Fannie Mae 2007 Annual Report Download - page 8

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6
FANNIE MAE
ROBERT J. LEVIN, EXECUTIVE VICE PRESIDENT AND CHIEF BUSINESS OFFICER AND
MICHAEL J. WILLIAMS, EXECUTIVE VICE PRESIDENT AND CHIEF OPERATING OFFICER
Net, we posted a disappointing
$2.1 billion loss for the year — the fi rst
full-year loss for Fannie Mae in more
than 20 years.
There were some positive notes. We
closed the year with more core capital
than we began — $45.4 billion versus
$42.0 billion. Our $8.9 billion in
preferred stock issuances in the second
half of 2007 helped us fuel the growth
of our guaranty business and helped us
manage the drain on capital from rising
credit-related expenses and derivatives
losses. We completed our internal
controls and regulatory remediation
and issued current fi nancial statements,
putting the past behind us. We cut
more than $400 million in admin-
istrative expenses, twice our goal.
Fannie Mae won major new accounts
with large customers, and stood by
longstanding partners as market shocks
hit them. Together with our customers
and partners, we provided mortgage
nancing to more than 2.4 million
low- and moderate-income households
— 340,000 more than in 2006.
The company provided record levels
of support for multifamily housing,
with $59.9 billion in acquisitions.
Lastly, we helped more than 100,000
homeowners avoid foreclosure or
refi nance out of subprime mortgages,
and worked with counseling
organizations nationwide so that
troubled consumers could fi nd a
lifeline.
All in all, it was a year of progress
in our operations and growth in our
business. But these positives were
more than offset by starkly negative
market conditions.
Looking Ahead in 2008
In 2008 the market will remain
challenging. We expect rising credit
costs as the housing correction and its
accompanying symptoms continue to
play out.
We believe home prices will continue
to fall in 2008, and falling home
prices, as you have read in this letter,
are a principal driver of credit losses.
In some markets, prices are stable.
But the severe correction in Florida,
Arizona, Nevada, California and other
epicenters of the pre-2007 speculation-
driven housing boom has made the
national picture look bleak. Another
wave of foreclosures is expected as
homeowners who took on adjustable-
rate subprime loans with low initial
Fannie Mae won major new accounts
with large customers, and stood by
longstanding partners as market shocks
hit them.