of consolidated trusts . . . . . . . . . . (547)

Total long-term debt . . . . . . . . . . . . . . . . . . $ (938)
FANNIE MAE

(In conservatorship)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(UNAUDITED)

118

Fair Value Measurements as of December 31, 2014

Fair

Value

Significant Valuation

Techniques

Significant 

Unobservable Inputs(1) Range(1)

Weighted - 

Average(1)

(Dollars in millions)

Recurring fair value measurements:

Trading securities:

Mortgage-related securities:

Agency(2)(4)

. . . . . . . . . . . . . . . . . . . . . . $ 153 Single Vendor Prepayment Speed (%) 100.0 100.0

Spreads (bps) 256.5 - 350.8 293.4

130 Consensus Prepayment Speed (%) 100.0 100.0

Spreads (bps) 184.6 - 219.5 197.5

22 Other

Total Agency. . . . . . . . . . . . . . . . . . . . . . 305

Alt-A private-label securities(3). . . . . . . . 290 Single Vendor Default Rate (%) 8.3 - 9.1 8.5

Prepayment Speed (%) 2.9 - 3.2 3.1

Severity (%) 79.5 - 95.0 90.4

Spreads (bps) 267.2 - 308.2 279.4

66 Consensus Default Rate (%) 5.4 5.4

Prepayment Speed (%) 7.0 7.0

Severity (%) 48.8 48.8

Spreads (bps) 264.8 264.8

151 Consensus

90 Other

Total Alt-A private-label securities. . . . . 597

Subprime private-label securities(3)

. . . . . 422 Consensus Default Rate (%) 3.5 - 11.8 7.2

Prepayment Speed (%) 1.4 - 5.2 2.8

Severity (%) 72.1 - 95.0 85.9

Spreads (bps) 265.0 265.0

549 Consensus

290 Discounted Cash Flow Default Rate (%) 4.3 - 6.2 5.2

Prepayment Speed (%) 2.3 - 4.2 3.3

Severity (%) 62.2 - 95.0 73.8

Spreads (bps) 265.0 - 382.1 283.7

46 Other

Total subprime private-label securities . 1,307

Mortgage revenue bonds . . . . . . . . . . . . . 161 Dealer Mark Spreads (bps) 288.1 288.1

540 Discounted Cash Flow Spreads (bps) 6.0 - 318.0 263.0

21 Other

Total mortgage revenue bonds . . . . . . . 722

Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99 Dealer Mark

Total trading securities . . . . . . . . . . . . . . . . . $ 3,030
FANNIE MAE

(In conservatorship)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(UNAUDITED)

119

Fair Value Measurements as of December 31, 2014

Fair

Value

Significant Valuation

Techniques

Significant 

Unobservable Inputs(1) Range(1)

Weighted - 

Average(1)

(Dollars in millions)

Available-for-sale securities:

Mortgage-related securities:

Agency(2). . . . . . . . . . . . . . . . . . . . . . . . $ 6 Other

Alt-A private-label securities(3). . . . . . . 322 Single Vendor Default Rate (%) 0.2 - 13.1 4.6

Prepayment Speed (%) 0.2 - 20.5 8.2

Severity (%) 27.8 - 89.7 61.0

Spreads (bps) 190.0 - 315.0 264.9

493 Single Vendor

1,187 Consensus Default Rate (%) 0.4 - 31.2 5.1

Prepayment Speed (%) 0.1 - 48.9 11.0

Severity (%) 0.2 - 95.0 59.6

Spreads (bps) 183.8 - 240.0 236.7

691 Consensus

403 Discounted Cash Flow Default Rate (%) 5.0 - 11.5 7.0

Prepayment Speed (%) 0.5 - 8.4 3.4

Severity (%) 35.1 - 92.4 54.2

Spreads (bps) 188.0 - 340.0 243.4

44 Other

Total Alt-A private-label securities. . . 3,140

Subprime private-label securities(3). . . . 383 Single Vendor Default Rate (%) 2.1 - 8.3 5.5

Prepayment Speed (%) 1.5 - 3.3 2.1

Severity (%) 65.4 - 95.0 78.5

Spreads (bps) 215.0 - 262.0 230.0

2,722 Consensus Default Rate (%) 1.5 - 37.4 6.3

Prepayment Speed (%) 0.1 - 17.7 2.6

Severity (%) 1.5 - 95.0 84.4

Spreads (bps) 155.0 - 265.0 220.0

1,755 Consensus

317 Discounted Cash Flow Default Rate (%) 3.0 - 12.3 7.0

Prepayment Speed (%) 1.1 - 9.0 4.1

Severity (%) 28.9 - 91.8 81.2

Spreads (bps) 155.0 - 895.0 250.5

63 Other

Total subprime private-label securities 5,240

Mortgage revenue bonds . . . . . . . . . . . . 1,504 Single Vendor Spreads (bps) (11.5)- 361.5 52.7

418 Single Vendor

510 Dealer Mark Spreads (bps) 222.8 - 322.1 265.9

1,581 Discounted Cash Flow Spreads (bps) (11.5)- 620.2 251.4

10 Other

Total mortgage revenue bonds. . . . . . . 4,023

Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . 337 Single Vendor Default Rate (%) 1.7 - 5.0 4.4

Prepayment Speed (%) 3.0 - 9.3 3.8

Severity (%) 4.0 - 94.6 69.6

Spreads (bps) 263.1 - 427.2 291.5

720 Consensus Default Rate (%) 0.1 - 6.6 3.9

Prepayment Speed (%) 3.0 - 30.4 4.8

Severity (%) 0.4 - 95.0 62.4

Spreads (bps) 215.0 - 481.4 320.6

1,215 Dealer Mark

399 Other

Total other . . . . . . . . . . . . . . . . . . . . . . 2,671

Total available-for-sale securities. . . . . . . . . $15,080
FANNIE MAE

(In conservatorship)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(UNAUDITED)

