Second-Quarter 2011 Results 1

Resource Center: 1-800-732-6643 

Contact: Pete Bakel 

202-752-2034 

Number: 5458a 

 

Date: August 5, 2011 

Fannie Mae Reports Second-Quarter 2011 Results 

Company Focused on Providing Liquidity to the Mortgage Market, 

Building Strong New Book of Business, and Limiting Losses on Legacy Book 

WASHINGTON, DC – Fannie Mae (FNMA/OTC) today reported a net loss of $2.9 billion in the 

second quarter of 2011, compared to a net loss of $6.5 billion in the first quarter of the year. The 

company’s net loss in the second quarter reflected $6.1 billion in credit-related expenses, substantially 

all of which were related to the company’s legacy (pre-2009) book of business. The loss in the second 

quarter of 2011 reflects the continued weakness in the housing and mortgage markets, which remain 

under pressure from high levels of unemployment, underemployment, and the prolonged decline in 

home prices since their peak in the third quarter of 2006. Pursuing loan modifications, a key aspect of 

the company’s strategy to reduce defaults, also contributed to its loss in the quarter. Fannie Mae 

expects its credit-related expenses to remain elevated in 2011 due to these factors. 

“We remain the largest source of liquidity for the U.S. mortgage market, and we are committed to 

creating long-term value by helping to build a stable, sustainable housing market for the future,” said 

Michael J. Williams, president and chief executive officer. “We are focused on reducing taxpayer 

exposure by limiting our credit losses and building a strong new book of business. Our new book of 

business is now nearly half of our overall single-family book and we expect these new loans will be 

profitable over their lifetime.” 

“With regard to our legacy book of business, our goal is to reduce our credit losses while helping as 

many families as possible stay in their homes, protecting property values in communities across the 

country,” said Susan McFarland, executive vice president and chief financial officer. “Home retention 

solutions, including loan modifications, are an important component of our effort to limit losses on our 

legacy book of business. While modifications contribute to credit-related expenses, successful 

modifications reduce foreclosures and keep families in homes, which we expect to benefit the housing 

market and reduce long-term credit losses.” 

 

Fannie Mae’s net loss attributable to common stockholders in the second quarter of 2011 was $5.2 

billion, or $(0.90) per diluted share, including $2.3 billion in dividend payments to the U.S. Treasury. 

The company’s net worth deficit of $5.1 billion as of June 30, 2011 reflects the recognition of its total 

comprehensive loss of $2.9 billion and its payment to Treasury of $2.3 billion in senior preferred stock 

dividends during the second quarter of 2011. The Acting Director of the Federal Housing Finance 

Agency (“FHFA”) will submit a request to Treasury on Fannie Mae’s behalf for $5.1 billion to 

eliminate the company’s net worth deficit. Upon receipt of those funds, the company’s total obligation 
Second-Quarter 2011 Results 2

to Treasury for its senior preferred stock will be $104.8 billion. The table below shows the amount of 

Fannie Mae’s requested draws from Treasury and dividend payments to Treasury since entering into 

conservatorship on September 6, 2008. 

Treasury Draw Requests and Dividend Payments 

$ in Billions 

Cumulative 

Total 

Treasury Draw Requests(1) $103.8 

Dividend Payments $14.7 

Cumulative percentage of 

dividends to Treasury Draw 14.2% 

$15.2

$19.0

$10.7

$15.0 $15.3

$8.4

$1.5

$2.5 $2.6

$8.5

$5.1

$0.0 $0.0 $0.4 $0.9 $1.2 $1.5 $1.9 $2.1 $2.2 $2.2 $2.3

Q4 2008 Q1 2009 Q2 2009 Q3 2009 Q4 2009 Q1 2010 Q2 2010 Q3 2010 Q4 2010 Q1 2011 Q2 2011

Draw Request from Treasury Dividend Payment to Treasury

(2) (2)

(3) (4)

(1) Treasury draw requests do not include the initial $1.0 billion liquidation preference of Fannie Mae's senior preferred stock, 

for which we did not receive any cash proceeds. 

(2) Fannie Mae paid dividends of $31 million in the fourth quarter of 2008 and $25 million in the first quarter of 2009. 

(3) Represents the draw required and requested based on Fannie Mae's net worth deficit for the quarters presented. Draw 

requests were funded in the quarter following each quarterly net worth deficit. 

(4) Represents quarterly cash dividends paid during the quarters presented by Fannie Mae to Treasury, based on an annual rate 

of 10% per year on the aggregate liquidation preference of the senior preferred stock. 

PROVIDING LIQUIDITY AND SUPPORT TO THE MARKET 

Fannie Mae has continued to provide liquidity and support to the U.S. mortgage market in a number of 

important ways: 

 The company served as a stable source of funds for purchases of homes and multifamily rental 

housing, as well as for refinancing existing mortgages, having provided nearly $2 trillion in 
Second-Quarter 2011 Results 3

liquidity to the mortgage market from January 1, 2009 through June 30, 2011 through its 

purchases and guarantees of mortgage loans. 

 The company has been a consistent market presence as it continued to provide liquidity to the 

mortgage market even when other sources of capital exited the market, as evidenced by the 

events of the last few years. It is estimated that Fannie Mae, Freddie Mac, and Ginnie Mae 

collectively guaranteed more than 80 percent of single-family mortgages originated in the 

United States since January 1, 2009. 

 The company has strengthened its lending standards to support sustainable homeownership, 

enabling borrowers to have access to a variety of conforming mortgage products, including 

long-term, fixed-rate mortgages, such as the prepayable 30-year fixed-rate mortgage that 

protects homeowners from interest rate swings. 

