Fannie Mae 2009 Annual Report Download - page 266

FANNIE MAE
(In conservatorship)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Summary of Significant Accounting Policies
Organization
We are a stockholder-owned corporation organized and existing under the Federal National Mortgage
Association Charter Act (“The Charter Act” or our “charter”). We are a government-sponsored enterprise
(“GSE”), and we are subject to government oversight and regulation. Our regulators include the Federal
Housing Finance Agency (“FHFA”), the U.S. Department of Housing and Urban Development (“HUD”), the
U.S. Securities and Exchange Commission (“SEC”), and the U.S. Department of the Treasury (“Treasury”).
Through July 29, 2008, we were regulated by the Office of Federal Housing Enterprise Oversight (“OFHEO”),
which was replaced on July 30, 2008 with FHFA upon the enactment of the Federal Housing Finance
Regulatory Reform Act of 2008 (“Regulatory Reform Act”). The U.S. government does not guarantee, directly
or indirectly, our securities or other obligations.
We operate in the secondary mortgage market by purchasing mortgage loans and mortgage-related securities,
including mortgage-related securities guaranteed by us, from primary mortgage market institutions, such as
commercial banks, savings and loan associations, mortgage banking companies, securities dealers and other
investors. We do not lend money directly to consumers in the primary mortgage market. We provide additional
liquidity in the secondary mortgage market by issuing guaranteed mortgage-related securities.
We operate under three business segments: Single-Family Credit Guaranty (“Single-Family”), Housing and
Community Development (“HCD”) and Capital Markets. Our Single-Family segment generates revenue
primarily from the guaranty fees on the mortgage loans underlying guaranteed single-family Fannie Mae
mortgage-backed securities (“Fannie Mae MBS”). Our HCD segment generates revenue from a variety of
sources, including guaranty fees 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. Our Capital Markets segment invests in mortgage loans, mortgage-related
securities and other investments, and generates income primarily from the difference, or spread, between the
yield on the mortgage assets we own and the interest we pay on the debt we issue in the global capital
markets to fund the purchases of these mortgage assets.
On September 7, 2008, the Secretary of the Treasury and the Director of FHFA announced several actions
taken by Treasury and FHFA regarding Fannie Mae, which included: (1) placing us in conservatorship; (2) the
execution of a senior preferred stock purchase agreement by our conservator, on our behalf, and Treasury,
pursuant to which we issued to Treasury both senior preferred stock and a warrant to purchase common stock;
and (3) Treasury’s agreement to establish a temporary secured lending credit facility that was available to us
and the other GSEs regulated by FHFA under identical terms until December 31, 2009. We entered into a
lending agreement with Treasury pursuant to which Treasury established this secured lending credit facility on
September 19, 2008. The secured lending facility terminated on December 31, 2009 in accordance with its
terms.
Conservatorship
On September 6, 2008, at the request of the Secretary of the Treasury, the Chairman of the Board of
Governors of the Federal Reserve and the Director of FHFA, our Board of Directors adopted a resolution
consenting to the company’s placement into conservatorship. After obtaining this consent, the Director of
FHFA appointed FHFA as our conservator in accordance with the Federal Housing Enterprises Financial
Safety and Soundness Act of 1992, as amended by the 2008 Reform Act, (together, the “GSE Act”). Under
the GSE Act, the conservator immediately succeeded to all rights, titles, powers and privileges of Fannie Mae,
and of any stockholder, officer or director of Fannie Mae with respect to Fannie Mae and its assets, and
succeeded to the title to the books, records and assets of any other legal custodian of Fannie Mae.
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