120

Fair Value Measurements as of December 31, 2014

Fair

Value

Significant Valuation

Techniques

Significant 

Unobservable Inputs(1) Range(1)

Weighted - 

Average(1)

(Dollars in millions)

Mortgage loans of consolidated trusts:

Single-family. . . . . . . . . . . . . . . . . . . . . . . $ 934 Build-Up Default Rate (%) 0.0 - 99.0 14.9

Prepayment Speed (%) 3.6 - 99.8 16.3

Severity (%) 3.4 - 100.0 23.7

279 Consensus

402 Discounted Cash Flow Default Rate (%) 2.7 - 13.1 5.5

Prepayment Speed (%) 0.1 - 13.5 7.5

Severity (%) 35.5 - 95.0 61.3

Spreads (bps) 155.0 - 665.0 227.4

39 Other

Total single-family . . . . . . . . . . . . . . . . . 1,654

Multifamily . . . . . . . . . . . . . . . . . . . . . . . . 179 Build-Up Spreads (bps) 59.0 - 323.4 137.3

Total mortgage loans of consolidated trusts $ 1,833

Net derivatives. . . . . . . . . . . . . . . . . . . . . . . $ (107) Internal Model

150 Dealer Mark

2 Other

Total net derivatives. . . . . . . . . . . . . . . . . . $ 45

Long-term debt:

Of Fannie Mae:

Senior floating . . . . . . . . . . . . . . . . . . . . $ (363) Discounted Cash Flow

Of consolidated trusts(4). . . . . . . . . . . . . . (219) Consensus

(205) Discounted Cash Flow Default Rate (%) 2.7 - 11.9 4.0

Prepayment Speed (%) 0.1 - 100.0 33.4

Severity (%) 35.5 - 95.0 54.6

Spreads (bps) 88.0 - 665.0 249.4

(103) Other

Total of consolidated trusts. . . . . . . . . . . (527)

Total long-term debt . . . . . . . . . . . . . . . . . . $ (890)

_________

(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 and Freddie Mac securities.

(3) Default Rate as disclosed represents the estimated beginning annualized rate of default and is used as a basis to forecast the future 

default rates that serve as an input for valuation.

(4) Includes instruments for which the prepayment speed as disclosed represents the estimated annualized rate of prepayment after all 

prepayment penalty provisions have expired and also instruments for which prepayment speed as disclosed represents the estimated rate 

of prepayment over the remaining life of the instrument.

In our condensed consolidated balance sheets certain assets and liabilities are measured at fair value on a nonrecurring basis; 

that is, the instruments are not measured at fair value on an ongoing basis but are subject to fair value adjustments in certain 

circumstances (for example, when we evaluate loans for impairment). We did not have any Level 1 assets or liabilities that 

were measured at fair value on a nonrecurring basis as of March 31, 2015 and December 31, 2014. We held $7 million and 

$93 million Level 2 assets, comprised of mortgage loans held for sale, and no Level 2 liabilities that were measured at fair 

value on a nonrecurring basis as of March 31, 2015 and December 31, 2014, respectively.

The following table displays valuation techniques for our Level 3 assets measured at fair value on a nonrecurring basis as of 

March 31, 2015 and December 31, 2014. The significant unobservable inputs related to these techniques primarily relate to 
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collateral dependent valuations. The related ranges and weighted averages are not meaningful when aggregated as they vary 

significantly from property to property.

Fair Value Measurements (Level 3)

as of

Valuation Techniques

March 31,

2015

December 31,

2014

(Dollars in millions)

Nonrecurring fair value measurements:

Mortgage loans held for sale, at lower of cost or fair value . . . . . Consensus $ 202 $ 110

Single-family mortgage loans held for investment, at amortized

cost:

Of Fannie Mae . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Internal Model 13,540 16,654

Consensus 271 —

Of consolidated trusts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other 20 60

Total single-family mortgage loans held for investment, at

amortized cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,831 16,714

Multifamily mortgage loans held for investment, at amortized

cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Broker Price Opinions 83 45

Asset Manager Estimate 557 580

Other 11 —

Total multifamily mortgage loans held for investment, at

amortized cost. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 651 625

Acquired property, net:

Single-family . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Accepted Offers 873 864

Appraisals 1,194 1,509

Walk Forwards 800 1,173

Internal Model 967 1,045

Other 172 191

Total single-family. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,006 4,782

Multifamily. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Accepted Offers 13 —

Broker Price Opinions 35 127

Other — 13

Total multifamily . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48 140

Other assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other 27 45

Total nonrecurring assets at fair value . . . . . . . . . . . . . . . . . . . . . $ 18,765 $ 22,416

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 in more specific situations. 

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.

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 in active markets 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.
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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.

Dealer Mark: This valuation technique utilizes one dealer 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.

For 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: We derive the fair value of mortgage loans using a build-up valuation technique. In the build-up valuation 

technique we start with the base value for our Fannie Mae MBS and then add or subtract the fair value of the associated 

guaranty asset, guaranty obligation (“GO”) and master servicing arrangement. We use observable market values of Fannie 

Mae MBS with similar characteristics, either on a pool or loan level, 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. 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 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 

also estimate the fair value of the GO using our current guaranty pricing and adjust that pricing, as appropriate, for the 

seasoning of the collateral when such transactions reflect credit characteristics of loans held in our portfolio. As a result, the 

fair value of our mortgage loans will change when the pricing for our credit guaranty changes in the GSE securitization 

market.

Our performing 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.
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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 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 certain key factors, including collateral value, 

cash flow characteristics and mortgage insurance repayment. Collateral value is derived from the current estimated mark-tomarket LTV ratio of the individual loan and, where appropriate, a state-level distressed property sales discount. Cash flow 

characteristics include attributes such as the weighted average coupon rate and loan payment history. 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. Fair value is estimated from the extrapolation of indicative sample bids obtained 

from multiple active market participants plus the estimated value of any applicable mortgage insurance. These loans are 

classified as Level 3 of the valuation hierarchy because significant inputs are unobservable. 

