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, 2018

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 3900 Wisconsin Avenue, NW

Washington, DC 20016

(800) 2FANNIE 

(800-232-6643)

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

(Address of principal executive offices,

including zip code)

(Registrant’s telephone number, including

area code)

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, a 

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

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

Large accelerated filer Accelerated filer 

Non-accelerated filer (Do not check if a smaller reporting company) Smaller reporting company 

Emerging growth company 

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

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

Exchange Act. 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange 

Act). Yes No 

As of March 31, 2018, there were 1,158,087,567 shares of common stock of the registrant outstanding.
Fannie Mae First Quarter 2018 Form 10-Q i

TABLE OF CONTENTS

Page

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

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—Short-Term and Long-Term Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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

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

Note 10—Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Note 11—Concentrations of Credit Risk . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Note 12—Netting Arrangements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Note 13—Fair Value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Note 14—Commitments and Contingencies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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

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

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

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

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

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

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

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

Total Book of Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Business Segments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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

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

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

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

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

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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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MD&A | Introduction

Fannie Mae First Quarter 2018 Form 10-Q 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 provided for the exercise of certain functions by our 

Board of Directors. Our directors do not have any fiduciary duties to any person or entity except to the 

conservator and, accordingly, are not obligated to consider the interests of the company, the holders of our 

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

conservator. 

Our conservatorship has no specified termination date. We do not know when or how the conservatorship will

terminate, what further changes to our business will be made during or following conservatorship, what form

we will have and what ownership interest, if any, our current common and preferred stockholders will hold in

us after the conservatorship is terminated or whether we will continue to exist following conservatorship.

Congress continues to consider options for reform of the housing finance system, including Fannie Mae. As a

result of our agreements with the U.S. Department of the Treasury (“Treasury”) and directives from our

conservator, we are not permitted to retain more than $3.0 billion in capital reserves or to pay dividends or

other distributions to stockholders other than Treasury. Our agreements with Treasury also include covenants

that significantly restrict our business activities. For additional information on the conservatorship, the

uncertainty of our future, our agreements with Treasury, and recent actions and statements relating to

housing finance reform by the Administration, Congress and FHFA, see “Business—Conservatorship and

Treasury Agreements,” “Business—Legislation and Regulation” and “Risk Factors” in our annual report on

Form 10-K for the year ended December 31, 2017 (“2017 Form 10-K”) and “Legislation and Regulation” and

“Risk Factors” in this report.

You should read this Management’s Discussion and Analysis of Financial Condition and Results of Operations 

(“MD&A”) in conjunction with our unaudited condensed consolidated financial statements and related notes in this 

report and the more detailed information in our 2017 Form 10-K. You can find a “Glossary of Terms Used in This

Report” in the MD&A of our 2017 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 these forward-looking statements. Our actual results may differ materially from those 

reflected in our forward-looking 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 2017 Form 10-K. 

Introduction

Fannie Mae provides a stable source of liquidity to the mortgage market and increases the availability and 

affordability of housing in the United States. We operate in the secondary mortgage market, primarily working with 

lenders. We do not originate loans or lend money directly to consumers in the primary mortgage market. Instead, 

we securitize mortgage loans originated by lenders into Fannie Mae mortgage-backed securities that we 

guarantee (which we refer to as Fannie Mae MBS); purchase mortgage loans and mortgage-related securities, 

primarily for securitization and sale at a later date; and engage in other activities that increase the supply of 

affordable housing. Our common stock is traded in the OTCQB market and quoted under the ticker symbol 

“FNMA.”

Through our single-family and multifamily business segments, we provided $124 billion in liquidity to the mortgage 

market in the first quarter of 2018, which enabled the financing of 638,000 home purchases, refinancings or rental 

units.
MD&A | Introduction

Fannie Mae First Quarter 2018 Form 10-Q 2

Fannie Mae Provided $124 Billion in Liquidity in the First Quarter of 2018 

Executive Summary

Summary of Our Financial Performance 

We recognized net income of $4.3 billion and comprehensive income of $3.9 billion in the first quarter of 2018

compared with comprehensive and net income of $2.8 billion in the first quarter of 2017.

The increase in our net income was primarily driven by the shift to fair value gains in the first quarter of 2018 from 

fair value losses in the first quarter of 2017. Fair value gains in the first quarter of 2018 were primarily driven by:

• increases in the fair value of our mortgage commitment derivatives due to rising interest rates; and 

• increases in the fair value of our risk management derivatives due to an increase in longer-term swap 

rates.

See “MD&A—Consolidated Results of Operations” for more information on our financial results.
MD&A | Executive Summary

Fannie Mae First Quarter 2018 Form 10-Q 3

Net Worth

Our net worth of $3.9 billion as of March 31, 2018 reflects our comprehensive income of $3.9 billion for the first 

quarter of 2018 and our receipt of $3.7 billion from Treasury during the quarter pursuant to the senior preferred 

stock purchase agreement to eliminate our net worth deficit as of December 31, 2017.

Financial Performance Outlook

We expect to remain profitable on an annual basis for the foreseeable future; however, certain factors could result 

in significant volatility in our financial results from quarter to quarter or year to year. We expect volatility from 

quarter to quarter in our financial results due to 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. Other factors that may result in volatility in our quarterly financial results include developments that 

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

as natural disasters.

The potential for significant volatility in our financial results could result in a net loss in a future quarter. We are 

permitted to retain up to $3.0 billion in capital reserves as a buffer in the event of a net loss in a future quarter. 

However, any net loss we experience in the future could be greater than the amount of our capital reserves, 

resulting in a net worth deficit for that quarter. See “Risk Factors” in our 2017 Form 10-K for a discussion of the 

risks associated with the limitations on our ability to rebuild our capital reserves, including factors that could result 

in a net loss or net worth deficit in a future quarter. 

Treasury Draws and Dividend Payments

Treasury has made a commitment under a senior preferred stock purchase agreement to provide funding to us 

under certain circumstances if we have a net worth deficit. Pursuant to the senior preferred stock purchase 

agreement, we issued shares of senior preferred stock to Treasury in 2008. Acting as successor to the rights, 

titles, powers and privileges of the Board, the conservator has declared and directed us to pay dividends to 

Treasury on the senior preferred stock on a quarterly basis for every dividend period for which dividends were 

payable since we entered into conservatorship in 2008.

The chart below shows the funds we have drawn from Treasury pursuant to the senior preferred stock purchase 

agreement, as well as the dividend payments we have made to Treasury on the senior preferred stock, since 

entering into conservatorship. Because we had a net worth deficit of $3.7 billion as of December 31, 2017, we 

drew $3.7 billion from Treasury to eliminate this net worth deficit and no dividend was payable to Treasury for the 

first quarter of 2018.
MD&A | Executive Summary

Fannie Mae First Quarter 2018 Form 10-Q 4

__________

(1) Under the terms of the senior preferred stock purchase agreement, dividend payments we make to Treasury do not offset 

our prior draws of funds from Treasury, and we are not permitted to pay down draws we have made under the agreement 

except in limited circumstances. Amounts may not sum due to rounding.

(2) Treasury draws are shown in the period for which requested, not when the funds were received by us. Draw requests 

have been funded in the quarter following a net worth deficit.

We expect to pay Treasury a dividend of $938 million for the second quarter of 2018 by June 30, 2018. The 

current dividend provisions of the senior preferred stock provide for quarterly dividends consisting of the amount, 

if any, by which our net worth as of the end of the immediately preceding fiscal quarter exceeds a $3.0 billion

capital reserve amount. We refer to this as a “net worth sweep” dividend. As noted above, our net worth was $3.9 

billion as of March 31, 2018.

If we experience a net worth deficit in a future quarter, we will be required to draw additional funds from Treasury 

under the senior preferred stock purchase agreement to avoid being placed into receivership. As of the date of 

this filing, the maximum amount of remaining funding under the agreement is $113.9 billion. If we were to draw 

additional funds from Treasury under the agreement in respect of a future period, the amount of remaining funding 

under the agreement would be reduced by the amount of our draw. Dividend payments we make to Treasury do 

not restore or increase the amount of funding available to us under the agreement. For a description of the terms 

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

Conservatorship and Treasury Agreements—Treasury Agreements” in our 2017 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.

Legislation and Regulation

The information in this section updates and supplements information regarding legislation and regulation affecting 

our business set forth in “Business—Legislation and Regulation” in our 2017 Form 10-K. Also see “Risk Factors” 

in this report and in our 2017 Form 10-K for discussions of risks relating to legislative and regulatory matters.
MD&A | Legislation and Regulation

Fannie Mae First Quarter 2018 Form 10-Q 5

Housing Finance Reform

Congress continues to consider housing finance reform that could result in significant changes in our structure 

and role in the future. As a result, there continues to be significant uncertainty regarding the future of our 

company. See “Risk Factors” in our 2017 Form 10-K for a discussion of the risks to our business relating to the 

uncertain future of our company.

In February 2018, Treasury released its Strategic Plan 2018-2022, which includes an objective to support housing 

finance reform to resolve Fannie Mae’s and Freddie Mac’s conservatorships and prevent taxpayer bailouts of 

public and private mortgage finance entities, while promoting consumer choice within the mortgage market.

Single Security Initiative: New Uniform Mortgage-Backed Security Implementation Date

Since 2014, we, Freddie Mac and FHFA have been working on developing and implementing a uniform mortgagebacked security for Fannie Mae and Freddie Mac. In March 2018, FHFA announced that Fannie Mae and Freddie 

Mac will start issuing the new, common security—referred to as the Uniform Mortgage-Backed Security or UMBS

—in place of their current offerings of TBA-eligible mortgage-backed securities on June 3, 2019. The new UMBS 

will be issued by Fannie Mae and Freddie Mac through their joint venture, Common Securitization Solutions, LLC 

(“CSS”), using the Common Securitization Platform (“CSP”). At that time, we plan to begin using CSS and the 

CSP to perform certain operational functions associated with issuing and managing these UMBS on our behalf, 

including data acceptance, issuance support, bond administration and the production of disclosures. See 

“Business—Legislation and Regulation—Housing Finance Reform—Conservator Developments and Strategic 

Goals” in our 2017 Form 10-K for more information on the expected features of the securities. See “Risk Factors” 

in this report and in our 2017 Form 10-K for a discussion of the risks to our business associated with the Single 

Security Initiative.

Housing Goals

2017 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 goals-qualifying originations in the primary mortgage market. Multifamily goals are established as a 

number of units to be financed. 

For 2017, we believe we met four of our five single-family benchmarks and all of our multifamily goals. We 

narrowly missed meeting the single-family very low-income families home purchase benchmark. Very low-income 

families are defined as those with income equal to or less than 50% of area median income. Final performance 

results will be determined and published by FHFA sometime after the release in the fall of 2018 of data reported 

by primary market originators under the Home Mortgage Disclosure Act. 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 this goal if we meet the applicable market share measure for the goal.

2018 Single-Family Housing Goals: Low-Income Areas Home Purchase Goal Benchmark

Each year, FHFA sets the benchmark level for our acquisitions of single-family owner-occupied home purchase 

mortgage loans for families in low-income areas based on the benchmark level for the low-income areas home 

purchase subgoal (which is 14% for 2018), plus an adjustment factor reflecting an additional incremental share of 

mortgages for moderate-income families (defined as income equal to or less than 100% of area median income) 

in designated disaster areas. In April 2018, FHFA set the 2018 overall low-income areas home purchase 

benchmark goal at 18%. 

See “Business—Legislation and Regulation—GSE Act and Other Regulation of Our Business—Housing Goals” in 

our 2017 Form 10-K for a more detailed discussion of our housing goals.
MD&A | Key Market Economic Indicators

Fannie Mae First Quarter 2018 Form 10-Q 6

Key Market Economic Indicators

The table below displays certain macroeconomic indicators that can significantly influence our business and 

financial results. We expect home prices on a national basis to continue to grow in 2018 at a similar rate as in 

2017. We also expect significant regional variation in the timing and rate of home price growth.

Selected Key Market Economic Indicators

For the Three Months Ended

March 31, 2018 December 31, 2017 March 31, 2017

Growth in U.S. gross domestic product ("GDP"), annualized 

percentage change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.3% 2.9% 1.2%

Home price change based on Fannie Mae national home price 

index(1)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.0 0.3 1.1

As of

March 31, 2018 December 31, 2017 March 31, 2017

U.S. unemployment rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.1 4.1 4.5

2-year swap rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.58 2.08 1.62

10-year swap rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.79 2.40 2.38

10-year Treasury rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.74 2.41 2.40

30-year Fannie Mae MBS par coupon rate . . . . . . . . . . . . . . . . 3.46 3.00 3.13

_______

(1) Calculated internally using property data information on loans purchased by Fannie Mae, Freddie Mac and property data 

information obtained from other third-party data providers. Fannie Mae’s home price index is a weighted repeat 

transactions index, measuring average price changes in repeat transactions on the same properties. Fannie Mae’s home 

price index excludes prices on properties sold in foreclosure. The reported home price change reflects the percentage 

change in Fannie Mae’s home price index from the last day of the prior quarter to the applicable period end date. Fannie 

Mae’s home price estimates are based on preliminary data and are subject to change as additional data becomes 

available.

See “Key Market Economic Indicators” in our 2017 Form 10-K for a description of how changes in GDP, 

unemployment rates, home prices and interest rates can affect our financial results.
MD&A | Consolidated Results of Operations

Fannie Mae First Quarter 2018 Form 10-Q 7

Consolidated Results of Operations

This section provides a discussion of our condensed consolidated results of operations and should be read 

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

Summary of Condensed Consolidated Results of Operations

For the Three Months

Ended March 31,

2018 2017 Variance

(Dollars in millions)

Net interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 5,232 $ 5,346 $ (114)

Fee and other income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 320 249 71

Net revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,552 5,595 (43)

Investment gains (losses), net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 250 (9) 259

Fair value gains (losses), net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,045 (40) 1,085

Administrative expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (750) (684) (66)

Credit-related income:

Benefit for credit losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 217 396 (179)

Foreclosed property expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (162) (217) 55

Total credit-related income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55 179 (124)

Temporary Payroll Tax Cut Continuation Act of 2011 (“TCCA”) fees . . . . . . . . . . . (557) (503) (54)

Other expenses, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (203) (382) 179

Income before federal income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,392 4,156 1,236

Provision for federal income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,131) (1,383) 252

Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 4,261 $ 2,773 $ 1,488

Other comprehensive income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (323) 6 (329)

Total comprehensive income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,938 $ 2,779 $ 1,159

Net Interest Income

We have two primary sources of net interest income: 

• guaranty fees we receive for managing the credit risk on loans underlying Fannie Mae MBS held by third 

parties; and

• 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.

The table below displays the components of our net interest income from our guaranty book of business and our 

retained mortgage portfolio.

Components of Net Interest Income

For the Three Months Ended March 31,

2018 2017 Variance

(Dollars in millions)

Net interest income from retained mortgage portfolio(1)

. . . . . . . . . . . . . . . . . . . . . . . . $ 1,078 $ 1,083 $ (5)

Net interest income from guaranty book of business:

Base guaranty fee income, net of TCCA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,089 1,986 103

Base guaranty fee income related to TCCA(2)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 557 503 54

Net amortization income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,508 1,774 (266)

Total net interest income from guaranty book of business . . . . . . . . . . . . . . . . . . . . . . 4,154 4,263 (109)

Total net interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 5,232 $ 5,346 $ (114)
MD&A | Consolidated Results of Operations

Fannie Mae First Quarter 2018 Form 10-Q 8

__________

(1) Includes interest income from assets held in our other investments portfolio, as well as other assets used to generate 

lender liquidity. Also includes interest expense on outstanding Connecticut Avenue SecuritiesTM of $302 million and $208 

million for the first quarter of 2018 and 2017, respectively. 

(2) Revenues generated by the 10 basis point guaranty fee increase we implemented in 2012 pursuant to the TCCA, the 

incremental revenue from which is remitted to Treasury and not retained by us. 

Net interest income decreased in the first quarter of 2018 compared with the first quarter of 2017 primarily due to:

• A decline in net amortization income as a higher interest rate environment during the first quarter of 2018

slowed down loan prepayments, resulting in lower amortization of the cost basis adjustments on 

mortgage loans of consolidated trusts and related debt.

• This decline was partially offset by an increase in base guaranty fee income as the size of our guaranty 

book of business increased and loans with higher base guaranty fees comprised a larger part of our 

guaranty book of business in the first quarter of 2018 than in the first quarter of 2017.

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

value. We recognize the difference between the initial fair value and the carrying value of these mortgage loans 

and debt as cost basis adjustments in our consolidated balance sheet. We amortize cost basis adjustments, 

including premiums and discounts on mortgage loans and securities, as a yield adjustment over the contractual 

life of the loan or security as a component of net interest income. 

The impact of net premiums and discounts on net interest income can vary:

• The net premium position of our consolidated debt will amortize as income over time.

• The net discount position on our mortgage loans of Fannie Mae was primarily recorded upon the 

acquisition of credit-impaired loans. The extent to which we may record income in future periods as we 

amortize this discount will be based on the actual performance of the loans.

The timing of when this amortization income is recognized in our consolidated statements of income can vary 

based on a number of factors, primarily interest rates. In a rising interest rate environment, our mortgage loans 

tend to prepay more slowly, which typically results in lower amortization income from cost basis adjustments. 

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

net amortization income from cost basis adjustments.

The following charts display information about the outstanding net premium and net discount positions on our 

debt of consolidated trusts and loans of Fannie Mae.
MD&A | Consolidated Results of Operations

Fannie Mae First Quarter 2018 Form 10-Q 9

The table below 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. 

Analysis of Net Interest Income and Yield

For the Three Months Ended March 31,

2018 2017

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 . . . . . . . . . . . . . . . $ 163,134 $ 1,736 4.26% $ 200,051 $ 2,093 4.18%

Mortgage loans of consolidated trusts . . . . . . . . . 3,048,711 26,298 3.45 2,923,792 24,954 3.41

Total mortgage loans(1)

. . . . . . . . . . . . . . . . . . . . 3,211,845 28,034 3.49 3,123,843 27,047 3.46

Mortgage-related securities . . . . . . . . . . . . . . . . . 10,531 100 3.80 15,394 142 3.69

Non-mortgage-related securities(2)

. . . . . . . . . . . . 51,707 207 1.60 55,994 101 0.72

Federal funds sold and securities purchased

under agreements to resell or similar

arrangements . . . . . . . . . . . . . . . . . . . . . . . . . . 37,389 142 1.52 40,586 66 0.65

Advances to lenders . . . . . . . . . . . . . . . . . . . . . . . . . 3,844 31 3.23 4,506 28 2.49

Total interest-earning assets . . . . . . . . . . . . . . . . . . . $ 3,315,316 $ 28,514 3.44% $ 3,240,323 $ 27,384 3.38%

Interest-bearing liabilities:

Short-term funding debt . . . . . . . . . . . . . . . . . . . . $ 31,242 $ (106) 1.36% $ 32,454 $ (43) 0.53%

Long-term funding debt . . . . . . . . . . . . . . . . . . . . 214,397 (1,158) 2.16 272,918 (1,478) 2.17

Connecticut Avenue SecuritiesTM (“CAS”) . . . . . . 22,473 (302) 5.38 16,873 (208) 4.93

Total debt of Fannie Mae . . . . . . . . . . . . . . . . . . 268,112 (1,566) 2.34 322,245 (1,729) 2.15

Debt securities of consolidated trusts held by

third parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,050,041 (21,716) 2.85 2,925,290 (20,309) 2.78

Total interest-bearing liabilities . . . . . . . . . . . . . . . . . . $ 3,318,153 $ (23,282) 2.81% $ 3,247,535 $ (22,038) 2.71%

Net interest income/net interest yield . . . . . . . . . . . . . $ 5,232 0.63% $ 5,346 0.66%

__________

(1) Average balance includes mortgage loans on nonaccrual status. Typically, interest income on nonaccrual mortgage loans is 

recognized when cash is received. Interest income not recognized for loans on nonaccrual status was $168 million for the 

first quarter of 2018, compared with $216 million for the first quarter of 2017.

(2) Includes cash equivalents.

Investment Gains (Losses), Net

Investment gains (losses), net primarily consists of gains and losses recognized from the sale of available-for-sale 

(“AFS”) securities, sales of loans, gains and losses recognized on the consolidation and deconsolidation of 

securities, and lower of cost or fair value adjustments on held for sale (“HFS”) loans. The shift to investment gains 

in the first quarter of 2018 from investment losses in the first quarter of 2017 was primarily driven by gains on 

sales of AFS securities, as sales of AFS securities were higher during the first quarter of 2018 as compared with 

the first quarter of 2017. 
MD&A | Consolidated Results of Operations

Fannie Mae First Quarter 2018 Form 10-Q 10

Fair Value Gains (Losses), Net

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

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

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

estimated fair value of our derivatives that serve to mitigate certain risk exposures may fluctuate, some of the 

financial instruments that generate these exposures are not recorded at fair value in our condensed consolidated 

financial statements.

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

Fair Value Gains (Losses), Net

For the Three Months

Ended March 31,

2018 2017

(Dollars in millions)

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

Net contractual interest expense accruals on interest rate swaps . . . . . . . . . . . . . . . . . . . $ (215) $ (255)

Net change in fair value during the period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 514 367

Total risk management derivatives fair value gains, net . . . . . . . . . . . . . . . . . . . . . . . . 299 112

Mortgage commitment derivatives fair value gains (losses), net . . . . . . . . . . . . . . . . . . . . . . . 564 (80)

Total derivatives fair value gains, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 863 32

Trading securities gains, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98 68

CAS fair value losses, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (8) (162)

Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92 22

Fair value gains (losses), net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,045 $ (40)

Fair value gains in the first quarter of 2018 were primarily driven by: 

• increases in the fair value of our mortgage commitments due to gains on commitments to sell mortgagerelated securities due to a decrease in prices as interest rates increased during the commitment periods; 

and 

• increases in the fair value of our pay-fixed risk management derivatives due to an increase in longer-term 

swap rates during the quarter. 

Fair value losses in the first quarter of 2017 were primarily due to losses on CAS reported at fair value resulting 

from tightening spreads between CAS yields and LIBOR during the period. These fair value losses in the first 

quarter of 2017 were partially offset by gains on risk management derivatives primarily due to increases in the fair 

value of our pay-fixed derivatives due to increases in longer-term swap rates during the period.

Credit-Related Income (Expense)

Credit-related income (expense) consists of our benefit (provision) for credit losses and foreclosed property 

expense.
MD&A | Consolidated Results of Operations

Fannie Mae First Quarter 2018 Form 10-Q 11

Benefit for Credit Losses

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

periods presented. Many of the drivers that contribute to our benefit for credit losses overlap or are 

interdependent. The attribution shown below is based on internal allocation estimates. The table below also 

displays our multifamily benefit or provision for credit losses.

Components of Benefit for Credit Losses

For the Three Months

Ended March 31,

2018 2017

(Dollars in billions)

Benefit for credit losses:

Changes in loan activity(1)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (0.2) *

Redesignation of held for investment (“HFI”) loans to held for sale (“HFS”) loans. . . . 0.2 0.1

Actual and forecasted home prices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.3 0.6

Actual and projected interest rates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (0.4) (0.2)

Other(2)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.3 (0.1)

Single-family benefit for credit losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.2 0.4

Multifamily benefit (provision) for credit losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . * *

Total benefit for credit losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 0.2 $ 0.4

_________

* Represents less than $50 million.

(1) Primarily consists of changes in the allowance due to loan delinquency, loan liquidations, new troubled debt restructurings, 

amortization of concessions granted to borrowers and the impact of FHFA’s Advisory Bulletin 2012-02, “Framework for 

Adversely Classifying Loans, Other Real Estate Owned, and Other Assets and Listing Assets for Special Mention” (the 

“Advisory Bulletin”).

(2) Primarily consists of model and assumption changes and changes in the reserve for guaranty losses that are not 

separately included in the other components.

The primary factors that impacted our benefit for credit losses in the first quarter of 2018 were:

• An increase in actual and forecasted home prices, which contributed to the benefit for credit losses. 

Higher home prices decrease the likelihood that loans will default and reduce the amount of credit loss on 

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

provision for credit losses.

• The redesignation of certain single-family loans from HFI to HFS during the quarter as we no longer 

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

recorded the loans at the lower of cost or fair value with a charge-off to the allowance for loan losses. 

Amounts recorded in the allowance related to the loans exceeded the amounts charged off, which 

contributed to the benefit for credit losses.

• The benefit for credit losses was partially offset by the impact of higher actual and projected mortgage 

interest rates. As mortgage interest rates rise, we expect a decrease in future prepayments on singlefamily individually impaired loans, including modified loans. Lower expected prepayments lengthen the 

expected lives of modified loans, which increases the impairment relating to concessions provided on 

these loans and results in an increase in the provision for credit losses.

• The benefit for credit losses was also reduced by the impact of an increase in single-family loans 

classified as a troubled debt restructuring (“TDR”) in the areas affected by Hurricanes Harvey, Irma and 

Maria (collectively, “the hurricanes”).

We recognized a benefit for credit losses in the first quarter of 2017 primarily due to an increase in actual and 

forecasted home prices.
MD&A | Consolidated Results of Operations

Fannie Mae First Quarter 2018 Form 10-Q 12

Temporary Payroll Tax Cut Continuation Act of 2011 (“TCCA”) Fees

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

and remit this increase to Treasury. This TCCA-related revenue is included in “Net interest income” and the 

expense is recognized as “TCCA fees” in our condensed consolidated financial statements. TCCA fees increased 

in the first quarter of 2018 compared with the first quarter of 2017 as our book of business subject to the TCCA

continued to grow. We expect the guaranty fees collected and expenses incurred under the TCCA to continue to 

increase. 

Federal Income Taxes

The decrease in our provision for federal income taxes in the first quarter of 2018 as compared to the first quarter

of 2017 was the result of the Tax Cuts and Jobs Act of 2017, which reduced the federal corporate income tax rate 

from 35% to 21% effective January 1, 2018. This decline in the federal corporate income tax rate was the primary 

driver of the reduction in our effective tax rate to 21.0% in the first quarter of 2018, compared with 33.3% for the 

same period in 2017.

Other Comprehensive Income (Loss)

The shift to other comprehensive loss in the first quarter of 2018 from other comprehensive income in the first 

quarter of 2017 was primarily driven by the reclassification of gains on AFS securities from other comprehensive 

income (loss) to investment gains (losses), net as a result of sales of AFS securities, which were higher during the 

first quarter of 2018 as compared with the first quarter of 2017. 
MD&A | Consolidated Balance Sheet Analysis

Fannie Mae First Quarter 2018 Form 10-Q 13

Consolidated Balance Sheet Analysis

This section provides a discussion of our condensed consolidated balance sheets and should be read together 

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

Summary of Condensed Consolidated Balance Sheets

As of

March 31,

2018

December 31,

2017 Variance

(Dollars in millions)

Assets

Cash and cash equivalents and federal funds sold and securities

purchased under agreements to resell or similar arrangements . . . . $ 49,949 $ 51,580 $ (1,631)

Restricted cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27,112 28,150 (1,038)

Investments in securities(1). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43,985 39,522 4,463

Mortgage loans:

Of Fannie Mae . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 158,632 167,793 (9,161)

Of consolidated trusts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,057,888 3,029,816 28,072

Allowance for loan losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (18,734) (19,084) 350

Mortgage loans, net of allowance for loan losses . . . . . . . . . . . . . . . 3,197,786 3,178,525 19,261

Deferred tax assets, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16,517 17,350 (833)

Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29,053 30,402 (1,349)

Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,364,402 $ 3,345,529 $ 18,873

Liabilities and equity (deficit)

Debt:

Of Fannie Mae . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 265,401 $ 276,752 $ (11,351)

Of consolidated trusts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,075,071 3,053,302 21,769

Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19,992 19,161 831

Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,360,464 3,349,215 11,249

Fannie Mae stockholders’ equity (deficit):

Senior preferred stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 120,836 117,149 3,687

Other net deficit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (116,898) (120,835) 3,937

Total equity (deficit) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,938 (3,686) 7,624

Total liabilities and equity (deficit) . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,364,402 $ 3,345,529 $ 18,873

__________

(1) Includes $33.3 billion as of March 31, 2018 and $29.2 billion as of December 31, 2017 of non-mortgage-related securities. 

Other Investments Portfolio

Our 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—Other Investments Portfolio” for additional information on our 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 

decreased as of March 31, 2018 compared with the balance as of December 31, 2017 primarily as a result of a 

decrease in prepayments received on mortgage loans in March 2018 compared with prepayments received in 

December 2017.
MD&A | Consolidated Balance Sheet Analysis

Fannie Mae First Quarter 2018 Form 10-Q 14

Investments in Securities

Our investments in securities are classified in our condensed consolidated balance sheets as either trading or 

available-for-sale and are measured at fair value. See “Note 5, Investments in Securities” for information on our 

investments in securities, including the composition of our trading and available-for-sale securities at amortized 

cost and fair value and the gross unrealized gains and losses related to our available-for-sale securities as of 

March 31, 2018 and December 31, 2017.

Mortgage Loans, Net of Allowance for Loan Losses

The mortgage loans reported in our condensed consolidated balance sheet are classified as either HFS or HFI 

and include loans owned by Fannie Mae and loans held in consolidated trusts. 

Mortgage loans, net of allowance for loan losses increased as of March 31, 2018 compared with December 31, 

2017 primarily driven by:

• an increase in mortgage loans due to acquisitions, partially offset by liquidations and sales; and

• a decrease in our allowance for loan losses upon redesignation of single-family loans from HFI to HFS.

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

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

Debt

Debt of Fannie Mae is the primary means of funding our mortgage purchases. Debt of consolidated trusts 

represents the amount of Fannie Mae MBS issued from consolidated trusts and held by third-party 

certificateholders. 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 7, Short-Term and Long-Term Debt” for additional information on 

our outstanding debt. 