 The company helped more than 874,000 homeowners struggling to pay their mortgages work 

out their loans from January 1, 2009 through June 30, 2011, which helped to support 

neighborhoods, home prices, and the housing market. Workouts refer to home retention 

strategies, such as modifications, repayment plans, and forbearances, as well as preforeclosure 

sales and deeds-in-lieu of foreclosure. 

 The company continued to support affordability in the multifamily rental market. The vast 

majority of the multifamily units it financed during 2009 and 2010 were affordable to families 

earning at or below the median income in their area. 

 The company remained the largest single issuer of mortgage-related securities in the secondary 

market in the second quarter of 2011, with an estimated market share of new single-family 

mortgage-related securities issuances of 43.2 percent, compared to 48.6 percent in the first 

quarter of 2011 and 39.1 percent in the second quarter of 2010. Fannie Mae also remained a 

constant source of liquidity in the multifamily market. As of March 31, 2011 (the latest date for 

which information was available), the company owned or guaranteed approximately one-fifth 

of the outstanding debt on multifamily properties. 

In the first half of 2011, Fannie Mae purchased or guaranteed approximately $306 billion in loans, 

measured by unpaid principal balance, which included approximately $36 billion in delinquent loans 

purchased from its single-family mortgage-backed securities (MBS) trusts. Excluding delinquent loans 

purchased from its MBS trusts, Fannie Mae’s purchases and guarantees enabled its lender customers to 

finance approximately 1,238,000 single-family conventional loans and loans secured by multifamily 

properties with approximately 179,000 units. 

CREDIT QUALITY 

New Single-Family Book of Business: Forty-seven percent of Fannie Mae’s single-family guaranty 

book of business as of June 30, 2011 consisted of loans it had purchased or guaranteed since the 

beginning of 2009. Its new single-family book of business has a strong overall credit profile and is 

performing well. While it is too early to know how loans in its new single-family book of business will 

ultimately perform, the company expects loans it has acquired in 2009, 2010, and the first half of 2011 

to be profitable over their lifetime, generating more fee income than credit losses and administrative 
Second-Quarter 2011 Results 4

costs. If future macroeconomic conditions turn out to be significantly more adverse than our 

expectations, these loans could become unprofitable. Conventional single-family loans added to Fannie 

Mae’s book of business since January 1, 2009 have a weighted average loan-to-value ratio at 

origination of 68 percent, and a weighted average credit score at origination of 761. For more 

information on the expected lifetime profitability of the company’s new single-family book of 

business, please refer to the discussion around Table 2 in the company’s quarterly report on Form 10-Q 

for the quarter ended June 30, 2011.

2005 – 2008 Single-Family Book of Business: The single-family credit losses the company realized 

from January 1, 2009 through June 30, 2011, combined with the amounts the company has reserved for 

single-family credit losses as of June 30, 2011, total approximately $130 billion, which includes a 

portion of the company’s fair value losses on credit impaired loans that the company deems an 

“effective reserve” for future credit losses. The vast majority of these losses were attributable to singlefamily loans the company acquired from 2005 through 2008. The company expects that future defaults 

on loans in its legacy book and the resulting charge-offs will occur over a period of years. 

The 2005 to 2008 acquisitions are becoming a smaller percentage of the company’s guaranty book of 

business, having decreased from 39 percent of its guaranty book of business as of December 31, 2010 

to 34 percent as of June 30, 2011. 

Fannie Mae’s single-family serious delinquency rate has decreased each month since February 2010. 

This decrease is primarily the result of home retention solutions, as well as foreclosure alternatives and 

completed foreclosures. The decrease also is attributable to acquisition of loans with stronger credit 

profiles since the beginning of 2009, as these loans have become an increasingly larger portion of the 

single-family guaranty book of business, resulting in fewer loans becoming seriously delinquent. The 

company expects serious delinquency rates will continue to be affected in the future by home price 

changes, changes in other macroeconomic conditions, the length of the foreclosure process, and the 

extent to which borrowers with modified loans continue to make timely payments. 

To reduce the credit losses Fannie Mae ultimately incurs on its single-family guaranty book of 

business, the company has been focusing its efforts on several strategies, including reducing defaults. 

Pursuing home retention solutions, such as loan modifications, is a key aspect of this strategy. The 

company has completed over 603,000 loan modifications since January 1, 2009. The ultimate longterm success of the company’s current modification efforts is uncertain and will be highly dependent 

on economic factors, such as unemployment rates, household wealth and income, and home prices. 

Improving servicing is another key aspect of this strategy. On June 6, 2011, Fannie Mae issued new 

standards for mortgage servicers regarding the management of delinquent loans, default prevention, 

and foreclosure time frames under FHFA’s Servicing Alignment Initiative. This initiative is a FHFAdirected effort to establish consistent policies and processes for the servicing of delinquent loans 

owned or guaranteed by Fannie Mae and Freddie Mac. The new standards, reinforced by new 

incentives and compensatory fees, require servicers to take a more consistent approach to homeowner 

communications, loan modifications and other workouts, and, when necessary, foreclosures. Servicers 

are required to implement the new servicing standards related to the management of delinquent loans 

and default prevention by no later than October 1, 2011. The new standards relating to foreclosure time 

frames were effective as of January 1, 2011. The company believes these standards will bring greater 
Second-Quarter 2011 Results 5

consistency, clarity, fairness, and efficiency to the process, help improve servicer performance, and 

hold servicers accountable for their effectiveness in assisting homeowners. 

FORECLOSURE PREVENTION 

Loan Workouts: During the second quarter of 2011, Fannie Mae completed more than 80,000 singlefamily loan workouts, including more than 59,000 home-retention solutions (modifications, repayment 

plans, and forbearances). Details of the company’s home-retention solutions and foreclosure 

alternatives include: 

 Loan modifications, which consist of permanent modifications under the Treasury 

Department’s Home Affordable Modification Program and Fannie Mae’s own modification 

options, decreased in the second quarter of 2011 to 50,336 from 51,043 in the first quarter of 

2011. These figures do not include modifications in trial periods. 

 Repayment plans/forbearances of 8,683, compared with 9,916 in the first quarter of 2011. 

