Fannie Mae 2005 Annual Report Download - page 163

OFHEO announced on November 1, 2005 that we had achieved a 30% surplus over minimum capital
requirement at September 30, 2005. In addition to generating capital through retained earnings, we achieved
this capital surplus by taking the following actions pursuant to our capital restoration plan:
• significantly reducing the size of our investment portfolio, through both normal mortgage liquidations and
selected sales of mortgage assets, which reduced the amount of assets in the consolidated balance sheets
and thereby reduced our overall minimum capital requirements;
• issuing $5.0 billion in non-cumulative preferred stock in December 2004;
• reducing our quarterly dividend rate by 50% on January 18, 2005, from $0.52 per share of common stock
to $0.26 per share of common stock; and
• canceling our plans to build major new corporate facilities in Southwest Washington, DC and undertaking
other cost-cutting efforts.
Under our May 23, 2006 consent order with OFHEO, we agreed to continue our commitment to maintain a
30% capital surplus over our statutory minimum capital requirement until such time as the Director of OFHEO
determines that the requirement should be modified or allowed to expire, considering factors such as resolution
of accounting and internal control issues. OFHEO actively monitors our compliance with the capital restoration
plan. We believe that we continue to be in compliance with the plan as of the date of this filing.
Statutory Critical Capital Requirement
Our critical capital requirement is the amount of core capital below which we would be classified as critically
undercapitalized and generally would be required to be placed in conservatorship. Our critical capital
requirement is generally equal to the sum of:
• 1.25% of on-balance sheet assets;
• 0.25% of the unpaid principal balance of outstanding Fannie Mae MBS held by third parties; and
• up to 0.25% of other off-balance sheet obligations.
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