The decrease in debt of Fannie Mae from December 31, 2017 to March 31, 2018 was primarily driven by lower 

funding needs. The increase in debt of consolidated trusts from December 31, 2017 to March 31, 2018 was 

primarily driven by sales of Fannie Mae MBS, which are accounted for as issuances of debt of consolidated trusts 

in our condensed consolidated balance sheets, since the MBS certificate ownership is transferred from us to a 

third party.

Stockholders’ Equity (Deficit)

The shift from a net deficit of $3.7 billion as of December 31, 2017 to net equity of $3.9 billion as of March 31, 

2018 was driven by: 

• our receipt of $3.7 billion from Treasury during the first quarter of 2018 pursuant to the senior preferred 

stock purchase agreement, which eliminated our net worth deficit as of December 31, 2017; and

• our comprehensive income of $3.9 billion for the first quarter of 2018.

Retained Mortgage Portfolio

Our retained mortgage portfolio consists of mortgage loans and mortgage-related securities that we own, 

including Fannie Mae MBS and non-Fannie Mae mortgage-related securities. Assets held by consolidated MBS 

trusts that back mortgage-related securities owned by third parties are not included in our retained mortgage 

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

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

The chart below separates the instruments within our retained mortgage portfolio, measured by unpaid principal 

balance, into three categories based on each instrument’s use:

• Lender liquidity, which includes balances related to our whole loan conduit activity, supports our efforts to 

provide liquidity to the single-family and multifamily mortgage markets. 

• Loss mitigation supports our loss mitigation efforts through the purchase of delinquent loans from MBS 

trusts. 
MD&A | Retained Mortgage Portfolio

Fannie Mae First Quarter 2018 Form 10-Q 15

• Other represents assets that were previously purchased for investment purposes. More than half of the 

balance of “Other” consisted of reverse mortgage loans and Fannie Mae-wrapped reverse mortgage 

securities as of March 31, 2018. We expect the amount of assets in “Other” will decline over time as they 

liquidate, mature or are sold.

Retained Mortgage Portfolio

(Dollars in billions)

Lender liquidity Loss mitigation Other
MD&A | Retained Mortgage Portfolio

Fannie Mae First Quarter 2018 Form 10-Q 16

The table below displays the components of our retained mortgage portfolio, measured by unpaid principal 

balance.

Retained Mortgage Portfolio

As of

March 31,

2018

December 31,

2017

(Dollars in millions)

Single-family:

Mortgage loans(1). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 138,567 $ 146,316

Reverse mortgages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25,300 26,458

Mortgage-related securities:

Agency securities(2). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40,177 31,719

Fannie Mae-wrapped reverse mortgage securities . . . . . . . . . . . . . . . . . . . . . . 6,570 6,689

Ginnie Mae reverse mortgage securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,180 527

Other Fannie Mae-wrapped securities(3). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 691 3,414

Private-label and other securities(3). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,743 2,588

Total single-family mortgage-related securities(4). . . . . . . . . . . . . . . . . . . . . . . . . . 53,361 44,937

Total single-family mortgage loans and mortgage-related securities . . . . . . . . . . . . . 217,228 217,711

Multifamily:

Mortgage loans(5). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,246 4,591

Mortgage-related securities:

Agency securities(2). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,330 7,860

Commercial mortgage-backed securities (“CMBS”) . . . . . . . . . . . . . . . . . . . . . 13 24

Mortgage revenue bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 470 597

Total multifamily mortgage-related securities(6). . . . . . . . . . . . . . . . . . . . . . . . . . . 6,813 8,481

Total multifamily mortgage loans and mortgage-related securities . . . . . . . . . . . . . . . 11,059 13,072

Total retained mortgage portfolio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 228,287 $ 230,783

__________

(1) Includes single-family loans classified as a TDR that were on accrual status of $82.7 billion and $86.3 billion as of 

March 31, 2018 and December 31, 2017, respectively, and single-family loans on nonaccrual status of $33.0 billion and 

$33.1 billion as of March 31, 2018 and December 31, 2017, respectively.

(2) Includes Fannie Mae, Freddie Mac and Ginnie Mae mortgage-related securities, excluding Fannie Mae-wrapped reverse 

mortgage securities, Ginnie Mae reverse mortgage securities and other Fannie Mae-wrapped securities.

(3) The increase in private-label and other securities and the corresponding decrease in other Fannie Mae-wrapped securities 

from December 31, 2017 to March 31, 2018 was due to the dissolution of a Fannie Mae-wrapped private-label securities 

trust during the period.

(4) The fair value of these single-family mortgage-related securities was $54.5 billion and $46.7 billion as of March 31, 2018

and December 31, 2017, respectively.

(5) Includes multifamily loans classified as a TDR that were on accrual status of $84 million as of March 31, 2018 and 

December 31, 2017, and multifamily loans on nonaccrual status of $182 million and $122 million as of March 31, 2018 and 

December 31, 2017, respectively.

(6) The fair value of these multifamily mortgage-related securities was $7.1 billion and $9.0 billion as of March 31, 2018 and 

December 31, 2017, respectively.

The amount of mortgage assets that we may own is restricted by our senior preferred stock purchase agreement 

with Treasury, as described in “Business—Conservatorship and Treasury Agreements—Treasury Agreements” in 

our 2017 Form 10-K. Our retained mortgage portfolio is below the final $250 billion cap under the senior preferred 

stock purchase agreement that becomes effective on December 31, 2018. We expect the size of our retained 

mortgage portfolio will continue to decrease in 2018.
MD&A | Retained Mortgage Portfolio

Fannie Mae First Quarter 2018 Form 10-Q 17

In support of our loss mitigation strategy, we purchased $5.2 billion of loans from our single-family MBS trusts in 

the first quarter of 2018, the substantial majority of which were delinquent. See “MD&A—Retained Mortgage 

Portfolio—Purchases of Loans from Our MBS Trusts” in our 2017 Form 10-K for more information relating to our 

purchases of loans from MBS trusts.

Total Book of Business

The table below displays the composition of our total book of business based on unpaid principal balance. Our 

single-family book of business accounted for 91% of our total book of business as of March 31, 2018 and 

December 31, 2017. While our total 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.

Composition of Total Book of Business

As of

March 31, 2018 December 31, 2017

SingleFamily Multifamily TotalSingleFamily Multifamily Total

(Dollars in millions)

Guaranty book of business(1)

. . . . . . . . . . . . . $2,944,620 $ 284,517 $3,229,137 $2,931,356 $ 280,502 $3,211,858

Non-Fannie Mae mortgage securities(2)

. . . . . 7,350 483 7,833 4,005 621 4,626

Total book of business . . . . . . . . . . . . . . . . . $2,951,970 $ 285,000 $3,236,970 $2,935,361 $ 281,123 $3,216,484

Guaranty Book of Business Detail:

Conventional guaranty book of business(3)

. $2,905,650 $ 283,272 $3,188,922 $2,890,908 $ 279,235 $3,170,143

Government guaranty book of business(4)

. . $ 38,970 $ 1,245 $ 40,215 $ 40,448 $ 1,267 $ 41,715

__________

(1) Includes other single-family Fannie Mae guarantees of $1.8 billion as of March 31, 2018 and December 31, 2017, and 

other multifamily Fannie Mae guarantees of $12.2 billion and $12.4 billion as of March 31, 2018 and December 31, 2017, 

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

(2) Includes mortgage-related securities issued by Freddie Mac and Ginnie Mae, mortgage revenue bonds, Alt-A and subprime 

private-label securities, and CMBS.

(3) 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. 

(4) 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. 

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”), requires us 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 and to pay this amount to specified U.S. Department of Housing and Urban Development (“HUD”) and 

Treasury funds. 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. In February 2018, we paid $239 million to the funds based on 

our new business purchases in 2017. Our new business purchases were $123.9 billion for the first three months 

of 2018. Accordingly, we recognized an expense of $52 million related to this obligation for the first three months 

of 2018. We expect to pay this amount, plus additional amounts to be accrued based on our new business 

purchases in the remaining nine months of 2018, to the funds on or before March 1, 2019. See “Business—

Legislation and Regulation—GSE Act and Other Regulation of Our Business—Affordable Housing Allocations” in 

our 2017 Form 10-K for more information regarding this obligation.
MD&A | Business Segments

Fannie Mae First Quarter 2018 Form 10-Q 18

Business Segments

We have two reportable business segments: Single-Family and Multifamily. This section describes each 

segment’s business and credit metrics, and financial results. 

Single-Family Business

Single-Family Mortgage Market

Housing sales slightly declined in the first quarter of 2018 compared with the fourth quarter of 2017. Total existing 

home sales averaged 5.5 million units annualized in the first quarter of 2018, compared with 5.6 million units in 

the fourth quarter of 2017, according to data from the National Association of REALTORS®. According to the U.S. 

Census Bureau, new single-family home sales increased during the first quarter of 2018, averaging an annualized 

rate of 668,000 units, compared with 657,000 units in the fourth quarter of 2017.

The 30-year fixed mortgage rate averaged 4.44% during the first quarter of 2018, compared with 3.99% during 

the fourth quarter of 2017, according to Freddie Mac’s Primary Mortgage Market Survey®.

We forecast that total originations in the U.S. single-family mortgage market in 2018 will decrease from 2017 

levels by approximately 8%, from an estimated $1.84 trillion in 2017 to $1.69 trillion in 2018, and that the amount 

of originations in the U.S. single-family mortgage market that are refinancings will decrease from an estimated 

$708 billion in 2017 to $498 billion in 2018.

Single-Family Market Share

The chart below displays our market share of single-family mortgage-related securities issuances in the first 

quarter of 2018 as compared with that of our primary competitors for the issuance of single-family mortgagerelated securities.

• We estimate our market share of single-family mortgage-related securities issuances was 42% in the first 

quarter of 2018, compared with 37% in the fourth quarter of 2017 and 39% in the first quarter of 2017.
MD&A | Business Segments

Fannie Mae First Quarter 2018 Form 10-Q 19

Single-Family Business Metrics

The charts and related discussion below present certain business metrics of our Single-Family business.

__________

(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 long-term standby commitments. It excludes non-Fannie Mae single-family mortgage-related securities 

held in our retained mortgage portfolio for which we do not provide a guaranty.

Although single-family Fannie Mae MBS issuances decreased in the first quarter of 2018 primarily as a result of 

lower refinancing activity during the quarter, single-family Fannie Mae MBS outstanding increased as of March 31, 

2018, as liquidations slowed in the first quarter of 2018 driven by a decline in prepayments due to the rising 

interest rate environment.

Average Charged Guaranty Fee on Single-Family Guaranty Book of Business and

Average Charged Guaranty Fee on New Single-Family Acquisitions(1)
MD&A | Business Segments

Fannie Mae First Quarter 2018 Form 10-Q 20

__________

(1) Calculated based on the average guaranty fee rate for our single-family guaranty arrangements during the 

period plus the recognition of any upfront cash payments over an estimated average life. Excludes the impact 

of a 10 basis point guaranty fee increase implemented in 2012 pursuant to the TCCA, the incremental revenue 

from which is remitted to Treasury and not retained by us.

Our average charged guaranty fee on newly acquired single-family loans, net of TCCA, decreased from 48.7 bps 

in the first quarter of 2017 to 47.1 bps in the first quarter of 2018 primarily driven by increased competition.

Single-Family Business Financial Results

Single-Family Business Financial Results

For the Three Months Ended March 31,

2018 2017 Variance

(Dollars in millions)

Net interest income(1)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 4,561 $ 4,756 $ (195)

Fee and other income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 158 76 82

Net revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,719 4,832 (113)

Investment gains (losses), net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 242 (50) 292

Fair value gains (losses), net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,034 (12) 1,046

Administrative expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (643) (601) (42)

Credit-related income(2)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34 184 (150)

TCCA fees(1)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (557) (503) (54)

Other expenses, net(3)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (132) (256) 124

Income before federal income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,697 3,594 1,103

Provision for federal income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,016) (1,252) 236

Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,681 $ 2,342 $ 1,339

__________

(1) Reflects the impact of a 10 basis point guaranty fee increase implemented in 2012 pursuant to the TCCA, the incremental 

revenue from which is remitted to Treasury. The resulting revenue is included in net interest income and the expense is 

recognized as “TCCA fees.” 

(2) Consists of the benefit (provision) for credit losses and foreclosed property expense.

(3) Consists of gains (losses) from partnership investments, debt extinguishment (gains) losses, and other expenses.

Net interest income

Single-family net interest income decreased in the first quarter of 2018 compared with the first quarter of 2017, 

primarily due to a decline in net amortization income, partially offset by an increase in single-family base guaranty 

fee income. The drivers of net interest income for the single-family segment for the first quarter of 2018 are 

consistent with the drivers of net interest income discussed in our condensed consolidated statements of 

operations and comprehensive income. See “Consolidated Results of Operations—Net Interest Income” for more 

information on the drivers of our net interest income.

Investment gains (losses), net

We recognized investment gains in the first quarter of 2018 compared with investment losses in the first quarter of 

2017. Investment gains in the first quarter of 2018 were primarily driven by gains on sales of AFS securities, as 

sales of AFS securities were higher during the first quarter of 2018 as compared with the first quarter of 2017.

Fair value gains (losses), net

We recognized fair value gains in the first quarter of 2018, a shift from fair value losses recognized in the first 

quarter of 2017. The fair value gains and losses that are reported for the single-family segment are consistent with 

the fair value gains and losses reported in our condensed consolidated statements of operations and 
MD&A | Business Segments

Fannie Mae First Quarter 2018 Form 10-Q 21

comprehensive income. We discuss our fair value gains and losses in “Consolidated Results of Operations—Fair 

Value Gains (Losses), Net.”

Credit-related income

We recognized lower single-family credit-related income in the first quarter of 2018 compared with the first quarter

of 2017. The credit-related income that is reported for the single-family segment is consistent with the creditrelated income reported in our condensed consolidated statements of operations and comprehensive income. 

See “Consolidated Results of Operations—Credit-Related Income” for a discussion of the drivers of our creditrelated income.

Single-Family Mortgage Credit Risk Management

This section updates our discussion of single-family mortgage credit risk management in our 2017 Form 10-K in 

“MD&A—Business Segments—Single-Family Business—Single-Family Mortgage Credit Risk Management.”

Single-Family Acquisition and Servicing Policies and Underwriting and Servicing Standards

For information on our underwriting and servicing standards, quality control process, repurchase requests, and 

representation and warranty framework, see “MD&A—Business Segments—Single-Family Business—SingleFamily Mortgage Credit Risk Management—Single-Family Acquisition and Servicing Policies and Underwriting 

and Servicing Standards” in our 2017 Form 10-K. The discussion below updates some of that information.

Recent Changes

In July 2017, we implemented DU® Version 10.1, which included a change that enabled loans with debt-to-income 

ratios above 45% (up to 50%) to rely on DU’s comprehensive risk assessment, and removed specific policy rules 

that had previously set maximum loan-to-value (“LTV”) ratio and minimum reserves requirements for those loans. 

Due in part to our implementation of this change, the percentage of our non-Refi Plus single-family acquisitions 

associated with borrower debt-to-income ratios above 45% increased to 23% in the first quarter of 2018, 

compared with 7% in the first quarter of 2017. After assessing the loan profile of loans delivered to us since the 

DU Version 10.1 changes went into effect, we revised DU’s risk assessment to limit risk layering. Risk layering 

refers to the acquisition of loans with multiple higher-risk characteristics (such as high LTV ratio, credit profile with 

a history of delinquencies, debt-to-income ratio above 45% and no or low levels of reserves). We implemented 

these changes in March 2018 through DU Version 10.2. With DU Version 10.2, we expect fewer DU Approve 

recommendations on loans that have multiple higher-risk characteristics; however, we expect to continue to 

acquire a higher proportion of loans with debt-to-income ratios above 45% than we have in previous years. 

Single-Family Portfolio Diversification and Monitoring

For information on key loan attributes, see “MD&A—Business Segments—Single-Family Business—SingleFamily Mortgage Credit Risk Management—Single-Family Portfolio Diversification and Monitoring” in our 2017

Form 10-K. The table below displays our single-family conventional business volumes and our single-family 

conventional guaranty book of business, based on certain key risk characteristics that we use to evaluate the risk 

profile and credit quality of our single-family loans. 
MD&A | Business Segments

Fannie Mae First Quarter 2018 Form 10-Q 22

Risk Characteristics of Single-Family Conventional Business Volume and Guaranty Book of Business(1)

Percent of Single-Family 

Conventional Business 

Volume at Acquisition(2) Percent of Single-Family

Conventional Guaranty Book of

Business(3)(4)

As of

For the Three Months Ended

March 31,

2018 2017 March 31, 2018 December 31, 2017

Original LTV ratio:(5)

<= 60% . . . . . . . . . . . . . . . . . . . . . . . . 18 % 22 % 20 % 20 %

60.01% to 70% . . . . . . . . . . . . . . . . . . 13 14 14 14

70.01% to 80% . . . . . . . . . . . . . . . . . . 38 38 38 38

80.01% to 90% . . . . . . . . . . . . . . . . . . 12 11 11 11

90.01% to 95% . . . . . . . . . . . . . . . . . . 13 11 10 10

95.01% to 100% . . . . . . . . . . . . . . . . . 6 4 4 4

Greater than 100% . . . . . . . . . . . . . . . * * 3 3

Total . . . . . . . . . . . . . . . . . . . . . . . . 100 % 100 % 100 % 100 %

Weighted average. . . . . . . . . . . . . . 75 % 73 % 75 % 75 %

Average loan amount . . . . . . . . . . . . . . . . $ 232,284 $ 221,405 $ 167,594 $ 166,643

Estimated mark-to-market LTV ratio:(6)

<= 60% . . . . . . . . . . . . . . . . . . . . . . . . 52 % 52 %

60.01% to 70% . . . . . . . . . . . . . . . . . . 18 18

70.01% to 80% . . . . . . . . . . . . . . . . . . 17 17

80.01% to 90% . . . . . . . . . . . . . . . . . . 8 8

90.01% to 100% . . . . . . . . . . . . . . . . . 4 4

Greater than 100% . . . . . . . . . . . . . . . 1 1

Total . . . . . . . . . . . . . . . . . . . . . . . . 100 % 100 %

Weighted average. . . . . . . . . . . . . . 58 % 58 %

Product type:

Fixed-rate:(7)

Long-term . . . . . . . . . . . . . . . . . . . . 88 % 81 % 80 % 80 %

Intermediate-term . . . . . . . . . . . . . . 10 17 15 15

Interest-only . . . . . . . . . . . . . . . . . . — — * *

Total fixed-rate. . . . . . . . . . . . . . . 98 98 95 95

Adjustable-rate:

Interest-only . . . . . . . . . . . . . . . . . . — — 1 1

Other ARMs . . . . . . . . . . . . . . . . . . 2 2 4 4

Total adjustable-rate . . . . . . . . . . 2 2 5 5

Total. . . . . . . . . . . . . . . . . . . . . . 100 % 100 % 100 % 100 %

Number of property units:

1 unit . . . . . . . . . . . . . . . . . . . . . . . . . . 97 % 97 % 97 % 97 %

2-4 units. . . . . . . . . . . . . . . . . . . . . . . . 3 3 3 3

Total . . . . . . . . . . . . . . . . . . . . . . . . 100 % 100 % 100 % 100 %
MD&A | Business Segments

Fannie Mae First Quarter 2018 Form 10-Q 23

Percent of Single-Family 

Conventional Business 

Volume at Acquisition(2) Percent of Single-Family Conventional 

Guaranty Book of

Business(3)(4)

As of

For the Three Months Ended

March 31,

2018 2017 March 31, 2018 December 31, 2017

Property type:

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

Condo/Co-op . . . . . . . . . . . . . . . . . . . . 9 10 9 9

Total . . . . . . . . . . . . . . . . . . . . . . . . 100 % 100 % 100 % 100 %

Occupancy type:

Primary residence . . . . . . . . . . . . . . . . 89 % 88 % 89 % 89 %

Second/vacation home . . . . . . . . . . . . 4 4 4 4

Investor . . . . . . . . . . . . . . . . . . . . . . . . 7 8 7 7

Total . . . . . . . . . . . . . . . . . . . . . . . . 100 % 100 % 100 % 100 %

FICO credit score at origination:

< 620. . . . . . . . . . . . . . . . . . . . . . . . . . * % * % 2 % 2 %

620 to < 660 . . . . . . . . . . . . . . . . . . . . 6 5 5 5

660 to < 700 . . . . . . . . . . . . . . . . . . . . 14 13 12 12

700 to < 740 . . . . . . . . . . . . . . . . . . . . 23 22 20 20

>= 740. . . . . . . . . . . . . . . . . . . . . . . . . 57 60 61 61

Total . . . . . . . . . . . . . . . . . . . . . . . . 100 % 100 % 100 % 100 %

Weighted average. . . . . . . . . . . . . . 743 746 745 745

Loan purpose:

Purchase. . . . . . . . . . . . . . . . . . . . . . . 53 % 44 % 39 % 39 %

Cash-out refinance . . . . . . . . . . . . . . . 26 24 20 20

Other refinance . . . . . . . . . . . . . . . . . . 21 32 41 41

Total . . . . . . . . . . . . . . . . . . . . . . . . 100 % 100 % 100 % 100 %

Geographic concentration:(8)

Midwest. . . . . . . . . . . . . . . . . . . . . . . . 13 % 13 % 15 % 15 %

Northeast . . . . . . . . . . . . . . . . . . . . . . 14 15 18 18

Southeast . . . . . . . . . . . . . . . . . . . . . . 22 22 22 22

Southwest . . . . . . . . . . . . . . . . . . . . . . 20 20 17 17

West . . . . . . . . . . . . . . . . . . . . . . . . . . 31 30 28 28

Total . . . . . . . . . . . . . . . . . . . . . . . . 100 % 100 % 100 % 100 %

Origination year:

2012 and prior . . . . . . . . . . . . . . . . . . . 34 % 36 %

2013 . . . . . . . . . . . . . . . . . . . . . . . . . . 12 12

2014 . . . . . . . . . . . . . . . . . . . . . . . . . . 7 7

2015 . . . . . . . . . . . . . . . . . . . . . . . . . . 11 12

2016 . . . . . . . . . . . . . . . . . . . . . . . . . . 18 18

2017 . . . . . . . . . . . . . . . . . . . . . . . . . . 16 15

2018 . . . . . . . . . . . . . . . . . . . . . . . . . . 2 —

Total . . . . . . . . . . . . . . . . . . . . . . . . 100 % 100 %

__________

* Represents less than 0.5% of single-family conventional business volume or book of business.
MD&A | Business Segments

Fannie Mae First Quarter 2018 Form 10-Q 24

(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 7% of our single-family conventional guaranty book of business as of March 31, 2018 and 

December 31, 2017. See “MD&A—Business Segments—Single-Family Business—Single-Family Mortgage Credit Risk 

Management—Single-Family Portfolio Diversification and Monitoring—Jumbo-Conforming and High-Balance Loans” in our 

2017 Form 10-K for information on these loans.

(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) 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.

(7) Long-term fixed-rate consists of mortgage loans with maturities greater than 15 years, while intermediate-term fixed-rate 

loans have maturities equal to or less than 15 years. Loans with interest-only terms are included in the interest-only 

category regardless of their maturities.

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

PR, RI, VT and VI. Southeast consists of AL, DC, FL, GA, KY, MD, MS, NC, SC, TN, VA and WV. Southwest consists of AZ, 

AR, CO, KS, LA, MO, NM, OK, TX and UT. West consists of AK, CA, GU, HI, ID, MT, NV, OR, WA and WY.

As shown in the table above, a greater proportion of our single-family loan acquisitions in the first quarter of 2018 

had LTV ratios over 90% (from 15% in the first quarter of 2017 to 19% in the first quarter of 2018), and there was 

a decline in the weighted average FICO credit score of our single-family acquisitions in the first quarter of 2018 

(from 746 in the first quarter of 2017 to 743 in the first quarter of 2018). We believe several factors drove these 

changes, including a decline in refinance volume and the changes to our eligibility standards implemented in DU 

Version 10.1 described above.

See “MD&A—Business Segments—Single-Family Business—Single-Family Mortgage Credit Risk Management—

Single-Family Portfolio Diversification and Monitoring” in our 2017 Form 10-K for more information on the credit 

characteristics of loans in our guaranty book of business, including Home Affordable Refinance Program®

(“HARP®”) and Refi PlusTM loans, jumbo-conforming and high-balance loans, reverse mortgages and mortgage 

products with rate resets.
MD&A | Business Segments

Fannie Mae First Quarter 2018 Form 10-Q 25

Transfer of Mortgage Credit Risk

Single-Family Credit Enhancements

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

purchase or securitize if it has an LTV ratio over 80% at the time of purchase. We also enter into various other 

types of transactions in which we transfer mortgage credit risk to third parties. The table below displays 

information on the outstanding unpaid principal balance of our single-family loans, as well as the percentage of 

our total single-family conventional guaranty book of business measured by unpaid principal balance, that were 

covered by one or more forms of credit enhancement as of the dates specified. For a description of the types of 

credit enhancements specified in the table, see “MD&A—Business Segments—Single-Family Business—SingleFamily Mortgage Credit Risk Management—Transfer of Mortgage Credit Risk” in our 2017 Form 10-K. For a 

discussion of our exposure to and management of the institutional counterparty credit risk associated with the 

providers of these credit enhancements see “Risk Management—Credit Risk Management—Institutional 

Counterparty Credit Risk Management” in our 2017 Form 10-K and “Note 11, Concentrations of Credit Risk” in 

this report. 

Single-Family Loans with Credit Enhancement

As of

March 31, 2018 December 31, 2017

Unpaid

Principal

Balance

Percentage of

Single-Family

Conventional

Guaranty Book

of Business

Unpaid

Principal

Balance

Percentage of

Single-Family

Conventional

Guaranty Book

of Business

(Dollars in billions)

Primary mortgage insurance and other . . . . . . . . . . . . . . . $ 583 20% $ 566 20%

Connecticut Avenue SecuritiesTM (“CAS”) . . . . . . . . . . . . . 731 25 681 24

Credit Insurance Risk TransferTM (“CIRT

TM”) . . . . . . . . . . . . 193 7 181 6

Lender risk sharing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78 3 65 2

Less: Loans covered by multiple credit enhancements . . (362) (12) (335) (12)

Total unpaid principal balance of single-family loans with

credit enhancement . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,223 43% $ 1,158 40%

Credit Risk Transfer Transactions 

Our Single-Family business has developed risk-sharing capabilities to transfer portions of our single-family 

mortgage credit risk to the private market. Our primary method of achieving this objective has been through our 

CAS and CIRT transactions. In most of our credit risk transfer transactions, we transfer a small portion of the 

expected credit losses, and a significant portion of the losses we expect would be incurred in a stressed credit 

environment, such as a severe or prolonged economic downturn. 
MD&A | Business Segments

Fannie Mae First Quarter 2018 Form 10-Q 26

The table below displays the mortgage credit risk transferred to third parties and retained by Fannie Mae pursuant 

to our single-family credit risk transfer transactions.

Single-Family Credit Risk Transfer Transactions

Issuances from Inception to March 31, 2018

(Dollars in billions)

Senior Fannie Mae(1)

Initial 

Reference 

Pool(4)

$1,280

Mezzanine Fannie Mae(1) CIRT

(2)(3) CAS(2)

Lender 

RiskSharing(2)

$2 $6 $28 $1 $1,327

First Loss Fannie Mae(1) CAS(2)(5)

Lender 

RiskSharing(2)

$7 $2 $1

Outstanding as of March 31, 2018

(Dollars in billions)

Senior Fannie Mae(1)

Outstanding 

Reference 

Pool(4)(6)

$956

Mezzanine Fannie Mae(1) CIRT

(2)(3) CAS(2)

Lender 

RiskSharing(2)

$1 $6 $21 $1 $995

First Loss Fannie Mae(1) CAS(2)(5)

Lender 

RiskSharing(2)

$7 $2 $1

__________

(1) Credit risk retained by Fannie Mae in CAS, CIRT and lender risk-sharing transactions. Tranche sizes vary across 

programs.

(2) Credit risk transferred to third parties. Tranche sizes vary across programs.

(3) Includes mortgage pool insurance transactions covering loans with an unpaid principal balance of approximately $4 billion

outstanding as of March 31, 2018.

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

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

(6) For CAS and some lender risk-sharing transactions, represents outstanding reference pools, not the outstanding unpaid 

principal balance of the underlying loans, which was $1,002 billion as of March 31, 2018.

During 2018, pursuant to our credit risk transfer transactions, we transferred a portion of the mortgage credit risk 

on single-family mortgages with an unpaid principal balance of $100 billion at the time of the transactions. 

• For the quarter ended March 31, 2018, we paid approximately $200 million in interest expense, net of 

LIBOR, on our outstanding CAS and approximately $60 million in CIRT premiums.
MD&A | Business Segments

Fannie Mae First Quarter 2018 Form 10-Q 27

• Comparatively, we paid approximately $170 million in interest expense, net of LIBOR, on our outstanding 

CAS and approximately $38 million in CIRT premiums for the quarter ended March 31, 2017.

These expenses increased from the first quarter of 2017 to the first quarter of 2018 as we continue to transfer 

credit risk on a larger portion of our single-family book of business.