We estimate the fair value for a portion of our senior-subordinated trust structures using the average of two or more vendor 

prices at the security level as a proxy for estimating loan fair value. These loans are classified as Level 3 of the valuation 

hierarchy because significant inputs are unobservable.

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. We also estimate the fair value of our 

reverse mortgages using the single vendor valuation technique. These loans are classified as Level 3 of the valuation 

hierarchy because significant inputs are unobservable. 

Internal Model: For loans whose value it has been determined should be based on collateral value, we use an internal 

proprietary distressed home price model. The internal model used in this process takes one of two approaches when valuing 

the collateral. 

The first approach relies on comparable foreclosed property sales to estimate the value of the target collateral. The 

comparable foreclosed property sales approach uses various factors such as geographic distance, transaction time and the 

value difference. The second approach referred to as the median Metropolitan Statistical Area (“MSA”) is based on the 

median of all the foreclosure sales of REOs in a specific MSA. Using this sales price, MSA level discount is computed and 

applied to the estimated non distressed value to derive an estimated fair value. If there are not enough REO sales in a specific 

MSA, a median state level foreclosure discount is used to estimate the fair value. 

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 median MSA is based 

on historical accuracy. 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. 

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 
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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. 

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 next highest priority valuation methodology available, 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, 2015, these methodologies 

comprised approximately 71% of our valuations, while accepted offers comprised approximately 25% of our valuations. 

Based on the number of properties measured as of December 31, 2014, these methodologies comprised approximately 77%

of our valuations, while accepted offers comprised approximately 19% 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 significant 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 
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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. 

We review the appraisals and broker price opinions received to determine if they have been performed in accordance with 

applicable standards and if the results are consistent with our observed transactions on similar properties. We make necessary 

adjustments as required.

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. 
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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 Fannie Mae debt instruments 

and debt of consolidated trusts with embedded derivatives, which are recorded in our condensed consolidated balance sheets 

at fair value on a recurring basis. 

We classify debt instruments that have quoted market prices in active markets for similar liabilities when traded as assets as 

Level 2 of the valuation hierarchy. For all valuation techniques used for debts instruments where there is limited activity or 

less transparency around these inputs to the valuation, these debt instruments are classified as Level 3 of the valuation 

hierarchy.

A description of our debt valuation techniques is as follows: 

Consensus: We estimate the fair value of debt of Fannie Mae and our debt of consolidated trusts using an average of two or 

more vendor prices or dealer marks that represents estimated fair value for similar liabilities when traded as assets. 

Single Vendor: We estimate the fair value of debt of Fannie Mae and our debt of consolidated trusts using a single vendor 

price that represents estimated fair value for these liabilities when traded as assets. 

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 the debt of Fannie Mae and our debt of consolidated trusts using a discounted 

cash flow technique that uses spreads based on market assumptions where available. 

The valuation methodology and inputs used in estimating the fair value of MBS assets are described under “Trading 

Securities and Available-for-Sale Securities.” 

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 and Verification Group is responsible for the estimation and verification of the fair value for the majority of our 

financial assets and financial liabilities, including review of material assumptions used when market-based inputs do not 

exist. The Pricing and Verification Group also provides a quarterly update to the Valuation Oversight Committee (“VOC”) on 

relevant market information, pricing trends, significant valuation challenges and the resolution of those challenges. The 

Pricing and Verification Group resides within our Finance Division and is independent of any trading or market related 

activities. Fair value measurements for acquired property and collateral dependent loans are determined by other valuation 

groups in the Finance Division.

Our 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, models 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 and Verification 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. 
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We have discussions with the pricing vendors 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.

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 oversight from the Model Risk Management 

Group, which is responsible for establishing risk management controls and for reviewing models used in the determination of 

fair value measurements for financial reporting. 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 Property Valuation Review Group reviews appraisals and broker price opinions to determine the most appropriate value 

by comparing data within these products with current comparable properties and market data. We conduct regular 

performance reviews of the counterparties that provide products and services for this process. In addition, valuation results 

and trend analyses are reviewed regularly by management responsible for valuing and disposing of real estate.

Fair Value of Financial Instruments

The following table displays the carrying value and estimated fair value of our financial instruments as of March 31, 2015

and December 31, 2014. The fair value of financial instruments we disclose includes commitments to purchase multifamily 

and single-family mortgage loans that we do not record in our condensed consolidated balance sheets. The fair values of 

these commitments are included as “Mortgage loans held for investment, net of allowance for loan losses.” The disclosure 

excludes 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, 2015

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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 65,299 $ 46,349 $ 18,950 $ — $ — $ 65,299

Federal funds sold and securities purchased

under agreements to resell or similar

arrangements . . . . . . . . . . . . . . . . . . . . . . . 20,230 — 20,230 — — 20,230

Trading securities . . . . . . . . . . . . . . . . . . . . . 31,286 19,367 9,633 2,286 — 31,286

Available-for-sale securities . . . . . . . . . . . . . 27,732 — 14,261 13,471 — 27,732

Mortgage loans held for sale . . . . . . . . . . . . . 613 — 153 567 — 720

Mortgage loans held for investment, net of

allowance for loan losses:

Of Fannie Mae. . . . . . . . . . . . . . . . . . . . . 235,827 — 31,127 214,493 — 245,620

Of consolidated trusts . . . . . . . . . . . . . . . 2,776,676 — 2,644,458 204,706 — 2,849,164

Mortgage loans held for investment . . . . . . . 3,012,503 — 2,675,585 419,199 — 3,094,784

Advances to lenders. . . . . . . . . . . . . . . . . . . . 6,361 — 5,901 443 — 6,344

Derivative assets at fair value . . . . . . . . . . . . 1,692 — 7,103 215 (5,626) 1,692

