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, 2017

OR

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

EXCHANGE ACT OF 1934

For the transition period from to 

Commission File No.: 0-50231

Federal National Mortgage Association

(Exact name of registrant as specified in its charter) 

Fannie Mae

Federally chartered corporation 52-0883107

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

3900 Wisconsin Avenue, NW

Washington, DC

20016

(Zip Code)

(Address of principal executive offices)

Registrant’s telephone number, including area code: (800) 2FANNIE (800-232-6643)

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, 2017, there were 1,158,087,567 shares of common stock of the registrant outstanding.
Fannie Mae First Quarter 2017 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 Borrowings and Long-Term Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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

Note 9—Earnings (Loss) Per Share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Note 10—Segment Reporting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Note 11—Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Note 12—Concentrations of Credit Risk . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Note 13—Netting Arrangements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Note 14—Fair Value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Note 15—Commitments and Contingencies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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

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

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

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

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

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

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

Mortgage Credit 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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1

59

60

61

62

65

66

72

74

77

78

79

82

83

84

84

88

90

105

1

1

2

10

12

19

21

22

24

42

48

48

56

57

57

107

107

109

109

110

111

113

113

113

113
Fannie Mae First Quarter 2017 Form 10-Q ii

MD&A TABLE REFERENCE

Table Description Page

1 Summary of Condensed Consolidated Results of Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

2 Analysis of Net Interest Income and Yield . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

3 Rate/Volume Analysis of Changes in Net Interest Income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

4 Fair Value Losses, Net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

5 Changes in Combined Loss Reserves . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

6 Troubled Debt Restructurings and Nonaccrual Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

7 Credit Loss Performance Metrics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18

8 Summary of Condensed Consolidated Balance Sheets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19

9 Summary of Mortgage-Related Securities at Fair Value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20

10 Retained Mortgage Portfolio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21

11 Retained Mortgage Portfolio Profile . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22

12 Composition of Mortgage Credit Book of Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23

13 Single-Family Business Key Performance Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25

14 Single-Family Business Financial Results . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26

15 Representation and Warranty Status of Single-Family Conventional Loans Acquired in

2013-2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28

16 Credit Risk Transfer Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29

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

Acquisition Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30

18 Risk Characteristics of Single-Family Conventional Business Volume and Guaranty Book of

Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32

19 Delinquency Status and Activity of Single-Family Conventional Loans . . . . . . . . . . . . . . . . . . . . . . 35

20 Single-Family Conventional Seriously Delinquent Loan Concentration Analysis . . . . . . . . . . . . . . . 36

21 Statistics on Single-Family Loan Workouts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37

22 Single-Family Foreclosed Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38

23 Multifamily Business Key Performance Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40

24 Multifamily Business Financial Results . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41

25 Multifamily Guaranty Book of Business Key Risk Characteristics . . . . . . . . . . . . . . . . . . . . . . . . . . 42

26 Activity in Debt of Fannie Mae . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44

27 Outstanding Short-Term Borrowings and Long-Term Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46

28 Cash and Other Investments Portfolio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47

29 Mortgage Insurance Coverage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51

30 Interest Rate Sensitivity of Net Portfolio to Changes in Interest Rate Level and Slope of Yield

Curve . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55

31 Derivative Impact on Interest Rate Risk (50 Basis Points) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
MD&A | Introduction

Fannie Mae First Quarter 2017 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 delegated specified authorities to our Board of Directors

and has delegated to management the authority to conduct our day-to-day operations. Our directors do not

have any fiduciary duties to any person or entity except to the conservator and, accordingly, are not obligated

to consider the interests of the company, the holders of our equity or debt securities or the holders of Fannie

Mae MBS unless specifically directed to do so by the conservator. We describe the rights and powers of the

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

impact on shareholders in our Annual Report on Form 10-K for the year ended December 31, 2016 (“2016

Form 10-K”) in “Business—Conservatorship and Treasury Agreements.”

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

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

report and the more detailed information in our 2016 Form 10-K.

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

subject to significant uncertainties and changes in circumstances. Please review “Forward-Looking Statements” 

for more information on the forward-looking statements in this report. Our actual results may differ materially from 

those reflected in our 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 2016 Form 10-K. 

You can find a “Glossary of Terms Used in This Report” in the MD&A of our 2016 Form 10-K. 

Introduction

Fannie Mae is a government-sponsored enterprise (“GSE”) chartered by Congress. We serve as a stable source 

of liquidity for purchases of homes and financing of multifamily rental housing, as well as for refinancing existing 

mortgages. Our role in the market enables qualified borrowers to have reliable access to affordable mortgage 

credit, including a variety of conforming mortgage products such as the prepayable 30-year fixed-rate mortgage 

that protects homeowners from fluctuations in interest rates.

We operate in the secondary mortgage market. We support the liquidity and stability of the U.S. mortgage market 

primarily by securitizing mortgage loans originated by lenders into Fannie Mae mortgage-backed securities that 

we guarantee, which we refer to as Fannie Mae MBS. We also purchase mortgage loans and mortgage-related 

securities, primarily for securitization and sale at a later date. We use the term “acquire” in this report to refer to 

both our securitizations and our purchases of mortgage-related assets. We do not originate loans or lend money 

directly to consumers in the primary mortgage market. 

We remain in conservatorship and 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. In addition, as a result of our agreements with Treasury and directives from our conservator, we 

are not permitted to retain our net worth (other than a limited amount that will decrease to zero in 2018), rebuild 

our capital position or pay dividends or other distributions to stockholders other than Treasury. Our senior 

preferred stock purchase agreement with Treasury also includes covenants that significantly restrict our business 

activities. Congress continues to consider options for reform of the housing finance system, including the GSEs. 

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

actions the Administration or FHFA may take with respect to housing finance reform. We provide additional 

information on the uncertainty of our future, the conservatorship, the provisions of our agreements with Treasury, 

their impact on our business, and recent actions and statements relating to housing finance reform by the 

Administration, Congress and FHFA in our 2016 Form 10-K in “Business—Conservatorship and Treasury 
MD&A | Introduction

Fannie Mae First Quarter 2017 Form 10-Q 2

Agreements,” “Business—Legislation and Regulation—Housing Finance Reform” and “Risk Factors” and in this 

report in “Legislation and Regulation” and “Risk Factors.” 

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

has made a commitment under a senior preferred stock purchase agreement to provide us with funds to maintain 

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

obligations.

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

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

Executive Summary

Summary of Our Financial Performance

We recognized comprehensive income and net income of $2.8 billion in the first quarter of 2017. In comparison, 

we recognized comprehensive income of $936 million in the first quarter of 2016, consisting of net income of $1.1 

billion, partially offset by other comprehensive loss of $200 million. The increase in our net income in the first

quarter of 2017 compared with the first quarter of 2016 was primarily driven by lower fair value losses and higher 

net interest income, partially offset by lower credit-related income. 

The table below highlights our financial results and key performance data. The performance measures shown 

below are discussed in later sections of the MD&A. See “MD&A—Consolidated Results of Operations” for more 

information on our financial results. 
MD&A | Executive Summary

Fannie Mae First Quarter 2017 Form 10-Q 3

Financial Results and Key Performance Data

First Quarter of

2017

First Quarter of

2016

Comprehensive income $2.8 billion $936 million

Net income $2.8 billion $1.1 billion

Net interest income

 

The increase in net interest income was due to an increase in guaranty fee 

income partially offset by a decline in the average balance of our retained 

mortgage portfolio. We receive guaranty fee income as compensation for 

managing the credit risk on loans underlying Fannie Mae MBS held by third 

parties.

$5.3 billion $4.8 billion

Net fair value losses

 

Fair value losses in the first quarter of 2017 were primarily due to losses on 

Connecticut Avenue SecuritiesTM (“CAS”) debt reported at fair value resulting 

from tightening spreads between CAS yields and LIBOR during the quarter. 

These fair value losses were partially offset by gains on risk management 

derivatives primarily due to increases in longer-term swap rates during the first 

quarter of 2017. 

 

Fair value losses in the first quarter of 2016 were primarily due to losses on our 

risk management derivatives resulting from decreases in longer-term swap rates. 

($40 million) ($2.8 billion)

Credit-related income

 

Credit-related income in the first quarter of 2017 was primarily driven by an 

increase in actual and forecasted home prices. 

 

Credit-related income in the first quarter of 2016 was primarily due to decreasing 

interest rates and an increase in actual home prices.

$179 million $850 million

Retained mortgage portfolio as of quarter end $268.8 billion $332.6 billion

Single-family guaranty book of business as of quarter end $2.9 trillion $2.8 trillion

Net worth as of quarter end $3.4 billion $2.1 billion

Capital reserve amount applicable to quarterly dividend payment to Treasury $600 million $1.2 billion

Dividends paid to Treasury in the quarter

 

First quarter 2017 dividend payment was based on our net worth as of December 

31, 2016, less the applicable capital reserve amount.

 

First quarter 2016 dividend payment was based on our net worth as of December 

31, 2015, less the applicable capital reserve amount.

$5.5 billion $2.9 billion

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

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

market through our earnings. These instruments include derivatives and certain securities whose estimated 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. We 

use derivatives to manage the interest rate risk exposure of our net portfolio, which consists of our retained 

mortgage portfolio, cash and other investments portfolio, and outstanding debt of Fannie Mae. Some of these 

financial instruments in our net portfolio are not recorded at fair value in our condensed consolidated financial 

statements, and as a result we may experience accounting gains or losses due to changes in interest rates or 

other market conditions that may not be indicative of the economic interest rate risk exposure of our net portfolio. 

See “Risk Management—Market Risk Management, Including Interest Rate Risk Management” for more 

information. In addition, our credit-related income or expense can vary substantially from period to period based 

on a number of factors such as changes in actual and expected home prices, fluctuations in interest rates, 

borrower payment behavior, the types and volume of our loss mitigation activities, the volume of foreclosures 

completed, and redesignations of loans from held for investment (“HFI”) to held for sale (“HFS”).

Our Strategy and Business Objectives

Our vision is to be America’s most valued housing partner and to provide liquidity, access to credit and 

affordability in all U.S. housing markets at all times, while effectively managing and reducing risk to our business, 

taxpayers and the housing finance system. In support of this vision, we are focused on: 
MD&A | Executive Summary

Fannie Mae First Quarter 2017 Form 10-Q 4

• advancing a sustainable and reliable business model that reduces risk to the housing finance system and 

taxpayers;

• providing reliable, large-scale access to affordable mortgage credit for qualified borrowers and helping 

struggling homeowners; and

• serving customer needs by building a company that is efficient, innovative and continuously improving.

Advancing a sustainable and reliable business model that reduces risk to the housing finance 

system and taxpayers

We have significantly changed our business model since we entered conservatorship in 2008 and our business 

continues to evolve. We have strengthened our underwriting and eligibility standards and transitioned from a 

portfolio-focused business to a guaranty-focused business. In addition, we are transferring an increasing portion 

of the credit risk on our guaranty book of business. These changes have transformed our business model and 

reduced certain risks of our business as compared with our business prior to entering conservatorship. 

Our business also continues to evolve as a result of our many other efforts to build a safer and sustainable 

housing finance system and to pursue the strategic goals identified by our conservator. See “Business—

Legislation and Regulation—Housing Finance Reform—Conservator Developments and Strategic Goals” in our 

2016 Form 10-K for a discussion of some of these efforts and FHFA’s strategic goals for our conservatorship.

Stronger underwriting and eligibility standards 

We strengthened our underwriting and eligibility standards for loans we acquired beginning in late 2008 and 2009. 

These changes improved the credit quality of our single-family guaranty book of business and contributed to 

improvement in our credit performance. As of March 31, 2017, 88% of our single-family conventional guaranty 

book of business consisted of loans acquired since 2009. Our single-family serious delinquency rate has 

decreased each quarter since the first quarter of 2010 and was 1.12% as of March 31, 2017.

__________

* We have acquired HARP loans and other Refi Plus loans under our Refi PlusTM initiative since 2009. Our Refi Plus 

initiative offers refinancing flexibility to eligible borrowers who are current on their loans and whose loans are owned or 

guaranteed by us and meet certain additional criteria. HARP loans, which have loan-to-value (“LTV”) ratios at origination 

greater than 80%, refers to loans we have acquired pursuant to the Home Affordable Refinance Program® (“HARP®”). 

Other Refi Plus loans, which have LTV ratios at origination of 80% or less, refers to loans we have acquired under our 

Refi Plus initiative other than HARP loans. Loans we acquire under Refi Plus and HARP are refinancings of loans that 

were originated prior to June 2009.
MD&A | Executive Summary

Fannie Mae First Quarter 2017 Form 10-Q 5

See “Business Segments—Single-Family Business” for information on our recent single-family acquisitions and 

the credit performance of our single-family mortgage loans.

Transition to a guaranty-focused business

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

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

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

assets. Our retained mortgage portfolio refers to the mortgage-related assets we own (which excludes the portion 

of assets held by consolidated MBS trusts that back mortgage-related securities owned by third parties). 

As shown in the chart below, in recent periods, an increasing portion of our net interest income has been derived 

from guaranty fees, rather than from our retained mortgage portfolio assets. This shift has been driven by both the 

guaranty fee increases we implemented in 2012 and the reduction of our retained mortgage portfolio in 

accordance with the requirements of our senior preferred stock purchase agreement with Treasury and direction 

from FHFA. More than 75% of our net interest income for the first quarter of 2017 was derived from the loans 

underlying our Fannie Mae MBS in consolidated trusts, which primarily generate income through guaranty fees. 

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

__________

* Guaranty fee income reflects the impact of a 10 basis point guaranty fee increase implemented in 2012 pursuant to the 

Temporary Payroll Tax Cut Continuation Act of 2011, the incremental revenue from which is remitted to Treasury and not 

retained by us.

Transferring a portion of the mortgage credit risk on our single-family book of business 

In late 2013, we began entering into credit risk transfer transactions with the goal of transferring, to the extent 

economically sensible, a portion of the mortgage credit risk on some of the recently-acquired loans in our singlefamily book of business in order to reduce the economic risk to us and to taxpayers of future borrower defaults. 

Our primary method of achieving this objective has been through our CAS and Credit Insurance Risk TransferTM

(“CIRT

TM”) transactions. In these transactions, we transfer to investors a portion of the mortgage credit risk 

associated with losses on a reference pool of mortgage loans and in exchange we pay investors a premium that 

effectively reduces the guaranty fee income we retain on the loans. As of March 31, 2017, $723 billion in 

outstanding unpaid principal balance of our single-family loans, or approximately 26% of the loans in our singlefamily conventional guaranty book of business measured by unpaid principal balance, were included in a 
MD&A | Executive Summary

Fannie Mae First Quarter 2017 Form 10-Q 6

reference pool for a credit risk transfer transaction. Over time, we expect that a larger portion of our single-family 

conventional guaranty book of business will be covered by credit risk transfer transactions. 

The chart below shows as of the dates specified the total 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 included in a reference pool for a credit risk transfer transaction.

For further discussion of our credit risk transfer transactions, including information on the portion of the credit risk 

of these loans we have transferred, see “Business Segments—Single-Family Business—Single-Family Mortgage 

Credit Risk Management—Transfer of Mortgage Credit Risk: Credit Risk Transfer Transactions.”

Providing reliable, large-scale access to affordable mortgage credit for qualified borrowers and 

helping struggling homeowners 

We continued to provide reliable, large-scale access to affordable mortgage credit to the U.S. housing market and 

to help struggling homeowners in the first quarter 2017:

• We provided approximately $136 billion in liquidity to the mortgage market in the first quarter of 2017

through our purchases of loans and guarantees of loans and securities. This liquidity enabled borrowers 

to complete approximately 303,000 mortgage refinancings and approximately 233,000 home purchases, 

and provided financing for approximately 202,000 units of multifamily housing. 

• We provided approximately 25,000 loan workouts in the first quarter of 2017 to help homeowners stay in 

their homes or otherwise avoid foreclosure. 

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

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

and who meet certain additional criteria. We acquired approximately 33,000 Refi Plus loans in the first

quarter of 2017. Refinancings delivered to us through Refi Plus in the first quarter of 2017 reduced 

borrowers’ monthly mortgage payments by an average of $213. 

• We support affordability in the multifamily rental market. This has become more challenging in recent 

years as rent growth has outpaced wage growth, causing units once affordable at 120% of area median 

income to be affordable only at higher levels. Approximately 85% of the multifamily units we financed in 

the first quarter of 2017 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. 

Serving customer needs by building a company that is efficient, innovative and continuously 

improving

We are committed to providing our lender customers with the products, services and tools they need to serve the 

housing market more effectively and efficiently, as well as continuing to improve our business processes. For 

information on enhancements we have recently made or are currently working on, see “Business—Executive 

Summary—Our Strategy and Business Objectives” in our 2016 Form 10-K.
MD&A | Executive Summary

Fannie Mae First Quarter 2017 Form 10-Q 7

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 this agreement and the senior preferred 

stock we issued to Treasury in 2008, the Director of FHFA has directed us to pay dividends to Treasury on a 

quarterly basis since entering 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.

__________

(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. Accordingly, the current aggregate liquidation preference of the senior preferred stock is 

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

cash proceeds) and the $116.1 billion we have drawn from Treasury. 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. We have not 

requested a draw for any period since 2012.

We expect to pay Treasury a dividend of $2.8 billion for the second quarter of 2017 by June 30, 2017, calculated 

based on our net worth of $3.4 billion as of March 31, 2017, less the current capital reserve amount of $600 

million. We expect to retain only a limited amount of any future net worth because we are required by the dividend 

provisions of the senior preferred stock and quarterly directives from our conservator to pay Treasury each 

quarter 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. This capital reserve amount is 

$600 million for each quarter of 2017 and will decrease to zero in 2018. These dividend payment provisions are 

referred to as “net worth sweep” dividend provisions. 

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 in order to avoid being placed into receivership. As of the 

date of this filing, the maximum amount of remaining funding under the agreement is $117.6 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 under the agreement. For a description of the terms 
MD&A | Executive Summary

Fannie Mae First Quarter 2017 Form 10-Q 8

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

Conservatorship and Treasury Agreements—Treasury Agreements” in our 2016 Form 10-K. See “Risk Factors” in 

our 2016 Form 10-K for a discussion of the risks associated with our limited and declining capital reserves, and 

“Outlook” in this report for our current expectations about our future financial results.

As described in “Legal Proceedings” and “Note 15, Commitments and Contingencies,” several lawsuits have been 

filed by preferred and common stockholders of Fannie Mae and Freddie Mac 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, including challenges to the net 

worth sweep dividend provisions of the senior preferred stock. We are also a party to some of those lawsuits. We 

cannot predict the course or the outcome of these lawsuits, or the actions the U.S. government (including 

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

2017 Market Share 

We were the largest issuer of single-family mortgage-related securities in the secondary market in the first quarter 

of 2017, with an estimated market share of new single-family mortgage-related securities issuances of 39%, 

compared with 41% in the fourth quarter of 2016 and 37% in the first quarter of 2016. The chart below shows our 

market share of single-family mortgage-related securities issuances in the first quarter of 2017 compared with that 

of our primary competitors.

We remained a continuous source of liquidity in the multifamily market in the first quarter of 2017. We owned or 

guaranteed approximately 19% of the outstanding debt on multifamily properties as of December 31, 2016 (the 

latest date for which information is available). 

Outlook

In this section, we present a number of estimates and expectations regarding our future performance, as well as 

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

current assumptions regarding numerous factors. See “Forward-Looking Statements” and “Risk Factors” in this 

report and in our 2016 Form 10-K for discussions of factors that could cause actual results to differ materially from 

our current estimates and expectations. Due to the large size of our guaranty book of business, even small 

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

Financial Results. We continued to be profitable in the first quarter of 2017, with net income of $2.8 billion. We 

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

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

quarter or year to year. Our future financial results also will be affected by a number of other factors, including: our 

guaranty fee rates; the volume of single-family mortgage originations in the future; the size, composition and 

quality of our retained mortgage portfolio and guaranty book of business; and economic and housing market 

conditions. Although we expect to remain profitable on an annual basis for the foreseeable future, due to our 
MD&A | Executive Summary

Fannie Mae First Quarter 2017 Form 10-Q 9

limited and declining capital reserves (which decrease to zero in 2018) and the potential for significant volatility in 

our financial results, we could experience a net worth deficit in a future quarter. 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.

Our expectations for our future financial results do not take into account the impact on our business of potential 

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

the enactment of housing finance reform legislation, corporate income tax reform legislation and changes in 

accounting standards. For example, the current Administration proposes reducing the U.S. corporate income tax 

rate. Under applicable accounting standards, a significant reduction in the U.S. corporate income tax rate would 

require that we record a substantial reduction in the value of our deferred tax assets in the quarter in which the 

legislation is enacted. Thus, if legislation significantly lowering the U.S. corporate income tax rate is enacted, we 

expect to incur a significant net loss and net worth deficit for the quarter in which the legislation is enacted and we 

could potentially incur a net loss for that year. As noted above, 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 in order to avoid being placed into receivership.

See “Risk Factors” in this report and in our 2016 Form 10-K for discussions of the risks associated with our limited 

and declining capital reserves and the potential impact of legislative and regulatory actions. 

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

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

earned on the assets in our retained mortgage portfolio and the interest expense associated with the debt that 

funds those assets. 

Our guaranty fee revenues consist of two primary components: (1) the base guaranty fees that we receive over 

the life of the loan; and (2) upfront fees we receive at loan acquisition which are amortized over the contractual life 

of the loan. When mortgage loans prepay faster due to a lower interest rate environment, we typically have higher 

amortization income. Conversely, when mortgage loans prepay more slowly due to a higher interest rate 

environment, we typically have lower amortization income. Our guaranty fee revenues increased in recent years 

primarily driven by: (1) loans with higher base guaranty fees comprising a larger part of our guaranty book of 

business; and (2) an increase in amortization income as a lower interest rate environment during portions of these 

years increased prepayments on mortgage loans. We expect loans with lower guaranty fees to continue to 

liquidate from our book of business and be replaced with new loans that typically have higher guaranty fees, 

which will contribute to increasing guaranty fee revenues; however, the impact of this trend on our guaranty fee 

revenues could be offset by lower amortization income if interest rates remain at higher levels and result in lower 

prepayments on mortgage loans. Accordingly, our guaranty fee revenues may remain relatively flat in the near 

term. 

We expect the size of our retained mortgage portfolio to continue to decrease each year to meet the requirements 

of our senior preferred stock purchase agreement with Treasury and FHFA’s additional portfolio cap, which we 

describe in “Business—Conservatorship and Treasury Agreements—Treasury Agreements” in our 2016 10-K. 

These decreases in our retained mortgage portfolio will continue to negatively impact our net interest income and 

net revenues. 

Factors that may affect our future revenues include: changes to guaranty fee pricing we may make in the future 

and their impact on our competitive environment and guaranty fee revenues; economic and housing market 

conditions, including changes in interest rates and home prices; the size, composition and quality of our guaranty 

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

retained mortgage portfolio; our market share; and legislative and regulatory changes.

Overall Market Conditions. While we expect the single-family serious delinquency rate for the overall mortgage 

market will continue to decline, we believe the rate of decline will be gradual. We expect the national single-family 

serious delinquency rate will remain high compared with pre-housing crisis levels because it will take some time 

for the remaining delinquent loans originated prior to 2009 to work their way through the foreclosure process.

We forecast that total originations in the U.S. single-family mortgage market in 2017 will decrease from 2016

levels by approximately 20% from an estimated $1.96 trillion in 2016 to $1.58 trillion in 2017, and that the amount 

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

$949 billion in 2016 to $510 billion in 2017.
MD&A | Executive Summary

Fannie Mae First Quarter 2017 Form 10-Q 10

Home Prices. Based on our home price index, we estimate that home prices on a national basis increased by 

0.5% in the first quarter of 2017. We expect the rate of home price appreciation in 2017 to be slightly lower than 

the rate in 2016. We also expect significant regional variation in the timing and rate of home price growth. 

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

on our loans. Our credit losses were $1.2 billion for the first quarter of 2017, down from $1.6 billion for the first 

quarter of 2016. We expect our credit losses for 2017 to be lower than for 2016, absent further significant 

redesignations of loans from HFI to HFS; however, we expect a significantly smaller decline in credit losses for 

2017 than the decline for 2016. See “Consolidated Results of Operations—Credit-Related Income (Expense)—

Credit Loss Performance Metrics” for a discussion of our credit losses for the first quarter of 2017 and the first 

quarter of 2016.

Loss Reserves. Our allowance for loan losses was $22.1 billion as of March 31, 2017, down from $23.5 billion as 

of December 31, 2016. Our loss reserves declined in recent years and are expected to decline further in 2017; 

however, we expect a smaller decline in our loss reserves in 2017 than the decline in 2016. For a discussion of 

the factors that contributed to the decline in our loss reserves in the first quarter of 2017, see “Consolidated 

Results of Operations—Credit-Related Income (Expense)” and “Consolidated Balance Sheet Analysis—Mortgage 

Loans and Allowance for Loan Losses.”

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 2016 Form 10-K. Also see “Risk Factors” 

in this report and in our 2016 Form 10-K for discussions of risks relating to legislative and regulatory matters.

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” for a discussion of the risks to our business relating to the uncertain future of our 

company.

Single Security Initiative. Since 2014, we, Freddie Mac and FHFA have been working on developing and 

implementing a common mortgage-backed security for Fannie Mae and Freddie Mac. In March 2017, FHFA

announced that implementation of the Single Security Initiative by Fannie Mae and Freddie Mac is planned for the 

second quarter of 2019.

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 

Security Initiative approaches, some Fannie Mae MBS and comparable Freddie Mac PCs are trading closer to or 

at parity. See “Business—Legislation and Regulation—Housing Finance Reform—Conservator Developments and 

Strategic Goals” and “Risk Factors” in our 2016 Form 10-K for more information on the expected features of the 

securities and a discussion of the risks to our business associated with the Single Security Initiative for Fannie 

Mae and Freddie Mac.

The Fannie and Freddie Open Records Act of 2017

On April 27, 2017, the House of Representatives passed, by a vote of 425 to 0, the Fannie and Freddie Open 

Records Act of 2017. If enacted, this bill would subject Fannie Mae and Freddie Mac to the Freedom of 

Information Act, a law that provides the public the right to access records from federal agencies. The bill provides 

an exemption for trade secrets and confidential or privileged commercial or financial information. It is unclear 

whether the Senate will consider this or similar legislation. If this bill were to pass the Senate and be signed into 

law, it could impose substantial operational burdens on us and adversely affect our business. 
MD&A | Legislation and Regulation

Fannie Mae First Quarter 2017 Form 10-Q 11

Housing Goals 

2016 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 2016, we believe we met two of our five single-family benchmarks. The single-family benchmarks we believe 

we did not meet were the low-income families home purchase and refinance benchmarks and the very lowincome families home purchase benchmark. Low-income families are defined as those with income equal to or 

less than 80% of area median income, and very low-income families as those with income equal to or less than 

50% of area median income. In addition, we believe we met our multifamily goal and subgoals for 2016. Final 

performance results will be determined and published by FHFA sometime after the release in the fall of 2017 of 

data reported by primary market originators under the Home Mortgage Disclosure Act. To determine whether we 

met our low-income families home purchase and refinance goals and our very low-income families home 

purchase goal, FHFA will compare our performance with that of the market. We will be in compliance with these 

goals if we meet the applicable market share measures for these goals. 

2017 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 2017), 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 2017, FHFA set the 2017 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 2016 Form 10-K for a more detailed discussion of our housing goals.

Ability to Repay

Regulation Z, which was issued by the Consumer Financial Protection Bureau (the “CFPB”) in 2013 to implement 

a requirement of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”), 

requires lenders to determine a borrower’s “ability to repay” a mortgage loan. The rule offers several options for 

complying, including making loans that meet certain terms and characteristics (referred to as “qualified 

mortgages”). In March 2017, a CFPB official announced that the agency would soon begin its statutorilymandated assessment of the ability to repay and qualified mortgage provisions. The CFPB is required to assess 

the effectiveness of the regulations in light of their stated goals and to publish a report, after public comment, on 

whether to modify, expand or eliminate the regulations. The CFPB’s assessment is due no later than January 10, 

2019. To the extent that this assessment leads to regulatory changes in how lenders comply with the ability to 

repay rules or how loans gain qualified mortgage status, these changes may have a material effect on the quality 

and quantity of loans available for sale to Fannie Mae.
MD&A | Consolidated Results of Operations

Fannie Mae First Quarter 2017 Form 10-Q 12

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.

Table 1: Summary of Condensed Consolidated Results of Operations

For the Three Months

Ended March 31,

2017 2016 Variance

(Dollars in millions)

Net interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 5,346 $ 4,769 $ 577

Fee and other income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 249 203 46

Net revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,595 4,972 623

Investment gains (losses), net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (9) 69 (78)

Fair value losses, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (40) (2,813) 2,773

Administrative expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (684) (688) 4

Credit-related income:

Benefit for credit losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 396 1,184 (788)

Foreclosed property expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (217) (334) 117

Total credit-related income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 179 850 (671)

Temporary Payroll Tax Cut Continuation Act of 2011 (“TCCA”) fees. . . . . . . . . . . . (503) (440) (63)

Other expenses, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (382) (264) (118)

Income before federal income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,156 1,686 2,470

Provision for federal income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,383) (550) (833)

Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,773 $ 1,136 $ 1,637

Total comprehensive income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,779 $ 936 $ 1,843

Net Interest Income

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

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

on the assets in our retained mortgage portfolio and the interest expense associated with the debt that funds 

those assets. 

Guaranty fees consist of two primary components: (1) base guaranty fees that we receive over the life of the loan; 

and (2) upfront fees that we receive at the time of loan acquisition, primarily related to single-family loan level 

pricing adjustments and other fees we receive from lenders, which are amortized over the contractual life of the 

loan. We recognize almost all of our guaranty fee revenue in net interest income due to the consolidation of the 

substantial majority of loans underlying our Fannie Mae MBS in consolidated trusts on our balance sheet. Those 

guaranty fees are the primary component of the difference between the interest income on loans in consolidated 

trusts and the interest expense on the debt of consolidated trusts. 
MD&A | Consolidated Results of Operations

Fannie Mae First Quarter 2017 Form 10-Q 13

Table 2 displays an analysis of our net interest income, average balances, and related yields earned on assets 

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

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

monthly averages. Table 3 displays the change in our net interest income between periods and the extent to 

which that variance is attributable to: (1) changes in the volume of our interest-earning assets and interest-bearing 

liabilities or (2) changes in the interest rates of these assets and liabilities.

Table 2: Analysis of Net Interest Income and Yield

For the Three Months Ended March 31,

2017 2016

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 . . . . . . . . . . . . . . . $ 200,051 $ 2,093 4.18% $ 238,041 $ 2,335 3.92%

Mortgage loans of consolidated trusts . . . . . . . . . 2,923,792 24,954 3.41 2,817,328 24,626 3.50

Total mortgage loans(1)

. . . . . . . . . . . . . . . . . . . . 3,123,843 27,047 3.46 3,055,369 26,961 3.53

Mortgage-related securities, net . . . . . . . . . . . . . . 15,394 142 3.69 26,580 269 4.05

Non-mortgage-related securities(2)

. . . . . . . . . . . . 55,994 101 0.72 50,257 54 0.43

Federal funds sold and securities purchased

under agreements to resell or similar

arrangements . . . . . . . . . . . . . . . . . . . . . . . . . . 40,586 66 0.65 24,195 29 0.48

Advances to lenders . . . . . . . . . . . . . . . . . . . . . . . 4,506 28 2.49 3,546 19 2.12

Total interest-earning assets . . . . . . . . . . . . . . . . . . . $3,240,323 $27,384 3.38% $3,159,947 $27,332 3.46%

Interest-bearing liabilities:

Short-term funding debt . . . . . . . . . . . . . . . . . . . . $ 32,454 $ 43 0.53% $ 60,085 $ 50 0.33%

Long-term funding debt . . . . . . . . . . . . . . . . . . . . 289,791 1,686 2.33 318,944 1,854 2.33

Total funding debt. . . . . . . . . . . . . . . . . . . . . . . . 322,245 1,729 2.15 379,029 1,904 2.01

Debt securities of consolidated trusts held by

third parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,925,290 20,309 2.78 2,800,436 20,659 2.95

Total interest-bearing liabilities. . . . . . . . . . . . . . . . . . $3,247,535 $22,038 2.71% $3,179,465 $22,563 2.84%

Net interest income/net interest yield . . . . . . . . . . . . . $ 5,346 0.66% $ 4,769 0.60%

As of March 31,

2017 2016

Selected benchmark interest rates

3-month LIBOR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.15% 0.63%

2-year swap rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.62 0.84

5-year swap rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.05 1.17

10-year swap rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.38 1.64

30-year Fannie Mae MBS par coupon rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.13 2.57

__________

(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 $216 million for the 

first quarter of 2017 compared with $338 million for the first quarter of 2016.

