Fannie Mae 2004 Annual Report Download - page 358

22. Subsequent Events
Hurricanes Katrina and Rita
In August and September 2005, Hurricanes Katrina and Rita damaged the Gulf Coast. Our exposure to losses
as a result of Hurricanes Katrina and Rita arises primarily from our guaranty of MBS secured by property in
the affected areas, our portfolio holdings of mortgages and mortgage-related securities secured by property in
the affected areas, and real estate owned in the affected areas. We continue to evaluate the impact to the
consolidated financial statements as a result of the damage.
Additionally, we instituted mortgage relief provisions designed to meet the individual needs of borrowers
facing hardship as a result of the hurricanes. Our disaster relief provisions allow lenders to help borrowers in
several ways, including suspending or reducing mortgage payments for up to 18 months or more and
permitting repayment of the amounts deferred over time, consistent with provisions included in the trust.
Regulatory Capital
On September 1, 2005, we entered into an agreement with OFHEO under which they regulated certain
financial risk management and disclosure commitments designed to enhance market discipline, liquidity and
capital. In addition, every six months, commencing January 1, 2006, we are required to submit, and have
submitted, to OFHEO a subordinated debt management plan that includes any issuance plans for the upcoming
six months, which is subject to OFHEO’s approval, and required to comply with our commitment regarding
qualifying subordinated debt issuance requirements.
On May 23, 2006, we agreed to the issuance of a consent order by OFHEO, which superseded and terminated
the September 27, 2004 OFHEO agreement and the March 8, 2005 OFHEO agreement. See “Note 16,
Regulatory Capital Requirements” for additional information.
Stock Repurchase Program
On May 9, 2006, we announced a stock repurchase program under which we may repurchase up to
$100 million of Fannie Mae shares from non-officer employees. Prior to the creation of this employee stock
repurchase program, we repurchased shares in a limited number of instances relating to financial hardship as
well as reacquired common stock from employees as payment for the cost of option exercises and tax
withholding.
Final OFHEO Report and Settlements with OFHEO and SEC
On May 23, 2006, OFHEO issued its final report on its special examination of our accounting policies,
internal controls, financial reporting, corporate governance, and other safety and soundness matters. Concur-
rently with OFHEO’s release of its final report, we entered into comprehensive settlements that resolved open
matters with OFHEO and with the SEC. As part of the settlements, we agreed to pay $400 million civil
penalty to the U.S. government, with $50 million payable to the U.S. Treasury and $350 million payable to
the SEC for distribution to shareholders pursuant to the Fair Funds for Investors provision of the Sarbanes-
Oxley Act of 2002, both of which were paid in 2006. See “Note 20, Commitments and Contingencies” for
additional information.
Increase in Common Stock Dividend
On December 6, 2006, the Board of Directors increased the quarterly common stock dividend to $0.40 per
share. The Board determined that the increased dividend would be effective beginning in the fourth quarter of
2006, and therefore declared a special common stock dividend of $0.14 per share, payable on December 29,
2006, to stockholders of record on December 15, 2006. This special dividend of $0.14, combined with our
previously declared dividend of $0.26 paid on November 27, 2006, will result in a total common stock
dividend of $0.40 per share for the fourth quarter of 2006.
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FANNIE MAE
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)