Guaranty assets and buy-ups. . . . . . . . . . . . . 201 — — 599 — 599

Total financial assets . . . . . . . . . . . . . . . . . . . $ 3,165,917 $ 65,716 $ 2,751,816 $ 436,780 $ (5,626) $ 3,248,686

Financial liabilities:

Federal funds purchased and securities sold

under agreements to repurchase. . . . . . . . . $ 87 $ — $ 87 $ — $ — $ 87

Short-term debt:

 Of Fannie Mae . . . . . . . . . . . . . . . . . . . . . 99,349 — 99,361 — — 99,361

 Of consolidated trusts. . . . . . . . . . . . . . . . 1,463 — — 1,463 — 1,463

Long-term debt:

 Of Fannie Mae . . . . . . . . . . . . . . . . . . . . . 349,391 — 363,358 994 — 364,352

 Of consolidated trusts. . . . . . . . . . . . . . . . 2,762,428 — 2,830,632 22,826 — 2,853,458

Derivative liabilities at fair value . . . . . . . . . 802 — 12,689 149 (12,036) 802

Guaranty obligations . . . . . . . . . . . . . . . . . . . 367 — — 1,536 — 1,536

Total financial liabilities . . . . . . . . . . . . . . . . $ 3,213,887 $ — $ 3,306,127 $ 26,968 $ (12,036) $ 3,321,059
FANNIE MAE

(In conservatorship)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(UNAUDITED)

129

As of December 31, 2014

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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 54,565 $ 37,965 $ 16,600 $ — $ — $ 54,565

Federal funds sold and securities purchased

under agreements to resell or similar

arrangements . . . . . . . . . . . . . . . . . . . . . . . 30,950 — 30,950 — — 30,950

Trading securities . . . . . . . . . . . . . . . . . . . . . 31,504 19,466 9,008 3,030 — 31,504

Available-for-sale securities . . . . . . . . . . . . . 30,654 — 15,574 15,080 — 30,654

Mortgage loans held for sale . . . . . . . . . . . . . 331 — 169 169 — 338

Mortgage loans held for investment, net of

allowance for loan losses:

Of Fannie Mae. . . . . . . . . . . . . . . . . . . . . 239,243 — 29,896 217,064 — 246,960

Of consolidated trusts . . . . . . . . . . . . . . . 2,779,920 — 2,657,863 183,263 — 2,841,126

Mortgage loans held for investment . . . . . . . 3,019,163 — 2,687,759 400,327 — 3,088,086

Advances to lenders. . . . . . . . . . . . . . . . . . . . 5,559 — 5,079 470 — 5,549

Derivative assets at fair value . . . . . . . . . . . . 1,485 — 6,489 182 (5,186) 1,485

Guaranty assets and buy-ups. . . . . . . . . . . . . 210 — — 616 — 616

Total financial assets . . . . . . . . . . . . . . . . . . . $ 3,174,421 $ 57,431 $ 2,771,628 $ 419,874 $ (5,186) $ 3,243,747

Financial liabilities:

Federal funds purchased and securities sold

under agreements to repurchase. . . . . . . . . $ 50 $ — $ 50 $ — $ — $ 50

Short-term debt:

 Of Fannie Mae . . . . . . . . . . . . . . . . . . . . . 105,012 — 105,022 — — 105,022

 Of consolidated trusts. . . . . . . . . . . . . . . . 1,560 — — 1,560 — 1,560

Long-term debt:

 Of Fannie Mae . . . . . . . . . . . . . . . . . . . . . 355,431 — 367,703 982 — 368,685

 Of consolidated trusts. . . . . . . . . . . . . . . . 2,760,152 — 2,815,843 19,334 — 2,835,177

Derivative liabilities at fair value . . . . . . . . . 614 — 10,671 137 (10,194) 614

Guaranty obligations . . . . . . . . . . . . . . . . . . . 382 — — 1,579 — 1,579

Total financial liabilities . . . . . . . . . . . . . . . . $ 3,223,201 $ — $ 3,299,289 $ 23,592 $ (10,194) $ 3,312,687

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.

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 collateral that is easily traded. Were we to calculate the fair value of these instruments we would 

use observable inputs resulting in Level 2 classification.
FANNIE MAE

(In conservatorship)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(UNAUDITED)

130

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.” These loans are 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.

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 

similar 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 $3.5 billion as of March 31, 2015

and $3.3 billion as of December 31, 2014. The total fair value of our mortgage loans that have been refinanced under HARP

as presented in the table above was $310.2 billion as of March 31, 2015 and $314.0 billion as of December 31, 2014.

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. If we were 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 inputs.

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 as Level 3. 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 also classified as Level 3.

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. Therefore, we take a further discount of 

the present value for these liquidity considerations. This discount is based on market quotes from third-party pricing services.

The fair value of the guaranty assets includes the fair value of any associated buy-ups. 

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 as Level 3. The valuation 

methodology and inputs used in estimating the fair value of the guaranty obligations are described under “Fair Value 

Measurement—Mortgage Loans Held for Investment, Build-up.”
FANNIE MAE

(In conservatorship)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(UNAUDITED)

131

Fair Value Option

We elected the fair value option for our credit risk sharing debt securities issued under our CAS series and certain loans of 

consolidated trusts that 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 such instruments. 

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 “Interest income—Mortgage loans” and interest expense for the debt 

instruments is recorded in “Interest expense—Long-term debt” in our condensed consolidated statements of operations and 

comprehensive income. 

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, 2015 and December 31, 2014. 