(2) Includes cash equivalents.
MD&A | Consolidated Results of Operations

Fannie Mae First Quarter 2017 Form 10-Q 14

Table 3: Rate/Volume Analysis of Changes in Net Interest Income

For the Three Months Ended

March 31, 2017 vs. 2016

Total Variance Due to:(1)

Variance Volume Rate

(Dollars in millions)

Interest income:

Mortgage loans of Fannie Mae . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (242) $ (390) $ 148

Mortgage loans of consolidated trusts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 328 917 (589)

Total mortgage loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86 527 (441)

Mortgage-related securities, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (127) (105) (22)

Non-mortgage-related securities(2)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47 7 40

Federal funds sold and securities purchased under agreements to resell or similar

arrangements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37 24 13

Advances to lenders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 6 3

Total interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 52 $ 459 $ (407)

Interest expense:

Short-term funding debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (7) (29) 22

Long-term funding debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (168) (170) 2

Total funding debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (175) (199) 24

Debt securities of consolidated trusts held by third parties . . . . . . . . . . . . . . . . . . . . . (350) 950 (1,300)

Total interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (525) $ 751 $ (1,276)

Net interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 577 $ (292) $ 869

__________

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

(2) Includes cash equivalents.

Net interest income and net interest yield increased in the first quarter of 2017 compared with the first quarter of 

2016 was due to an increase in guaranty fee income driven by: (1) an increase in amortization income in the first

quarter of 2017 due to activity related to increased prepayments on mortgage loans and liquidations of MBS debt 

of consolidated trusts, which accelerated the amortization of cost basis adjustments on the loans and related 

debt; and (2) loans with higher base guaranty fees comprising a larger part of our guaranty book of business in 

the first quarter of 2017 compared with the first quarter of 2016. The increase in net interest income due to higher 

guaranty fee income was partially offset by a decline in the average balance of our retained mortgage portfolio as 

we continued to reduce this portfolio. See “Retained Mortgage Portfolio” for more information.
MD&A | Consolidated Results of Operations

Fannie Mae First Quarter 2017 Form 10-Q 15

Fair Value Losses, Net

Table 4 displays the components of our fair value gains and losses.

Table 4: Fair Value Losses, Net

For the Three Months

Ended March 31,

2017 2016

(Dollars in millions)

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

Net contractual interest expense accruals on interest rate swaps. . . . . . . . . . . . . . . . . . . $ (255) $ (269)

Net change in fair value during the period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 367 (2,102)

Total risk management derivatives fair value gains (losses), net . . . . . . . . . . . . . . . . 112 (2,371)

Mortgage commitment derivatives fair value losses, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . (80) (362)

Total derivatives fair value gains (losses), net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32 (2,733)

Trading securities gains, net. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68 28

CAS debt fair value losses, net(1). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (162) (60)

Other, net(2). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 (48)

Fair value losses, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (40) $ (2,813)

__________

(1) Consists of fair value losses on CAS debt reported at fair value.

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

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

resulting from tightening spreads between CAS yields and LIBOR during the first quarter of 2017. 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 first 

quarter of 2017. 

Fair value losses in the first quarter of 2016 were primarily due to losses on risk management derivatives resulting 

from decreases in the fair value of our pay-fixed derivatives due to declines in longer-term swap rates during the 

first quarter of 2016.

Credit-Related Income (Expense)

We refer to our benefit (provision) for loan losses and benefit (provision) for guaranty losses collectively as our 

“benefit (provision) for credit losses.” Credit-related income (expense) consists of our benefit (provision) for credit 

losses and foreclosed property income (expense).

Benefit for Credit Losses

Our combined loss reserves provide for an estimate of credit losses incurred in our guaranty book of business, 

including concessions we granted borrowers upon modification of their loans. We establish our combined loss 

reserves through our provision for credit losses for losses that we believe have been incurred and will eventually 

be realized over time in our financial statements. When we reduce our combined loss reserves, we recognize a 

benefit for credit losses. When we determine that a loan is uncollectible, typically upon foreclosure or other 

liquidation event (such as a deed-in-lieu of foreclosure or a short sale), we recognize a charge-off against our 

combined loss reserves. For a subset of delinquent single-family loans, we charge off the portion of the loans that 

is deemed uncollectible prior to foreclosure when the loans have been delinquent for a specified length of time 

and meet specified mark-to-market LTV ratios. We also recognize a charge-off upon the redesignation of loans 

from HFI to HFS. We record recoveries of previously charged-off amounts as a reduction to charge-offs.
MD&A | Consolidated Results of Operations

Fannie Mae First Quarter 2017 Form 10-Q 16

Table 5 displays the changes in the combined loss reserves, which consists of the allowance for loan losses and 

the reserve for guaranty losses.

Table 5: Changes in Combined Loss Reserves

For the Three Months

Ended March 31,

2017 2016

(Dollars in millions)

Changes in combined loss reserves:

Beginning balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 23,835 $ 28,590

Benefit for credit losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (396) (1,184)

Charge-offs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,062) (1,303)

Recoveries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 119 165

Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30 64

Ending balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 22,526 $ 26,332

As of

March 31,

2017

December 31,

2016

(Dollars in millions)

Allocation of combined loss reserves:

Balance at end of each period attributable to:

Single-family . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 22,326 $ 23,639

Multifamily . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 200 196

 Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 22,526 $ 23,835

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

applicable guaranty book of business:

Single-family . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.78 % 0.83 %

Multifamily . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.08 0.08

Combined loss reserves as a percentage of:

Total guaranty book of business. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.72 % 0.77 %

Recorded investment in nonaccrual loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55.03 53.62

The amount of our provision or benefit for credit losses may vary from period to period based on a number of 

factors such as changes in actual and expected home prices, fluctuations in interest rates, borrower payment 

behavior, the types and volumes of our loss mitigation activities, the volume of foreclosures completed, and 

redesignations of loans from HFI to HFS. In addition, our provision or benefit for credit losses and our combined 

loss reserves can be impacted by updates to the models, assumptions and data used in determining our 

allowance for loan losses.

The following factors contributed to our benefit for credit losses in each of the periods presented:

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

forecasted home prices. Higher home prices decrease the likelihood that loans will default and reduce the amount 

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

combined loss reserves and provision for credit losses.

We recognized a benefit for credit losses in the first quarter of 2016 primarily due to decreasing interest rates and 

an increase in actual home prices. Actual and projected mortgage interest rates declined during the first quarter of 

2016. As mortgage interest rates decline, we expect an increase in future prepayments on single-family 

individually impaired loans, including modified loans. Higher expected prepayments shorten the expected lives of 

modified loans, which decreases the impairment relating to concessions provided on these loans and results in a 

decrease in the provision for credit losses. Home prices, including distressed property valuations, increased 

during the first quarter of 2016. 
MD&A | Consolidated Results of Operations

Fannie Mae First Quarter 2017 Form 10-Q 17

We discuss our expectations regarding our future loss reserves in “Executive Summary—Outlook—Loss 

Reserves.”

Troubled Debt Restructurings and Nonaccrual Loans

Table 6 displays the composition of loans restructured in a troubled debt restructuring (“TDR”) that are on accrual 

status and loans on nonaccrual status. The table includes our recorded investment in HFI and HFS mortgage 

loans. For information on the impact of TDRs and other individually impaired loans on our allowance for loan 

losses, see “Note 3, Mortgage Loans.” 

Table 6: Troubled Debt Restructurings and Nonaccrual Loans

As of

March 31,

2017

December 31,

2016

(Dollars in millions)

TDRs on accrual status:

Single-family . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 126,193 $ 127,353

Multifamily . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 140 141

Total TDRs on accrual status . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 126,333 $ 127,494

Nonaccrual loans:

Single-family . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 40,554 $ 44,047

Multifamily . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 383 403

Total nonaccrual loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 40,937 $ 44,450

Accruing on-balance sheet loans past due 90 days or more(1)

. . . . . . . . . . . . . . . . . . . $ 369 $ 402

For the Three Months

Ended March 31,

2017 2016

(Dollars in millions)

Interest related to on-balance sheet TDRs and nonaccrual loans:

Interest income forgone(2). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 970 $ 1,238

Interest income recognized for the period(3). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,459 1,610

__________

(1) Includes loans that, as of the end of each period, are 90 days or more past due and continuing to accrue interest. The 

majority of these amounts consists of loans insured or guaranteed by the U.S. government and loans for which we have 

recourse against the seller in the event of a default.

(2) Represents the amount of interest income we did not recognize, but would have recognized during the period for 

nonaccrual loans and TDRs on accrual status as of the end of each period had the loans performed according to their 

original contractual terms.

(3) Represents interest income recognized during the period, 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.

Credit Loss Performance Metrics

Our credit-related income (expense) should be considered in conjunction with our credit loss performance 

metrics. Our credit loss performance metrics, however, are not defined terms within GAAP and may not be 

calculated in the same manner as similarly titled measures reported by other companies. Because management 

does not view changes in the fair value of our mortgage loans as credit losses, we adjust our credit loss 

performance metrics for the impact associated with our acquisition of credit-impaired loans from unconsolidated 

MBS trusts. We also exclude interest forgone on nonaccrual loans and TDRs, other-than-temporary impairment 

losses resulting from deterioration in the credit quality of our mortgage-related securities and accretion of interest 

income on acquired credit-impaired loans from credit losses. We believe that credit loss performance metrics may 

be useful to investors as the losses are presented as a percentage of our book of business and have historically 

been used by analysts, investors and other companies within the financial services industry. Moreover, by 

presenting credit losses with and without the effect of fair value losses associated with the acquisition of creditimpaired loans, investors are able to evaluate our credit performance on a more consistent basis among periods. 
MD&A | Consolidated Results of Operations

Fannie Mae First Quarter 2017 Form 10-Q 18

Table 7 displays the components of our credit loss performance metrics as well as our single-family and 

multifamily initial charge-off severity rates. 

Table 7: Credit Loss Performance Metrics

For the Three Months Ended March 31,

2017 2016

Amount Ratio(1) Amount Ratio(1)

(Dollars in millions)

Charge-offs, net of recoveries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 943 12.1 bps $ 1,138 15.0 bps

Foreclosed property expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 217 2.8 334 4.4

Credit losses including the effect of fair value losses on acquired creditimpaired loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,160 14.9 1,472 19.4

Plus: Impact of acquired credit-impaired loans on charge-offs and 

foreclosed property expense(2)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61 0.8 100 1.3

Credit losses and credit loss ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,221 15.7 bps $ 1,572 20.7 bps

Credit losses attributable to:

Single-family . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,221 $ 1,569

Multifamily . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0 3

 Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,221 $ 1,572

Single-family initial charge-off severity rate(3)

. . . . . . . . . . . . . . . . . . . . . . . . 16.97 % 23.16 %

Multifamily initial charge-off severity rate(3)(4)

. . . . . . . . . . . . . . . . . . . . . . . . . 0.00 % 15.35 %

__________

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

business during the period.

(2) Includes fair value losses from acquired credit-impaired loans. 

(3) Single-family and multifamily rates exclude fair value losses on credit-impaired loans acquired from MBS trusts and any 

costs, gains or losses associated with REO after initial acquisition through final disposition. The single-family rate includes 

charge-offs pursuant to the provisions of FHFA’s Advisory Bulletin AB 2012-02, “Framework for Adversely Classifying 

Loans, Other Real Estate Owned, and Other Assets and Listing Assets for Special Mention” and charge-offs of property tax 

and insurance receivables, while it excludes charge-offs from short sales and third-party sales. Multifamily rate is net of risk 

sharing agreements. 

(4) Multifamily initial charge-off severity rate reflects one loan that was foreclosed on during the quarter without any credit 

losses.

We discuss our expectations regarding our future credit losses in “Executive Summary—Outlook—Credit Losses.”

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.” TCCA fees increased in the first quarter of 2017 compared with the first 

quarter of 2016 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 in the future. 
MD&A | Consolidated Balance Sheet Analysis

Fannie Mae First Quarter 2017 Form 10-Q 19

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. 

Table 8: Summary of Condensed Consolidated Balance Sheets

As of

March 31,

2017

December 31,

2016 Variance

(Dollars in millions)

Assets

Cash and cash equivalents and federal funds sold and securities

purchased under agreements to resell or similar arrangements . . . . . $ 60,248 $ 55,639 $ 4,609

Restricted cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27,321 36,953 (9,632)

Investments in securities(1). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45,405 48,925 (3,520)

Mortgage loans:

Of Fannie Mae . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 192,204 207,190 (14,986)

Of consolidated trusts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,939,427 2,896,028 43,399

Allowance for loan losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (22,129) (23,465) 1,336

Mortgage loans, net of allowance for loan losses . . . . . . . . . . . . . . . . 3,109,502 3,079,753 29,749

Deferred tax assets, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32,647 33,530 (883)

Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28,631 33,168 (4,537)

Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,303,754 $ 3,287,968 $ 15,786

Liabilities and equity

Debt:

Of Fannie Mae . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 327,183 $ 327,097 $ 86

Of consolidated trusts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,954,471 2,935,219 19,252

Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18,721 19,581 (860)

Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,300,375 3,281,897 18,478

Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,379 6,071 (2,692)

Total liabilities and equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,303,754 $ 3,287,968 $ 15,786

__________

(1) Includes $30.2 billion as of March 31, 2017 and $32.3 billion as of December 31, 2016 of U.S. Treasury securities that are 

included in our other investments portfolio.

Cash and Other Investments Portfolio

Our cash and other investments portfolio consists of cash and cash equivalents, securities purchased under 

agreements to resell or similar arrangements, and investments in U.S. Treasury securities. See “Liquidity and 

Capital Management—Liquidity Management—Cash and Other Investments Portfolio” for additional information 

on our cash and other investments portfolio.

Restricted Cash

Restricted cash primarily includes unscheduled borrower payments received by servicers of loans backing 

consolidated trusts due to be remitted to the MBS certificateholders in the subsequent month. Our restricted cash 

decreased as of March 31, 2017 compared with the balance as of December 31, 2016 primarily as a result of a 

decrease in prepayments received on mortgage loans in March 31, 2017 compared with prepayments received in 

December 31, 2016. 
MD&A | Consolidated Balance Sheet Analysis

Fannie Mae First Quarter 2017 Form 10-Q 20

Investments in Mortgage-Related Securities

Our investments in mortgage-related securities are classified in our condensed consolidated balance sheets as 

either trading or available-for-sale and are measured at fair value. Table 9 displays the fair value of our 

investments in trading and available-for-sale mortgage-related securities. We classify private-label securities as 

Alt-A, subprime or commercial mortgage-backed securities (“CMBS”) if the securities were labeled as such when 

issued. We have also invested in subprime private-label mortgage-related securities that we have resecuritized to 

include our guaranty.

Table 9: Summary of Mortgage-Related Securities at Fair Value

As of

March 31,

2017

December 31,

2016

(Dollars in millions)

Mortgage-related securities:

Fannie Mae . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 6,967 $ 7,323

Other agency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,523 2,605

Alt-A and subprime private-label securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,252 3,345

CMBS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 855 1,580

Mortgage revenue bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,205 1,293

Other mortgage-related securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 448 462

Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 15,250 $ 16,608

The decrease in mortgage-related securities at fair value from December 31, 2016 to March 31, 2017 was 

primarily driven by liquidations.

See “Note 5, Investments in Securities” for additional information on our investments in mortgage-related 

securities, including the composition of our trading and available-for-sale securities at amortized cost and fair 

value and the gross unrealized gains and losses related to our available-for-sale securities as of March 31, 2017

and December 31, 2016.

Mortgage Loans and Allowance for Loan Losses

The increase in mortgage loans, net of allowance, from December 31, 2016 to March 31, 2017 was driven by an 

increase in mortgage loans of consolidated trusts as we continued to add to our guaranty book of business 

through securitization activity. Partially offsetting this was a decline in mortgage loans of Fannie Mae resulting 

from liquidations, portfolio securitizations and sales. For additional information on our mortgage loans, see “Note 

3, Mortgage Loans.”

The decrease in our allowance for loan losses from December 31, 2016 to March 31, 2017 was driven primarily 

by redesignations of loans from held for investment to held for sale and charge-offs, which relieved the allowance 

on these loans, as well as an increase in actual and forecasted home prices. See “Consolidated Results of 

Operations—Credit-Related Income (Expense)—Benefit for Credit Losses” for more information.

Other Assets

The decrease in other assets from December 31, 2016 to March 31, 2017 was primarily driven by a decrease in 

advances to lenders as a result of lower lender funding needs. For additional information on our accounting policy 

for advances to lenders, refer to “Note 1, Summary of Significant Accounting Policies” in our 2016 Form 10-K.

Debt

Debt of Fannie Mae is the primary means of funding our mortgage investments. 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 Borrowings and Long-Term Debt” for additional 

information on our outstanding debt. 

Debt of Fannie Mae remained relatively flat from December 31, 2016 to March 31, 2017. The increase in debt of 

consolidated trusts from December 31, 2016 to March 31, 2017 was primarily driven by sales of Fannie Mae 
MD&A | Consolidated Balance Sheet Analysis

Fannie Mae First Quarter 2017 Form 10-Q 21

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

Our net equity decreased as of March 31, 2017 compared with December 31, 2016 due to our payment of senior 

preferred stock dividends to Treasury during the first quarter of 2017, partially offset by our comprehensive 

income recognized during the first quarter of 2017.

Retained Mortgage Portfolio

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

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

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

portfolio.

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

with Treasury and FHFA’s additional cap, as described in “Business—Conservatorship and Treasury Agreements

—Treasury Agreements” in our 2016 Form 10-K. We plan to reduce our retained mortgage portfolio to no more 

than the FHFA cap of $259.6 billion as of December 31, 2017, which also would be in compliance with the senior 

preferred stock purchase agreement cap of $288.4 billion. Table 10 displays the unpaid principal balance of our 

retained mortgage portfolio.

Table 10: Retained Mortgage Portfolio

As of

March 31, 2017 December 31, 2016

(Dollars in millions)

Single-family:

Mortgage loans(1). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 168,722 $ 181,219

Reverse mortgages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28,720 29,443

Mortgage-related securities:

Agency securities(2). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37,901 25,667

Fannie Mae-wrapped reverse mortgage securities . . . . . . . . . . . . . . . . 7,245 7,420

Other Fannie Mae-wrapped securities . . . . . . . . . . . . . . . . . . . . . . . . . 3,726 3,773

Private-label and other securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,788 4,980

Total single-family mortgage-related securities(3). . . . . . . . . . . . . . . . . . . . 53,660 41,840

Total single-family mortgage loans and mortgage-related securities . . . . . . . 251,102 252,502

Multifamily:

Mortgage loans(4). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,297 9,407

Mortgage-related securities:

Agency securities(2). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,478 7,693

CMBS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 853 1,567

Mortgage revenue bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,103 1,185

Total multifamily mortgage-related securities(5). . . . . . . . . . . . . . . . . . . . . 10,434 10,445

Total multifamily mortgage loans and mortgage-related securities . . . . . . . . . 17,731 19,852

Total retained mortgage portfolio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 268,833 $ 272,354

__________

(1) Includes single-family loans restructured in a TDR that were on accrual status of $109.8 billion and $119.4 billion as of 

March 31, 2017 and December 31, 2016, respectively, and single-family loans on nonaccrual status of $36.2 billion and 

$38.7 billion as of March 31, 2017 and December 31, 2016, respectively.

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

mortgage securities and other Fannie Mae-wrapped securities.
MD&A | Retained Mortgage Portfolio

Fannie Mae First Quarter 2017 Form 10-Q 22

(3) The fair value of these single-family mortgage-related securities was $55.3 billion and $42.9 billion as of March 31, 2017

and December 31, 2016, respectively.

(4) Includes multifamily loans restructured in a TDR that were on accrual status of $130 million and $131 million as of 

March 31, 2017 and December 31, 2016, respectively, and multifamily loans on nonaccrual status of $224 million and $246 

million as of March 31, 2017 and December 31, 2016, respectively.

(5) The fair value of these multifamily mortgage-related securities was $11.2 billion as of March 31, 2017 and December 31, 

2016.

We purchased $3.1 billion of loans from our single-family MBS trusts in the first quarter of 2017, the majority of 

which were delinquent. 

We primarily use our retained mortgage portfolio to: (1) provide liquidity to the mortgage market and (2) support 

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

Table 11 below separates the instruments within our retained mortgage portfolio 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. “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, 2017 and December 31, 2016.

Table 11: Retained Mortgage Portfolio Profile

As of

March 31, 2017 December 31, 2016

SingleFamily Multifamily Total

% of

Mortgage

Credit

Book of

Business

SingleFamily Multifamily Total

% of

Mortgage

Credit

Book of

Business

(Dollars in millions)

Lender liquidity . . $ 48,950 $ 8,478 $ 57,428 2% $ 36,272 $ 7,694 $ 43,966 2%

Loss mitigation . . 151,402 354 151,756 5 164,028 376 164,404 5

Other . . . . . . . . . 50,750 8,899 59,649 2 52,202 11,782 63,984 2

Total . . . . . . . $ 251,102 $ 17,731 $ 268,833 9% $ 252,502 $ 19,852 $ 272,354 9%

Mortgage Credit Book of Business

Table 12 displays the composition of our mortgage credit book of business based on unpaid principal balance. 

Our single-family mortgage credit book of business accounted for 92% of our mortgage credit book of business as 

of March 31, 2017 and December 31, 2016. While our mortgage credit book of business includes all of our 

mortgage-related assets, both on- and off-balance sheet, our guaranty book of business excludes non-Fannie 

Mae mortgage-related securities held in our retained mortgage portfolio for which we do not provide a guaranty.
MD&A | Mortgage Credit Book of Business

Fannie Mae First Quarter 2017 Form 10-Q 23

Table 12: Composition of Mortgage Credit Book of Business

As of

March 31, 2017 December 31, 2016

SingleFamily Multifamily TotalSingleFamily Multifamily Total

(Dollars in millions)

Mortgage loans and Fannie Mae MBS(1)

. . . . $2,856,991 $ 240,691 $3,097,682 $2,838,086 $ 229,896 $3,067,982

Unconsolidated Fannie Mae MBS, held by 

third parties(2)

. . . . . . . . . . . . . . . . . . . . . . . 7,313 1,107 8,420 7,795 1,159 8,954

Other credit guarantees(3)

. . . . . . . . . . . . . . . . 2,098 12,927 15,025 2,193 13,142 15,335

Guaranty book of business . . . . . . . . . . . . . $2,866,402 $ 254,725 $3,121,127 $2,848,074 $ 244,197 $3,092,271

Other agency mortgage-related securities(4)

. 2,413 — 2,413 2,500 — 2,500

Other mortgage-related securities(5)

. . . . . . . . 4,788 1,956 6,744 4,980 2,752 7,732

Mortgage credit book of business . . . . . . . . $2,873,603 $ 256,681 $3,130,284 $2,855,554 $ 246,949 $3,102,503

Guaranty Book of Business Detail:

Conventional Guaranty Book of Business(6) $2,822,247 $ 253,414 $3,075,661 $2,802,572 $ 242,834 $3,045,406

Government Guaranty Book of Business(7)

. $ 44,155 $ 1,311 $ 45,466 $ 45,502 $ 1,363 $ 46,865

__________

(1) Consists of mortgage loans and Fannie Mae MBS recognized in our condensed consolidated balance sheets. The principal 

balance of resecuritized Fannie Mae MBS is included only once in the reported amount.

(2) The principal balance of resecuritized Fannie Mae MBS is included only once in the reported amount.

(3) Consists of single-family and multifamily credit enhancements that we have provided and that are not otherwise reflected in 

the table.

(4) Consists of mortgage-related securities issued by Freddie Mac and Ginnie Mae.

(5) Primarily includes mortgage revenue bonds, Alt-A and subprime PLS, and CMBS.

(6) Consists of mortgage loans and mortgage-related securities that are not guaranteed or insured, in whole or in part, by the 

U.S. government or one of its agencies.

(7) Consists of 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 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 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 2017, we paid $268 

million to the funds based on our new business purchases in 2016. Our new business purchases were $136.0 

billion for the first three months of 2017. Accordingly, we recognized an expense of $57 million related to this 

obligation for the first three months of 2017. We expect to pay this amount, plus additional amounts to be accrued 

based on our new business purchases in the remaining nine months of 2017, to the funds on or before March 1, 

2018. See “Business—Legislation and Regulation—GSE Act and Other Regulation of Our Business—Affordable 

Housing Allocations” in our 2016 Form 10-K for more information regarding this obligation.
MD&A | Business Segments

Fannie Mae First Quarter 2017 Form 10-Q 24

Business Segments

Overview

We have two reportable business segments: Single-Family and Multifamily. Previously, we had a third reportable 

business segment, Capital Markets, which was incorporated into the Single-Family and Multifamily segments in 

the fourth quarter of 2016. Results of our two business segments are intended to reflect each segment as if it 

were a stand-alone business. We have revised the presentation of our segment results for the prior periods to be 

consistent with the current period presentation.

This section describes the following for each of our business segments:

• market conditions relating to the business segment;

• the segment’s business and financial results; and

• credit risk management relating to the business segment.

This section should be read together with our comparative discussion of our condensed consolidated results of 

operations in “Consolidated Results of Operations.”

Single-Family Business

Single-Family Housing and Mortgage Market and Economic Conditions

According to the U.S. Bureau of Economic Analysis advance estimate, the inflation-adjusted U.S. gross domestic 

product, or GDP, rose by 0.7% on an annualized basis in the first quarter of 2017, compared with an increase of 

2.1% in the fourth quarter of 2016. The overall economy gained an estimated 2.1 million non-farm jobs in the first

quarter of 2017. According to the U.S. Bureau of Labor Statistics, over the 12 months ending in March 2017, the 

economy created an estimated 533,000 non-farm jobs. The unemployment rate was 4.5% in March 2017, 

compared with 4.7% in December 2016. 

According to the Federal Reserve, total U.S. residential mortgage debt outstanding, which includes $10.3 trillion

of single-family debt outstanding, was estimated to be approximately $11.5 trillion as of December 31, 2016 (the 

latest date for which information is available) and $11.4 trillion as of September 30, 2016.

Housing sales increased in the first quarter of 2017 compared with the fourth quarter of 2016. Total existing home 

sales averaged 5.6 million units annualized in the first quarter of 2017, an increase of 1.4% from the fourth quarter 

of 2016, according to data from the National Association of REALTORS®. Sales of foreclosed homes and 

preforeclosure, or “short,” sales (together, “distressed sales”) accounted for 6.0% of existing home sales in March 

2017, compared with 7.0% in December 2016 and 8.0% in March 2016. According to the U.S. Census Bureau, 

new single-family home sales increased during the first quarter of 2017, averaging an annualized rate of 598,000

units, a 6.0% gain from the fourth quarter of 2016. 

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

each below their historical average at the end of the first quarter of 2017. According to the U.S. Census Bureau, 

the months’ supply of new single-family unsold homes was 5.2 months as of March 31, 2017, compared with 5.6

months as of December 31, 2016. According to the National Association of REALTORS®, the months’ supply of 

existing unsold homes was 3.8 months as of March 31, 2017, compared with 3.6 months as of December 31, 

2016. 

The overall mortgage market serious delinquency rate fell to 3.1% as of December 31, 2016 (the latest date for 

which information is available), according to the Mortgage Bankers Association’s National Delinquency Survey, 

compared with 3.4% as of December 31, 2015. We provide information about Fannie Mae’s serious delinquency 

rate, in “Single-Family Mortgage Credit Risk Management” below.

Based on our home price index, we estimate that home prices on a national basis increased by 0.5% in the first 

quarter of 2017, following increases of 5.8% in 2016, 4.7% in 2015 and 4.3% in 2014. We estimate that, through 

March 31, 2017, home prices on a national basis remained 0.7% below their peak in the third quarter of 2006. Our 

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

available. 
MD&A | Business Segments

Fannie Mae First Quarter 2017 Form 10-Q 25

Thirty-year fixed-rate mortgage rates ended the quarter at 4.14% for the week of March 31, 2017, down from 

4.32% for the week of December 31, 2016, according to Freddie Mac’s Primary Mortgage Market Survey®.

Single-Family Business Metrics

Table 13: Single-Family Business Key Performance Data

For the Three Months Ended March 31,

2017 2016

(Dollars in millions)

Securitization Activity/New Business

Single-family Fannie Mae MBS issuances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 127,791 $ 101,797

Single-family Fannie Mae MBS outstanding, at end of period . . . . . . . . . . . . . . $ 2,695,565 $ 2,624,000

Portfolio Data

Single-family retained mortgage portfolio, at end of period . . . . . . . . . . . . . . . . $ 251,102 $ 305,353

Credit Guaranty Activity

Average single-family guaranty book of business(1)

. . . . . . . . . . . . . . . . . . . . . . $ 2,857,238 $ 2,826,544

Average charged guaranty fee on single-family guaranty book of business:(2)

Fee, net of TCCA fees (in basis points)(3)

. . . . . . . . . . . . . . . . . . . . . . . . . . . 41.9 40.4

Total fee (in basis points) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49.1 46.8

Average charged guaranty fee on new single-family acquisitions:(2)

Fee, net of TCCA fees (in basis points)(3)

. . . . . . . . . . . . . . . . . . . . . . . . . . . 48.7 49.2

Total fee (in basis points) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58.7 59.2

Single-family credit loss ratio (in basis points)(4)

. . . . . . . . . . . . . . . . . . . . . . . . 17.1 22.2

Single-family serious delinquency rate, at end of period(5)

. . . . . . . . . . . . . . . . . 1.12 % 1.44 %

__________

(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.

(2) Calculated based on the average guaranty fee rate for our single-family guaranty arrangements plus the recognition of any 

upfront cash payments over an estimated average life.

(3) 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.

(4) Calculated based on single-family segment credit losses divided by the average single-family guaranty book of business. 

(5) Calculated based on the number of single-family conventional loans that are 90 days or more past due or in the foreclosure 

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

Our single-family Fannie Mae MBS issuances increased in the first quarter of 2017 compared with the first quarter 

of 2016, driven primarily by an increase in refinance activity. Additionally, home purchase mortgage loans 

increased in the first quarter of 2017 compared with the first quarter of 2016.
MD&A | Business Segments

Fannie Mae First Quarter 2017 Form 10-Q 26

Single-Family Business Financial Results

Table 14: Single-Family Business Financial Results

For the Three Months Ended March 31,

2017 2016 Variance

(Dollars in millions)

Net interest income(1)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 4,756 $ 4,245 $ 511

Fee and other income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76 67 9

Net revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,832 4,312 520

Investment gains (losses), net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (50) 56 (106)

Fair value losses, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (12) (2,850) 2,838

Administrative expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (601) (609) 8

Credit-related income(2)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 184 828 (644)

TCCA fees(1)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (503) (440) (63)

Other expenses, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (256) (246) (10)

Income before federal income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,594 1,051 2,543

Provision for federal income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,252) (389) (863)

Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,342 $ 662 $ 1,680

__________

(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 for credit losses and foreclosed property expense.

Single-family net income increased in the first quarter of 2017 compared with the first quarter of 2016. The 

increase in net income was primarily due to lower fair value losses and higher net interest income in the first 

quarter of 2017, partially offset by lower credit-related income in the first quarter of 2017. 

Fair value losses decreased in the first quarter of 2017 compared with the first quarter of 2016. The fair value 

losses that are reported for the single-family segment are consistent with the fair value losses reported in our 

condensed consolidated statements of operations and comprehensive income. We discuss our fair value gains 

and losses in “Consolidated Results of Operations—Fair Value Losses, Net.”

Single-family net interest income increased in the first quarter of 2017 compared with the first quarter of 2016, 

primarily due to an increase in guaranty fee income driven by: (1) an increase in amortization income due to 

activity related to increased prepayments on mortgage loans and liquidations of MBS debt of consolidated trusts 

in the first quarter of 2017, which accelerated the amortization of cost basis adjustments on the loans and related 

debt; and (2) loans with higher base guaranty fees comprising a larger part of our guaranty book of business in 

the first quarter of 2017 compared with the first quarter of 2016. The increase in single-family net interest income 

due to higher guaranty fee income was partially offset by a decline in the average balance of our retained 

mortgage portfolio as we continued to reduce this portfolio.

We recognized lower single-family credit-related income in the first quarter of 2017 compared with the first quarter 

of 2016. Credit-related income in the first quarter of 2017 was driven by an increase in actual and forecasted 

home prices. Credit-related income in the first quarter of 2016 was primarily due to decreasing interest rates and 

an increase in actual home prices. See “Consolidated Results of Operations—Credit-Related Income (Expense)” 

for more information on the drivers of our credit-related income or expense.

Single-Family Mortgage Credit Risk Management

Our strategy in managing single-family mortgage credit risk consists of five primary components: 

• our acquisition and servicing policies along with our underwriting and servicing standards; 

• the transfer of credit risk through risk transfer transactions and the use of credit enhancements; 

• portfolio diversification and monitoring; 
MD&A | Business Segments

Fannie Mae First Quarter 2017 Form 10-Q 27

• management of problem loans; and 

• REO management. 

This section updates our discussion of single-family mortgage credit risk management in our 2016 Form 10-K in 

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

additional information on how we manage risk, see “MD&A—Risk Management” and “Risk Factors” in our 2016 

Form 10-K.

The single-family credit statistics we focus on and report below generally relate to our single-family conventional 

guaranty book of business, which represents the substantial majority of our total single-family guaranty book of 

business. We exclude from these credit statistics approximately 1% of our single-family conventional guaranty 

book of business for which our loan level information is incomplete as of March 31, 2017 and December 31, 2016. 

We typically obtain this data from the sellers or servicers of the mortgage loans in our guaranty book of business 

and receive representations and warranties from them as to the accuracy of the information. While we perform 

various quality assurance checks by sampling loans to assess compliance with our underwriting and eligibility 

criteria, we do not independently verify all reported information. We rely on a combination of new data verification 

tools we are making available to lenders and lender representations regarding the accuracy of the characteristics 

of loans in our guaranty book of business. See “Risk Factors” in our 2016 Form 10-K for a discussion of the risk 

that we could experience mortgage fraud as a result of this reliance on lender representations. We provide 

information on non-Fannie Mae mortgage-related securities held in our portfolio in “Note 5, Investments in 

Securities.”