As a part of our continued effort to innovate and improve our credit risk transfer programs, in April 2018 we 

announced changes to our Single Family MBS program to facilitate proposed future enhancements to our 

benchmark Connecticut Avenue SecuritiesTM structure. These proposed future enhancements to the CAS 

program will enable the company to structure future CAS offerings as notes issued by trusts that qualify as Real 

Estate Mortgage Investment Conduits (“REMICs”). This proposed REMIC structure differs from the current CAS 

notes that are issued as Fannie Mae corporate debt. The proposed enhancements to our CAS program are 

designed to promote the continued growth of the market by expanding the potential investor base for these 

securities, making the program more attractive to real estate investment trust investors, as well as certain other 

investors, and limiting investor exposure to Fannie Mae counterparty risk, without disrupting the To-Be-Announced 

(“TBA”) MBS market. We may issue CAS under the new REMIC structure later this year, subject to FHFA

approval, market conditions and other factors.

Under the current CAS structure, there can be a significant lag between the time when we recognize a provision 

for credit losses and when we recognize the related recovery from the CAS transaction. While a credit expense 

on a loan in a reference pool for a CAS transaction is recorded when it is probable that we have incurred a loss, 

for our CAS issued beginning in 2016, a recovery is recorded only when an actual loss event occurs, which is 

typically several months after the collateral has been liquidated. The proposed new CAS structure will eliminate 

this timing mismatch, allowing us to recognize the credit loss protection benefit at the same time the credit loss is 

recognized in our condensed consolidated financial statements.

Single-Family 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. 

See “MD&A—Business Segments—Single-Family Business—Single-Family Mortgage Credit Risk Management—

Problem Loan Management” in our 2017 Form 10-K for a discussion of delinquency statistics on our problem 

loans, efforts undertaken to manage our problem loans, metrics regarding our loan workout activities, real estate 

owned (‘REO”) management and other single-family credit-related disclosures. The discussion below updates 

some of that information.
MD&A | Business Segments

Fannie Mae First Quarter 2018 Form 10-Q 28

Delinquency

The table below 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 singlefamily conventional guaranty book of business. 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. 

Delinquency Status and Activity of Single-Family Conventional Loans

As of

March 31,

2018

December 31,

2017

March 31,

2017

Delinquency status:

30 to 59 days delinquent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.20% 1.63% 1.19%

60 to 89 days delinquent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.37 0.50 0.33

Seriously delinquent (“SDQ”) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.16 1.24 1.12

Percentage of SDQ loans that have been delinquent for more

than 180 days . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47% 43% 62%

Percentage of SDQ loans that have been delinquent for more

than two years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 13 21

For the Three Months

Ended March 31,

2018 2017

Single-family SDQ loans (number of loans):

Beginning balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 212,183 206,549

Additions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66,804 61,008

Removals:

Modifications and other loan workouts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (21,855) (18,851)

Liquidations and sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (16,942) (19,531)

Cured or less than 90 days delinquent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (41,133) (35,980)

Total removals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (79,930) (74,362)

Ending balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 199,057 193,195

Our single-family serious delinquency rate was 1.16% as of March 31, 2018, compared with 1.24% as of 

December 31, 2017 and 1.12% as of March 31, 2017. Our serious delinquency rate increased in the latter part of 

2017 due to the impact of the hurricanes in the third quarter of 2017, as many homeowners in the areas affected 

by the hurricanes became delinquent on their loans, including those that were granted temporary forbearance. 

Our serious delinquency rate declined in the first quarter of 2018 primarily because many delinquent borrowers 

resolved their loan delinquencies during the quarter by entering into a loan modification or resuming payments 

and becoming current on their loans, including loans in the areas affected by the hurricanes.

We expect our single-family serious delinquency rate to remain higher compared with pre-hurricane levels during 

the next several months. We expect many delinquent borrowers in the areas affected by the hurricanes will 

continue to resolve their loan delinquencies, either through resuming their mortgage payments and becoming 

current on their loans or by obtaining a loan modification. We have already seen significant trial modification 

activity from the areas affected by the hurricanes in the first quarter of 2018, and expect elevated trial modification 

activity to continue at least through the second quarter of 2018. Over the long term, we expect the impact of the 

hurricanes on our serious delinquency rate to subside and for this rate to resume its previous downward trend; 

however, because our single-family serious delinquency rate has already declined significantly over the past 

several years, we expect more modest declines and may experience period to period fluctuations in this rate.

Certain higher-risk loan categories, such as Alt-A loans, 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. Single-family loans originated in 2005 through 2008 constituted 6% of our 
MD&A | Business Segments

Fannie Mae First Quarter 2018 Form 10-Q 29

single-family book of business as of March 31, 2018, but constituted 41% of our seriously delinquent single-family 

loans as of March 31, 2018 and drove 60% of our single-family credit losses in the first quarter of 2018. In 

addition, loans in certain judicial foreclosure states such as Florida, New Jersey and New York with historically 

long foreclosure timelines have exhibited higher than average delinquency rates and/or account for a higher share 

of our credit losses. 

The table below displays the serious delinquency rates for, and the percentage of our total seriously delinquent 

single-family conventional loans represented by, the specified loan categories. 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. 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.

Single-Family Conventional Seriously Delinquent Loan Concentration Analysis

As of

March 31, 2018 December 31, 2017 March 31, 2017

Percentage

of Book

Outstanding

Percentage 

of Seriously 

Delinquent 

Loans(1)

Serious

Delinquency

Rate

Percentage

of Book

Outstanding

Percentage 

of Seriously 

Delinquent 

Loans(1)

Serious

Delinquency

Rate

Percentage

of Book

Outstanding

Percentage 

of Seriously 

Delinquent 

Loans(1)

Serious

Delinquency

Rate

States:

California. . . . . . . . . . 19% 5% 0.39% 19% 5% 0.42% 19% 6% 0.47%

Florida. . . . . . . . . . . . 6 19 3.56 6 19 3.71 6 10 1.73

New Jersey . . . . . . . . 4 5 1.91 4 5 2.15 4 8 2.85

New York. . . . . . . . . . 5 7 1.87 5 7 2.02 5 10 2.48

All other states . . . . . 66 64 1.02 66 64 1.09 66 66 1.04

Product type:

Alt-A(2)

. . . . . . . . . . . . 2 12 4.76 2 12 4.95 3 15 4.87

Vintages:

2004 and prior. . . . . . 3 22 3.24 4 23 3.28 4 25 2.76

2005-2008. . . . . . . . . 6 41 6.22 6 42 6.55 8 50 6.15

2009-2018. . . . . . . . . 91 37 0.51 90 35 0.53 88 25 0.34

Estimated mark-tomarket LTV ratio:

<= 60% . . . . . . . . . . . 52 42 0.81 52 41 0.84 49 34 0.67

60.01% to 70% . . . . . 18 18 1.28 18 18 1.34 19 15 1.07

70.01% to 80% . . . . . 17 16 1.38 17 16 1.48 17 15 1.22

80.01% to 90% . . . . . 8 11 1.94 8 11 2.09 9 13 1.94

90.01% to 100% . . . . 4 6 2.26 4 6 2.62 4 9 2.71

Greater than 100% . . 1 7 11.21 1 8 11.70 2 14 10.07

Credit enhanced:(3)

Primary MI & other(4)

. 20 24 1.67 20 26 1.95 18 27 1.95

Credit risk transfer(5)

. 35 9 0.39 32 8 0.42 25 2 0.16

Non-credit enhanced. . . 57 71 1.24 60 69 1.27 65 71 1.12

__________

(1) Calculated based on the number of single-family loans that were seriously delinquent for each category divided by the total 

number of single-family conventional loans that were seriously delinquent.

(2) For a description of our Alt-A loan classification criteria, see “Glossary of Terms Used in This Report” in our 2017 Form 10-

K.

(3) The credit-enhanced categories are not mutually exclusive. A loan with primary mortgage insurance that is also covered by 

a credit risk transfer transaction will be included in both the “Primary MI & other” category and the “Credit risk transfer” 

category. As a result, the “Credit enhanced” and “Non-credit enhanced” categories do not sum to 100%. The total 

percentage of our single-family conventional guaranty book of business with some form of credit enhancement as of 

March 31, 2018 was 43%.
MD&A | Business Segments

Fannie Mae First Quarter 2018 Form 10-Q 30

(4) Refers to loans included in an agreement used to reduce credit risk by requiring primary mortgage insurance, collateral, 

letters of credit, corporate guarantees, or other agreements to provide an entity with some assurance that it will be 

compensated to some degree in the event of a financial loss. Excludes loans covered by credit risk transfer transactions 

unless such loans are also covered by primary mortgage insurance.

(5) Refers to loans included in reference pools for credit risk transfer transactions, including loans in these transactions that 

are also covered by primary mortgage insurance. For CAS and some lender risk-sharing transactions, this represents 

outstanding unpaid principal balance of the underlying loans on the single-family mortgage credit book, not the outstanding 

reference pool, as of the specified date. Loans included in our credit risk transfer transactions have all been acquired since 

2012 and newer vintages typically have significantly lower delinquency rates than more seasoned loans.

Loan Workout Metrics

Our loan workouts reflect our home retention solutions, including loan modifications, repayment plans and 

forbearances, and foreclosure alternatives, including short sales and deeds-in-lieu of foreclosure.

The chart below displays our completed single-family loan workouts, 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 troubled debt restructurings, or repayment or forbearance plans that have been initiated but 

not completed. As of March 31, 2018, there were approximately 44,700 loans in a trial modification period.

__________

(1) Consists of modifications and completed repayment plans and forbearances. Repayment plans reflect only those plans 

associated with loans that were 60 days or more delinquent. Forbearances reflect loans that were 90 days or more 

delinquent.

(2) Consists of short sales and deeds-in-lieu of foreclosure.

The increase in home retention solutions in the first quarter of 2018 compared with the first quarter of 2017 was 

primarily driven by forbearances granted to borrowers in the areas affected by the hurricanes during the first 

quarter of 2018.
MD&A | Business Segments

Fannie Mae First Quarter 2018 Form 10-Q 31

REO Management

If a loan defaults, we acquire the home through foreclosure or a deed-in-lieu of foreclosure. The table below

displays our foreclosure activity by region. Regional REO acquisition trends generally follow a pattern that is 

similar to, but lags, that of regional delinquency trends.

Single-Family REO Properties

For the Three Months

Ended March 31,

2018 2017

Single-family REO properties (number of properties):

Beginning of period inventory of single-family REO properties(1). . . . . . . . . . . . . . . . 26,311 38,093

Acquisitions by geographic area:(2)

Midwest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,748 2,602

Northeast . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,758 2,713

Southeast . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,204 3,424

Southwest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,001 1,588

West . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 515 859

Total REO acquisitions(1). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,226 11,186

Dispositions of REO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (9,474) (14,728)

End of period inventory of single-family REO properties(1). . . . . . . . . . . . . . . . . . . . . . 24,063 34,551

Carrying value of single-family REO properties (dollars in millions) . . . . . . . . . . . . . . . $ 2,917 $ 3,951

Single-family foreclosure rate(3). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.17 % 0.26 %

REO net sales prices to unpaid principal balance(4). . . . . . . . . . . . . . . . . . . . . . . . . . . 76 % 74 %

Short sales net sales prices to unpaid principal balance(5). . . . . . . . . . . . . . . . . . . . . . 76 % 74 %

__________

(1) Includes acquisitions through foreclosure and deeds-in-lieu of foreclosure. Also includes held for use properties, which are 

reported in our condensed consolidated balance sheets as a component of “Other assets.” 

(2) See footnote 8 to the Risk Characteristics of Single-Family Conventional Business Volume and Guaranty Book of Business

table for states included in each geographic region.

(3) Estimated based on the annualized total number of properties acquired through foreclosure or deeds-in-lieu of foreclosure 

as a percentage of the total number of loans in our single-family guaranty book of business as of the end of each 

respective period.

(4) Calculated as the amount of sale proceeds received on disposition of REO properties during the respective periods, 

excluding those subject to repurchase requests made to our sellers or servicers, divided by the aggregate unpaid principal 

balance of the related loans at the time of foreclosure. Net sales price represents the contract sales price less selling costs 

for the property and other charges paid by the seller at closing. 

(5) Calculated as the amount of sale proceeds received on properties sold in short sale transactions during the respective 

periods divided by the aggregate unpaid principal balance of the related loans. Net sales price represents the contract 

sales price less the selling costs for the property and other charges paid by the seller at the closing, including borrower 

relocation incentive payments and subordinate lien(s) negotiated payoffs. 

Single-family foreclosed properties declined in the first quarter of 2018 compared with the first quarter of 2017

primarily due to declining REO acquisitions from serious delinquencies aged greater than 180 days over the 

course of the past year.

Other Single-Family Credit Information

Credit Loss Performance and Concentration Metrics

The amount of credit losses we realize in a given period are driven by foreclosures, pre-foreclosure sales, REO 

activity and mortgage loan redesignations in a given period. The table below displays the components of our 

single-family credit loss performance metrics, as well as our single-family initial charge-off severity rate. Our credit 

loss performance metrics are not defined terms within generally accepted accounting principles in the United 

States of America (“GAAP”) and may not be calculated in the same manner as similarly titled measures reported 

by other companies. We believe that credit loss performance metrics may be useful to investors as the losses are 

presented as a percentage of our book of business and have historically been used by analysts, investors and 
MD&A | Business Segments

Fannie Mae First Quarter 2018 Form 10-Q 32

other companies within the financial services industry. In prior years, because management did not view changes 

in the fair value of our mortgage loans as credit losses, we adjusted our credit loss performance metrics to 

exclude the impact associated with our acquisition of credit-impaired loans from unconsolidated MBS trusts. This 

impact on our credit loss metrics is no longer significant, hence we no longer adjust our credit loss performance 

metrics in this manner. The credit loss metrics presented below for all periods reflect this revised presentation. In 

addition, the prior period credit loss ratios have been adjusted to reflect the change in presentation relating to our 

guaranty book of business described in “MD&A—Total Book of Business” in our 2017 Form 10-K.

Single-Family Credit Loss Performance Metrics

For the Three Months Ended March 31,

2018 2017

Amount Ratio(1) Amount Ratio(1)

(Dollars in millions)

Charge-offs, net of recoveries . . . . . . . . . . . . . . . . $ (392) 5.3 bps $ (944) 13.0 bps

Foreclosed property expense. . . . . . . . . . . . . . . . . (162) 2.2 (216) 3.0

Credit losses and credit loss ratio . . . . . . . . . . . . . $ (554) 7.5 bps $ (1,160) 16.0 bps

Single-family initial charge-off severity rate(2)

. . . . . 13.48 % 16.97 %

___________

(1) Basis points are based on the amount for each line item presented divided by the average single-family guaranty book of 

business during the period.

(2) The rate excludes any costs, gains or losses associated with REO after initial acquisition through final disposition. The rate 

includes charge-offs pursuant to the provisions of the Advisory Bulletin and charge-offs of property tax and insurance 

receivables.

Our single-family credit losses and credit loss ratio decreased in the first quarter of 2018 compared with the first 

quarter of 2017 primarily due to lower charge-offs and reduced foreclosures.

Our single-family initial charge-off severity rate declined in the first quarter of 2018 primarily driven by higher 

home prices.

Single-Family Combined Loss Reserves

Our combined single-family loss reserves provide for an estimate of credit losses incurred in our single-family 

guaranty book of business, including concessions we granted borrowers upon modification of their loans. Our 

combined loss reserves have declined substantially from their peak and are expected to decline further in 2018; 

however, we expect a smaller decline in our loss reserves in the future as compared to the trend in recent years.
MD&A | Business Segments

Fannie Mae First Quarter 2018 Form 10-Q 33

The table below summarizes the changes in our single-family combined loss reserves, which consists of the 

allowance for loan losses and the reserve for guaranty losses for single-family loans.

Single-Family Combined Loss Reserves

For the Three Months Ended

March 31,

2018 2017

(Dollars in millions)

Changes in combined loss reserves:

Beginning balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (19,155) $ (23,639)

Benefit for credit losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 196 400

Charge-offs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 476 1,061

Recoveries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (84) (117)

Other(1)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1) (31)

Ending balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (18,568) $ (22,326)

As of

March 31,

2018

December 31,

2017

Combined loss reserves as a percentage of single-family:

Guaranty book of business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.63% 0.65%

Recorded investment in nonaccrual loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43.59 40.80

__________

(1) Amounts represent changes in other loss reserves which are reflected in single-family benefit for credit losses, charge-offs 

and recoveries.

Troubled Debt Restructurings and Nonaccrual Loans

The table below displays the single-family loans classified as a TDR that are on accrual status and loans on 

nonaccrual status. The table includes our recorded investment in HFI and HFS single-family 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.”

Single-Family Troubled Debt Restructurings on Accrual Status and Nonaccrual Loans

As of

March 31,

2018

December 31,

2017

(Dollars in millions)

TDRs on accrual status . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 110,158 $ 110,043

Nonaccrual loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42,600 46,945

Total TDRs on accrual status and nonaccrual loans . . . . . . . . . . . . . . . . . . . . . . . . $ 152,758 $ 156,988

Accruing on-balance sheet loans past due 90 days or more(1)

. . . . . . . . . . . . . . . . . . . $ 267 $ 353

For the Three Months

Ended March 31,

2018 2017

(Dollars in millions)

Interest related to on-balance sheet TDRs on accrual status and nonaccrual loans:

Interest income forgone(2). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 721 $ 964

Interest income recognized(3). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,394 1,458

__________

(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.
MD&A | Business Segments

Fannie Mae First Quarter 2018 Form 10-Q 34

(2) Represents the amount of interest income we did not recognize, but would have recognized during the period for 

nonaccrual loans and TDRs on accrual status as of the end of each period had the loans performed according to their 

original contractual terms.

(3) Represents interest income recognized during the period, including the amortization of any deferred cost basis 

adjustments, for loans classified as either nonaccrual loans or TDRs on accrual status as of the end of each period. 

Includes primarily amounts accrued while the loans were performing and cash payments received on nonaccrual loans.

The post-modification unpaid principal balance of single-family HFI and HFS loans classified as TDRs as of 

March 31, 2018 was $149.1 billion, compared with $146.4 billion as of December 31, 2017. This increase in loans 

classified as TDRs was primarily attributable to single-family loan modifications and other forms of loss mitigation 

in the areas affected by the hurricanes that resulted in a restructuring of the terms of these loans.

Multifamily Business

Our Multifamily business provides mortgage market liquidity primarily for properties with five or more residential 

units, which may be apartment communities, cooperative properties, seniors housing, dedicated student housing 

or manufactured housing communities.

Multifamily Mortgage Market

National multifamily market fundamentals, which include factors such as vacancy rates and rents, remained 

relatively stable during the first quarter of 2018 despite an increase in new apartment supply. Although the 

national estimated vacancy level increased during the first quarter of 2018, it remained near historic lows, 

benefiting from steady rental demand.

• Vacancy rates. According to preliminary third-party data, the national multifamily vacancy rate for 

institutional investment-type apartment properties was an estimated 5.8% as of March 31, 2018, 

compared to 5.5% as of December 31, 2017. 

• Rents. Rents continued to increase during the first quarter of 2018. National asking rents increased by an 

estimated 0.5%, compared with 0.3% during the fourth quarter of 2017. 

Continued demand for multifamily rental units during the first quarter of 2018 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 28,000 units, according to preliminary data from Reis, Inc., compared with approximately 33,000

units during the fourth quarter of 2017.

Vacancy rates and rents are important to loan performance because multifamily loans are generally repaid from 

the cash flows generated by the underlying property. Several years of improvement in these fundamentals helped 

to increase property values in most metropolitan areas. It is estimated that approximately 446,000 new multifamily 

units will be completed in 2018. The bulk of this new supply is concentrated in a limited number of metropolitan 

areas.

Multifamily Business Metrics

Multifamily new business volume decreased in the first quarter of 2018 compared with the first quarter of 2017

driven by reduced activity in the multifamily market. FHFA’s 2018 conservatorship scorecard includes an objective 

to maintain the dollar volume of new multifamily business at or below $35 billion, excluding certain targeted 

affordable and underserved market business segments. Approximately 38% of our multifamily new business 

volume of $11.3 billion for the first quarter of 2018 counted toward FHFA’s 2018 multifamily volume cap.
MD&A | Business Segments

Fannie Mae First Quarter 2018 Form 10-Q 35

__________

(1) Reflects unpaid principal balance of multifamily Fannie Mae MBS issued, multifamily loans purchased, and credit 

enhancements provided during the period.

We support affordability in the multifamily rental market. Over 90% of the multifamily units we financed in the first 

quarter of 2018 were affordable to families earning at or below 120% of the median income in their area, providing 

support for both workforce housing and affordable housing.

The chart below displays our multifamily MBS outstanding as of March 31, 2018 compared with December 31, 

2017. 

Multifamily Fannie Mae MBS Outstanding

(Dollars in billions)
MD&A | Business Segments

Fannie Mae First Quarter 2018 Form 10-Q 36

Multifamily Business Financial Results

Multifamily Business Financial Results

For the Three Months Ended

March 31,

2018 2017 Variance

(Dollars in millions)

Net interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 671 $ 590 $ 81

Fee and other income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 162 173 (11)

Net revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 833 763 70

Fair value gains (losses), net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 (28) 39

Administrative expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (107) (83) (24)

Credit-related income (expense)(1)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 (5) 26

Other expenses, net(2)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (63) (85) 22

Income before federal income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 695 562 133

Provision for federal income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (115) (131) 16

Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 580 $ 431 $ 149

__________

(1) Consists of the benefit (provision) for credit losses and foreclosed property income.

(2) Consists of investment gains, gains on partnership investments and other income (expenses).

Net interest income

Multifamily net interest income increased in the first quarter of 2018 compared with the first quarter of 2017 

primarily due to an increase in guaranty fee income. Our multifamily guaranty book of business grew and loans 

with higher guaranty fees became a larger part of our book, while loans with lower guaranty fees continued to 

liquidate.

__________

(1) 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 non-Fannie Mae multifamily mortgage-related securities held in our retained mortgage portfolio for 

which we do not provide a guaranty.
MD&A | Business Segments

Fannie Mae First Quarter 2018 Form 10-Q 37

Fair value gains (losses), net

Fair value gains in the first quarter of 2018 were primarily driven by gains on commitments to sell multifamily 

mortgage-related securities as a result of decreases in prices as interest rates increased during the commitment 

periods.

Fair value losses in the first quarter of 2017 were primarily driven by losses on our multifamily commitments to sell 

mortgage-related securities as a result of increases in prices as interest rates decreased during the commitment 

periods.

Credit-related income (expense)

Credit-related income in the first quarter of 2018 was primarily driven by a decrease in the allowance for loan 

losses as a result of updated estimates of hurricane-related losses.

Multifamily Mortgage Credit Risk Management

This section updates our discussion of multifamily mortgage credit risk management in our 2017 Form 10-K in 

“MD&A—Business Segments—Multifamily Business—Multifamily Mortgage Credit Risk Management.”

Multifamily Underwriting Standards and Portfolio Monitoring

Lender risk-sharing is a cornerstone of our Multifamily business. We primarily transfer risk through our Delegated 

Underwriting and Servicing (“DUS®”) program, which delegates to DUS lenders the ability to underwrite and 

service multifamily loans, in accordance with our standards and requirements. DUS lenders receive credit riskrelated revenues for their respective portion of credit risk retained, and, in turn, are required to fulfill any loss 

sharing obligation. This aligns the interests of the lender and Fannie Mae from day one and throughout the life of 

the loan.

Our DUS model typically results in our lenders sharing on a pro-rata or tiered basis approximately one-third of the 

credit risk on our multifamily loans. In the first quarter of 2018, nearly 100% of our new multifamily business 

volume had lender risk-sharing. As of March 31, 2018, 97% of the unpaid principal balance of loans in our $284.5 

billion multifamily guaranty book of business had lender risk-sharing, compared with 96% as of December 31, 

2017. 

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. The table below displays original LTV 

ratio and DSCR metrics for our multifamily guaranty book of business. 

Multifamily Guaranty Book of Business Key Risk Characteristics

As of

March 31,

2018

December 31,

2017

March 31,

2017

Weighted average original LTV ratio. . . . . . . . . . . . . . . . . . . . . . . . . . . 67% 67% 67%

Original LTV ratio greater than 80% . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 2 2

Original DSCR less than or equal to 1.10 . . . . . . . . . . . . . . . . . . . . . . . 13 14 14

We and our lenders monitor the performance and risk characteristics of our multifamily loans and the underlying 

properties on an ongoing basis throughout the loan term at the asset and portfolio level. We closely monitor loans 

with an estimated current DSCR below 1.0, as that is an indicator of heightened default risk. The percentage of 

loans in our multifamily guaranty book of business, calculated based on unpaid principal balance, with a current 

DSCR less than 1.0 was approximately 2% as of March 31, 2018 and December 31, 2017. 

Multifamily Problem Loan Management and Foreclosure Prevention

The multifamily serious delinquency rate was 0.13% as of March 31, 2018, compared with 0.11% as of 

December 31, 2017 and 0.05% as of March 31, 2017. The impact of the hurricanes in the third quarter of 2017 

resulted in an increase in our multifamily serious delinquency rate as of both December 31, 2017 and March 31, 

2018. We classify multifamily loans as seriously delinquent when payment is 60 days or more past due.
MD&A | Business Segments

Fannie Mae First Quarter 2018 Form 10-Q 38

REO Management

The number of multifamily foreclosed properties held for sale increased to 13 properties with a carrying value of 

$81 million as of March 31, 2018, compared with 11 properties with a carrying value of $66 million as of 

December 31, 2017.

Other Multifamily Credit Information

Multifamily Credit Losses

For the first quarter of 2018, we had $4 million in multifamily credit losses and a multifamily credit loss ratio of 0.6

basis points, compared with no credit losses for the first quarter of 2017.

Multifamily Combined Loss Reserves

The table below summarizes the changes in our multifamily combined loss reserves, which consists of the 

allowance for loan losses and the reserve for guaranty losses for multifamily loans.

Multifamily Combined Loss Reserves

For the Three Months Ended

March 31,

2018 2017

(Dollars in millions)

Changes in combined loss reserves:

Beginning balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (245) $ (196)

Benefit (provision) for credit losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 (4)

Charge-offs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 1

Recoveries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — (2)

Other(1)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 1

Ending balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (220) $ (200)

As of

March 31,

2018

December 31,

2017

Combined loss reserves as a percentage of multifamily guaranty book of business . . 0.08% 0.09%

__________

(1) Amounts represent changes in other loss reserves which are reflected in multifamily benefit (provision) for credit losses, 

charge-offs and recoveries.

Troubled Debt Restructurings and Nonaccrual Loans

The table below displays the composition of multifamily loans classified as a TDR that are on accrual status and 

multifamily loans on nonaccrual status. The table includes our recorded investment in HFI and HFS multifamily 

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.”

Multifamily Troubled Debt Restructurings on Accrual Status and Nonaccrual Loans

As of

March 31,

2018

December 31,

2017

(Dollars in millions)

TDRs on accrual status . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 88 $ 87

Nonaccrual loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 524 424

Total TDRs on accrual status and nonaccrual loans . . . . . . . . . . . . . . . . . . . . . . $ 612 $ 511
MD&A | Business Segments

Fannie Mae First Quarter 2018 Form 10-Q 39

For the Three Months

Ended March 31,

2018 2017

(Dollars in millions)

Interest related to on-balance sheet TDRs on accrual status and nonaccrual loans:

Interest income forgone(1). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 7 $ 6

Interest income recognized(2). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 1

__________

(1) Represents the amount of interest income we did not recognize, but would have recognized during the period for 

nonaccrual loans and TDRs on accrual status as of the end of each period had the loans performed according to their 

original contractual terms.

(2) Represents interest income recognized during the period, including the amortization of any deferred cost basis 

adjustments, for loans classified as 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.

Liquidity and Capital Management

Liquidity Management

This section supplements and updates information regarding liquidity risk management in our 2017 Form 10-K. 

See “MD&A—Liquidity and Capital Management—Liquidity Management” and “Risk Factors” in our 2017 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

Outstanding Debt

Total outstanding debt of Fannie Mae excludes debt of consolidated trusts. Short-term debt of Fannie Mae 

consists of borrowings with an original contractual maturity of one year or less and, therefore, does not include the 

current portion of long-term debt. Long-term debt of Fannie Mae consists of borrowings with an original 

contractual maturity of greater than one year. 

The chart and table below display information on our outstanding short-term and long-term debt of Fannie Mae 

based on original contractual maturity. The total amount of our outstanding debt of Fannie Mae decreased as of 

March 31, 2018 compared with December 31, 2017 primarily due to lower funding needs as our retained 

mortgage portfolio continued to decrease and our draw of funds from Treasury in the first quarter of 2018.
MD&A | Liquidity and Capital Management

Fannie Mae First Quarter 2018 Form 10-Q 40

Selected Debt Information

As of

December 31,

2017

March 31,

2018

(Dollars in billions)

Selected Weighted-Average Interest Rates(1)

Interest rate on short-term debt 1.18% 1.49%

Interest rate on long-term debt, including portion

maturing within one year 2.40% 2.46%

Interest rate on callable long-term debt 2.31% 2.46%

Selected Maturity Data

Weighted-average maturity of debt maturing

within one year (in days) 123 136

Weighted-average maturity of debt maturing in

more than one year (in months) 57 59

Other Data

Outstanding callable debt $ 72.3 $ 70.4

Connecticut Avenue Securities(2) $ 22.5 $ 24.3

__________

(1) Outstanding debt amounts and weighted-average interest rates reported in this chart and table include the effects of 

discounts, premiums, other cost basis adjustments and fair value gains and losses associated with debt that we elected to 

carry at fair value. Reported amounts for total debt of Fannie Mae include unamortized cost basis adjustments and fair 

value adjustments of $697 million and $788 million as of March 31, 2018 and December 31, 2017, respectively.

(2) See “Business Segments—Single-Family Business—Single-Family Mortgage Credit Risk Management—Transfer of 

Mortgage Credit Risk—Credit Risk Transfer Transactions” in our 2017 Form 10-K for information regarding our Connecticut 

Avenue Securities.

