Fannie Mae 2010 Annual Report Download - page 137

In addition to funding we obtain from the issuance of debt securities, our other sources of cash include:
• principal and interest payments received on mortgage loans, mortgage-related securities and non-mortgage
investments we own;
• proceeds from the sale of mortgage-related securities, mortgage loans and non-mortgage assets, including
proceeds from the sales of foreclosed real estate assets;
• funds from Treasury pursuant to the senior preferred stock purchase agreement;
• borrowings under secured and unsecured intraday funding lines of credit we have established with several
large financial institutions;
• guaranty fees received on Fannie Mae MBS;
• borrowings against mortgage-related securities and other investment securities we hold pursuant to
repurchase agreements and loan agreements;
• payments received from mortgage insurance counterparties; and
• net receipts on derivative instruments.
Our primary funding needs include:
• the repayment of matured, redeemed and repurchased debt;
• the purchase of mortgage loans (including delinquent loans from MBS trusts), mortgage-related securities
and other investments;
• interest payments on outstanding debt;
• dividend payments made to Treasury pursuant to the senior preferred stock purchase agreement;
• net payments on derivative instruments;
• the pledging of collateral under derivative instruments;
• administrative expenses; and
• losses incurred in connection with our Fannie Mae MBS guaranty obligations.
An increased proportion of our funding needs during 2010, compared with 2009, came from: (1) purchasing
delinquent loans from MBS trusts; (2) an increase in the redemption of callable debt; and (3) increased
dividend payments to Treasury under the senior preferred stock purchase agreement. As we draw more funds
pursuant to the senior preferred stock purchase agreement, we expect our cash dividend payments to Treasury
will continue to increase in future periods if we continue to pay the dividend on a quarterly basis, rather than
allowing the dividend to accrue at an increased rate of 12% and be added to the liquidation preference of the
senior preferred stock.
Debt Funding
Effective January 1, 2010, we adopted new accounting standards that resulted in the consolidation of the
substantial majority of our MBS trusts and recognized the underlying assets and debt of these trusts in our
consolidated balance sheet. Debt from consolidations represents our liability to third-party beneficial interest
holders of MBS that we guarantee when we have included the assets of a corresponding trust in our
consolidated balance sheets. Despite the increase in debt recognized in our consolidated balance sheets due to
consolidations, the adoption of the new accounting standards did not change our exposure to liquidity risk. We
separately present the debt from consolidations (“debt of consolidated trusts”) and the debt issued by us (“debt
of Fannie Mae”) in our consolidated balance sheets and in the debt tables below. Our discussion regarding
debt funding in this section focuses on the debt of Fannie Mae.
132