 Preforeclosure sales and deeds-in-lieu of foreclosure of 21,176, compared with 17,120 in the 

first quarter of 2011. 

Homeowner Initiatives: In the second quarter of 2011, Fannie Mae continued to develop programs 

and invest in initiatives designed to help keep people in homes, assist prospective homeowners, and 

support the mortgage and housing markets overall. As of June 30, 2011, Fannie Mae had established 

nine Mortgage Help Centers across the nation to accelerate the response time for struggling borrowers 

with loans owned by Fannie Mae. In the first half of 2011, these centers helped borrowers obtain 

nearly 2,300 home retention plans. The company also uses direct mail and phone calls to encourage 

homeowners to pursue foreclosure alternatives, and also has established partnerships with counseling 

agencies in seven states across the country to provide similar services. 

FORECLOSURES AND REO 

Fannie Mae acquired 53,697 single-family real-estate owned (REO) properties, primarily through 

foreclosure, in the second quarter of 2011, compared with 53,549 in the first quarter of 2011. Fannie 

Mae disposed of 71,202 single-family REO in the second quarter of 2011, compared with 62,814 in the 

first quarter of 2011. As of June 30, 2011, the company’s inventory of single-family REO properties 

was 135,719, compared with 153,224 as of March 31, 2011. The carrying value of the company’s 

single-family REO was $12.5 billion, compared with $14.1 billion as of March 31, 2011. 

The company’s single-family foreclosure rate was 1.20 percent on an annualized basis in the second 

quarter of 2011, compared with 1.19 percent in the first quarter of 2011 and 1.52 percent in the second 

quarter of 2010. This reflects the annualized number of single-family properties acquired through 

foreclosure as a percentage of the total number of loans in Fannie Mae’s conventional single-family 

guaranty book of business. 

The changing foreclosure environment has significantly lengthened the time it takes to foreclose on a 

mortgage loan in many states, which has slowed the pace of Fannie Mae’s REO property acquisitions. 

The increase in foreclosure timelines also has increased Fannie Mae’s credit-related expenses and 

negatively affected its single-family serious delinquency rates. Fannie Mae believes these changes in 

the foreclosure environment will continue to negatively affect its foreclosure timelines, credit-related 

expenses, and single-family serious delinquency rates. Moreover, Fannie Mae believes these changes 

in the foreclosure environment will delay the recovery of the housing market because it will take 
Second-Quarter 2011 Results 6

longer to clear the housing market’s supply of distressed homes, which typically sell at a discount to 

non-distressed homes and therefore negatively affect overall home prices. 

SUMMARY OF SECOND-QUARTER 2011 RESULTS 

Fannie Mae reported a net loss of $2.9 billion for the second quarter of 2011, compared to a net loss of 

$6.5 billion in the first quarter of 2011. The company’s net loss attributable to common stockholders 

was $5.2 billion, or $(0.90) per diluted share, compared with a loss of $8.7 billion in the first quarter of 

2011, or $(1.52) per diluted share. The net worth deficit of $5.1 billion as of June 30, 2011 takes into 

account dividends paid on senior preferred stock held by Treasury. 

 

(dollars in millions, except per share 

amounts)(1) 2Q11 1Q11 Variance 2Q11 2Q10 Variance

 

Net interest income $ 4,972 $ 4,960 $ 12 $ 4,972 $ 4,207 $ 765 

Fee and other income 265 237 28 265 294 (29)

Net revenues 5,237 5,197 40 5,237 4,501 736 

Investment gains, net 171 75 96 171 23 148 

Net other-than-temporary impairments (56) (44) (12) (56) (137) 81 

Fair value gains (losses), net (1,634) 289 (1,923) (1,634) 303 (1,937)

Administrative expenses (569) (605) 36 (569) (670) 101 

Credit-related expenses(2) (6,059) (11,042) 4,983 (6,059) (4,851) (1,208)

Other non-interest expenses(3) (75) (339) 264 (75) (383) 308 

Net losses and expenses (8,222) (11,666) 3,444 (8,222) (5,715) (2,507)

Loss before federal income taxes (2,985) (6,469) 3,484 (2,985) (1,214) (1,771)

Benefit (provision) for federal income taxes 93 (2) 95 93 (9) 102 

Net loss (2,892) (6,471) 3,579 (2,892) (1,223) (1,669)

Less: Net (income) loss attributable to the 

noncontrolling interest (1) - (1) (1) 5 (6)

Net loss attributable to Fannie Mae $ (2,893) $ (6,471) $ 3,578 $ (2,893) $ (1,218) $ (1,675)

Preferred stock dividends (2,282) (2,216) (66) (2,282) (1,907) (375)

Net loss attributable to common stockholders $ (5,175) $ (8,687) $ 3,512 $ (5,175) $ (3,125) $ (2,050)

 

Diluted loss per common share $ (0.90) $ (1.52) $ 0.62 $ (0.90) $ (0.55) $ (0.35)

 

(1) Certain prior period amounts have been reclassified to conform to the current period presentation.

(2) Consists of provision for loan losses, provision for guaranty losses and foreclosed property expense (income).

(3) Consists of debt extinguishment losses, net and other expenses.

 

Net revenues were relatively flat at $5.2 billion in the second quarter of 2011. 