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

For an overview and additional information on our quality control process, see “MD&A—Business Segments—

Single-Family Business—Single-Family Mortgage Credit Risk Management—Single-Family Acquisition and 

Servicing Policies and Underwriting and Servicing Standards” in our 2016 Form 10-K.

Repurchase Requests

If we determine that a mortgage loan did not meet our underwriting or eligibility requirements, loan 

representations or warranties were violated or a mortgage insurer rescinded coverage, then our mortgage sellers 

and/or servicers are obligated to either repurchase the loan or foreclosed property, reimburse us for our losses or 

provide other remedies, unless the loan is eligible for representation and warranty relief as described below. We 

collectively refer to our demands that mortgage sellers and servicers meet these obligations as repurchase 

requests. The unpaid principal balance of single-family loans that are subject to a repurchase request has 

declined significantly since we strengthened our underwriting standards in late 2008 and 2009, implemented 

changes to our quality control process in 2013 and implemented our revised representation and warranty 

framework described below. As of March 31, 2017, we had issued repurchase requests on approximately 0.13%

of the $470.9 billion of unpaid principal balance of single-family loans delivered to us during the twelve months 

ended July 2016. Our total outstanding repurchase requests were $287 million as of March 31, 2017, compared 

with $303 million as of December 31, 2016.

Representation and Warranty Relief

We implemented a revised representation and warranty framework in 2013 to provide lenders with a higher 

degree of certainty and clarity regarding their exposure to repurchase requests on future deliveries, as well as 

greater consistency around repurchase timelines and remedies. This framework was further revised in 2014. 

Under the framework, lenders are relieved of certain repurchase liabilities for loans that meet specific 

requirements. In addition, through our Day 1 CertaintyTM initiative we have developed new tools that enable 

lenders to obtain relief from certain representations and warranties at an earlier date than provided for under the 

framework. For information on our representation and warranty framework and our Day 1 Certainty initiative, see 

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

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

Warranty Relief” in our 2016 Form 10-K.

As of March 31, 2017, approximately 50% of the outstanding loans in our single-family conventional guaranty 

book of business were acquired after January 1, 2013 and are subject to the revised representation and warranty 

framework, compared with 48% as of December 31, 2016. Table 15 below displays information regarding the 

relief status of single-family conventional loans, based only on payment history or the satisfactory conclusion of a 
MD&A | Business Segments

Fannie Mae First Quarter 2017 Form 10-Q 28

full-file quality control review, delivered to us beginning in 2013 under the revised representation and warranty 

framework. 

Table 15: Representation and Warranty Status of Single-Family Conventional Loans Acquired in

2013-2017

As of March 31, 2017

Refi Plus Non-Refi Plus Total

Unpaid

Principal

Balance

Number of

Loans

Unpaid

Principal

Balance

Number of

Loans

Unpaid

Principal

Balance

Number of

Loans

(Dollars in millions)

Single-family conventional loans

that:

Obtained relief . . . . . . . . . . . . . . . $168,511 1,216,122 $ 374,492 1,996,962 $ 543,003 3,213,084

Remain eligible for relief . . . . . . . 24,587 160,249 1,084,499 5,070,838 1,109,086 5,231,087

Are not eligible for relief . . . . . . . . 4,370 29,091 14,471 77,898 18,841 106,989

Total outstanding loans acquired

since January 1, 2013 . . . . . . . . . $197,468 1,405,462 $1,473,462 7,145,698 $1,670,930 8,551,160

As of March 31, 2017, approximately 38% of loans acquired under the revised representation and warranty 

framework had obtained relief, compared with 37% as of December 31, 2016. Providing lenders with relief from 

repurchasing loans for breaches of certain representations and warranties on loans that meet specified eligibility 

requirements shifts some of the risk of non-compliance with our requirements back to us. However, we believe 

that we have taken appropriate steps to mitigate this risk, including moving the primary focus and timing of our 

quality control reviews to shortly after loan delivery. We also retain the right to review all loans, including reviews 

for any violations of “life of loan” representations and warranties. 

Transfer of Mortgage Credit Risk: 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. The goal of these transactions is, to the extent economically sensible, 

to transfer a portion of the existing mortgage credit risk on a portion of recently acquired loans in our single-family 

guaranty book of business in order to reduce the economic risk to us and to taxpayers of future borrower defaults. 

Our primary method of achieving this objective has been through our CAS and CIRT transactions. In these 

transactions, we transfer to investors a portion of the mortgage credit risk associated with losses on a reference 

pool of mortgage loans and in exchange we pay investors a premium that effectively reduces the guaranty fee 

income we retain on the loans. We enter into other types of credit risk transfer transactions in addition to our CAS 

and CIRT transactions, including lender risk-sharing transactions. For information on our credit risk transfer 

transactions, see “MD&A—Business Segments—Single-Family Business—Single-Family Mortgage Credit Risk 

Management—Transfer of Mortgage Credit Risk—Credit Risk Transfer Transactions” in our 2016 Form 10-K.

As of March 31, 2017, $723 billion in outstanding unpaid principal balance of our single-family loans, or 

approximately 26% of the loans in our single-family conventional guaranty book of business measured by unpaid 

principal balance, were included in a reference pool for a credit risk transfer transaction. During the first three 

months of 2017, 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 $108 billion at the time of the transactions. Our 

CAS and CIRT transactions are our primary credit risk transfer transactions. In the first three months of 2017, we 

incurred $175 million on our outstanding CAS debt for the spread over LIBOR at the time of issuance of the debt 

and $41 million in CIRT premiums, compared with $101 million on CAS debt and $21 million in CIRT premiums in 

the first three months of 2016. These amounts increased from the first three months of 2016 to the first three 

months of 2017 as we continue to transfer credit risk on a larger portion of our single-family book of business.

We generally include approximately half of our recent single-family acquisitions in credit risk transfer transactions, 

as we target only certain types of loan categories for these transactions. Loan categories we have targeted for 

credit risk transfer transactions generally consist of fixed-rate 30-year single-family conventional loans that meet 

certain credit performance characteristics, are non-Refi Plus and have LTV ratios between 60% and 97%. The 

portion of our single-family loan acquisitions we include in credit risk transfer transactions can vary from period to 

period based on market conditions and other factors.
MD&A | Business Segments

Fannie Mae First Quarter 2017 Form 10-Q 29

Table 16 displays the mortgage credit risk transferred to third parties and retained by Fannie Mae at the time of 

issuance and the outstanding reference pool balances as of March 31, 2017, pursuant to our single-family credit 

risk transfer transactions.

Table 16: Credit Risk Transfer Transactions

Issuances from Inception to March 31, 2017

(Dollars in billions)

Senior Fannie Mae(1)

$905

Mezzanine

Fannie Mae(1) CIRT

(2)(3) CAS(2)

Lender 

RiskSharing(2)

Initial 

Reference 

Pool(4)

$1 $4 $22 $1 $939

First Loss

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

$5 $1

Outstanding as of March 31, 2017

(Dollars in billions)

Senior Fannie Mae(1)

$694

Mezzanine

Fannie Mae(1) CIRT

(2)(3) CAS(2)

Lender 

RiskSharing(2)

Outstanding 

Reference 

Pool(4)(6)

$1 $4 $17 $1 $723

First Loss

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

$5 $1

__________

(1) Credit risk retained by Fannie Mae. Tranche sizes vary across programs.

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

(3) Includes mortgage pool insurance transactions covering loans with an unpaid principal balance of approximately $7 billion

at issuance and approximately $5 billion outstanding as of March 31, 2017.

(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, as of March 31, 2017.

As shown in the outstanding balances in Table 16 above, we have designed our credit risk transfer transactions 

so that prepayment activity typically has a more substantial impact on the senior tranches retained by Fannie Mae 

than on the risk transferred to third parties. Principal payments on the underlying reference pool are first allocated 

between the senior tranches and then applied sequentially to the subordinate tranches. Losses are applied in 
MD&A | Business Segments

Fannie Mae First Quarter 2017 Form 10-Q 30

reverse sequential order starting with the first loss tranche. For CAS transactions, all principal payments and 

losses are allocated pro rata between the sold notes and the portion we retain. The decreases in outstanding 

balances from issuance to March 31, 2017 in the senior and mezzanine tranches are the result of paydowns. 

Outstanding balances from issuance to March 31, 2017 in the first loss tranches decreased only slightly as the 

losses allocated to those tranches were insignificant.

While these deals are expected to mitigate some of our potential future credit losses, they are not designed to 

shield us from all losses. We retain a portion of the risk of future credit losses on loans covered by CAS and CIRT

transactions, including all or at least half of the first loss positions and all of the senior loss positions. In addition, 

on our CAS transactions, we retain a pro rata share of risk equal to approximately 5% of all notes sold. When 

structuring these transactions, we seek to optimize benefit to cost considerations by taking into account a number 

of factors, including the level of investor demand, liquidity and pricing levels, and the amount of risk reduction 

provided assuming various economic scenarios. See “Risk Factors” in our 2016 Form 10-K for a discussion of 

factors that may limit our ability to use credit risk transfer transactions to mitigate some of our potential future 

credit losses, including factors that may result in these transactions providing less protection than we expect.

Single-Family Portfolio Diversification and Monitoring

Overview

Diversification within our single-family mortgage credit book of business by product type, loan characteristics and 

geography is an important factor that influences credit quality and performance and may reduce our credit risk. 

We monitor various loan attributes, in conjunction with housing market and economic conditions, to determine if 

our pricing, eligibility and underwriting criteria accurately reflect the risk associated with loans we acquire or 

guarantee. In some cases, we may decide to significantly reduce our participation in riskier loan product 

categories. We also review the payment performance of loans in order to help identify potential problem loans 

early in the delinquency cycle and to guide the development of our loss mitigation strategies. For information on 

key loan attributes, see “MD&A—Business Segments—Single-Family Business—Single-Family Mortgage Credit 

Risk Management—Single-Family Portfolio Diversification and Monitoring” in our 2016 Form 10-K.

Credit Risk Profile of Our Single-Family Acquisitions and Book of Business

We initiated underwriting and eligibility changes that became effective for deliveries in late 2008 and 2009 and 

that focused on strengthening our underwriting and eligibility standards to promote sustainable homeownership. 

The result of many of these changes is reflected in the substantially improved credit risk profile of our singlefamily loan acquisitions since 2009. 

Table 17 below displays information regarding the credit characteristics of the loans in our single-family 

conventional guaranty book of business by acquisition period. 

Table 17: Selected Credit Characteristics of Single-Family Conventional Guaranty Book of Business, by

Acquisition Period

As of March 31, 2017

% of SingleFamily 

Conventional 

Guaranty Book 

of Business(1)

Current 

Estimated Markto-Market LTV 

Ratio(2)

Current 

Estimated Markto-Market LTV 

Ratio>100%(3)

Serious

Delinquency

Rate

2009-2017 acquisitions, excluding HARP and other

Refi Plus loans . . . . . . . . . . . . . . . . . . . . . . . . . . . 73 % 59 % * % 0.24 %

HARP loans(4)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 75 9 1.14

Other Refi Plus loans(5)

. . . . . . . . . . . . . . . . . . . . . . . 7 45 * 0.43

2005-2008 acquisitions. . . . . . . . . . . . . . . . . . . . . . . 8 71 12 5.97

2004 and prior acquisitions. . . . . . . . . . . . . . . . . . . . 4 43 1 2.79

Total single-family conventional guaranty book of

business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100 % 60 % 2 % 1.12 %

__________

* Represents less than 0.5%
MD&A | Business Segments

Fannie Mae First Quarter 2017 Form 10-Q 31

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

aggregate unpaid principal balance of loans in our single-family conventional guaranty book of business as of March 31, 

2017.

(2) The aggregate estimated mark-to-market LTV ratio is based on the unpaid principal balance of the loans as of the end of 

the period divided by the estimated current value of the properties, which we calculate using an internal valuation model 

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

(3) The current estimated mark-to-market LTV ratio greater than 100% is based on the unpaid principal balance of the loans 

with mark-to-market LTV ratios greater than 100% for each category as of the end of the period divided by the aggregate 

unpaid principal balance of loans for each category in our single-family conventional guaranty book of business as of 

March 31, 2017.

(4) HARP loans, which we began to acquire in 2009, have LTV ratios at origination in excess of 80%. Some borrowers for 

HARP loans may have lower FICO credit scores and may provide less documentation than we would otherwise require. As 

of March 31, 2017, HARP loans had a weighted average FICO credit score at origination of 726 compared with 745 for 

loans in our single-family book of business overall.

(5) Other Refi Plus loans, which we began to acquire in 2009, includes all other Refi Plus loans that are not HARP loans.
MD&A | Business Segments

Fannie Mae First Quarter 2017 Form 10-Q 32

Table 18 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. 

Table 18: 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,

2017 2016 March 31, 2017 December 31, 2016

Original LTV ratio:(5)

<= 60% . . . . . . . . . . . . . . . . . . . . . . . . 22 % 19 % 21 % 21 %

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

70.01% to 80% . . . . . . . . . . . . . . . . . . 38 40 38 38

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

90.01% to 100% . . . . . . . . . . . . . . . . . 15 15 12 12

Greater than 100% . . . . . . . . . . . . . . . * * 4 4

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

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

Average loan amount . . . . . . . . . . . . . . . . $ 221,405 $ 219,195 $ 163,896 $ 163,200

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

<= 60% . . . . . . . . . . . . . . . . . . . . . . . . 49 % 49 %

60.01% to 70% . . . . . . . . . . . . . . . . . . 19 19

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

80.01% to 90% . . . . . . . . . . . . . . . . . . 9 9

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

Greater than 100% . . . . . . . . . . . . . . . 2 2

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

Weighted-average. . . . . . . . . . . . . . 60 % 60 %

Product type:

Fixed-rate:(7)

Long-term . . . . . . . . . . . . . . . . . . . . 81 % 81 % 78 % 77 %

Intermediate-term . . . . . . . . . . . . . . 17 17 16 17

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

Total fixed-rate. . . . . . . . . . . . . . . 98 98 94 94

Adjustable-rate:

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

Other ARMs . . . . . . . . . . . . . . . . . . 2 2 5 5

Total adjustable-rate . . . . . . . . . 2 2 6 6

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 2017 Form 10-Q 33

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,

2017 2016 March 31, 2017 December 31, 2016

Property type:

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

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

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

Occupancy type:

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

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

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

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

FICO credit score at origination:

< 620(8). . . . . . . . . . . . . . . . . . . . . . * % 1 % 2 % 2 %

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

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

700 to < 740 . . . . . . . . . . . . . . . . . . 22 21 20 20

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

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

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

Loan purpose:

Purchase . . . . . . . . . . . . . . . . . . . . 44 % 46 % 36 % 35 %

Cash-out refinance . . . . . . . . . . . . . 24 20 19 20

Other refinance. . . . . . . . . . . . . . . . 32 34 45 45

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

Geographic concentration:(9)

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

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

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

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

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

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

__________

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

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

table. 

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

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

aggregate unpaid principal balance of loans in our single-family conventional guaranty book of business as of the end of 

each period.

(4) Our single-family conventional guaranty book of business includes jumbo-conforming and high-balance loans that 

represented approximately 6% of our single-family conventional guaranty book of business as of March 31, 2017 and 

December 31, 2016. See “Business—Legislation and Regulation—Charter Act” and “MD&A—Business Segments—SingleFamily Business—Single-Family Mortgage Credit Risk Management—Single-Family Portfolio Diversification and 

Monitoring—Jumbo-Conforming and High-Balance Loans” in our 2016 Form 10-K for information on our loan limits.

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

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

available.

(6) 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.
MD&A | Business Segments

Fannie Mae First Quarter 2017 Form 10-Q 34

(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) Loans acquired after 2009 with FICO credit scores at origination below 620 consist primarily of the refinance of existing 

loans under our Refi Plus initiative.

(9) 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.

Our acquisitions in the first three months of 2017 continued to have a strong credit profile with a weighted average 

original LTV ratio of 73% and a weighted average FICO credit score at origination of 746. The credit profile of our 

future acquisitions will depend on many factors. For example, to the extent we expect refinancings will be a 

smaller percentage of our acquisitions in future periods compared with recent periods, the loans we acquire in 

those periods may have a higher weighted average original LTV ratio and a lower weighted average FICO credit 

score at origination. Other factors that will affect the credit profile of our future acquisitions include: our future 

guaranty fee pricing and our competitors’ pricing, and any impact of that pricing on the volume and mix of loans 

we acquire; our future eligibility standards and those of mortgage insurers, FHA and VA; the percentage of loan 

originations representing refinancings; changes in interest rates; our future objectives and activities in support of 

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

government policy; market and competitive conditions; and the volume and characteristics of HARP and high LTV 

refinance loans we acquire in the future. We expect the ultimate performance of all our loans will be affected by 

borrower behavior, public policy and macroeconomic trends, including unemployment, the economy and home 

prices. In addition, if lender customers retain more of the higher-quality loans they originate, it could negatively 

affect the credit profile of our new single-family acquisitions. 

In August 2016, FHFA directed us and Freddie Mac to implement a new high LTV refinance offering aimed at 

borrowers who are making their mortgage payments on time but whose LTV ratio exceeds the maximum allowed 

for our standard refinance products. We continue to work with FHFA and Freddie Mac on the details regarding this 

offering.

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

Single-Family Portfolio Diversification and Monitoring” in our 2016 Form 10-K for more information on the credit 

characteristics of loans in our guaranty book of business, including HARP and Refi Plus loans, Alt-A loans, jumboconforming and high-balance loans, reverse mortgages and mortgage products with rate resets.

Problem Loan Management

Our problem loan management strategies are primarily focused on reducing defaults to avoid losses that would 

otherwise occur and pursuing foreclosure alternatives to attempt to minimize the severity of the losses we incur. If 

a borrower does not make required payments, or is in jeopardy of not making payments, we work with the loan 

servicer to offer workout solutions to minimize the likelihood of foreclosure as well as the severity of loss. Our loan 

workouts reflect our various types of home retention solutions, including loan modifications, repayment plans and 

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

appropriate, we seek to move to foreclosure expeditiously. See “MD&A—Business Segments—Single-Family 

Business—Single-Family Mortgage Credit Risk Management—Problem Loan Management” in our 2016 Form 

10-K for a discussion of our work with mortgage servicers to implement our foreclosure prevention initiatives.

In the following section, we present statistics on our problem loans, describe efforts undertaken to manage these 

loans and prevent foreclosures, and provide metrics regarding the performance of our loan workout activities. 

Unless otherwise noted, single-family delinquency data is calculated based on number of loans. We include 

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

single-family delinquency rate. Seriously delinquent loans are loans that are 90 days or more past due or in the 

foreclosure process. Percentage of book outstanding calculations are based on the unpaid principal balance of 

loans for each category divided by the unpaid principal balance of our total single-family guaranty book of 

business for which we have detailed loan level information.
MD&A | Business Segments

Fannie Mae First Quarter 2017 Form 10-Q 35

Problem Loan Statistics

Table 19 displays the delinquency status of loans in our single-family conventional guaranty book of business 

(based on number of loans) and changes in the balance of seriously delinquent loans in our single-family 

conventional guaranty book of business.

Table 19: Delinquency Status and Activity of Single-Family Conventional Loans

As of

March 31,

2017

December 31,

2016

March 31,

2016

Delinquency status:

30 to 59 days delinquent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.19% 1.51% 1.25%

60 to 89 days delinquent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.33 0.41 0.33

Seriously delinquent (“SDQ”) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.12 1.20 1.44

Percentage of SDQ loans that have been delinquent for more than

180 days . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62% 59% 69%

Percentage of SDQ loans that have been delinquent for more than

two years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 21 29

For the Three Months

Ended March 31,

2017 2016

Single-family SDQ loans (number of loans):

Beginning balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 206,549 267,174

Additions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61,008 62,658

Removals:

Modifications and other loan workouts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (18,851) (19,725)

Liquidations and sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (19,531) (28,350)

Cured or less than 90 days delinquent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (35,980) (34,476)

Total removals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (74,362) (82,551)

Ending balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 193,195 247,281

Our single-family serious delinquency rate was 1.12% as of March 31, 2017, compared with 1.20% as of 

December 31, 2016. The decrease in our serious delinquency rate as of March 31, 2017 was primarily the result 

of home retention solutions, foreclosure alternatives and completed foreclosures, and improved loan payment 

performance. 

We expect our single-family serious delinquency rate to continue to decline; however, as our single-family serious 

delinquency rate has already declined significantly over the past several years, we expect more modest declines 

in this rate in the future. Our single-family serious delinquency rate and the period of time that loans remain 

seriously delinquent continue to be negatively affected by the length of time required to complete a foreclosure in 

some states. Other factors that affect our single-family serious delinquency rate include the pace of loan 

modifications, the timing and volume of nonperforming loan sales we make, servicer performance, and changes in 

home prices, unemployment levels and other macroeconomic conditions.

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 8% of our 

single-family book of business as of March 31, 2017, but constituted 50% of our seriously delinquent single-family 

loans as of March 31, 2017 and drove 65% of our first quarter 2017 single-family credit losses. In addition, loans 

in certain states such as Florida, New Jersey and New York have exhibited higher than average delinquency rates 

and/or account for a higher share of our credit losses.
MD&A | Business Segments

Fannie Mae First Quarter 2017 Form 10-Q 36

Table 20 displays the serious delinquency rates for, and the percentage of our total seriously delinquent singlefamily conventional loans represented by, the specified loan categories. We also include information for our loans 

in California, as this state accounts for a large share of our single-family conventional guaranty book of business. 

The reported categories are not mutually exclusive.

Table 20: Single-Family Conventional Seriously Delinquent Loan Concentration Analysis

As of

March 31, 2017 December 31, 2016 March 31, 2016

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% 6% 0.47% 19% 6% 0.50% 20% 5% 0.55%

Florida. . . . . . . . . . . . 6 10 1.73 6 10 1.89 6 11 2.56

New Jersey . . . . . . . . 4 8 2.85 4 8 3.07 4 10 4.46

New York. . . . . . . . . . 5 10 2.48 5 10 2.65 5 11 3.32

All other states . . . . . 66 66 1.04 66 66 1.11 65 63 1.25

Product type:

Alt-A(2)

. . . . . . . . . . . . 3 15 4.87 3 15 5.00 4 17 6.11

Vintages:

2004 and prior. . . . . . 4 25 2.76 5 26 2.82 5 26 2.95

2005-2008. . . . . . . . . 8 50 6.15 8 51 6.39 10 55 7.18

2009-2017. . . . . . . . . 88 25 0.34 87 23 0.36 85 19 0.35

Estimated mark-tomarket LTV ratio:

<= 60% . . . . . . . . . . . 49 34 0.67 49 33 0.70 46 28 0.74

60.01% to 70% . . . . . 19 15 1.07 19 15 1.13 19 14 1.19

70.01% to 80% . . . . . 17 15 1.22 17 16 1.31 17 15 1.46

80.01% to 90% . . . . . 9 13 1.94 9 13 2.11 10 14 2.44

90.01% to 100% . . . . 4 9 2.71 4 9 2.99 5 10 3.58

Greater than 100% . . 2 14 10.07 2 14 10.44 3 19 10.37

Credit enhanced:(3)

Primary MI & other(4)

. 18 27 1.95 18 28 2.18 17 26 2.65

Credit risk transfer(5)

. 25 2 0.16 22 2 0.17 19 1 0.90

Non-credit enhanced . . 65 71 1.12 67 70 1.16 70 73 1.39

__________

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

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

(2) For a description of our Alt-A loan classification criteria, see “MD&A—Business Segments—Single-Family Business—

Single-Family Mortgage Credit Risk Management—Single-Family Portfolio Diversification and Monitoring” in our 2016 

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, 2017 was 35%.

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

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

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

unless such loans are also covered by primary mortgage insurance.
MD&A | Business Segments

Fannie Mae First Quarter 2017 Form 10-Q 37

(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 Connecticut Avenue Securities 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.

Our primary loan modification initiatives have included HAMP, which had a December 31, 2016 application

deadline, and our proprietary Standard and Streamlined Modification initiatives. In December 2016, we 

announced a new modification program, the Fannie Mae Flex Modification, which replaces both HAMP and our 

Standard and Streamlined Modification programs with a single modification program that leverages the lessons 

learned from the housing crisis. The Flex Modification program became available for our servicers to implement 

on March 1, 2017 and must be implemented by October 1, 2017. The program offers additional payment relief 

allowing forbearance of principal to an 80% mark-to-market LTV ratio for eligible borrowers and targeting a 20% 

payment reduction.

Table 21 displays statistics on our single-family loan workouts that were completed, by type. These statistics 

include loan modifications but do not include trial modifications, loans to certain borrowers who have received 

bankruptcy relief that are classified as TDRs, or repayment or forbearance plans that have been initiated but not 

completed. As of March 31, 2017, there were approximately 34,400 loans in a trial modification period. For a 

description of our loan workout types, see “MD&A—Business Segments—Single-Family Business—Single Family 

Mortgage Credit Risk Management—Problem Loan Management—Loan Workout Metrics” in our 2016 Form 10-

K.

Table 21: Statistics on Single-Family Loan Workouts

For the Three Months Ended March 31,

2017 2016

Unpaid

Principal

Balance

Number

of Loans

Unpaid

Principal

Balance

Number

of Loans

(Dollars in millions)

Home retention solutions:

Modifications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,343 19,928 $ 3,451 20,899

Repayment plans and forbearances completed(1). . . . . . . . . 262 1,895 175 1,296

Total home retention solutions . . . . . . . . . . . . . . . . . . . . . . . 3,605 21,823 3,626 22,195

Foreclosure alternatives:

Short sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 450 2,181 611 2,995

Deeds-in-lieu of foreclosure . . . . . . . . . . . . . . . . . . . . . . . . . . 178 1,153 265 1,745

Total foreclosure alternatives . . . . . . . . . . . . . . . . . . . . . . . . 628 3,334 876 4,740

Total loan workouts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 4,233 25,157 $ 4,502 26,935

Loan workouts as a percentage of single-family guaranty book

of business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.59 % 0.58 % 0.64 % 0.62 %

__________

(1) Repayment plans reflect only those plans associated with loans that were 60 days or more delinquent. Forbearances reflect 

loans that were 90 days or more delinquent.

The volume of home retention solutions completed in the first quarter of 2017 decreased compared with the first 

quarter of 2016, primarily due to a decline in the number of delinquent loans in the first quarter of 2017, compared 

with the first quarter of 2016.
MD&A | Business Segments

Fannie Mae First Quarter 2017 Form 10-Q 38

REO Management

Foreclosure and REO activity affect the amount of credit losses we realize in a given period. Table 22 displays our 

foreclosure activity by region. Regional REO acquisition and charge-off trends generally follow a pattern that is 

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

Table 22: Single-Family Foreclosed Properties

For the Three Months

Ended March 31,

2017 2016

Single-family foreclosed properties (number of properties):

Beginning of period inventory of single-family foreclosed properties (REO)(1). . . . . . 38,093 57,253

Acquisitions by geographic area:(2)

Midwest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,602 3,830

Northeast . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,713 3,679

Southeast . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,424 5,399

Southwest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,588 1,983

West . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 859 1,476

Total properties acquired through foreclosure(1). . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,186 16,367

Dispositions of REO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (14,728) (21,331)

End of period inventory of single-family foreclosed properties (REO)(1). . . . . . . . . . . . 34,551 52,289

Carrying value of single-family foreclosed properties (dollars in millions) . . . . . . . . . . . $ 3,951 $ 5,963

Single-family foreclosure rate(3). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.26 % 0.38 %

REO net sales prices to unpaid principal balance(4)

. . . . . . . . . . . . . . . . . . . . . . . . . . . 74 % 73 %

Short sales net sales prices to unpaid principal balance(5). . . . . . . . . . . . . . . . . . . . . . 74 % 73 %

__________

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

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

(2) See footnote 9 to “Table 18: Risk Characteristics of Single-Family Conventional Business Volume and Guaranty Book of 

Business” for states included in each geographic region.

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

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

respective period.

(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. 

The continued decrease in the number of our seriously delinquent single-family loans resulted in a reduction in 

the number of REO acquisitions in the first quarter of 2017 compared with the first quarter of 2016.

We continue to manage our REO inventory to appropriately control costs and maximize sales proceeds. However, 

we are unable to market and sell a large portion of our inventory, primarily due to occupancy and state or local 

redemption or confirmation periods, which extends the amount of time it takes to bring our properties to a 

marketable state and eventually dispose of them. This results in higher foreclosed property expenses, which 

include costs related to maintaining the property and ensuring that the property is vacant. As of March 31, 2017, 

approximately 40% of our REO properties were unable to be marketed, 21% of our REO properties were 

available for sale, 20% of our REO properties were pending sale settlement and 19% of our REO properties were 

pending appraisals and being prepared to be listed for sale.
MD&A | Business Segments

Fannie Mae First Quarter 2017 Form 10-Q 39

Multifamily Business

Our multifamily business provides mortgage market liquidity primarily for properties with five or more residential 

units, which may be communities, cooperative properties, seniors housing, dedicated student housing or 

manufactured housing communities.

Multifamily Mortgage Market Conditions and Outlook

National multifamily market fundamentals, which include factors such as vacancy rates and rents, exhibited mixed 

results during the first quarter of 2017. 

• Vacancy rates. According to preliminary third-party data, the national multifamily vacancy rate for 

institutional investment-type apartment properties was an estimated 5.5% as of March 31, 2017, 

compared with 5.25% as of December 31, 2016. Although the national estimated vacancy rate has 

increased, it remains below its average rate over the last 10 years.

• Rents. Estimated multifamily rents increased slightly during the first quarter of 2017 after remaining flat 

during the fourth quarter of 2016. National asking rents increased by an estimated 0.5% during the first 

quarter of 2017. Despite the recent moderating trend, because estimated multifamily rent growth has 

outpaced wage growth over the past few years, multifamily rental housing affordability has declined in 

recent years.

Despite the increase in vacancy and new multifamily supply, estimated rent growth was positive during the first 

quarter of 2017, likely due to job growth and new household formations.

Continued but slowing demand for multifamily rental units was reflected in the estimated positive net absorption 

(that is, the net change in the number of occupied rental units during the time period) of approximately 24,000

units during the first quarter of 2017, according to preliminary data from Reis, Inc., compared with approximately 

43,000 units during the fourth quarter of 2016. 

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

increase in the amount of new multifamily construction development nationally. According to Dodge Data & 

Analytics, it is estimated that there will be approximately 412,000 new multifamily units completed in 2017. The 

bulk of this new supply is concentrated in a limited number of metropolitan areas. We believe this increase in 

supply will result in a slowdown in national net absorption rates, occupancy levels and effective rents in 2017.
MD&A | Business Segments

Fannie Mae First Quarter 2017 Form 10-Q 40

Multifamily Business Metrics

Table 23: Multifamily Business Key Performance Data

For the Three Months Ended March 31,

2017 2016

(Dollars in millions)

Securitization Activity/New Business

Multifamily new business volume(1)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 17,379 $ 12,551

Multifamily units financed from new business volume . . . . . . . . . . . . . . . . . . . . 202,000 161,000

Multifamily Fannie Mae MBS issuances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 17,246 $ 12,551

Multifamily Fannie Mae structured securities issuances. . . . . . . . . . . . . . . . . . . $ 3,075 $ 2,733

Multifamily Fannie Mae MBS outstanding, at end of period . . . . . . . . . . . . . . . . $ 236,062 $ 195,410

Portfolio Data

Multifamily retained mortgage portfolio, at end of period . . . . . . . . . . . . . . . . . . $ 17,731 $ 27,290

Credit Guaranty Activity

Average multifamily guaranty book of business(2)

. . . . . . . . . . . . . . . . . . . . . . . $ 249,461 $ 217,076

Average charged guaranty fee rate on multifamily guaranty book of business

(in basis points) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76.7 70.3

Multifamily credit loss ratio (in basis points)(3)

. . . . . . . . . . . . . . . . . . . . . . . . . . 0.0 0.6

Multifamily serious delinquency rate, at end of period . . . . . . . . . . . . . . . . . . . . 0.05 % 0.06 %

Percentage of multifamily guaranty book of business with lender risk-sharing,

at end of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95 % 92 %

_______

(1) Reflects unpaid principal balance of multifamily Fannie Mae MBS issued (excluding portfolio securitizations), multifamily 

loans purchased, and credit enhancements provided during the period.

(2) 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.

(3) Calculated based on Multifamily segment credit losses divided by the average multifamily guaranty book of business.

FHFA’s 2017 conservatorship scorecard included an objective to maintain the dollar volume of new multifamily 

business at or below $36.5 billion excluding certain targeted affordable and underserved market business 

segments. Approximately 62% of Fannie Mae’s multifamily new business volume of $17.4 billion for the first 

quarter of 2017 counted towards FHFA’s 2017 multifamily volume cap.
MD&A | Business Segments

Fannie Mae First Quarter 2017 Form 10-Q 41

Multifamily Business Financial Results

Table 24: Multifamily Business Financial Results

For the Three Months Ended March 31,

2017 2016 Variance

(Dollars in millions)

Net interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 590 $ 524 $ 66

Fee and other income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 173 136 37

Net revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 763 660 103

Fair value gains (losses), net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (28) 37 (65)

Administrative expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (83) (79) (4)

Credit-related income (expense)(1)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (5) 22 (27)

Other expenses, net(2)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (85) (5) (80)

Income before federal income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 562 635 (73)

Provision for federal income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (131) (161) 30

Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 431 $ 474 $ (43)

__________

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

(2) Consists of investment gains (losses) and other income (expenses).

