Fannie Mae 2009 Annual Report Download - page 48

TREASURY HOUSING FINANCE AGENCY INITIATIVE
To assist state and local housing finance agencies (“HFAs”) to continue to meet their mission of providing
affordable financing for both single-family and multifamily housing, in October of 2009 we entered into a
memorandum of understanding with Treasury, FHFA and Freddie Mac that established terms under which we,
Freddie Mac and Treasury would provide assistance to HFAs. Pursuant to this HFA initiative, we, Freddie Mac
and Treasury are providing assistance to the HFAs through two primary programs: a temporary credit and
liquidity facilities program, which is intended to improve the HFAs’ access to liquidity for outstanding HFA
bonds, and a new issue bond program, which is intended to support new lending by the HFAs. Pursuant to the
temporary credit and liquidity facilities program, Treasury has purchased participation interests in temporary
credit and liquidity facilities provided by us and Freddie Mac to the HFAs. These facilities create a credit and
liquidity backstop for the HFAs. Pursuant to the new issue bond program, Treasury has purchased new
securities issued by us and Freddie Mac backed by new housing bonds issued by the HFAs. Please see
“Certain Relationships and Related Transactions, and Director Independence—Transactions with Related
Persons—Transactions with Treasury—Treasury Housing Finance Agency Initiative” for a more detailed
discussion of the HFA initiative.
OUR CUSTOMERS
Our principal customers are lenders that operate within the primary mortgage market where mortgage loans
are originated and funds are loaned to borrowers. Our customers include mortgage banking companies, savings
and loan associations, savings banks, commercial banks, credit unions, community banks, insurance
companies, and state and local housing finance agencies. Lenders originating mortgages in the primary
mortgage market often sell them in the secondary mortgage market in the form of whole loans or in the form
of mortgage-related securities.
During 2009, approximately 1,100 lenders delivered single-family mortgage loans to us, either for
securitization or for purchase. We acquire a significant portion of our single-family mortgage loans from
several large mortgage lenders. During 2009, our top five lender customers, in the aggregate, accounted for
approximately 62% of our single-family business volume, compared with 66% in 2008. Two lender customers,
Bank of America Corporation and Wells Fargo & Company, including their respective affiliates, each
accounted for more than 20% of our single-family business volume for 2009.
Due to ongoing consolidation within the mortgage industry, as well as the number of mortgage lenders that
have gone out of business since late 2006, we, as well as our competitors, seek business from a decreasing
number of large mortgage lenders. To the extent we become more reliant on a smaller number of lender
customers, our negotiating leverage with these customers decreases, which could diminish our ability to price
our products and services optimally. In addition, many of our lender customers are experiencing financial and
liquidity problems that may affect the volume of business they are able to generate. We discuss these and
other risks that this customer concentration poses to our business in “Risk Factors.”
COMPETITION
Historically, our competitors have included Freddie Mac, FHA, Ginnie Mae (which primarily guarantees
securities backed by FHA-insured loans), the FHLBs, financial institutions, securities dealers, insurance
companies, pension funds, investment funds and other investors. During 2008, almost all of our competitors,
other than Freddie Mac, FHA, Ginnie Mae and the FHLBs, ceased their activities in the residential mortgage
finance business, and we remained the largest single issuer of mortgage-related securities in the secondary
market in 2009.
We compete to acquire mortgage assets in the secondary market both for our investment portfolio and for
securitization into Fannie Mae MBS. We also compete for the issuance of mortgage-related securities to
investors. Competition in these areas is affected by many factors, including the amount of residential mortgage
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