As of

March 31, 2015 December 31, 2014

Loans of 

Consolidated 

Trusts(1)

Long-Term

Debt of

Fannie Mae

Long-Term Debt

of Consolidated

Trusts

Loans of 

Consolidated 

Trusts(1)

Long-Term

Debt of

Fannie Mae

Long-Term Debt of

Consolidated

Trusts

(Dollars in millions)

Fair value . . . . . . . . . . . . . . . $ 15,570 $ 7,920 $ 21,373 $ 15,629 $ 6,403 $ 19,483

Unpaid principal balance . . . 14,817 7,803 19,364 15,001 6,512 17,810

__________

(1) Includes nonaccrual loans with a fair value of $235 million and $240 million as of March 31, 2015 and December 31, 2014, 

respectively. The difference between unpaid principal balance and the fair value of these nonaccrual loans as of March 31, 2015 and 

December 31, 2014 was $68 million and $75 million, respectively. Includes loans that are 90 days or more past due with a fair value of 

$261 million and $271 million as of March 31, 2015 and December 31, 2014, respectively. The difference between unpaid principal 

balance and the fair value of these 90 or more days past due loans as of March 31, 2015 and December 31, 2014 was $74 million and 

$78 million, 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 losses, 

net” in our condensed consolidated statements of operations and comprehensive income for the three months ended March 

31, 2015 and 2014.

For the Three Months Ended March 31,

2015 2014

Loans

LongTerm

Debt

Total

Losses Loans

LongTerm

Debt

Total

(Losses)

Gains

(Dollars in millions)

Changes in instrument-specific credit risk . . . . . . . . . . . . . . . . . . $ (12) $ (193) $ (205) $ 9 $ (51) $ (42)

Other changes in fair value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 167 (188) (21) 123 (116) 7

Fair value gains (losses), net. . . . . . . . . . . . . . . . . . . . . . . . . . . $ 155 $ (381) $ (226) $ 132 $ (167) $ (35)
FANNIE MAE

(In conservatorship)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(UNAUDITED)

132

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 

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.

16. 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 basis, we review relevant information about all pending legal actions and proceedings for the purpose of 

evaluating and revising our contingencies, reserves and disclosures. 

We have substantial and valid defenses to the claims in the proceedings described below and intend to defend these matters 

vigorously. However, legal actions and proceedings of all types are subject to many uncertain factors that generally cannot be 

predicted with assurance. Accordingly, the outcome of any given matter and the amount or range of potential loss at particular 

points in time is frequently difficult to ascertain. Uncertainties can include how fact finders will evaluate documentary 

evidence and the credibility and effectiveness of witness testimony, and how courts will apply the law. Disposition valuations 

are also subject to the uncertainty of how opposing parties and their counsel may view the evidence and applicable law. 

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 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 matters when a loss is probable and we can reasonably estimate the amount of such loss. For legal 

actions or proceedings where there is only a reasonable possibility that a loss may be incurred, or where we are not currently 

able to estimate the reasonably possible loss or range of loss, we do not establish a reserve. We are often unable to estimate 

the possible losses or ranges of losses, particularly for proceedings that are in their early stages of development, where 

plaintiffs seek indeterminate or unspecified damages, where there may be novel or unsettled legal questions relevant to the 

proceedings, or where settlement negotiations have not occurred or progressed. 

Given the uncertainties involved in any action or proceeding, regardless of whether we have established 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. 

In addition to the matters specifically described below, we are involved in a number of legal and regulatory proceedings that 

arise in the ordinary course of business that we do not expect will have a material impact on our business or financial 

condition. We have also advanced fees and expenses of certain current and former officers and directors in connection with 

various legal proceedings pursuant to our bylaws and indemnification agreements. 
FANNIE MAE

(In conservatorship)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(UNAUDITED)

133

2008 Class Action Lawsuits and Related Proceedings

In re Fannie Mae 2008 Securities Litigation 

In a consolidated amended complaint filed in 2009 in the U.S. District Court for the Southern District of New York, lead 

plaintiffs Massachusetts Pension Reserves Investment Management Board and Boston Retirement Board (for common 

shareholders) and Tennessee Consolidated Retirement System (for preferred shareholders) alleged 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 alleged 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 sought various forms of relief, 

including rescission, damages, interest, costs, attorneys’ and experts’ fees, and other equitable and injunctive relief. 

On July 15, 2014, the parties reached an agreement in principle to settle the litigation. On March 3, 2015, the court granted 

final approval of the settlement and entered an order and judgment effecting the settlement. The settlement amount did not 

materially impact our results of operations or financial condition. The time for filing an appeal has expired, and this matter is 

concluded with respect to Fannie Mae.

In re 2008 Fannie Mae ERISA Litigation 

In a consolidated complaint filed in 2009 in the U.S. District Court for the Southern District of New York, plaintiffs alleged 

that certain of our current and former officers and directors, including members of Fannie Mae’s Benefit Plans Committee 

and the Compensation Committee of Fannie Mae’s Board of Directors during the relevant time periods, 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 purported 

to represent a class of participants and beneficiaries of the ESOP whose accounts invested in Fannie Mae common stock 

beginning April 17, 2007. Plaintiffs sought unspecified damages, attorneys’ fees and other fees and costs, and injunctive and 

other equitable relief.

On October 31, 2014, we reached an agreement in principle with plaintiffs that would resolve this matter on behalf of all 

parties. The proposed settlement amount did not impact our results of operations or financial condition. On April 17, 2015, 

plaintiffs filed a motion for preliminary approval of the settlement, which the court granted on May 5, 2015.

Comprehensive Investment Services v. Mudd

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 U.S. District Court for 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 alleged 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% non-cumulative preferred Series T stock. Plaintiff sought relief in the form of rescission, actual 

damages, punitive damages, interest, costs, attorneys’ and experts’ fees, and other equitable and injunctive relief.

On February 26, 2015, Fannie Mae and plaintiff reached an agreement in principle to settle the litigation. The settlement 

amount did not materially impact our results of operations or financial condition. As a result of the settlement and at the 

request of the parties, the court dismissed the case with prejudice on April 28, 2015.

Smith v. Fannie Mae

This individual securities action was originally filed on February 25, 2010, by plaintiff Edward Smith against us, certain of 

our former officers, and certain of our underwriters, in the U.S. District Court for the Central District of California. On 

April 12, 2010, this case was transferred to the U.S. District Court for 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 alleged violations of Section 10(b) of the Securities Exchange Act of 1934 and Rule 
FANNIE MAE

(In conservatorship)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(UNAUDITED)

134

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 sought relief in the 

form of rescission, actual damages (including interest), and exemplary and punitive damages.

