Fannie Mae 2012 Annual Report Download - page 32

27
other reasons, including conditions that FHFA has already asserted existed at the time the 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. For more
information on the risks to our business relating to conservatorship and uncertainties regarding the future of our business, see
“Risk Factors.”
Treasury Agreements
On September 7, 2008, we, through FHFA, in its capacity as conservator, and Treasury entered into a senior preferred stock
purchase agreement, which was subsequently amended on September 26, 2008, May 6, 2009, December 24, 2009 and
August 17, 2012. Unless the context indicates otherwise, references in this report to the senior preferred stock purchase
agreement refer to the agreement as amended through August 17, 2012. The terms of the senior preferred stock purchase
agreement, senior preferred stock and the warrant discussed below will continue to apply to us even if we are released from
the conservatorship. See “Risk Factors” for a description of the risks to our business relating to the Treasury agreements, as
well as the adverse effects of the senior preferred stock and the warrant on the rights of holders of our common stock and
other series of preferred stock.
August 2012 Amendment to Senior Preferred Stock Purchase Agreement with Treasury
The August 2012 amendment revised the terms of the senior preferred stock purchase agreement and the related senior
preferred stock in the following ways:
• Dividends. The method for calculating the amount of dividends we are required to pay Treasury on the senior
preferred stock was changed, as described more fully below in “Senior Preferred Stock Purchase Agreement and
Related Issuance of Senior Preferred Stock and Common Stock Warrant—Senior Preferred Stock.”
• Periodic Commitment Fee. A periodic commitment fee provided for under the agreement was suspended, as long as
the changes to the dividend payment provisions referenced above remain in effect.
• Transfer-of-Assets Covenant. The transfer-of-assets covenant contained in the agreement was amended to allow the
company to dispose of assets and properties at fair market value, in one transaction or a series of related
transactions, without requiring the prior written consent of Treasury, if such assets have a fair market value
individually or in the aggregate of less than $250 million, regardless of whether or not the transaction is in the
ordinary course of business.
• Mortgage Assets Covenant. The mortgage assets covenant contained in the agreement was amended to accelerate the
reduction of our mortgage asset portfolio, decreasing our mortgage asset cap to $250 billion by 2018, rather than by
2022. Limits on the amount of mortgage assets we may own are described in “Covenants under Treasury
Agreements—Mortgage Asset Limit.”
• Annual Risk Management Plan Covenant. A new covenant was added requiring that we provide an annual risk
management plan to Treasury not later than December 15 of each year we remain in conservatorship, as described
more fully below. We submitted our risk management plan to Treasury in December 2012.
In its August 17, 2012 announcement regarding the modifications to the senior preferred stock purchase agreement, Treasury
stated that the modifications will help achieve several important objectives, including:
• making sure that every dollar of earnings that Fannie Mae and Freddie Mac generate will be used to benefit
taxpayers for their investment in those firms;
• ending the circular practice of Treasury advancing funds to the GSEs simply to pay dividends back to Treasury;
• acting upon the commitment made in the Administration’s 2011 White Paper that the GSEs will be wound down and
will not be allowed to retain profits, rebuild capital, and return to the market in their prior form;
• supporting the continued flow of mortgage credit by providing borrowers, market participants and taxpayers with
additional confidence in the ability of the GSEs to meet their commitments while operating under conservatorship;
and
• providing greater market certainty regarding the financial strength of the GSEs.