Fannie Mae 2005 Annual Report Download - page 28

under New York Stock Exchange standards. Because we have not held an annual meeting of stockholders
since 2004, some of our directors are serving terms that have exceeded one year. In accordance with
OFHEO regulation, we have elected to follow the applicable corporate governance practices and
procedures of the Delaware General Corporation Law, as it may be amended from time to time.
•Other Limitations and Requirements. Under the Charter Act, we may not originate mortgage loans or
advance funds to a mortgage seller on an interim basis, using mortgage loans as collateral, pending the
sale of the mortgages in the secondary market. In addition, we may only purchase or securitize mortgages
originated in the United States, including the District of Columbia, the Commonwealth of Puerto Rico,
and the territories and possessions of the United States.
Regulation and Oversight of Our Activities
As a federally chartered corporation, we are subject to Congressional legislation and oversight and are
regulated by HUD and OFHEO. In addition, we are subject to regulation by the U.S. Department of the
Treasury and by the SEC. The Government Accountability Office is authorized to audit our programs,
activities, receipts, expenditures and financial transactions.
HUD Regulation
Program Approval
HUD has general regulatory authority to promulgate rules and regulations to carry out the purposes of the
Charter Act, excluding authority over matters granted exclusively to OFHEO. We are required under the
Charter Act to obtain approval of the Secretary of HUD for any new conventional mortgage program that is
significantly different from those approved or engaged in prior to the 1992 amendment of the Charter Act
through enactment of the Federal Housing Enterprises Financial Safety and Soundness Act of 1992 (the “1992
Act”). The Secretary must approve any new program unless the Charter Act does not authorize it or the
Secretary finds that it is not in the public interest.
On June 13, 2006, HUD announced that it would conduct a review of our investments and holdings, including
certain equity and debt investments classified in our consolidated financial statements as “other assets/other
liabilities,” to determine whether our investment activities are consistent with our charter authority. We are
fully cooperating with this review, but cannot predict the outcome of this review or whether it may require us
to modify our investment approach or restrict our current business activities.
Housing Goals
The Secretary of HUD establishes annual housing goals pursuant to the 1992 Act for housing (1) for low- and
moderate-income families, (2) in HUD-defined underserved areas, including central cities and rural areas, and
(3) for low-income families in low-income areas and for very low-income families, which is referred to as
“special affordable housing.” Each of these three goals is set as a percentage of the total number of dwelling
units financed by eligible mortgage loan purchases. A dwelling unit may be counted in more than one category
of goals. Included in eligible mortgage loan purchases are loans underlying our Fannie Mae MBS issuances,
subordinate mortgage loans and refinanced mortgage loans. Several activities are excluded from eligible
mortgage loan purchases, such as most purchases of non-conventional mortgage loans, equity investments
(even if they facilitate low-income housing), mortgage loans secured by second homes and commitments to
purchase or securitize mortgage loans at a later date. In addition, beginning in 2005, HUD also established
three home purchase mortgage subgoals that measure our purchase or securitization of loans by the number of
loans (not dwelling units) providing purchase money for owner-occupied single-family housing in metropolitan
areas. We also have a subgoal for multifamily special affordable housing that is expressed as a dollar amount.
Each year, we are required to submit an annual report on our performance in meeting our housing goals. We
deliver the report to the Secretary of HUD as well as to the House Committee on Financial Services and the
Senate Committee on Banking, Housing and Urban Affairs.
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