On December 9, 2014, Fannie Mae and plaintiff reached an agreement in principle to settle the litigation. The settlement 

amount did not materially impact our results of operations or financial condition. As a result of the settlement and at the 

request of the parties, the court dismissed the case with prejudice on April 27, 2015.

Senior Preferred Stock Purchase Agreements Litigation

A number of putative class action lawsuits were filed in the U.S. District Court for the District of Columbia against us, FHFA

as our conservator, Treasury and Freddie Mac from July through September 2013 by shareholders of Fannie Mae and/or 

Freddie Mac challenging the August 2012 amendment to each company’s senior preferred stock purchase agreement with 

Treasury. These lawsuits were consolidated and, on December 3, 2013, plaintiffs (preferred and common shareholders of 

Fannie Mae and/or Freddie Mac) filed a consolidated class action complaint in the U.S. District Court for the District of 

Columbia against us, FHFA as our conservator, Treasury and Freddie Mac (“In re Fannie Mae/Freddie Mac Senior Preferred 

Stock Purchase Agreement Class Action Litigations”). The preferred shareholder plaintiffs allege that the net worth sweep 

dividend provisions of the senior preferred stock that were implemented pursuant to the August 2012 amendments to the 

senior preferred stock purchase agreements nullified certain of the shareholders’ rights, particularly the right to receive 

dividends. The common shareholder plaintiffs allege that the August 2012 amendments constituted a taking of their property 

by requiring that all future profits of Fannie Mae and Freddie Mac be paid to Treasury. Plaintiffs allege claims for breach of 

contract and breach of the implied covenant of good faith and fair dealing against us, FHFA and Freddie Mac, a takings claim 

against FHFA and Treasury, and a breach of fiduciary duty claim derivatively on our and Freddie Mac’s behalf against FHFA

and Treasury. Plaintiffs seek to represent several classes of preferred and/or common shareholders of Fannie Mae and/or 

Freddie Mac who held stock as of the public announcement of the August 2012 amendments. Plaintiffs seek unspecified 

damages, equitable and injunctive relief, and costs and expenses, including attorneys’ fees.

A non-class action suit, Arrowood Indemnity Company v. Fannie Mae, was filed in the U.S. District Court for the District of 

Columbia on September 20, 2013 by preferred shareholders against us, FHFA as our conservator, the Director of FHFA (in 

his official capacity), Treasury, the Secretary of the Treasury (in his official capacity) and Freddie Mac. Plaintiffs bring claims 

for breach of contract and breach of the implied covenant of good faith and fair dealing against us, FHFA and Freddie Mac, 

and claims for violation of the Administrative Procedure Act against the FHFA and Treasury defendants, alleging that the net 

worth sweep provisions nullified certain rights of the preferred shareholders, particularly the right to receive dividends. 

Plaintiffs seek damages, equitable and injunctive relief, and costs and expenses, including attorneys’ fees.

On September 30, 2014, the court dismissed both lawsuits and plaintiffs in both suits filed timely notices of appeal. On 

October 27, 2014, the U.S. Court of Appeals for the D.C. Circuit consolidated these appeals with appeals in two other cases 

involving the same subject matter, but to which we are not a party.

Given the stage of these lawsuits, the substantial and novel legal questions that remain, and our substantial defenses, we are 

currently unable to estimate the reasonably possible loss or range of loss arising from this litigation.
135

Item 3. Quantitative and Qualitative Disclosures about Market Risk

Information about market risk is set forth in “MD&A—Risk Management—Market Risk Management, Including Interest 

Rate Risk Management.”

Item 4. Controls and Procedures

Overview

We are required under applicable laws and regulations to maintain controls and procedures, which include disclosure controls 

and procedures as well as internal control over financial reporting, as further described below.

Evaluation of Disclosure Controls and Procedures

Disclosure Controls and Procedures

Disclosure controls and procedures refer to controls and other procedures designed to provide reasonable assurance that 

information required to be disclosed in the reports we file or submit under the Exchange Act is recorded, processed, 

summarized and reported within the time periods specified in the rules and forms of the SEC. Disclosure controls and 

procedures include, without limitation, controls and procedures designed to provide reasonable assurance that information 

required to be disclosed by us in the reports that we file or submit under the Exchange Act is accumulated and communicated 

to management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions 

regarding our required disclosure. In designing and evaluating our disclosure controls and procedures, management 

recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable 

assurance of achieving the desired control objectives, and management was required to apply its judgment in evaluating and 

implementing possible controls and procedures.

Evaluation of Disclosure Controls and Procedures

As required by Rule 13a-15 under the Exchange Act, management has evaluated, with the participation of our Chief 

Executive Officer and Chief Financial Officer, the effectiveness of our disclosure controls and procedures as in effect as of 

March 31, 2015, 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, 2015 or as of the date of filing this report.

Our disclosure controls and procedures were not effective as of March 31, 2015 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, 2015 or as of the date of this filing, and we continue to 

have a material weakness in our internal control over financial reporting. This material weakness is described in more detail 

below under “Description of Material Weakness.” Based on discussions with FHFA and the structural nature of this material 

weakness, we do not expect to remediate this material weakness while we are under conservatorship.

Description of Material Weakness

The Public Company Accounting Oversight Board’s Auditing Standard 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, 2015 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 

policy of a typical reporting company, there are inherent structural limitations on our ability to design, implement, test 
136

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, 2015 or as of the date of 

filing this report. Based on discussions with FHFA and the structural nature of this weakness, we do not expect to 

remediate this material weakness while we are under conservatorship.

Mitigating Actions 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 Division of Conservatorship, which is intended to facilitate operation of the company with 

the oversight of the conservator.