For more information on our outstanding short-term and long-term debt, see “Note 7, Short-Term and Long-Term 

Debt.”

Debt Funding Activity

The table below displays the activity in debt of Fannie Mae. This activity excludes the debt of consolidated trusts 

and intraday loans. The reported amounts of debt issued and paid off during the period represent the face amount 

of the debt at issuance and redemption.
MD&A | Liquidity and Capital Management

Fannie Mae First Quarter 2018 Form 10-Q 41

Activity in Debt of Fannie Mae

For the Three Months

Ended March 31,

2018 2017

(Dollars in millions)

Issued during the period:

Short-term:

Amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $219,288 $151,384

Weighted-average interest rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.28% 0.51%

Long-term:(1)

Amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 5,168 $ 13,108

Weighted-average interest rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.96% 2.27%

Total issued:

Amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $224,456 $164,492

Weighted-average interest rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.32% 0.65%

Paid off during the period:(2)

Short-term:

Amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $217,678 $148,746

Weighted-average interest rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.17% 0.46%

Long-term:(1)

Amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 17,780 $ 15,872

Weighted-average interest rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.49% 2.22%

Total paid off:

Amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $235,458 $164,618

Weighted-average interest rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.20% 0.63%

__________

(1) Includes Connecticut Avenue Securities. 

(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.

Other Investments Portfolio

The chart below displays information on the composition of our other investments portfolio. The balance of our 

other investments portfolio fluctuates based on changes in our cash flows, liquidity in the fixed income markets 

and our liquidity risk management framework and practices.
MD&A | Liquidity and Capital Management

Fannie Mae First Quarter 2018 Form 10-Q 42

Cash Flows

Three Months Ended March 31, 2018. Cash and cash equivalents decreased by $21.9 billion in the three months 

ended March 31, 2018. The decrease was primarily driven by cash outflows from (1) the net increase in federal 

funds sold and securities purchased under agreements to resell or similar agreements (2) the purchase of Fannie 

Mae MBS from third parties and (3) the redemption of funding debt, which outpaced issuances, due to lower 

funding needs.

Partially offsetting these cash outflows were cash inflows from, among other things, (1) the sale of Fannie Mae 

MBS to third parties and (2) proceeds from repayments and sales of loans of Fannie Mae.

Three Months Ended March 31, 2017. Cash and cash equivalents decreased by $236 million in the three months 

ended March 31, 2017. The decrease was primarily driven by cash outflows from (1) the purchase of Fannie Mae 

MBS from third parties, (2) the payment of senior preferred stock dividends to Treasury and (3) the acquisition of 

delinquent loans out of MBS trusts.

Partially offsetting these cash outflows were cash inflows from (1) the sale of Fannie MBS to third parties and (2) 

proceeds from repayments and sales of loans of Fannie Mae.

Credit Ratings

As of March 31, 2018, our credit ratings have not changed since we filed our 2017 Form 10-K. For information on 

our credit ratings, see “MD&A—Liquidity and Capital Management—Liquidity Management—Credit Ratings” in 

our 2017 Form 10-K.

Capital Management

Regulatory Capital

The deficit of our core capital over statutory minimum capital was $140.2 billion as of March 31, 2018 and $144.4 

billion as of December 31, 2017. For information on our minimum capital requirements, see “Note 12, Regulatory 

Capital Requirements” in our 2017 Form 10-K.
MD&A | Liquidity and Capital Management

Fannie Mae First Quarter 2018 Form 10-Q 43

Capital Activity

The current dividend provisions of the senior preferred stock provide for quarterly dividends consisting of the 

amount, if any, by which our net worth as of the end of the immediately preceding fiscal quarter exceeds a $3.0 

billion capital reserve amount.

• Q1 2018. Because we had a net worth deficit of $3.7 billion as of December 31, 2017, no dividend was 

payable to Treasury on the senior preferred stock for the first quarter of 2018 and we received $3.7 billion 

from Treasury during the quarter pursuant to the senior preferred stock purchase agreement to eliminate 

our net worth deficit as of December 31, 2017.

• Q2 2018. Because we had a positive net worth of $3.9 billion as of March 31, 2018, we expect to pay 

Treasury a second quarter 2018 dividend of $938 million by June 30, 2018, and we will not be required to 

draw additional funds from Treasury pursuant to the senior preferred stock purchase agreement for this 

quarter.

The dividend provisions of the senior preferred stock permit us to retain only up to $3.0 billion as capital reserves, 

provided our conservator directs us to declare and pay senior preferred stock dividends in full in the future. We 

are effectively unable to raise equity capital from private sources at this time and, therefore, are reliant on the 

funding available under our senior preferred stock purchase agreement with Treasury to address any net worth 

deficit. Under the senior preferred stock purchase agreement, Treasury made a commitment to provide funding, 

under certain conditions, to eliminate deficiencies in our net worth. As of the date of this filing, the amount of 

remaining funding under the senior preferred stock purchase agreement is $113.9 billion. If we were to draw 

additional funds from Treasury under the agreement in a future period, the amount of remaining funding under the 

agreement would be reduced by the amount of our draw. Dividend payments we make to Treasury do not restore 

or increase the amount of funding available to us from Treasury under the agreement. 

See “Business—Conservatorship and Treasury Agreements—Treasury Agreements” in our 2017 Form 10-K for 

more information on the terms of our senior preferred stock and our senior preferred stock purchase agreement 

with Treasury. See “Risk Factors” in our 2017 Form 10-K for a discussion of the risks associated with the limit on 

our capital reserves.

Off-Balance Sheet Arrangements

Our off-balance sheet arrangements result primarily from the following: 

• our guaranty of mortgage loan securitization and resecuritization transactions, and other guaranty 

commitments over which we do not have control; 

• liquidity support transactions; and 

• partnership interests. 

Our off-balance sheet exposure to credit losses is primarily related to the unpaid principal balance of our 

unconsolidated Fannie Mae MBS and other financial guarantees. This exposure was $21.9 billion as of March 31, 

2018 and $25.1 billion as of December 31, 2017.

Our total outstanding liquidity commitments to advance funds for securities backed by multifamily housing 

revenue bonds totaled $9.1 billion as of March 31, 2018 and $9.2 billion as of December 31, 2017. 

Risk Management

Our business activities expose us to the following three major categories of risk: credit risk (including mortgage 

credit risk and institutional counterparty credit risk), market risk (including interest rate risk and liquidity risk) and 

operational risk (including cybersecurity, third-party and model risk). See “MD&A—Risk Management” and “MD&A

—Business Segments” in our 2017 Form 10-K for a discussion of our management of these risks.

In this section we provide an update on our management of market risk, including interest rate risk. We provide an 

update on our management of mortgage credit risk in this report in “Business Segments—Single-Family Business

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

Mortgage Credit Risk Management.”
MD&A | Risk Management

Fannie Mae First Quarter 2018 Form 10-Q 44

Market Risk Management, Including Interest Rate Risk Management

This section supplements and updates information regarding market risk management in our 2017 Form 10-K. 

See “MD&A—Risk Management—Market Risk Management, Including Interest Rate Risk Management” and 

“Risk Factors” in our 2017 Form 10-K for additional information, including our sources of interest rate risk 

exposure, business risks posed by changes in interest rates, and our strategy for managing interest rate risk. 

Measurement of Interest Rate Risk

The table below displays the pre-tax market value sensitivity of our net portfolio to changes in the level of interest 

rates and the slope of the yield curve as measured on the last day of each period presented. The table below also 

provides the daily average, minimum, maximum and standard deviation values for duration gap and for the most 

adverse market value impact on the net portfolio to changes in the level of interest rates and the slope of the yield 

curve for the three months ended March 31, 2018 and 2017. 

For information on how we measure our interest rate risk, see our 2017 Form 10-K in “MD&A—Risk Management

—Market Risk Management, Including Interest Rate Risk Management.”

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

As of (1)(2)

March 31, 2018 December 31, 2017

(Dollars in billions)

Rate level shock:

-100 basis points . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (0.1) $ 0.0

-50 basis points . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (0.1) 0.0

+50 basis points . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.0 0.0

+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,(1)(3)

2018 2017

Duration

Gap

Rate Slope

Shock 25 bps

Rate Level

Shock 50 bps

Duration

Gap

Rate Slope

Shock 25 bps

Rate Level

Shock 50 bps

Market Value Sensitivity Market Value Sensitivity

(In months) (Dollars in billions) (In months) (Dollars in billions)

Average . . . . . . . . . . . . 0.2 $ 0.0 $ (0.1) (0.1) $ 0.0 $ 0.0

Minimum. . . . . . . . . . . . (0.2) 0.0 (0.1) (0.7) (0.1) (0.1)

Maximum . . . . . . . . . . . 0.7 0.0 0.0 0.2 0.0 0.0

Standard deviation . . . . 0.2 0.0 0.0 0.2 0.0 0.0

__________

(1) Computed based on changes in LIBOR interest rates swap curve. Changes in the level of interest rates assume a parallel 

shift in all maturities of the U.S. LIBOR interest rate swap curve. Changes in the slope of the yield curve assume a constant 

7-year rate, a shift of 16.7 basis points for the 1-year rate (and shorter tenors) and a shift of 8.3 basis points for the 30-year 

rate. Rate shocks for remaining maturity points are interpolated. 

(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. Because the effective duration gap of our net portfolio was close 

to zero months in the periods presented, the convexity exposure was the primary driver of the market value 

sensitivity of our net portfolio as of March 31, 2018. In addition, the convexity exposure may result in similar 

market value sensitivities for positive and negative interest rate shocks of the same magnitude.
MD&A | Risk Management

Fannie Mae First Quarter 2018 Form 10-Q 45

We use derivatives to help manage the residual interest rate risk exposure between our assets and liabilities. 

Derivatives have enabled us to keep our interest rate risk exposure at consistently low levels in a wide range of 

interest-rate environments. The table below displays an example of how derivatives impacted the net market 

value exposure for a 50 basis point parallel interest rate shock.

Derivative Impact on Interest Rate Risk (50 Basis Points)

As of (1)

March 31, 2018 December 31, 2017

(Dollars in billions)

Before derivatives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (0.6) $ (0.5)

After derivatives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.0 0.0

Effect of derivatives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.6 0.5

__________

(1) Measured on the last day of each period presented.

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 2017 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 2017 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 two of our accounting policies as critical because they involve significant judgments and assumptions 

about highly complex and inherently uncertain matters, and the use of reasonably different estimates and 

assumptions could have a material impact on our reported results of operations or financial condition: fair value 

measurement and allowance for loan losses. See “MD&A—Critical Accounting Policies and Estimates” in our 

2017 Form 10-K for a discussion of these critical accounting policies and estimates.

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. Examples of forward-looking 

statements in this report include, but are not limited to, statements relating to our expectations regarding the 

following matters:

• our profitability and financial results, and the factors that will affect our profitability and financial results; 

• our business plans and strategies and the impact of such plans and strategies; 

• our dividend payments to Treasury; 
MD&A | Forward-Looking Statements

Fannie Mae First Quarter 2018 Form 10-Q 46

• our payments to HUD and Treasury funds under the GSE Act;

• the effects of our credit risk transfer transactions;

• the impact of accounting guidance and accounting changes on our business or financial results, including 

the impact of impairment accounting guidance;

• mortgage market and economic conditions (including home price appreciation rates) and the impact of 

such conditions on our business or financial results;

• the risks to our business;

• our loss reserves;

• our serious delinquency rate and the factors that will affect our serious delinquency rate;

• our single-family loan acquisitions and the credit risk profile of such acquisitions; and

• our response to legal and regulatory proceedings and their impact on our business or financial condition.

Forward-looking statements reflect our management’s expectations, forecasts or predictions of future conditions, 

events or results based on various assumptions and management’s estimates of trends and economic factors in 

the markets in which we are active, as well as our business plans. They are not guarantees of future performance. 

By their nature, forward-looking statements are subject to risks and uncertainties. Our actual results and financial 

condition may differ, possibly materially, from the anticipated results and financial condition indicated in these 

forward-looking statements. 

There are a number of factors that could cause actual conditions, events or results to differ materially from those 

described in the forward-looking statements contained in this report, including, but not limited to, the following: 

• the uncertainty of our future; 

• future legislative and regulatory requirements or changes affecting us, such as the enactment of housing 

finance reform legislation; 

• actions by FHFA, Treasury, HUD or other regulators that affect our business; 

• changes in the structure and regulation of the financial services industry; 

• the timing and level of, as well as regional variation in, home price changes; 

• changes in interest rates and credit spreads; 

• changes in unemployment rates and other macroeconomic and housing market conditions; 

• credit availability; 

• disruptions in the housing and credit markets; 

• changes in the fiscal and monetary policies of the Federal Reserve, including implementation of the 

Federal Reserve’s balance sheet normalization program; 

• our future guaranty fee pricing and the impact of that pricing on our competitive environment and 

guaranty fee revenues; 

• the volume of mortgage originations;

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

• our market share; 

• the life of the loans in our guaranty book of business; 

• challenges we face in retaining and hiring qualified executives and other 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; 
MD&A | Forward-Looking Statements

Fannie Mae First Quarter 2018 Form 10-Q 47

• actions we may be required to take by FHFA, in its role as our conservator or as our regulator, such as 

changes in the type of business we do or implementation of the Single Security Initiative; 

• limitations on our business imposed by FHFA, in its role as our conservator or as our regulator; 

• our future objectives and activities in support of those objectives, including actions we may take to reach 

additional underserved creditworthy borrowers; 

• a decrease in our credit ratings; 

• limitations on our ability to access the debt capital markets; 

• significant changes in modification and foreclosure activity; 

• the volume and pace of future nonperforming and reperforming loan sales and their impact on our results 

and serious delinquency rates; 

• changes in borrower behavior; 

• the effectiveness of our loss mitigation strategies, management of our REO inventory and pursuit of 

contractual remedies; 

• defaults by one or more institutional counterparties; 

• resolution or settlement agreements we may enter into with our counterparties; 

• our need to rely on third parties to fully achieve some of our corporate objectives; 

• our reliance on mortgage servicers; 

• changes in GAAP, guidance by the Financial Accounting Standards Board and changes to our accounting 

policies; 

• changes in the fair value of our assets and liabilities; 

• operational control weaknesses; 

• our reliance on models and future updates we make to our models, including the assumptions used by 

these models; 

• global political risks; 

• natural disasters, environmental disasters, terrorist attacks, pandemics or other major disruptive events; 

• cyber attacks or other information security breaches or threats; and 

• those factors described in “Risk Factors” in this report and in our 2017 Form 10-K.

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 this report and in our 2017 Form 

10-K. 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. 
 Financial Statements | Condensed Consolidated Balance Sheets

Fannie Mae (In conservatorship) First Quarter 2018 Form 10-Q 48

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,

2018 2017

ASSETS

Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 10,248 $ 32,110

Restricted cash (includes $21,420 and $22,132, respectively, related to consolidated trusts) . . . . . . . . . . . 27,112 28,150

Federal funds sold and securities purchased under agreements to resell or similar arrangements . . . . . . . 39,701 19,470

Investments in securities:

Trading, at fair value (includes $1,078 and $747, respectively, pledged as collateral). . . . . . . . . . . . . . . 40,097 34,679

Available-for-sale, at fair value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,888 4,843

Total investments in securities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43,985 39,522

Mortgage loans:

Loans held for sale, at lower of cost or fair value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,366 4,988

Loans held for investment, at amortized cost:

Of Fannie Mae . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 147,270 162,809

Of consolidated trusts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,057,884 3,029,812

Total loans held for investment (includes $10,095 and $10,596, respectively, at fair value) . . . . . . . . . . 3,205,154 3,192,621

Allowance for loan losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (18,734) (19,084)

Total loans held for investment, net of allowance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,186,420 3,173,537

Total mortgage loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,197,786 3,178,525

Deferred tax assets, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16,517 17,350

Accrued interest receivable, net (includes $7,535 and $7,560, respectively, related to consolidated trusts). 8,076 8,133

Acquired property, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,044 3,220

Other assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17,933 19,049

Total assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,364,402 $ 3,345,529

LIABILITIES AND EQUITY (DEFICIT)

Liabilities:

Accrued interest payable (includes $8,682 and $8,598, respectively, related to consolidated trusts). . . . . $ 9,773 $ 9,682

Debt:

Of Fannie Mae (includes $7,860 and $8,186, respectively, at fair value). . . . . . . . . . . . . . . . . . . . . . . . . 265,401 276,752

Of consolidated trusts (includes $28,637 and $30,493, respectively, at fair value) . . . . . . . . . . . . . . . . . 3,075,071 3,053,302

Other liabilities (includes $389 and $492, respectively, related to consolidated trusts). . . . . . . . . . . . . . . . 10,219 9,479

Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,360,464 3,349,215

Commitments and contingencies (Note 14) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — —

Fannie Mae stockholders’ equity (deficit):

Senior preferred stock, 1,000,000 shares issued and outstanding. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 120,836 117,149

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

1,158,087,567 shares outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 687 687

Accumulated deficit. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (129,662) (133,805)

Accumulated other comprehensive income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 347 553

Treasury stock, at cost, 150,675,136 shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (7,400) (7,400)

Total stockholders’ equity (deficit) (See Note 1: Senior Preferred Stock Purchase Agreement and 

Senior Preferred Stock for information on our dividend obligation to Treasury) . . . . . . . . . . . . . . . . . . 3,938 (3,686)

Total liabilities and equity (deficit). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,364,402 $ 3,345,529

See Notes to Condensed Consolidated Financial Statements
 Financial Statements | Condensed Consolidated Statements of Operations and Comprehensive Income

Fannie Mae (In conservatorship) First Quarter 2018 Form 10-Q 49

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,

2018 2017

Interest income:

Trading securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 236 $ 142

Available-for-sale securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71 101

Mortgage loans (includes $26,298 and $24,954, respectively, related to consolidated trusts). . . . . . . . . . . . . . . . . . 28,034 27,047

Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 173 94

Total interest income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28,514 27,384

Interest expense:

Short-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (107) (44)

Long-term debt (includes $21,715 and $20,308, respectively, related to consolidated trusts) . . . . . . . . . . . . . . . . . . (23,175) (21,994)

Total interest expense. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (23,282) (22,038)

Net interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,232 5,346

Benefit for credit losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 217 396

Net interest income after benefit for credit losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,449 5,742

Investment gains (losses), net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 250 (9)

Fair value gains (losses), net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,045 (40)

Fee and other income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 320 249

Non-interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,615 200

Administrative expenses:

Salaries and employee benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (381) (344)

Professional services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (243) (229)

Other administrative expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (126) (111)

Total administrative expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (750) (684)

Foreclosed property expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (162) (217)

Temporary Payroll Tax Cut Continuation Act of 2011 (“TCCA”) fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (557) (503)

Other expenses, net. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (203) (382)

Total expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,672) (1,786)

Income before federal income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,392 4,156

Provision for federal income taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,131) (1,383)

Net income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,261 2,773

Other comprehensive income (loss):

Changes in unrealized gains on available-for-sale securities, net of reclassification adjustments and taxes. . . . . . . (320) 8

Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (3) (2)

Total other comprehensive income (loss). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (323) 6

Total comprehensive income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,938 $ 2,779

Net income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 4,261 $ 2,773

Dividends distributed or available for distribution to senior preferred stockholder. . . . . . . . . . . . . . . . . . . . . . . . . . . . . (938) (2,779)

Net income (loss) attributable to common stockholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,323 $ (6)

Earnings (loss) per share:

Basic. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 0.58 $ 0.00

Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.56 0.00

Weighted-average common shares outstanding:

Basic. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,762 5,762

Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,893 5,762

See Notes to Condensed Consolidated Financial Statements
 Financial Statements | Condensed Consolidated Statements of Cash Flows

Fannie Mae (In conservatorship) First Quarter 2018 Form 10-Q 50

FANNIE MAE

(In conservatorship)

Condensed Consolidated Statements of Cash Flows — (Unaudited)

(Dollars in millions)

For the Three Months

Ended March 31,

2018 2017

Net cash provided by (used in) operating activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (1,409) $ 2,619

Cash flows provided by investing activities:

Proceeds from maturities and paydowns of trading securities held for investment . . . . . . . . . . . . . . . . . . . . . . . 110 579

Proceeds from sales of trading securities held for investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 66

Proceeds from maturities and paydowns of available-for-sale securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 266 594

Proceeds from sales of available-for-sale securities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 648 151

Purchases of loans held for investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (40,045) (41,206)

Proceeds from repayments of loans acquired as held for investment of Fannie Mae . . . . . . . . . . . . . . . . . . . . . 4,164 6,718

Proceeds from sales of loans acquired as held for investment of Fannie Mae. . . . . . . . . . . . . . . . . . . . . . . . . . . 80 —

Proceeds from repayments and sales of loans acquired as held for investment of consolidated trusts. . . . . . . . 96,626 97,415

Advances to lenders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (27,898) (28,703)

Proceeds from disposition of acquired property and preforeclosure sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,360 3,454

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

arrangements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (20,231) (4,845)

Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (264) (330)

Net cash provided by investing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15,816 33,893

Cash flows used in financing activities:

Proceeds from issuance of debt of Fannie Mae . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 288,281 230,272

Payments to redeem debt of Fannie Mae. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (299,797) (230,601)

Proceeds from issuance of debt of consolidated trusts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89,493 78,443

Payments to redeem debt of consolidated trusts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (119,413) (119,208)

Payments of cash dividends on senior preferred stock to Treasury . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — (5,471)

Proceeds from senior preferred stock purchase agreement with Treasury . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,687 —

Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 442 185

Net cash used in financing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (37,307) (46,380)

Net decrease in cash, cash equivalents and restricted cash. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (22,900) (9,868)

Cash, cash equivalents and restricted cash at beginning of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60,260 62,177

Cash, cash equivalents and restricted cash at end of period. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 37,360 $ 52,309

Cash paid during the period for:

Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 27,041 $ 25,954

Income taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — —

See Notes to Condensed Consolidated Financial Statements
Notes to Condensed Consolidated Financial Statements | Summary of Significant Accounting Policies

Fannie Mae (In conservatorship) First Quarter 2018 Form 10-Q 51

FANNIE MAE

(In conservatorship)

Notes to Condensed Consolidated Financial Statements

(Unaudited)

1. Summary of Significant Accounting Policies

We are a stockholder-owned corporation organized and existing under the Federal National Mortgage Association 

Charter Act (the “Charter Act” or our “charter”). We are a government-sponsored enterprise and we are subject to 

government oversight and regulation. Our regulators include the Federal Housing Finance Agency (“FHFA”), the 

U.S. Department of Housing and Urban Development (“HUD”), the U.S. Securities and Exchange Commission 

(“SEC”), and the U.S. Department of the Treasury (“Treasury”). The U.S. government does not guarantee our 

securities or other obligations. 

We have been under conservatorship, with FHFA acting as conservator, since September 6, 2008. See “Note 1, 

Summary of Significant Accounting Policies” in our annual report on Form 10-K for the year ended December 31, 

2017 (“2017 Form 10-K”) for additional information on our conservatorship and the impact of U.S. government 

support of our business.

The unaudited interim condensed consolidated financial statements as of and for the three months ended 

March 31, 2018, and related notes, should be read in conjunction with our audited consolidated financial 

statements and related notes included in our 2017 Form 10-K.

Basis of Presentation

The accompanying unaudited interim condensed consolidated financial statements have been prepared in 

accordance with generally accepted accounting principles in the United States of America (“GAAP”) for interim 

financial information and with the SEC’s instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, 

they do not include all of the information and note disclosures required by GAAP for complete consolidated 

financial statements. In the opinion of management, all adjustments of a normal recurring nature considered 

necessary for a fair presentation have been included. The accompanying condensed consolidated financial 

statements include our accounts as well as the accounts of other entities in which we have a controlling financial 

interest. All intercompany accounts and transactions have been eliminated. To conform to our current period 

presentation, we have reclassified certain amounts reported in our prior periods’ condensed consolidated financial 

statements. Results for the three months ended March 31, 2018 may not necessarily be indicative of the results 

for the year ending December 31, 2018.

Cash, Cash Equivalents and Restricted Cash 

On January 1, 2018, we adopted new accounting guidance that requires us to include in total cash and cash 

equivalents on the statement of cash flows the cash and cash equivalents that have restrictions on withdrawal or 

use. This guidance was applied retrospectively to the statement of cash flows for the prior period presented. As a 

result of this adoption, the net change in restricted cash that results from transfers between cash, cash 

equivalents, and restricted cash will no longer be presented as an investing activity in our condensed 

consolidated statement of cash flows. Additionally, we adopted new accounting guidance that clarified the 

classification of certain cash receipts and cash payments. This guidance was applied retrospectively to the 

statement of cash flows for the prior period presented. The adoption did not have a material impact to our 

statement of cash flows.

Reclassification to Retained Earnings Resulting from the Enactment of the Tax Act

In February 2018, the Financial Accounting Standards Board (“FASB”) issued guidance allowing a reclassification 

from accumulated other comprehensive income to retained earnings for stranded tax amounts resulting from the 

enactment of the Tax Cuts and Jobs Act of 2017 (“Tax Act”). GAAP requires the effect of changes in tax laws or 

rates on deferred taxes to be included in continuing operations in the reporting period that includes the enactment 

date. This applies even in situations in which the initial tax effects were recognized directly in other 

comprehensive income at a historical corporate income tax rate resulting in stranded tax amounts in accumulated 

other comprehensive income related to the corporate income tax rate differential. The guidance is effective 

beginning for fiscal years beginning January 1, 2019 and early adoption is permitted. We have elected to early 

adopt the guidance by reclassifying such stranded tax amounts, which were $117 million as of January 1, 2018, 

from accumulated other comprehensive income to retained earnings.
Notes to Condensed Consolidated Financial Statements | Summary of Significant Accounting Policies

Fannie Mae (In conservatorship) First Quarter 2018 Form 10-Q 52

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 allowance for loan 

losses. Actual results could be different from these estimates.

Senior Preferred Stock Purchase Agreement and Senior Preferred Stock

Treasury has made a commitment under the senior preferred stock purchase agreement to provide funding to us 

under certain circumstances if we have a net worth deficit. On March 30, 2018, we received $3.7 billion from 

Treasury to eliminate our net worth deficit as of December 31, 2017. Pursuant to the senior preferred stock 

purchase agreement, we have received a total of $119.8 billion from Treasury as of March 31, 2018, and the 

amount of remaining funding available to us under the agreement was $113.9 billion. Because we had a positive 

net worth of $3.9 billion as of March 31, 2018, we will not be required to draw additional funds from Treasury 

pursuant to the senior preferred stock purchase agreement for this quarter.

Pursuant to the senior preferred stock purchase agreement, we issued shares of senior preferred stock to 

Treasury in 2008. Acting as successor to the rights, titles, powers and privileges of the Board, our conservator has 

declared and directed us to pay dividends to Treasury on the senior preferred stock on a quarterly basis for every 

dividend period for which dividends were payable since we entered into conservatorship in 2008. Effective 

January 1, 2018, the dividend provisions of the senior preferred stock provide for quarterly dividends consisting of 

the amount, if any, by which our net worth as of the end of the immediately preceding fiscal quarter exceeds a 

$3.0 billion capital reserve amount. We refer to this as a “net worth sweep” dividend. Because we had a net worth 

deficit as of December 31, 2017, no dividend was payable to Treasury on the senior preferred stock for the first 

quarter of 2018. Because we had a positive net worth of $3.9 billion as of March 31, 2018, we expect to pay 

Treasury a dividend of $938 million for the second quarter of 2018 by June 30, 2018.

The liquidation preference of the senior preferred stock is subject to adjustment. The aggregate liquidation 

preference of the senior preferred stock was $123.8 billion as of March 31, 2018. 

See “Note 11, Equity (Deficit)” in our 2017 Form 10-K for additional information about the senior preferred stock 

purchase agreement and the senior preferred stock.

Regulatory Capital

We submit capital reports to FHFA, which monitors our capital levels. The deficit of core capital over statutory 

minimum capital was $140.2 billion as of March 31, 2018 and $144.4 billion as of December 31, 2017. Due to the 

terms of our senior preferred stock described above, 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, 2018, Treasury held an investment in our senior preferred stock with an aggregate liquidation 

preference of $123.8 billion. FHFA’s control of Fannie Mae and Freddie Mac has caused Fannie Mae, FHFA and 

Freddie Mac to be deemed related parties. In 2013, Fannie Mae and Freddie Mac established Common 

Securitization Solutions, LLC (“CSS”), a jointly owned limited liability company to operate a common securitization 

platform; therefore, CSS is deemed a related party.

Transactions with Treasury

Our administrative expenses were reduced by $7 million and $12 million for the three months ended March 31, 

2018 and March 31, 2017, respectively, due to reimbursements from Treasury and Freddie Mac for expenses 

incurred as program administrator for Treasury’s Home Affordable Modification Program and other initiatives 

under Treasury’s Making Home Affordable Program.

During the three months ended March 31, 2018 and 2017, we did not make any payments to the Internal 

Revenue Service (“IRS”), a bureau of Treasury.
Notes to Condensed Consolidated Financial Statements | Summary of Significant Accounting Policies

Fannie Mae (In conservatorship) First Quarter 2018 Form 10-Q 53

In 2009, we entered into a memorandum of understanding with Treasury, FHFA and Freddie Mac pursuant to 

which we agreed to provide assistance to state and local housing finance agencies (“HFAs”) through certain 

programs, including a new issue bond (“NIB”) program. As of March 31, 2018, under the NIB program, Fannie 

Mae and Freddie Mac had $4.8 billion outstanding of pass-through securities backed by single-family 

and multifamily housing bonds issued by HFAs, which is less than 35% of the total original principal under the 

program, the amount of losses that Treasury would bear. Accordingly, we do not have a potential risk of loss under 

the NIB program.

