Fannie Mae 2011 Annual Report Download - page 11

markets and the deteriorated credit performance of loans in our mortgage credit book of business that we
acquired prior to 2009. In his February 2012 letter to Congress, Acting Director DeMarco wrote, “[I]t is clear that
the draws [Fannie Mae and Freddie Mac] have taken from the Treasury are so large they cannot be repaid under
any foreseeable scenarios.” As a result of our draws, we do not expect to earn profits in excess of our annual
dividend obligation to Treasury for the indefinite future.
There is significant uncertainty regarding the future of our company, including how long the company will
continue to exist in its current form. The Administration, Congress and our regulators are considering options for
the future state of Fannie Mae, Freddie Mac and the U.S. government’s role in residential mortgage finance. In
February 2011, Treasury and HUD released a report to Congress on reforming America’s housing finance
market. The report provides that the Administration will work with FHFA to determine the best way to
responsibly reduce Fannie Mae’s and Freddie Mac’s role in the market and ultimately wind down both
institutions. The report emphasizes the importance of proceeding with a careful transition plan and providing the
necessary financial support to Fannie Mae and Freddie Mac during the transition period. On February 2, 2012,
Treasury Secretary Geithner stated that the Administration intended to release new details around approaches to
housing finance reform, including winding down Fannie Mae and Freddie Mac, in the spring of 2012 and to work
with Congressional leaders to explore options for legislation, but that he does not expect housing finance reform
legislation to be enacted in 2012. In his February 2012 letter to Congress, Acting Director DeMarco states that
achieving the strategic goals for the next phase of conservatorship will “prepare the foundation for a new,
stronger housing finance system in the future. Although that future may not include Fannie Mae and Freddie
Mac, at least as they are known today, this important work in conservatorship can be a lasting, positive legacy for
the country and its housing system.” We discuss efforts to reform the GSEs and the housing finance system in
more detail in “Legislative and Regulatory Developments—GSE Reform.”
In 2011 we refined and began implementing a plan designed to support the creation of a sustainable housing
finance system by improving our business processes, infrastructure and organizational structure. We expect to
continue implementing the plan in phases with goals of providing value to our customers, simplifying and
standardizing our operating model, and reducing our costs.
To provide context for analyzing our consolidated financial statements and understanding our MD&A, we
discuss the following topics in this executive summary:
• Our provision of liquidity and support to the mortgage market;
• Our 2011 financial performance;
• Our strong new book of business and expected losses on loans we acquired prior to 2009;
• Our efforts to reduce losses on single-family loans we acquired prior to 2009, which we refer to as our
“legacy book of business”;
• Credit statistics for our single-family book of business;
• Our liquidity position; and
• Our outlook.
Providing Liquidity and Support to the Mortgage Market
Our Liquidity and Support Activities
We provide liquidity and support to the U.S. mortgage market in a number of important ways:
• We serve as a stable source of liquidity for purchases of homes and financing of multifamily rental housing,
as well as for refinancing existing mortgages. We provided approximately $2.3 trillion in liquidity to the
mortgage market in 2009 through 2011 through our purchases and guarantees of loans, which enabled
homeowners to refinance 6.6 million mortgages, 1.9 million households to purchase a home, and financing
for over 1.1 million units of multifamily housing.
• We are a consistent market presence as we continue to provide liquidity to the mortgage market even when
other sources of capital have exited the market, as has been shown repeatedly over the last few years. We
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