• We have provided drafts of our SEC filings to FHFA personnel for their review and comment prior to filing. We also 

have provided drafts of external press releases, statements and speeches to FHFA personnel for their review and 

comment prior to release.

• FHFA personnel, including senior officials, have reviewed our SEC filings prior to filing, including this quarterly 

report on Form 10-Q for the quarter ended March 31, 2015 (“First Quarter 2015 Form 10-Q”), and engaged in 

discussions regarding issues associated with the information contained in those filings. Prior to filing our First 

Quarter 2015 Form 10-Q, FHFA provided Fannie Mae management with a written acknowledgment that it had 

reviewed the First Quarter 2015 Form 10-Q, and it was not aware of any material misstatements or omissions in the 

First Quarter 2015 Form 10-Q and had no objection to our filing the First Quarter 2015 Form 10-Q.

• The 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

Management has evaluated, with the participation of our Chief Executive Officer and Chief Financial Officer, whether any 

changes in our internal control over financial reporting that occurred during our last fiscal quarter have materially affected, or 

are reasonably likely to materially affect, our internal control over financial reporting. There have been no changes in our 

internal control over financial reporting since December 31, 2014 that management believes have materially affected, or are 

reasonably likely to materially affect, our internal control over financial reporting.
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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 2014 Form 10-K. We also provide information regarding material legal proceedings in “Note 16, 

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 those 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. Except for matters that have been settled, we presently cannot determine the ultimate resolution of the matters 

described below or incorporated by reference into this item or in our 2014 Form 10-K. 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

As we disclosed in our 2014 Form 10-K in “Legal Proceedings,” in the third quarter of 2011, FHFA, as conservator, filed 

sixteen lawsuits on behalf of both Fannie Mae 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. Fourteen of these lawsuits were resolved during 2013 and 2014, and two remain pending.

One of the remaining lawsuits is against Nomura Holding America Inc. and certain related entities and individuals, and is 

pending in the U.S. District Court for the Southern District of New York. The other remaining lawsuit is against The Royal 

Bank of Scotland Group PLC and certain related entities and individuals, and is pending in the U.S. District Court for the 

District of Connecticut. Both lawsuits were filed on September 2, 2011. These two remaining lawsuits seek to recover losses 

we and Freddie Mac incurred on the private-label mortgage-related securities the defendants sold to us and Freddie Mac. The 

lawsuits allege that the defendants violated federal and state securities laws 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. The complaints seek, among other things, rescission and recovery of consideration paid for 

the securities at issue in the lawsuits and interest.

Senior Preferred Stock Purchase Agreements Litigation

Between June 2013 and August 2014, several lawsuits were filed by preferred and common stockholders of Fannie Mae and 

Freddie Mac in the U.S. Court of Federal Claims, the U.S. District Court for the District of Columbia and the U.S. District 

Court for the Southern District of Iowa against the United States, Treasury and/or FHFA, challenging actions taken by the 

defendants relating to the senior preferred stock purchase agreements and the conservatorships of Fannie Mae and Freddie 

Mac. Some of these lawsuits also contain claims against Fannie Mae and Freddie Mac. The legal claims being advanced by 

one or more of these lawsuits include challenges to the net worth sweep dividend provisions of the senior preferred stock that 

were implemented pursuant to the August 2012 amendments to the agreements, as well as to FHFA’s decision to require 

Fannie Mae and Freddie Mac to draw funds from Treasury in order to pay dividends to Treasury during conservatorship. The 

plaintiffs seek various forms of equitable and injunctive relief, including rescission of the August 2012 amendments, as well 

as damages. On September 30, 2014, the U.S. District Court for the District of Columbia dismissed all but one of the cases 

pending before that court. The plaintiffs in each of the dismissed cases have filed a notice of appeal. The plaintiffs in the case 

that was not dismissed by the court voluntarily dismissed their lawsuit on October 31, 2014. On February 3, 2015, the U.S. 

District Court for the Southern District of Iowa dismissed the single case pending before it. The matters where Fannie Mae is 

a named defendant are described below or in “Note 16, Commitments and Contingencies.”

Fannie Mae is a nominal defendant in two actions filed against the United States in the U.S. Court of Federal Claims: Fisher 

v. United States of America, filed on December 2, 2013, and Rafter v. United States of America, filed on August 14, 2014. 

Plaintiffs in these cases allege that the net worth sweep dividend provisions of the senior preferred stock that were 

implemented pursuant to the August 2012 amendment to the senior preferred stock purchase agreement constitute a taking of 

Fannie Mae’s property without just compensation in violation of the U.S. Constitution. The Fisher plaintiffs are pursuing this 

claim derivatively on behalf of Fannie Mae, while the Rafter plaintiffs are pursing the claim directly against the United 

States. Plaintiffs in Rafter also allege a derivative claim that the government breached an implied contract with Fannie Mae’s 
138

Board of Directors by implementing the net worth sweep dividend provisions. Plaintiffs in Fisher request just compensation 

to Fannie Mae in an unspecified amount. Plaintiffs in Rafter seek just compensation to themselves on their constitutional 

claim and payment of damages to Fannie Mae on their derivative claim for breach of an implied contract. The United States 

filed a motion to dismiss the Fisher case on January 23, 2014; however, the court has stayed proceedings in this case until 

discovery in a related case, Fairholme Funds v. United States, is complete and the court sets a date for the Fairholme

plaintiffs to respond to the government’s motion to dismiss filed in that case. In the Rafter case, the court has ordered the 

government to file a response to the complaint within sixty days after discovery is complete in the Fairholme Funds case.

