Fannie Mae 2010 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”).
The U.S. government does not guarantee 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”), Multifamily
(“Multifamily”—formerly “Housing and Community Development”) 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 Multifamily 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.
Conservatorship
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.
Under the Federal Housing Enterprises Financial Safety and Soundness Act of 1992, as amended by the
Federal Housing Finance Regulatory Reform Act of 2008, (together, the “GSE Act”), the conservator
immediately succeeded to (1) 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 (2) title to the books, records
and assets of any other legal custodian of Fannie Mae. The conservator has since delegated specified
authorities to our Board of Directors and has delegated to management the authority to conduct our day-to-day
operations. The conservator retains the authority to withdraw its delegations at any time.
We were directed by FHFA to voluntarily delist our common stock and each listed series of our preferred
stock from the New York Stock Exchange and the Chicago Stock Exchange. The last trading day for the listed
securities on the New York Stock Exchange and the Chicago Stock Exchange was July 7, 2010, and since
July 8, 2010, the securities have been quoted on the over-the-counter market.
As of February 24, 2011, the conservator has advised us that it has not disaffirmed or repudiated any contracts
we entered into prior to its appointment as conservator. The GSE Act requires FHFA to exercise its right to
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