Fannie Mae 2014 Annual Report Download - page 24

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Business Segment Primary Business Activities Primary Drivers of Revenue Primary Drivers of Expense
Capital Markets Mortgage and other investments:
Purchases mortgage assets and
invests in non-mortgage interest-
earning assets
Mortgage securitizations:
Purchases loans from a large
group of lenders, securitizes
them, and may sell the securities
to dealers and investors
Structured mortgage
securitizations and other
customer services: Issues
structured Fannie Mae MBS for
customers in exchange for a
transaction fee and provides
other fee-related services to our
lender customers
Interest rate risk management:
Manages the interest rate risk on
our portfolio by issuing a variety
of debt securities in a wide range
of maturities and by using
derivatives
Net interest income: Generated
from the difference between the
interest income earned on our
interest-earning assets and the
interest expense associated with
the debt funding those assets
Fee and other income:
Compensation received for
engaging in structured
transactions and providing other
lender services. In addition, the
substantial majority of fee and
other income for 2013 and 2014
consisted of income resulting
from settlement agreements
resolving certain lawsuits
relating to PLS sold to us.
Fair value gains and losses:
Primarily consists of fair value
gains and losses on derivatives,
trading securities and other
financial instruments
Investment gains and losses:
Primarily consists of (1) gains
and losses on the sale or
securitization of mortgage assets
and (2) impairments recognized
on our investments
Administrative expenses:
Consists of salaries and benefits,
occupancy costs, professional
services, and other expenses
associated with our Capital
Markets business operations
Revenues from our Business Segments
Table 4 displays our total net revenues for each of our business segments for each of the last three years. Net revenues include
net interest income, guaranty fee income, and fee and other income. Under our segment reporting, the sum of the results for
our three business segments does not equal our consolidated statements of operations and comprehensive income, as we
separate the activity related to our consolidated trusts from the results generated by our three segments. We also include an
eliminations/adjustments category to reconcile our business segment financial results and the activity related to our
consolidated trusts to net income in our consolidated statements of operations and comprehensive income. For more
information about the financial results and performance and total assets of each of our segments, see “MD&A—Business
Segment Results” and “Note 13, Segment Reporting.”
Table 4: Business Segment Revenues
For the Year Ended
December 31,
2014 2013 2012
Single-Family. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $12,332 $11,303 $ 8,120
Multifamily . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,384 1,325 1,234
Capital Markets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,182 11,659 12,667
Consolidated Trusts and Eliminations/Adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 957 2,047 967
Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $25,855 $26,334 $22,988
Single-Family Business
Working with our lender customers, our Single-Family business provides funds to the mortgage market by acquiring single-
family loans through lender swap transactions or, working also with our Capital Markets group, through loan purchases. Our
Single-Family business has primary responsibility for pricing and managing the credit risk on our single-family guaranty
book of business, which consists of single-family mortgage loans underlying Fannie Mae MBS and single-family loans held
in our retained mortgage portfolio.
A single-family loan is secured by a property with four or fewer residential units. Our Single-Family business and Capital
Markets group securitize and purchase primarily conventional (not federally insured or guaranteed) single-family fixed-rate
or adjustable-rate, first-lien mortgage loans, or mortgage-related securities backed by these types of loans. We also securitize
or purchase loans insured by FHA, loans guaranteed by the VA, loans guaranteed by the Rural Development Housing and