Fannie Mae 2010 Annual Report Download - page 33

cooperative properties or manufactured housing communities. During 2010, we changed the name of our
multifamily business division from Housing and Community Development to Multifamily Mortgage Business.
The new name better reflects the division’s realignment to focus on our core multifamily activities and the
discontinuation of some of our non-mortgage secured debt and equity investment activities as instructed by
FHFA.
Our Multifamily business works with our lender customers to provide funds to the mortgage market by
securitizing multifamily mortgage loans into Fannie Mae MBS. Through our Multifamily business, we provide
liquidity and support to the U.S. multifamily housing market principally by purchasing or securitizing loans
that finance multifamily rental housing properties. We also provide some limited debt financing for other
acquisition, development, construction and rehabilitation activity related to projects that complement this
business. Our Multifamily business also works with our Capital Markets group to facilitate the purchase and
securitization of multifamily mortgage loans and securities for Fannie Mae’s portfolio, as well as to facilitate
portfolio securitization and resecuritization activities. Our multifamily guaranty book of business consists of
multifamily mortgage loans underlying Fannie Mae MBS and multifamily loans and securities held in our
mortgage portfolio. Our Multifamily business has primary responsibility for pricing the credit risk on our
multifamily guaranty book of business and for managing the credit risk on multifamily loans and Fannie Mae
MBS backed by multifamily loans that are held in our mortgage portfolio.
Revenues for our Multifamily business are derived from a variety of sources, including: (1) guaranty fees
received as compensation for assuming the credit risk on the mortgage loans underlying multifamily Fannie
Mae MBS and on the multifamily mortgage loans held in our portfolio and on other mortgage-related
securities; (2) transaction fees associated with the multifamily business and (3) other bond credit enhancement
related fees.
We describe the credit risk management process employed by our Multifamily business, along with our
Multifamily Enterprise Risk Management group, including its key strategies in managing credit risk and key
metrics used in measuring and evaluating our multifamily credit risk, in “MD&A—Risk Management—Credit
Risk Management—Multifamily Mortgage Credit Risk Management.”
Key Characteristics of the Multifamily Mortgage Market and Multifamily Transactions
The multifamily mortgage market and our transactions in that market have a number of key characteristics that
affect our multifamily activities and distinguish them from our activities in the single-family residential
mortgage market.
•Funding sources: Unlike the single-family residential mortgage market in which the GSEs’
predominance makes us a driver of market standards and rates, the multifamily market is made up of a
wide variety of lending sources, including commercial banks, life insurance companies, investment banks,
small community banks, FHA, state and local housing finance agencies and the GSEs.
•Number of lenders; lender relationships: In 2010, we executed multifamily transactions with 32 lenders.
Of these, 24 lenders delivered loans to us under our Delegated Underwriting and Servicing, or DUS»,
product line. In determining whether to do business with a multifamily lender, we consider the lender’s
financial strength, multifamily underwriting and servicing experience, portfolio performance and
willingness and ability to share in the risk of loss associated with the multifamily loans they originate.
•Loan size: On average, loans in our multifamily guaranty book of business are several million dollars in
size. A significant number of our multifamily loans are under $5 million, and some of our multifamily
loans are greater than $25 million.
•Collateral: Multifamily loans are collateralized by properties that generate cash flows, such as garden
and high-rise apartment complexes, seniors housing communities, cooperatives, dedicated student housing
and manufactured housing communities. These rental properties are operated as businesses.
•Borrower profile: Most multifamily borrowers are for-profit corporations, limited liability companies,
partnerships, real estate investment trusts and individuals who invest in real estate for cash flow and
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