Fannie Mae 2009 Annual Report Download - page 131

• dividend payments made to Treasury pursuant to the senior preferred stock purchase agreement;
• net payments on derivative instruments;
• the pledging of collateral under derivative instruments;
• administrative expenses; and
• losses incurred in connection with our Fannie Mae MBS guaranty obligations.
An increased proportion of our cash funding during 2009, compared with 2008, came from (1) principal
repayments on liquidations and sales of mortgage assets due to an increase in refinancing activity and
(2) payments we received from Treasury under the senior preferred stock purchase agreement. In addition, in
2008 we began paying cash dividends to Treasury under the senior preferred stock purchase agreement, and
have paid a total of $2.5 billion in dividends as of December 31, 2009. As we draw more funds pursuant to
the senior preferred stock purchase agreement, we expect our cash dividend payments to Treasury will
continue to increase in future periods if we continue to pay the dividend on a quarterly basis, rather than
allowing the dividend to accrue at an increased rate of 12% and be added to the liquidation preference of the
senior preferred stock.
On February 10, 2010, we announced that we intend to significantly increase our purchases of delinquent
loans from single-family MBS trusts. Under our single-family MBS trust documents, we have the option to
purchase from our MBS trusts loans that are delinquent as to four or more consecutive monthly payments. We
will begin purchasing these loans in March 2010. As a result, we expect our funding needs to increase in 2010
because we expect to purchase a significant portion of the current delinquent population within a few months
period subject to market, servicer capacity, and other constraints including the limit on the mortgage assets
that we may own pursuant to the senior preferred stock purchase agreement. As of December 31, 2009, the
total unpaid principal balance of all loans in single-family MBS trusts that were delinquent four or more
months was approximately $127 billion.
Debt Funding
We fund our business primarily through the issuance of short-term and long-term debt securities in the
domestic and international capital markets. Because debt issuance is our primary funding source, we are
subject to “roll-over,” or refinancing risk on our outstanding debt. Our roll-over risk increases when our
outstanding short-term debt increases as a percentage of our total outstanding debt.
We have a diversified funding base of domestic and international investors. Purchasers of our debt securities
include fund managers, commercial banks, pension funds, insurance companies, foreign central banks,
corporations, state and local governments, and other municipal authorities. Since 2009, the Federal Reserve
has been supporting the liquidity of our debt as an active and significant purchaser of our non-callable long-
term debt in the secondary market. Purchasers of our debt securities are also geographically diversified, with a
significant portion of our investors historically located in the United States, Europe and Asia.
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