Fannie Mae 2010 Annual Report Download - page 368

In addition, the agreement provides that we may not enter into any new compensation arrangements or
increase amounts or benefits payable under existing compensation arrangements with our named executive
officers (as defined by SEC rules) without the consent of the Director of FHFA, in consultation with the
Secretary of the Treasury. As of December 31, 2010, we were in compliance with the senior preferred stock
purchase agreement covenants.
Termination Provisions
The senior preferred stock purchase agreement provides that Treasury’s funding commitment will terminate
under any the following circumstances: (1) the completion of our liquidation and fulfillment of Treasury’s
obligations under its funding commitment at that time, (2) the payment in full of, or reasonable provision for,
all of our liabilities (whether or not contingent, including mortgage guaranty obligations), or (3) the funding
by Treasury of the maximum amount under the agreement. In addition, Treasury may terminate its funding
commitment and declare the senior preferred stock purchase agreement null and void if a court vacates,
modifies, amends, conditions, enjoins, stays or otherwise affects the appointment of the conservator or
otherwise curtails the conservator’s powers. Treasury may not terminate its funding commitment solely by
reason of our being in conservatorship, receivership or other insolvency proceeding, or due to our financial
condition or any adverse change in our financial condition.
Waivers and Amendments
The senior preferred stock purchase agreement provides that most provisions of the agreement may be waived
or amended by mutual written agreement of the parties. No waiver or amendment of the agreement, however,
may decrease Treasury’s aggregate funding commitment or add conditions to Treasury’s funding commitment
if the waiver or amendment would adversely affect in any material respect the holders of our debt securities or
guaranteed Fannie Mae MBS.
Third-party Enforcement Rights
If we default on payments with respect to our debt securities or guaranteed Fannie Mae MBS and Treasury
fails to perform its obligations under its funding commitment, and if we and/or the conservator are not
diligently pursuing remedies in respect of that failure, the holders of these debt securities or Fannie Mae MBS
may file a claim for relief in the United States Court of Federal Claims. The relief, if granted, would require
Treasury to fund to us the lesser of (1) the amount necessary to cure the payment defaults on our debt and
Fannie Mae MBS and (2) the lesser of (a) the deficiency amount and (b) the maximum amount available
under the agreement less the aggregate amount of funding previously provided under the commitment. Any
payment that Treasury makes under those circumstances would be treated for all purposes as a draw under the
senior preferred stock purchase agreement that would increase the liquidation preference of the senior
preferred stock.
17. Regulatory Capital Requirements
In 2008, FHFA announced that our existing statutory and FHFA-directed regulatory capital requirements will
not be binding during the conservatorship, and that FHFA will not issue quarterly capital classifications during
the conservatorship. We submit capital reports to FHFA during the conservatorship and FHFA monitors our
capital levels. FHFA has stated that it does not intend to report our critical capital, risk-based capital or
subordinated debt levels during the conservatorship. As of December 31, 2010 and 2009, we had a minimum
capital deficiency of $123.2 billion and $107.6 billion, respectively. Our minimum capital deficiency as of
December 31, 2010 was determined based on guidance from FHFA, in which FHFA (1) directed us, for loans
backing Fannie Mae MBS held by third parties, to continue reporting our minimum capital requirements based
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FANNIE MAE
(In conservatorship)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)