Fannie Mae 2010 Annual Report Download - page 6

PART I
We have been under conservatorship, with the Federal Housing Finance Agency (“FHFA”) acting as
conservator, since September 6, 2008. As conservator, FHFA succeeded to all rights, titles, powers and
privileges of the company, and of any shareholder, officer or director of the company with respect to the
company and its assets. 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. We describe the
rights and powers of the conservator, key provisions of our agreements with the U.S. Department of the
Treasury (“Treasury”), and their impact on shareholders in “Conservatorship and Treasury Agreements.”
This report contains forward-looking statements, which are statements about matters that are not historical
facts. Forward-looking statements often include words like “expects,” “anticipates,” “intends,” “plans,”
“believes,” “seeks,” “estimates,” “would,” “should,” “could,” “may,” or similar words. Actual results could
differ materially from those projected in the forward-looking statements as a result of a number of factors
including those discussed in “Risk Factors” and elsewhere in this report. Please review “Forward-Looking
Statements” for more information on the forward-looking statements in this report.
We provide a glossary of terms in “Management’s Discussion and Analysis of Financial Condition and Results
of Operations (“MD&A”)—Glossary of Terms Used in This Report.”
Item 1. Business
OVERVIEW
Fannie Mae is a government-sponsored enterprise that was chartered by Congress in 1938 to support liquidity,
stability and affordability in the secondary mortgage market, where existing mortgage-related assets are
purchased and sold. Our charter does not permit us to originate loans and lend money directly to consumers in
the primary mortgage market. Our most significant activities include providing market liquidity by securitizing
mortgage loans originated by lenders in the primary mortgage market into Fannie Mae mortgage-backed
securities, which we refer to as Fannie Mae MBS, and purchasing mortgage loans and mortgage-related
securities in the secondary market for our mortgage portfolio. We acquire funds to purchase mortgage-related
assets for our mortgage portfolio by issuing a variety of debt securities in the domestic and international
capital markets. We also make other investments that increase the supply of affordable housing. During 2010,
we concentrated much of our efforts on minimizing our credit losses by using home retention solutions and
foreclosure alternatives to address delinquent mortgages, starting with solutions, such as modifications, that
permit people to stay in their homes. When there is no lower-cost alternative, our goal is to move to
foreclosure expeditiously. We describe our business activities below.
As a federally chartered corporation, we are subject to extensive regulation, supervision and examination by
FHFA, and regulation by other federal agencies, including Treasury, the Department of Housing and Urban
Development (“HUD”), and the Securities and Exchange Commission (“SEC”).
Although we are a corporation chartered by the U.S. Congress, our conservator is a U.S. government agency,
Treasury owns our senior preferred stock and a warrant to purchase 79.9% of our common stock, and Treasury
has made a commitment under a senior preferred stock purchase agreement to provide us with funds under
specified conditions to maintain a positive net worth, the U.S. government does not guarantee our securities or
other obligations. Our common stock was delisted from the New York Stock Exchange and the Chicago Stock
Exchange on July 8, 2010 and since then has been traded in the over-the-counter market and quoted on the
OTC Bulletin Board under the symbol “FNMA.” Our debt securities are actively traded in the over-the-counter
market.
The conservatorship we have been under since September 2008, with FHFA acting as conservator, has no
specified termination date. There can be no assurance as to when or how the conservatorship will be
terminated, whether we will continue to exist following conservatorship, or what changes to our business
structure will be made during or following the conservatorship.
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