Fannie Mae 2014 Annual Report Download - page 37

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designated states and territories (Alaska, Hawaii, Guam and the U.S. Virgin Islands). Higher loan limits also apply in
designated high-cost areas (counties or county-equivalent areas). FHFA provides Fannie Mae with the designated high-
cost areas annually. Our charter sets loan limits for high-cost areas up to 150% of the national loan limit ($625,500 for
a one-family residence; higher for two- to four-family residences and in the four statutorily-designated states and
territories).
No statutory limits apply to the maximum original principal balance of multifamily mortgage loans that we purchase or
securitize. In addition, the Charter Act imposes no maximum original principal balance limits on loans we purchase or
securitize that are insured by FHA or guaranteed by the VA.
• Loan-to-Value and Credit Enhancement Requirements. The Charter Act generally requires credit enhancement on any
single-family conventional mortgage loan that we purchase or securitize if it has a loan-to-value ratio over 80% at the
time of purchase. Although we do not currently purchase or securitize second lien single-family mortgage loans, the
Charter Act requires a second lien mortgage loan to have credit enhancement if the combined loan-to-value ratio
exceeds 80%. The credit enhancement required by our charter may take the form of one or more of the following:
(1) insurance or a guaranty by a qualified insurer of the over-80% portion of the unpaid principal balance of the
mortgage; (2) a seller’s agreement to repurchase or replace the mortgage in the event of default (for such period and
under such circumstances as we may require); or (3) retention by the seller of at least a 10% participation interest in the
mortgage. Regardless of loan-to-value ratio, the Charter Act does not require us to obtain credit enhancement to
purchase or securitize loans insured by FHA or guaranteed by the VA.
Authority of U.S. Treasury to Purchase GSE Securities
Pursuant to our charter, at the discretion of the Secretary of the Treasury, Treasury may purchase our obligations up to a
maximum of $2.25 billion outstanding at any one time.
Other Charter Act Provisions
The Charter Act has the following additional provisions.
• Issuances of Our Securities. We are authorized, upon the approval of the Secretary of the Treasury, to issue debt
obligations and mortgage-related securities. Neither the U.S. government nor any of its agencies guarantees, directly
or indirectly, our debt or mortgage-related securities.
• Exemptions for Our Securities. The Charter Act generally provides that our securities are exempt under the federal
securities laws administered by the SEC. As a result, we are not required to file registration statements with the SEC
under the Securities Act of 1933 with respect to offerings of any of our securities. Our non-equity securities are also
exempt securities under the Securities Exchange Act of 1934 (the “Exchange Act”). However, our equity securities
are not treated as exempt securities for purposes of Sections 12, 13, 14 or 16 of the Exchange Act. Consequently, we
are required to file periodic and current reports with the SEC, including annual reports on Form 10-K, quarterly
reports on Form 10-Q and current reports on Form 8-K.
• Exemption from Specified Taxes. Fannie Mae is exempt from taxation by states, territories, counties, municipalities
and local taxing authorities, except for taxation by those authorities on our real property. We are not exempt from the
payment of federal corporate income taxes.
• Other Limitations and Requirements. We may not originate mortgage loans or advance funds to a mortgage seller on
an interim basis, using mortgage loans as collateral, pending the sale of the mortgages in the secondary market. In
addition, we may only purchase or securitize mortgages on properties located in the United States and its territories.
The GSE Act
As a federally chartered corporation, we are subject to government regulation and oversight. FHFA is an independent agency
of the federal government with general supervisory and regulatory authority over Fannie Mae, Freddie Mac and the 12
Federal Home Loan Banks (“FHLBs”). FHFA was established in July 2008, assuming the duties of our former safety and
soundness regulator, the Office of Federal Housing Enterprise Oversight (“OFHEO”), and our former mission regulator,
HUD. HUD remains our regulator with respect to fair lending matters. Our regulators also include the SEC and Treasury.
The GSE Act provides FHFA with safety and soundness authority that is comparable to and in some respects broader than
that of the federal banking agencies. Even if we were not in conservatorship, the GSE Act gives FHFA the authority to raise
capital levels above statutory minimum levels, regulate the size and content of our portfolio and approve new mortgage
products, among other things.