Fannie Mae 2010 Annual Report Download - page 14

single-family mortgage-related securities of 49.0% during the fourth quarter of 2010 and 44.0% for the full
year. In comparison, our estimated market share of new single-family mortgage-related securities issuances
was 44.5% in the third quarter of 2010 and 38.9% in the fourth quarter of 2009. If the Federal Housing
Administration (“FHA”) continues to be the lower-cost option for some consumers, and in some cases the only
option, for loans with higher loan-to-value (“LTV”) ratios, our market share could be adversely impacted if the
market shifts away from refinance activity, which is likely to occur when interest rates rise. In the multifamily
market, we remain a constant source of liquidity, guaranteeing an estimated 20.1% of multifamily mortgage
debt outstanding as of September 30, 2010, the latest date for which the Federal Reserve has estimated
mortgage debt outstanding for multifamily residences.
Our Expectations Regarding Profitability, the Single-Family Loans We Acquired Beginning in 2009, and
Credit Losses
In this section we discuss our expectations regarding the profitability, performance and credit profile of the
single-family loans we have purchased or guaranteed since the beginning of 2009, shortly after entering into
conservatorship in late 2008, and our expected single-family credit losses. We refer to loans we have
purchased or guaranteed as loans that we have “acquired.”
• Since the beginning of 2009, we have acquired single-family loans that have a strong overall credit profile
and are performing well. We expect these loans will be profitable, by which we mean they will generate
more fee income than credit losses and administrative costs, as we discuss in “Expected Profitability of
Our Single-Family Acquisitions” below. For further information, see “Table 2: Single-Family Serious
Delinquency Rates by Year of Acquisition” and “Table 3: Credit Profile of Single-Family Conventional
Loans Acquired.”
• The vast majority of our realized credit losses in 2009 and 2010 on single-family loans are attributable to
single-family loans that we purchased or guaranteed from 2005 through 2008. While these loans will give
rise to additional credit losses that we have not yet realized, we estimate that we have reserved for the
substantial majority of the remaining losses.
Factors that Could Cause Actual Results to be Materially Different from Our Estimates and Expectations
In this discussion, we present a number of estimates and expectations regarding the profitability of single-
family loans we have acquired, our single-family credit losses, and our draws from and dividends to be paid to
Treasury. These estimates and expectations are forward-looking statements based on our current assumptions
regarding numerous factors, including future home prices and the future performance of our loans. Our future
estimates of these amounts, as well as the actual amounts, may differ materially from our current estimates
and expectations as a result of home price changes, changes in interest rates, unemployment, direct and
indirect consequences resulting from failures by servicers to follow proper procedures in the administration of
foreclosure cases, government policy, changes in generally accepted accounting principles (“GAAP”), credit
availability, social behaviors, other macro-economic variables, the volume of loans we modify, the
effectiveness of our loss mitigation strategies, management of our REO inventory and pursuit of contractual
remedies, changes in the fair value of our assets and liabilities, impairments of our assets, or many other
factors, including those discussed in “Risk Factors” and “MD&A — Forward-Looking Statements.” For
example, if the economy were to enter a deep recession during this time period, we would expect actual
outcomes to differ substantially from our current expectations.
Expected Profitability of Our Single-Family Acquisitions
While it is too early to know how loans we have acquired since January 1, 2009 will ultimately perform,
given their strong credit risk profile, low levels of payment delinquencies shortly after their acquisition, and
low serious delinquency rate, we expect that, over their lifecycle, these loans will be profitable. Table 1
provides information about whether we expect loans we acquired in 1991 through 2010 to be profitable, and
the percentage of our single-family guaranty book of business represented by these loans as of December 31,
2010. The expectations reflected in Table 1 are based on the credit risk profile of the loans we have acquired,
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