Fannie Mae 2008 Annual Report Download - page 28

In general, the liability of the conservator for the disaffirmance or repudiation of any contract is limited to
actual direct compensatory damages determined as of September 6, 2008, which is the date we were placed
into conservatorship. The liability of the conservator for the disaffirmance or repudiation of a qualified
financial contract is limited to actual direct compensatory damages (which include normal and reasonable
costs of cover or other reasonable measures of damages utilized in the industries for such contract and
agreement claims) determined as of the date of the disaffirmance or repudiation. If the conservator disaffirms
or repudiates any lease to or from us, or any contract for the sale of real property, the Regulatory Reform Act
specifies the liability of the conservator.
Security Interests Protected; Exercise of Rights Under Qualified Financial Contracts
Notwithstanding the conservator’s powers described above, the conservator must recognize legally enforceable
or perfected security interests, except where such an interest is taken in contemplation of our insolvency or
with the intent to hinder, delay or defraud us or our creditors. In addition, the Regulatory Reform Act provides
that no person will be stayed or prohibited from exercising specified rights in connection with qualified
financial contracts, including termination or acceleration (other than solely by reason of, or incidental to, the
appointment of the conservator), rights of offset, and rights under any security agreement or arrangement or
other credit enhancement relating to such contract. The term “qualified financial contract” means any
securities contract, commodity contract, forward contract, repurchase agreement, swap agreement and any
similar agreement that FHFA determines by regulation, resolution or order to be a qualified financial contract.
Avoidance of Fraudulent Transfers
The conservator may avoid, or refuse to recognize, a transfer of any property interest of Fannie Mae or of any
of our debtors, and also may avoid any obligation incurred by Fannie Mae or by any debtor of Fannie Mae, if
the transfer or obligation was made (1) within five years of September 6, 2008, and (2) with the intent to
hinder, delay, or defraud Fannie Mae, FHFA, the conservator or, in the case of a transfer in connection with a
qualified financial contract, our creditors. To the extent a transfer is avoided, the conservator may recover, for
our benefit, the property or, by court order, the value of that property from the initial or subsequent transferee,
unless the transfer was made for value and in good faith. These rights are superior to any rights of a trust or
any other party, other than a federal agency, under the U.S. bankruptcy code.
Modification of Statutes of Limitations
Under the Regulatory Reform Act, notwithstanding any provision of any contract, the statute of limitations
with regard to any action brought by the conservator is (1) for claims relating to a contract, the longer of six
years or the applicable period under state law, and (2) for tort claims, the longer of three years or the
applicable period under state law, in each case, from the later of September 6, 2008 or the date on which the
cause of action accrues. In addition, notwithstanding the state law statute of limitation for tort claims, the
conservator may bring an action for any tort claim that arises from fraud, intentional misconduct resulting in
unjust enrichment, or intentional misconduct resulting in substantial loss to us, if the state’s statute of
limitations expired not more than five years before September 6, 2008.
Treatment of Breach of Contract Claims
Any final and unappealable judgment for monetary damages against the conservator for breach of an
agreement executed or approved in writing by the conservator will be paid as an administrative expense of the
conservator.
Attachment of Assets and Other Injunctive Relief
The conservator may seek to attach assets or obtain other injunctive relief without being required to show that
any injury, loss or damage is irreparable and immediate.
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