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We do not rely solely on our classifications of loans as Alt-A or subprime to evaluate the credit risk exposure relating to these
loans in our single-family conventional guaranty book of business. For more information about the credit risk characteristics
of loans in our single-family guaranty book of business, see “Note 3, Mortgage Loans” and “Note 6, Financial Guarantees.”
Our exposure to Alt-A and subprime loans included in our single-family conventional guaranty book of business, based on
the classification criteria described in this section, does not include (1) our investments in private-label mortgage-related
securities backed by Alt-A and subprime loans or (2) resecuritizations, or wraps, of private-label mortgage-related securities
backed by Alt-A mortgage loans that we have guaranteed. See “Note 5, Investments in Securities” for more information on
our exposure to private-label mortgage-related securities backed by Alt-A and subprime loans. As a result of our decision to
discontinue the purchase of newly originated Alt-A loans, except for those that represent the refinancing of a loan we
acquired prior to 2009, we expect our acquisitions of Alt-A mortgage loans to continue to be minimal in future periods and
the percentage of the book of business attributable to Alt-A to continue to decrease over time. We are also not currently
acquiring newly originated subprime loans, although we are acquiring refinancings of existing Fannie Mae subprime loans in
connection with our Refi Plus initiative. Unlike the loans they replace, these refinancings are not included in our reported
subprime loans because they do not meet our classification criteria for subprime loans.
We have classified a mortgage loan as Alt-A if and only if the lender that delivered the loan to us classified the loan as Alt-A,
based on documentation or other features. We have classified a mortgage loan as subprime if and only if the loan was
originated by a lender specializing in subprime business or by a subprime division of a large lender; however, we exclude
loans originated by these lenders from the subprime classification if we acquired the loans in accordance with our standard
underwriting criteria, which typically require compliance by the seller with our Selling Guide (including standard
representations and warranties) and/or evaluation of the loans through our Desktop Underwriter system. The unpaid principal
balance of Alt-A loans included in our single-family conventional guaranty book of business of $131.3 billion as of
December 31, 2013, represented approximately 5.0% of our single-family conventional guaranty book of business. The
unpaid principal balance of subprime loans included in our single-family conventional guaranty book of business of $4.2
billion as of December 31, 2013, represented approximately 0.1% of our single-family conventional guaranty book of
business.
Jumbo-Conforming and High-Balance Loans
The outstanding unpaid principal balance of our jumbo-conforming and high-balance loans was $142.3 billion, or 5.0% of
our single-family conventional guaranty book of business, as of December 31, 2013 and $129.0 billion, or 4.7% of our
single-family conventional guaranty book of business, as of December 31, 2012. The standard conforming loan limit for a
one-unit property was $417,000 in 2013 and 2012. Our loan limits were higher in specified high-cost areas, reaching as high
as $729,750 for one-unit properties; however, our loan limits for loans originated after September 30, 2011 decreased in
specified high-cost areas to an amount not to exceed $625,500 for one-unit properties. Our current loan limits apply to all
new acquisitions; therefore, we cannot refinance any of our existing loans that are above our current loan limits. See
“Business—Our Charter and Regulation of Our Activities—Charter Act—Loan Standards” for additional information on our
loan limits, including potential future reductions in our loan limits.
Reverse Mortgages
The outstanding unpaid principal balance of reverse mortgage loans and Fannie Mae MBS backed by reverse mortgage loans
in our guaranty book of business was $48.0 billion as of December 31, 2013 and $50.2 billion as of December 31, 2012.
Since December 2010, we ceased acquisitions of newly originated reverse mortgages. The balance of our reverse mortgage
loans could increase over time, as each month the scheduled and unscheduled payments, interest, mortgage insurance
premium, servicing fee and default-related costs accrue to increase the unpaid principal balance. The majority of these loans
are home equity conversion mortgages insured by the federal government through FHA. Because home equity conversion
mortgages are insured by the federal government, we believe that we have limited exposure to losses on these loans.
Adjustable-rate Mortgages (“ARMs”) and Fixed-rate Interest-only Mortgages
ARMs are mortgage loans with an interest rate that adjusts periodically over the life of the mortgage based on changes in a
specified index. Interest-only loans allow the borrower to pay only the monthly interest due, and none of the principal, for a
fixed term. The majority of our interest-only loans are ARMs. Our negative-amortizing loans are ARMs that allow the
borrower to make monthly payments that are less than the interest actually accrued for the period. The unpaid interest is
added to the principal balance of the loan, which increases the outstanding loan balance. ARMs represented approximately
9.0% of our single-family conventional guaranty book of business as of December 31, 2013.
Table 41 displays information for ARMs and fixed-rate interest-only loans in our single-family guaranty book of business,
aggregated by product type and categorized by the year of their next scheduled contractual reset date. The contractual reset is