Credit-related expenses, which are the total provision for credit losses plus foreclosed property 

expense, were $6.1 billion in the second quarter of 2011, down from $11.0 billion in the first quarter of 

2011. The decrease in our credit-related expenses in the second quarter of 2011 was driven by (1) the 

deterioration in home prices in the first quarter of 2011, which was not present in the second quarter of 
Second-Quarter 2011 Results 7

2011 and (2) an increase in the amounts received from lenders related to our outstanding repurchase 

requests. 

Credit losses, which the company defines generally as net charge-offs plus foreclosed property 

expense, excluding the effect of certain fair-value losses, were $3.9 billion in the second quarter of 

2011, compared with $5.7 billion in the first quarter of 2011. The decline in credit losses was primarily 

due to an increase in amounts received related to outstanding repurchase requests. 

Total loss reserves, which reflect an estimate of the probable losses the company has incurred in its 

guaranty book of business, increased to $74.8 billion as of June 30, 2011, compared with $72.1 billion 

as of March 31, 2011. The total loss reserve coverage to total nonperforming loans was 36.91 percent 

as of June 30, 2011, compared with 34.66 percent and 30.85 percent as of March 31, 2011 and 

December 31, 2010, respectively. The continued stress on a broad segment of borrowers from 

persistent high levels of unemployment and underemployment and the prolonged decline in home 

prices have caused the company’s total loss reserves to remain high for the past few years. 

Net fair value losses were $1.6 billion in the second quarter of 2011, driven primarily by fair value 

losses on Fannie Mae’s derivatives due to a decline in interest rates, compared with net fair value gains 

of $289 million in the first quarter of 2011. 

NET WORTH AND U.S. TREASURY FUNDING 

The Acting Director of FHFA will request $5.1 billion of funds from Treasury on the company’s 

behalf under the terms of the senior preferred stock purchase agreement between Fannie Mae and 

Treasury to eliminate the company’s net worth deficit as of June 30, 2011. Fannie Mae’s secondquarter dividend of $2.3 billion on its senior preferred stock held by Treasury was declared by FHFA 

and paid by the company on June 30, 2011. 

In June 2011, Treasury provided to the company $8.5 billion to cure its net worth deficit as of March 

31, 2011. As a result of this draw, the aggregate liquidation preference of the senior preferred stock 

increased from $91.2 billion to $99.7 billion as of June 30, 2011. It will increase to $104.8 billion upon 

the receipt of funds from Treasury to eliminate the company’s second-quarter 2011 net worth deficit, 

which will require an annualized dividend payment of $10.5 billion. This amount exceeds the 

company’s reported annual net income for each year since its inception. 

Through June 30, 2011, Fannie Mae has paid an aggregate of $14.7 billion to Treasury in dividends on 

the senior preferred stock. 

FAIR VALUE UPDATE 

The $7.7 billion decrease in the fair value of Fannie Mae’s net assets during the first half of 2011 was 

attributable to a net decrease in the fair value due to credit-related items principally related to declining 

actual and expected home prices as well as a decrease in the estimated rate of prepayments, which 

increased the expected life of the guaranty book of business and increased expected credit losses. This 

net decrease due to credit-related items was partially offset by an increase in the fair value of the net 

portfolio attributable to the positive impact of the spread between mortgage assets and associated debt 
Second-Quarter 2011 Results 8

and derivatives. Additionally, the fair value of the company’s net assets was impacted by the receipt of 

funds from Treasury to reduce the company’s net worth deficits and payment to Treasury of dividends 

under the senior preferred stock purchase agreement. 

 

As part of Fannie Mae’s disclosure requirements with FHFA, the company discloses on a quarterly 

basis supplemental non-GAAP consolidated fair value balance sheets, reflecting the company’s assets 

and liabilities at estimated fair value. The fair value of the company’s net assets is not a measure 

defined within generally accepted accounting principles and may not be comparable to similarly titled 

measures reported by other companies. The estimated fair value of the company’s net assets is 

calculated as of a particular point in time based on its existing assets and liabilities, and does not 

incorporate other factors that may have a significant impact on its long-term fair value. As a result, the 

estimated fair value of the company’s net assets presented in its non-GAAP consolidated fair value 

balance sheets does not represent an estimate of its net realizable value, liquidation value, or its market 

value as a whole. In addition, the fair value of the company’s net assets attributable to common 

stockholders presented in its fair value balance sheet does not represent an estimate of the value it 

expects to realize from operating the company, nor what it expects to draw from Treasury under the 

terms of the senior preferred stock purchase agreement. 

For more information on the change in the company’s fair value net deficit, please refer to 

“Supplemental Non-GAAP Information — Fair Value Balance Sheets” in the company’s quarterly 

report on Form 10-Q for the quarter ended June 30, 2011. See also “Supplemental Non-GAAP 

Consolidated Fair Value Balance Sheets” and “Explanation and Reconciliation of Non-GAAP 

Measures to GAAP Measures” later in this release for a reconciliation of the company’s fair value 

balance sheets to its GAAP consolidated balance sheets. 

BUSINESS SEGMENT RESULTS 

Fannie Mae conducts its activities through three complementary businesses: its Single-Family 

business, its Multifamily business, and its Capital Markets group. The company’s Single-Family and 

Multifamily businesses work with Fannie Mae’s lender customers, who deliver mortgage loans that the 

company purchases and securitizes into Fannie Mae MBS. The Capital Markets group manages the 

company’s investment activity in mortgage-related assets, funding investments primarily with 

proceeds received from the issuance of Fannie Mae debt securities in the domestic and international 

capital markets. The Capital Markets group also provides liquidity to the mortgage market through 

short-term financing and other activities. 