The fee revenue and expense related to the TCCA are recorded in “Mortgage loans interest income” and “TCCA

fees,” respectively, in our condensed consolidated statements of operations and comprehensive income. We 

recognized $557 million and $503 million in TCCA fees during the three months ended March 31, 2018 and 2017, 

respectively, of which $557 million had not been remitted to Treasury as of March 31, 2018.

We incurred expenses in connection with certain funding obligations under the Federal Housing Enterprises 

Financial Safety and Soundness Act of 1992, as amended by the Federal Housing Finance Regulatory Reform 

Act of 2008 (the “GSE Act”), a portion of which is attributable to Treasury’s Capital Magnet Fund. These 

expenses, recognized in “Other expenses, net” in our condensed consolidated statements of operations and 

comprehensive income, were measured as the product of 4.2 basis points and the unpaid principal balance of our 

total new business purchases for the respective period. We recognized $18 million and $15 million in “Other 

expenses, net” in connection with Treasury’s Capital Magnet Fund for the three months ended March 31, 2018

and 2017, respectively, of which $18 million had not been remitted as of March 31, 2018.

In addition to the transactions with Treasury mentioned above, we purchase and sell Treasury securities in the 

normal course of business. As of March 31, 2018 and December 31, 2017, we held Treasury securities with a fair 

value of $33.2 billion and $29.2 billion, respectively, and accrued interest receivable of $87 million and $77 million, 

respectively. We recognized interest income on these securities held by us of $129 million and $63 million for the 

three months ended March 31, 2018 and 2017, respectively.

Transactions with Freddie Mac

As of March 31, 2018 and December 31, 2017, we held Freddie Mac mortgage-related securities with a fair value 

of $579 million and $613 million, respectively, and accrued interest receivable of $2 million. We recognized 

interest income on these securities held by us of $7 million and $13 million for the three months ended March 31, 

2018 and 2017, respectively. In addition, Freddie Mac may be an investor in variable interest entities (“VIEs”) that 

we have consolidated, and we may be an investor in VIEs that Freddie Mac has consolidated. Freddie Mac may 

also be an investor in our debt securities.

Transactions with FHFA

The GSE Act authorizes FHFA to establish an annual assessment for regulated entities, including Fannie Mae, 

which is payable on a semi-annual basis (April and October), for FHFA’s costs and expenses, as well as to 

maintain FHFA’s working capital. We recognized FHFA assessment fees, which are recorded in “Administrative 

expenses” in our condensed consolidated statements of operations and comprehensive income, of $29 million

and $30 million for the three months ended March 31, 2018 and 2017, respectively.

Transactions with CSS

In connection with our jointly owned company with Freddie Mac, we contributed capital to CSS of $41 million and 

$35 million for the three months ended March 31, 2018 and 2017, respectively. No other transactions outside of 

normal business activities have occurred between us and CSS during the three months ended March 31, 2018

and 2017. 

Income Taxes

The decrease in our provision for federal income taxes for the three months ended March 31, 2018 as compared 

to the three months ended March 31, 2017 was the result of the Tax Act, which reduced the federal corporate 

income tax rate from 35% to 21% effective January 1, 2018. This decline in the federal corporate income tax rate 

was the primary driver of the reduction in our effective tax rate to 21.0% for the three months ended March 31, 

2018, compared with 33.3% for the same period in 2017.
Notes to Condensed Consolidated Financial Statements | Summary of Significant Accounting Policies

Fannie Mae (In conservatorship) First Quarter 2018 Form 10-Q 54

Earnings (Loss) per Share 

Earnings (loss) per share (“EPS”) is presented for basic and diluted EPS. We compute basic EPS by dividing net 

income (loss) attributable to common stockholders by the weighted-average number of shares of common stock 

outstanding during the period. However, as a result of our conservatorship status and the terms of the senior 

preferred stock, no amounts are available to distribute as dividends to common or preferred stockholders (other 

than to Treasury as holder of the senior preferred stock). Weighted average common shares includes 4.6 billion

shares for the periods ended March 31, 2018 and 2017 that would be issued upon the full exercise of the warrant 

issued to Treasury from the date the warrant was issued through March 31, 2018 and 2017.

The calculation of diluted EPS includes all the components of basic earnings per share, plus the dilutive effect of 

common stock equivalents such as convertible securities and stock options. Weighted average shares 

outstanding is increased to include the number of additional common shares that would have been outstanding if 

the dilutive potential common shares had been issued. Our diluted EPS weighted average shares outstanding 

includes 131 million shares of convertible preferred stock for the quarter ended March 31, 2018. For the quarter 

ended March 31, 2017, convertible preferred stock is not included in the calculation because a net loss 

attributable to common stockholders was incurred and it would have an anti-dilutive effect.

New Accounting Guidance

In January 2016, the FASB issued guidance, which we adopted on January 1, 2018, that amends certain aspects 

of recognition, measurement, presentation and disclosure of financial instruments. The adoption of these 

amendments did not have a material effect on our condensed consolidated financial statements.

In June 2016, the FASB issued guidance that changes the impairment model for most financial assets and certain 

other instruments. For loans, held-to-maturity debt securities and other financial assets recorded at amortized 

cost, entities will be required to use a new forward-looking “expected loss” model that will replace today’s 

“incurred loss” model and generally will result in the earlier recognition of allowance for loan losses. The guidance 

is effective on January 1, 2020 with early adoption permitted on January 1, 2019. We will adopt the standard on 

January 1, 2020. We will recognize the impact of the new guidance through a cumulative effect adjustment to 

retained earnings as of the beginning of the year of adoption. We are continuing to evaluate the impact of this 

guidance on our condensed consolidated financial statements. We expect the greater impact of the guidance to 

relate to our accounting for credit losses for loans that are not individually impaired. The adoption of this guidance 

may decrease, perhaps substantially, our retained earnings and increase our allowance for loan losses.

2. Consolidations and Transfers of Financial Assets

We have interests in various entities that are considered to be VIEs. The primary types of entities are 

securitization trusts and limited partnerships. 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.
Notes to Condensed Consolidated Financial Statements | Consolidations and Transfers of Financial Assets

Fannie Mae (In conservatorship) First Quarter 2018 Form 10-Q 55

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 securitization trusts.

As of

March 31, 2018 December 31, 2017

(Dollars in millions)

Assets:

Trading securities:

Fannie Mae . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,679 $ 3,809

Non-Fannie Mae . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,100 1,580

Total trading securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,779 5,389

Available-for-sale securities:

Fannie Mae . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,904 2,032

Non-Fannie Mae . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,373 2,062

Total available-for-sale securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,277 4,094

Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73 74

Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (114) (467)

Net carrying amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 10,015 $ 9,090

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 maximum exposure to loss related to unconsolidated 

mortgage-backed trusts was approximately $15 billion as of March 31, 2018 and December 31, 2017. The total 

assets of our unconsolidated securitization trusts were approximately $70 billion as of March 31, 2018 and 

December 31, 2017.

The maximum exposure to loss for our unconsolidated limited partnerships and similar legal entities, which 

consist of low-income housing tax credit investments, community investments and other entities, was $102 million

and the related carrying value was $80 million as of March 31, 2018. As of December 31, 2017, the maximum 

exposure to loss was $105 million and the related carrying value was $82 million. The total assets of these limited 

partnership investments were $3.2 billion as of March 31, 2018 and December 31, 2017.

The unpaid principal balance of our multifamily loan portfolio was $269.3 billion as of March 31, 2018. As our 

lending relationship does not provide us with a controlling financial interest in the borrower entity, we do not 

consolidate these borrowers regardless of their status as either a VIE or a voting interest entity. We have 

excluded these entities from our VIE disclosures. However, the disclosures we have provided in “Note 3, 

Mortgage Loans,” “Note 4, Allowance for Loan Losses” and “Note 6, Financial Guarantees” with respect to this 

population are consistent with the FASB’s stated objectives for the disclosures related to unconsolidated VIEs.

Transfers of Financial Assets

We issue Fannie Mae MBS through portfolio securitization transactions by transferring pools of mortgage loans or 

mortgage-related securities to one or more trusts or special purpose entities. We are considered to be the 

transferor when we transfer assets from our own retained mortgage portfolio in a portfolio securitization 

transaction. For the three months ended March 31, 2018 and 2017, the unpaid principal balance of portfolio 

securitizations was $64.3 billion and $57.3 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, 2018, the unpaid principal balance of retained interests 

was $1.6 billion and its related fair value was $2.6 billion. The unpaid principal balance of retained interests was 

$3.9 billion and its related fair value was $4.7 billion as of December 31, 2017. For the three months ended March 

31, 2018 and 2017, the principal and interest received on retained interests was $226 million and $257 million, 

respectively.
Notes to Condensed Consolidated Financial Statements | Consolidations and Transfers of Financial Assets

Fannie Mae (In conservatorship) First Quarter 2018 Form 10-Q 56

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 $1.3 billion as of March 31, 2018 and December 31, 2017. For information on our onbalance sheet mortgage loans, see “Note 3, Mortgage Loans.”

3. Mortgage Loans

We own single-family mortgage loans, which are secured by four or fewer residential dwelling units, and 

multifamily mortgage loans, which are secured by five or more residential dwelling units. We classify these loans 

as either held for investment (“HFI”) or held for sale (“HFS”). We report the 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 “Investment gains (losses), net” in our condensed consolidated statements of operations and 

comprehensive income. We define the recorded investment of HFI loans as 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 that are guaranteed or insured, 

in whole or in part, by the U.S. government or one of its agencies, and 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,

2018

December 31,

2017

(Dollars in millions)

Single-family . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,907,387 $ 2,890,634

Multifamily . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 269,316 265,069

Total unpaid principal balance of mortgage loans . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,176,703 3,155,703

Cost basis and fair value adjustments, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39,817 41,906

Allowance for loan losses for loans held for investment. . . . . . . . . . . . . . . . . . . . . . . . (18,734) (19,084)

Total mortgage loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,197,786 $ 3,178,525

During the three months ended March 31, 2018 and 2017, we redesignated loans with a carrying value of $7.4 

billion and $2.5 billion, respectively, from HFI to HFS. During the three months ended March 31, 2018 and 2017, 

we redesignated loans with a carrying value of $18 million and $35 million from HFS to HFI. We sold loans with an 

unpaid principal balance of $748 million and $93 million during the three months ended March 31, 2018 and 

March 31, 2017 respectively.

The recorded investment of single-family mortgage loans for which formal foreclosure proceedings are in process 

was $12.7 billion and $13.0 billion as of March 31, 2018 and December 31, 2017, respectively. As a result of our 

various loss mitigation and foreclosure prevention efforts, we expect that a portion of the loans in the process of 

formal foreclosure proceedings will not ultimately foreclose.

Nonaccrual Loans

We discontinue accruing interest on loans when we believe collectibility of principal or interest is not reasonably 

assured, which for a single-family loan we have determined, based on our historical experience, to be when the 

loan becomes two months or more past due according to its contractual terms. Interest previously accrued but not 

collected is reversed through interest income at the date a loan is placed on nonaccrual status. We return a nonmodified single-family loan to accrual status at the point that the borrower brings the loan current. We return a 

modified single-family loan to accrual status at the point that the borrower successfully makes all required 

payments during the trial period (generally three to four months) and the modification is made permanent. We 

place a multifamily loan on nonaccrual status when the loan becomes three months or more past due according 

to its contractual terms or is deemed to be individually impaired, unless the loan is well secured such that 
Notes to Condensed Consolidated Financial Statements | Mortgage Loans

Fannie Mae (In conservatorship) First Quarter 2018 Form 10-Q 57

collectibility of principal and accrued interest is reasonably assured. We return a multifamily loan to accrual status 

when the borrower cures the delinquency of the loan or we otherwise determine that the loan is well secured such 

that collectibility is reasonably assured.

Aging Analysis

The following tables display an aging analysis of the total recorded investment in our HFI mortgage loans by 

portfolio segment and class, excluding loans for which we have elected the fair value option.

As of March 31, 2018

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. . . . . . . . $ 25,517 $ 7,457 $ 22,387 $ 55,361 $ 2,766,596 $ 2,821,957 $ 36 $ 34,039

Government(2). . 44 19 184 247 25,050 25,297 184 —

Alt-A . . . . . . . . . . 2,632 939 3,047 6,618 57,586 64,204 4 4,558

Other . . . . . . . . . 915 350 1,126 2,391 18,011 20,402 3 1,658

Total singlefamily . . . . . . 29,108 8,765 26,744 64,617 2,867,243 2,931,860 227 40,255

Multifamily(3). . . . . . 94 N/A 291 385 270,703 271,088 — 524

Total . . . . . . . $ 29,202 $ 8,765 $ 27,035 $ 65,002 $ 3,137,946 $ 3,202,948 $ 227 $ 40,779

As of December 31, 2017

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 . . . . . . . $ 35,582 $ 10,396 $ 23,999 $ 69,977 $ 2,732,818 $ 2,802,795 $ 87 $ 37,971

Government(2). . 55 21 206 282 30,807 31,089 206 —

Alt-A. . . . . . . . . . 3,186 1,147 3,418 7,751 59,475 67,226 5 5,094

Other . . . . . . . . . 1,185 411 1,252 2,848 19,016 21,864 5 1,834

Total singlefamily . . . . . . 40,008 11,975 28,875 80,858 2,842,116 2,922,974 303 44,899

Multifamily(3). . . . . 26 N/A 276 302 266,699 267,001 — 424

Total . . . . . . $ 40,034 $ 11,975 $ 29,151 $ 81,160 $ 3,108,815 $ 3,189,975 $ 303 $ 45,323

__________

(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.
Notes to Condensed Consolidated Financial Statements | Mortgage Loans

Fannie Mae (In conservatorship) First Quarter 2018 Form 10-Q 58

Credit Quality Indicators

The following table displays the total recorded investment in our single-family HFI loans by class and credit quality 

indicator, excluding loans for which we have elected the fair value option. 

As of

March 31, 2018(1) December 31, 2017(1)

Primary Alt-A Other Primary Alt-A Other

(Dollars in millions)

Estimated mark-to-market loan-to-value (“LTV”) ratio:(2)

Less than or equal to 80% . . . . . . . . . . . . . . . . . . . . . . $ 2,454,704 $ 50,556 $15,618 $ 2,439,858 $ 51,903 $16,428

Greater than 80% and less than or equal to 90% . . . . . 239,258 6,094 2,037 238,038 6,680 2,277

Greater than 90% and less than or equal to 100% . . . . 111,063 3,590 1,273 106,076 4,044 1,443

Greater than 100% . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16,932 3,964 1,474 18,823 4,599 1,716

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,821,957 $ 64,204 $20,402 $ 2,802,795 $ 67,226 $21,864

__________

(1) Excludes $25.3 billion and $31.1 billion as of March 31, 2018 and December 31, 2017, respectively, of mortgage loans 

guaranteed or insured, in whole or in part, by the U.S. government or one of its agencies, that are not Alt-A loans. The 

segment class is primarily reverse mortgages for which we do not calculate an estimated mark-to-market LTV 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.

The following table displays the total recorded investment in our multifamily HFI loans by credit quality indicator, 

excluding loans for which we have elected the fair value option.

As of

March 31, December 31,

2018 2017

(Dollars in millions)

Credit risk profile by internally assigned grade:

Non-classified . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 267,093 $ 263,416

Classified:(1)

Substandard . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,993 3,585

Doubtful . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 —

Total classified . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,995 3,585

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 271,088 $ 267,001

_________

(1) A loan classified as “Substandard” has a well-defined weakness that jeopardizes the timely full repayment. “Doubtful” refers 

to a loan with a weakness that makes collection or liquidation in full highly questionable and improbable based on existing 

conditions and values.
Notes to Condensed Consolidated Financial Statements | Mortgage Loans

Fannie Mae (In conservatorship) First Quarter 2018 Form 10-Q 59

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; excluding loans classified as HFS. The following tables 

display the total unpaid principal balance, recorded investment, related allowance, average recorded investment 

and interest income recognized for individually impaired loans. 

As of

March 31, 2018 December 31, 2017

Unpaid

Principal

Balance

Total

Recorded

Investment

Related

Allowance

for Loan

Losses

Unpaid

Principal

Balance

Total

Recorded

Investment

Related

Allowance

for Loan

Losses

(Dollars in millions)

Individually impaired loans:

With related allowance recorded:

Single-family:

Primary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 93,426 $ 89,354 $ (12,026) $ 91,194 $ 86,864 $ (11,652)

Government . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 271 273 (55) 276 279 (56)

Alt-A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22,005 20,086 (3,907) 23,077 21,045 (4,046)

Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,044 7,588 (1,438) 8,488 8,006 (1,493)

Total single-family . . . . . . . . . . . . . . . . . . . . . . . . . 123,746 117,301 (17,426) 123,035 116,194 (17,247)

Multifamily . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 235 236 (41) 279 280 (42)

Total individually impaired loans with related

allowance recorded . . . . . . . . . . . . . . . . . . . . . . . . . 123,981 117,537 (17,467) 123,314 116,474 (17,289)

With no related allowance recorded:(1)

Single-family:

Primary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15,672 14,878 — 16,027 15,158 —

Government . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66 60 — 66 60 —

Alt-A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,141 2,796 — 3,253 2,870 —

Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 951 882 — 988 909 —

Total single-family . . . . . . . . . . . . . . . . . . . . . . . . . 19,830 18,616 — 20,334 18,997 —

Multifamily . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 351 353 — 308 310 —

Total individually impaired loans with no related

allowance recorded . . . . . . . . . . . . . . . . . . . . . . . . . 20,181 18,969 — 20,642 19,307 —

Total individually impaired loans(2)

. . . . . . . . . . . . . . . . . $ 144,162 $ 136,506 $ (17,467) $ 143,956 $ 135,781 $ (17,289)
Notes to Condensed Consolidated Financial Statements | Mortgage Loans

Fannie Mae (In conservatorship) First Quarter 2018 Form 10-Q 60

For the Three Months Ended March 31,

2018 2017

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. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 88,411 $ 911 $ 107 $ 98,223 $ 986 $ 88

Government . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 276 3 — 301 3 —

Alt-A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,708 212 16 25,550 249 15

Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,854 71 5 10,171 87 5

Total single-family . . . . . . . . . . . . . . . . . . . . . . . 117,249 1,197 128 134,245 1,325 108

Multifamily . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 258 — — 311 2 —

Total individually impaired loans with related

allowance recorded. . . . . . . . . . . . . . . . . . . . . . . 117,507 1,197 128 134,556 1,327 108

With no related allowance recorded:(1)

Single-family:

Primary. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15,007 243 26 14,988 289 23

Government . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60 — — 61 1 —

Alt-A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,842 58 4 3,087 73 3

Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 900 16 1 1,067 23 1

Total single-family . . . . . . . . . . . . . . . . . . . . . . . 18,809 317 31 19,203 386 27

Multifamily . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 331 2 — 283 3 —

Total individually impaired loans with no related

allowance recorded. . . . . . . . . . . . . . . . . . . . . . . 19,140 319 31 19,486 389 27

Total individually impaired loans . . . . . . . . . . . . . . . . $136,647 $ 1,516 $ 159 $154,042 $ 1,716 $ 135

__________

(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 classified as a TDR with a recorded investment of $135.5 billion and $134.7 billion as of 

March 31, 2018 and December 31, 2017, respectively. Includes multifamily loans classified as a TDR with a recorded 

investment of $212 million and $185 million as of March 31, 2018 and December 31, 2017, respectively.

(3) Total single-family interest income recognized of $1.5 billion for the three months ended March 31, 2018 consists of $1.3 

billion of contractual interest and $166 million of effective yield adjustments. Total single-family interest income recognized 

of $1.7 billion for the three months ended March 31, 2017 consists of $1.4 billion of contractual interest and $268 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, 2018 and 2017, the average term extension 

of a single-family modified loan was 144 months and 153 months, respectively, and the average interest rate 

reduction was 0.31 and 0.94 percentage points, respectively.
Notes to Condensed Consolidated Financial Statements | Mortgage Loans

Fannie Mae (In conservatorship) First Quarter 2018 Form 10-Q 61

The following table displays the number of loans and recorded investment in loans classified as a TDR.

For the Three Months Ended March 31,

2018 2017

Number of

Loans

Recorded

Investment

Number of

Loans

Recorded

Investment

(Dollars in millions)

Single-family:

Primary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41,679 $ 6,524 17,235 $ 2,363

Government . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48 4 61 6

Alt-A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,182 283 1,565 224

Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 445 84 309 53

Total single-family . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44,354 6,895 19,170 2,646

Multifamily . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 42 — —

Total TDRs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44,362 $ 6,937 19,170 $ 2,646

The increase in loans classified as a TDR for the three months ended March 31, 2018 compared with the three

months ended March 31, 2017 was primarily attributable to single-family loan modifications and other forms of 

loss mitigation in the areas affected by Hurricanes Harvey, Irma and Maria that resulted in a restructuring of the 

terms of these loans.

The following table displays the number of loans and our recorded investment in these loans at the time of 

payment default for loans that were classified as 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,

2018 2017

Number of

Loans

Recorded

Investment

Number of

Loans

Recorded

Investment

(Dollars in millions)

Single-family:

Primary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,818 $ 701 4,479 $ 621

Government . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 2 19 2

Alt-A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 677 109 614 96

Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 195 38 201 38

Total single-family . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,704 850 5,313 757

Multifamily . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 2 1 4

Total TDRs that subsequently defaulted . . . . . . . . . . . . . . . . . . 5,705 $ 852 5,314 $ 761

4. Allowance for Loan Losses

We maintain an allowance for loan losses for HFI loans held by Fannie Mae and loans backing Fannie Mae MBS 

issued from consolidated trusts. When calculating our allowance for loan losses, we consider the unpaid principal 

balance, net of amortized premiums and discounts, and other cost basis adjustments of HFI loans at the balance 

sheet date. We record charge-offs as a reduction to our allowance for loan losses at the point of foreclosure, 

completion of a short sale, upon the redesignation of loans from HFI to HFS or when a loan is determined to be 

uncollectible.

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 that provide loan level loss coverage and are either 
Notes to Condensed Consolidated Financial Statements | Allowance for Loan Losses

Fannie Mae (In conservatorship) First Quarter 2018 Form 10-Q 62

contractually attached to a loan or that were entered into contemporaneously with and in contemplation of a 

guaranty or loan purchase transaction. We use recent regional historical sales and appraisal information including 

the sales of our own foreclosed properties, to develop our loss severity estimates for all loan categories. Our 

allowance calculation also incorporates a loss confirmation period (the anticipated time lag between a credit loss 

event and the confirmation of the credit loss resulting from that event) to ensure our allowance estimate captures 

credit losses that have been incurred as of the balance sheet date but have not been confirmed. 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 classified as a TDR and acquired credit-impaired 

loans. We consider a loan to be impaired when, based on current information, it is probable that we will not 

receive all amounts due, including interest, in accordance with the contractual terms of the loan agreement. When 

a loan has been restructured, we measure impairment using a cash flow analysis discounted at the loan’s original 

effective interest rate. If we expect to recover our recorded investment in an individually impaired loan through 

probable foreclosure of the underlying collateral, we measure impairment based on the fair value of the collateral, 

reduced by estimated disposal costs and adjusted for estimated proceeds from mortgage, flood, or hazard 

insurance or similar sources.

We establish a collective allowance for all loans in our multifamily guaranty book of business that are not 

individually measured for impairment 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. 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, as we have concluded that such loans 

are collateral dependent. We evaluate collectively for impairment smaller-balance homogeneous multifamily 

loans. 
Notes to Condensed Consolidated Financial Statements | Allowance for Loan Losses

Fannie Mae (In conservatorship) First Quarter 2018 Form 10-Q 63

The following table displays changes in single-family, multifamily and total allowance for loan losses. 

For the Three Months

Ended March 31,

2018 2017

(Dollars in millions)

Single-family allowance for loan losses:

Beginning balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (18,849) $ (23,283)

Benefit (provision) for loan losses(1)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (78) 420

Charge-offs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 465 1,040

Recoveries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (60) (85)

Other(2)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1) (30)

Ending balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (18,523) $ (21,938)

Multifamily allowance for loan losses:

Beginning balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (235) $ (182)

Benefit (provision) for loan losses(1)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 (9)

Charge-offs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 —

Ending balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (211) $ (191)

Total allowance for loan losses:

Beginning balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (19,084) $ (23,465)

Benefit (provision) for loan losses(1)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (58) 411

Charge-offs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 469 1,040

Recoveries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (60) (85)

Other(2)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1) (30)

Ending balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (18,734) $ (22,129)

__________

(1) Benefit (provision) for loan losses is included in “Benefit for credit losses” in our condensed consolidated statements of 

operations and comprehensive income.

(2) Amounts represent changes in other loss reserves which are reflected in benefit (provision) for loan losses, charge-offs, 

and recoveries.

The following table displays the allowance for loan losses and recorded investment in our HFI loans by 

impairment or allowance methodology and portfolio segment, excluding loans for which we have elected the fair 

value option.

As of

March 31, 2018 December 31, 2017

SingleFamily Multifamily TotalSingleFamily Multifamily Total

(Dollars in millions)

Allowance for loan losses by segment:

Individually impaired loans(1)

. . . . . . . . . . $ (17,426) $ (41) $ (17,467) $ (17,247) $ (42) $ (17,289)

Collectively reserved loans . . . . . . . . . . . (1,097) (170) (1,267) (1,602) (193) (1,795)

Total allowance for loan losses . . . . . . $ (18,523) $ (211) $ (18,734) $ (18,849) $ (235) $ (19,084)

Recorded investment in loans by segment:

Individually impaired loans(1)

. . . . . . . . . . $ 135,917 $ 589 $ 136,506 $ 135,191 $ 590 $ 135,781

Collectively reserved loans . . . . . . . . . . . 2,795,943 270,499 3,066,442 2,787,783 266,411 3,054,194

Total recorded investment in loans . . . $ 2,931,860 $ 271,088 $ 3,202,948 $ 2,922,974 $ 267,001 $ 3,189,975

__________

(1) Includes acquired credit-impaired loans.
Notes to Condensed Consolidated Financial Statements | Investments in Securities

Fannie Mae (In conservatorship) First Quarter 2018 Form 10-Q 64

5. Investments in Securities

Trading Securities

Trading securities are recorded at fair value with subsequent changes in fair value recorded as “Fair value gains 

(losses), net” in our condensed consolidated statements of operations and comprehensive income. The following 

table displays our investments in trading securities.

As of

March 31,

2018

December 31,

2017

(Dollars in millions)

Mortgage-related securities:

Fannie Mae(1). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,739 $ 3,876

Other agency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,347 1,118

Alt-A and subprime private-label securities(1). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,745 453

Commercial mortgage-backed securities (“CMBS”) . . . . . . . . . . . . . . . . . . . . . . . . . 8 9

Mortgage revenue bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 1

Total mortgage-related securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,840 5,457

Non-mortgage-related securities:

U.S. Treasury securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33,160 29,222

Other securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97 —

Total non-mortgage-related securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33,257 29,222

Total trading securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 40,097 $ 34,679

__________

(1) The increase in Alt-A and subprime private-label securities and the corresponding decrease in Fannie Mae securities from 

December 31, 2017 to March 31, 2018 was due to the dissolution of a Fannie Mae-wrapped private-label securities trust 

during the period.

The following table displays information about our net trading gains.

For the Three

Months Ended

March 31,

2018 2017

(Dollars in millions)

Net trading gains . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 98 $ 68

Net trading gains recognized in the period related to securities still held at period end . . . . . . . 76 77

Available-for-Sale Securities

We record available-for-sale (“AFS”) securities at fair value with unrealized gains and losses, recorded net of tax, 

as a component of “Other comprehensive income (loss)” and we recognize realized gains and losses from the 

sale of AFS securities in “Investment gains (losses), net” in our condensed consolidated statements of operations 

and comprehensive income. 

The following table displays the gross realized gains and proceeds on sales of AFS securities.

For the Three Months

Ended March 31,

2018 2017

(Dollars in millions)

Gross realized gains . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 363 $ 3

Total proceeds (excludes initial sale of securities from new portfolio securitizations) . . . . . . . 635 95
Notes to Condensed Consolidated Financial Statements | Investments in Securities

Fannie Mae (In conservatorship) First Quarter 2018 Form 10-Q 65

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, 2018

Total 

Amortized 

Cost(1)

Gross

Unrealized

Gains

Gross 

Unrealized 

Losses(2)

Total

Fair

Value

(Dollars in millions)

Fannie Mae . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,940 $ 83 $ (37) $ 1,986

Other agency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 305 22 — 327

Alt-A and subprime private-label securities . . . . . . . . . . . . . . . . . . . . . . 376 295 — 671

CMBS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 — — 5

Mortgage revenue bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 536 14 (11) 539

Other mortgage-related securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . 346 14 — 360

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,508 $ 428 $ (48) $ 3,888

As of December 31, 2017

Total 

Amortized 

Cost(1)

Gross

Unrealized

Gains

Gross 

Unrealized 

Losses(2)

Total

Fair

Value

(Dollars in millions)

Fannie Mae . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,044 $ 102 $ (27) $ 2,119

Other agency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 332 25 — 357

Alt-A and subprime private-label securities . . . . . . . . . . . . . . . . . . . . . . 662 652 — 1,314

CMBS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 — — 15

Mortgage revenue bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 655 20 (4) 671

Other mortgage-related securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . 350 17 — 367

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 4,058 $ 816 $ (31) $ 4,843

__________

(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 (losses), net” in our condensed 

consolidated statements of operations and comprehensive income.

