Fannie Mae 2009 Annual Report Download - page 218

continued weakness in the housing and financial markets and noted that, without the company’s
involvement, the housing market would have been significantly worse. The Committee noted that
management exceeded the target for the number of homeowners helped and exceeded the targets for
single-family and multifamily market share. The Committee determined that the company successfully
executed its role as administrator of HAMP, implementing and administering the program in a very
difficult operating environment. The Committee also recognized that the company took a variety of steps
to help its borrowers who were not eligible under HAMP. The Committee noted that, notwithstanding
management’s performance, significant opportunities remain for converting HAMP trial modifications into
permanent modifications; however, the Committee concluded that, based on the factors described above, it
was not appropriate to reduce the named executives’ long-term incentive awards or 2008 Retention
Program awards based on the performance of HAMP in 2009.
•Goal 2: Our second 2009 performance goal was to protect taxpayers, achieve our mission and build a
more streamlined, high-performing company. Our performance against this goal was to be measured by
our achievement of the following seven objectives:
•Administrative expenses. The first objective was to (a) limit administrative expenses to $1.8 billion,
excluding extraordinary items such as the implementation of new accounting rules on consolidation,
certain costs relating to HAMP and other extraordinary expenses, and (b) limit the number of our
employees to 5,800. This objective was to be balanced against our other corporate goals and objectives
when evaluating our performance against it. We met the first target of this objective by keeping our
administrative expenses, excluding extraordinary items, to $1.7 billion. We did not, however, meet the
second target of this objective, as our employee headcount of approximately 6,000 employees at year
end exceeded our target by approximately 4%. These additional employees were hired to support our
credit-related initiatives, including our work as HAMP program administrator, and to replace existing
contractors.
•Cumulative Treasury Infusion. The second objective was to protect taxpayers by limiting the amount
of the investment Treasury must make under the senior preferred stock purchase agreement. Because
this objective might be in conflict with Goal 1, it was to be balanced against Goal 1 when evaluating
our performance against it. We met this objective by actively managing our business throughout the
year with the goal that our new business activities would be profitable. These efforts mitigated the size
of our draws under the senior preferred stock purchase agreement in 2009, which were primarily caused
by credit losses relating to business originated prior to 2009. We also focused on a variety of initiatives
to help reduce our credit losses from what they otherwise would have been.
•Housing Goals. The third objective was to finalize a framework for our new housing goals with
FHFA and meet these housing goals to the extent feasible. FHFA announced our final 2009 housing
goals in August. Based on our preliminary determination, which has not yet been validated by FHFA,
we believe we met all of the 2009 housing goals and related subgoals, except for the “underserved
areas” goal and the increased “multifamily special affordable housing” subgoal. We did not meet this
goal and subgoal based on our assessment that they were infeasible given the current market and
economic conditions. See “Business—Our Charter and Regulation of Our Activities—Regulation and
Oversight of Our Activities—Housing Goals and Subgoals and Duty to Serve Underserved Markets” for
more information on our 2009 housing goals and our performance against these goals.
•Return on Capital Framework. The fourth objective was to work to establish a return on capital
methodology to ensure that we earn the appropriate return on new business, with a particular focus on
economic capital. We met this objective by developing a framework for economic capital and return on
capital for the company.
•Information Technology/Operations Redesign. The fifth objective was to begin a two- to three-year
plan to reengineer end-to-end business processes, including information technology architecture and
operations processes. We successfully completed all 2009 milestones associated with this objective,
which consisted of developing a target state architecture and governance framework, making this
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