Multifamily net income decreased in the first quarter of 2017 compared with the first quarter of 2016 primarily due 

to fair value losses in the first quarter of 2017 compared with fair value gains in the first quarter of 2016. This 

decrease was partially offset by an increase in net interest income.

Net interest income increased in the first quarter of 2017 compared with the first quarter of 2016 primarily due to 

an increase in guaranty fee income as our multifamily guaranty book of business grew and loans with higher 

guaranty fees became a larger part of our book of business, while loans with lower guaranty fees continued to 

liquidate.

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 during the commitment periods.

Multifamily Mortgage Credit Risk Management

This section updates our discussion of multifamily mortgage credit risk management in our 2016 Form 10-K in 

“MD&A—Business Segments—Multifamily Business—Multifamily Mortgage Credit Risk Management.”

We exclude from the multifamily credit statistics reported below the approximately 1% of our multifamily guaranty 

book of business for which our loan level information is incomplete as of March 31, 2017 and December 31, 2016.

Multifamily Acquisition Policy and Underwriting Standards

Our multifamily business is responsible for pricing and managing the credit risk on multifamily mortgage loans we 

purchase and on Fannie Mae MBS backed by multifamily loans (whether held in our retained mortgage portfolio 

or held by third-parties). Our primary multifamily delivery channel is the Delegated Underwriting and Servicing, or 

DUS®, program, which consists of large financial institutions and independent mortgage lenders. Multifamily loans 

that we purchase or that back Fannie Mae MBS are underwritten by Fannie Mae-approved lenders and may be 

subject to our underwriting review prior to closing, depending on the product type, loan size, market and other 

factors. Loans delivered to us by DUS lenders and their affiliates represented 98% of our multifamily guaranty 

book of business as of March 31, 2017, and 97% of our multifamily guaranty book of business as of 

December 31, 2016. 

We use credit enhancement arrangements, primarily lender risk-sharing, for our multifamily loans. As of March 31, 

2017, 95% of the unpaid principal balance of loans in our multifamily guaranty book of business had lender risksharing, compared with 94% as of December 31, 2016. Our maximum potential loss recovery from lenders under 

current risk-sharing agreements represented over 20% of the unpaid principal balance of our multifamily guaranty 

book of business as of March 31, 2017 and December 31, 2016. 
MD&A | Business Segments

Fannie Mae First Quarter 2017 Form 10-Q 42

Our standards for multifamily loans specify maximum original LTV ratio and minimum original debt service 

coverage ratio (“DSCR”) values that vary based on loan characteristics. Our experience has been that original 

LTV ratio and DSCR values have been reliable indicators of future credit performance. At underwriting, the DSCR 

is evaluated based on both actual and underwritten debt service payments. The original DSCR is calculated using 

the underwritten debt service payments for the loan, rather than the actual debt service payments which, 

depending on the interest rate of the loan and loan structure, may result in a more conservative estimate of the 

debt service payments.

Table 25 displays original LTV ratio and DSCR metrics for our multifamily guaranty book of business. 

Table 25: Multifamily Guaranty Book of Business Key Risk Characteristics

As of

March 31,

2017

December 31,

2016

March 31,

2016

Weighted average original LTV ratio . . . . . . . . . . . . . . . . . . . . . . . . . 67% 67% 66%

Original LTV ratio greater than 80%. . . . . . . . . . . . . . . . . . . . . . . . . . 2 2 2

Original DSCR less than or equal to 1.10 . . . . . . . . . . . . . . . . . . . . . 14 14 13

Multifamily Portfolio Diversification and Monitoring

Diversification within our multifamily mortgage credit book of business by geographic concentration, term to 

maturity, interest rate structure, borrower concentration and loan size, as well as credit enhancement coverage, 

are important factors that influence credit performance and help reduce our credit risk.

We and our lenders monitor the performance and risk characteristics of our multifamily loans and the underlying 

properties on an ongoing basis throughout the 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 1% as of March 31, 2017, compared with approximately 2% as of 

December 31, 2016. 

Multifamily Problem Loan Management and Foreclosure Prevention

We periodically refine our underwriting standards in response to market conditions and implement proactive 

portfolio management and monitoring, which are each designed to keep credit losses and delinquencies to a low 

level relative to our multifamily guaranty book of business. The multifamily serious delinquency rate was 0.05% as 

of March 31, 2017 and December 31, 2016. We classify multifamily loans as seriously delinquent when payment 

is 60 days or more past due.

REO Management

The number of multifamily foreclosed properties held for sale remained low at 13 properties with a carrying value 

of $79 million as of March 31, 2017 and $85 million as of December 31, 2016.

Liquidity and Capital Management

Liquidity Management

Our business activities require that we maintain adequate liquidity to fund our operations. Our liquidity risk 

management framework is designed to address our liquidity risk. Liquidity risk is the risk that we will not be able to 

meet our funding obligations in a timely manner. Liquidity risk management involves forecasting funding 

requirements, maintaining sufficient capacity to meet our needs based on our ongoing assessment of financial 

market liquidity and adhering to our regulatory requirements.

Our primary source of funds is proceeds from the issuance of short-term and long-term debt securities. 

Accordingly, our liquidity depends largely on our ability to issue unsecured debt in the capital markets. Our status 

as a GSE and federal government support of our business continue to be essential to maintaining our access to 

the unsecured debt markets. Our treasury group is responsible for implementing our liquidity and contingency 

planning strategies. We hold a portfolio of highly liquid investments and maintain access to alternative sources of 
MD&A | Liquidity and Capital Management

Fannie Mae First Quarter 2017 Form 10-Q 43

liquidity which are designed to provide near term availability of cash in the event that our access to the debt 

markets becomes limited. While our liquidity contingency planning attempts to address stressed market conditions 

and our status under conservatorship and Treasury arrangements, we believe that our liquidity contingency plans 

may be difficult or impossible to execute for a company of our size in our circumstances.

Our liquidity position could be adversely affected by many factors, both internal and external to our business, 

including: actions taken by FHFA, the Federal Reserve, Treasury or other government agencies; legislation 

relating to us or our business; a U.S. government payment default on its debt obligations; a downgrade in the 

credit ratings of our senior unsecured debt or the U.S. government’s debt from the major ratings organizations; a 

systemic event leading to the withdrawal of liquidity from the market; an extreme market-wide widening of credit 

spreads; public statements by key policy makers; a significant decline in our net worth; potential investor concerns 

about the adequacy of funding available to us under the senior preferred stock purchase agreement; loss of 

demand for our debt, or certain types of our debt, from a major group of investors; a significant credit event 

involving one of our major institutional counterparties; a sudden catastrophic operational failure in the financial 

sector; or elimination of our GSE status.

This section supplements and updates information regarding liquidity risk management in our 2016 Form 10-K. 

See “MD&A—Liquidity and Capital Management—Liquidity Management” and “Risk Factors” in our 2016 Form 

10-K for additional information, including discussions of our primary sources and uses of funds, our liquidity risk 

management practices and liquidity contingency planning, factors that influence our debt funding activity, factors 

that may impact our access to or the cost of our debt funding, and factors that could adversely affect our liquidity.

Debt Funding

We fund our business primarily through the issuance of a variety of short-term and long-term debt securities in the 

domestic and international capital markets. Because debt issuance is our primary funding source, we are subject 

to “roll over,” or refinancing, risk on our outstanding debt.

Our debt funding needs and debt funding activity may vary from quarter to quarter depending on market 

conditions and are influenced by anticipated liquidity needs, the size of our retained mortgage portfolio and our 

dividend payment obligations to Treasury. See “Retained Mortgage Portfolio” for information about our retained 

mortgage portfolio and our requirement to reduce the size of our retained mortgage portfolio.
MD&A | Liquidity and Capital Management

Fannie Mae First Quarter 2017 Form 10-Q 44

Fannie Mae Debt Funding Activity

Table 26 displays the activity in debt of Fannie Mae. This activity excludes the debt of consolidated trusts and 

intraday loans. Activity for short-term debt of Fannie Mae relates to borrowings with an original contractual 

maturity of one year or less while activity for long-term debt of Fannie Mae relates to borrowings with an original 

contractual maturity of greater than one year. The reported amounts of debt issued and paid off during the period 

represent the face amount of the debt at issuance and redemption. The increase in our issuances and payoffs of 

short-term debt during the first quarter of 2017 compared with the first quarter of 2016 was driven by increased 

utilization of short-term notes with overnight maturities. 

Table 26: Activity in Debt of Fannie Mae

For the Three Months Ended

March 31,

2017 2016

(Dollars in millions)

Issued during the period:

Short-term:

Amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 151,384 $ 106,813

Weighted-average interest rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.51% 0.27%

Long-term:(1)

Amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 13,108 $ 24,268

Weighted-average interest rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.27% 1.89%

Total issued:

Amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 164,492 $ 131,081

Weighted-average interest rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.65% 0.57%

Paid off during the period:(2)

Short-term:

Amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 148,746 $ 117,429

Weighted-average interest rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.46% 0.23%

Long-term:(1)

Amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 15,872 $ 29,252

Weighted-average interest rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.22% 2.23%

Total paid off:

Amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 164,618 $ 146,681

Weighted-average interest rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.63% 0.63%

__________

(1) Includes credit risk-sharing securities issued under our CAS series. For additional information on our credit risk transfer 

transactions, see “Business Segments—Single Family Business—Single-Family Mortgage Credit Risk Management—

Transfer of Mortgage Credit Risk: Credit Risk Transfer Transactions.”

(2) Consists of all payments on debt, including regularly scheduled principal payments, payments at maturity, payments 

resulting from calls and payments for any other repurchases. Repurchases of debt and early retirements of zero-coupon 

debt are reported at original face value, which does not equal the amount of actual cash payment.

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, 2017 and 2016. We had no borrowings outstanding under this line of 

credit as of March 31, 2017.
MD&A | Liquidity and Capital Management

Fannie Mae First Quarter 2017 Form 10-Q 45

Outstanding Debt

Total outstanding debt of Fannie Mae includes short-term and long-term debt, excluding 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.

Our outstanding short-term debt, based on its original contractual maturity, as a percentage of our total 

outstanding debt, was 11% as of March 31, 2017 and December 31, 2016. The weighted-average interest rate on 

our long-term debt, based on its original contractual maturity, increased to 2.34% as of March 31, 2017 from 

2.31% as of December 31, 2016.

Our outstanding debt maturing within one year, including the current portion of our long-term debt and amounts 

we have announced for early redemption, as a percentage of our total outstanding debt, excluding debt of 

consolidated trusts, was 33% as of March 31, 2017 and 32% as of December 31, 2016. The weighted-average 

maturity of our outstanding debt that is maturing within one year was 132 days as of March 31, 2017, compared 

with 146 days as of December 31, 2016. The weighted-average maturity of our outstanding debt maturing in more 

than one year was approximately 57 months as of March 31, 2017, compared with approximately 56 months as of 

December 31, 2016.

We intend to repay our short-term and long-term debt obligations as they become due primarily through proceeds 

from the issuance of additional debt securities. We also may use proceeds from our mortgage assets to pay our 

debt obligations.

Pursuant to the terms of the senior preferred stock purchase agreement, we are prohibited from issuing debt 

without the prior consent of Treasury if it would result in our aggregate indebtedness exceeding our outstanding 

debt limit, which is 120% of the amount of mortgage assets we were allowed to own under the senior preferred 

stock purchase agreement on December 31 of the immediately preceding calendar year. Our debt limit under the 

senior preferred stock purchase agreement was reduced to $407.2 billion in 2017. As of March 31, 2017, our 

aggregate indebtedness totaled $328.5 billion, which was $78.7 billion below our debt limit. The calculation of our 

indebtedness for purposes of complying with our debt limit reflects the unpaid principal balance and excludes debt 

basis adjustments and debt of consolidated trusts. Because of our debt limit, we may be restricted in the amount 

of debt we issue to fund our operations.
MD&A | Liquidity and Capital Management

Fannie Mae First Quarter 2017 Form 10-Q 46

Table 27 displays information on our outstanding short-term and long-term debt based on its original contractual 

terms.

Table 27: Outstanding Short-Term Borrowings and Long-Term Debt(1)

As of

March 31, 2017 December 31, 2016

Maturities Outstanding

WeightedAverage

Interest

Rate Maturities Outstanding

WeightedAverage

Interest

Rate

(Dollars in millions)

Federal funds purchased and securities 

sold under agreements to repurchase(2)

. — $ 185 —% — $ — —%

Short-term debt:

Debt of Fannie Mae . . . . . . . . . . . . . . . — $ 37,452 0.58% — $ 34,995 0.49%

Debt of consolidated trusts . . . . . . . . . . — 557 0.63 — 584 0.48

Total short-term debt . . . . . . . . . . . . . . . . . $ 38,009 0.58% $ 35,579 0.49%

Long-term debt:

Senior fixed:

Benchmark notes and bonds . . . . . . 2017 - 2030 $ 150,996 2.09% 2017 - 2030 $ 153,983 2.16%

Medium-term notes(3)

. . . . . . . . . . . . 2017 - 2026 83,310 1.42 2017 - 2026 82,230 1.40

Other(4)

. . . . . . . . . . . . . . . . . . . . . . . 2017 - 2038 12,887 6.78 2017 - 2038 12,800 6.74

Total senior fixed . . . . . . . . . . . . 247,193 2.11 249,013 2.14

Senior floating:

Medium-term notes(3)

. . . . . . . . . . . . 2017 - 2020 18,751 0.91 2017 - 2019 21,476 0.71

Connecticut Avenue Securities(5)

. . . 2023 - 2029 18,579 4.93 2023 - 2029 16,511 4.77

Other(6)

. . . . . . . . . . . . . . . . . . . . . . . 2020 - 2037 350 7.26 2020 - 2037 346 6.75

Total senior floating . . . . . . . . . . 37,680 2.91 38,333 2.48

Subordinated debentures . . . . . . . . . . 2019 4,756 9.93 2019 4,645 9.93

Secured borrowings(7)

. . . . . . . . . . . . . 2021 - 2022 102 1.59 2021 - 2022 111 1.44

Total long-term debt of Fannie Mae . . . . . . 289,731 2.34 292,102 2.31

Debt of consolidated trusts . . . . . . . . . 2017 - 2056 2,953,914 2.86 2017 - 2056 2,934,635 2.57

Total long-term debt . . . . . . . . . . . . . . . . . . $ 3,243,645 2.82% $ 3,226,737 2.54%

Outstanding callable debt of Fannie Mae(8) $ 79,526 2.01% $ 77,257 1.89%

__________

(1) Outstanding debt amounts and weighted-average interest rates reported in this table include the effects of discounts, 

premiums and other cost basis adjustments. Reported outstanding amounts include fair value gains and losses associated 

with debt that we elected to carry at fair value. Reported amounts for total debt of Fannie Mae include unamortized 

discounts and premiums, other cost basis adjustments and fair value adjustments of $1.4 billion and $1.8 billion as of 

March 31, 2017 and December 31, 2016, respectively. 

(2) Represents agreements to repurchase securities for a specified price, with repayment generally occurring on the following 

day. 

(3) Includes long-term debt with an original contractual maturity of greater than 1 year and up to 10 years, excluding zerocoupon debt.

(4) Includes other long-term debt with an original contractual maturity of greater than 10 years and foreign exchange bonds.

(5) Credit risk-sharing securities that transfer a portion of the credit risk on specified pools of mortgage loans in our singlefamily guaranty book of business to the investors in these securities, a portion of which is reported at fair value. For 

additional information on our credit risk transfer transactions, see “Business Segments—Single-Family Business—SingleFamily Mortgage Credit Risk Management—Transfer of Mortgage Credit Risk: Credit Risk Transfer Transactions.”

(6) Consists of structured debt instruments that are reported at fair value.

(7) Represents remaining liability resulting from the transfer of financial assets from our condensed consolidated balance 

sheets that did not qualify as a sale.
MD&A | Liquidity and Capital Management

Fannie Mae First Quarter 2017 Form 10-Q 47

(8) Consists of the unpaid principal balance of long-term callable debt of Fannie Mae that can be paid off in whole or in part at 

our option at any time on or after a specified date.

Cash and Other Investments Portfolio

Table 28 displays information on the composition of our cash and other investments portfolio. The balance of our 

cash and 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. See “Risk Management—Credit Risk 

Management—Institutional Counterparty Credit Risk Management—Counterparty Credit Exposure of Investments 

Held in our Cash and Other Investments Portfolio” in our 2016 Form 10-K for additional information on the risks 

associated with the assets in our cash and other investments portfolio.

Table 28: Cash and Other Investments Portfolio

As of

March 31,

2017

December 31,

2016

(Dollars in millions)

Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $24,988 $25,224

Federal funds sold and securities purchased under agreements to resell or similar

arrangements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35,260 30,415

U.S. Treasury securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30,155 32,317

Total cash and other investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $90,403 $87,956

Credit Ratings

As of March 31, 2017, our credit ratings have not changed since we filed our 2016 Form 10-K. For additional 

information on our credit ratings, see “MD&A—Liquidity and Capital Management—Credit Ratings” in our 2016

Form 10-K.

Cash Flows

Three Months Ended March 31, 2017. Cash and cash equivalents decreased by $236 million from $25.2 billion as 

of December 31, 2016 to $25.0 billion as of 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 dividends to Treasury under our 

senior preferred stock purchase agreement 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.

Three Months Ended March 31, 2016. Cash and cash equivalents increased by $4.2 billion from $14.7 billion as 

of December 31, 2015 to $18.9 billion as of March 31, 2016. The increase was primarily driven by cash inflows 

from (1) proceeds from the sale and liquidation of mortgage-related securities, (2) proceeds from the repayments 

and sales of loans of Fannie Mae and (3) the sale of Fannie MBS to third parties.

Partially offsetting these cash inflows were cash outflows from (1) the redemption of funding debt, which outpaced 

issuances, due to lower funding needs, (2) the acquisition of delinquent loans out of MBS trusts and (3) the 

payment of dividends to Treasury under our senior preferred stock purchase agreement.

Capital Management

Regulatory Capital

FHFA stated that, during conservatorship, our existing statutory and FHFA-directed regulatory capital 

requirements will not be binding and FHFA will not issue quarterly capital classifications. The deficit of our core 

capital over statutory minimum capital was $138.6 billion as of March 31, 2017 and $136.2 billion as of 

December 31, 2016. For more information on our minimum capital requirements, see “Note 14, Regulatory 

Capital Requirements” in our 2016 Form 10-K.
MD&A | Liquidity and Capital Management

Fannie Mae First Quarter 2017 Form 10-Q 48

Capital Activity

The Director of FHFA has directed us to make dividend payments on the senior preferred stock on a quarterly 

basis. Our first quarter 2017 dividend of $5.5 billion was declared by FHFA and subsequently paid by us on 

March 31, 2017. Based on the terms of the senior preferred stock, we expect to pay Treasury a dividend for the 

second quarter of 2017 of $2.8 billion by June 30, 2017.

The terms of our senior preferred stock provide for dividends to accrue at a rate equal to our net worth less an 

applicable capital reserve amount, which continues to decrease annually. The capital reserve amount is $600 

million for dividend periods in 2017, and will be reduced to zero on January 1, 2018.

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. We have received a total of $116.1 billion from 

Treasury pursuant to the senior preferred stock purchase agreement as of March 31, 2017. The current aggregate 

liquidation preference of the senior preferred stock, including the initial aggregate liquidation preference of $1.0 

billion, remains at $117.1 billion. 

While we had a positive net worth as of March 31, 2017 and have not received funds from Treasury under the 

agreement since the first quarter of 2012, we will be required to obtain additional funding from Treasury pursuant 

to the senior preferred stock purchase agreement if we have a net worth deficit in future periods. As of the date of 

this filing, the amount of remaining available funding under the senior preferred stock purchase agreement is 

$117.6 billion. 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 under the 

agreement.

See “Business—Conservatorship and Treasury Agreements—Treasury Agreements” in our 2016 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 2016 Form 10-K for a discussion of the risks relating to our limited and 

declining capital reserves and our dividend obligations to Treasury on our senior preferred stock.

Off-Balance Sheet Arrangements

Our maximum potential exposure to credit losses relating to our outstanding and unconsolidated Fannie Mae 

MBS and other financial guarantees is primarily represented by the unpaid principal balance of the mortgage 

loans underlying outstanding and unconsolidated Fannie Mae MBS and other financial guarantees of $23.4 billion

as of March 31, 2017 and $24.3 billion as of December 31, 2016.

For a description of our off-balance sheet arrangements, see “MD&A—Off-Balance Sheet Arrangements” in our 

2016 Form 10-K.

Risk Management

Our business activities expose us to the following three major categories of risk: credit risk, market risk (including 

interest rate and liquidity risk) and operational risk. We seek to actively manage and monitor these risks by using 

an established risk management program. We are also exposed to compliance risk, reputational risk and strategic 

risk, which encompasses the uncertainty regarding the future of our company, including how long we will continue 

to be in existence, which we discuss in more detail in “Risk Factors” and in “Business—Legislation and Regulation

—Housing Finance Reform” in our 2016 Form 10-K.

In this section we provide an update on our management of our major risk categories. For a more complete 

discussion of the primary risks we face and how we manage credit risk, market risk and operational risk, see 

“MD&A—Risk Management” and “Risk Factors” in our 2016 Form 10-K. 
MD&A | Risk Management

Fannie Mae First Quarter 2017 Form 10-Q 49

Credit Risk Management

We are generally subject to two types of credit risk: mortgage credit risk and institutional counterparty credit risk. 

The metrics used to measure credit risk are generated using internal models. Our internal models require 

numerous assumptions and there are inherent limitations in any methodology used to estimate macroeconomic 

factors such as home prices, unemployment and interest rates, and their impact on borrower behavior. When 

market conditions change rapidly and dramatically, the assumptions of our models may no longer accurately 

capture or reflect the changing conditions. Management periodically makes judgments about the appropriateness 

of the risk assessments indicated by the models. See “Risk Factors” in our 2016 Form 10-K for a discussion of the 

risks associated with our use of models.

Mortgage Credit Risk Management

Mortgage credit risk is the risk of loss resulting from the failure of a borrower to make required mortgage 

payments. We are exposed to credit risk on our mortgage credit book of business because we either hold 

mortgage assets, have issued a guaranty in connection with the creation of Fannie Mae MBS backed by 

mortgage assets or provided other credit enhancements on mortgage assets. For a discussion of our single-family 

mortgage credit risk management, see “MD&A—Business Segments—Single-Family Business—Single-Family 

Mortgage Credit Risk Management” in our 2016 Form 10-K and in this report. For a discussion of our multifamily 

credit risk management, see “MD&A—Business Segments—Multifamily Business—Multifamily Mortgage Credit 

Risk Management” in our 2016 Form 10-K and in this report.

Institutional Counterparty Credit Risk Management

Institutional counterparty credit risk is the risk of loss resulting from the failure of an institutional counterparty to 

fulfill its contractual obligations to us. Defaults by a counterparty with significant obligations to us could result in 

significant financial losses to us.

See “MD&A—Risk Management—Credit Risk Management—Institutional Counterparty Credit Risk Management” 

and “Risk Factors” in our 2016 Form 10-K for additional information about our institutional counterparty risk, 

including counterparty risk we face from mortgage originators, investors and dealers, from debt security dealers, 

from document custodians and from mortgage fraud.

Mortgage Sellers and Servicers

One of our primary exposures to institutional counterparty risk is with mortgage servicers that service the loans 

we hold in our retained mortgage portfolio or that back our Fannie Mae MBS, as well as mortgage sellers and 

servicers that are obligated to repurchase loans from us or reimburse us for losses in certain circumstances. We 

rely on mortgage servicers to meet our servicing standards and fulfill their servicing obligations. We also rely on 

mortgage sellers and servicers to fulfill their repurchase obligations. 

Our five largest single-family mortgage servicers, including their affiliates, serviced approximately 39% of our 

single-family guaranty book of business as of March 31, 2017 and December 31, 2016. Our largest mortgage 

servicer is Wells Fargo Bank, N.A., which, together with its affiliates, serviced approximately 17% of our singlefamily guaranty book of business as of March 31, 2017 and December 31, 2016.

Our five largest multifamily mortgage servicers, including their affiliates, serviced approximately 47% of our 

multifamily guaranty book of business as of March 31, 2017 and December 31, 2016. Wells Fargo Bank, N.A. and 

Walker & Dunlop, LLC each serviced over 10% of our multifamily guaranty book of business as of March 31, 2017

and December 31, 2016. 

A large portion of our single-family guaranty book is serviced by non-depository servicers. As of March 31, 2017, 

15% of our total single-family guaranty book of business, including 55% of our delinquent single-family loans, was 

serviced by our five largest non-depository servicers, compared with 16% of our total single-family guaranty book 

of business, including 51% of our delinquent single-family loans, as of December 31, 2016. Compared with 

depository financial institutions, non-depository servicers pose additional risks to us because non-depository 

servicers may have a greater reliance on third-party sources of liquidity and may, in the event of significant 

increases in delinquent loan volumes, have less financial capacity to advance funds on our behalf or satisfy 

repurchase requests or compensatory fee obligations. In addition, regulatory bodies have been reviewing the 

activities of some of our largest non-depository servicers. See “Risk Factors” in our 2016 Form 10-K for a 

discussion of the risks of our reliance on servicers.
MD&A | Risk Management

Fannie Mae First Quarter 2017 Form 10-Q 50

Our five largest single-family mortgage sellers, including their affiliates, accounted for approximately 36% of our 

single-family business acquisition volume in the first quarter of 2017, compared with approximately 29% in the 

first quarter of 2016. Our largest mortgage seller is Wells Fargo Bank, N.A., which, together with its affiliates, 

accounted for approximately 16% of our single-family business acquisition volume in the first quarter of 2017 and 

compared with approximately 12% in the first quarter of 2016. 

We acquire a portion of our business volume directly from non-depository and smaller depository financial 

institutions that may not have the same financial strength or operational capacity as our largest mortgage seller 

counterparties. We could be required to absorb losses on defaulted loans that a failed mortgage seller is obligated 

to repurchase from us if we determine there was an underwriting eligibility breach.

Credit Guarantors

We use various types of credit guarantors to manage our mortgage credit risk, including mortgage insurers, credit 

insurance risk transfer counterparties, financial guarantors, and multifamily lenders with risk sharing. 

Mortgage Insurers

We are generally required, pursuant to our charter, to obtain credit enhancements on single-family conventional 

mortgage loans that we purchase or securitize with LTV ratios over 80% at the time of purchase. We use several 

types of credit enhancements to manage our single-family mortgage credit risk, including primary and pool 

mortgage insurance coverage. Table 29 displays our risk in force for mortgage insurance coverage on singlefamily loans in our guaranty book of business and our insurance in force for our mortgage insurer counterparties, 

excluding insurance coverage provided by federal government entities and credit insurance obtained through 

CIRT deals. The table includes our top nine mortgage insurer counterparties, which provided over 99% of our total 

mortgage insurance coverage on single-family loans in our guaranty book of business as of March 31, 2017 and 

December 31, 2016. In addition, for our mortgage insurer counterparties not approved to write new business, we 

have provided the percentage of their claims payments the counterparties are currently deferring based on the 

direction of their state regulators, referred to as their deferred payment obligation. As of March 31, 2017 and 

December 31, 2016, less than 1% of our total risk in force mortgage insurance coverage was pool insurance. In 

addition, approximately 1% of our total insurance in force mortgage insurance coverage was pool insurance as of 

March 31, 2017 and December 31, 2016. 

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 expect to receive on primary mortgage insurance, as 

mortgage insurance recoveries would reduce the severity of the loss associated with defaulted loans. The amount 

by which our estimated benefit from mortgage insurance reduced our total combined loss reserves was $1.2 

billion as of March 31, 2017 and $1.4 billion as of December 31, 2016.
MD&A | Risk Management

Fannie Mae First Quarter 2017 Form 10-Q 51

Table 29: Mortgage Insurance Coverage

Risk in Force(1) Insurance in Force(2)

As of As of Deferred

March 31, December 31, March 31, December 31, Payment

2017 2016 2017 2016 Obligation %(3)

(Dollars in millions)

Counterparty:(4)

Approved:

(5)

Arch Capital Group Ltd.:(6)

United Guaranty Residential Insurance

Co. . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 26,935 $ 27,161 $103,452 $104,418

Arch Mortgage Insurance Co. . . . . . . . . . 6,780 6,059 26,866 23,998

Total Arch Capital Group Ltd. . . . . . . . . . . 33,715 33,220 130,318 128,416

Radian Guaranty, Inc. . . . . . . . . . . . . . . . . 26,234 25,866 102,021 100,626

Mortgage Guaranty Insurance Corp.. . . . . 24,894 24,662 96,515 95,431

Genworth Mortgage Insurance Corp. . . . . 18,905 18,573 74,458 73,075

Essent Guaranty, Inc. . . . . . . . . . . . . . . . . 11,895 11,213 47,862 45,053

National Mortgage Insurance Corp. . . . . . 4,803 4,388 22,787 21,209

Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . 294 282 1,801 1,724

Total approved . . . . . . . . . . . . . . . . . . . 120,740 118,204 475,762 465,534

Not approved:

(5)

PMI Mortgage Insurance Co.(7). . . . . . . . . 3,596 3,790 14,342 15,112 28.5%

Republic Mortgage Insurance Co.(7). . . . . 2,940 3,104 11,405 12,043 —

Triad Guaranty Insurance Corp.(7). . . . . . . 1,056 1,106 3,796 3,975 25.0%

Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 11 33 34

Total not approved . . . . . . . . . . . . . . . . 7,603 8,011 29,576 31,164

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 128,343 $ 126,215 $ 505,338 $ 496,698

Total as a percentage of single-family

guaranty book of business . . . . . . . . . . . 4 % 4 % 18 % 17 %

__________

(1) Risk in force is generally the maximum potential loss recovery under the applicable mortgage insurance policies in force 

and is based on the loan level insurance coverage percentage and, if applicable, any aggregate pool loss limit, as specified 

in the policy. 

(2) Insurance in force represents the unpaid principal balance of single-family loans in our guaranty book of business covered 

under the applicable mortgage insurance policies.

(3) Deferred payment obligation represents the percentage of cash payments on policyholder claims being deferred as 

directed by the insurer’s respective regulator in its state of domicile. As of March 31, 2017, we had an aggregate unpaid 

issued deferred payment obligation of $923 million from PMI Mortgage Insurance Co. and Triad Guaranty Insurance 

Corporation. We reserve for any unpaid amounts for which collectability is uncertain.

(4) Insurance coverage amounts provided for each counterparty may include coverage provided by affiliates and subsidiaries 

of the counterparty.

(5) “Approved” mortgage insurers are counterparties approved to write new insurance with us. “Not approved” mortgage 

insurers are counterparties that are no longer approved to write new insurance with us.

(6) In December 2016, Arch Capital Group Ltd., the ultimate parent company of Arch Mortgage Insurance Co., acquired United 

Guaranty Corporation. United Guaranty Corporation is the ultimate parent company of United Guaranty Residential 

Insurance Co.

(7) These mortgage insurers are under various forms of supervised control by their state regulators and are in run-off.

When an insured loan held in our retained mortgage portfolio subsequently goes into foreclosure, we charge off 

the loan, eliminating any previously-recorded loss reserves, and record REO and a mortgage insurance 

receivable for the claim proceeds deemed probable of recovery, as appropriate. However, if a mortgage insurer 

rescinds, cancels or denies insurance coverage, the initial receivable becomes due from the mortgage seller or 

servicer. We had outstanding receivables of $1.0 billion recorded in “Other assets” in our condensed consolidated 

balance sheets as of March 31, 2017 and December 31, 2016 related to amounts claimed on insured, defaulted 
MD&A | Risk Management

Fannie Mae First Quarter 2017 Form 10-Q 52

loans excluding government insured loans. Of this amount, $104 million as of March 31, 2017 and $141 million as 

of December 31, 2016 was due from our mortgage sellers or servicers. We assessed the total outstanding 

receivables for collectibility, and they are recorded net of a valuation allowance of $609 million as of March 31, 

2017 and $638 million as of December 31, 2016. The valuation allowance reduces our claim receivable to the 

amount considered probable of collection as of March 31, 2017 and December 31, 2016.

Credit Insurance Risk Transfer Counterparties

In a credit insurance risk transfer transaction, we shift a portion of the credit risk on a reference pool of mortgage 

loans to a panel of credit insurers or reinsurers. A portion of the credit insurers’ or reinsurers’ obligations are 

collateralized with highly-rated liquid assets held in a trust account. Our credit insurance risk transfer transactions 

are described in “Business Segments—Single-Family Business—Single-Family Mortgage Credit Risk 

Management—Transfer of Mortgage Credit Risk: Credit Risk Transfer Transactions.”

Multifamily Lenders with Risk Sharing

We enter into risk sharing agreements with lenders pursuant to which the lenders agree to bear all or some 

portion of the credit losses on the covered loans. Our maximum potential loss recovery from lenders under risk 

sharing agreements on DUS and non-DUS multifamily loans was $57.4 billion as of March 31, 2017, compared 

with $54.8 billion as of December 31, 2016. As of March 31, 2017 and December 2016, 43% of our maximum 

potential loss recovery on multifamily loans was from four DUS lenders. 