Single-Family guaranty book of business was $2.88 trillion as of June 30, 2011 compared with $2.90 

trillion as of March 31, 2011. Single-Family guaranty fee income for both the first and second quarter 

of 2011 was $1.9 billion. The Single-Family business lost $5.0 billion in the second quarter of 2011, 

compared with a loss of $10.7 billion in the first quarter of 2011, due primarily to credit-related 

expenses of $5.9 billion, the vast majority of which were attributable to loans purchased or guaranteed 

from 2005 through 2008. 

Multifamily guaranty book of business was $191.5 billion as of June 30, 2011, compared with $190.6 

billion as of March 31, 2011. Multifamily recorded credit-related expenses of $126 million in the 

second quarter of 2011, compared with credit-related income of $64 million in the first quarter of 
Second-Quarter 2011 Results 9

2011. Multifamily earned $87 million in the second quarter of 2011, compared with $247 million in 

the first quarter of 2011. 

Capital Markets’ net interest income was $3.9 billion in the second quarter of 2011, compared with 

$3.7 billion for the first quarter of 2011. Fair value losses were $1.5 billion, compared with fair value 

gains of $218 million in the first quarter of 2011. The net mortgage investment portfolio balance 

decreased to $731.8 billion as of June 30, 2011, compared with $757.6 billion as of March 31, 2011, 

resulting from purchases of $32.8 billion, liquidations of $37.0 billion, and sales of $21.6 billion 

during the quarter. Capital Markets earned $2.8 billion in the second quarter of 2011, compared with 

$4.3 billion in the first quarter of 2011. 

The company provides further discussion of its financial results and condition, credit performance, fair 

value balance sheets, and other matters in its quarterly report on Form 10-Q for the quarter ended June 

30, 2011, which was filed today with the Securities and Exchange Commission. Further information 

about the company’s credit performance, the characteristics of its guaranty book of business, the 

drivers of its credit losses, its foreclosure-prevention efforts, and other measures is contained in the 

“2011 Second-Quarter Credit Supplement” on Fannie Mae’s Web site, www.fanniemae.com. 

# # # 

In this release, the company has presented a number of estimates, forecasts, expectations, and other forward-looking statements regarding the company’s 

future financial results; the profitability of its loans; the impact of successful loan modifications; FHFA’s future requests to Treasury on Fannie Mae’s 

behalf; Fannie Mae’s future serious delinquency rates, credit losses, credit-related expenses, defaults, and charge-offs; its draws from and dividends to be 

paid to Treasury; the performance and caliber of loans it has acquired and will acquire; the impact of the changing foreclosure environment; and the 

impact of Fannie Mae’s actions under FHFA’s Servicing Alignment Initiative. These estimates, forecasts, expectations, and statements are forwardlooking statements and are based on the company’s current assumptions regarding numerous factors, including assumptions about future home prices and 

the future performance of its loans. The company’s future estimates of these amounts, as well as the actual amounts, may differ materially from its current 

estimates as a result of home price changes, interest rate changes, unemployment, other macroeconomic variables, government policy matters, changes in 

generally accepted accounting principles, credit availability, social behaviors, the volume of loans it modifies, the effectiveness of its loss mitigation 

strategies, management of its real estate owned inventory and pursuit of contractual remedies, changes in the fair value of its assets and liabilities, 

impairments of its assets, the adequacy of its loss reserves, its ability to maintain a positive net worth, effects from activities the company takes to support 

the mortgage market and help homeowners, the conservatorship and its effect on the company’s business, the investment by Treasury and its effect on the 

company’s business, changes in the structure and regulation of the financial services industry, the company’s ability to access the debt markets, 

disruptions in the housing, credit, and stock markets, government investigations and litigation, the extent of the servicer foreclosure process deficiencies 

and the duration of the related foreclosure pause, and many other factors. Changes in the company’s underlying assumptions and actual outcomes, which 

could be affected by the economic environment, government policy, and many other factors, including those discussed in the “Risk Factors” sections of 

the company’s annual report on Form 10-K for the year ended December 31, 2010 and quarterly report on Form 10-Q for the quarter ended June 30, 

2011 and elsewhere in this release, could result in actual results being materially different from what is set forth in the forward-looking statements. 

Fannie Mae provides Web site addresses in its news releases solely for readers’ information. Other content or information appearing on these Web sites is 

not part of this release. 

Fannie Mae exists to expand affordable housing and bring global capital to local communities in order to serve the U.S. housing market. Fannie Mae has 

a federal charter and operates in America's secondary mortgage market to enhance the liquidity of the mortgage market by providing funds to mortgage 

bankers and other lenders so that they may lend to home buyers. Our job is to help those who house America. 
ANNEX I 

FANNIE MAE

 (In conservatorship)

Condensed Consolidated Balance Sheets— (Unaudited) 

(Dollars in millions, except share amounts) 

Second-Quarter 2011 Results 10 

 As of

 June 30, December 31, 

 2011 2010 

ASSETS

Cash and cash equivalents (includes $3 and $348, respectively, related to consolidated trusts) $ 14,274 $ 17,297 

Restricted cash (includes $33,136 and $59,619, respectively, related to consolidated trusts) 37,579 63,678 

Federal funds sold and securities purchased under agreements to resell or similar arrangements 19,500 11,751 

Investments in securities: 

 Trading, at fair value (includes $21 as of both periods related to consolidated trusts) 61,907 56,856 

 Available-for-sale, at fair value (includes $1,590 and $1,055, respectively, related to consolidated trusts) 86,616 94,392 

 Total investments in securities 148,523 151,248 

Mortgage loans: 

 Loans held for sale, at lower of cost or fair value (includes $73 and $661, respectively, related 

 to consolidated trusts) 439 915 

 Loans held for investment, at amortized cost: 

 Of Fannie Mae 386,356 407,228 

 Of consolidated trusts (includes $3,084 and $2,962, respectively, at fair value and loans pledged as collateral 

 that may be sold or repledged of $460 and $2,522, respectively) 2,610,540 2,577,133 