LIBOR Lawsuit

On October 31, 2013, Fannie Mae filed a lawsuit in the U.S. District Court for the Southern District of New York against 

Barclays Bank PLC, UBS AG, The Royal Bank of Scotland Group PLC, The Royal Bank of Scotland PLC, Deutsche Bank 

AG, Credit Suisse Group AG, Credit Suisse International, Bank of America Corp., Bank of America, N.A., Citigroup Inc., 

Citibank, N.A., J.P. Morgan Chase & Co., J.P. Morgan Chase Bank, N.A., Coöperative Centrale Raiffeisen-Boerenleenbank 

B.A., the British Bankers Association (“BBA”) and BBA LIBOR Ltd. alleging they manipulated LIBOR. On October 6, 

2014, Fannie Mae filed an amended complaint alleging, among other things, that the banks submitted false borrowing costs 

to the BBA in order to suppress LIBOR. The amended complaint seeks compensatory and punitive damages based on claims 

for breach of contract, breach of the implied duty of good faith and fair dealing, unjust enrichment, fraud and conspiracy to 

commit fraud. The defendants filed motions to dismiss the lawsuit on November 5, 2014.

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 2014 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 2014

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 and in our 2014 Form 10-K, we face risks and uncertainties not currently known to us or that we currently believe are 

immaterial. 

The future of our company is uncertain. 

There continues to be significant 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, what ownership interest, if 

any, our current common and preferred stockholders will hold in us after the conservatorship is terminated and whether we 

will continue to exist following conservatorship. The conservatorship is indefinite in duration and the timing, conditions and 

likelihood of our emerging from conservatorship are uncertain. Termination of the conservatorship, other than in connection 

with a receivership, requires Treasury’s consent under the senior preferred stock purchase agreement.

In 2011, the Administration released a report to Congress on ending the conservatorships of the GSEs and reforming 

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

way to responsibly reduce Fannie Mae and Freddie Mac’s role in the market and ultimately wind down both institutions. The 

report also addresses three options for a reformed housing finance system. The report does not state whether or how the 

existing infrastructure or human capital of Fannie Mae may be used in the establishment of such a reformed system. The 

report emphasizes the importance of proceeding with a careful transition plan and providing the necessary financial support 

to Fannie Mae and Freddie Mac during the transition period. In August 2013, the White House released a paper confirming 

that a core principle of the Administration’s housing policy priorities is to wind down Fannie Mae and Freddie Mac through a 

responsible transition. In January 2015, the White House reaffirmed the Administration’s view that housing finance reform 

should include ending Fannie Mae and Freddie Mac’s business model. Administration officials have also publicly stated on 

several occasions that the passage of housing finance reform legislation is the only responsible way to end the 

conservatorships of Fannie Mae and Freddie Mac.

In the last Congress, members of Congress considered several bills to reform the housing finance system, including bills that, 

among other things, would require Fannie Mae and Freddie Mac to be wound down after a period of time and place certain 

restrictions on Fannie Mae’s and Freddie Mac’s activities prior to being wound down. We expect that Congress will continue 

to hold hearings and consider legislation on the future status of Fannie Mae and Freddie Mac, including proposals that would 

result in Fannie Mae’s liquidation or dissolution. Congress or FHFA may also consider legislation or regulation aimed at 

increasing the competition we face or reducing our market share. We cannot predict the prospects for the enactment, timing 
139

or final content of housing finance reform legislation. See “Business—Housing Finance Reform” in our 2014 Form 10-K for 

more information about the Administration’s report and paper, and Congressional proposals regarding housing finance 

reform. 

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, 2015, we did not sell any equity securities.

Information about Certain Securities Issuances by Fannie Mae

Pursuant to SEC regulations, public companies are required to disclose certain information when they incur a material direct 

financial obligation or become directly or contingently liable for a material obligation under an off-balance sheet 

arrangement. The disclosure must be made in a current report on Form 8-K under Item 2.03 or, if the obligation is incurred in 

connection with certain types of securities offerings, in prospectuses for that offering that are filed with the SEC.

Because the securities we issue are exempted securities under the Securities Act of 1933, we do not file registration 

statements or prospectuses with the SEC with respect to our securities offerings. To comply with the disclosure requirements 

of Form 8-K relating to the incurrence of material financial obligations, we report our incurrence of these types of obligations 

either in offering circulars or prospectuses (or supplements thereto) that we post on our 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 2015.

Dividend Restrictions 

Our payment of dividends is subject to the following restrictions: 

Restrictions Relating to Conservatorship. Our conservator announced on September 7, 2008 that we would not pay any 

dividends on the common stock or on any series of preferred stock, other than the senior preferred stock. In addition, FHFA’s 

regulations relating to conservatorship and receivership operations prohibit us from paying any dividends while in 

conservatorship unless authorized by the Director of FHFA. The Director of FHFA directs us to make dividend payments on 

the senior preferred stock on a quarterly basis.

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 (other than the senior preferred stock) without the 

prior written consent of Treasury. In addition, in 2012 the terms of the senior preferred stock purchase agreement and the 

senior preferred stock were amended to ultimately require the payment of our entire net worth to Treasury. As a result, our net 

income is not available to common stockholders. For more information on the terms of the senior preferred stock purchase 

agreement and senior preferred stock, see “Business—Conservatorship and Treasury Agreements—Treasury Agreements—

Senior Preferred Stock Purchase Agreement and Related Issuance of Senior Preferred Stock and Common Stock Warrant” in 

our 2014 Form 10-K.

Additional Restrictions Relating to Preferred Stock. Payment of dividends on our common stock is also subject to the prior 

payment of dividends on our preferred stock and our senior preferred stock. Payment of dividends on all outstanding 
140

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. 

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.
141

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 7, 2015

By: /s/ David C. Benson

David C. Benson

Executive Vice President and

Chief Financial Officer

Date: May 7, 2015
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 (Commission file number 

001-34140) for the year ended December 31, 2010, 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 (Commission file number 001-34140) for the year ended

December 31, 2008, filed February 26, 2009.)

18.1 Letter from Deloitte & Touche LLP, Independent Registered Public Accounting Firm, Regarding Change

in Accounting Principle for Nonaccrual Loans

18.2 Letter from Deloitte & Touche LLP, Independent Registered Public Accounting Firm, Regarding Change

in Accounting Principle for Loans Held for Sale

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. 
FR022