Fannie Mae 2010 Annual Report Download - page 242

Policy and Conflict of Interest Procedure for employees require our executive officers to request review and
approval of any existing or proposed transaction with us, whether or not in the ordinary course of business, in
which that officer or a member of his or her immediate family has a direct or indirect interest.
TRANSACTIONS WITH RELATED PERSONS
Transactions with Treasury
Treasury beneficially owns more than 5% of the outstanding shares of our common stock by virtue of the
warrant we issued to Treasury on September 7, 2008. The warrant entitles Treasury to purchase shares of our
common stock equal to 79.9% of our outstanding common stock on a fully diluted basis on the date of
exercise, for an exercise price of $0.00001 per share, and is exercisable in whole or in part at any time on or
before September 7, 2028. We describe below our current agreements with Treasury.
Treasury Senior Preferred Stock Purchase Agreement
We issued the warrant to Treasury pursuant to the terms of the senior preferred stock purchase agreement we
entered into with Treasury on September 7, 2008. Under the senior preferred stock purchase agreement, we
also issued to Treasury one million shares of senior preferred stock. We issued the warrant and the senior
preferred stock as an initial commitment fee in consideration of Treasury’s commitment to provide up to
$100 billion in funds to us under the terms and conditions set forth in the senior preferred stock purchase
agreement. On May 6, 2009, Treasury amended the senior preferred stock purchase agreement to increase its
funding commitment to $200 billion and to revise some of the covenants in the agreement. Treasury further
amended the senior preferred stock purchase agreement on December 24, 2009 in order to further increase its
funding commitment to accommodate any net worth deficits for calendar quarters in 2010 through 2012. For
any net worth deficits after December 31, 2012, Treasury’s remaining funding commitment will be
$124.8 billion, ($200 billion less the $75.2 billion cumulatively drawn through March 31, 2010), less the
smaller of either (a) our positive net worth as of December 31, 2012 or (b) our cumulative draws from
Treasury for the calendar quarters in 2010 through 2012. The amendment also made some other revisions to
the agreement. The senior preferred stock purchase agreement also requires that we pay a quarterly
commitment fee, beginning on March 31, 2011, in an amount to be determined by Treasury no later than
December 31, 2010. In December 2010, Treasury notified FHFA that Treasury was waiving the quarterly
commitment fee for the first quarter of 2011 due to adverse conditions in the U.S. mortgage market and
because it believed that imposing the commitment fee would not generate increased compensation for
taxpayers. Treasury further noted that it would reevaluate matters in the next calendar quarter to determine
whether to set the quarterly commitment fee.
We have received an aggregate of $87.6 billion from Treasury under the senior preferred stock purchase
agreement, and in February 2011, the Acting Director of FHFA submitted a request on behalf of Fannie Mae
to Treasury for an additional $2.6 billion from Treasury under the senior preferred purchase stock agreement.
Through December 31, 2010, we have paid an aggregate of $10.2 billion to Treasury in dividends on the
senior preferred stock. See “Business—Conservatorship and Treasury Agreements—Treasury Agreements” for
more information about the senior preferred stock purchase agreement.
Treasury Making Home Affordable Program
On February 18, 2009, the Obama Administration announced its Homeowner Affordability and Stability Plan,
a plan to provide stability and affordability to the U.S. housing market. Pursuant to this plan, in March 2009,
the Administration announced the details of its Making Home Affordable Program, a program intended to
provide assistance to homeowners and prevent foreclosures. One of the primary initiatives under the Making
Home Affordable Program is the Home Affordable Modification Program, or HAMP, which is aimed at
helping borrowers whose loan is either currently delinquent or at imminent risk of default by modifying their
mortgage loan to make their monthly payments more affordable. In addition to our participation in the
Administration’s initiatives under the Making Home Affordable Program, Treasury engaged us to serve as
program administrator for loans modified under HAMP pursuant to the financial agency agreement between
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