 Total loans held for investment 2,996,896 2,984,361 

 Allowance for loan losses (69,506) (61,556)

 Total loans held for investment, net of allowance 2,927,390 2,922,805 

 Total mortgage loans 2,927,829 2,923,720 

Accrued interest receivable, net (includes $8,683 and $8,910, respectively, related to consolidated trusts) 10,681 11,279 

Acquired property, net 13,592 16,173 

Other assets (includes $59 and $593, respectively, related to consolidated trusts) 24,134 26,826 

 Total assets $ 3,196,112 $ 3,221,972 

LIABILITIES AND EQUITY (DEFICIT)

Liabilities:

 Accrued interest payable (includes $9,584 and $9,712, respectively, related to consolidated trusts) $ 13,289 $ 13,764 

 Federal funds purchased and securities sold under agreements to repurchase - 52 

 Debt: 

 Of Fannie Mae (includes $862 and $893, respectively, at fair value) 724,799 780,044 

 Of consolidated trusts (includes $3,273 and $2,271, respectively, at fair value) 2,450,046 2,416,956 

 Other liabilities (includes $707 and $893, respectively, related to consolidated trusts) 13,065 13,673 

 Total liabilities 3,201,199 3,224,489 

Commitments and contingencies (Note 14) - - 

Fannie Mae stockholders' equity (deficit): 

 Senior preferred stock, 1,000,000 shares issued and outstanding 99,700 88,600 

 Preferred stock, 700,000,000 shares are authorized—555,374,922 and 576,868,139 shares issued 

 and outstanding, respectively 19,130 20,204 

 Common stock, no par value, no maximum authorization—1,308,762,703 and 1,270,092,708 shares 

 issued, respectively; 1,157,750,434 and 1,118,504,194 shares outstanding, respectively 687 667 

 Accumulated deficit (115,784) (102,986)

 Accumulated other comprehensive loss (1,499) (1,682)

 Treasury stock, at cost, 151,012,269 and 151,588,514 shares, respectively (7,402) (7,402)

 Total Fannie Mae stockholders’ deficit (5,168) (2,599)

Noncontrolling interest 81 82 

 Total deficit (5,087) (2,517)

Total liabilities and equity (deficit) $ 3,196,112 $ 3,221,972 

See Notes to Condensed Consolidated Financial Statements 
FANNIE MAE

(In conservatorship)

Condensed Consolidated Statements of Operations and Comprehensive Loss – (Unaudited) 

(Dollars and shares in millions, except per share amounts) 

Second-Quarter 2011 Results 11 

 For the Three For the Six

 Months Ended Months Ended

 June 30, June 30, 

 2011 2010 2011 2010 

Interest income: 

 Trading securities $ 264 $ 330 $ 548 $ 645 

 Available-for-sale securities 1,152 1,389 2,365 2,862 

 Mortgage loans (includes $31,613 and $33,682, respectively, for the 

 three months ended and $63,478 and $68,003, respectively, 

 for the six months ended related to consolidated trusts) 35,333 37,632 70,923 75,251 

 Other 25 41 53 80 

 Total interest income 36,774 39,392 73,889 78,838 

Interest expense: 

 Short-term debt (includes $2 and $3, respectively, for the three months ended and $5 

 for the six months ended, for both periods, related to consolidated trusts) 81 167 188 285 

 Long-term debt (includes $27,919 and $30,043, respectively, for the three months 

 ended and $55,771 and $61,501, respectively, for the six months 

 ended related to consolidated trusts) 31,721 35,018 63,769 71,557 

 Total interest expense 31,802 35,185 63,957 71,842 

Net interest income 4,972 4,207 9,932 6,996 

Provision for loan losses (5,802) (4,295) (16,389) (16,234)

Net interest loss after provision for loan losses (830) (88) (6,457) (9,238)

Investment gains, net 171 23 246 189 

Other-than-temporary impairments (28) (48) (85) (234)

Noncredit portion of other-than-temporary impairments recognized in other 

 comprehensive income (28) (89) (15) (139)

Net other-than-temporary impairments (56) (137) (100) (373)

Fair value gains (losses), net (1,634) 303 (1,345) (1,402)

Debt extinguishment losses, net (43) (159) (30) (283)

Fee and other income 265 294 502 527 

 Non-interest income (loss) (1,297) 324 (727) (1,342)

Administrative expenses: 

 Salaries and employee benefits 310 324 630 648 

 Professional services 169 260 358 454 

 Occupancy expenses 43 40 85 81 

 Other administrative expenses 47 46 101 92 

 Total administrative expenses 569 670 1,174 1,275 

Provision for guaranty losses 735 69 702 33 

Foreclosed property expense (income) (478) 487 10 468 

Other expenses 32 224 384 454 

 Total expenses 858 1,450 2,270 2,230 

Loss before federal income taxes (2,985) (1,214) (9,454) (12,810)

Provision (benefit) for federal income taxes (93) 9 (91) (58)

Net loss (2,892) (1,223) (9,363) (12,752)

Other comprehensive (loss) income: 

 Changes in unrealized losses on available-for-sale securities, net of 

 reclassification adjustments and taxes (1) 1,667 178 3,037 

 Other 3 3 5 5 

 Total other comprehensive income 2 1,670 183 3,042 

Total comprehensive (loss) income (2,890) 447 (9,180) (9,710)

 Less: Comprehensive (income) loss attributable to the noncontrolling interest (1) 5 (1) 4 

Total comprehensive (loss) income attributable to Fannie Mae $ (2,891) $ 452 $ (9,181) $ (9,706)

 

Net loss $ (2,892) $ (1,223) $ (9,363) $ (12,752)

