Fannie Mae 2010 Annual Report Download - page 243

Treasury and us, dated February 18, 2009. See “Business—Making Home Affordable Program—Our Role as
Program Administrator” for a description of our principal activities as program administrator for HAMP and
other initiatives under the Making Home Affordable Program.
Under our arrangement with Treasury, Treasury has agreed to compensate us for a significant portion of the
work we have performed in our role as program administrator for HAMP and other initiatives under the
Making Home Affordable Program. In December 2009, Treasury established an initial budget for services
provided by us in our role as program administrator. This initial budget covered U.S. government fiscal years
2009, 2010 and 2011, and has since been updated to reflect changes in program scope. We expect to receive
an aggregate of approximately $200.5 million from Treasury for our work as program administrator for
U.S. government fiscal years 2009, 2010 and 2011, as well as receive from Treasury an additional amount of
approximately $45.3 million to be passed through to third-party vendors engaged by us for HAMP and other
initiatives under the Making Home Affordable Program. These amounts are based on current workload
estimates and program scope, and will be updated to reflect any changes in policy, workload and program
scope.
Treasury Housing Finance Agency Initiative
On October 19, 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 state and local
housing finance agencies (“HFAs”) so that the HFAs could continue to meet their mission of providing
affordable financing for both single-family and multifamily housing. 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 (“TCLF”) program, which is intended to improve the HFAs’ access to liquidity
for outstanding HFA bonds, and a new issue bond (“NIB”) program, which is intended to support new lending
by the HFAs. We entered into various agreements in November and December 2009 to implement these HFA
assistance programs, including several to which Treasury is a party. Pursuant to the TCLF program, Treasury
has purchased participation interests in temporary credit and liquidity facilities provided by us and Freddie
Mac to the HFAs, which facilities create a credit and liquidity backstop for the HFAs. Pursuant to the NIB
program, Treasury has purchased new securities issued by us and Freddie Mac backed by new housing bonds
issued by the HFAs. Freddie Mac is also providing assistance to the HFAs through a multifamily credit
enhancement program. We did not participate in this program.
The total amount originally established by Treasury for the TCLF program and the NIB program was
$23.4 billion: an aggregate of $8.2 billion for the TCLF program (of which $7.7 billion consisted of principal
and approximately $500 million consisted of accrued interest) and an aggregate of $15.2 billion for the NIB
program (of which $12.4 billion related to single-family bonds and $2.8 billion related to multifamily bonds).
The amounts outstanding under these programs have been reduced since the programs were established and
will continue to be reduced over time as principal payments are received on the mortgage loans financed by
the NIB program and as liquidity facilities under the TCLF program are replaced by the HFAs. As of
December 31, 2010, the total outstanding principal balance under the TCLF program was $6.9 billion and the
total unpaid principal amount outstanding under the NIB program was $15.2 billion.
We and Freddie Mac administer these programs on a coordinated basis. We provide temporary credit and
liquidity facility support and issued securities backed by HFA bonds on a 50-50 pro rata basis with Freddie
Mac under these programs. Treasury will bear the initial losses of principal under the TCLF program and the
NIB program up to 35% of total principal on a combined program-wide basis, and thereafter we and Freddie
Mac each will bear the losses of principal that are attributable to our own portion of the temporary credit and
liquidity facilities and the securities that we have issued. Treasury will bear all losses of unpaid interest under
the two programs. Accordingly, as of December 31, 2010, Fannie Mae’s maximum potential risk of loss under
these programs, assuming a 100% loss of principal, was approximately $7.2 billion.
FHFA, as conservator, approved the senior preferred stock purchase agreement and the amendments to the
agreement, our role as program administrator for HAMP and other initiatives under the Making Home
Affordable Program, and the HFA transactions described above.
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