(2) Represents the gross unrealized losses on securities for which we have not recognized OTTI, as well as the noncredit 

component of OTTI and cumulative changes in fair value of securities for which we previously recognized the credit 

component of OTTI in “Accumulated other comprehensive income” in our condensed consolidated balance sheets.
Notes to Condensed Consolidated Financial Statements | Investments in Securities

Fannie Mae (In conservatorship) First Quarter 2018 Form 10-Q 66

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, 2018

Less Than 12

Consecutive Months

12 Consecutive

Months or Longer

Gross

Unrealized

Losses

Fair

Value

Gross

Unrealized

Losses

Fair

Value

(Dollars in millions)

Fannie Mae . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (5) $ 157 $ (32) $ 425

Mortgage revenue bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (8) 45 (3) 3

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (13) $ 202 $ (35) $ 428

As of December 31, 2017

Less Than 12

Consecutive Months

12 Consecutive

Months or Longer

Gross

Unrealized

Losses

Fair

Value

Gross

Unrealized

Losses

Fair

Value

(Dollars in millions)

Fannie Mae . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (1) $ 134 $ (26) $ 461

Mortgage revenue bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — — (4) 3

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (1) $ 134 $ (30) $ 464

Other-Than-Temporary Impairments

The balance of the unrealized credit loss component of AFS debt securities held by us and recognized in our 

condensed consolidated statements of operations and comprehensive income was $729 million and $1.1 billion

as of March 31, 2018 and December 31, 2017, respectively. The decrease in the first three months of 2018 was 

primarily driven by securities no longer held in the retained portfolio at period end. 

The balance of the unrealized credit loss component of AFS debt securities held by us and recognized in our 

condensed consolidated statements of operations and comprehensive income was $1.8 billion and $1.9 billion as 

of March 31, 2017 and December 31, 2016, respectively. The decrease in the first three months of 2017 was 

primarily driven by changes in cash flows expected to be collected over the remaining life of the securities.

Maturity Information

The following table displays the amortized cost and fair value of our AFS securities by major security type and 

remaining contractual maturity, assuming no principal prepayments. The contractual maturity of mortgage-backed 

securities is not a reliable indicator of their expected life because borrowers generally have the right to prepay 

their obligations at any time.

As of March 31, 2018

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 . . . . . . . . . . . . $ 1,940 $ 1,986 $ 1 $ 1 $ 11 $ 11 $ 82 $ 87 $ 1,846 $ 1,887

Other agency . . . . . . . . . . . 305 327 1 1 11 11 53 57 240 258

Alt-A and subprime privatelabel securities . . . . . . . 376 671 — — — — — — 376 671

CMBS. . . . . . . . . . . . . . . . . 5 5 5 5 — — — — — —

Mortgage revenue bonds . . 536 539 3 3 36 36 65 67 432 433

Other mortgage-related

securities. . . . . . . . . . . . 346 360 — — — — 5 5 341 355

Total . . . . . . . . . . . . . . . . . $ 3,508 $ 3,888 $ 10 $ 10 $ 58 $ 58 $ 205 $ 216 $ 3,235 $ 3,604
Notes to Condensed Consolidated Financial Statements | Financial Guarantees

Fannie Mae (In conservatorship) First Quarter 2018 Form 10-Q 67

6. Financial Guarantees

We recognize a guaranty obligation for our obligation to stand ready to perform on our guarantees to 

unconsolidated trusts and other guaranty arrangements. These off-balance sheet guarantees expose us to credit 

losses primarily relating to the unpaid principal balance of our unconsolidated Fannie Mae MBS and other 

financial guarantees. The remaining contractual terms of our guarantees range from 8 days to 34 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. 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, 2018 December 31, 2017

Maximum

Exposure

Guaranty

Obligation

Maximum 

Recovery(1)

Maximum

Exposure

Guaranty

Obligation

Maximum 

Recovery(1)

(Dollars in millions)

Unconsolidated Fannie Mae MBS. . . . . . . . $ 7,944 $ 31 $ 7,201 $ 10,876 $ 127 $ 7,340

Other guaranty arrangements(2)

. . . . . . . . . 13,960 138 2,356 14,265 131 2,404

Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 21,904 $ 169 $ 9,557 $ 25,141 $ 258 $ 9,744

__________

(1) Recoverability of such credit enhancements and recourse is subject to, among other factors, our mortgage insurers’ and 

financial guarantors’ ability to meet their obligations to us. For information on our mortgage insurers and financial 

guarantors, see “Note 13, Concentrations of Credit Risk” in our 2017 Form 10-K and “Note 11, Concentrations of Credit 

Risk” in this report.

(2) Primarily consists of credit enhancements and long-term standby commitments.

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 $8 million and $276 million as of March 31, 2018

and December 31, 2017, respectively. These Fannie Mae MBS consist primarily of private-label wraps where our 

guaranty arrangement is with an unconsolidated MBS trust.

7. Short-Term and Long-Term Debt

Short-Term Debt

The following table displays our outstanding short-term debt (debt with an original contractual maturity of one year 

or less) and weighted-average interest rates of this debt.

As of

March 31, 2018 December 31, 2017

Outstanding

WeightedAverage 

Interest 

Rate(1) Outstanding

WeightedAverage 

Interest 

Rate(1)

(Dollars in millions)

Federal funds purchased and securities sold under agreements 

to repurchase(2). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 451 1.35% $ — —%

Short-term debt of Fannie Mae . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 34,506 1.49% $ 33,377 1.18%

Debt of consolidated trusts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 378 1.45 379 1.11

Total short-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 34,884 1.49% $ 33,756 1.18%

__________

(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.
Notes to Condensed Consolidated Financial Statements | Short-Term and Long-Term Debt

Fannie Mae (In conservatorship) First Quarter 2018 Form 10-Q 68

Intraday Line of Credit

We use a secured intraday funding line of credit provided by a large financial institution. We post collateral which, 

in some circumstances, the secured party has the right to repledge to third parties. As this line of credit is an 

uncommitted intraday loan facility, we may be unable to draw on it if and when needed. The line of credit under 

this facility was $15.0 billion as of March 31, 2018 and December 31, 2017.

Long-Term Debt

Long-term debt represents debt with an original contractual maturity of greater than one year. The following table 

displays our outstanding long-term debt.

As of

March 31, 2018 December 31, 2017

Maturities Outstanding

WeightedAverage 

Interest 

Rate(1) Maturities Outstanding

WeightedAverage 

Interest 

Rate(1)

(Dollars in millions)

Senior fixed:

Benchmark notes and bonds . . . . . . . . 2018 - 2030 $ 118,550 2.12% 2018 - 2030 $ 123,541 2.11%

Medium-term notes(2)

. . . . . . . . . . . . . . 2018 - 2026 74,077 1.37 2018 - 2026 75,901 1.41

Other(3)

. . . . . . . . . . . . . . . . . . . . . . . . . 2018 - 2038 7,151 4.54 2018 - 2038 7,421 4.84

Total senior fixed . . . . . . . . . . . . . . . 199,778 1.93 206,863 1.95

Senior floating:

Medium-term notes(2)

. . . . . . . . . . . . . . 2019 - 2020 1,175 1.26 2018 - 2020 8,425 1.36

Connecticut Avenue Securities(4)

. . . . . 2023 - 2030 24,284 5.38 2023 - 2030 22,527 5.18

Other(5)

. . . . . . . . . . . . . . . . . . . . . . . . . 2020 - 2037 357 6.91 2020 - 2037 376 6.36

Total senior floating . . . . . . . . . . . . . 25,816 5.21 31,328 4.14

Subordinated debentures . . . . . . . . . . . . . 2019 5,230 9.64 2019 5,106 9.93

Secured borrowings(6)

. . . . . . . . . . . . . . . . 2021 - 2022 71 1.82 2021 - 2022 78 1.70

Total long-term debt of Fannie Mae(7)

. 230,895 2.46 243,375 2.40

Debt of consolidated trusts . . . . . . . . . . . . 2018 - 2057 3,074,693 2.89 2018 - 2057 3,052,923 2.80

Total long-term debt . . . . . . . . . . . . . $ 3,305,588 2.86% $ 3,296,298 2.77%

__________

(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 zerocoupon debt.

(3) Includes other long-term debt with an original contractual maturity of greater than 10 years and foreign exchange bonds.

(4) Credit risk-sharing securities that transfer a portion of the credit risk on specified pools of single-family mortgage loans to 

the investors in these securities, a portion of which is reported at fair value. 

(5) Consists of structured debt instruments that are reported at fair value.

(6) Represents our remaining liability resulting from the transfer of financial assets from our condensed consolidated balance 

sheets that did not qualify as a sale under the accounting guidance for the transfer of financial instruments.

(7) Includes unamortized discounts and premiums, other cost basis adjustments and fair value adjustments of $631 million and 

$752 million as of March 31, 2018 and December 31, 2017, respectively.

8. Derivative Instruments

Derivative instruments are an integral part of our strategy in managing interest rate risk. Derivative instruments 

may be privately-negotiated, bilateral contracts, or they may be listed and traded on an exchange. We refer to our 

derivative transactions made pursuant to bilateral contracts as our over-the-counter (“OTC”) derivative 

transactions and our derivative transactions accepted for clearing by a derivatives clearing organization as our 

cleared derivative transactions. We typically do not settle the notional amount of our risk management derivatives; 

rather, notional amounts provide the basis for calculating actual payments or settlement amounts. The derivatives 
Notes to Condensed Consolidated Financial Statements | Derivative Instruments

Fannie Mae (In conservatorship) First Quarter 2018 Form 10-Q 69

we use for interest rate risk management purposes consist primarily of interest rate swaps and interest rate 

options. 

We enter into various forms of credit risk sharing agreements, including credit risk transfer transactions, swap 

credit enhancements and mortgage insurance contracts, that we account for as derivatives. The majority of our 

credit-related derivatives are credit risk transfer transactions, whereby a portion of the credit risk associated with 

losses on a reference pool of mortgage loans is transferred to a third party.

We enter into forward purchase and sale commitments that lock in the future delivery of mortgage loans and 

mortgage-related securities at a fixed price or yield. Certain commitments to purchase mortgage loans and 

purchase or sell mortgage-related securities meet the criteria of a derivative. We typically settle the notional 

amount of our mortgage commitments that are accounted for as derivatives.

We recognize all derivatives as either assets or liabilities in our condensed consolidated balance sheets at their 

fair value on a trade date basis. Fair value amounts, which are 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 13, Fair Value” for additional information on derivatives recorded at fair 

value. We present cash flows from derivatives as operating activities in our condensed consolidated statements of 

cash flows.
Notes to Condensed Consolidated Financial Statements | Derivative Instruments

Fannie Mae (In conservatorship) First Quarter 2018 Form 10-Q 70

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, 2018 As of December 31, 2017

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 . . . . . . . . . . . . . . . . . $ 92,573 $ 601 $ 24,643 $ (878) $ 52,732 $ 772 $ 70,211 $ (2,120)

Receive-fixed . . . . . . . . . . . . . . 105,051 1,371 61,174 (1,254) 31,671 2,391 138,852 (1,764)

Basis. . . . . . . . . . . . . . . . . . . . . 273 102 600 (1) 873 124 — —

Foreign currency . . . . . . . . . . . 243 62 245 (43) 234 59 236 (56)

Swaptions:

Pay-fixed . . . . . . . . . . . . . . . . . 11,375 222 2,750 (5) 9,750 95 4,000 (20)

Receive-fixed . . . . . . . . . . . . . . 500 21 9,375 (317) 250 13 9,250 (304)

Other(1)

. . . . . . . . . . . . . . . . . . . . . . . . 20,912 25 — (1) 13,240 22 7,315 (1)

Total gross risk management

derivatives . . . . . . . . . . . . . . . . 230,927 2,404 98,787 (2,499) 108,750 3,476 229,864 (4,265)

Accrued interest receivable

(payable) . . . . . . . . . . . . . . . . . — 378 — (521) — 835 — (814)

Netting adjustment(2)

. . . . . . . . . . . — (2,744) — 2,867 — (4,272) — 4,979

Total net risk management

derivatives . . . . . . . . . . . . . . . $ 230,927 $ 38 $ 98,787 $ (153) $108,750 $ 39 $229,864 $ (100)

Mortgage commitment derivatives:

Mortgage commitments to

purchase whole loans . . . . . . . 5,490 18 575 (2) 4,143 9 1,570 (2)

Forward contracts to purchase

mortgage-related securities . . . 63,336 227 8,092 (40) 45,925 108 21,099 (21)

Forward contracts to sell

mortgage-related securities . . . 5,671 32 108,580 (468) 19,320 15 85,556 (205)

Total mortgage commitment

derivatives . . . . . . . . . . . . . . . 74,497 277 117,247 (510) 69,388 132 108,225 (228)

Derivatives at fair value . . . . . . $ 305,424 $ 315 $ 216,034 $ (663) $178,138 $ 171 $338,089 $ (328)

__________

(1) Includes credit risk transfer transactions, futures, swap credit enhancements and mortgage insurance contracts that we 

account for as derivatives.

(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 $755 million and $1.4 billion as of March 31, 2018 and December 31, 2017, respectively. Cash 

collateral received was $633 million and $649 million as of March 31, 2018 and December 31, 2017, respectively. 
Notes to Condensed Consolidated Financial Statements | Derivative Instruments

Fannie Mae (In conservatorship) First Quarter 2018 Form 10-Q 71

We record all derivative gains and losses, including accrued interest, in “Fair value gains (losses), net” in our 

condensed consolidated statements of operations and comprehensive income. The following table displays, by 

type of derivative instrument, the fair value gains and losses, net on our derivatives.

For the Three Months

Ended March 31,

2018 2017

(Dollars in millions)

Risk management derivatives:

Swaps:

Pay-fixed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,783 $ 691

Receive-fixed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2,387) (317)

Basis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (23) 7

Foreign currency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 12

Swaptions:

Pay-fixed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 129 —

Receive-fixed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (16) (18)

Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 (8)

Net accrual of periodic settlements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (215) (255)

Total risk management derivatives fair value gains, net . . . . . . . . . . . . . . . . . . . . . . . . . . 299 112

Mortgage commitment derivatives fair value gains (losses), net. . . . . . . . . . . . . . . . . . . . . . . . 564 (80)

Total derivatives fair value gains, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 863 $ 32

Derivative Counterparty Credit Exposure

Our derivative counterparty credit exposure relates principally to interest rate derivative contracts. We are 

exposed to the risk that a counterparty in a derivative transaction will default on payments due to us, which may 

require us to seek a replacement derivative from a different counterparty. This replacement may be at a higher 

cost, or we may be unable to find a suitable replacement. We manage our derivative counterparty credit exposure 

relating to our risk management derivative transactions mainly through enforceable master netting arrangements, 

which allow us to net derivative assets and liabilities with the same counterparty or clearing organization and 

clearing member. For our OTC derivative transactions, we require counterparties to post collateral, which may 

include cash, U.S. Treasury securities, agency debt and agency mortgage-related securities.

See “Note 12, Netting Arrangements” for information on our rights to offset assets and liabilities.

9. Segment Reporting

We have two reportable business segments: Single-Family and Multifamily. Results of our two business segments 

are intended to reflect each segment as if it were a stand-alone business. The sum of the results for our two 

business segments equals our condensed consolidated results of operations.
Notes to Condensed Consolidated Financial Statements | Segment Reporting

Fannie Mae (In conservatorship) First Quarter 2018 Form 10-Q 72

The following table displays our segment results.

For the Three Months Ended March 31,

2018 2017

SingleFamily Multifamily TotalSingleFamily Multifamily Total

(Dollars in millions)

Net interest income(1)

. . . . . . . . . . . . . . . . . . $ 4,561 $ 671 $ 5,232 $ 4,756 $ 590 $ 5,346

Fee and other income(2)

. . . . . . . . . . . . . . . . 158 162 320 76 173 249

Net revenues . . . . . . . . . . . . . . . . . . . . . . . . 4,719 833 5,552 4,832 763 5,595

Investment gains (losses), net(3)

. . . . . . . . . . 242 8 250 (50) 41 (9)

Fair value gains (losses), net(4)

. . . . . . . . . . 1,034 11 1,045 (12) (28) (40)

Administrative expenses . . . . . . . . . . . . . . . (643) (107) (750) (601) (83) (684)

Credit-related income (expense)(5)

Benefit (provision) for credit losses . . . . . 196 21 217 400 (4) 396

Foreclosed property expense . . . . . . . . . (162) — (162) (216) (1) (217)

Total credit-related income (expense) . . . . . 34 21 55 184 (5) 179

TCCA fees(6)

. . . . . . . . . . . . . . . . . . . . . . . . . (557) — (557) (503) — (503)

Other expenses, net. . . . . . . . . . . . . . . . . . . (132) (71) (203) (256) (126) (382)

Income before federal income taxes . . . . . . 4,697 695 5,392 3,594 562 4,156

Provision for federal income taxes . . . . . . . . (1,016) (115) (1,131) (1,252) (131) (1,383)

Net income . . . . . . . . . . . . . . . . . . . . . . . $ 3,681 $ 580 $ 4,261 $ 2,342 $ 431 $ 2,773

__________

(1) Net interest income primarily consists of guaranty fees received as compensation for assuming and managing the credit 

risk on loans underlying Fannie Mae MBS held by third parties for the respective business segment, and the difference 

between the interest income earned on the respective business segment’s mortgage assets in our retained mortgage 

portfolio and the interest expense associated with the debt funding those assets. Revenues from single-family guaranty 

fees include revenues generated by the 10 basis point increase in guaranty fees we implemented in 2012 pursuant to 

TCCA.

(2) Single-Family fee and other income primarily consists of compensation for engaging in structured transactions and 

providing other lender services, and income resulting from settlement agreements resolving certain claims relating to 

private-label securities we purchased or that we have guaranteed. Multifamily fee and other income consists of fees 

associated with multifamily business activities, including yield maintenance income.

(3) Investment gains and losses primarily consists of gains and losses on the sale of mortgage assets for the respective 

business segment. 

(4) Single-Family fair value gains and losses primarily consist of fair value gains and losses on risk management and 

mortgage commitment derivatives, trading securities and other financial instruments associated with our single-family total 

book of business. Multifamily fair value gains and losses primarily consist of fair value gains and losses on MBS 

commitment derivatives, trading securities and other financial instruments associated with our multifamily total book of 

business. 

(5) Credit-related income or expense is based on the guaranty book of business of the respective business segment and 

consists of the applicable segment’s benefit or provision for credit losses and foreclosed property expense on loans 

underlying the segment’s guaranty book of business. 

(6) Consists of the portion of our single-family guaranty fees that is remitted to Treasury pursuant to the TCCA.
Notes to Condensed Consolidated Financial Statements | Equity

Fannie Mae (In conservatorship) First Quarter 2018 Form 10-Q 73

10. Equity

The following table displays the activity in other comprehensive income (loss), net of tax, by major categories.

For the Three Months

Ended March 31,

2018 2017

(Dollars in millions)

Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 4,261 $ 2,773

Other comprehensive income (loss), net of tax effect:

Changes in net unrealized gains (losses) on AFS securities (net of tax of $15 and $5,

respectively) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(57) 9

Reclassification adjustment for other-than-temporary impairment ("OTTI") recognized in

net income (net of tax of $0) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 1

Reclassification adjustment for gains on AFS securities included in net income (net of tax

of $70 and $1, respectively) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (264) (2)

Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (3) (2)

Total other comprehensive income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (323) 6

Total comprehensive income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,938 $ 2,779

The following table displays our accumulated other comprehensive income, net of tax, by major categories.

As of

March 31, December 31,

2018 2017

(Dollars in millions)

Net unrealized gains on AFS securities for which we have not recorded OTTI . . . . . . $ 58 $ 87

Net unrealized gains on AFS securities for which we have recorded OTTI . . . . . . . . . 242 423

Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47 43

Accumulated other comprehensive income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 347 $ 553

The following table displays changes in accumulated other comprehensive income, net of tax.

For the Three Months Ended March 31,

2018 2017

AFS(1) Other Total AFS(1) Other Total

(Dollars in millions)

Beginning balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 510 $ 43 $ 553 $ 716 $ 43 $ 759

Reclassification of accumulated other comprehensive 

income to retained earnings resulting from the enactment 

of the Tax Cuts and Jobs Act(2)

. . . . . . . . . . . . . . . . . . . . . . 110 7 117 — — —

Other comprehensive income:

Other comprehensive income (loss) before

reclassifications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (57) — (57) 9 — 9

Amounts reclassified from other comprehensive income

(loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (263) (3) (266) (1) (2) (3)

Net other comprehensive income (loss) . . . . . . . . . . . . . . . (320) (3) (323) 8 (2) 6

Ending balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 300 $ 47 $ 347 $ 724 $ 41 $ 765

__________

(1) The amounts reclassified from accumulated other comprehensive income 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 

“Investment gains (losses), net” in our condensed consolidated statements of operations and comprehensive income.

(2) Reclassification from accumulated other comprehensive income to retained earnings of the tax effects resulting from the 

enactment of tax legislation on December 22, 2017 that reduced the federal corporate income tax rate from 35% to 21%

effective January 1, 2018. This amount is not included in other comprehensive loss for the period ending March 31, 2018.
Notes to Condensed Consolidated Financial Statements | Concentrations of Credit Risk

Fannie Mae (In conservatorship) First Quarter 2018 Form 10-Q 74

11. Concentrations of Credit Risk

Risk Characteristics of our Guaranty Book of Business

One of the measures by which we gauge our performance risk under our guaranty is 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 singlefamily loans 90 days or more past due or in the foreclosure process, and loans that have higher risk 

characteristics, such as high mark-to-market LTV ratios.

For multifamily loans, management monitors the serious delinquency rate, which is the percentage of multifamily 

loans, based on unpaid principal balance, that are 60 days or more past due, and other loans that have higher 

risk characteristics, to 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 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 delinquency status and serious delinquency rates for specified loan categories of 

our single-family conventional and total multifamily guaranty book of business.

As of

March 31, 2018(1) December 31, 2017(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)

. . . . . . . . . . . . . . . . 1.03% 0.32% 1.08% 1.42% 0.43% 1.15%

Percentage of single-family 

conventional loans(4). . . . . . . . 1.20 0.37 1.16 1.63 0.50 1.24

As of

March 31, 2018(1) December 31, 2017(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% . . . . . . . . . . . . . . . . . . . . . . . . . . . 1% 11.21% 1% 11.70%

Geographical distribution:

California . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 0.39 19 0.42

Florida . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 3.56 6 3.71

New Jersey . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 1.91 4 2.15

New York . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 1.87 5 2.02

All other states . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66 1.02 66 1.09

Product distribution:

Alt-A. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 4.76 2 4.95

Vintages:

2004 and prior . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 3.24 4 3.28

2005-2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 6.22 6 6.55

2009-2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91 0.51 90 0.53
Notes to Condensed Consolidated Financial Statements | Concentrations of Credit Risk

Fannie Mae (In conservatorship) First Quarter 2018 Form 10-Q 75

__________

(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, 2018 and December 31, 2017.

(2) Consists of single-family conventional loans that were 90 days or more past due or in the foreclosure process as of 

March 31, 2018 and December 31, 2017.

(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.

As of

March 31, 2018 (1)(2) December 31, 2017(1)(2)

30 Days

Delinquent

Seriously 

Delinquent(3)

30 Days

Delinquent

Seriously 

Delinquent(3)

Percentage of multifamily guaranty book of business . . . . . . . 0.01% 0.13% 0.03% 0.11%

As of

March 31, 2018 December 31, 2017

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% . . . . . . . . . . . . . . . . . . . . . . . . 1% 0.21% 2% 0.21%

Less than or equal to 80% . . . . . . . . . . . . . . . . . . 99 0.13 98 0.11

Current DSCR less than 1.0(5). . . . . . . . . . . . . . . . . . 2 1.68 2 1.96

__________

(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, 2018 and 

December 31, 2017, 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 Insurers. Mortgage insurance “risk in force” refers to our maximum potential loss recovery under the 

applicable mortgage insurance policies in force and is generally based on the loan level insurance coverage 

percentage and, if applicable, any aggregate pool loss limit, as specified in the policy.
Notes to Condensed Consolidated Financial Statements | Concentrations of Credit Risk

Fannie Mae (In conservatorship) First Quarter 2018 Form 10-Q 76

The following table displays our total mortgage insurance risk in force by primary and pool insurance, as well as 

the total risk in force mortgage insurance coverage as a percentage of the single-family guaranty book of 

business.

As of

March 31, 2018 December 31, 2017

Risk in Force

Percentage of

Single-Family

Guaranty Book

of Business Risk in Force

Percentage of

Single-Family

Guaranty Book

of Business

(Dollars in millions)

Mortgage insurance risk in force:

Primary mortgage insurance . . . . . . . . . . . . . . . $ 140,760 $ 137,941

Pool mortgage insurance . . . . . . . . . . . . . . . . . . 452 519

Total mortgage insurance risk in force . . . . . . . $ 141,212 5% $ 138,460 5%

The table below displays our mortgage insurer counterparties that provided approximately 10% or more of the risk 

in force mortgage insurance coverage on the single-family loans in our guaranty book of business.

Percentage of Total Risk in

Force Mortgage Insurance

Coverage

As of

March 31,

2018

December 31,

2017

Counterparty:(1)

Arch Capital Group Ltd.(2). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25% 25%

Radian Guaranty, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 21

Mortgage Guaranty Insurance Corp. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 19

Genworth Mortgage Insurance Corp. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 15

Essent Guaranty, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 11

Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 9

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% 100%

__________

(1) Insurance coverage amounts provided for each counterparty may include coverage provided by affiliates and subsidiaries 

of the counterparty.

(2) Arch Capital Group Ltd. is the parent company of Arch Mortgage Insurance Co. and United Guaranty Residential Insurance 

Co.

Three of our mortgage insurer counterparties that are currently not approved to write new business are in run-off: 

PMI Mortgage Insurance Co. (“PMI”), Triad Guaranty Insurance Corporation (“Triad”) and Republic Mortgage 

Insurance Company (”RMIC”). Entering run-off may close off a source of profits and liquidity that may have 

otherwise assisted a mortgage insurer in paying claims under insurance policies, and could also cause the quality 

and speed of its claims processing to deteriorate. These three mortgage insurers provided a combined $5.8 

billion, or 4%, of our risk in force mortgage insurance coverage of our single-family guaranty book of business as 

of March 31, 2018.

PMI and Triad have been paying only a portion of policyholder claims and deferring the remaining portion. PMI is 

currently paying 71.5% of claims under its mortgage insurance policies in cash and is deferring the remaining 

28.5%, and Triad is currently paying 75% of claims in cash and deferring the remaining 25%. It is uncertain 

whether PMI or Triad will be permitted in the future to pay any remaining deferred policyholder claims and/or 

increase or decrease the amount of cash they pay on claims. RMIC is no longer deferring payments on 

policyholder claims and has paid us its previously outstanding deferred payment obligations as well as interest on 

those obligations; however, RMIC remains in run-off.

We have counterparty credit risk relating to the potential insolvency of, or non-performance by, mortgage insurers 

that insure single-family loans we purchase or guarantee. There is risk that these counterparties may fail to fulfill 

their obligations to pay our claims under insurance policies. If we determine that it is probable that we will not 
Notes to Condensed Consolidated Financial Statements | Concentrations of Credit Risk

Fannie Mae (In conservatorship) First Quarter 2018 Form 10-Q 77

collect all of our claims from one or more of our mortgage insurer counterparties, it could increase our loss 

reserves, which could adversely affect our results of operations, liquidity, financial condition and net worth.

When we estimate the credit losses that are inherent in our mortgage loans and under the terms of our guaranty 

obligations we also consider the recoveries that we will receive on primary mortgage insurance, as mortgage 

insurance recoveries would reduce the severity of the loss associated with defaulted loans. We evaluate the 

financial condition of our mortgage insurer counterparties and adjust the contractually due recovery amounts to 

ensure that 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 increase our combined loss reserves. As of March 31, 2018 and December 31, 

2017, the amount by which our estimated benefit from mortgage insurance reduced our combined loss reserves 

was $969 million and $989 million, respectively.

We had outstanding receivables of $825 million recorded in “Other assets” in our condensed consolidated 

balance sheets as of March 31, 2018 and $858 million as of December 31, 2017 related to amounts claimed on 

insured, defaulted loans excluding government-insured loans. Of this amount, $65 million as of March 31, 2018

and $75 million as of December 31, 2017 was due from our mortgage servicers or sellers. We assessed the total 

outstanding receivables for collectibility, and they are recorded net of a valuation allowance of $591 million as of 

March 31, 2018 and $593 million as of December 31, 2017. The valuation allowance reduces our claim receivable 

to the amount which is considered probable of collection as of March 31, 2018 and December 31, 2017.

Mortgage Servicers and Sellers. Mortgage servicers collect mortgage and escrow payments from borrowers, pay 

taxes and insurance costs from escrow accounts, monitor and report delinquencies, and perform other required 

activities on our behalf. Our mortgage servicers and sellers may also be obligated to repurchase loans or 

foreclosed properties, reimburse us for losses or provide other remedies under certain circumstances, such as if it 

is determined that the mortgage loan did not meet our underwriting or eligibility requirements, if certain loan 

representations and warranties are violated or if mortgage insurers rescind coverage. 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. The table below displays the percentage of our singlefamily guaranty book of business serviced by our top five depository single-family mortgage servicers and top five 

non-depository single-family mortgage servicers, and identifies one servicer that serviced more than 10% of our 

single-family guaranty book of business.

Percentage of Single-Family

Guaranty Book of Business

As of

March 31,

2018

December 31,

2017

Wells Fargo Bank, N.A. (together with its affiliates) . . . . . . . . . . . . . . . . . . . . . . . . . . 18% 18%

Remaining top five depository servicers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 17

Top five non-depository servicers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 20

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54% 55%

The table below displays the percentage of our multifamily guaranty book of business serviced by our top five 

multifamily mortgage servicers, and identifies two servicers that serviced 10% or more of our multifamily guaranty 

book of business.

