Fannie Mae 2009 Annual Report Download - page 62

deliver to us. We acquire a significant portion of our mortgage loans from several large mortgage lenders.
During 2009, two of our customers each accounted for greater than 20% of our single-family business volume.
Accordingly, maintaining our current business relationships and business volumes with our top lender
customers is critical to our business.
The mortgage industry has been consolidating and a decreasing number of large lenders originate most single-
family mortgages. The loss of business from any one of our major lender customers could adversely affect our
revenues and the liquidity of Fannie Mae MBS, which in turn could have an adverse effect on their market
value. In addition, as 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 optimally.
In addition, many of our lender customers are experiencing, or may experience in the future, financial and
liquidity problems that may affect the volume of business they are able to generate. Many of our lender
customers also have tightened their lending criteria, which has reduced their loan volume. If any of our key
lender customers significantly reduces the volume or quality of mortgage loans that the lender delivers to us or
that we are willing to buy from them, we could lose significant business volume that we might be unable to
replace, which could adversely affect our business and result in a decrease in our revenues. In addition, a
significant reduction in the volume of mortgage loans that we securitize could reduce the liquidity of Fannie
Mae MBS, which in turn could have an adverse effect on their market value.
Our reliance on third parties to service our mortgage loans may impede our efforts to keep people in their
homes, as well as the re-performance rate of loans we modify.
Mortgage servicers, or their agents and contractors, typically are the primary point of contact for borrowers as
we delegate servicing responsibilities to them. We rely on these mortgage servicers to identify and contact
troubled borrowers as early as possible, to assess the situation and offer appropriate options for resolving the
problem and to successfully implement a solution. The demands placed on experienced mortgage loan
servicers to service delinquent loans have increased significantly across the industry, straining servicer
capacity. The Making Home Affordable Program is also impacting servicer resources. To the extent that
mortgage servicers are hampered by limited resources or other factors, they may not be successful in
conducting their servicing activities in a manner that fully accomplishes our objectives within the timeframe
we desire. Further, our servicers have advised us that they have not been able to reach many of the borrowers
who may need help with their mortgage loans even when repeated efforts have been made to contact the
borrower.
For these reasons, our ability to actively manage the troubled loans that we own or guarantee, and to
implement our homeownership assistance and foreclosure prevention efforts quickly and effectively, may be
limited by our reliance on our mortgage servicers.
Our adoption of new accounting standards relating to the elimination of QSPEs could have a material
adverse effect on our ability to issue financial reports in a timely manner.
Effective January 1, 2010, we adopted new accounting standards for transfers of financial assets and
consolidation, which will result in our recording on our consolidated balance sheet substantially all of the
loans held in our MBS trusts. Implementation of these standards required us to make major operational and
system changes. These changes, which involved the efforts of hundreds of our employees and contractors,
have had a substantial impact on our overall internal control environment. The adoption of these accounting
standards requires that we consolidate onto our balance sheet the assets and liabilities of the substantial
majority of our MBS trusts, which will significantly increase the amount of our assets and liabilities. We
initially recorded the assets and liabilities of the substantial majority of our existing outstanding MBS trusts
that we were required to consolidate effective January 1, 2010 based on the unpaid principal balance as of that
date. The unpaid principal balance amounts we consolidated related to MBS trusts increased both our total
assets and total liabilities by approximately $2.4 trillion effective January 1, 2010. In addition, the number of
loans on our balance sheet increased as a result of this consolidation to approximately 18 million as of
January 1, 2010, from approximately two million as of December 31, 2009. Because of the magnitude and
complexity of the operational and system changes that we have made, there is a risk that unexpected
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