Fannie Mae 2010 Annual Report Download - page 73

requirements, which may reduce the economic value of mortgage servicing rights. As a result, a number of
our customers and counterparties may change their business practices.
In addition, the actions of Treasury, the CFTC, the SEC, the Federal Deposit Insurance Corporation, the
Federal Reserve and international central banking authorities directly or indirectly impact financial
institutions’ cost of funds for lending, capital raising and investment activities, which could increase our
borrowing costs or make borrowing more difficult for us. Changes in monetary policy are beyond our control
and difficult to anticipate.
Legislative and regulatory changes could affect us in substantial and unforeseeable ways and could have a
material adverse effect on our business, results of operations, financial condition, liquidity and net worth. In
particular, these changes could affect our ability to issue debt and may reduce our customer base.
Structural changes in the financial services industry may negatively impact our business.
The financial market crisis has resulted in mergers of some of our most significant institutional counterparties.
Consolidation of the financial services industry has increased and may continue to increase our concentration
risk to counterparties in this industry, and we are and may become more reliant on a smaller number of
institutional counterparties. This both increases our risk exposure to any individual counterparty and decreases
our negotiating leverage with these counterparties. The structural changes in the financial services industry
could affect us in substantial and unforeseeable ways and could have a material adverse effect on our business,
results of operations, financial condition, liquidity and net worth.
The occurrence of a major natural or other disaster in the United States could negatively impact our credit
losses and credit-related expenses or disrupt our business operations in the affected geographic area.
We conduct our business in the residential mortgage market and own or guarantee the performance of
mortgage loans throughout the United States. The occurrence of a major natural or environmental disaster,
terrorist attack, pandemic, or similar event (a “major disruptive event”) in a regional geographic area of the
United States could negatively impact our credit losses and credit-related expenses in the affected area.
The occurrence of a major disruptive event could negatively impact a geographic area in a number of different
ways, depending on the nature of the event. A major disruptive event that either damaged or destroyed
residential real estate underlying mortgage loans in our book of business or negatively impacted the ability of
homeowners to continue to make principal and interest payments on mortgage loans in our book of business
could increase our delinquency rates, default rates and average loan loss severity of our book of business in
the affected region or regions, which could have a material adverse effect on our business, results of
operations, financial condition, liquidity and net worth. While we attempt to create a geographically diverse
mortgage credit book of business, there can be no assurance that a major disruptive event, depending on its
magnitude, scope and nature, will not generate significant credit losses and credit-related expenses.
Additionally, the contingency plans and facilities that we have in place may be insufficient to prevent an
adverse effect on our ability to conduct business, which could lead to financial losses. Substantially all of our
senior management and investment personnel work out of our offices in the Washington, DC metropolitan
area. If a disruption occurs and our senior management or other employees are unable to occupy our offices,
communicate with other personnel or travel to other locations, our ability to interact with each other and with
our customers may suffer, and we may not be successful in implementing contingency plans that depend on
communication or travel.
Item 1B. Unresolved Staff Comments
None.
Item 2. Properties
We own our principal office, which is located at 3900 Wisconsin Avenue, NW, Washington, DC, as well as
additional Washington, DC facilities at 3939 Wisconsin Avenue, NW and 4250 Connecticut Avenue, NW. We
also own two office facilities in Herndon, Virginia, as well as two additional facilities located in Reston,
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