Percentage of Multifamily

Guaranty Book of Business

As of

March 31,

2018

December 31,

2017

Wells Fargo Bank, N.A. (together with its affiliates) . . . . . . . . . . . . . . . . . . . . . . . . . . 14% 14%

Walker & Dunlop, LLC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 12

Remaining top five servicers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 22

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48% 48%
Notes to Condensed Consolidated Financial Statements | Concentrations of Credit Risk

Fannie Mae (In conservatorship) First Quarter 2018 Form 10-Q 78

If a significant mortgage servicer or seller counterparty, or a number of mortgage servicers or sellers, fails to meet 

their obligations to us, it could increase our credit losses and credit-related expense, and adversely affect our 

results of operations and financial condition.

For information on credit risk associated with our derivative transactions and repurchase agreements see “Note 8, 

Derivative Instruments” and “Note 12, Netting Arrangements.”

12. Netting Arrangements

We use master netting arrangements, which allow us to offset certain financial instruments and collateral with the 

same counterparty, to minimize counterparty credit exposure. The tables below display information related to 

derivatives, securities purchased under agreements to resell or similar arrangements, and securities sold under 

agreements to repurchase or similar arrangements, which are subject to an enforceable master netting 

arrangement or similar agreement that are either offset or not offset in our condensed consolidated balance 

sheets.

As of March 31, 2018

Gross 

Amount 

Offset (1)

Net Amount

Presented in

our Condensed

Consolidated

Balance Sheets

Amounts Not Offset in our

Condensed Consolidated

Balance Sheets

Gross

Amount

Financial 

Instruments(2) Collateral(3)

Net

Amount

(Dollars in millions)

Assets:

OTC risk management derivatives. . . . . . . . $ 2,756 $ (2,754) $ 2 $ — $ — $ 2

Cleared risk management derivatives . . . . . — 10 10 — — 10

Mortgage commitment derivatives . . . . . . . . 277 — 277 (235) — 42

Total derivative assets . . . . . . . . . . . . . . . . 3,033 (2,744) 289 (4) (235) — 54

Securities purchased under agreements to 

resell or similar arrangements(5)

. . . . . . . . 39,701 — 39,701 — (39,701) —

Total assets . . . . . . . . . . . . . . . . . . . . . . . $ 42,734 $ (2,744) $39,990 $ (235) $ (39,701) $ 54

Liabilities:

OTC risk management derivatives. . . . . . . . $ (3,020) $ 2,867 $ (153) $ — $ — $ (153)

Mortgage commitment derivatives . . . . . . . . (510) — (510) 235 235 (40)

Total derivative liabilities . . . . . . . . . . . . . . (3,530) 2,867 (663)

(4) 235 235 (193)

Securities sold under agreements to

repurchase or similar arrangements. . . . . (451) — (451) — 451 —

Total liabilities . . . . . . . . . . . . . . . . . . . . . $ (3,981) $ 2,867 $ (1,114) $ 235 $ 686 $ (193)
Notes to Condensed Consolidated Financial Statements | Netting Arrangements

Fannie Mae (In conservatorship) First Quarter 2018 Form 10-Q 79

As of December 31, 2017

Gross 

Amount 

Offset (1)

Net Amount

Presented in

our Condensed

Consolidated

Balance Sheets

Amounts Not Offset in our

Condensed Consolidated

Balance Sheets

Gross

Amount

Financial 

Instruments(2) Collateral(3)

Net

Amount

(Dollars in millions)

Assets:

OTC risk management derivatives. . . . . . . . $ 2,479 $ (2,464) $ 15 $ — $ — $ 15

Cleared risk management derivatives . . . . . 1,811 (1,808) 3 — — 3

Mortgage commitment derivatives . . . . . . . . 132 — 132 (117) (1) 14

Total derivative assets . . . . . . . . . . . . . . . . 4,422 (4,272) 150 (4) (117) (1) 32

Securities purchased under agreements to 

resell or similar arrangements(5)

. . . . . . . . 44,670 — 44,670 — (44,670) —

Total assets . . . . . . . . . . . . . . . . . . . . . . . $ 49,092 $ (4,272) $44,820 $ (117) $ (44,671) $ 32

Liabilities:

OTC risk management derivatives. . . . . . . . $ (3,045) $ 2,957 $ (88) $ — $ — $ (88)

Cleared risk management derivatives . . . . . (2,033) 2,022 (11) — 11 —

Mortgage commitment derivatives . . . . . . . . (228) — (228) 117 93 (18)

Total derivative liabilities . . . . . . . . . . . . . . (5,306) 4,979 (327)

(4) 117 104 (106)

Total liabilities . . . . . . . . . . . . . . . . . . . . . $ (5,306) $ 4,979 $ (327) $ 117 $ 104 $ (106)

__________

(1) Represents the effect of the right to offset under legally enforceable master netting arrangements to settle with the same 

counterparty on a net basis, including cash collateral posted and received and accrued interest. 

(2) Mortgage commitment derivative amounts reflect where we have recognized both an asset and a liability with the same 

counterparty under an enforceable master netting arrangement but we have not elected to offset the related amounts in our 

condensed consolidated balance sheets. 

(3) Represents collateral received or posted that has not been offset in our condensed consolidated balance sheets. Does not 

include collateral held or posted in excess of our exposure. The fair value of non-cash collateral we pledged was $1.1 

billion and $747 million as of March 31, 2018 and December 31, 2017, respectively, which the counterparty was permitted 

to sell or repledge. The fair value of non-cash collateral received was $39.7 billion and $44.7 billion, of which $37.3 billion

and $42.5 billion could be sold or repledged as of March 31, 2018 and December 31, 2017, respectively. $451 million of the 

underlying collateral was sold or repledged as of March 31, 2018 compared with none as of December 31, 2017. 

(4) Excludes derivative assets of $26 million and $21 million as of March 31, 2018 and December 31, 2017, respectively, and 

no derivative liabilities as of March 31, 2018 and $1 million as of December 31, 2017 recognized in our condensed 

consolidated balance sheets, respectively, that are not subject to enforceable master netting arrangements.

(5) Includes $25.2 billion in securities purchased under agreements to resell classified as “Cash and cash equivalents” in our 

condensed consolidated balance sheets as of December 31, 2017.

Derivative instruments are recorded at fair value and securities purchased under agreements to resell or similar 

arrangements are recorded at amortized cost in our condensed consolidated balance sheets. For how we 

determine our rights to offset the assets and liabilities presented above with the same counterparty, including 

collateral posted or received, see “Note 14, Netting Arrangements” in our 2017 Form 10-K.

13. 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 
Notes to Condensed Consolidated Financial Statements | Fair Value

Fannie Mae (In conservatorship) First Quarter 2018 Form 10-Q 80

and liabilities based on limited observable inputs or observable inputs for similar assets and liabilities. The lowest 

priority, Level 3, is given to measurements based on unobservable inputs. 

Recurring Changes in Fair Value 

The following tables display our assets and liabilities measured in our condensed consolidated balance sheets at 

fair value on a recurring basis subsequent to initial recognition, including instruments for which we have elected 

the fair value option. 

Fair Value Measurements as of March 31, 2018

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 . . . . . . . . . . . . . . . . . . . . . . $ — $ 1,656 $ 83 $ — $ 1,739

Other agency. . . . . . . . . . . . . . . . . . . . . — 2,347 — — 2,347

Alt-A and subprime private-label

securities . . . . . . . . . . . . . . . . . . . . . — 2,745 — — 2,745

CMBS . . . . . . . . . . . . . . . . . . . . . . . . . . — 8 — — 8

Mortgage revenue bonds . . . . . . . . . . . — — 1 — 1

Non-mortgage-related securities:

U.S. Treasury securities . . . . . . . . . . . . 33,160 — — — 33,160

Other securities . . . . . . . . . . . . . . . . . . . — 97 — — 97

Total trading securities . . . . . . . . . . . . . . . . 33,160 6,853 84 — 40,097

Available-for-sale securities:

Mortgage-related securities:

Fannie Mae . . . . . . . . . . . . . . . . . . . . . . — 1,784 202 — 1,986

Other agency. . . . . . . . . . . . . . . . . . . . . — 327 — — 327

Alt-A and subprime private-label

securities . . . . . . . . . . . . . . . . . . . . . — 644 27 — 671

CMBS . . . . . . . . . . . . . . . . . . . . . . . . . . — 5 — — 5

Mortgage revenue bonds . . . . . . . . . . . — — 539 — 539

Other . . . . . . . . . . . . . . . . . . . . . . . . . . . — 9 351 — 360

Total available-for-sale securities . . . . . . . . — 2,769 1,119 — 3,888

Mortgage loans . . . . . . . . . . . . . . . . . . . . . — 8,993 1,102 — 10,095

Other assets:

Risk management derivatives:

Swaps . . . . . . . . . . . . . . . . . . . . . . . . . . — 2,406 108 — 2,514

Swaptions . . . . . . . . . . . . . . . . . . . . . . . — 243 — — 243

Other . . . . . . . . . . . . . . . . . . . . . . . . . . . — — 25 — 25

Netting adjustment . . . . . . . . . . . . . . . . — — — (2,744) (2,744)

Mortgage commitment derivatives . . . . — 275 2 — 277

Total other assets . . . . . . . . . . . . . . . . . . . . — 2,924 135 (2,744) 315

Total assets at fair value . . . . . . . . . . . $ 33,160 $ 21,539 $ 2,440 $ (2,744) $ 54,395
Notes to Condensed Consolidated Financial Statements | Fair Value

Fannie Mae (In conservatorship) First Quarter 2018 Form 10-Q 81

Fair Value Measurements as of March 31, 2018

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 . . . . . . . . . . . . . . . . . . . . $ — $ 7,503 $ 357 $ — $ 7,860

Total of Fannie Mae. . . . . . . . . . . . . . . . . — 7,503 357 — 7,860

Of consolidated trusts . . . . . . . . . . . . . . . — 28,175 462 — 28,637

Total long-term debt . . . . . . . . . . . . . . . . . . — 35,678 819 — 36,497

Other liabilities:

Risk management derivatives:

Swaps . . . . . . . . . . . . . . . . . . . . . . . . . . — 2,697 — — 2,697

Swaptions . . . . . . . . . . . . . . . . . . . . . . . — 322 — — 322

Other . . . . . . . . . . . . . . . . . . . . . . . . . . . — — 1 — 1

Netting adjustment . . . . . . . . . . . . . . . . — — — (2,867) (2,867)

Mortgage commitment derivatives. . . . . . — 509 1 — 510

Total other liabilities . . . . . . . . . . . . . . . . . . — 3,528 2 (2,867) 663

Total liabilities at fair value. . . . . . . . . . . $ — $ 39,206 $ 821 $ (2,867) $ 37,160
Notes to Condensed Consolidated Financial Statements | Fair Value

Fannie Mae (In conservatorship) First Quarter 2018 Form 10-Q 82

Fair Value Measurements as of December 31, 2017

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 . . . . . . . . . . . . . . . . . . . . . . $ — $ 2,905 $ 971 $ — $ 3,876

Other agency. . . . . . . . . . . . . . . . . . . . . — 1,083 35 — 1,118

Alt-A and subprime private-label

securities . . . . . . . . . . . . . . . . . . . . . — 259 194 — 453

CMBS . . . . . . . . . . . . . . . . . . . . . . . . . . — 9 — — 9

Mortgage revenue bonds . . . . . . . . . . . — — 1 — 1

Non-mortgage-related securities:

U.S. Treasury securities . . . . . . . . . . . . 29,222 — — — 29,222

Total trading securities . . . . . . . . . . . . . . . . 29,222 4,256 1,201 — 34,679

Available-for-sale securities:

Mortgage-related securities:

Fannie Mae . . . . . . . . . . . . . . . . . . . . . . — 1,911 208 — 2,119

Other agency. . . . . . . . . . . . . . . . . . . . . — 357 — — 357

Alt-A and subprime private-label

securities . . . . . . . . . . . . . . . . . . . . . — 1,237 77 — 1,314

CMBS . . . . . . . . . . . . . . . . . . . . . . . . . . — 15 — — 15

Mortgage revenue bonds . . . . . . . . . . . — — 671 — 671

Other . . . . . . . . . . . . . . . . . . . . . . . . . . . — 10 357 — 367

Total available-for-sale securities . . . . . . . . — 3,530 1,313 — 4,843

Mortgage loans . . . . . . . . . . . . . . . . . . . . . — 9,480 1,116 — 10,596

Other assets:

Risk management derivatives:

Swaps . . . . . . . . . . . . . . . . . . . . . . . . . . — 4,035 146 — 4,181

Swaptions . . . . . . . . . . . . . . . . . . . . . . . — 108 — — 108

Other . . . . . . . . . . . . . . . . . . . . . . . . . . . — — 22 — 22

Netting adjustment . . . . . . . . . . . . . . . . — — — (4,272) (4,272)

Mortgage commitment derivatives. . . . . . — 131 1 — 132

Total other assets . . . . . . . . . . . . . . . . . . . . — 4,274 169 (4,272) 171

Total assets at fair value . . . . . . . . . . . . $ 29,222 $ 21,540 $ 3,799 $ (4,272) $ 50,289
Notes to Condensed Consolidated Financial Statements | Fair Value

Fannie Mae (In conservatorship) First Quarter 2018 Form 10-Q 83

Fair Value Measurements as of December 31, 2017

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. . . . . . . . . . . . . . . . . . . . . $ — $ 7,810 $ 376 $ — $ 8,186

Total of Fannie Mae . . . . . . . . . . . . . . . . . — 7,810 376 — 8,186

Of consolidated trusts . . . . . . . . . . . . . . . . — 29,911 582 — 30,493

Total long-term debt. . . . . . . . . . . . . . . . . . . — 37,721 958 — 38,679

Other liabilities:

Risk management derivatives:

Swaps . . . . . . . . . . . . . . . . . . . . . . . . . . . — 4,721 33 — 4,754

Swaptions . . . . . . . . . . . . . . . . . . . . . . . . — 324 — — 324

Other . . . . . . . . . . . . . . . . . . . . . . . . . . . — — 1 — 1

Netting adjustment . . . . . . . . . . . . . . . . . — — — (4,979) (4,979)

Mortgage commitment derivatives . . . . . . — 227 1 — 228

Total other liabilities . . . . . . . . . . . . . . . . . . . — 5,272 35 (4,979) 328

Total liabilities at fair value . . . . . . . . . . . $ — $ 42,993 $ 993 $ (4,979) $ 39,007

__________

(1) Derivative contracts are reported on a gross basis by level. The netting adjustment represents the effect of the legal right to 

offset under legally enforceable master netting arrangements to settle with the same counterparty on a net basis, including 

cash collateral posted and received.
Notes to Condensed Consolidated Financial Statements | Fair Value

Fannie Mae (In conservatorship) First Quarter 2018 Form 10-Q 84

The following tables display a reconciliation of all assets and liabilities measured at fair value on a recurring basis 

using significant unobservable inputs (Level 3). The tables also display gains and losses due to changes in fair 

value, including realized and unrealized gains and losses, recognized in our condensed consolidated statements 

of operations and comprehensive income for Level 3 assets and liabilities. When assets and liabilities are 

transferred between levels, we recognize the transfer as of the end of the period. 

Fair Value Measurements Using Significant Unobservable Inputs (Level 3)

For the Three Months Ended March 31, 2018

Net Unrealized 

Gains (Losses) 

Included in Net 

Income 

Related to 

Assets and 

Liabilities Still 

Held as of 

March 31, 

2018(5)(6)

Total Gains (Losses)

(Realized/Unrealized) 

Balance,

December

31, 2017

Included

in Net

Income

Included in 

Total Other 

Comprehensive 

Income (Loss)(1) Purchases(2) Sales(2) Issues(3) Settlements(3)

Transfers 

out of 

Level 3(4)

Transfers 

into 

Level 3

Balance,

March 31,

2018

(Dollars in millions)

Trading securities:

Mortgage-related:

Fannie Mae . . . . $ 971 $ 171 $ — $ 1 $(1,060) $ — $ — $ — $ — $ 83 $ 1

Other agency . . . 35 (1) — — — — (1) (33) — — —

Alt-A and

subprime

private-label

securities . . . . 194 (85) — — — — (5) (104) — — —

Mortgage

revenue

bonds . . . . . . 1 — — — — — — — — 1 —

Total trading

securities . . . . . . .

$ 1,201 $ 85

(6)(7)

$ — $ 1 $(1,060) $ — $ (6) $ (137) $ — $ 84 $ 1

Available-for-sale

securities:

Mortgage-related:

Fannie Mae . . . . $ 208 $ — $ (4) $ — $ — $ — $ (2) $ — $ — $ 202 $ —

Alt-A and

subprime

private-label

securities . . . . 77 — (45) — — — (1) (4) — 27 —

Mortgage

revenue

bonds . . . . . . 671 11 (13) — (11) — (119) — — 539 —

Other . . . . . . . . . 357 7 (2) — — — (11) — — 351 —

Total available-forsale securities . . .

$ 1,313 $ 18

(7)(8)

$ (64) $ — $ (11) $ — $ (133) $ (4) $ — $ 1,119 $ —

Mortgage loans . . . . $ 1,116 $ 17 (6)(7) $ — $ — $ — $ — $ (48) $ (36) $ 53 $ 1,102 $ 11

Net derivatives . . . . . 134 (58)

(6) — — — — 4 53 — 133 (22)

Long-term debt:

Of Fannie Mae:

Senior floating . . $ (376) $ 19 $ — $ — $ — $ — $ — $ — $ — $ (357) $ 19

Of consolidated

trusts. . . . . . . . .

(582) 3 — — — 1 10 154 (48) (462) 1

Total long-term debt . $ (958) $ 22 (6) $ — $ — $ — $ 1 $ 10 $ 154 $ (48) $ (819) $ 20
Notes to Condensed Consolidated Financial Statements | Fair Value

Fannie Mae (In conservatorship) First Quarter 2018 Form 10-Q 85

Fair Value Measurements Using Significant Unobservable Inputs (Level 3)

For the Three Months Ended March 31, 2017

Net Unrealized 

Gains (Losses) 

Included in Net 

Income 

Related to 

Assets and 

Liabilities Still 

Held as of 

March 31, 

2017(5)(6)

Total Gains (Losses)

(Realized/Unrealized) 

Balance,

December

31, 2016

Included

in Net

Income

Included in 

Total Other 

Comprehensive 

Income (Loss)(1) Purchases(2) Sales(2) Issues(3) Settlements(3)

Transfers

out of

Level 3

Transfers 

into 

Level 3

Balance,

March 31,

2017

(Dollars in millions)

Trading securities:

Mortgage-related:

Fannie Mae . . . . $ 835 $ 3 $ — $ — $ — $ — $ (3) $ (1) $ 22 $ 856 $ 3

Alt-A and

subprime

private-label

securities . . . . 271 8 — — — — (7) — — 272 8

Mortgage

revenue

bonds . . . . . . 21 — — — — — (1) — — 20 —

Total trading

securities . . . . . . .

$ 1,127 $ 11

(6)(7)

$ — $ — $ — $ — $ (11) $ (1) $ 22 $ 1,148 $ 11

Available-for-sale

securities:

Mortgage-related:

Fannie Mae . . . . $ 230 $ 1 $ 1 $ — $ — $ — $ (4) $ (26) $ 30 $ 232 $ —

Other agency . . . 5 — — — (1) — — (4) — — —

Alt-A and

subprime

private-label

securities . . . . 217 — 6 — — — (18) — — 205 —

Mortgage

revenue

bonds . . . . . . 1,272 1 (1) — (12) — (75) — — 1,185 —

Other . . . . . . . . . 429 — 5 — — — (17) — — 417 —

Total available-forsale securities . . .

$ 2,153 $ 2

(7)(8)

$ 11 $ — $ (13) $ — $ (114) $ (30) $ 30 $ 2,309 $ —

Mortgage loans . . . . $ 1,197 $ 8

(6)(7) $ — $ — $ — $ — $ (62) $ (46) $ 52 $ 1,149 $ (1)

Net derivatives . . . . . 44 73

(6) — — — — (8) 5 (1) 113 (9)

Long-term debt:

Of Fannie Mae:

Senior floating . . $ (347) $ (3) $ — $ — $ — $ — $ — $ — $ — $ (350) $ (3)

Of consolidated

trusts. . . . . . . . .

(241) 1 — — — (2) 7 66 (45) (214) 1

Total long-term debt . $ (588) $ (2)

(6) $ — $ — $ — $ (2) $ 7 $ 66 $ (45) $ (564) $ (2)

__________

(1) Gains (losses) included in other comprehensive income (loss) are included in “Changes in unrealized gains on AFS 

securities, net of reclassification adjustments and taxes” in our condensed consolidated statements of operations and 

comprehensive income.

(2) Purchases and sales include activity related to the consolidation and deconsolidation of assets of securitization trusts. 

During the first quarter of 2018, includes the dissolution of a Fannie Mae-wrapped private-label securities trust.

(3) Issues and settlements include activity related to the consolidation and deconsolidation of liabilities of securitization trusts.

(4) Transfers out of Level 3 during the first quarter of 2018 consisted primarily of mortgage loans of consolidated trusts for 

which unobservable inputs used in valuations became less significant. Transfers out of Level 3 also included private-label 

mortgage-related securities backed by Alt-A loans and subprime loans. Prices for these securities were available from 

multiple third-party vendors and demonstrated an increased and sustained level of observability over time. 

(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 “Fair value gains (losses), net” in our condensed consolidated statements of operations and 

comprehensive income.

(7) Gains (losses) are included in “Net interest income” in our condensed consolidated statements of operations and 

comprehensive income.

(8) Gains (losses) are included in “Investment gains (losses), net” in our condensed consolidated statements of operations and 

comprehensive income.
Notes to Condensed Consolidated Financial Statements | Fair Value

Fannie Mae (In conservatorship) First Quarter 2018 Form 10-Q 86

The following tables display valuation techniques and the range and the weighted average of significant 

unobservable inputs for our Level 3 assets and liabilities measured at fair value on a recurring basis. 

Fair Value Measurements as of March 31, 2018

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). . . . . . . . . . . . . . . . . . . . . . . . . . $ 83 Various

Mortgage revenue bonds . . . . . . . . . . . . . 1 Various

Total trading securities . . . . . . . . . . . . . . . . . . $ 84

Available-for-sale securities:

Mortgage-related securities:

Agency(2). . . . . . . . . . . . . . . . . . . . . . . . . . $ 133 Single Vendor Prepayment Speed (%) 100.0 - 168.0 132.3

Spreads (bps) 150.0 - 210.0 176.8

69 Various

Total Agency . . . . . . . . . . . . . . . . . . . . . . . 202

Alt-A and subprime private-label

securities . . . . . . . . . . . . . . . . . . . . . . 27 Various

Mortgage revenue bonds . . . . . . . . . . . . . 428 Single Vendor Spreads (bps) 1.5 - 322.4 55.0

111 Various

Total mortgage revenue bonds . . . . . . . 539

Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 297 Discounted Cash Flow Default Rate (%) 3.0 3.0

Prepayment Speed (%) 1.4 1.4

Severity (%) 50.0 50.0

Spreads (bps) 58.9 - 563.0 560.9

54 Various

Total other . . . . . . . . . . . . . . . . . . . . . . . 351

Total available-for-sale securities . . . . . . . . . . $ 1,119

Net derivatives . . . . . . . . . . . . . . . . . . . . . . . . 107 Dealer Mark

26 Various

Total net derivatives . . . . . . . . . . . . . . . . . . . . $ 133
Notes to Condensed Consolidated Financial Statements | Fair Value

Fannie Mae (In conservatorship) First Quarter 2018 Form 10-Q 87

Fair Value Measurements as of December 31, 2017

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). . . . . . . . . . . . . . . . . . . . . . . . . . $ 971 Single Vendor Prepayment Speed (%) 0.0 - 177.0 160.0

Spreads (bps) 51.5 - 375.0 200.1

35 Various

Total agency. . . . . . . . . . . . . . . . . . . . . . 1,006

Alt-A and subprime private-label

securities . . . . . . . . . . . . . . . . . . . . . . 154 Consensus

40 Various

Total Alt-A and subprime private-label

securities . . . . . . . . . . . . . . . . . . . . . 194

Mortgage revenue bonds . . . . . . . . . . . . . 1 Various

Total trading securities . . . . . . . . . . . . . . . . . . $ 1,201

Available-for-sale securities:

Mortgage-related securities:

Agency(2). . . . . . . . . . . . . . . . . . . . . . . . . . $ 112 Single Vendor Prepayment Speed (%) 0.0 - 175.7 147.1

Spreads (bps) 150.0 - 210.0 182.3

96 Various

Total agency. . . . . . . . . . . . . . . . . . . . . . 208

Alt-A and subprime private-label

securities . . . . . . . . . . . . . . . . . . . . . . 77 Various

Mortgage revenue bonds . . . . . . . . . . . . . 475 Single Vendor Spreads (bps) (17.0) - 248.0 39.0

196 Various

Total mortgage revenue bonds . . . . . . . 671

Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 325 Discounted Cash Flow Prepayment Speed (%) 1.6 - 2.5 2.5

Severity (%) 50.0 - 88.0 86.6

Spreads (bps) 84.8 - 607.0 577.9

32 Various

Total other . . . . . . . . . . . . . . . . . . . . . . . 357

Total available-for-sale securities . . . . . . . . . . $ 1,313

Net derivatives . . . . . . . . . . . . . . . . . . . . . . . . $ 113 Dealer Mark

21 Various

Total net derivatives . . . . . . . . . . . . . . . . . . . . $ 134

_________

(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. The prepayment speed used for 

trading agency securities and available-for-sale agency securities is the Public Securities Association prepayment speed, 

which can be greater than 100%. For all other securities, the Conditional Prepayment Rate is used as the prepayment 

speed, which can be between 0% and 100%.

(2) Includes Fannie Mae and Freddie Mac securities.

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 held as of March 31, 2018 or December 31, 2017 that were measured at fair 

value on a nonrecurring basis. We held $238 million and $14 million in 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, 2018 and December 31, 2017, respectively.
Notes to Condensed Consolidated Financial Statements | Fair Value

Fannie Mae (In conservatorship) First Quarter 2018 Form 10-Q 88

The following table displays valuation techniques for our Level 3 assets measured at fair value on a nonrecurring 

basis. The significant unobservable inputs related to these techniques primarily relate to collateral dependent 

valuations. The related ranges and weighted averages are not meaningful when aggregated as they vary 

significantly from property to property. 

Fair Value Measurements 

as of

Valuation Techniques

March 31,

2018

December 31,

2017

(Dollars in millions)

Nonrecurring fair value measurements:

Mortgage loans held for sale, at lower of cost or fair

value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Single Vendor $ 4,035 $ 1,880

Consensus 1,944 1,113

Total mortgage loans held for sale, at lower of cost or

fair value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,979 2,993

Single-family mortgage loans held for investment, at

amortized cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Internal Model 838 1,623

Multifamily mortgage loans held for investment, at

amortized cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Asset Manager Estimate 88 163

Various 12 32

Total multifamily mortgage loans held for investment, at

amortized cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100 195

Acquired property, net:(1)

Single-family . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Accepted Offers 217 218

Appraisals 371 438

Walk Forwards 161 222

Internal Model 248 319

Various 70 113

Total single-family . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,067 1,310

Multifamily . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Various 14 19

Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Various — 2

Total nonrecurring assets at fair value. . . . . . . . . . . . . . . . $ 7,998 $ 6,142

__________

(1) The most commonly used techniques in our valuation of acquired property are proprietary home price model and thirdparty valuations (both current and walk forward). Based on the number of properties measured as of March 31, 2018, these 

methodologies comprised approximately 73% of our valuations, while accepted offers comprised approximately 21% of our 

valuations. Based on the number of properties measured as of December 31, 2017, these methodologies comprised 

approximately 77% of our valuations, while accepted offers comprised approximately 18% of our valuations.

We use valuation techniques that maximize the use of observable inputs and minimize the use of unobservable 

inputs. See “Note 15, Fair Value” in our 2017 Form 10-K for information on the valuation control processes and 

the valuation techniques we use for fair value measurement and disclosure as well as our basis for classifying 

these measurements as Level 1, Level 2 or Level 3 of the valuation hierarchy in more specific situations. We 

made no material changes to the valuation control processes or the valuation techniques for the three months 

ended March 31, 2018. 
Notes to Condensed Consolidated Financial Statements | Fair Value

Fannie Mae (In conservatorship) First Quarter 2018 Form 10-Q 89

Fair Value of Financial Instruments

The following table displays the carrying value and estimated fair value of our financial instruments. The fair value 

of financial instruments we disclose includes commitments to purchase multifamily and single-family mortgage 

loans that we do not record in our condensed consolidated balance sheets. The fair values of these commitments 

are included as “Mortgage loans held for investment, net of allowance for loan losses.” The disclosure excludes all 

non-financial instruments; therefore, the fair value of our financial assets and liabilities does not represent the 

underlying fair value of our total consolidated assets and liabilities.