 Less: Net (income) loss attributable to the noncontrolling interest (1) 5 (1) 4 

Net loss attributable to Fannie Mae (2,893) (1,218) (9,364) (12,748)

Preferred stock dividends (2,282) (1,907) (4,498) (3,434)

Net loss attributable to common stockholders $ (5,175) $ (3,125) $ (13,862) $ (16,182)

 

Loss per share - Basic and Diluted $ (0.90) $ (0.55) $ (2.43) $ (2.84)

Weighted-average common shares outstanding - Basic and Diluted 5,730 5,694 5,714 5,693 

See Notes to Condensed Consolidated Financial Statements 
FANNIE MAE

(In conservatorship)

Condensed Consolidated Statements of Cash Flows – (Unaudited)

(Dollars in millions) 

Second-Quarter 2011 Results 12 

 For the Six Months 

 Ended June 30, 

 2011 2010 

 

Net cash used in operating activities $ (2,095) $ (47,133) 

Cash flows provided by investing activities: 

 Purchases of trading securities held for investment (545) (7,887) 

 Proceeds from maturities and paydowns of trading securities held for investment 1,051 1,398 

 Proceeds from sales of trading securities held for investment 516 20,442 

 Purchases of available-for-sale securities (44) (142) 

 Proceeds from maturities and paydowns of available-for-sale securities 6,933 9,022 

 Proceeds from sales of available-for-sale securities 1,850 5,949 

 Purchases of loans held for investment (26,000) (25,743) 

 Proceeds from repayments of loans held for investment of Fannie Mae 11,722 9,188 

 Proceeds from repayments of loans held for investment of consolidated trusts 226,210 219,380 

 Net change in restricted cash 26,099 9,798 

 Advances to lenders (27,990) (23,131) 

 Proceeds from disposition of acquired property and preforeclosure sales 24,142 17,693 

 Net change in federal funds sold and securities purchased under agreements to resell 

 or similar agreements (7,749) 15,618 

 Other, net (33) (627) 

Net cash provided by investing activities 236,162 250,958 

Cash flows used in financing activities: 

 Proceeds from issuance of debt of Fannie Mae 345,028 592,508 

 Payments to redeem debt of Fannie Mae (401,125) (519,120) 

 Proceeds from issuance of debt of consolidated trusts 117,760 135,809 

 Payments to redeem debt of consolidated trusts (305,465) (412,359) 

 Payments of cash dividends on senior preferred stock to Treasury (4,497) (3,436) 

 Proceeds from senior preferred stock purchase agreement with Treasury 11,100 23,700 

 Net change in federal funds purchased and securities sold under agreements to repurchase - 142 

 Other, net 109 (37) 

Net cash used in financing activities (237,090) (182,793) 

Net (decrease) increase in cash and cash equivalents (3,023) 21,032 

Cash and cash equivalents at beginning of period 17,297 6,812 

Cash and cash equivalents at end of period $ 14,274 $ 27,844 

Cash paid during the period for interest $ 65,710 $ 73,272 

 

 

 

See Notes to Condensed Consolidated Financial Statements 
 Second-Quarter 2011 Results 13 

Supplemental Non-GAAP Consolidated Fair Value Balance Sheets 

 As of June 30, 2011 As of December 31, 2010 

 GAAP GAAP 

 Carrying Fair Value Estimated Carrying Fair Value Estimated 

 Value Adjustment(1) Fair Value Value Adjustment(1) Fair Value 

 (Dollars in millions) 

Assets: 

Cash and cash equivalents $ 51,853 $ - $ 51,853 $ 80,975 $ - $ 80,975 

Federal funds sold and securities purchased 

under agreements to resell or similar 

arrangements 19,500 - 19,500 11,751 - 11,751 

Trading securities 61,907 - 61,907 56,856 - 56,856 

Available-for-sale securities 86,616 - 86,616 94,392 - 94,392 

Mortgage loans: 

Mortgage loans held for sale 439 - 439 915 - 915 

Mortgage loans held for investment, net of 

 allowance for loan losses: 

 Of Fannie Mae 330,390 (30,847) 299,543 358,698 (39,331) 319,367 

 Of consolidated trusts 2,597,000 42,555 (2) 2,639,555 (3) 2,564,107 46,038 (2) 2,610,145 (3) 

Total mortgage loans 2,927,829 11,708 2,939,537 (4) 2,923,720 6,707 2,930,427 (4) 

Advances to lenders 3,829 (188) 3,641 (5) (6) 7,215 (225) 6,990 (5) (6) 

Derivative assets at fair value 668 - 668 (5) (6) 1,137 - 1,137 (5) (6) 

Guaranty assets and buy-ups, net 483 446 929 (5) (6) 458 356 814 (5) (6) 

Total financial assets 3,152,685 11,966 3,164,651 (7) 3,176,504 6,838 3,183,342 (7) 

Credit enhancements 471 2,958 3,429 (5) (6) 479 3,286 3,765 (5) (6) 

Other assets 42,956 (267) 42,689 (5) (6) 44,989 (261) 44,728 (5) (6) 

Total assets $ 3,196,112 $ 14,657 $ 3,210,769 $ 3,221,972 $ 9,863 $ 3,231,835 

Liabilities: 

Federal funds purchased and securities sold 

under agreements to repurchase $ - $ - $ - $ 52 $ (1) $ 51 

Short-term debt: 

 Of Fannie Mae 162,005 36 162,041 151,884 90 151,974 

 Of consolidated trusts 5,193 1 5,194 5,359 - 5,359 

Long-term debt: 

 Of Fannie Mae 562,794 (8) 22,604 585,398 628,160 (8) 21,524 649,684 

 Of consolidated trusts 2,444,853 (8) 113,038 (2) 2,557,891 2,411,597 (8) 103,332 (2) 2,514,929 