As noted above in “Business Segments—Multifamily Business—Multifamily Mortgage Credit Risk Management—

Multifamily Acquisition Policy and Underwriting Standards,” our primary multifamily delivery channel is our DUS 

program, which is comprised of lenders that range from large depositories to independent non-bank financial 

institutions. As of March 31, 2017 and December 31, 2016, 35% of the unpaid principal balance of loans in our 

multifamily guaranty book of business serviced by our DUS lenders was from institutions with an external 

investment grade credit rating or a guaranty from an affiliate with an external investment grade credit rating. Given 

the recourse nature of the DUS program, DUS lenders are bound by eligibility standards that dictate, among other 

items, minimum capital and liquidity levels, and the posting of collateral at a highly rated custodian to secure a 

portion of the lenders’ future obligations. We actively monitor the financial condition of these lenders to help 

ensure the level of risk remains within our standards and to ensure required capital levels are maintained and are 

in alignment with actual and modeled loss projections.

Custodial Depository Institutions

We evaluate our custodial depository institutions to determine whether they are eligible to hold deposits on our 

behalf based on requirements specified in our Servicing Guide. If a custodial depository institution were to fail 

while holding remittances of borrower payments of principal and interest due to us in our custodial account, we 

would be exposed to risk for balances in excess of the deposit insurance protection and might not be able to 

recover all of the principal and interest payments being held by the depository on our behalf, or there might be a 

substantial delay in receiving these amounts. If this were to occur, we would be required to replace these amounts 

with our own funds to make payments that are due to Fannie Mae MBS certificateholders. Accordingly, the 

insolvency of one of our principal custodial depository institutions could result in significant financial losses to us. 

A total of $27.2 billion in deposits for single-family payments were received and held by 256 institutions during the 

month of March 2017 and a total of $42.3 billion in deposits for single-family payments were received and held by 

258 institutions during the month of December 2016. Of these total deposits, 91% as of March 31, 2017 and 

December 31, 2016, were held by institutions rated as investment grade by S&P Global Ratings (“S&P”), Moody’s 

Investors Services (“Moody’s”) and Fitch Ratings Limited (“Fitch”). 

During the month of March 2017, a total of $2.8 billion in deposits for multifamily payments were received and 

held by 28 institutions and $3.1 billion in deposits for multifamily payments were received and held by 27

institutions during the month of December 2016. Of these total deposits, 96% as of March 31, 2017, were held by 

institutions rated as investment grade by S&P, Moody’s and Fitch, compared with 98% as of December 31, 2016. 

Our transactions with custodial depository institutions are concentrated. Our six largest single-family custodial 

depository institutions held 79% of these deposits as of March 31, 2017, compared with 80% as of December 31, 

2016. Our six largest multifamily custodial depository institutions held 87% of these deposits as of March 31, 

2017, compared with 91% as of December 31, 2016.
MD&A | Risk Management

Fannie Mae First Quarter 2017 Form 10-Q 53

Derivative Counterparty Credit Exposure

Our derivative counterparty credit exposure relates principally to interest rate derivative contracts. We are 

exposed to the risk that a counterparty in a derivative transaction will default on payments due to us, which may 

require us to seek a replacement derivative from a different counterparty. This replacement may be at a higher 

cost, or we may be unable to find a suitable replacement. Historically, our risk management derivative 

transactions have been made pursuant to bilateral contracts with a specific counterparty governed by the terms of 

an International Swaps and Derivatives Association Inc. master agreement. Pursuant to regulations implementing 

the Dodd-Frank Act, we are required to submit certain categories of new interest rate swaps to a derivatives 

clearing organization. We refer to our derivative transactions made pursuant to bilateral contracts as our over-thecounter (“OTC”) derivative transactions and our derivative transactions accepted for clearing by a derivatives 

clearing organization as our cleared derivative transactions.

We manage our derivative counterparty credit exposure relating to our OTC derivative transactions through 

enforceable master netting arrangements. These arrangements allow us to net derivative assets and liabilities 

with the same counterparty. We also manage our derivative counterparty exposure relating to our OTC derivative 

transactions by requiring counterparties to post collateral, which may include cash, U.S. Treasury securities, 

agency debt and agency mortgage-related securities. Regulations that took effect March 1, 2017 require posting 

of variation margin without the application of any thresholds for OTC derivative transactions executed after that 

date. As a result, our and our counterparties’ credit ratings are no longer used in determining the amount of 

collateral to be posted in connection with these transactions.

Our cleared derivative transactions are submitted to derivatives clearing organizations on our behalf through 

clearing members of the organizations. A contract accepted by a derivatives clearing organization is governed by 

the terms of the clearing organization’s rules and arrangements between us and the clearing member of the 

clearing organization. As a result, we are exposed to the institutional credit risk of both the derivatives clearing 

organizations and the members who are acting on our behalf. We manage our credit exposure relating to our 

cleared derivative transactions through enforceable master netting arrangements. These arrangements allow us 

to net our exposure to cleared derivatives by clearing organization and by clearing member. 

We will continue to have credit risk exposure to derivatives clearing organizations and certain of their members in 

the future as cleared derivative contracts comprise a larger percentage of our derivative instruments. We estimate 

our exposure to credit loss on derivative instruments by calculating the replacement cost, on a present value 

basis, to settle at current market prices all outstanding derivative contracts in a net gain position at the 

counterparty level where the right of legal offset exists. 

The fair value of derivatives in a gain position is included in our condensed consolidated balance sheets in “Other 

assets.” Total exposure represents our exposure to credit loss on derivative instruments less the cash and noncash collateral posted by our counterparties to us. This does not include collateral held in excess of exposure. Our 

total exposure was $27 million as of March 31, 2017 and $54 million as of December 31, 2016. The majority of 

our total exposure as of each date consisted of credit risk transfer transactions and mortgage insurance contracts 

that we account for as derivatives.

As of March 31, 2017 and December 31, 2016, we had sixteen counterparties with which we may transact OTC 

derivative transactions, all of which were subject to enforceable master netting arrangements. We had 

outstanding notional amounts with most of these counterparties, and the highest concentration by our total 

outstanding notional amount was approximately 9% as of March 31, 2017 and December 31, 2016. 

See “Note 8, Derivative Instruments” and “Note 13, Netting Arrangements” for additional information on our 

derivative contracts as of March 31, 2017 and December 31, 2016.

Market Risk Management, Including Interest Rate Risk Management

We are subject to market risk, which includes interest rate risk, spread risk and liquidity risk. These risks arise 

from our mortgage asset investments. Interest rate risk is the risk of loss from adverse changes in the value of our 

assets or liabilities or our future earnings due to changes in interest rates. Spread risk or basis risk is the resulting 

impact of changes in the spread between our mortgage assets and our debt and derivatives we use to hedge our 

position. Liquidity risk is the risk that we will not be able to meet our funding obligations in a timely manner. We 

describe our sources of interest rate risk exposure, business risks posed by changes in interest rates, and our 

strategy for managing interest rate risk and spread risk in “MD&A—Risk Management—Market Risk 

Management, Including Interest Rate Risk Management” and in “Risk Factors” in our 2016 Form 10-K. 
MD&A | Risk Management

Fannie Mae First Quarter 2017 Form 10-Q 54

Measurement of Interest Rate Risk

Below we present two quantitative metrics that provide estimates of our interest rate risk exposure: (1) fair value 

sensitivity of our net portfolio to changes in interest rate levels and slope of yield curve; and (2) duration gap. Our 

net portfolio consists of our retained mortgage portfolio assets; cash and other investments portfolio assets; our 

outstanding debt of Fannie Mae that is used to fund our retained mortgage portfolio assets and cash and other 

investments portfolio assets; mortgage commitments; and risk management derivatives. Risk management 

derivatives along with our debt instruments are used to manage interest rate risk. 

The metrics presented are calculated using internal models that require standard assumptions regarding interest 

rates and future prepayments of principal over the remaining life of our securities. These assumptions are derived 

based on the characteristics of the underlying structure of the securities and historical prepayment rates 

experienced at specified interest rate levels, taking into account current market conditions, the current mortgage 

rates of our existing outstanding loans, loan age and other factors. On a continuous basis, management makes 

judgments about the appropriateness of the risk assessments and will make adjustments as necessary to 

properly assess our interest rate exposure and manage our interest rate risk. The methodologies used to 

calculate risk estimates are periodically changed on a prospective basis to reflect improvements in the underlying 

estimation process.

Interest Rate Sensitivity to Changes in Interest Rate Level and Slope of Yield Curve

Pursuant to a disclosure commitment with FHFA, we disclose on a monthly basis the estimated adverse impact 

on the fair value of our net portfolio that would result from the following hypothetical situations:

• A 50 basis point shift in interest rates.

• A 25 basis point change in the slope of the yield curve.

In measuring the estimated impact of changes in the level of interest rates, we assume a parallel shift in all 

maturities of the U.S. LIBOR interest rate swap curve.

In measuring the estimated impact of changes in the slope of the yield curve, we assume a constant 7-year rate 

and a shift of 16.7 basis points for the 1-year rate and 8.3 basis points for the 30-year rate. We believe these 

interest rate shocks represent moderate movements in interest rates over a one-month period.

Duration Gap

Duration gap measures the price sensitivity of our assets and liabilities in our net portfolio to changes in interest 

rates by quantifying the difference between the estimated durations of our assets and liabilities. Our duration gap 

analysis reflects the extent to which the estimated maturity and repricing cash flows for our assets are matched, 

on average, over time and across interest rate scenarios to those of our liabilities. A positive duration gap 

indicates that the duration of our assets exceeds the duration of our liabilities. We disclose duration gap on a 

monthly basis under the caption “Interest Rate Risk Disclosures” in our Monthly Summary, which is available on 

our website and announced in a press release.

While our goal is to reduce the price sensitivity of our net portfolio to movements in interest rates, various factors 

can contribute to a duration gap that is either positive or negative. For example, changes in the market 

environment can increase or decrease the price sensitivity of our mortgage assets relative to the price sensitivity 

of our liabilities because of prepayment uncertainty associated with our assets. In a declining interest rate 

environment, prepayment rates tend to accelerate, thereby shortening the duration and average life of the fixed 

rate mortgage assets we hold in our net portfolio. Conversely, when interest rates increase, prepayment rates 

generally slow, which extends the duration and average life of our mortgage assets. Our debt and derivative 

instrument positions are used to manage the interest rate sensitivity of our retained mortgage portfolio and our 

investments in non-mortgage securities. As a result, the degree to which the interest rate sensitivity of our 

retained mortgage portfolio and our investments in non-mortgage securities is offset will depend on, among other 

factors, the mix of funding and other risk management derivative instruments we use at any given point in time.

The market value sensitivities of our net portfolio are a function of both the duration and the convexity of our net 

portfolio. Duration provides a measure of the price sensitivity of a financial instrument to changes in interest rates 

while convexity reflects the degree to which the duration of the assets and liabilities in our net portfolio changes in 

response to a given change in interest rates. We use convexity measures to provide us with information about 

how quickly and by how much our net portfolio’s duration may change in different interest rate environments. The 

market value sensitivity of our net portfolio will depend on a number of factors, including the interest rate 
MD&A | Risk Management

Fannie Mae First Quarter 2017 Form 10-Q 55

environment, modeling assumptions and the composition of assets and liabilities in our net portfolio, which vary 

over time. 

Results of Interest Rate Sensitivity Measures

The interest rate risk measures discussed below exclude the impact of changes in the fair value of our guaranty 

assets and liabilities resulting from changes in interest rates. We exclude our guaranty business from these 

sensitivity measures based on our current assumption that the guaranty fee income generated from future 

business activity will largely replace guaranty fee income lost due to mortgage prepayments.

Table 30 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. Table 30 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, 2017 and 2016. 

The sensitivity measures displayed in Table 30, which we disclose on a quarterly basis pursuant to a disclosure 

commitment with FHFA, are an extension of our monthly sensitivity measures. There are three primary differences 

between our monthly sensitivity disclosure and the quarterly sensitivity disclosure presented below: (1) the 

quarterly disclosure is expanded to include the sensitivity results for larger rate level shocks of positive or 

negative 100 basis points; (2) the monthly disclosure reflects the estimated pre-tax impact on the market value of 

our net portfolio calculated based on a daily average, while the quarterly disclosure reflects the estimated pre-tax 

impact calculated based on the estimated financial position of our net portfolio and the market environment as of 

the last business day of the quarter; and (3) the monthly disclosure shows the most adverse pre-tax impact on the 

market value of our net portfolio from the hypothetical interest rate shocks, while the quarterly disclosure includes 

the estimated pre-tax impact of both up and down interest rate shocks.

Table 30: Interest Rate Sensitivity of Net Portfolio to Changes in Interest Rate Level and Slope of Yield

Curve

As of

March 31, 2017(1)(2) December 31, 2016(1)(2)

(Dollars in billions)

Rate level shock:

-100 basis points . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 0.0 $ (0.2)

-50 basis points . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.0 0.0

+50 basis points . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.0 0.0

+100 basis points . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (0.1) 0.0

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)

2017 2016

Duration

Gap

Rate Slope

Shock 25 bps

Rate Level

Shock 50 bps

Duration

Gap

Rate Slope

Shock 25 bps

Rate Level

Shock 50 bps

Exposure Exposure

(In months) (Dollars in billions) (In months) (Dollars in billions)

Average . . . . . . . . . . . . (0.1) $ 0.0 $ 0.0 (0.1) $ 0.1 $ 0.0

Minimum. . . . . . . . . . . . (0.7) 0.0 0.0 (0.9) 0.0 0.0

Maximum . . . . . . . . . . . 0.2 0.1 0.1 0.7 0.1 0.4

Standard deviation . . . . 0.2 0.0 0.0 0.3 0.0 0.1

__________

(1) Computed based on changes in LIBOR interest rates swap curve.

(2) Measured on the last day of each period presented.

(3) Computed based on daily values during the period presented.
MD&A | Risk Management

Fannie Mae First Quarter 2017 Form 10-Q 56

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, 2017. In addition, the convexity exposure may result in similar 

market value sensitivities for positive and negative interest rate shocks of the same magnitude.

A majority of the interest rate risk associated with our mortgage-related securities and loans is hedged with our 

debt issuances, which include callable debt. We use derivatives to help manage the residual interest rate risk 

exposure between our assets and liabilities. Derivatives have enabled us to keep our interest rate risk exposure at 

consistently low levels in a wide range of interest-rate environments. Table 31 displays an example of how 

derivatives impacted the net market value exposure for a 50 basis point parallel interest rate shock.

Table 31: Derivative Impact on Interest Rate Risk (50 Basis Points)

As of(1)

March 31, 2017 December 31, 2016

(Dollars in billions)

Before derivatives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (0.8) $ (1.0)

After derivatives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.0 0.0

Effect of derivatives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.8 1.0

__________

(1) Measured on the last day of each period presented.

Liquidity Risk Management

See “MD&A—Liquidity and Capital Management—Liquidity Management” in our 2016 Form 10-K and in this 

report for a discussion of how we manage liquidity risk.

Operational Risk Management

See “MD&A—Risk Management—Operational Risk Management” in our 2016 Form 10-K for information on 

operational risks that we face and our framework for managing operational risk.

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 2016 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 2016 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 combined loss reserves.

See “MD&A—Critical Accounting Policies and Estimates” in our 2016 Form 10-K for a discussion of these critical 

accounting policies and estimates.
MD&A | Impact of Future Adoption of New Accounting Guidance

Fannie Mae First Quarter 2017 Form 10-Q 57

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 revenues and the factors that will affect our revenues; 

• the composition, quality and size of our retained mortgage portfolio;

• our business plans and strategies and the impact of such plans and strategies; 

• our capital reserves and our dividend payments to Treasury; 

• our payments to HUD and Treasury funds under the GSE Act;

• the consequences of our conservatorship and possible receivership;

• the impact of legislation, regulation and accounting guidance on our business or financial results, 

including the impact of corporate income tax legislation and impairment accounting guidance;

• housing and mortgage market conditions, including home price appreciation, and the impact of such 

conditions on our financial results;

• the risks to our business;

• our credit losses and loss reserves;

• our serious delinquency rates and foreclosures;

• our engagement in credit risk transfer transactions and the effects of those transactions;

• factors that will affect or mitigate our credit risk exposure;

• the characteristics and performance of the loans in our book of business and factors that will affect their 

characteristics and performance; 

• our single-family loan acquisitions and the credit risk profile of such acquisitions; 

• factors that will affect our liquidity and ability to meet our debt obligations and factors relating to our 

liquidity contingency plans; 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 or corporate income tax reform legislation; actions by FHFA, 

Treasury, HUD or other regulators that affect our business; the timing and level of, as well as regional variation in, 
MD&A | Forward-Looking Statements

Fannie Mae First Quarter 2017 Form 10-Q 58

home price changes; changes in interest rates, including negative interest rates; changes in unemployment rates 

and other macroeconomic and housing market variables; our future guaranty fee pricing and the impact of that 

pricing on our competitive environment and guaranty fee revenues; 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; 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 for Fannie Mae and Freddie Mac; 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; disruptions in the housing and credit markets; significant changes in modification and foreclosure 

activity; the volume and pace of future nonperforming 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 (“FASB”); future changes to our accounting policies; changes in the 

fair value of our assets and liabilities; operational control weaknesses; our reliance on models; future updates to 

our models, including the assumptions used by these models; the level and volatility of interest rates and credit 

spreads; changes in the fiscal and monetary policies of the Federal Reserve, including any change in the Federal 

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

sales of such securities; changes in the structure and regulation of the financial services industry; credit 

availability; global political risks; natural disasters, environmental disasters, terrorist attacks, pandemics or other 

major disruptive events; information security breaches or threats; and those factors described in “Risk Factors” in 

this report and in our 2016 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 our 2016 Form 10-K and in this 

report. These forward-looking statements are representative only as of the date they are made, and we undertake 

no obligation to update any forward-looking statement as a result of new information, future events or otherwise, 

except as required under the federal securities laws. 
 Financial Statements | Condensed Consolidated Balance Sheets

Fannie Mae (In conservatorship) First Quarter 2017 Form 10-Q 59

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,

2017 2016

ASSETS

Cash and cash equivalents. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 24,988 $ 25,224

Restricted cash (includes $22,642 and $31,536, related to consolidated trusts) . . . . . . . . . . . . . . . . . . . . . 27,321 36,953

Federal funds sold and securities purchased under agreements to resell or similar arrangements. . . . . . . 35,260 30,415

Investments in securities:

Trading, at fair value (includes $1,066 and $1,277, respectively, pledged as collateral ) . . . . . . . . . . . . 37,684 40,562

Available-for-sale, at fair value (includes $113 and $107, respectively, related to consolidated trusts) . 7,721 8,363

Total investments in securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45,405 48,925

Mortgage loans:

Loans held for sale, at lower of cost or fair value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,024 2,899

Loans held for investment, at amortized cost:

Of Fannie Mae . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 187,211 204,318

Of consolidated trusts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,939,396 2,896,001

Total loans held for investment (includes $11,683 and $12,057, respectively, at fair value). . . . . . . . . 3,126,607 3,100,319

Allowance for loan losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (22,129) (23,465)

Total loans held for investment, net of allowance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,104,478 3,076,854

Total mortgage loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,109,502 3,079,753

Deferred tax assets, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32,647 33,530

Accrued interest receivable (includes $7,089 and $7,064, respectively, related to consolidated trusts) . . . 7,704 7,737

Acquired property, net. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,103 4,489

Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16,824 20,942

Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,303,754 $ 3,287,968

LIABILITIES AND EQUITY

Liabilities:

Accrued interest payable (includes $8,311 and $8,285, respectively, related to consolidated trusts). . . . $ 9,588 $ 9,431

Debt:

Of Fannie Mae (includes $9,162 and $9,582, respectively, at fair value) . . . . . . . . . . . . . . . . . . . . . . . . 327,183 327,097

Of consolidated trusts (includes $36,372 and $36,524, respectively, at fair value). . . . . . . . . . . . . . . . . 2,954,471 2,935,219

Other liabilities (includes $336 and $390, respectively, related to consolidated trusts). . . . . . . . . . . . . . . 9,133 10,150

Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,300,375 3,281,897

Commitments and contingencies (Note 15) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — —

Stockholders’ equity:

Senior preferred stock, 1,000,000 shares issued and outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 117,149 117,149

Preferred stock, 700,000,000 shares are authorized—555,374,922 shares issued and outstanding. . . 19,130 19,130

Common stock, no par value, no maximum authorization—1,308,762,703 shares issued,

1,158,087,567 and 1,158,082,750 shares outstanding, respectively . . . . . . . . . . . . . . . . . . . . . . . . . 687 687

Accumulated deficit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (126,952) (124,253)

Accumulated other comprehensive income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 765 759

Treasury stock, at cost, 150,675,136 and 150,679,953 shares, respectively . . . . . . . . . . . . . . . . . . . . . (7,400) (7,401)

Total stockholders’ equity (See Note 1: Impact of U.S. Government Support for information on our 

dividend obligation to Treasury) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,379 6,071

Total liabilities and equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,303,754 $ 3,287,968

See Notes to Condensed Consolidated Financial Statements
 Financial Statements | Condensed Consolidated Statements of Operations and Comprehensive Income

Fannie Mae (In conservatorship) First Quarter 2017 Form 10-Q 60

FANNIE MAE

(In conservatorship)

Condensed Consolidated Statements of Operations and Comprehensive Income — (Unaudited)

(Dollars and shares in millions, except per share amounts)

For the Three Months

Ended March 31,

2017 2016

Interest income:

Trading securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 142 $ 120

Available-for-sale securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101 203

Mortgage loans (includes $24,954 and $24,626, respectively, related to consolidated trusts). . . . . . . . . . . . . . . . . . 27,047 26,961

Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94 48

Total interest income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27,384 27,332

Interest expense:

Short-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44 51

Long-term debt (includes $20,308 and $20,658, respectively, related to consolidated trusts) . . . . . . . . . . . . . . . . . . 21,994 22,512

Total interest expense. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22,038 22,563

Net interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,346 4,769

Benefit for credit losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 396 1,184

Net interest income after benefit for credit losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,742 5,953

Investment gains (losses), net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (9) 69

Fair value losses, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (40) (2,813)

Fee and other income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 249 203

Non-interest income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 200 (2,541)

Administrative expenses:

Salaries and employee benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 344 364

Professional services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 229 215

Occupancy expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46 45

Other administrative expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65 64

Total administrative expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 684 688

Foreclosed property expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 217 334

Temporary Payroll Tax Cut Continuation Act of 2011 (“TCCA”) fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 503 440

Other expenses, net. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 382 264

Total expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,786 1,726

Income before federal income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,156 1,686

Provision for federal income taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,383) (550)

Net income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,773 1,136

Other comprehensive income (loss):

Changes in unrealized gains on available-for-sale securities, net of reclassification adjustments and taxes. . . . . . . 8 (198)

Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2) (2)

Total other comprehensive income (loss). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 (200)

Total comprehensive income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,779 $ 936

Net income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,773 $ 1,136

Dividends distributed or available for distribution to senior preferred stockholder (Note 9). . . . . . . . . . . . . . . . . . . . . . (2,779) (919)

Net income (loss) attributable to common stockholders (Note 9) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (6) $ 217

Earnings (loss) per share:

Basic. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 0.00 $ 0.04

Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.00 0.04

Weighted-average common shares outstanding:

Basic. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,762 5,762

Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,762 5,893

See Notes to Condensed Consolidated Financial Statements
 Financial Statements | Condensed Consolidated Statements of Cash Flows

Fannie Mae (In conservatorship) First Quarter 2017 Form 10-Q 61

FANNIE MAE

(In conservatorship)

Condensed Consolidated Statements of Cash Flows — (Unaudited)

(Dollars in millions)

For the Three Months

Ended March 31,

2017 2016

Net cash provided by (used in) operating activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,673 $ (3,111)

Cash flows provided by investing activities:

Proceeds from maturities and paydowns of trading securities held for investment. . . . . . . . . . . . . . 579 975

Proceeds from sales of trading securities held for investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66 792

Proceeds from maturities and paydowns of available-for-sale securities . . . . . . . . . . . . . . . . . . . . . 594 883

Proceeds from sales of available-for-sale securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 151 3,802

Purchases of loans held for investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (41,206) (39,935)

Proceeds from repayments of loans acquired as held for investment of Fannie Mae. . . . . . . . . . . . 6,718 5,026

Proceeds from sales of loans acquired as held for investment of Fannie Mae . . . . . . . . . . . . . . . . . — 849

Proceeds from repayments and sales of loans acquired as held for investment of consolidated

trusts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97,415 104,669

Net change in restricted cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,632 (2,994)

Advances to lenders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (28,703) (25,635)

Proceeds from disposition of acquired property and preforeclosure sales . . . . . . . . . . . . . . . . . . . . 3,454 4,129

Net change in federal funds sold and securities purchased under agreements to resell or similar

arrangements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (4,845) 9,800

Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (330) (545)

Net cash provided by investing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43,525 61,816

Cash flows used in financing activities:

Proceeds from issuance of debt of Fannie Mae . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 230,272 180,322

Payments to redeem debt of Fannie Mae . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (230,655) (196,016)

Proceeds from issuance of debt of consolidated trusts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78,443 71,723

Payments to redeem debt of consolidated trusts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (119,208) (107,575)

Payments of cash dividends on senior preferred stock to Treasury . . . . . . . . . . . . . . . . . . . . . . . . . (5,471) (2,859)

Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 185 (58)

Net cash used in financing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (46,434) (54,463)

Net increase (decrease) in cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (236) 4,242

Cash and cash equivalents at beginning of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25,224 14,674

Cash and cash equivalents at end of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 24,988 $ 18,916

Cash paid during the period for:

Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 25,954 $ 26,013

Income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 360

See Notes to Condensed Consolidated Financial Statements
Notes to Condensed Consolidated Financial Statements | Summary of Significant Accounting Policies

Fannie Mae (In conservatorship) First Quarter 2017 Form 10-Q 62

FANNIE MAE

(In conservatorship)

Notes to Condensed Consolidated Financial Statements

(Unaudited)

1. Summary of Significant Accounting Policies

Organization

We are a stockholder-owned corporation organized and existing under the Federal National Mortgage Association 

Charter Act (the “Charter Act” or our “charter”). We are a government-sponsored enterprise (“GSE”) and we are 

subject to government oversight and regulation. Our regulators include the Federal Housing Finance Agency 

(“FHFA”), the U.S. Department of Housing and Urban Development (“HUD”), the U.S. Securities and Exchange 

Commission (“SEC”), and the U.S. Department of the Treasury (“Treasury”). The U.S. government does not 

guarantee our securities or other obligations.

Conservatorship

On September 7, 2008, the Secretary of the Treasury and the Director of FHFA announced several actions taken 

by Treasury and FHFA regarding Fannie Mae, which included: (1) placing us in conservatorship, and (2) the 

execution of a senior preferred stock purchase agreement by our conservator, on our behalf, and Treasury, 

pursuant to which we issued to Treasury both senior preferred stock and a warrant to purchase common stock.

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

Housing Finance Regulatory Reform Act of 2008 (together, the “GSE Act”), the conservator immediately 

succeeded to (1) all rights, titles, powers and privileges of Fannie Mae, and of any stockholder, officer or director 

of Fannie Mae with respect to Fannie Mae and its assets, and (2) title to the books, records and assets of any 

other legal custodian of Fannie Mae. The conservator has since delegated specified authorities to our Board of 

Directors and has delegated to management the authority to conduct our day-to-day operations. The conservator 

retains the authority to withdraw its delegations at any time.

The conservatorship has no specified termination date and there continues to be significant uncertainty regarding 

our future, including how long we will continue to exist in our current form, the extent of our role in the market, 

how long we will be in conservatorship, what form we will have and what ownership interest, if any, our current 

common and preferred stockholders will hold in us after the conservatorship is terminated and whether we will 

continue to exist following conservatorship. Under the GSE Act, FHFA must place us into receivership if the 

Director of FHFA makes a written determination that our assets are less than our obligations or if we have not 

been paying our debts, in either case, for a period of 60 days. In addition, the Director of FHFA may place us into 

receivership at his discretion at any time for other reasons set forth in the GSE Act, including if we are critically 

undercapitalized or if we are undercapitalized and have no reasonable prospect of becoming adequately 

capitalized. Should we be placed into receivership, different assumptions would be required to determine the 

carrying value of our assets, which could lead to substantially different financial results. We are not aware of any 

plans of FHFA to fundamentally change our business model or capital structure in the near term.

Impact of U.S. Government Support

We continue to rely on support from Treasury to eliminate any net worth deficits we may experience in the future, 

which would otherwise trigger our being placed into receivership. Based on consideration of all the relevant 

conditions and events affecting our operations, including our reliance on the U.S. government, we continue to 

operate as a going concern and in accordance with our delegation of authority from FHFA.

We fund our business primarily through the issuance of short-term and long-term debt securities in the domestic 

and international capital markets. Because debt issuance is our primary funding source, we are subject to 

“rollover,” or refinancing, risk on our outstanding debt. Our ability to issue long-term debt has been strong 

primarily due to actions taken by the federal government to support us.

We believe that continued federal government support of our business, as well as our status as a GSE, are 

essential to maintaining our access to debt funding. Changes or perceived changes in federal government 

support of our business or our status as a GSE could materially and adversely affect our liquidity, financial 

condition and results of operations. In addition, due to our reliance on the U.S. government’s support, our access 

to debt funding or the cost of debt funding also could be materially adversely affected by a change or perceived 
Notes to Condensed Consolidated Financial Statements | Summary of Significant Accounting Policies

Fannie Mae (In conservatorship) First Quarter 2017 Form 10-Q 63

change in the creditworthiness of the U.S. government. A downgrade in our credit ratings could reduce demand 

for our debt securities and increase our borrowing costs. Future changes or disruptions in the financial markets 

could significantly change the amount, mix and cost of funds we obtain, which also could increase our liquidity 

and roll-over risk and have a material adverse impact on our liquidity, financial condition and results of operations.

Pursuant to the senior preferred stock purchase agreement, Treasury has committed to provide us with funding to 

help us maintain a positive net worth thereby avoiding the mandatory receivership trigger described above. As 

consideration for Treasury’s funding commitment, we issued one million shares of senior preferred stock and a 

warrant to purchase shares of our common stock to Treasury. As of March 31, 2017 and December 31, 2016, we 

have received a total of $116.1 billion from Treasury pursuant to the senior preferred stock purchase agreement. 

The aggregate liquidation preference of the senior preferred stock, including the initial aggregate liquidation 

preference of $1.0 billion, was $117.1 billion as of March 31, 2017. As of March 31, 2017, the amount of 

remaining funding available to us under the senior preferred stock purchase agreement was $117.6 billion.

On March 31, 2017, we paid Treasury a dividend of $5.5 billion based on our net worth of $6.1 billion as of 

December 31, 2016, less the applicable capital reserve amount of $600 million. Based on the terms of the senior 

preferred stock, we expect to pay Treasury a dividend of $2.8 billion by June 30, 2017 based on our net worth of 

$3.4 billion as of March 31, 2017. Beginning in 2018, the dividend amount for each dividend period will be the 

entire amount of our net worth, if any, as of the end of the immediately preceding fiscal quarter. 

Basis of Presentation

The accompanying unaudited interim condensed consolidated financial statements have been prepared in 

accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim 

financial information and with the SEC’s instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, 

they do not include all of the information and note disclosures required by GAAP for complete consolidated 

financial statements. In the opinion of management, all adjustments of a normal recurring nature considered 

necessary for a fair presentation have been included. The accompanying condensed consolidated financial 

statements include our accounts as well as the accounts of other entities in which we have a controlling financial 

interest. All intercompany accounts and transactions have been eliminated. To conform to our current period 

presentation, we have reclassified certain amounts reported in our prior periods’ condensed consolidated financial 

statements. Results for the three months ended March 31, 2017 may not necessarily be indicative of the results 

for the year ending December 31, 2017. The unaudited interim condensed consolidated financial statements as of 

and for the three months ended March 31, 2017 should be read in conjunction with our audited consolidated 

financial statements and related notes included in our Annual Report on Form 10-K for the year ended 

December 31, 2016 (“2016 Form 10-K”), filed with the SEC on February 17, 2017.

Regulatory Capital

FHFA stated that, during conservatorship, our existing statutory and FHFA-directed regulatory capital 

requirements will not be binding and FHFA will not issue quarterly capital classifications. We submit capital reports 

to FHFA and FHFA monitors our capital levels. The deficit of core capital over statutory minimum capital was 

$138.6 billion as of March 31, 2017 and $136.2 billion as of December 31, 2016. 

Under the terms of the senior preferred stock, we are required to pay Treasury a dividend each quarter, when, as 

and if declared, equal to the excess of our net worth as of the end of the preceding quarter over an applicable 

capital reserve amount. The Director of FHFA has directed us to make dividend payments on the senior preferred 

stock on a quarterly basis. Therefore, we do not expect to eliminate our deficit of core capital over statutory 

minimum capital.

Related Parties

As a result of our issuance to Treasury of the warrant to purchase shares of Fannie Mae common stock equal to 

79.9% of the total number of shares of Fannie Mae common stock, we and Treasury are deemed related parties. 

