Fannie Mae 2006 Annual Report Download - page 20

loans underlying multifamily Fannie Mae MBS and on the multifamily mortgage loans held in our
portfolio, transaction fees associated with the multifamily business and bond credit enhancement fees. In
addition, HCD’s investments in rental housing projects eligible for the federal low-income housing tax
credit generate both tax credits and net operating losses that reduce our federal income tax liability. Other
investments in rental and for-sale housing generate revenue from operations and the eventual sale of the
assets.
• Our Capital Markets group manages our investment activity in mortgage loans and mortgage-related
securities, and has responsibility for managing our assets and liabilities and our liquidity and capital
positions. Through the issuance of debt securities in the capital markets, our Capital Markets group
attracts capital from investors globally to finance housing in the U.S. In addition, our Capital Markets
group increases the liquidity of the mortgage market by maintaining a constant presence as an active
investor in mortgage assets and in particular supports the liquidity and value of Fannie Mae MBS in a
variety of market conditions. Our Capital Markets group has responsibility for managing the credit risk of
the non-Fannie Mae mortgage-related securities in our portfolio and for managing our interest rate risk.
Our Capital Markets group generates income primarily from the difference, or spread, between the yield
on the mortgage assets we own and the cost of the debt we issue in the global capital markets to fund
these assets.
The table below displays net revenues, net income and total assets for each of our business segments for each
of the three years during the period ended December 31, 2006.
Business Segment Summary Financial Information
2006 2005 2004
For the Year Ended December 31,
(Dollars in millions)
Net revenues:
(1)
Single-Family Credit Guaranty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 6,073 $ 5,585 $ 5,007
Housing and Community Development . . . . . . . . . . . . . . . . . . . . . . . . . . . 510 607 527
Capital Markets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,202 10,764 16,666
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $11,785 $16,956 $22,200
Net income:
Single-Family Credit Guaranty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,044 $ 2,623 $ 2,396
Housing and Community Development . . . . . . . . . . . . . . . . . . . . . . . . . . . 338 503 425
Capital Markets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,677 3,221 2,146
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 4,059 $ 6,347 $ 4,967
2006 2005
As of December 31,
Total assets:
Single-Family Credit Guaranty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 15,777 $ 14,450
Housing and Community Development . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,100 12,075
Capital Markets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 814,059 807,643
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $843,936 $834,168
(1)
Includes net interest income, guaranty fee income, and fee and other income.
We use various management methodologies to allocate certain balance sheet and income statement line items,
including capital and administrative costs, and to apply guaranty fees for managing credit risk, to the
responsible operating segment. For a description of our allocation methodologies, see “Notes to Consolidated
Financial Statements—Note 15, Segment Reporting.” For further information on the results of operations and
assets of our business segments, see “Item 7—MD&A—Business Segment Results.”
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