Derivative liabilities at fair value 592 - 592 (9) (10) 1,715 - 1,715 (9) (10) 

Guaranty obligations 778 2,922 3,700 (9) (10) 769 3,085 3,854 (9) (10) 

Total financial liabilities 3,176,215 138,601 3,314,816 (7) 3,199,536 128,030 3,327,566 (7) 

Other liabilities 24,984 (1,102) 23,882 (9) (10) 24,953 (472) 24,481 (9) (10) 

Total liabilities 3,201,199 137,499 3,338,698 3,224,489 127,558 3,352,047 

Equity (deficit): 

Fannie Mae stockholders' equity (deficit): 

Senior preferred(11) 99,700 - 99,700 88,600 - 88,600 

Preferred 19,130 (17,593) 1,537 20,204 (19,829) 375 

Common (123,998) (105,249) (229,247) (111,403) (97,866) (209,269) 

Total Fannie Mae stockholders' 

 

deficit/non-GAAP fair value of net 

assets $ (5,168) $ (122,842) $ (128,010) $ (2,599) $ (117,695) $ (120,294) 

Noncontrolling interests 81 - 81 82 - 82 

Total deficit (5,087) (122,842) (127,929) (2,517) (117,695) (120,212) 

Total liabilities and equity (deficit) $ 3,196,112 $ 14,657 $ 3,210,769 $ 3,221,972 $ 9,863 $ 3,231,835 

See Explanation and Reconciliation of Non-GAAP Measures to GAAP Measures 
 Second-Quarter 2011 Results 14 

Explanation and Reconciliation of Non-GAAP Measures to GAAP Measures

(1) Each of the amounts listed as a “fair value adjustment” represents the difference between the carrying value included in our 

GAAP condensed consolidated balance sheets and our best judgment of the estimated fair value of the listed item. 

(2) Fair value exceeds carrying value of consolidated loans and consolidated debt as a significant portion of these were 

consolidated at unpaid principal balance as of January 1, 2010, upon adoption of accounting standards on transfers of 

financial assets and consolidation of variable interest entities (“VIEs”). Also impacting the difference between fair value and

carrying value of the consolidated loans is the credit component included in consolidated loans, which has no 

corresponding impact on the consolidated debt. 

(3) Includes certain mortgage loans that we elected to report at fair value in our GAAP condensed consolidated balance sheets of 

$3.1 billion and $3.0 billion as of June 30, 2011 and December 31, 2010, respectively. 

(4) Performing loans had both a fair value and an unpaid principal balance of $2.8 trillion as of June 30, 2011 compared with a 

fair value of $2.8 trillion and an unpaid principal balance of $2.7 trillion as of December 31, 2010. Nonperforming loans, 

which include loans that are delinquent by one or more payments, had a fair value of $139.7 billion and an unpaid principal 

balance of $247.3 billion as of June 30, 2011 compared with a fair value of $168.5 billion and an unpaid principal balance 

of $287.4 billion as of December 31, 2010. See "Note 13, Fair Value" for additional information on valuation techniques for 

performing and nonperforming loans. 

(5) The following line items: (a) Advances to lenders; (b) Derivative assets at fair value; (c) Guaranty assets and buy-ups, net; 

(d) Credit enhancements; and (e) Other assets, together consist of the following assets presented in our GAAP condensed 

consolidated balance sheets: (a) Accrued interest receivable, net; (b) Acquired property, net; and (c) Other assets. 

(6) “Other assets” include the following GAAP condensed consolidated balance sheets line items: (a) Accrued interest 

receivable, net and (b) Acquired property, net. The carrying value of these items in our GAAP condensed consolidated 

balance sheets totaled $24.3 billion and $27.5 billion as of June 30, 2011 and December 31, 2010, respectively. “Other 

assets” in our GAAP condensed consolidated balance sheets include the following: (a) Advances to Lenders; (b) Derivative 

assets at fair value; (c) Guaranty assets and buy-ups, net; and (d) Credit enhancements. The carrying value of these items 

totaled $5.5 billion and $9.3 billion as of June 30, 2011 and December 31, 2010, respectively. 

(7) We determined the estimated fair value of these financial instruments in accordance with the fair value accounting standard 

as described in “Note 13, Fair Value.” 

(8) Includes certain long-term debt instruments that we elected to report at fair value in our GAAP condensed consolidated 

balance sheets of $4.1 billion and $3.2 billion as of June 30, 2011 and December 31, 2010, respectively. 

(9) The following line items: (a) Derivative liabilities at fair value; (b) Guaranty obligations; and (c) Other liabilities, consist of 

the following liabilities presented in our GAAP condensed consolidated balance sheets: (a) Accrued interest payable and 

(b) Other liabilities. 

(10) “Other liabilities” include Accrued interest payable in our GAAP condensed consolidated balance sheets. The carrying value 

of this item in our GAAP condensed consolidated balance sheets totaled $13.3 billion and $13.8 billion as of June 30, 2011 

and December 31, 2010, respectively. We assume that certain other liabilities, such as deferred revenues, have no fair value. 

Although we report the “Reserve for guaranty losses” as part of “Other liabilities” in our GAAP condensed consolidated 

balance sheets, it is incorporated into and reported as part of the fair value of our guaranty obligations in our non-GAAP 

supplemental consolidated fair value balance sheets. “Other liabilities” in our GAAP condensed consolidated balance sheets 

include the following: (a) Derivative liabilities at fair value and (b) Guaranty obligations. The carrying value of these items

totaled $1.4 billion and $2.5 billion as of June 30, 2011 and December 31, 2010, respectively. 

(11) The amount included in “estimated fair value” of the senior preferred stock is the liquidation preference, which is the same 

as the GAAP carrying value, and does not reflect fair value.