Fannie Mae 2008 Annual Report Download - page 370

16. 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.
During the year ended December 31, 2008, our Chief Executive Officer was replaced. Our new Chief
Executive Officer has been delegated the authority by FHFA to conduct day-to-day management activities, and
as such, our Chief Executive Officer continues to be the chief operating decision maker who makes decisions
about resources to be allocated to each segment and assesses segment performance.
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.
Single-family mortgage loans relate to properties with four or fewer residential units. 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 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. 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 makes debt and equity investments 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. HCD also manages the credit risk of its LIHTC and other debt and equity investments.
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 rental housing
projects eligible for the federal low-income housing tax credit generate both tax credits and net operating
losses that may reduce our federal income tax liability. As described in “Note 12, Income Taxes,” we
determined that it is more likely than not that we will not realize a portion of our deferred tax assets in the
future. As a result, we are not currently making new LIHTC investments other than pursuant to commitments
existing prior to 2008 and are recognizing only a small amount of tax benefits associated with tax credits and
net operating losses in our consolidated financial statements. Other investments in rental and for-sale housing
generate revenue and losses from operations and
F-92
FANNIE MAE
(In conservatorship)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)