As of March 31, 2017, Treasury held an investment in our senior preferred stock with an aggregate liquidation 

preference of $117.1 billion. FHFA’s control of both us and Freddie Mac has caused us, 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.
Notes to Condensed Consolidated Financial Statements | Summary of Significant Accounting Policies

Fannie Mae (In conservatorship) First Quarter 2017 Form 10-Q 64

Transactions with Treasury

Our administrative expenses were reduced by $12 million and $16 million for the three months ended 

March 31, 2017 and 2016, respectively, due to reimbursements from Treasury and Freddie Mac for expenses 

incurred as program administrator for Treasury’s Home Affordable Modification Program (“HAMP”) and other 

initiatives under Treasury’s Making Home Affordable Program. 

During the three months ended March 31, 2017, we did not make any payments to the Internal Revenue Service 

(“IRS”), a bureau of Treasury. We made tax payments of $360 million during the three months ended March 31, 

2016.

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, 2017, under the NIB program, Fannie 

Mae and Freddie Mac had $5.3 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 Temporary Payroll Tax Cut Continuation Act of 2011 (“TCCA”) are 

recorded in “Mortgage loans interest income” and “TCCA fees,” respectively, in our condensed consolidated 

statements of operations and comprehensive income. We recognized $503 million and $440 million for the three 

months ended March 31, 2017 and 2016, respectively, of which $503 million had not been remitted as of 

March 31, 2017.

We incurred expenses in connection with certain funding obligations under the GSE Act, a portion of which is 

attributable to Treasury’s Capital Magnet and HOPE Reserve Funds. 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 $29 million and $25 million in “Other expenses, net” in connection with 

Treasury’s Capital Magnet and HOPE Reserve Funds for the three months ended March 31, 2017 and 2016, 

respectively, of which $29 million had not been remitted as of March 31, 2017.

In addition to the transactions with Treasury mentioned above, we also purchase and sell Treasury securities in 

the normal course of business. As of March 31, 2017 and December 31, 2016, we held Treasury securities with a 

fair value of $30.2 billion and $32.3 billion, respectively, and accrued interest receivable of $42 million and $39 

million, respectively. We recognized interest income on these securities held by us of $63 million and $32 million

for the three months ended March 31, 2017 and 2016, respectively.

Transactions with Freddie Mac

As of March 31, 2017 and December 31, 2016, we held Freddie Mac mortgage-related securities with a fair value 

of $1.1 billion and $1.4 billion, respectively, and accrued interest receivable of $4 million and $5 million, 

respectively. We recognized interest income on these securities held by us of $13 million and $45 million for the 

three months ended March 31, 2017 and 2016, 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 $30 million

and $28 million for the three months ended March 31, 2017 and 2016, respectively.

Transactions with CSS

In connection with our jointly owned company with Freddie Mac, we contributed $35 million and $30 million of 

capital into CSS for the three months ended March 31, 2017 and 2016, respectively. In November 2016, Fannie 

Mae, Freddie Mac and CSS entered into a Customer Services Agreement that sets forth the terms under which 
Notes to Condensed Consolidated Financial Statements | Summary of Significant Accounting Policies

Fannie Mae (In conservatorship) First Quarter 2017 Form 10-Q 65

CSS will provide securitization services to us and Freddie Mac. No other transactions outside of normal business 

activities have occurred between us and CSS during the three months ended March 31, 2017 and 2016.

Use of Estimates

Preparing condensed consolidated financial statements in accordance with GAAP requires management to make 

estimates and assumptions that affect our reported amounts of assets and liabilities, and disclosure of contingent 

assets and liabilities as of the dates of our condensed consolidated financial statements, as well as our reported 

amounts of revenues and expenses during the reporting periods. Management has made significant estimates in 

a variety of areas including, but not limited to, valuation of certain financial instruments and other assets and 

liabilities and allowance for loan losses. Actual results could be different from these estimates.

New Accounting Guidance

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 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, including the timing of the adoption. 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 will 

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.

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, 2017 December 31, 2016

(Dollars in millions)

Assets:

Trading securities:

Fannie Mae . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 4,455 $ 4,642

Non-Fannie Mae . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,932 3,473

Total trading securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,387 8,115

Available-for-sale securities:

Fannie Mae . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,261 2,447

Non-Fannie Mae . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,502 4,879

Total available-for-sale securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,763 7,326

Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73 77

Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (555) (528)

Net carrying amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 13,668 $ 14,990
Notes to Condensed Consolidated Financial Statements | Consolidations and Transfers of Financial Assets

Fannie Mae (In conservatorship) First Quarter 2017 Form 10-Q 66

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 

securitization trusts was approximately $19 billion and $21 billion as of March 31, 2017 and December 31, 2016, 

respectively. The total assets of our unconsolidated securitization trusts were approximately $120 billion and $150 

billion as of March 31, 2017 and December 31, 2016, respectively.

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 $110 million

and the related carrying value was $86 million as of March 31, 2017. As of December 31, 2016, the maximum 

exposure to loss was $118 million and the related carrying value was $92 million. The total assets of these limited 

partnership investments were $3.9 billion as of March 31, 2017 and December 31, 2016.

The unpaid principal balance of our multifamily loan portfolio was $240.7 billion as of March 31, 2017. 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, 2017 and 2016, the unpaid principal balance of portfolio 

securitizations was $57.3 billion and $48.3 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, 2017, the unpaid principal balance of retained interests 

was $4.3 billion and its related fair value was $5.5 billion. The unpaid principal balance of retained interests was 

$4.4 billion and its related fair value was $5.8 billion as of December 31, 2016. For the three months ended 

March 31, 2017 and 2016, the principal and interest received on retained interests was $257 million and $308 

million, respectively.

Managed Loans

Managed loans are on-balance sheet mortgage loans, as well as mortgage loans that we have securitized in 

unconsolidated portfolio securitization trusts. The unpaid principal balance of securitized loans in unconsolidated 

portfolio securitization trusts, which are primarily loans that are guaranteed or insured, in whole or in part, by the 

U.S. government, was $1.4 billion as of March 31, 2017 and December 31, 2016. 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.
Notes to Condensed Consolidated Financial Statements | Mortgage Loans

Fannie Mae (In conservatorship) First Quarter 2017 Form 10-Q 67

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,

2017

December 31,

2016

(Dollars in millions)

Single-family . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,852,739 $ 2,833,750

Multifamily . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 240,691 229,896

Total unpaid principal balance of mortgage loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,093,430 3,063,646

Cost basis and fair value adjustments, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38,201 39,572

Allowance for loan losses for loans held for investment . . . . . . . . . . . . . . . . . . . . . . . . (22,129) (23,465)

Total mortgage loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,109,502 $ 3,079,753

During the three months ended March 31, 2017 and 2016, we redesignated loans with a carrying value of $2.5 

billion and $596 million, respectively, from HFI to HFS. During the three months ended March 31, 2017, we 

redesignated loans with a carrying value of $35 million from HFS to HFI. We sold loans with an unpaid principal 

balance of $93 million and $1.1 billion during the three months ended March 31, 2017 and 2016, respectively.

The recorded investment of single-family mortgage loans for which formal foreclosure proceedings are in process 

was $17.1 billion and $18.3 billion as of March 31, 2017 and December 31, 2016, 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 

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.
Notes to Condensed Consolidated Financial Statements | Mortgage Loans

Fannie Mae (In conservatorship) First Quarter 2017 Form 10-Q 68

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, 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. . . . . . . . $ 24,067 $ 6,468 $ 19,363 $ 49,898 $ 2,688,070 $ 2,737,968 $ 19 $ 29,929

Government(2). . 47 16 237 300 35,931 36,231 237 —

Alt-A . . . . . . . . . . 3,119 1,006 3,753 7,878 70,426 78,304 2 5,421

Other . . . . . . . . . 1,131 371 1,378 2,880 24,463 27,343 5 1,985

Total singlefamily . . . . . . 28,364 7,861 24,731 60,956 2,818,890 2,879,846 263 37,335

Multifamily(3). . . . . 25 N/A 114 139 242,465 242,604 — 383

Total. . . . . . . $ 28,389 $ 7,861 $ 24,845 $ 61,095 $ 3,061,355 $ 3,122,450 $ 263 $ 37,718

As of December 31, 2016

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 . . . . . . . $ 31,631 $ 7,910 $ 21,761 $ 61,302 $ 2,654,195 $ 2,715,497 $ 22 $ 33,448

Government(2). . 56 22 256 334 36,814 37,148 256 —

Alt-A. . . . . . . . . . 3,629 1,194 4,221 9,044 72,903 81,947 2 6,019

Other . . . . . . . . . 1,349 438 1,582 3,369 25,974 29,343 5 2,238

Total singlefamily . . . . . . 36,665 9,564 27,820 74,049 2,789,886 2,863,935 285 41,705

Multifamily(3). . . . . 44 N/A 129 173 231,708 231,881 — 403

Total . . . . . . $ 36,709 $ 9,564 $ 27,949 $ 74,222 $ 3,021,594 $ 3,095,816 $ 285 $ 42,108

__________

(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 2017 Form 10-Q 69

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, 2017(1) December 31, 2016(1)

Primary Alt-A Other Primary Alt-A Other

(Dollars in millions)

Estimated mark-to-market LTV ratio:(2)

Less than or equal to 80% . . . . . . . . . . . . . . . . . . . . . . . $2,334,050 $ 54,618 $18,508 $ 2,321,201 $ 56,250 $19,382

Greater than 80% and less than or equal to 90%. . . . . . 249,910 9,225 3,297 244,231 9,787 3,657

Greater than 90% and less than or equal to 100%. . . . . 120,954 6,175 2,336 114,412 6,731 2,627

Greater than 100% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33,054 8,286 3,202 35,653 9,179 3,677

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $2,737,968 $ 78,304 $27,343 $ 2,715,497 $ 81,947 $29,343

__________

(1) Excludes $36.2 billion and $37.1 billion as of March 31, 2017 and December 31, 2016, 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,

2017 2016

(Dollars in millions)

Credit risk profile by internally assigned grade:

Non-classified . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 239,265 $ 228,749

Classified:(1)

Substandard . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,336 3,129

Doubtful . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 3

Total classified . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,339 3,132

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 242,604 $ 231,881

_________

(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 2017 Form 10-Q 70

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, 2017 December 31, 2016

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. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 101,570 $ 96,469 $ 13,746 $ 105,113 $ 99,825 $ 14,462

Government . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 296 299 58 302 305 59

Alt-A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27,380 24,912 5,053 28,599 26,059 5,365

Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,312 9,724 1,874 11,087 10,465 2,034

Total single-family . . . . . . . . . . . . . . . . . . . . . . . . 139,558 131,404 20,731 145,101 136,654 21,920

Multifamily. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 298 300 37 320 323 33

Total individually impaired loans with related

allowance recorded. . . . . . . . . . . . . . . . . . . . . . . . 139,856 131,704 20,768 145,421 136,977 21,953

With no related allowance recorded:(1)

Single-family:

Primary. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15,917 15,023 — 15,733 14,758 —

Government . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65 60 — 63 59 —

Alt-A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,494 3,075 — 3,511 3,062 —

Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,130 1,044 — 1,159 1,065 —

Total single-family . . . . . . . . . . . . . . . . . . . . . . . . 20,606 19,202 — 20,466 18,944 —

Multifamily. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 298 299 — 266 266 —

Total individually impaired loans with no related

allowance recorded. . . . . . . . . . . . . . . . . . . . . . . . 20,904 19,501 — 20,732 19,210 —

Total individually impaired loans(2)

. . . . . . . . . . . . . . . . $ 160,760 $ 151,205 $ 20,768 $ 166,153 $ 156,187 $ 21,953
Notes to Condensed Consolidated Financial Statements | Mortgage Loans

Fannie Mae (In conservatorship) First Quarter 2017 Form 10-Q 71

For the Three Months Ended March 31,

2017 2016

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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 98,223 $ 986 $ 88 $109,318 $ 1,021 $ 104

Government . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 301 3 — 323 3 —

Alt-A. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25,550 249 15 28,665 253 19

Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,171 87 5 12,013 92 8

Total single-family. . . . . . . . . . . . . . . . . . . . . . . . 134,245 1,325 108 150,319 1,369 131

Multifamily . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 311 2 — 616 5 —

Total individually impaired loans with related

allowance recorded . . . . . . . . . . . . . . . . . . . . . . . 134,556 1,327 108 150,935 1,374 131

With no related allowance recorded:(1)

Single-family:

Primary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,988 289 23 15,241 268 20

Government . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61 1 — 57 1 —

Alt-A. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,087 73 3 3,367 62 3

Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,067 23 1 1,135 22 1

Total single-family. . . . . . . . . . . . . . . . . . . . . . . . 19,203 386 27 19,800 353 24

Multifamily . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 283 3 — 350 3 —

Total individually impaired loans with no related

allowance recorded . . . . . . . . . . . . . . . . . . . . . . . 19,486 389 27 20,150 356 24

Total individually impaired loans. . . . . . . . . . . . . . . . . $154,042 $ 1,716 $ 135 $171,085 $ 1,730 $ 155

__________

(1) The discounted cash flows or collateral value equals or exceeds the carrying value of the loan and, as such, no valuation 

allowance is required.

(2) Includes single-family loans restructured in a TDR with a recorded investment of $150.0 billion and $155.0 billion as of 

March 31, 2017 and December 31, 2016, respectively. Includes multifamily loans restructured in a TDR with a recorded 

investment of $244 million and $248 million as of March 31, 2017 and December 31, 2016, respectively.

(3) 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. Total single-family interest income recognized 

of $1.7 billion for the three months ended March 31, 2016 consists of $1.4 billion of contractual interest and $310 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. 

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, 2017 and 2016, the average term extension 

of a single-family modified loan was 153 months and 157 months, respectively, and the average interest rate 

reduction was 0.94 and 0.73 percentage points, respectively. 
Notes to Condensed Consolidated Financial Statements | Mortgage Loans

Fannie Mae (In conservatorship) First Quarter 2017 Form 10-Q 72

The following table displays the number of single-family loans and recorded investment in loans restructured in a 

TDR.

For the Three Months Ended March 31,

2017 2016

Number of

Loans

Recorded

Investment

Number of

Loans

Recorded

Investment

(Dollars in millions)

Primary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17,235 $ 2,363 17,190 $ 2,332

Government . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61 6 54 6

Alt-A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,565 224 1,911 270

Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 309 53 399 72

Total TDRs(1). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19,170 $ 2,646 19,554 $ 2,680

__________

(1) During the three months ended March 31, 2017 and 2016, there were no multifamily loans that were restructured in a TDR.

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 restructured in a TDR in the twelve months prior to the payment default. For 

purposes of this disclosure, we define loans that had a payment default as: single-family and multifamily loans 

with completed TDRs that liquidated during the period, either through foreclosure, deed-in-lieu of foreclosure or a 

short sale; single-family loans with completed modifications that are two or more months delinquent during the 

period; or multifamily loans with completed modifications that are one or more months delinquent during the 

period.

For the Three Months Ended March 31,

2017 2016

Number of

Loans

Recorded

Investment

Number of

Loans

Recorded

Investment

(Dollars in millions)

Single-family:

Primary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,479 $ 621 5,461 $ 802

Government . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 2 15 2

Alt-A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 614 96 852 144

Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 201 38 243 49

Total single-family. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,313 757 6,571 997

Multifamily . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 4 — —

 Total TDRs that subsequently defaulted . . . . . . . . . . . 5,314 $ 761 6,571 $ 997

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 our net carrying 

value of HFI loans at the balance sheet date, which includes unpaid principal balance, net of amortized premiums 

and discounts, and other cost basis adjustments. 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 

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 
Notes to Condensed Consolidated Financial Statements | Allowance for Loan Losses

Fannie Mae (In conservatorship) First Quarter 2017 Form 10-Q 73

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 restructured in a TDR and acquired creditimpaired 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 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. For groups of smaller-balance 

homogeneous multifamily loans, we evaluate collectively for impairment. We establish a collective multifamily loss 

reserve for all loans in our multifamily guaranty book of business that are not individually impaired using an 

internal model that applies loss factors to loans in similar risk categories. Our loss factors are developed based on 

our historical default and loss severity experience.

The following table displays changes in single-family, multifamily and total allowance for loan losses.

For the Three Months

Ended March 31,

2017 2016

(Dollars in millions)

Single-family allowance for loan losses:

Beginning balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 23,283 $ 27,709

Benefit for loan losses(1)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (420) (1,016)

Charge-offs(2)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,040) (1,279)

Recoveries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85 119

Other(3)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30 64

Ending balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 21,938 $ 25,597

Multifamily allowance for loan losses:

Beginning balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 182 $ 242

Provision (benefit) for loan losses(1)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 (16)

Charge-offs(2)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — (5)

Recoveries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 1

Ending balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 191 $ 222

Total allowance for loan losses:

Beginning balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 23,465 $ 27,951

Benefit for loan losses(1)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (411) (1,032)

Charge-offs(2)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,040) (1,284)

Recoveries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85 120

Other(3)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30 64

Ending balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 22,129 $ 25,819

__________

(1) Benefit for loan losses is included in “Benefit for credit losses” in our condensed consolidated statements of operations and 

comprehensive income.

(2) While we purchase the substantial majority of loans that are four or more months delinquent from our MBS trusts, we do 

not exercise this option to purchase loans during a forbearance period. Charge-offs of consolidated trusts generally 

represent loans that remained in our consolidated trusts at the time of default.
Notes to Condensed Consolidated Financial Statements | Allowance for Loan Losses

Fannie Mae (In conservatorship) First Quarter 2017 Form 10-Q 74

(3) Amounts represent changes in other loss reserves which are reflected in benefit for loan losses, charge-offs, and 

recoveries. 

The following table displays the allowance for loan losses and recorded investment in our HFI loans, excluding 

loans for which we have elected the fair value option, by impairment or allowance methodology and portfolio 

segment.

As of

March 31, 2017 December 31, 2016

SingleFamily Multifamily TotalSingleFamily Multifamily Total

(Dollars in millions)

Allowance for loan losses by segment:

Individually impaired loans(1)

. . . . . . . . . $ 20,731 $ 37 $ 20,768 $ 21,920 $ 33 $ 21,953

Collectively reserved loans . . . . . . . . . . 1,207 154 1,361 1,363 149 1,512

Total allowance for loan losses . . . . . $ 21,938 $ 191 $ 22,129 $ 23,283 $ 182 $ 23,465

Recorded investment in loans by segment:

Individually impaired loans(1)

. . . . . . . . . $ 150,606 $ 599 $ 151,205 $ 155,598 $ 589 $ 156,187

Collectively reserved loans . . . . . . . . . . 2,729,240 242,005 2,971,245 2,708,337 231,292 2,939,629

Total recorded investment in loans. . $ 2,879,846 $ 242,604 $ 3,122,450 $ 2,863,935 $ 231,881 $ 3,095,816

__________

(1) Includes acquired credit-impaired loans.

5. Investments in Securities

Trading Securities

Trading securities are recorded at fair value with subsequent changes in fair value recorded as “Fair value losses, 

net” in our condensed consolidated statements of operations and comprehensive income. The following table 

displays our investments in trading securities.

As of

March 31,

2017

December 31,

2016

(Dollars in millions)

Mortgage-related securities:

Fannie Mae . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 4,594 $ 4,769

Other agency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,053 2,058

Alt-A and subprime private-label securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 624 636

Commercial mortgage-backed securities (“CMBS”) . . . . . . . . . . . . . . . . . . . . . . . . . 238 761

Mortgage revenue bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 21

Total mortgage-related securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,529 8,245

U.S. Treasury securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30,155 32,317

Total trading securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 37,684 $ 40,562
Notes to Condensed Consolidated Financial Statements | Investments in Securities

Fannie Mae (In conservatorship) First Quarter 2017 Form 10-Q 75

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, losses and proceeds on sales of AFS securities.

For the Three

Months Ended

March 31,

2017 2016

(Dollars in millions)

Gross realized gains . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3 $ 211

Gross realized losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 4

Total proceeds (excludes initial sale of securities from new portfolio securitizations) . . . . . . . . . 95 3,622

The following tables display the amortized cost, gross unrealized gains and losses, and fair value by major 

security type for AFS securities in our retained mortgage portfolio.

As of March 31, 2017

Total 

Amortized 

Cost(1)

Gross

Unrealized

Gains

Gross 

Unrealized 

Losses(2)

Total

Fair

Value

(Dollars in millions)

Fannie Mae . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,271 $ 128 $ (26) $ 2,373

Other agency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 436 34 — 470

Alt-A and subprime private-label securities. . . . . . . . . . . . . . . . . . . . 1,713 917 (2) 2,628

CMBS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 616 1 — 617

Mortgage revenue bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,158 33 (6) 1,185

Other mortgage-related securities . . . . . . . . . . . . . . . . . . . . . . . . . . 413 35 — 448

Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 6,607 $ 1,148 $ (34) $ 7,721

As of December 31, 2016

Total 

Amortized 

Cost(1)

Gross

Unrealized

Gains

Gross 

Unrealized 

Losses(2)

Total

Fair

Value

(Dollars in millions)

Fannie Mae . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,445 $ 137 $ (28) $ 2,554

Other agency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 508 39 — 547

Alt-A and subprime private-label securities. . . . . . . . . . . . . . . . . . . . 1,817 895 (3) 2,709

CMBS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 815 4 — 819

Mortgage revenue bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,245 36 (9) 1,272

Other mortgage-related securities . . . . . . . . . . . . . . . . . . . . . . . . . . 431 31 — 462

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 7,261 $ 1,142 $ (40) $ 8,363

__________

(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 2017 Form 10-Q 76

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, 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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (2) $ 87 $ (24) $ 461

Alt-A and subprime private-label securities . . . . . . . . . . . . . . . . . . . . . . — — (2) 69

Mortgage revenue bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1) 144 (5) 17

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (3) $ 231 $ (31) $ 547

As of December 31, 2016

Less Than 12

Consecutive Months

12 Consecutive

Months or Longer

Gross

Unrealized

Losses

Fair

Value

Gross

Unrealized

Losses

Fair

Value

(Dollars in millions)

Fannie Mae . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (2) $ 139 $ (26) $ 477

Alt-A and subprime private-label securities . . . . . . . . . . . . . . . . . . . . . . — — (3) 73

Mortgage revenue bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (7) 78 (2) 6

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (9) $ 217 $ (31) $ 556

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 $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. 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 $2.3 billion and $2.4 billion as 

of March 31, 2016 and December 31, 2015, respectively. The decrease in the first three months of 2016 was 

primarily driven by securities no longer held in portfolio at period end. 
Notes to Condensed Consolidated Financial Statements | Investments in Securities

Fannie Mae (In conservatorship) First Quarter 2017 Form 10-Q 77

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, 2017

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. . . . . . . . . . . . . . . . . $ 2,271 $ 2,373 $ 1 $ 1 $ 19 $ 19 $ 62 $ 66 $ 2,189 $ 2,287

Other agency . . . . . . . . . . . . . . . 436 470 1 1 32 33 66 71 337 365

Alt-A and subprime private-label

securities . . . . . . . . . . . . . . . . 1,713 2,628 — — — — — — 1,713 2,628

CMBS . . . . . . . . . . . . . . . . . . . . . 616 617 610 611 — — — — 6 6

Mortgage revenue bonds . . . . . . 1,158 1,185 10 10 79 79 119 121 950 975

Other mortgage-related

securities . . . . . . . . . . . . . . . . 413 448 — — — — 3 3 410 445

Total . . . . . . . . . . . . . . . . . . . . . $ 6,607 $ 7,721 $ 622 $ 623 $ 130 $ 131 $ 250 $ 261 $ 5,605 $ 6,706

6. Financial Guarantees

We recognize a guaranty obligation for our obligation to stand ready to perform on our guarantees to 

unconsolidated trusts and other guaranty arrangements. These guarantees expose us to credit losses on the 

mortgage loans or, in the case of mortgage-related securities, the underlying mortgage loans of the related 

securities. The remaining contractual terms of our guarantees range from 1 day to 35 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, 2017 December 31, 2016

Maximum 

Exposure(1)

Guaranty

Obligation

Maximum 

Recovery(2)

Maximum 

Exposure(1)

Guaranty

Obligation

Maximum 

Recovery(2)

(Dollars in millions)

Unconsolidated Fannie Mae MBS. . . . . . . . $ 12,019 $ 138 $ 7,796 $ 12,607 $ 143 $ 8,048

Other guaranty arrangements(3)

. . . . . . . . . 15,025 133 2,582 15,335 137 2,663

 Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 27,044 $ 271 $ 10,378 $ 27,942 $ 280 $ 10,711

__________

(1) Primarily consists of the unpaid principal balance of the underlying mortgage loans.

(2) Recoverability of such credit enhancements and recourse is subject to, among other factors, our mortgage insurers’ and 

financial guarantors’ ability to meet their obligations to us. For information on our mortgage insurers and financial 

guarantors, see “Note 12, Concentrations of Credit Risk.”

(3) 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 $327 million and $446 million as of March 31, 2017

and December 31, 2016, respectively. These Fannie Mae MBS consist primarily of private-label wraps where our 

guaranty arrangement is with an unconsolidated MBS trust.
Notes to Condensed Consolidated Financial Statements | Short-Term Borrowings and Long-Term Debt

Fannie Mae (In conservatorship) First Quarter 2017 Form 10-Q 78

7. Short-Term Borrowings and Long-Term Debt

Short-Term Borrowings

The following table displays our outstanding short-term borrowings (borrowings with an original contractual 

maturity of one year or less) and weighted-average interest rates of these borrowings.

As of

March 31, 2017 December 31, 2016

Outstanding

WeightedAverage 

Interest 

Rate(1) Outstanding

WeightedAverage 

Interest 

Rate(1)

(Dollars in millions)

Federal funds purchased and securities sold under agreements 

to repurchase(2). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 185 —% $ — —%

Short-term debt of Fannie Mae . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 37,452 0.58% $ 34,995 0.49%

Debt of consolidated trusts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 557 0.63 584 0.48

Total short-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 38,009 0.58% $ 35,579 0.49%

__________

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

(2) Represents agreements to repurchase securities for a specified price, with repayment generally occurring on the following 

day.

Intraday Line of Credit

We 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, 2017 and December 31, 2016. We had no borrowings outstanding 

under this line of credit as of March 31, 2017.
Notes to Condensed Consolidated Financial Statements | Short-Term Borrowings and Long-Term Debt

Fannie Mae (In conservatorship) First Quarter 2017 Form 10-Q 79

Long-Term Debt

Long-term debt represents borrowings with an original contractual maturity of greater than one year. The following 

table displays our outstanding long-term debt.

As of

March 31, 2017 December 31, 2016

Maturities Outstanding

WeightedAverage 

Interest 

Rate(1) Maturities Outstanding

WeightedAverage 

Interest 

Rate(1)

(Dollars in millions)

Senior fixed:

Benchmark notes and bonds . . . . . . . . 2017 - 2030 $ 150,996 2.09% 2017 - 2030 $ 153,983 2.16%

Medium-term notes(2)

. . . . . . . . . . . . . . 2017 - 2026 83,310 1.42 2017 - 2026 82,230 1.40

Other(3)

. . . . . . . . . . . . . . . . . . . . . . . . . 2017 - 2038 12,887 6.78 2017 - 2038 12,800 6.74

Total senior fixed. . . . . . . . . . . . . . . 247,193 2.11 249,013 2.14

Senior floating:

Medium-term notes(2)

. . . . . . . . . . . . . . 2017 - 2020 18,751 0.91 2017 - 2019 21,476 0.71

Connecticut Avenue Securities(4)

. . . . . 2023 - 2029 18,579 4.93 2023 - 2029 16,511 4.77

Other(5)

. . . . . . . . . . . . . . . . . . . . . . . . . 2020 - 2037 350 7.26 2020 - 2037 346 6.75

Total senior floating. . . . . . . . . . . . . 37,680 2.91 38,333 2.48

Subordinated debentures . . . . . . . . . . . . . 2019 4,756 9.93 2019 4,645 9.93

Secured borrowings(6)

. . . . . . . . . . . . . . . . 2021 - 2022 102 1.59 2021 - 2022 111 1.44

Total long-term debt of Fannie Mae(7)

. 289,731 2.34 292,102 2.31

Debt of consolidated trusts . . . . . . . . . . . . 2017 - 2056 2,953,914 2.86 2017 - 2056 2,934,635 2.57

Total long-term debt. . . . . . . . . . . . . $ 3,243,645 2.82% $ 3,226,737 2.54%

__________

(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 $1.4 billion and 

$1.8 billion as of March 31, 2017 and December 31, 2016, 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 

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.
Notes to Condensed Consolidated Financial Statements | Derivative Instruments

Fannie Mae (In conservatorship) First Quarter 2017 Form 10-Q 80

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 14, Fair Value” for additional information on derivatives recorded at fair 

value. We present cash flows from derivatives as operating activities in our condensed consolidated statements of 

cash flows.

Notional and Fair Value Position of our Derivatives

The following table displays the notional amount and estimated fair value of our asset and liability derivative 

instruments.

As of March 31, 2017 As of December 31, 2016

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. . . . . . . . . . . . . . . . . $ 41,303 $ 733 $ 78,857 $ (2,885) $ 29,540 $ 660 $ 94,584 $ (4,396)

Receive-fixed . . . . . . . . . . . . . 32,880 2,495 140,428 (1,563) 30,207 2,696 135,470 (1,552)

Basis. . . . . . . . . . . . . . . . . . . . 1,623 113 12,600 (2) 1,624 115 15,600 (11)

Foreign currency. . . . . . . . . . . 217 45 220 (78) 214 40 216 (85)

Swaptions:

Pay-fixed. . . . . . . . . . . . . . . . . 9,600 230 2,350 (7) 9,600 241 4,850 (82)

Receive-fixed . . . . . . . . . . . . . — — 7,600 (263) — — 10,100 (257)

Other(1)

. . . . . . . . . . . . . . . . . . . . . . . 14,696 27 696 (1) 15,087 33 655 (2)

Total gross risk management

derivatives . . . . . . . . . . . . . . . 100,319 3,643 242,751 (4,799) 86,272 3,785 261,475 (6,385)

Accrued interest receivable

(payable). . . . . . . . . . . . . . . . . — 643 — (918) — 785 — (937)

Netting adjustment(2)

. . . . . . . . . . — (4,104) — 5,397 — (4,514) — 6,844

Total net risk management

derivatives . . . . . . . . . . . . . . $ 100,319 $ 182 $ 242,751 $ (320) $ 86,272 $ 56 $ 261,475 $ (478)

Mortgage commitment derivatives:

Mortgage commitments to

purchase whole loans . . . . . . $ 6,931 $ 26 $ 873 $ (1) $ 4,753 $ 28 $ 3,039 $ (49)

Forward contracts to purchase

mortgage-related securities . . 65,070 379 7,373 (10) 31,635 198 27,297 (388)

Forward contracts to sell

mortgage-related securities . . 8,335 12 98,781 (572) 34,103 405 47,645 (300)

Total mortgage commitment

derivatives . . . . . . . . . . . . . . $ 80,336 $ 417 $ 107,027 $ (583) $ 70,491 $ 631 $ 77,981 $ (737)

Derivatives at fair value . . . . . $ 180,655 $ 599 $ 349,778 $ (903) $ 156,763 $ 687 $ 339,456 $ (1,215)

__________

(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 $1.9 billion and $2.9 billion as of March 31, 2017 and December 31, 2016, respectively. Cash 

collateral received was $632 million and $535 million as of March 31, 2017 and December 31, 2016, respectively. 
Notes to Condensed Consolidated Financial Statements | Derivative Instruments

Fannie Mae (In conservatorship) First Quarter 2017 Form 10-Q 81

We record all derivative gains and losses, including accrued interest, in “Fair value losses, net” in our condensed 

consolidated statements of operations and comprehensive income. The following table displays, by type of 

derivative instrument, the fair value gains and losses, net on our derivatives.

For the Three Months

Ended March 31,

2017 2016

(Dollars in millions)

Risk management derivatives:

Swaps:

Pay-fixed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 691 $ (5,173)

Receive-fixed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (317) 2,987

Basis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 35

Foreign currency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 3

Swaptions:

Pay-fixed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 25

Receive-fixed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (18) (117)

Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (8) 138

Net accrual of periodic settlements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (255) (269)

Total risk management derivatives fair value gains (losses), net. . . . . . . . . . . . . . . . . . . . $ 112 $ (2,371)

Mortgage commitment derivatives fair value losses, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (80) (362)

Total derivatives fair value gains (losses), net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 32 $ (2,733)

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 13, Netting Arrangements” for information on our rights to offset assets and liabilities.
Notes to Condensed Consolidated Financial Statements | Earnings (Loss) Per Share

Fannie Mae (In conservatorship) First Quarter 2017 Form 10-Q 82

9. Earnings (Loss) Per Share

The calculation of income available to common stockholders and earnings per share is based on the underlying 

premise that all income after payment of dividends on preferred shares is available to and will be distributed to 

common stockholders. However, as a result of our conservatorship status and the terms of the senior preferred 

stock, no amounts are available to distribute as dividends to common or preferred stockholders (other than to 

Treasury as holder of the senior preferred stock). 

The following table displays the computation of basic and diluted earnings (loss) per share of common stock. 

