Fannie Mae 2013 Annual Report Download - page 26

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The Multifamily Markets in which We Operate
In the multifamily mortgage market, we aim to address the rental housing needs of a wide range of the population, with the
substantial majority of our focus on supporting rental housing that is affordable to families earning at or below the median
income in their area. Our mission requires us to serve the market steadily, rather than moving in and out depending on market
conditions. Through the secondary mortgage market, we support rental housing for the workforce population, for senior
citizens and students, and for families with the greatest economic need. Our Multifamily business is organized and operated
as an integrated commercial real estate finance business, addressing the spectrum of multifamily housing finance needs,
including the needs described below.
• To meet the growing need for smaller multifamily property financing, we focus on the acquisition of multifamily
loans up to $3 million ($5 million in high cost areas). We acquire these loans primarily from DUS lenders; however,
we have also acquired these loans from other financial institutions. Over the years, we have been an active purchaser
of these loans from both DUS and non-DUS lenders, and, as of December 31, 2013, they represented 63% of our
multifamily guaranty book of business by loan count and 14% based on unpaid principal balance.
• To serve low- and very low-income households, we have a team that focuses exclusively on relationships with
lenders financing privately-owned multifamily properties that receive public subsidies in exchange for maintaining
long-term affordable rents. We enable borrowers to leverage housing programs and subsidies provided by local, state
and federal agencies. These public subsidy programs are largely targeted to providing housing to families earning
less than 60% of area median income (as defined by the U.S. Department of Housing and Urban Development
“HUD”)) and are structured to ensure that the low and very low-income households who benefit from the subsidies
pay no more than 30% of their gross monthly income for rent and utilities. As of December 31, 2013, this type of
financing represented approximately 15% of our multifamily guaranty book of business, based on unpaid principal
balance, including $14.9 billion in bond credit enhancements.
Capital Markets
Our Capital Markets group manages our mortgage-related assets and other interest-earning non-mortgage investments. We
fund our purchases primarily through proceeds we receive from the issuance of debt securities in the domestic and
international capital markets. Our Capital Markets group has primary responsibility for managing the interest rate risk
associated with our investments in mortgage assets.
Our Capital Markets group’s business activity is primarily focused on making short-term use of our balance sheet rather than
on long-term investments. As a result, our Capital Markets group works with lender customers to provide funds to the
mortgage market through short-term financing and investing activities. Activities we are undertaking to provide liquidity to
the mortgage market include the following:
• Whole Loan Conduit. Whole loan conduit activities involve our purchase of single-family loans principally for the
purpose of securitizing them. We purchase loans from a large group of lenders and then securitize them as Fannie
Mae MBS, which may then be sold to dealers and investors.
• Early Funding. Lenders who deliver whole loans or pools of whole loans to us in exchange for MBS typically must
wait between 30 and 45 days from the closing and settlement of the loans or pools and the issuance of the MBS.
This delay may limit lenders’ ability to originate new loans. Under our early lender funding programs, we purchase
whole loans or pools of loans on an accelerated basis, allowing lenders to receive quicker payment for the whole
loans and pools, which replenishes their funds and allows them to originate more mortgage loans.
• REMICs and Other Structured Securitizations. We issue structured Fannie Mae MBS (including REMICs), typically
for our lender customers or securities dealer customers, in exchange for a transaction fee.
• MBS Trading. We regularly enter into purchase and sale transactions with other market participants
involving mortgage-backed securities issued by Fannie Mae, Freddie Mac and Ginnie Mae, which we refer to as
“agency MBS.” These transactions can provide for the future delivery of mortgage-backed securities with
underlying single-family loans that share certain general characteristics (often referred to as the “TBA
market”). These purchase and sale transactions also can provide for the future delivery of specifically identified
mortgage-backed securities with underlying loans that have other characteristics considered desirable by some
investors (often referred to as the “Specified Pools market”). Through our trading activity in the TBA and Specified
Pools markets, we provide significant liquidity to the agency MBS markets.