Fannie Mae 2012 Annual Report Download - page 309

FANNIE MAE
(In conservatorship)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
F-75
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.
15. Regulatory Capital Requirements
FHFA has announced that during the conservatorship our existing statutory and FHFA-directed regulatory capital
requirements will not be binding and that FHFA will not issue quarterly capital classifications. 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. Our regulatory capital classification
measures are 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 on 0.45% of the unpaid principal balance
and critical capital based on 0.25% of the unpaid principal balance, regardless of whether these loans have been consolidated
pursuant to accounting rules, and (2) issued a regulatory interpretation stating that our minimum capital requirements are not
automatically affected by the consolidation accounting guidance. Additionally, our regulatory capital classification measures
exclude the funds provided to us by Treasury pursuant to the senior preferred stock purchase agreement, as the senior
preferred stock does not qualify as core capital due to its cumulative dividend provisions.
Pursuant to the GSE Act, if the Director of FHFA makes a written determination that our total assets are less than our total
obligations (a net worth deficit) for a period of 60 days, FHFA is mandated by law to appoint a receiver for Fannie Mae.
Treasury’s funding commitment under the senior preferred stock purchase agreement is intended to ensure that we avoid a net
worth deficit, in order to avoid this mandatory trigger of receivership. In order to avoid a net worth deficit, our conservator
may request funds on our behalf from Treasury under the senior preferred stock purchase agreement.
FHFA has directed us, during the time we are under conservatorship, to focus on managing to a positive net worth. We had a
positive net worth of $7.2 billion as of December 31, 2012 and a net worth deficit of $4.6 billion as of December 31, 2011.
The following table displays our regulatory capital classification measures as of December 31, 2012 and 2011.
As of December 31,
2012(1) 2011(1)
(Dollars in millions)
Core Capital(2). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $(110,350) $ (115,967)
Statutory minimum capital requirement(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30,862 32,463
Deficit of core capital over statutory minimum capital requirement . . . . . . . . . . . . . . . . . . . . . . . $(141,212) $ (148,430)
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(1) Amounts as of December 31, 2012 and 2011 represent estimates that we have submitted to FHFA.
(2) The sum of (a) the stated value of our outstanding common stock (common stock less treasury stock); (b) the stated value of our
outstanding non-cumulative perpetual preferred stock; (c) our paid-in capital; and (d) our retained earnings (accumulated deficit). Core
capital does not include: (a) accumulated other comprehensive income (loss) or (b) senior preferred stock.