For the Three Months

Ended March 31,

2017 2016

(Dollars and shares in

millions, except per share

amounts)

Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,773 $ 1,136

Dividends distributed or available for distribution to senior preferred stockholder(1)

. . . . . . (2,779) (919)

Net income (loss) attributable to common stockholders . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (6) $ 217

Weighted-average common shares outstanding—Basic(2)

. . . . . . . . . . . . . . . . . . . . . . . . . 5,762 5,762

Convertible preferred stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 131

Weighted-average common shares outstanding—Diluted(2)

. . . . . . . . . . . . . . . . . . . . . . . . 5,762 5,893

Earnings (loss) per share:

Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 0.00 $ 0.04

Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.00 0.04

__________

(1) Dividends distributed or available for distribution were calculated based on our net worth as of the end of the fiscal 

quarters, less the applicable capital reserve amount. See “Note 1, Summary of Significant Accounting Policies” in our 2016 

Form 10-K for additional information on our senior preferred stock agreement and our payment of dividends to Treasury.

(2) Includes 4.6 billion of weighted average shares of common stock that would be issued upon the full exercise of the warrant 

issued to Treasury from the date the warrant was issued through March 31, 2017 and 2016.
Notes to Condensed Consolidated Financial Statements | Segment Reporting

Fannie Mae (In conservatorship) First Quarter 2017 Form 10-Q 83

10. Segment Reporting

We have two reportable business segments: Single-Family and Multifamily. Previously, we had a third reportable 

business segment, Capital Markets, which was incorporated into the Single-Family and Multifamily segments in 

the fourth quarter of 2016. Results of our two business segments are intended to reflect each segment as if it 

were a stand-alone business. We have revised the presentation of our segment results for the prior period to be 

consistent with the current period presentation.

For the Three Months Ended March 31,

2017 2016

SingleFamily Multifamily TotalSingleFamily Multifamily Total

(Dollars in millions)

Net interest income(1)

. . . . . . . . . . . . . . . . $ 4,756 $ 590 $ 5,346 $ 4,245 $ 524 $ 4,769

Fee and other income(2)

. . . . . . . . . . . . . . 76 173 249 67 136 203

Net revenues . . . . . . . . . . . . . . . . . . . . . . 4,832 763 5,595 4,312 660 4,972

Investment gains (losses), net(3)

. . . . . . . . (50) 41 (9) 56 13 69

Fair value gains (losses), net(4)

. . . . . . . . . (12) (28) (40) (2,850) 37 (2,813)

Administrative expenses. . . . . . . . . . . . . . (601) (83) (684) (609) (79) (688)

Credit-related income (expense):(5)

Benefit (provision) for credit losses . . . 400 (4) 396 1,163 21 1,184

Foreclosed property income

(expense) . . . . . . . . . . . . . . . . . . . . . (216) (1) (217) (335) 1 (334)

Total credit-related income (expense) . . . 184 (5) 179 828 22 850

TCCA fees(6)

. . . . . . . . . . . . . . . . . . . . . . . (503) — (503) (440) — (440)

Other expenses, net . . . . . . . . . . . . . . . . . (256) (126) (382) (246) (18) (264)

Income before federal income taxes . . . . 3,594 562 4,156 1,051 635 1,686

Provision for federal income taxes . . . . . . (1,252) (131) (1,383) (389) (161) (550)

Net income . . . . . . . . . . . . . . . . . . . . . $ 2,342 $ 431 $ 2,773 $ 662 $ 474 $ 1,136

__________

(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 PLS 

sold to us 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 

mortgage credit 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 mortgage 

credit 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 2017 Form 10-Q 84

11. 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,

2017 2016

(Dollars in millions)

Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,773 $ 1,136

Other comprehensive income (loss), net of tax effect:

Changes in net unrealized gains (losses) on AFS securities (net of tax of $5 and $48,

respectively) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 (89)

Reclassification adjustment for OTTI recognized in net income (net of tax of $0 and $10,

respectively) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 19

Reclassification adjustment for gains on AFS securities included in net income (net of tax

of $1 and $69, respectively) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2) (128)

Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2) (2)

Total other comprehensive income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 (200)

Total comprehensive income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,779 $ 936

The following table displays our accumulated other comprehensive income by major categories.

As of

March 31, December 31,

2017 2016

(Dollars in millions)

Net unrealized gains on AFS securities for which we have not recorded OTTI, net of

tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 127 $ 135

Net unrealized gains on AFS securities for which we have recorded OTTI, net of tax . 597 581

Other, net of tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41 43

Accumulated other comprehensive income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 765 $ 759

The table below displays changes in accumulated other comprehensive income, net of tax.

For the Three Months Ended March 31,

2017 2016

AFS(1) Other Total AFS(1) Other Total

(Dollars in millions)

Beginning balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 716 $ 43 $ 759 $1,358 $ 49 $1,407

Other comprehensive income (loss) before reclassifications. 9 — 9 (89) — (89)

Amounts reclassified from other comprehensive income

(loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1) (2) (3) (109) (2) (111)

Net other comprehensive income (loss) . . . . . . . . . . . . . . . . 8 (2) 6 (198) (2) (200)

Ending balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 724 $ 41 $ 765 $1,160 $ 47 $1,207

__________

(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.

12. 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.
Notes to Condensed Consolidated Financial Statements | Concentrations of Credit Risk

Fannie Mae (In conservatorship) First Quarter 2017 Form 10-Q 85

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 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, 2017(1) December 31, 2016(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% 0.29% 1.10% 1.30% 0.36% 1.18%

Percentage of single-family 

conventional loans(4). . . . . . . . 1.19 0.33 1.12 1.51 0.41 1.20

As of

March 31, 2017(1) December 31, 2016(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% . . . . . . . . . . . . . . . . . . . . . . . . . . 2% 10.07% 2% 10.44%

Geographical distribution:

California . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 0.47 19 0.50

Florida . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 1.73 6 1.89

New Jersey . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 2.85 4 3.07

New York . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 2.48 5 2.65

All other states . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66 1.04 66 1.11

Product distribution:

Alt-A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 4.87 3 5.00

Vintages:

2004 and prior . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 2.76 5 2.82

2005-2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 6.15 8 6.39

2009-2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88 0.34 87 0.36

__________

(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, 2017 and December 31, 2016.

(2) Consists of single-family conventional loans that were 90 days or more past due or in the foreclosure process as of 

March 31, 2017 and December 31, 2016.

(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.
Notes to Condensed Consolidated Financial Statements | Concentrations of Credit Risk

Fannie Mae (In conservatorship) First Quarter 2017 Form 10-Q 86

(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, 2017(1)(2) December 31, 2016(1)(2)

30 Days

Delinquent

Seriously 

Delinquent(3)

30 Days

Delinquent

Seriously 

Delinquent(3)

Percentage of multifamily guaranty book of business . . . . . . . 0.01% 0.05% 0.02% 0.05%

As of

March 31, 2017(1) December 31, 2016(1)

Percentage of 

Multifamily 

Guaranty Book 

of Business(2)

Percentage 

Seriously 

Delinquent(3)(4)

Percentage of 

Multifamily 

Guaranty Book 

of Business(2)

Percentage 

Seriously 

Delinquent(3)(4)

Original LTV ratio:

Greater than 80% . . . . . . . . . . . . . . . . . . . . . . . . 2% 0.33% 2% 0.22%

Less than or equal to 80% . . . . . . . . . . . . . . . . . . 98 0.04 98 0.05

Current DSCR less than 1.0(5). . . . . . . . . . . . . . . . . . 1 2.11 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, 2017 and 

December 31, 2016, excluding loans that have been defeased.

(2) Calculated based on the aggregate unpaid principal balance of multifamily loans for each category divided by the 

aggregate unpaid principal balance of loans in our multifamily guaranty book of business.

(3) Consists of multifamily loans that were 60 days or more past due as of the dates indicated.

(4) Calculated based on the unpaid principal balance of multifamily loans that were seriously delinquent divided by the 

aggregate unpaid principal balance of multifamily loans for each category included in our guaranty book of business.

(5) Our estimates of current DSCRs are based on the latest available income information for these properties. Although we 

use the most recently available results of our multifamily borrowers, there is a lag in reporting, which typically can range 

from 3 to 6 months but in some cases may be longer.

Other Concentrations

Mortgage Sellers and Servicers. Mortgage servicers collect mortgage and escrow payments from borrowers, pay 

taxes and insurance costs from escrow accounts, monitor and report delinquencies, and perform other required 

activities on our behalf. Our mortgage sellers and servicers 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. Our five largest single-family mortgage servicers, including their affiliates, serviced 

approximately 39% of our single-family guaranty book of business as of March 31, 2017 and December 31, 2016. 

Our five largest multifamily mortgage servicers, including their affiliates, serviced approximately 47% of our 

multifamily guaranty book of business as of March 31, 2017 and December 31, 2016.

If a significant mortgage seller or servicer counterparty, or a number of mortgage sellers or servicers, fails to meet 

their obligations to us, it could result in an increase in our credit losses and credit-related expense, and have an 

adverse effect on our results of operations and financial condition.

Mortgage Insurers. Mortgage insurance “risk in force” generally represents our maximum potential loss recovery 

under the applicable mortgage insurance policies. We had total mortgage insurance coverage risk in force of 

$128.3 billion and $126.2 billion on the single-family mortgage loans in our guaranty book of business as of 

March 31, 2017 and December 31, 2016, respectively, which represented 4% of our single-family guaranty book 

of business as of March 31, 2017 and December 31, 2016. Our primary mortgage insurance coverage risk in 

force was $127.8 billion and $125.6 billion as of March 31, 2017 and December 31, 2016, respectively. Our pool 

mortgage insurance coverage risk in force was $591 million and $617 million as of March 31, 2017 and 
Notes to Condensed Consolidated Financial Statements | Concentrations of Credit Risk

Fannie Mae (In conservatorship) First Quarter 2017 Form 10-Q 87

December 31, 2016, respectively. Our top three mortgage insurance companies provided 66% of our mortgage 

insurance coverage risk in force as of March 31, 2017 and December 31, 2016.

Of our largest primary mortgage insurers, PMI Mortgage Insurance Co., Triad Guaranty Insurance Corporation 

and Republic Mortgage Insurance Company are under various forms of supervised control by their state 

regulators and are in run-off. Entering run-off may close off a source of profits and liquidity that may have 

otherwise assisted a mortgage insurer in paying claims under insurance policies, and could also cause the quality 

and speed of its claims processing to deteriorate. These three mortgage insurers provided a combined $7.6 

billion, or 6%, of our risk in force mortgage insurance coverage of our single-family guaranty book of business as 

of March 31, 2017.

Although the financial condition of our mortgage insurer counterparties currently approved to write new business 

has improved in recent years, there is still risk that these counterparties may fail to fulfill their obligations to pay 

our claims under insurance policies. If we determine that it is probable that we will not collect all of our claims from 

one or more of our mortgage insurer counterparties, it could result in an increase in our loss reserves, which could 

adversely affect our results of operations, liquidity, financial condition and net worth.

When we estimate the credit losses that are inherent in our mortgage loans and under the terms of our guaranty 

obligations we also consider the recoveries that we will receive on primary mortgage insurance, as mortgage 

insurance recoveries would reduce the severity of the loss associated with defaulted loans. We evaluate the 

financial condition of our mortgage insurer counterparties and adjust the contractually due recovery amounts to 

ensure that only probable losses as of the balance sheet date are included in our loss reserve estimate. As a 

result, if our assessment of one or more of our mortgage insurer counterparties’ ability to fulfill their respective 

obligations to us worsens, it could result in an increase in our combined loss reserves. As of March 31, 2017 and 

December 31, 2016, the amount by which our estimated benefit from mortgage insurance reduced our total 

combined loss reserves was $1.2 billion and $1.4 billion, respectively.

We had outstanding receivables of $1.0 billion recorded in “Other assets” in our condensed consolidated balance 

sheets as of March 31, 2017 and December 31, 2016 related to amounts claimed on insured, defaulted loans 

excluding government insured loans. Of this amount, $104 million as of March 31, 2017 and $141 million as of 

December 31, 2016 was due from our mortgage sellers or servicers. We assessed the total outstanding 

receivables for collectibility, and they are recorded net of a valuation allowance of $609 million as of March 31, 

2017 and $638 million as of December 31, 2016. The valuation allowance reduces our claim receivable to the 

amount which is considered probable of collection as of March 31, 2017 and December 31, 2016.

For information on credit risk associated with our derivative transactions and repurchase agreements refer to 

“Note 8, Derivative Instruments” and “Note 13, Netting Arrangements.”
Notes to Condensed Consolidated Financial Statements | Netting Arrangements

Fannie Mae (In conservatorship) First Quarter 2017 Form 10-Q 88

13. 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, 2017

Net Amount

Presented in

our Condensed

Consolidated

Balance Sheets

Amounts Not Offset in our

Condensed Consolidated

Balance Sheets

Gross

Amount

Gross 

Amount 

Offset(1)

Financial 

Instruments(2) Collateral(3)

Net

Amount

(Dollars in millions)

Assets:

OTC risk management derivatives . . . . . . . . $ 3,061 $ (2,910) $ 151 $ — $ — $ 151

Cleared risk management derivatives. . . . . . 1,198 (1,194) 4 — — 4

Mortgage commitment derivatives . . . . . . . . 417 — 417 (313) — 104

Total derivative assets . . . . . . . . . . . . . . . . 4,676 (4,104) 572 (4) (313) — 259

Securities purchased under agreements to 

resell or similar arrangements(5)

. . . . . . . . 55,360 — 55,360 — (55,360) —

Total assets . . . . . . . . . . . . . . . . . . . . . . . $ 60,036 $ (4,104) $55,932 $ (313) $ (55,360) $ 259

Liabilities:

OTC risk management derivatives . . . . . . . . $ (3,926) $ 3,764 $ (162) $ — $ — $ (162)

Cleared risk management derivatives. . . . . . (1,790) 1,633 (157) — 157 —

Mortgage commitment derivatives . . . . . . . . (583) — (583) 313 3 (267)

Total derivative liabilities. . . . . . . . . . . . . . . (6,299) 5,397 (902)

(4) 313 160 (429)

Securities sold under agreements to

repurchase or similar arrangements . . . . . (185) — (185) — 185 —

Total liabilities. . . . . . . . . . . . . . . . . . . . . . $ (6,484) $ 5,397 $ (1,087) $ 313 $ 345 $ (429)
Notes to Condensed Consolidated Financial Statements | Netting Arrangements

Fannie Mae (In conservatorship) First Quarter 2017 Form 10-Q 89

As of December 31, 2016

Net Amount

Presented in

our Condensed

Consolidated

Balance Sheets

Amounts Not Offset in our

Condensed Consolidated

Balance Sheets

Gross

Amount

Gross 

Amount 

Offset(1)

Financial 

Instruments(2) Collateral(3)

Net

Amount

(Dollars in millions)

Assets:

OTC risk management derivatives . . . . . . . . $ 3,688 $ (3,667) $ 21 $ — $ — $ 21

Cleared risk management derivatives. . . . . . 849 (847) 2 — — 2

Mortgage commitment derivatives . . . . . . . . 631 — 631 (357) (22) 252

Total derivative assets . . . . . . . . . . . . . . . . 5,168 (4,514) 654 (4) (357) (22) 275

Securities purchased under agreements to 

resell or similar arrangements(5)

. . . . . . . . 51,115 — 51,115 — (51,115) —

Total assets . . . . . . . . . . . . . . . . . . . . . . . $ 56,283 $ (4,514) $51,769 $ (357) $ (51,137) $ 275

Liabilities:

OTC risk management derivatives . . . . . . . . $ (4,905) $ 4,520 $ (385) $ — $ — $ (385)

Cleared risk management derivatives. . . . . . (2,415) 2,324 (91) — 91 —

Mortgage commitment derivatives . . . . . . . . (737) — (737) 357 16 (364)

Total derivative liabilities. . . . . . . . . . . . . . . (8,057) 6,844 (1,213)

(4) 357 107 (749)

Total liabilities. . . . . . . . . . . . . . . . . . . . . . $ (8,057) $ 6,844 $ (1,213) $ 357 $ 107 $ (749)

__________

(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 non-cash collateral received that has not been recognized and not offset in our condensed consolidated 

balance sheets as well as non-cash collateral posted which has been recognized but not offset in our condensed 

consolidated balance sheets. Does not include collateral held or posted in excess of our exposure. The fair value of noncash collateral we pledged was $1.3 billion as of March 31, 2017 and December 31, 2016, which the counterparty was 

permitted to sell or repledge. The fair value of non-cash collateral received was $55.4 billion and $51.2 billion, of which 

$52.2 billion and $45.5 billion could be sold or repledged as of March 31, 2017 and December 31, 2016, respectively. None

of the underlying collateral was sold or repledged as of March 31, 2017 and December 31, 2016. 

(4) Excludes derivative assets of $27 million and $33 million as of March 31, 2017 and December 31, 2016, and derivative 

liabilities of $1 million and $2 million recognized in our condensed consolidated balance sheets as of March 31, 2017 and 

December 31, 2016, respectively, that are not subject to enforceable master netting arrangements.

(5) Includes $20.1 billion and $20.7 billion of securities purchased under agreements to resell classified as “Cash and cash 

equivalents” in our condensed consolidated balance sheets as of March 31, 2017 and December 31, 2016, respectively.

Derivative instruments are recorded at fair value and securities purchased under agreements to resell or similar 

arrangements are recorded at amortized cost in our condensed consolidated balance sheets.

We determine our rights to offset the assets and liabilities presented above with the same counterparty, including 

collateral posted or received, based on the contractual arrangements entered into with our individual 

counterparties and various rules and regulations that would govern the insolvency of a derivative counterparty. 

The following is a description, under various agreements, of the nature of those rights and their effect or potential 

effect on our financial position.

The terms of the majority of our contracts for OTC risk management derivatives are governed under master 

agreements of the International Swaps and Derivatives Association Inc. (“ISDA”). These agreements provide that 

all transactions entered into under the agreement with the counterparty constitute a single contractual 

relationship. An event of default by the counterparty allows the early termination of all outstanding transactions 

under the same ISDA agreement and we may offset all outstanding amounts related to the terminated 

transactions including collateral posted or received.
Notes to Condensed Consolidated Financial Statements | Netting Arrangements

Fannie Mae (In conservatorship) First Quarter 2017 Form 10-Q 90

The terms of our contracts for cleared derivatives are governed under the rules of the clearing organization and 

the agreement between us and the clearing member of that clearing organization. In the event of a clearing 

organization default, all open positions at the clearing organization are closed and a net position (on a clearing 

member by clearing member basis) is calculated. Unless otherwise transferred, in the event of a clearing member 

default, all open positions cleared through that clearing member are closed and a net position is calculated. 

The terms of our contracts for mortgage commitment derivatives are primarily governed by the Fannie Mae 

Single-Family Selling Guide (“Guide”), for Fannie Mae-approved lenders, or Master Securities Forward 

Transaction Agreements (“MSFTA”), for counterparties that are not Fannie Mae-approved lenders. In the event of 

default by the counterparty, both the Guide and the MSFTA allow us to terminate all outstanding transactions 

under the applicable agreement and offset all outstanding amounts related to the terminated transactions 

including collateral posted or received. Under the Guide, upon a lender event of default, we generally may offset 

any amounts owed to a lender against any amounts a lender may owe us under any other existing agreement, 

regardless of whether or not such other agreements are in default or payments are immediately due.

The terms of our contracts for securities purchased under agreements to resell and securities sold under 

agreements to repurchase are governed by Master Repurchase Agreements, which are based on the guidelines 

prescribed by the Securities Industry and Financial Markets Association. Master Repurchase Agreements provide 

that all transactions under the agreement constitute a single contractual relationship. An event of default by the 

counterparty allows the early termination of all outstanding transactions under the same agreement and we may 

offset all outstanding amounts related to the terminated transactions including collateral posted or received. 

We also have securities purchased under agreements to resell which we transact through the Fixed Income 

Clearing Corporation (“FICC”). Under the rules of the FICC, all agreements for securities purchased under 

agreements to resell that are submitted to the FICC for clearing become transactions with the FICC that are 

subject to FICC clearing rules. In the event of a FICC default, all open positions at the FICC are closed and a net 

position is calculated.

14. Fair Value

We use fair value measurements for the initial recording of certain assets and liabilities and periodic 

remeasurement of certain assets and liabilities on a recurring or nonrecurring basis. 

Fair Value Measurement

Fair value measurement guidance defines fair value, establishes a framework for measuring fair value and sets 

forth disclosures around fair value measurements. This guidance applies whenever other accounting guidance 

requires or permits assets or liabilities to be measured at fair value. The guidance establishes a three-level fair 

value hierarchy that prioritizes the inputs into the valuation techniques used to measure fair value. The fair value 

hierarchy gives the highest priority, Level 1, to measurements based on unadjusted quoted prices in active 

markets for identical assets or liabilities. The next highest priority, Level 2, is given to measurements of assets 

and liabilities based on limited observable inputs or observable inputs for similar assets and liabilities. The lowest 

priority, Level 3, is given to measurements based on unobservable inputs. 
Notes to Condensed Consolidated Financial Statements | Fair Value

Fannie Mae (In conservatorship) First Quarter 2017 Form 10-Q 91

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, 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)

Recurring fair value measurements:

Assets:

Trading securities:

Mortgage-related securities:

Fannie Mae . . . . . . . . . . . . . . . . . . . . . . $ — $ 3,738 $ 856 $ — $ 4,594

Other agency. . . . . . . . . . . . . . . . . . . . . — 2,053 — — 2,053

Alt-A and subprime private-label

securities . . . . . . . . . . . . . . . . . . . . . — 352 272 — 624

CMBS . . . . . . . . . . . . . . . . . . . . . . . . . . — 238 — — 238

Mortgage revenue bonds . . . . . . . . . . . — — 20 — 20

Non-mortgage-related securities:

U.S. Treasury securities . . . . . . . . . . . . 30,155 — — — 30,155

Total trading securities . . . . . . . . . . . . . . . . 30,155 6,381 1,148 — 37,684

Available-for-sale securities:

Mortgage-related securities:

Fannie Mae . . . . . . . . . . . . . . . . . . . . . . — 2,141 232 — 2,373

Other agency. . . . . . . . . . . . . . . . . . . . . — 470 — — 470

Alt-A and subprime private-label

securities . . . . . . . . . . . . . . . . . . . . . — 2,423 205 — 2,628

CMBS . . . . . . . . . . . . . . . . . . . . . . . . . . — 617 — — 617

Mortgage revenue bonds . . . . . . . . . . . — — 1,185 — 1,185

Other . . . . . . . . . . . . . . . . . . . . . . . . . . . — 31 417 — 448

Total available-for-sale securities. . . . . . . . — 5,682 2,039 — 7,721

Mortgage loans . . . . . . . . . . . . . . . . . . . . . — 10,534 1,149 — 11,683

Other assets:

Risk management derivatives:

Swaps . . . . . . . . . . . . . . . . . . . . . . . . . . — 3,903 126 — 4,029

Swaptions . . . . . . . . . . . . . . . . . . . . . . . — 230 — — 230

Other . . . . . . . . . . . . . . . . . . . . . . . . . . . — — 27 — 27

Netting adjustment . . . . . . . . . . . . . . . . — — — (4,104) (4,104)

Mortgage commitment derivatives . . . . — 414 3 — 417

Total other assets. . . . . . . . . . . . . . . . . . . . — 4,547 156 (4,104) 599

Total assets at fair value . . . . . . . . . . . $ 30,155 $ 27,144 $ 4,492 $ (4,104) $ 57,687
Notes to Condensed Consolidated Financial Statements | Fair Value

Fannie Mae (In conservatorship) First Quarter 2017 Form 10-Q 92

Fair Value Measurements as of March 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 . . . . . . . . . . . . . . . . . . . . $ — $ 8,812 $ 350 $ — $ 9,162

Total of Fannie Mae. . . . . . . . . . . . . . . . . — 8,812 350 — 9,162

Of consolidated trusts . . . . . . . . . . . . . . . — 36,158 214 — 36,372

Total long-term debt . . . . . . . . . . . . . . . . . . — 44,970 564 — 45,534

Other liabilities:

Risk management derivatives:

Swaps . . . . . . . . . . . . . . . . . . . . . . . . . . — 5,408 38 — 5,446

Swaptions . . . . . . . . . . . . . . . . . . . . . . . — 270 — — 270

Other . . . . . . . . . . . . . . . . . . . . . . . . . . . — — 1 — 1

Netting adjustment . . . . . . . . . . . . . . . . — — — (5,397) (5,397)

Mortgage commitment derivatives. . . . . . — 579 4 — 583

Total other liabilities . . . . . . . . . . . . . . . . . . — 6,257 43 (5,397) 903

Total liabilities at fair value. . . . . . . . . . . $ — $ 51,227 $ 607 $ (5,397) $ 46,437
Notes to Condensed Consolidated Financial Statements | Fair Value

Fannie Mae (In conservatorship) First Quarter 2017 Form 10-Q 93

Fair Value Measurements as of December 31, 2016

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 . . . . . . . . . . . . . . . . . . . . . . $ — $ 3,934 $ 835 $ — $ 4,769

Other agency. . . . . . . . . . . . . . . . . . . . . — 2,058 — — 2,058

Alt-A and subprime private-label

securities . . . . . . . . . . . . . . . . . . . . . — 365 271 — 636

CMBS . . . . . . . . . . . . . . . . . . . . . . . . . . — 761 — — 761

Mortgage revenue bonds . . . . . . . . . . . — — 21 — 21

Non-mortgage-related securities:

U.S. Treasury securities . . . . . . . . . . . . 32,317 — — — 32,317

Total trading securities . . . . . . . . . . . . . . . . 32,317 7,118 1,127 — 40,562

Available-for-sale securities:

Mortgage-related securities:

Fannie Mae . . . . . . . . . . . . . . . . . . . . . . — 2,324 230 — 2,554

Other agency. . . . . . . . . . . . . . . . . . . . . — 542 5 — 547

Alt-A and subprime private-label

securities . . . . . . . . . . . . . . . . . . . . . — 2,492 217 — 2,709

CMBS . . . . . . . . . . . . . . . . . . . . . . . . . . — 819 — — 819

Mortgage revenue bonds . . . . . . . . . . . — — 1,272 — 1,272

Other . . . . . . . . . . . . . . . . . . . . . . . . . . . — 33 429 — 462

Total available-for-sale securities. . . . . . . . — 6,210 2,153 — 8,363

Mortgage loans . . . . . . . . . . . . . . . . . . . . . — 10,860 1,197 — 12,057

Other assets:

Risk management derivatives:

Swaps . . . . . . . . . . . . . . . . . . . . . . . . . . — 4,159 137 — 4,296

Swaptions . . . . . . . . . . . . . . . . . . . . . . . — 241 — — 241

Other . . . . . . . . . . . . . . . . . . . . . . . . . . . — — 33 — 33

Netting adjustment . . . . . . . . . . . . . . . . — — — (4,514) (4,514)

Mortgage commitment derivatives. . . . . . — 619 12 — 631

Total other assets. . . . . . . . . . . . . . . . . . . . — 5,019 182 (4,514) 687

Total assets at fair value . . . . . . . . . . . . $ 32,317 $ 29,207 $ 4,659 $ (4,514) $ 61,669
Notes to Condensed Consolidated Financial Statements | Fair Value

Fannie Mae (In conservatorship) First Quarter 2017 Form 10-Q 94

Fair Value Measurements as of December 31, 2016

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 . . . . . . . . . . . . . . . . . . . . $ — $ 9,235 $ 347 $ — $ 9,582

Total of Fannie Mae. . . . . . . . . . . . . . . . . — 9,235 347 — 9,582

Of consolidated trusts . . . . . . . . . . . . . . . — 36,283 241 — 36,524

Total long-term debt . . . . . . . . . . . . . . . . . . — 45,518 588 — 46,106

Other liabilities:

Risk management derivatives:

Swaps . . . . . . . . . . . . . . . . . . . . . . . . . . — 6,933 48 — 6,981

Swaptions . . . . . . . . . . . . . . . . . . . . . . . — 339 — — 339

Other . . . . . . . . . . . . . . . . . . . . . . . . . . . — — 2 — 2

Netting adjustment . . . . . . . . . . . . . . . . — — — (6,844) (6,844)

Mortgage commitment derivatives. . . . . . — 649 88 — 737

Total other liabilities . . . . . . . . . . . . . . . . . . — 7,921 138 (6,844) 1,215

Total liabilities at fair value. . . . . . . . . . . $ — $ 53,439 $ 726 $ (6,844) $ 47,321

__________

(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 2017 Form 10-Q 95

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, 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(4)

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 $ 2,039 $ —

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)
Notes to Condensed Consolidated Financial Statements | Fair Value

Fannie Mae (In conservatorship) First Quarter 2017 Form 10-Q 96

Fair Value Measurements Using Significant Unobservable Inputs (Level 3)

For the Three Months Ended March 31, 2016

Net 

Unrealized 

Gains 

(Losses) 

Included in 

Net Income 

Related to 

Assets and 

Liabilities Still 

Held as of 

March 31, 

2016(5)(6)

Total Gains (Losses)

(Realized/Unrealized) 

Balance,

December

31, 2015

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,

2016

(Dollars in millions)

Trading securities:

Mortgage-related:

Fannie Mae . . . $ — $ — $ — $ — $ — $ — $ — $ — $ 25 $ 25 $ —

Other agency . . — — — — — — — — 1 1 —

Alt-A and

subprime

private-label

securities . . . 949 (91) — — (187) — (20) (363) — 288 (67)

Mortgage

revenue

bonds. . . . . . 449 12 — — (95) — (3) — — 363 10

Total trading

securities . . . . . . $ 1,398 $ (79)

(6)(7)

$ — $ — $ (282) $ — $ (23) $ (363) $ 26 $ 677 $ (57)

Available-for-sale

securities:

Mortgage-related:

Fannie Mae . . . $ — $ — $ — $ — $ — $ — $ — $ — $ 1 $ 1 $ —

Other agency . . 4 — — — — — — (2) — 2 —

Alt-A and

subprime

private-label

securities . . . 4,322 103 (168) — (875) — (144) (2,839) — 399 —

Mortgage

revenue

bonds. . . . . . 2,701 4 30 — (43) — (128) — — 2,564 —

Other . . . . . . 1,404 (3) (25) — (404) — (33) (284) — 655 —

Total available-forsale securities . . $ 8,431 $ 104

(7)(8)

$ (163) $ — $ (1,322) $ — $ (305) $ (3,125) $ 1 $ 3,621 $ —

Mortgage loans. . . . $ 1,477 $ 101

(6)(7)

$ — $ — $ (320) $ — $ (72) $ (65) $ 190 $ 1,311 $ 13

Net derivatives . . . . 157 180

(6)

— — — (4) (100) (2) — 231 66

Long-term debt:

Of Fannie Mae:

Senior floating . $ (369) $ (26) $ — $ — $ — $ — $ — $ — $ — $ (395) $ (26)

Of consolidated

trusts . . . . . . . . (496) (68) — — — (7) 309 37 (21) (246) (2)

Total long-term

debt. . . . . . . . . .

$ (865) $ (94)

(6)

$ — $ — $ — $ (7) $ 309 $ 37 $ (21) $ (641) $ (28)

__________

(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.

(3) Issues and settlements include activity related to the consolidation and deconsolidation of liabilities of securitization trusts.

(4) During the first quarter of 2016, transfers out of Level 3 consisted primarily of 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 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.
Notes to Condensed Consolidated Financial Statements | Fair Value

Fannie Mae (In conservatorship) First Quarter 2017 Form 10-Q 97

(8) Gains (losses) are included in “Investment gains (losses), net” in our condensed consolidated statements of operations and 

comprehensive income.

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, 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). . . . . . . . . . . . . . . . . . . . . . . . $ 856 Single Vendor

Alt-A and subprime private-label

securities. . . . . . . . . . . . . . . . . . . . .

174 Single Vendor Default Rate (%) 8.7 8.7

Prepayment Speed (%) 5.6 5.6

Severity (%) 95.0 95.0

Spreads (bps) 230.4 230.4

98 Various

Total Alt-A and subprime private-label

securities . . . . . . . . . . . . . . . . . . .

272

Mortgage revenue bonds . . . . . . . . . . . 20 Various

Total trading securities. . . . . . . . . . . . . . . . . $ 1,148

Available-for-sale securities:

Mortgage-related securities:

Agency(2). . . . . . . . . . . . . . . . . . . . . . . . $ 232 Various

Alt-A and subprime private-label

securities. . . . . . . . . . . . . . . . . . . . .

104 Consensus

101 Various

Total Alt-A and subprime private-label

securities . . . . . . . . . . . . . . . . . . .

205

Mortgage revenue bonds . . . . . . . . . . . 676 Single Vendor Spreads (bps) 21.5 - 383.1 75.5

429 Discounted Cash Flow Spreads (bps) 21.5 - 412.7 278.3

80 Various

Total mortgage revenue bonds. . . . . . 1,185

Other. . . . . . . . . . . . . . . . . . . . . . . . . . . 340 Discounted Cash Flow Default Rate (%) 0.5 0.5

Prepayment Speed (%) 0.5 0.5

Severity (%) 95.0 95.0

Spreads (bps) 175.0 - 438.1 436.2

77 Various

Total other . . . . . . . . . . . . . . . . . . . . . 417

Total available-for-sale securities . . . . . . . . $ 2,039
Notes to Condensed Consolidated Financial Statements | Fair Value

Fannie Mae (In conservatorship) First Quarter 2017 Form 10-Q 98

Fair Value Measurements as of March 31, 2017

Fair

Value

Significant Valuation

Techniques

Significant 

Unobservable Inputs(1) Range(1)

Weighted - 

Average(1)

(Dollars in millions)

Mortgage loans:

Single-family . . . . . . . . . . . . . . . . . . . . . $ 546 Build-Up

385 Consensus

56 Various

Total single-family. . . . . . . . . . . . . . . . 987

Multifamily . . . . . . . . . . . . . . . . . . . . . . . 162 Build-Up Spreads (bps) 45.0 - 282.2 126.7

Total mortgage loans. . . . . . . . . . . . . . . . . . $ 1,149

Net derivatives . . . . . . . . . . . . . . . . . . . . . . $ 113 Various

Long-term debt:

Of Fannie Mae:

Senior floating . . . . . . . . . . . . . . . . . . . . $ (350) Discounted Cash Flow

Of consolidated trusts . . . . . . . . . . . . . . . (120) Consensus

(94) Various

Total of consolidated trusts. . . . . . . . . (214)

Total long-term debt . . . . . . . . . . . . . . . . . . $ (564)
Notes to Condensed Consolidated Financial Statements | Fair Value

Fannie Mae (In conservatorship) First Quarter 2017 Form 10-Q 99

Fair Value Measurements as of December 31, 2016

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). . . . . . . . . . . . . . . . . . . . . . . . $ 809 Consensus

26 Various

Total agency. . . . . . . . . . . . . . . . . . . . 835

Alt-A and subprime private-label

securities. . . . . . . . . . . . . . . . . . . . .