As of March 31, 2018

Carrying

Value

Quoted

Prices in

Active

Markets

for

Identical

Assets

(Level 1)

Significant

Other

Observable

Inputs

(Level 2)

Significant

Unobservable

Inputs

(Level 3)

Netting

Adjustment

Estimated

Fair Value

(Dollars in millions)

Financial assets:

Cash and cash equivalents and

restricted cash . . . . . . . . . . . . . . . . . $ 37,360 $ 37,360 $ — $ — $ — $ 37,360

Federal funds sold and securities

purchased under agreements to

resell or similar arrangements . . . . . 39,701 — 39,701 — — 39,701

Trading securities. . . . . . . . . . . . . . . . . 40,097 33,160 6,853 84 — 40,097

Available-for-sale securities . . . . . . . . . 3,888 — 2,769 1,119 — 3,888

Mortgage loans held for sale . . . . . . . . 11,366 — 854 11,263 — 12,117

Mortgage loans held for investment,

net of allowance for loan losses . . . . 3,186,420 — 2,894,286 260,346 — 3,154,632

Advances to lenders . . . . . . . . . . . . . . 3,834 — 3,832 2 — 3,834

Derivative assets at fair value . . . . . . . 315 — 2,924 135 (2,744) 315

Guaranty assets and buy-ups . . . . . . . 156 — — 428 — 428

Total financial assets . . . . . . . . . . . . . . $ 3,323,137 $ 70,520 $ 2,951,219 $ 273,377 $ (2,744) $ 3,292,372

Financial liabilities:

Federal funds purchased and

securities sold under agreements to

repurchase . . . . . . . . . . . . . . . . . . . . $ 451 $ — $ 451 $ — $ — $ 451

Short-term debt:

Of Fannie Mae . . . . . . . . . . . . . . . . 34,506 — 34,510 — — 34,510

Of consolidated trusts. . . . . . . . . . . 378 — — 377 — 377

Long-term debt:

Of Fannie Mae . . . . . . . . . . . . . . . . 230,895 — 235,458 824 — 236,282

Of consolidated trusts. . . . . . . . . . . 3,074,693 — 2,978,606 40,355 — 3,018,961

Derivative liabilities at fair value. . . . . . 663 — 3,528 2 (2,867) 663

Guaranty obligations . . . . . . . . . . . . . . 169 — — 188 — 188

Total financial liabilities . . . . . . . . . . . . $ 3,341,755 $ — $ 3,252,553 $ 41,746 $ (2,867) $ 3,291,432
Notes to Condensed Consolidated Financial Statements | Fair Value

Fannie Mae (In conservatorship) First Quarter 2018 Form 10-Q 90

As of December 31, 2017

Carrying

Value

Quoted

Prices in

Active

Markets

for

Identical

Assets

(Level 1)

Significant

Other

Observable

Inputs

(Level 2)

Significant

Unobservable

Inputs

(Level 3)

Netting

Adjustment

Estimated

Fair Value

(Dollars in millions)

Financial assets:

Cash and cash equivalents and

restricted cash . . . . . . . . . . . . . . . . . $ 60,260 $ 35,060 $ 25,200 $ — $ — $ 60,260

Federal funds sold and securities

purchased under agreements to

resell or similar arrangements . . . . . 19,470 — 19,470 — — 19,470

Trading securities. . . . . . . . . . . . . . . . . 34,679 29,222 4,256 1,201 — 34,679

Available-for-sale securities . . . . . . . . . 4,843 — 3,530 1,313 — 4,843

Mortgage loans held for sale . . . . . . . . 4,988 — 101 5,333 — 5,434

Mortgage loans held for investment,

net of allowance for loan losses . . . . 3,173,537 — 2,886,470 315,719 — 3,202,189

Advances to lenders . . . . . . . . . . . . . . 4,938 — 4,936 2 — 4,938

Derivative assets at fair value . . . . . . . 171 — 4,274 169 (4,272) 171

Guaranty assets and buy-ups . . . . . . . 149 — — 436 — 436

Total financial assets . . . . . . . . . . . . . . $ 3,303,035 $ 64,282 $ 2,948,237 $ 324,173 $ (4,272) $ 3,332,420

Financial liabilities:

Short-term debt:

Of Fannie Mae . . . . . . . . . . . . . . . . $ 33,377 $ — $ 33,379 $ — $ — $ 33,379

Of consolidated trusts. . . . . . . . . . . 379 — — 378 — 378

Long-term debt:

Of Fannie Mae . . . . . . . . . . . . . . . . 243,375 — 249,780 837 — 250,617

Of consolidated trusts. . . . . . . . . . . 3,052,923 — 3,014,250 40,683 — 3,054,933

Derivative liabilities at fair value. . . . . . 328 — 5,272 35 (4,979) 328

Guaranty obligations . . . . . . . . . . . . . . 258 — — 456 — 456

Total financial liabilities . . . . . . . . . . . . $ 3,330,640 $ — $ 3,302,681 $ 42,389 $ (4,979) $ 3,340,091

For a detailed description and classification of our financial instruments, see “Note 15, Fair Value” in our 2017

Form 10-K.

Fair Value Option

We elected the fair value option for our credit risk sharing debt securities issued under our CAS series issued 

prior to January 1, 2016 and certain loans and debt 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. 

Interest income for the mortgage loans is recorded in “Interest income—Mortgage loans” and interest expense for 

the debt instruments is recorded in “Interest expense—Long-term debt” in our condensed consolidated 

statements of operations and comprehensive income. 
Notes to Condensed Consolidated Financial Statements | Fair Value

Fannie Mae (In conservatorship) First Quarter 2018 Form 10-Q 91

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, 2018 December 31, 2017

Loans(1)

Long-Term

Debt of

Fannie Mae

Long-Term Debt

of Consolidated

Trusts Loans(1)

Long-Term

Debt of

Fannie Mae

Long-Term Debt

of Consolidated

Trusts

(Dollars in millions)

Fair value. . . . . . . . . . . . . . $10,095 $ 7,860 $ 28,637 $10,596 $ 8,186 $ 30,493

Unpaid principal balance . . 9,932 7,052 26,286 10,246 7,368 27,717

__________

(1) Includes nonaccrual loans with a fair value of $213 million and $227 million as of March 31, 2018 and December 31, 2017, 

respectively. The difference between unpaid principal balance and the fair value of these nonaccrual loans as of March 31, 

2018 and December 31, 2017 was $36 million and $46 million, respectively. Includes loans that are 90 days or more past 

due with a fair value of $158 million and $159 million as of March 31, 2018 and December 31, 2017, respectively. The 

difference between unpaid principal balance and the fair value of these 90 or more days past due loans as of March 31, 

2018 and December 31, 2017 was $28 million and $34 million, respectively.

Changes in Fair Value under the Fair Value Option Election

We recorded losses of $149 million and gains of $42 million for the three months ended March 31, 2018 and 

2017, respectively, from changes in the fair value of loans recorded at fair value in “Fair value gains (losses), net” 

in our condensed consolidated statements of operations and comprehensive income.

We recorded gains of $254 million and losses of $169 million for the three months ended March 31, 2018 and 

2017, respectively, from changes in the fair value of long-term debt recorded at fair value in “Fair value gains 

(losses), net” in our condensed consolidated statements of operations and comprehensive income.

14. 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, accruals 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. 

We establish an accrual only for matters when a loss is probable and we can reasonably estimate the amount of 

such loss. We are often unable to estimate the possible losses or ranges of losses, particularly for proceedings 

that are in their early stages of development, where plaintiffs seek indeterminate or unspecified damages, where 

there may be novel or unsettled legal questions relevant to the proceedings, or where settlement negotiations 

have not occurred or progressed.

Given the uncertainties involved in any action or proceeding, regardless of whether we have established an 

accrual, the ultimate resolution of certain of these matters may be material to our operating results for a particular 

period, depending on, among other factors, the size of the loss or liability imposed and the level of our net income 

or loss for that period. 
Notes to Condensed Consolidated Financial Statements | Commitments and Contingencies

Fannie Mae (In conservatorship) First Quarter 2018 Form 10-Q 92

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.

Senior Preferred Stock Purchase Agreements Litigation

A consolidated class action and two non-class action lawsuits filed by Fannie Mae and Freddie Mac shareholders 

are pending in the U.S. District Court for the District of Columbia against us, FHFA as our conservator, and 

Freddie Mac that challenge the August 2012 amendment to each company’s senior preferred stock purchase 

agreement with Treasury. In the consolidated class action (“In re Fannie Mae/Freddie Mac Senior Preferred Stock 

Purchase Agreement Class Action Litigations”), plaintiffs filed an amended complaint on November 1, 2017 that 

alleges the net worth sweep dividend provisions of the senior preferred stock that were implemented pursuant to 

the August 2012 amendments nullified certain of the shareholders’ rights, particularly the right to receive 

dividends. Plaintiffs allege claims for breach of contract, breach of the implied covenant of good faith and fair 

dealing, breach of fiduciary duties, and violations of Delaware and Virginia corporate law against us, FHFA and 

Freddie Mac, and breach of fiduciary duties claims derivatively on our and Freddie Mac’s behalf against FHFA. 

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. The 

defendants moved to dismiss the amended complaint on January 10, 2018.

In the two non-class action suits, Arrowood Indemnity Company v. Fannie Mae and Fairholme Funds v. FHFA, the 

plaintiffs, Fannie Mae and Freddie Mac preferred shareholders, filed amended complaints on November 1, 2017 

against us, FHFA as our conservator, the Director of FHFA (in his official capacity) and Freddie Mac alleging that 

the net worth sweep dividend provisions nullified certain rights of the preferred shareholders, particularly the right 

to receive dividends, and exceeded FHFA’s statutory authority. Plaintiffs bring claims for breach of contract, 

breach of the implied covenant of good faith and fair dealing, breach of fiduciary duties and violations of Delaware 

and Virginia corporate law. They also assert claims for violation of the Administrative Procedure Act against FHFA. 

Plaintiffs seek damages, equitable and injunctive relief, and costs and expenses, including attorneys’ fees. The 

defendants moved to dismiss both amended complaints on January 10, 2018.

Plaintiffs in all three cases filed the amended complaints after the U.S. Court of Appeals for the D.C. Circuit issued 

a ruling on February 21, 2017 that affirmed in part and reversed in part the district court’s dismissal of the 

plaintiffs’ original complaints. In addition to filing the amended complaints, plaintiffs also filed petitions for certiorari 

with the United States Supreme Court on October 16, 2017 seeking review of the Court of Appeals’ rulings that 

plaintiffs could not pursue claims alleging violation of the Administrative Procedure Act and no conflict existed in 

allowing FHFA to decide whether to pursue derivative claims on behalf of Fannie Mae and Freddie Mac while they 

are in conservatorship. The Supreme Court denied those petitions on February 20, 2018.

On August 2, 2017, shareholder David J. Voacolo filed a lawsuit, Voacolo v. Fannie Mae, in the U.S. District Court 

for the District of New Jersey against Fannie Mae and the United States alleging 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 were a violation of due process and an illegal 

exaction. Plaintiff seeks damages only. The defendants filed motions to dismiss on March 26, 2018.

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.
Quantitative and Qualitative Disclosures about Market Risk

Fannie Mae First Quarter 2018 Form 10-Q 93

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, 2018, 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, 2018 or as of the date of filing this 

report.

Our disclosure controls and procedures were not effective as of March 31, 2018 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, 

2018 or as of the date of this filing, and we continue to have a material weakness in our internal control over 

financial reporting. This material weakness is described in more detail below under “Description of Material 

Weakness.” Based on discussions with FHFA and the structural nature of this material weakness, we do not 

expect to remediate this material weakness while we are under conservatorship.

Description of Material Weakness

The Public Company Accounting Oversight Board’s Auditing Standard 2201 defines a material weakness as a 

deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a 

reasonable possibility that a material misstatement of the company’s annual or interim financial statements will not 

be prevented or detected on a timely basis.

Management has determined that we continued to have the following material weakness as of March 31, 2018

and as of the date of filing this report:

• Disclosure Controls and Procedures. We have been under the conservatorship of FHFA since 

September 6, 2008. Under the GSE Act, FHFA is an independent agency that currently functions as both 

our conservator and our regulator with respect to our safety, soundness and mission. Because of the 

nature of the conservatorship under the GSE Act, which places us under the “control” of FHFA (as that term 

is defined by securities laws), some of the information that we may need to meet our disclosure obligations 

may be solely within the knowledge of FHFA. As our conservator, FHFA has the power to take actions 
Controls and Procedures

Fannie Mae First Quarter 2018 Form 10-Q 94

without our knowledge that could be material to our shareholders and other stakeholders, and could 

significantly affect our financial performance or our continued existence as an ongoing business. Although 

we and FHFA attempted to design and implement disclosure policies and procedures that would account 

for the conservatorship and accomplish the same objectives as a disclosure controls and procedures policy 

of a typical reporting company, there are inherent structural limitations on our ability to design, implement, 

test or operate effective disclosure controls and procedures. As both our regulator and our conservator 

under the GSE 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, 2018 or as of the date of filing this report. Based on discussions with 

FHFA and the structural nature of this weakness, we do not expect to remediate this material weakness 

while we are under conservatorship.

Mitigating Actions Related to Material Weakness

As described above under “Description of Material Weakness,” we continue to have a material weakness in our 

internal control over financial reporting relating to our disclosure controls and procedures. However, we and FHFA

have engaged in the following practices intended to permit accumulation and communication to management of 

information needed to meet our disclosure obligations under the federal securities laws:

• FHFA has established the Division of Conservatorship, 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, 2018 (“First Quarter 2018 Form 10-Q”), 

and engaged in discussions regarding issues associated with the information contained in those filings. 

Prior to filing our First Quarter 2018 Form 10-Q, FHFA provided Fannie Mae management with a written 

acknowledgment that it had reviewed the First Quarter 2018 Form 10-Q, and it was not aware of any 

material misstatements or omissions in the First Quarter 2018 Form 10-Q and had no objection to our 

filing the First Quarter 2018 Form 10-Q.

• The Director of FHFA and our Chief Executive Officer have been in frequent communication and meet on 

a regular basis.

• FHFA representatives attend meetings frequently with various groups within the company to enhance the 

flow of information and to provide oversight on a variety of matters, including accounting, credit and 

market risk management, external communications and legal matters.

• Senior officials within FHFA’s Office of the Chief Accountant have met frequently with our senior finance 

executives regarding our accounting policies, practices and procedures.

Changes in Internal Control Over Financial Reporting

Overview

Management has evaluated, with the participation of our Chief Executive Officer and Chief Financial Officer, 

whether any changes in our internal control over financial reporting that occurred during our last fiscal quarter 

have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. 

Below we describe changes in our internal control over financial reporting since December 31, 2017 that 

management believes have materially affected, or are reasonably likely to materially affect, our internal control 

over financial reporting.
Controls and Procedures

Fannie Mae First Quarter 2018 Form 10-Q 95

In the ordinary course of business, we review our system of internal control over financial reporting and make 

changes that we believe will improve these controls and increase efficiency, while continuing to ensure that we 

maintain effective internal controls. Changes may include implementing new, more efficient systems, automating 

manual processes, updating existing systems and retiring legacy systems. For example, we are currently 

implementing various financial system applications in stages across the company. As we continue to implement 

these financial system applications, each implementation may become a significant component of our internal 

control over financial reporting and prior components of our internal control over financial reporting may be retired. 

Additionally, we are working on an initiative to consolidate and modernize our data infrastructure and retire legacy 

data warehouses, which will impact some of our financial system applications and result in changes in our internal 

control over financial reporting.

Implementation of New Treasury Accounting System

In January 2018, we completed an initiative to simplify our accounting for debt, derivatives and other investment 

portfolio transactions by implementing a third-party treasury accounting system. This new system replaced our 

legacy system that was previously used for accounting and financial reporting purposes. In connection with this 

implementation and related business process changes, we replaced multiple existing internal controls that were 

previously considered effective with new or enhanced controls, amended existing controls and, in some cases, 

removed controls that were no longer applicable. We will continue to monitor and test these new controls for 

adequate design and operating effectiveness. This new system was operating during the first quarter of 2018 and 

was used to prepare our first quarter 2018 condensed consolidated financial statements included in this report.

Integration of Nonperforming Loans into the Single-Family Mortgage Loan Accounting 

Platform

In April 2018, we completed an initiative to integrate our accounting for nonperforming loans into our existing 

single-family performing loan accounting platform. As a result of this initiative, we redesigned, removed or 

replaced multiple existing internal controls that were previously considered effective with new controls. Because 

this initiative was not completed until April 2018, we continued to use our legacy single-family nonperforming loan 

accounting systems and controls in preparing our first quarter 2018 condensed consolidated financial statements 

included in this report.
Other Information

Fannie Mae First Quarter 2018 Form 10-Q 96

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 2017 Form 10-K. We also provide information regarding material legal proceedings in 

“Note 14, 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 establish an accrual for legal claims only when a loss is probable and we can reasonably estimate the amount 

of such loss. The actual costs of resolving legal claims may be substantially higher or lower than the amounts 

accrued for those claims. If certain of these matters are determined against us, FHFA or Treasury, it could have a 

material adverse effect on our results of operations, liquidity and financial condition, including our net worth. 

Senior Preferred Stock Purchase Agreements Litigation 

Between June 2013 and June 2017, preferred and common stockholders of Fannie Mae and Freddie Mac filed 

lawsuits in multiple federal courts against one or more of the United States, Treasury and FHFA, challenging 

actions taken by the defendants relating to the 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, the payment of dividends to Treasury under the net worth sweep 

dividend provisions, and FHFA’s decision to require Fannie Mae and Freddie Mac to draw funds from Treasury in 

order to pay dividends to Treasury prior to the August 2012 amendments. The plaintiffs seek various forms of 

equitable and injunctive relief, including rescission of the August 2012 amendments, as well as damages. The 

cases that remain pending or were terminated after December 31, 2017 are as follows:

District of Columbia. There are currently three cases pending in the U.S. District Court for the District of Columbia 

that have been consolidated for pretrial proceedings. The court initially dismissed these three cases, and a fourth 

case, in September 2014. All of the plaintiffs filed a notice of appeal. On February 21, 2017, the Court of Appeals 

for the District of Columbia Circuit affirmed in part and reversed in part the district court’s dismissal of the three 

currently pending cases, and affirmed the district court’s dismissal of the fourth case. On July 17, 2017, the Court 

of Appeals issued a revised opinion allowing certain plaintiffs to pursue claims the original opinion had found not 

properly preserved, and modifying its discussion of the standard that applies to one of those claims. On 

October 16, 2017, the plaintiffs in all four cases filed petitions for certiorari with the United States Supreme Court 

seeking review of the Court of Appeals’ ruling upholding the district court’s dismissal of certain claims. The 

Supreme Court denied these petitions on February 20, 2018. Certain plaintiffs filed amended complaints in the 

district court on November 1, 2017. The defendants moved to dismiss those complaints on January 10, 2018. 

Fannie Mae is a defendant in the three actions pending in the U.S. District Court for the District of Columbia, 

which are described in “Note 14, Commitments and Contingencies.”

Northern District of Illinois. On March 20, 2017, the U.S. District Court for the Northern District of Illinois dismissed 

the case pending before it. The plaintiff filed a notice of appeal and the appeal was docketed on April 27, 2017. 

Northern District of Iowa. On March 27, 2017, the U.S. District Court for the Northern District of Iowa dismissed 

the case pending before it. The plaintiff filed a notice of appeal and the appeal was docketed on April 4, 2017.

Southern District of Texas. On May 22, 2017, the U.S. District Court for the Southern District of Texas dismissed 

the case pending before it. The plaintiff filed a notice of appeal and the appeal was docketed on May 30, 2017.

Western District of Michigan and District of Minnesota. On June 1, 2017 and June 22, 2017, preferred and 

common stockholders of Fannie Mae and Freddie Mac filed complaints for declaratory and injunctive relief against 

FHFA and Treasury in the U.S. District Court for the Western District of Michigan and the U.S. District Court for 

the District of Minnesota. The complaints, which also ask the courts to set aside the net worth sweep dividend 

provisions of the senior preferred stock purchase agreements, allege that FHFA’s structure violates constitutional 

requirements, including: presidential removal authority; separation of powers; the appointments clause; the 
Other Information

Fannie Mae First Quarter 2018 Form 10-Q 97

nondelegation doctrine; and the private nondelegation doctrine. FHFA and Treasury moved to dismiss the 

Michigan case on September 9, 2017 and the Minnesota case on September 15, 2017. 

District of New Jersey. On August 2, 2017, shareholder David J. Voacolo filed a lawsuit against Fannie Mae and 

the United States in the U.S. District Court for the District of New Jersey alleging that the net worth sweep 

dividend provisions of the senior preferred stock that were implemented in August 2012 were a violation of due 

process and an illegal exaction. Plaintiff seeks damages only. The defendants filed motions to dismiss on March 

26, 2018.

U.S. Court of Federal Claims. 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 both derivatively and directly against the 

United States. Plaintiffs in Rafter also allege direct and derivative breach of contract claims against the 

government. Plaintiffs in Fisher request just compensation to Fannie Mae in an unspecified amount. Plaintiffs in 

Rafter seek just compensation for themselves on their direct claims and payment of damages to Fannie Mae on 

their derivative claims. The United States filed a motion to dismiss the Fisher case on January 23, 2014; however, 

the court stayed proceedings in the Fisher and Rafter cases until discovery concluded in a related case, 

Fairholme Funds v. United States. That discovery is complete, and the plaintiffs filed amended complaints, under 

seal, on March 8, 2018.

District of Delaware. Fannie Mae is also a nominal defendant in a case filed against FHFA and Treasury in the 

U.S. District Court for the District of Delaware: Jacobs v. FHFA, filed on August 17, 2015. The 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 agreements violate Delaware law. The plaintiffs are pursuing this claim 

derivatively on behalf of Fannie Mae and directly against the government. The court dismissed the case on 

November 27, 2017. The plaintiffs filed a notice of appeal and the appeal was docketed on December 22, 2017.

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 2017 Form 10-K. This section supplements and updates that discussion. Please 

also refer to “MD&A—Risk Management” in this report and in our 2017 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 forward-looking 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 2017 Form 10-K, we face risks and uncertainties not 

currently known to us or that we currently believe are immaterial. 

The Single Security Initiative may adversely affect our financial results and contribute to declines in the 

liquidity or market value of our MBS. The Single Security Initiative also increases our counterparty credit 

risk and operational risk.

In 2014, FHFA directed Fannie Mae and Freddie Mac to develop a single common mortgage-backed security that 

is fungible with then-outstanding Fannie Mae guaranteed mortgage pass-through certificates and Freddie Mac 

Participation Certificates (“Freddie Mac PCs”). The security to be developed will be known as a Uniform 

Mortgage-Backed Security or UMBS. The FHFA initiative to develop a UMBS (the “Single Security Initiative”) is 

intended to maximize liquidity for both Fannie Mae and Freddie Mac mortgage-backed securities in the “to-beannounced” or TBA market. In March 2018, FHFA announced that Fannie Mae and Freddie Mac will start issuing 

UMBS in place of their current offerings of TBA-eligible mortgage-backed securities on June 3, 2019. The new 

UMBS will be issued by Fannie Mae and Freddie Mac through their joint venture, Common Securitization 

Solutions, LLC (“CSS”), using the Common Securitization Platform (“CSP”). 

Historically, Fannie Mae MBS have had a trading advantage over comparable Freddie Mac PCs. One of FHFA’s 

stated objectives for the Single Security Initiative is to reduce the costs to Freddie Mac and taxpayers that result 

from differences in liquidity of Fannie Mae MBS and Freddie Mac PCs. As the implementation date of the Single 
Other Information

Fannie Mae First Quarter 2018 Form 10-Q 98

Security Initiative approaches, some Fannie Mae MBS and comparable Freddie Mac PCs are trading closer to or 

at parity. If this trend continues, it could adversely affect our financial results. It is also possible that uncertainty 

surrounding the implementation and overall impact of the Single Security Initiative could contribute to declines in 

the liquidity or market value of our Fannie Mae MBS. 

The Single Security Initiative will also result in our credit and operational exposure to Freddie Mac. Once the 

initiative is implemented, investors will be able to commingle Fannie Mae UMBS and Freddie Mac UMBS in 

resecuritizations. When we resecuritize Freddie Mac UMBS, our guaranty of principal and interest would extend 

to the underlying Freddie Mac UMBS. Accordingly, in the event Freddie Mac were to fail (for credit or operational 

reasons) to make a payment on Freddie Mac UMBS that we resecuritized, we would be responsible for making 

the entire payment on the related Fannie Mae UMBS in order for any of our certificates to be paid. We do not 

intend to limit the amount of resecuritized Freddie Mac UMBS that we guarantee and we do not intend to modify 

our liquidity strategies to address this increased risk. As a result, we could be dependent on Freddie Mac and on 

the senior preferred stock purchase agreements that we and Freddie Mac each have with Treasury to avoid a 

liquidity event or a default under our guaranty. See “Risk Factors” in our 2017 Form 10-K for a discussion of other 

operational risks associated with our implementation of the Single Security Initiative and related internal 

infrastructure upgrades.

Once we begin issuing UMBS, we plan to begin using CSS and the CSP to perform certain operational functions 

associated with issuing and managing these UMBS on our behalf. Accordingly, we will be reliant on CSS and the 

CSP for the operation of many of our securitization activities. Our business activities could be adversely affected 

and the market for Fannie Mae MBS could be disrupted if the CSP were to fail or otherwise become unavailable 

to us or if CSS were unable to perform its obligations to us. Any such failure or unavailability could have a 

significant adverse impact on our business, liquidity, financial condition, net worth and results of operations, and 

could adversely affect the liquidity or market value of our MBS.

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, 2018, 

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 offbalance sheet arrangement. The disclosure must be made in a current report on Form 8-K under Item 2.03 or, if 

the obligation is incurred in connection with certain types of securities offerings, in prospectuses for that offering 

that are filed with the SEC.

Because the securities we issue are exempted securities under the Securities Act of 1933, we do not file 

registration statements or prospectuses with the SEC with respect to our securities offerings. To comply with the 

disclosure requirements of Form 8-K relating to the incurrence of material financial obligations, we report our 

incurrence of these types of obligations either in offering circulars or prospectuses (or supplements thereto) that 

we post on our website or in a current report on Form 8-K that we file with the SEC, in accordance with a “noaction” letter we received from the SEC staff in 2004. In cases where the information is disclosed in a prospectus 

or offering circular posted on our website, the document will be posted on our website within the same time period 

that a prospectus for a non-exempt securities offering would be required to be filed with the SEC.

The website address for disclosure about our debt securities is www.fanniemae.com/debtsearch. From this 

address, investors can access the offering circular and related supplements for debt securities offerings under 

Fannie Mae’s universal debt facility, including pricing supplements for individual issuances of debt securities.

Disclosure about our obligations pursuant to 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 website address solely for your information. Information appearing on our website is not 

incorporated into this report.
Other Information

Fannie Mae First Quarter 2018 Form 10-Q 99

Our Purchases of Equity Securities

We did not repurchase any of our equity securities during the first quarter of 2018.

Dividend Restrictions 

Our payment of dividends is subject to the following restrictions: 

Restrictions Relating to Conservatorship. Our conservator announced on September 7, 2008 that we would not 

pay any dividends on the common stock or on any series of preferred stock, other than the senior preferred stock. 

In addition, FHFA’s regulations relating to conservatorship and receivership operations prohibit us from paying any 

dividends while in conservatorship unless authorized by the Director of FHFA. The Director of FHFA has directed 

us to make dividend payments on the senior preferred stock on a quarterly basis for every dividend period for 

which dividends were payable.

Restrictions Under Senior Preferred Stock Purchase Agreement and Senior Preferred Stock. The senior preferred 

stock purchase agreement prohibits us from declaring or paying any dividends on Fannie Mae equity securities 

(other than the senior preferred stock) without the prior written consent of Treasury. In addition, pursuant to the 

dividend provisions of the senior preferred stock and quarterly directives from our conservator, we are obligated to 

pay Treasury each quarter any dividends declared consisting of the amount, if any, by which our net worth as of 

the end of the immediately preceding fiscal quarter exceeds an applicable capital reserve amount, which is $3.0 

billion effective January 1, 2018. 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 2017

Form 10-K.

Additional Restrictions Relating to Preferred Stock. Payment of dividends on our common stock is also subject to 

the prior payment of dividends on our preferred stock and our senior preferred stock. Payment of dividends on all 

outstanding preferred stock, other than the senior preferred stock, is also subject to the prior payment of 

dividends on the senior preferred stock. 

Statutory Restrictions. Under the GSE Act, FHFA has authority to prohibit capital distributions, including payment 

of dividends, if we fail to meet our capital requirements. If FHFA classifies us as significantly undercapitalized, 

approval of the Director of FHFA is required for any dividend payment. Under the Charter Act and the GSE Act, 

we are not permitted to make a capital distribution if, after making the distribution, we would be undercapitalized. 

The Director of FHFA, however, may permit us to repurchase shares if the repurchase is made in connection with 

the issuance of additional shares or obligations in at least an equivalent amount and will reduce our financial 

obligations or otherwise improve our financial condition. 

Item 3. Defaults Upon Senior Securities

None. 

Item 4. Mine Safety Disclosures

None.

Item 5. Other Information

None.
Other Information

Fannie Mae First Quarter 2018 Form 10-Q 100

Item 6. Exhibits

The exhibits listed below are being filed with or incorporated by reference into this report. 

Item Description

3.1 Fannie Mae Charter Act (12 U.S.C. § 1716 et seq.) as amended through July 21, 2010 

(Incorporated by reference to Exhibit 3.1 to Fannie Mae’s Quarterly Report on Form 10-Q 

(Commission file number 000-50231) for the quarter ended June 30, 2015, filed August 6, 2015.)

3.2 Fannie Mae Bylaws, as amended through July 21, 2016 (Incorporated by reference to Exhibit 3.2 

to Fannie Mae’s Quarterly Report on Form 10-Q (Commission file number 000-50231) for the 

quarter ended June 30, 2016, filed August 4, 2016.)

4.17 Amended and Restated Certificate of Designation of Terms of Variable Liquidation Preference 

Senior Preferred Stock, Series 2008-2, amended and restated as of January 1, 2018 

(Incorporated by reference to Exhibit 4.17 to Fannie Mae’s Annual Report on Form 10-K 

(Commission file number 000-50231) for the year ended December 31, 2017, filed February 14, 

2018.)

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.
Signatures

Fannie Mae First Quarter 2018 Form 10-Q 101

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 3, 2018

By: /s/ David C. Benson

David C. Benson

Executive Vice President and

Chief Financial Officer

Date: May 3, 2018