Fannie Mae 2007 Annual Report Download - page 260

•Employee Stock Ownership Plan—The plan was amended to freeze participation in the Plan as of
December 31, 2007 and to provide that no contributions subsequent to the 2008 contribution for 2007 will
be made to this plan.
•Postretirement Health Care Plan—We will continue to subsidize premium costs for medical coverage for
employees who meet the age and service requirements and who retire after December 31, 2007, but the
subsidy amount will be frozen at the 2008 dollar amount with no subsequent increases in our contribution.
This change in plan does not apply to employees who retire after December 31, 2007 under the voluntary
retirement window program. Employees hired after December 31, 2007 will receive access to our retiree
medical plan, when eligible, but they will not qualify for the subsidy.
15. Segment Reporting
Our three reportable segments are: Single-Family, HCD and Capital Markets. We use these three segments to
generate revenue and manage business risk, and each segment is based on the type of business activities it
performs. These activities are discussed below.
Description of Business Segments
Single-Family. Our Single-Family segment works with our lender customers to securitize single-family
mortgage loans into Fannie Mae MBS and to facilitate the purchase of single-family mortgage loans for our
mortgage portfolio. Our Single-Family segment has responsibility for managing our credit risk exposure
relating to the single-family Fannie Mae MBS held by third parties (such as lenders, depositories and global
investors), as well as the single-family mortgage loans and single-family Fannie Mae MBS held in our
mortgage portfolio. Our Single-Family segment also has responsibility for pricing the credit risk of the
single-family mortgage loans we purchase for our mortgage portfolio. Revenues in the segment are derived
primarily from (i) the guaranty fees the segment receives as compensation for assuming the credit risk on the
mortgage loans underlying single-family Fannie Mae MBS and on the single-family mortgage loans held in
our portfolio and (ii) trust management income, which is a fee we earn derived from interest earned on cash
flows between the date of remittance of mortgage payments to us from servicers and the date of distribution of
these payments to MBS certificateholders, commonly referred to as float income. The primary source of profit
for the Single-Family segment is the difference between the guaranty fees earned and the costs of providing
this service, including credit-related losses.
Housing and Community Development. Our HCD segment helps to expand the supply of affordable and
market-rate rental housing in the United States primarily by: (i) working with our lender customers to
securitize multifamily mortgage loans into Fannie Mae MBS and to facilitate the purchase of multifamily
mortgage loans for our mortgage portfolio; and (ii) making investments in rental and for-sale housing projects,
including investments in rental housing that is eligible for federal low-income housing tax credits. Our HCD
segment has responsibility for managing our credit risk exposure relating to the multifamily Fannie Mae MBS
held by third parties, as well as the multifamily mortgage loans and multifamily Fannie Mae MBS held in our
mortgage portfolio. Revenues in the segment are derived from a variety of sources, including the guaranty fees
the segment receives as compensation for assuming the credit risk on the mortgage 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
housing projects eligible for the low-income housing tax credit and other investments 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 and losses from operations and the eventual sale of the assets. While the HCD
guaranty business is similar to our Single-Family business, neither the economic return nor the nature of the
credit risk is similar to that of Single-Family.
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FANNIE MAE
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)