232 Consensus Default Rate (%) 0.4 - 10.9 8.2

Prepayment Speed (%) 4.3 - 7.4 6.6

Severity (%) 71.0 - 95.0 88.9

Spreads (bps) 244.6 - 253.9 251.5

39 Consensus

Total Alt-A and subprime private-label

securities . . . . . . . . . . . . . . . . . . .

271

Mortgage revenue bonds . . . . . . . . . . . 19 Discounted Cash Flow Spreads (bps) 13.0 - 268.2 252.2

2 Various

Total mortgage revenue bonds. . . . . . 21

Total trading securities. . . . . . . . . . . . . . . . . $ 1,127

Available-for-sale securities:

Mortgage-related securities:

Agency(2). . . . . . . . . . . . . . . . . . . . . . . . $ 129 Single Vendor Prepayment Speed (%) 124.8 - 165.5 142.4

Spreads (bps) 175.0 - 210.0 182.5

72 Consensus

34 Various

Total agency. . . . . . . . . . . . . . . . . . . . 235

Alt-A and subprime private-label

securities. . . . . . . . . . . . . . . . . . . . .

93 Single Vendor Default Rate (%) 2.5 - 8.0 3.8

Prepayment Speed (%) 3.0 - 11.0 4.9

Severity (%) 38.0 - 80.0 48.1

Spreads (bps) 266.1 - 306.8 297.1

45 Discounted Cash Flow Spreads (bps) 361.0 - 450.0 406.0

79 Various

Total Alt-A and subprime private-label

securities . . . . . . . . . . . . . . . . . . .

217

Mortgage revenue bonds . . . . . . . . . . . 684 Single Vendor Spreads (bps) (16.8) - 336.9 44.3

126 Single Vendor

435 Discounted Cash Flow Spreads (bps) (16.8) - 391.1 260.0

27 Various

Total mortgage revenue bonds. . . . . . 1,272

Other. . . . . . . . . . . . . . . . . . . . . . . . . . . 47 Consensus Default Rate (%) 0.5 - 3.5 3.5

Prepayment Speed (%) 2.5 - 6.0 2.5

Severity (%) 20.0 - 88.0 87.5

Spreads (bps) 221.6 - 300.2 237.7

348 Discounted Cash Flow Default Rate (%) 2.3 2.3

Prepayment Speed (%) 0.5 0.5

Severity (%) 95.0 95.0

Spreads (bps) 190.0 - 450.0 449.1

34 Various

Total other . . . . . . . . . . . . . . . . . . . . . 429

Total available-for-sale securities . . . . . . . . $ 2,153
Notes to Condensed Consolidated Financial Statements | Fair Value

Fannie Mae (In conservatorship) First Quarter 2017 Form 10-Q 100

Fair Value Measurements as of December 31, 2016

Fair

Value

Significant Valuation

Techniques

Significant 

Unobservable Inputs(1) Range(1)

Weighted - 

Average(1)

(Dollars in millions)

Mortgage loans:

Single-family . . . . . . . . . . . . . . . . . . . . . $ 516 Build-Up

300 Consensus

218 Various

Total single-family. . . . . . . . . . . . . . . . 1,034

Multifamily . . . . . . . . . . . . . . . . . . . . . . . 163 Build-Up Spreads (bps) 55.0 - 305.2 140.2

Total mortgage loans. . . . . . . . . . . . . . . . . . $ 1,197

Net derivatives . . . . . . . . . . . . . . . . . . . . . . $ 10 Internal Model

89 Dealer Mark

21 Discounted Cash Flow

(76) Various

Total net derivatives . . . . . . . . . . . . . . . . . . $ 44

Long-term debt:

Of Fannie Mae:

Senior floating . . . . . . . . . . . . . . . . . . . . $ (347) Discounted Cash Flow

Of consolidated trusts . . . . . . . . . . . . . . . (241) Various

Total long-term debt . . . . . . . . . . . . . . . . . . $ (588)

_________

(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 

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, 2017 or December 31, 2016 that were measured at fair 

value on a nonrecurring basis. We held $485 million and $250 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, 2017 and December 31, 2016, respectively.
Notes to Condensed Consolidated Financial Statements | Fair Value

Fannie Mae (In conservatorship) First Quarter 2017 Form 10-Q 101

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,

2017

December 31,

2016

(Dollars in millions)

Nonrecurring fair value measurements:

Mortgage loans held for sale, at lower of cost or fair value. Consensus $ 2,468 $ 1,025

Single Vendor 84 54

Various 3 9

Total mortgage loans held for sale, at lower of cost or

fair value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,555 1,088

Single-family mortgage loans held for investment, at

amortized cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Internal Model 1,907 2,816

Multifamily mortgage loans held for investment, at

amortized cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Broker Price Opinions — 25

Asset Manager Estimate 94 170

Various 4 3

Total multifamily mortgage loans held for investment, at

amortized cost. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98 198

Acquired property, net:(1)

Single-family . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Accepted Offers 300 340

Appraisals 511 571

Walk Forwards 208 306

Internal Model 322 476

Various 62 99

Total single-family. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,403 1,792

Multifamily . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Broker Price Opinions 18 —

Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Various 2 12

Total nonrecurring assets at fair value . . . . . . . . . . . . . . . . $ 5,983 $ 5,906

__________

(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, 2017, these 

methodologies comprised approximately 72% of our valuations, while accepted offers comprised approximately 22% of our 

valuations. Based on the number of properties measured as of December 31, 2016, these methodologies comprised 

approximately 75% of our valuations, while accepted offers comprised approximately 19% of our valuations.

We use valuation techniques that maximize the use of observable inputs and minimize the use of unobservable 

inputs. See “Note 17, Fair Value“ in our 2016 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. There 

were no significant changes made to the valuation control processes and the valuation techniques in the first

quarter of 2017.
Notes to Condensed Consolidated Financial Statements | Fair Value

Fannie Mae (In conservatorship) First Quarter 2017 Form 10-Q 102

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, 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 . . . . . . . . . . . . . . . . . $ 52,309 $ 32,209 $ 20,100 $ — $ — $ 52,309

Federal funds sold and securities

purchased under agreements to

resell or similar arrangements . . . . . 35,260 — 35,260 — — 35,260

Trading securities. . . . . . . . . . . . . . . . . 37,684 30,155 6,381 1,148 — 37,684

Available-for-sale securities . . . . . . . . . 7,721 — 5,682 2,039 — 7,721

Mortgage loans held for sale . . . . . . . . 5,024 — 1,388 4,155 — 5,543

Mortgage loans held for investment,

net of allowance for loan losses . . . . 3,104,478 — 2,803,139 312,761 — 3,115,900

Advances to lenders . . . . . . . . . . . . . . 4,344 — 4,023 337 — 4,360

Derivative assets at fair value . . . . . . . 599 — 4,547 156 (4,104) 599

Guaranty assets and buy-ups . . . . . . . 151 — — 429 — 429

Total financial assets . . . . . . . . . . . . . . $ 3,247,570 $ 62,364 $ 2,880,520 $ 321,025 $ (4,104) $ 3,259,805

Financial liabilities:

Federal funds purchased and

securities sold under agreements to

repurchase . . . . . . . . . . . . . . . . . . . . $ 185 $ — $ 185 $ — $ — $ 185

Short-term debt:

Of Fannie Mae . . . . . . . . . . . . . . . . 37,452 — 37,449 — — 37,449

Of consolidated trusts. . . . . . . . . . . 557 — — 557 — 557

Long-term debt:

Of Fannie Mae . . . . . . . . . . . . . . . . 289,731 — 296,836 785 — 297,621

Of consolidated trusts. . . . . . . . . . . 2,953,914 — 2,916,788 37,409 — 2,954,197

Derivative liabilities at fair value. . . . . . 903 — 6,257 43 (5,397) 903

Guaranty obligations . . . . . . . . . . . . . . 271 — — 565 — 565

Total financial liabilities . . . . . . . . . . . . $ 3,283,013 $ — $ 3,257,515 $ 39,359 $ (5,397) $ 3,291,477
Notes to Condensed Consolidated Financial Statements | Fair Value

Fannie Mae (In conservatorship) First Quarter 2017 Form 10-Q 103

As of December 31, 2016

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 . . . . . . . . . . . . . . . . . $ 62,177 $ 41,477 $ 20,700 $ — $ — $ 62,177

Federal funds sold and securities

purchased under agreements to

resell or similar arrangements . . . . . 30,415 — 30,415 — — 30,415

Trading securities. . . . . . . . . . . . . . . . . 40,562 32,317 7,118 1,127 — 40,562

Available-for-sale securities . . . . . . . . . 8,363 — 6,210 2,153 — 8,363

Mortgage loans held for sale . . . . . . . . 2,899 — 509 2,751 — 3,260

Mortgage loans held for investment,

net of allowance for loan losses . . . . 3,076,854 — 2,767,813 316,742 — 3,084,555

Advances to lenders . . . . . . . . . . . . . . 7,494 — 7,156 352 — 7,508

Derivative assets at fair value . . . . . . . 687 — 5,019 182 (4,514) 687

Guaranty assets and buy-ups . . . . . . . 158 — — 432 — 432

Total financial assets . . . . . . . . . . . . . . $ 3,229,609 $ 73,794 $ 2,844,940 $ 323,739 $ (4,514) $ 3,237,959

Financial liabilities:

Short-term debt:

Of Fannie Mae . . . . . . . . . . . . . . . . $ 34,995 $ — $ 34,998 $ — $ — $ 34,998

Of consolidated trusts. . . . . . . . . . . 584 — — 584 — 584

Long-term debt:

Of Fannie Mae . . . . . . . . . . . . . . . . 292,102 — 298,980 770 — 299,750

Of consolidated trusts. . . . . . . . . . . 2,934,635 — 2,901,316 36,668 — 2,937,984

Derivative liabilities at fair value. . . . . . 1,215 — 7,921 138 (6,844) 1,215

Guaranty obligations . . . . . . . . . . . . . . 280 — — 710 — 710

Total financial liabilities . . . . . . . . . . . . $ 3,263,811 $ — $ 3,243,215 $ 38,870 $ (6,844) $ 3,275,241

For a detailed description and classification of our financial instruments, see “Note 17, Fair Value” in our 2016 

Form 10-K.
Notes to Condensed Consolidated Financial Statements | Fair Value

Fannie Mae (In conservatorship) First Quarter 2017 Form 10-Q 104

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 that contain embedded derivatives that would otherwise require 

bifurcation. Under the fair value option, we elected to carry these instruments at fair value instead of 

bifurcating the embedded derivative from such instruments. 

We elected the fair value option for all long-term structured debt instruments that are issued in response to 

specific investor demand and have interest rates that are based on a calculated index or formula and are 

economically hedged with derivatives at the time of issuance. By electing the fair value option for these 

instruments, we are able to eliminate the volatility in our results of operations that would otherwise result from the 

accounting asymmetry created by recording these structured debt instruments at cost while recording the related 

derivatives at fair value. 

We elected the fair value option for the financial assets and liabilities of the consolidated senior-subordinate trust 

structures. By electing the fair value option for these instruments, we are able to eliminate the volatility in our 

results of operations that would otherwise result from different accounting treatment between loans at cost and 

debt at cost. 

Interest income for the mortgage loans is recorded in “Interest income—Mortgage loans” and interest expense for 

the debt instruments is recorded in “Interest expense—Long-term debt” in our condensed consolidated 

statements of operations and comprehensive income. 

The following table displays the fair value and unpaid principal balance of the financial instruments for which we 

have made fair value elections.

As of

March 31, 2017 December 31, 2016

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. . . . . . . . . . . . . $11,683 $ 9,162 $ 36,372 $12,057 $ 9,582 $ 36,524

Unpaid principal balance . 11,313 8,504 32,927 11,688 9,090 33,055

__________

(1) Includes nonaccrual loans with a fair value of $196 million and $200 million as of March 31, 2017 and December 31, 2016, 

respectively. The difference between unpaid principal balance and the fair value of these nonaccrual loans as of March 31, 

2017 and December 31, 2016 was $36 million and $34 million, respectively. Includes loans that are 90 days or more past 

due with a fair value of $148 million and $152 million as of March 31, 2017 and December 31, 2016, respectively. The 

difference between unpaid principal balance and the fair value of these 90 or more days past due loans as of March 31, 

2017 and December 31, 2016 was $27 million and $25 million, respectively.
Notes to Condensed Consolidated Financial Statements | Fair Value

Fannie Mae (In conservatorship) First Quarter 2017 Form 10-Q 105

Changes in Fair Value under the Fair Value Option Election

The following table displays fair value gains and losses, net, including changes attributable to instrument-specific 

credit risk, for loans and debt for which the fair value election was made. Amounts are recorded as a component 

of “Fair value losses, net” in our condensed consolidated statements of operations and comprehensive income.

For the Three Months Ended March 31,

2017 2016

Loans

Long-Term

Debt

Total

Gains

(Losses) Loans

Long-Term

Debt

Total

Gains

(Losses)

(Dollars in millions)

Changes in instrument-specific credit

risk . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 27 $ (166) $ (139) $ 13 $ (52) $ (39)

Other changes in fair value . . . . . . . . . . . 15 (3) 12 218 (302) (84)

Fair value gains (losses), net. . . . . . . . $ 42 $ (169) $ (127) $ 231 $ (354) $ (123)

In determining the changes in the instrument-specific credit risk for loans, the changes in the associated creditrelated components of these loans, primarily the guaranty obligation, were taken into consideration with the 

change in the fair value of the loans for which we elected the fair value option for financial instruments. In 

determining the changes in the instrument-specific credit risk for debt, the changes in Fannie Mae debt spreads to 

LIBOR that occurred during the period were taken into consideration with the change in the fair value of the debt 

for which we elected the fair value option for financial instruments. Specifically, cash flows are evaluated taking 

into consideration any derivatives through which Fannie Mae has swapped out of the structured features of the 

notes and thus created a floating-rate LIBOR-based debt instrument. The change in value of these LIBOR-based 

cash flows based on the Fannie Mae yield curve at the beginning and end of the period represents the 

instrument-specific credit risk.

15. 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 for matters when a loss is probable and we can reasonably estimate the amount of such 

loss. For legal actions or proceedings where there is only a reasonable possibility that a loss may be incurred, or 

where we are not currently able to estimate the reasonably possible loss or range of loss, we do not establish an 

accrual. 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 
Notes to Condensed Consolidated Financial Statements | Commitments and Contingencies

Fannie Mae (In conservatorship) First Quarter 2017 Form 10-Q 106

period, depending on, among other factors, the size of the loss or liability imposed and the level of our net income 

or loss for that period. 

In addition to the matters specifically described below, we are involved in a number of legal and regulatory 

proceedings that arise in the ordinary course of business that we do not expect will have a material impact on our 

business or financial condition. We have also advanced fees and expenses of certain current and former officers 

and directors in connection with various legal proceedings pursuant to our bylaws and indemnification 

agreements.

Senior Preferred Stock Purchase Agreements Litigation

A number of putative class action lawsuits were filed in the U.S. District Court for the District of Columbia against 

us, FHFA as our conservator, Treasury and Freddie Mac from July through September 2013 by shareholders of 

Fannie Mae and/or Freddie Mac challenging the August 2012 amendment to each company’s senior preferred 

stock purchase agreement with Treasury. These lawsuits were consolidated and, on December 3, 2013, plaintiffs 

(preferred and common shareholders of Fannie Mae and/or Freddie Mac) filed a consolidated class action 

complaint in the U.S. District Court for the District of Columbia against us, FHFA as our conservator, Treasury and 

Freddie Mac (“In re Fannie Mae/Freddie Mac Senior Preferred Stock Purchase Agreement Class Action 

Litigations”). The preferred shareholder plaintiffs allege that the net worth sweep dividend provisions of the senior 

preferred stock that were implemented pursuant to the August 2012 amendments to the senior preferred stock 

purchase agreements nullified certain of the shareholders’ rights, particularly the right to receive dividends. The 

common shareholder plaintiffs allege that the August 2012 amendments constituted a taking of their property by 

requiring that all future profits of Fannie Mae and Freddie Mac be paid to Treasury. Plaintiffs allege claims for 

breach of contract and breach of the implied covenant of good faith and fair dealing against us, FHFA and Freddie 

Mac, a takings claim against FHFA and Treasury, and a breach of fiduciary duty claim derivatively on our and 

Freddie Mac’s behalf against FHFA and Treasury. Plaintiffs seek to represent several classes of preferred and/or 

common shareholders of Fannie Mae and/or Freddie Mac who held stock as of the public announcement of the 

August 2012 amendments. Plaintiffs seek unspecified damages, equitable and injunctive relief, and costs and 

expenses, including attorneys’ fees.

A non-class action suit, Arrowood Indemnity Company v. Fannie Mae, was filed in the U.S. District Court for the 

District of Columbia on September 20, 2013 by preferred shareholders against us, FHFA as our conservator, the 

Director of FHFA (in his official capacity), Treasury, the Secretary of the Treasury (in his official capacity) and 

Freddie Mac. Plaintiffs bring claims for breach of contract and breach of the implied covenant of good faith and 

fair dealing against us, FHFA and Freddie Mac, and claims for violation of the Administrative Procedure Act 

against the FHFA and Treasury defendants, alleging that the net worth sweep dividend provisions nullified certain 

rights of the preferred shareholders, particularly the right to receive dividends. Plaintiffs seek damages, equitable 

and injunctive relief, and costs and expenses, including attorneys’ fees.

On September 30, 2014, the court dismissed both lawsuits and plaintiffs in both suits filed timely notices of 

appeal. On February 21, 2017, the U.S. Court of Appeals for the D.C. Circuit affirmed the district court’s dismissal 

of the claims alleging violation of the Administrative Procedure Act, but reversed the district court’s dismissal of 

the claims alleging breach of the implied covenant of good faith and fair dealing and one of the breach of contract 

claims. The court also ruled that the class-action plaintiffs could seek leave in the district court to amend their 

claim for breach of fiduciary duty from a derivative to a direct claim.

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 2017 Form 10-Q 107

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, 2017, 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, 2017 or as of the date of filing this 

report.

Our disclosure controls and procedures were not effective as of March 31, 2017 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, 

2017 or as of the date of this filing, and we continue to have a material weakness in our internal control over 

financial reporting. This material weakness is described in more detail below under “Description of Material 

Weakness.” Based on discussions with FHFA and the structural nature of this material weakness, we do not 

expect to remediate this material weakness while we are under conservatorship.

Description of Material Weakness

The Public Company Accounting Oversight Board’s Auditing Standard No. 5 defines a material weakness as a 

deficiency or a combination of deficiencies in internal control over financial reporting, such that there is a 

reasonable possibility that a material misstatement of the company’s annual or interim financial statements will not 

be prevented or detected on a timely basis.

Management has determined that we continued to have the following material weakness as of March 31, 2017

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 2017 Form 10-Q 108

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, 2017 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, 2017 (“First Quarter 2017 Form 10-Q”), 

and engaged in discussions regarding issues associated with the information contained in those filings. 

Prior to filing our First Quarter 2017 Form 10-Q, FHFA provided Fannie Mae management with a written 

acknowledgment that it had reviewed the First Quarter 2017 Form 10-Q, and it was not aware of any 

material misstatements or omissions in the First Quarter 2017 Form 10-Q and had no objection to our 

filing the First Quarter 2017 Form 10-Q.

• The Director of FHFA and our Chief Executive Officer have been in frequent communication, typically 

meeting on at least a bi-weekly basis.

• FHFA representatives attend meetings frequently with various groups within the company to enhance the 

flow of information and to provide oversight on a variety of matters, including accounting, credit and 

market risk management, external communications and legal matters.

• Senior officials within FHFA’s Office of the Chief Accountant have met frequently with our senior finance 

executives regarding our accounting policies, practices and procedures.

Changes in Internal Control over Financial Reporting

Management has evaluated, with the participation of our Chief Executive Officer and Chief Financial Officer, 

whether any changes in our internal control over financial reporting that occurred during our last fiscal quarter 

have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. 

There have been no changes in our internal control over financial reporting since December 31, 2016 that 

management believes have materially affected, or are reasonably likely to materially affect, our internal control 

over financial reporting.
Other Information

Fannie Mae First Quarter 2017 Form 10-Q 109

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 2016 Form 10-K. We also provide information regarding material legal proceedings in 

“Note 15, Commitments and Contingencies,” which is incorporated herein by reference. In addition to the matters 

specifically described or incorporated by reference in this item, we are involved in a number of legal and 

regulatory proceedings that arise in the ordinary course of business that do not have a material impact on our 

business. Litigation claims and proceedings of all types are subject to many factors that generally cannot be 

predicted accurately. 

We record accruals for legal claims when losses associated with those claims become probable and the amounts 

can be reasonably estimated. The actual costs of resolving legal claims may be substantially higher or lower than 

the amounts accrued for those claims. For matters where the likelihood or extent of a loss is not probable or 

cannot be reasonably estimated, we do not recognize in our condensed consolidated financial statements the 

potential liability that may result from these matters. We presently cannot determine the ultimate resolution of the 

matters described below or incorporated by reference into this item or in our 2016 Form 10-K. 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 October 2016, several lawsuits were filed by preferred and common stockholders of 

Fannie Mae and Freddie Mac in the U.S. Court of Federal Claims, the U.S. District Court for the District of 

Columbia, the U.S. District Court for the Southern District of Iowa, the U.S. District Court for the Northern District 

of Iowa, the U.S. District Court for the District of Delaware, the U.S. District Court for the Eastern District of 

Kentucky, the U.S. District Court for the Northern District of Illinois, the U.S. District Court for the Western District 

of Texas and the U.S. District Court for the Southern District of Texas 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. 

On September 30, 2014, the U.S. District Court for the District of Columbia dismissed all but one of the cases 

then pending before that court. The plaintiffs in each of the dismissed cases filed a notice of appeal. The plaintiffs 

in the case that was not dismissed by the court voluntarily dismissed their lawsuit on October 31, 2014. On 

February 3, 2015, the U.S. District Court for the Southern District of Iowa dismissed the case pending before it. 

On September 9, 2016, the U.S. District Court for the Eastern District of Kentucky dismissed the case pending 

before it. The plaintiff in that case filed a notice of appeal and the appeal was docketed on November 17, 2016. 

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 cases filed in the U.S. District Court for the District of Columbia. On 

March 30, 2017, the U.S. District Court for the Northern District of Iowa dismissed the case pending before it. The 

plaintiff in that case filed a notice of appeal and the appeal was docketed on April 4, 2017. The matters where 

Fannie Mae is a named defendant are described below or in “Note 15, Commitments and Contingencies.”

Fannie Mae is a nominal defendant in two actions filed against the United States in the U.S. Court of Federal 

Claims: Fisher v. United States of America, filed on December 2, 2013, and Rafter v. United States of America, 

filed on August 14, 2014. Plaintiffs in these cases allege that the net worth sweep dividend provisions of the 

senior preferred stock that were implemented pursuant to the August 2012 amendment to the senior preferred 

stock purchase agreement constitute a taking of Fannie Mae’s property without just compensation in violation of 

the U.S. Constitution. The Fisher plaintiffs are pursuing this claim derivatively on behalf of Fannie Mae, while the 

Rafter plaintiffs are pursing the claim directly against the United States. Plaintiffs in Rafter also allege a derivative 

claim that the government breached an implied contract with Fannie Mae’s Board of Directors by implementing 
Other Information

Fannie Mae First Quarter 2017 Form 10-Q 110

the net worth sweep dividend provisions. Plaintiffs in Fisher request just compensation to Fannie Mae in an 

unspecified amount. Plaintiffs in Rafter seek just compensation for themselves on their constitutional claim and 

payment of damages to Fannie Mae on their derivative claim for breach of an implied contract. The United States 

filed a motion to dismiss the Fisher case on January 23, 2014; however, the court has stayed proceedings in this 

case until discovery in a related case, Fairholme Funds v. United States, is complete and the court sets a date for 

the Fairholme Funds plaintiffs to respond to the government’s motion to dismiss filed in that case. In the Rafter

case, the court has ordered the government to file a response to the complaint within sixty days after discovery is 

complete in the Fairholme Funds case.

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 plaintiffs amended their complaint on March 16, 2017 to 

add unjust enrichment claims against FHFA and Treasury. The defendants filed motions to dismiss on April 17, 

2017.

On March 14, 2016, Timothy Pagliara filed a lawsuit against Fannie Mae in the Delaware Court of Chancery: 

Pagliara v. Federal National Mortgage Association. The plaintiff owns Fannie Mae preferred stock and seeks 

access to Fannie Mae’s books and records under a provision of Delaware state law. The plaintiff alleges that he is 

entitled to inspect Fannie Mae’s books and records in order to investigate potential breaches of duties to 

stockholders related to 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, as well 

as Fannie Mae’s involvement in the common securitization platform, Common Securitization Solutions, LLC, and 

the Single Security Initiative. On March 25, 2016, Fannie Mae and FHFA removed the case to the U.S. District 

Court for the District of Delaware. On July 18, 2016, FHFA filed a motion to substitute itself for the plaintiff. On 

March 8, 2017, the case was remanded to the Delaware Court of Chancery. On March 31, 2017, Fannie Mae filed 

a motion to dismiss, or in the alternative, for FHFA to substitute itself as plaintiff.

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 2016 Form 10-K. This section supplements and updates that discussion. Please 

also refer to “MD&A—Risk Management” in this report and in our 2016 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 2016 Form 10-K, we face risks and uncertainties not 

currently known to us or that we currently believe are immaterial. 

The future of our company is uncertain. 

There continues to be significant uncertainty regarding the future of our company, including how long the 

company will continue to exist in its current form, the extent of our role in the market, how long we will be in 

conservatorship, what form we will have and what ownership interest, if any, our current common and preferred 

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

conservatorship. The conservatorship is indefinite in duration and the timing, conditions and likelihood of our 

emerging from conservatorship are uncertain. Our conservatorship could terminate through a receivership. 

Termination of the conservatorship, other than in connection with a receivership, requires Treasury’s consent 

under the senior preferred stock purchase agreement. 

The previous Administration endorsed the wind down of Fannie Mae and Freddie Mac through a responsible 

transition and the enactment of comprehensive housing finance reform legislation. The current Administration has 

not articulated a formal position on housing finance reform or the future of the GSEs; however, the Treasury 

Secretary has publicly stated that he is focused on housing finance reform and a solution to the current status of 

Fannie Mae and Freddie Mac.

We expect that Congress will continue to consider legislation that could result in significant changes in our 

structure and role in the future, including proposals that would result in Fannie Mae’s liquidation or dissolution. 
Other Information

Fannie Mae First Quarter 2017 Form 10-Q 111

Congress, FHFA or other agencies may also consider legislation or regulation aimed at or having the effect of 

increasing the competition we face, reducing our market share, expanding our obligations to provide funds to 

Treasury, constraining our business operations, or subjecting us to new obligations, such as the Freedom of 

Information Act, that could impose substantial burdens or adversely affect our results of operations or financial 

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

legislation or other legislation related to our activities. See “Business—Legislation and Regulation—Housing 

Finance Reform” in our 2016 Form 10-K and “MD&A—Legislation and Regulation—Housing Finance Reform” in 

this report for more information about recent actions and statements relating to housing finance reform from 

Congress, as well as actions our conservator has been taking to further housing finance reform.

A decline in activity in the U.S. housing market, increasing interest rates, or changes in tax laws could 

lower our business volumes or otherwise adversely affect our results of operations, net worth and 

financial condition.

Our business volume is affected by the rate of growth in total U.S. residential mortgage debt outstanding and the 

size of the U.S. residential mortgage market. A decline in mortgage debt outstanding reduces the unpaid principal 

balance of mortgage loans available for us to acquire, which in turn could reduce our net interest income. Even if 

we were able to increase our share of the secondary mortgage market, it may not be sufficient to make up for a 

decline in the rate of growth in mortgage originations.

Mortgage interest rates also affect our business volume. Rising interest rates generally result in fewer mortgage 

originations, particularly for refinances. An increase in interest rates, particularly if the increase is sudden and 

steep, could significantly reduce our business volume. Significant reductions in our business volume could 

adversely affect our results of operations and financial condition. In March 2017, the Federal Reserve raised the 

target range for the federal funds rate, and, in May 2017, the Federal Reserve reiterated that it expects economic 

conditions to evolve in a manner that will warrant gradual increases in the federal funds rate. The Federal 

Reserve may increase rates at a faster rate than it is currently expecting. Moreover, the Federal Reserve’s federal 

funds rate path is not the only factor that affects long-term interest rates. Accordingly, our business remains 

subject to the risk of sudden and steep interest rate increases.

Changes in tax laws may also adversely affect housing demand, home prices or other housing or mortgage 

market conditions, which could adversely affect our results of operations, net worth and financial condition.

A change in the Federal Reserve’s reinvestment policy could adversely affect our business, results of 

operations, financial condition, liquidity and net worth.

In recent years, the Federal Reserve has purchased a significant amount of mortgage-backed securities issued 

by us, Freddie Mac and Ginnie Mae. The Federal Reserve began to taper these purchases in January 2014 and 

concluded its asset purchase program in October 2014. Since concluding its asset purchase program, the Federal 

Reserve has maintained its existing policy of reinvesting principal payments from its holdings of agency debt and 

agency mortgage-backed securities in agency mortgage-backed securities; therefore, it has continued to 

purchase a significant amount of agency mortgage-backed securities. In the statement following the Federal 

Open Market Committee meeting in May 2017, the Federal Reserve indicated that it anticipates maintaining its 

current reinvestment policy “until normalization of the level of the federal funds rate is well under way.” The 

minutes of the March meeting stated that, if the economy continued to perform as expected, most participants 

“judged that a change to the committee’s reinvestment policy would likely be appropriate later this year.” Any 

change in the Federal Reserve’s policy towards the reinvestment of principal payments of mortgage-backed 

securities, or possible future sales of mortgage-backed securities by the Federal Reserve, could result in 

increases in mortgage interest rates and/or a widening of mortgage spreads, adversely affect our business 

volume and reduce demand for Fannie Mae MBS, which could adversely affect our business, results of 

operations, financial condition, liquidity and net worth.

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, 2017, 

we did not sell any equity securities.
Other Information

Fannie Mae First Quarter 2017 Form 10-Q 112

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.

Our Purchases of Equity Securities

We did not repurchase any of our equity securities during the first quarter of 2017.

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.

Restrictions Under Senior Preferred Stock Purchase Agreement. The senior preferred stock purchase agreement 

prohibits us from declaring or paying any dividends on Fannie Mae equity securities (other than the senior 

preferred stock) without the prior written consent of Treasury. In addition, in 2012 the terms of the senior preferred 

stock purchase agreement and the senior preferred stock were amended to require that we 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 will decrease to zero in 

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 2016 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 
Other Information

Fannie Mae First Quarter 2017 Form 10-Q 113

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

On May 2, 2017, Fannie Mae appointed Chryssa C. Halley, age 50, as Senior Vice President and Controller of the 

company, effective May 14, 2017. Ms. Halley will succeed Gregory A. Fink as Fannie Mae’s principal accounting 

officer, effective May 14, 2017.

Ms. Halley has been Senior Vice President and Deputy Controller of Fannie Mae since May 2013. Ms. Halley 

previously served as Vice President and Assistant Controller for Capital Markets and Operations from May 2012 

to May 2013; Vice President for Tax, Debt and Derivatives and Securities Accounting from September 2010 to 

May 2012; and Vice President for Corporate Tax from July 2007 to September 2010. Ms. Halley joined Fannie 

Mae in July 2006 as Director, Corporate Tax.

In connection with Ms. Halley’s appointment, her total annual target direct compensation will increase to 

$1,000,000; consisting of base salary of $385,000, fixed deferred salary of $315,000 and at-risk deferred salary of 

$300,000. The increase in Ms. Halley’s compensation will be effective May 14, 2017, and will be prorated for 2017 

based on the effective date of the increase.

Item 6. Exhibits

An index to exhibits has been filed as part of this report beginning on page E-1 and is incorporated herein by 

reference.
Signatures

Fannie Mae First Quarter 2017 Form 10-Q 114

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 5, 2017

By: /s/ David C. Benson

David C. Benson

Executive Vice President and

Chief Financial Officer

Date: May 5, 2017
Index to Exhibits

Fannie Mae First Quarter 2017 Form 10-Q E-1

INDEX TO EXHIBITS

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.)

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. 
FR030