Fannie Mae 2011 Annual Report Download - page 247

FANNIE MAE
(In conservatorship)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
that have been transferred to a Fannie Mae mortgage-backed securities (“MBS”) trust must be held by the
conservator for the beneficial owners of the Fannie Mae MBS and cannot be used to satisfy the general creditors
of Fannie Mae. As of February 29, 2012, FHFA has not exercised this power.
Neither the conservatorship nor the terms of our agreements with Treasury change our obligation to make
required payments on our debt securities or perform under our mortgage guaranty obligations. FHFA issued a
rule establishing a framework for conservatorship and receivership operations for the GSEs, which became
effective in July 2011. The rule established procedures for conservatorship and receivership, and priorities of
claims for contract parties and other claimants. This rule is part of FHFA’s implementation of the powers
provided by the Federal Housing Finance Regulatory Reform Act of 2008, and does not seek to anticipate or
predict future conservatorships or receiverships.
The conservatorship has no specified termination date and there continues to be uncertainty regarding the future
of our company, including how long the company will continue to exist in its current form, the extent of our role
in the market, what form we will have, and what ownership interest, if any, our current common and preferred
stockholders will hold in us after the conservatorship is terminated. Under the GSE Act, FHFA must place us into
receivership if the Director of FHFA makes a written determination that our assets are less than our obligations
or if we have not been paying our debts, in either case, for a period of 60 days. In addition, the Director of FHFA
may place us in receivership at his discretion at any time for other reasons, including conditions that FHFA has
already asserted existed at the time the former Director of FHFA placed us into conservatorship. Placement into
receivership would have a material adverse effect on holders of our common stock, preferred stock, debt
securities and Fannie Mae MBS. Should we be placed into receivership, different assumptions would be required
to determine the carrying value of our assets, which could lead to substantially different financial results. We are
not aware of any plans of FHFA to significantly change our business model or capital structure in the near-term.
Senior Preferred Stock and Warrant Issued to Treasury
On September 7, 2008, we, through FHFA in its capacity as conservator, entered into a senior preferred stock
purchase agreement with Treasury. The agreement was amended on September 26, 2008, May 6, 2009 and
December 24, 2009.
Pursuant to the amended senior preferred stock purchase agreement, Treasury has committed to provide us with
funding as needed to help us maintain a positive net worth thereby avoiding the mandatory receivership trigger
described above. As consideration for Treasury’s funding commitment, we issued one million shares of senior
preferred stock and a warrant to purchase shares of our common stock to Treasury.
The amended senior preferred stock purchase agreement provides that the $200 billion maximum amount of the
commitment from Treasury will increase as necessary to accommodate any net worth deficiencies attributable to
periods during 2010, 2011, and 2012. If we do not have a positive net worth as of December 31, 2012, then the
amount of funding available under the amended senior preferred stock purchase agreement after 2012 will be
$124.8 billion ($200 billion less $75.2 billion in cumulative draws for net worth deficiencies through
December 31, 2009).
In the event we have a positive net worth as of December 31, 2012, then the amount of funding available after
2012 under the amended senior preferred stock purchase agreement will depend on the size of that positive net
worth relative to the cumulative draws for net worth deficiencies attributable to periods during 2010, 2011, and
2012, as follows:
• If our positive net worth as of December 31, 2012 is less than the cumulative draws for net worth
deficiencies attributable to periods during 2010, 2011, and 2012, then the amount of available funding will
be $124.8 billion less our positive net worth as of December 31, 2012.
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